Tips for Lowering Your Credit Card Interest Rate
Yesterday, the Federal Reserve cut interest rates to help ease credit anxiety for borrowers. This cut was big news because it was the first since 2003, and twice as big as some analysts had predicted. Unfortunately, this will not lead to a substantial savings for consumers with credit card debt.
In order to actually receive a meaningful decrease in their interest rates, credit card consumers will have to ask for it themselves.
Since many credit cards now have variable rates that are tied to the prime rate, cardholders should expect a slightly lower interest rate and monthly payment. "This was intended as a break for consumers, but in reality this cut will only save about $2 per month on a $5,000 credit card balance," says Bill Hardekopf, CEO of LowCards.com. "It will be interesting to see how quickly issuers drop rates. They are
quick to raise rates with an increase, but it may take as long as one to three months for consumers to see the lower rate on their billing statement.
"Even though the rate cut sounds good and may make consumers feel good, the half-point cut will not make a real difference in saving money on interest payments. The best way to get a lower rate is to talk with your credit card company. If you carry a balance, they will often lower the rate because they want to keep your debt and
interest payments," says Hardekopf.
When should you ask for a lower rate?
* If you have a good payment history and your APR is over 12%. The average APR is around 14.9%.
* If you received a high rate for your first credit card, have paid on-time, and stayed under your credit limit for 6-12 months.
* If your card started out with a low rate, but your issuer has increased it several times.
* If you have had the same card for several years and your balance is under 30% of your credit limit.
Requesting a lower rate is pretty simple, even if you don't like negotiating and this seems out of your comfort zone. Call the number on the back of your credit card or bill. Tell them you have been a good customer but you would like a lower rate. Mention that you have received several offers with lower rates in the mail and have researched cards with lower rates online. You want a lower rate on your card or
you will switch to another card with a lower rate. Ask what can they do to help you.
If the first person tells you that they can't lower it, call back in a month. This is one area where persistence may pay off. If they tell you they can't lower your rate, remind them that there are other cards available.
If your interest rate is lowered by 4 points (from 18 to 14%), in the first year you will save $200 on a $5,000 balance. Apply this savings to pay down your balance.
LowCards.com ( http://www.lowcards.com ) is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives an unbiased ranking and review for each card, making it easy for consumers to compare more than 150 credit card offers and apply securely online. LowCards provides advice about credit
card and debt issues, news, and credit card updates. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over seven years.
In order to actually receive a meaningful decrease in their interest rates, credit card consumers will have to ask for it themselves.
Since many credit cards now have variable rates that are tied to the prime rate, cardholders should expect a slightly lower interest rate and monthly payment. "This was intended as a break for consumers, but in reality this cut will only save about $2 per month on a $5,000 credit card balance," says Bill Hardekopf, CEO of LowCards.com. "It will be interesting to see how quickly issuers drop rates. They are
quick to raise rates with an increase, but it may take as long as one to three months for consumers to see the lower rate on their billing statement.
"Even though the rate cut sounds good and may make consumers feel good, the half-point cut will not make a real difference in saving money on interest payments. The best way to get a lower rate is to talk with your credit card company. If you carry a balance, they will often lower the rate because they want to keep your debt and
interest payments," says Hardekopf.
When should you ask for a lower rate?
* If you have a good payment history and your APR is over 12%. The average APR is around 14.9%.
* If you received a high rate for your first credit card, have paid on-time, and stayed under your credit limit for 6-12 months.
* If your card started out with a low rate, but your issuer has increased it several times.
* If you have had the same card for several years and your balance is under 30% of your credit limit.
Requesting a lower rate is pretty simple, even if you don't like negotiating and this seems out of your comfort zone. Call the number on the back of your credit card or bill. Tell them you have been a good customer but you would like a lower rate. Mention that you have received several offers with lower rates in the mail and have researched cards with lower rates online. You want a lower rate on your card or
you will switch to another card with a lower rate. Ask what can they do to help you.
If the first person tells you that they can't lower it, call back in a month. This is one area where persistence may pay off. If they tell you they can't lower your rate, remind them that there are other cards available.
If your interest rate is lowered by 4 points (from 18 to 14%), in the first year you will save $200 on a $5,000 balance. Apply this savings to pay down your balance.
LowCards.com ( http://www.lowcards.com ) is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives an unbiased ranking and review for each card, making it easy for consumers to compare more than 150 credit card offers and apply securely online. LowCards provides advice about credit
card and debt issues, news, and credit card updates. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over seven years.
Posted by Lynn at
8:48 PM
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