The arsenal of lowering your interest rate
#1 – See if they will reduce the rate.
Sometimes it is enough to call the company and ask for an interest rate reduction. The credit card market is aggressive and strategies to match interest rates with those of competing companies are common. If a company has already offered you a cheaper rate, that should help bring your price down as well.
Call the company and say something like:
“I really don’t want to leave your service, but I need cheaper debt”
This usually works since credit card companies have customer retention representatives, those staff members have the power to authorize deals like this.
Make it a win-win situation: Don’t just call assuming your rate will be reduced. If your current rate is 11%, for example, and you’ve found another product on the market with an interest rate of 10%, use that as leverage. State that you will switch to bank X if you do not get a lower interest rate. Only one of two things can happen: You’ll either get the lower rate requested, or at least switch to a new, cheaper card anyway.
#2 – Move debt around with balance transfer offers.
Moving the balance on a credit card means moving debts from one card to another at an artificially cheaper rate. Why pay 15% of your current credit card balance when you can transfer it over and pay 0% per year for 6 months?
Previously, low-cost balance transfers were exclusive introductory offers for new cardholders, but now credit card companies have started fighting to keep customers, so many of them now have transfer offers as well. balance for existing cardholders.
This means that any huge debts you may have on a card can be transferred cheaply and easily. In Australia, the 3 most common offers are:
– 0% per year for 6 months
– 2.9% per year for 12 months
– 4.9% per year for life.
The third option may have caught your attention. What exactly does ‘for life’ mean when referring to balance transfer credit cards? As long as your credit card account remains open, you can take as long as you like to pay off your balance at a low 4.9% per year However, there are other factors to consider, such as the typically high annual fee associated with credit cards that They feature ‘lifetime’ balance transfers.
Check what offers your company has before calling them.
Some companies focus on individuals and make a plan for their needs, others have official fixed rates, and before you call it is vital to be prepared.
The steps to success:
Call your provider and ask these questions:
Can I transfer my debts from other cards? What is the APR if I do it?
What is my credit limit? (If the transfer rate is good, ask to increase it)
If the customer service person on the line can’t help you, ask for a supervisor or someone with the “power to change your interest rate.”
#3 – Transfer balances!
At this stage it is vital to take notes on the situation, write down all your debts in a list.
After you’ve written down all your debts, be sure to also include an overdraft, possibly more expensive debt than your cards. If you want to include personal loans, you can, too, but be careful, as switching to a lower interest rate may mean you pay more. Learn how to reduce the costs of your existing loans before you do.
It also includes any new cards you have opened or are thinking of opening; this should free up some space for this step to work more effectively.
Move the debt to where you pay less.
What we’re trying to do here is take advantage of customer transfer offers. This will require some planning.
Even if they don’t offer special rates, move the money to a card with the cheapest regular interest rate.
Here is a trick that is practically imperative in order not to get caught in a balance transfer trap. Do not make any purchases with your new credit card to which a balance has been transferred. The transferred balance will essentially be ‘locked in’ until the purchase or cash advance is paid. This is a common method used by credit card companies to extend your debt. They expect the consumer to run down their balance beyond the promotional period and end up paying interest.
Keep a backup plan as well. Don’t assume that your credit card application will be approved no matter what. Applying for new credit cards in rapid succession can raise a red flag about your credit score, which can jeopardize your credit card application approvals.
#4 – Pay off your debts with the highest interest, followed by the highest balance.
This might be the most important part of this scheme.
Start payments, putting as much money as possible on the biggest debts first! You should pay the minimum repayments on all your other, less expensive cards, and use as much extra money as you can to pay off the biggest debts. Once it’s paid off, target the next highest rate card and continue this method until you’re clear of all debt.
Include your overdrafts. With a 19% overdraft and a 14% credit card, it’s better to spend on the card, pay the minimum monthly payments, and use the leftover funds to pay off the overdraft because it’s more expensive debt. Balance transfers are truly amazing credit card consolidation techniques, but only if used correctly and managed with careful precision.