The Average Credit Card Interest Rate…
…currently stands at a 16.75%. Not as bad as you thought? Don’t let that deceive you. The range of credit card rates goes from 0% right up to a massive 40%. In the vanguard of this financial minefield are the store cards so many of us cling to.
Before you start to reduce the interest rates on your credit cards you first need to know how much you’re paying. All the information you need should be on your credit card statements. If not and you have an online banking facility then login and check the details there.
Regardless of how much you’re paying there are ways to lower your interest rates (unless you’re on a 0% card).
Simply Ask For A Lower Rate
Yes, really. Before you scoff have you ever tried this? Most credit card companies change their interest rates on a regular basis but they don’t always pass on the drop to you. It helps to keep abreast of the updates that your card company sends out which means you have to read those documents they send to you.
Next time you receive any correspondence relating to a drop in interest rates make sure this benefits have been passed on to you. If, when you check your account, there’s no sign of a rate reduction then card your card supplier and let them know. Then ask for the interest rate drop to be applied to your card.
How To Ask For A Low Interest Rate
Don’t beat about the bush. Be direct and to the point. The staff on the other end of the line don’t need to be told how good or bad you’ve been with your credit card – they can see your card usage history.
Try something like this: I’ve held one of your cards for 5 years. I’ve always paid my bills on time. Can I get a reduction in my interest rate?
It’s really that simple.
Switch To A Balance Transfer Card
By far the easiest way to reduce your interest rate is to move your existing debt over to a card offering 0% balance transfer. For every credit card on the market another will pop up offering you lower interest rates (for a period of time).
If you’re going to go down this route, which is the best balance transfer card for you? Here are two options:
The longest 0% offer: Grab a 0% offer with a long promotion period. Typically, lenders will slash the interest rates for between 18 and 21 months but, in return, you’ll pay a transfer fee.
No fee balance transfers: This option foregoes transfer fees but, in most cases, the promotion period is shorter – typically around 12 months.
The choice lies entirely with you but whichever route you go down make sure you move your balance before the offer expires. Taking advantage of multiple offers by spreading your debt over multiple cards will ease your loan repayments but might be difficult to track.
There’s no wrong answer here, and if you’re like me, you’ll take advantage of multiple offers. We keep a current list of the most popular balance transfer offers.
If you don’t qualify for a new card then try calling your existing creditor and ask if they have an offer you can take advantage of. If you have a couple of cards running you may well find that one of your existing credit cards has a low rate on balance transfers.
Improve Your Credit Score
If you have a high credit score you’re going to benefit from the best interest rates available. A high credit score could bag you an interest rate as low as 0% whilst a poor score could see your interest rates soaring as high as 29.99%!
It’s not the end of the world. Your credit score can be repaired. Once your score has been raised you’ll be in line for a better rate of interest.
How Do You Improve You Credit Score?
The simplest way is to pay your debts. As long as you make consistent payments (on time) your credit score will start to climb and rapidly. Credit scores are an indication of risk. If you miss payments, hold large debts and pay off only the minimum then you’re a risk. Don’t be a risk; pay your bills (on time and more than just the minimum amount).
When you see a rise in your credit rating then it’s time to get a better rate. You can either apply for a new card or simply ask your existing lender to drop the rates.
Part 3 of this series of posts on how to eliminate debt will be here tomorrow.