Personal Finance

How To Lower Your APR

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 5 minute read

Whether or whether you have the funds in your bank account at the time of purchase, credit cards are a simple alternative. Moreover, making use of credit card benefits might provide extra financial flexibility.

It may be quite costly to maintain a balance on a credit card due to the exorbitant interest rates that are often associated with such transactions. You should prioritize reducing your interest rate if you routinely carry a balance on a credit card that charges a high interest rate.
One way to reduce credit card debt is to reduce the interest rate. Your credit card provider may be prepared to reduce your interest rate if you take the appropriate measures.

How to Reduce Your Credit Card Interest Rate

There are a few options available to you if the interest rate that comes with your credit card is too high. The optimal choice is conditional on specifics.

  1. Deal With Your Credit Card Company

Negotiating with your credit card company may result in significant savings, as is the case in many areas of personal finance. However, phoning your credit card provider isn’t your only option if you want to negotiate successfully. Instead, you may increase your odds of success by putting in some work beforehand.

  • Examine Your Credit Score

Credit card interest rates are calculated using a number of criteria, one of the most important of which is your credit score. Get your credit score right away.

A lower interest rate is typically associated with a higher credit score. The risk that a lender is willing to take is reflected in the interest rate. Lenders will demand a higher interest rate from those with lower credit scores since they represent a greater risk to them. A high credit score might serve as a negotiating chip in financial dealings.

  • Enhance Your Credit Score

It’s probably not the best time to ask your credit card issuer for a reduced interest rate if your credit score is less than perfect. If you want to change your focus, work on raising your credit score. Try these methods to raise your credit rating:

  • Do a Credit Report Check. Get a free copy of your credit report once each year to check for mistakes. You have the right to dispute inaccurate information with the credit reporting companies.
  • Pay Your Bills Promptly. Your credit score is heavily weighted by your payment history. Make every effort to pay at least the minimal amount owing by the due date.
  • Get your credit use rate down. 30% of your FICO score is based on how much of your available credit you are using. It is a measurement of how much of your available credit you are really using. Reduce your credit use ratio to improve your credit score. Increasing your credit limits or eliminating debt will also reduce this percentage.

Building a strong credit history takes time, but the payoff in the form of cheaper interest rates over the course of a loan’s life is well worth the effort. If you often carry a debt on your credit cards, this might save you hundreds, if not thousands, of dollars annually.

  • Compile a list of competing credit card offers.

Every week, if not more frequently, most of us get mail with credit card offers. Before you delete those emails or throw away those postal offerings, make sure you know what the interest rate is.

It’s probable that you’ll find a better interest rate soon because credit card companies exploit the promise of reduced rates as a technique to entice new consumers. Before beginning discussions with your existing credit card issuer, you should gather as many offers as possible with improved credit card conditions.

  • Call Customer Service

Call your credit card business once you’ve improved your credit score and collected many offers. Be ready to submit your case to the customer support person. Make sure you have all the facts at your disposal before you decide to transfer to a new credit card or rely on your improved creditworthiness.

Credit card companies tend to be more flexible with long-term clients that have a good track record of making payments on time. There is no risk in asking for a cheaper interest rate from your credit card issuer, regardless of your connection with the company.

Don’t let a rejection dampen your spirits. Call back a few times or ask to talk to the representative’s manager if necessary. If you’re uneasy asking for what you want, realize that the worst they can say is “no” (again) (again).

  1. Benefit from a 0% APR Balance Transfer Offer

One or both parties to the discussions may become bored of hearing “no” at some time. But you shouldn’t give up looking for a lower APR on your credit card just yet. Finding a credit card that will allow you to transfer your debt to one with a reduced interest rate is your next step.

Credit cards with introductory 0% APR on debt transfers are among the finest available. This reduced rate period will allow you breathing room to focus on paying down your amount without sky-high interest rates, even if the interest rate will climb after that.

Before leaping at a low introductory APR on a balance transfer, be sure you understand the balance transfer cost. The interest you’d save by switching credit cards might be outweighed by the fees you’d have to pay.

  1. Apply for Low-Interest Credit Cards

On average, credit card interest rates are between 15% and 20% (give or take, depending on the card you choose and your credit history).

However, not every credit card is the same. Payments on some credit cards might be reduced since their interest rates are lower than average. Consider switching to a card with a lower interest rate if you are unable to negotiate a lower rate with your present issuer.

  1. Request a Debt Consolidation Loan

In terms of ease, using a credit card to make purchases is hard to beat. However, it isn’t always the most practical solution. Overspending is easy to do when you have a credit card with a reasonably large limit, which can be a problem in particular circumstances.

A debt consolidation loan might be the answer if you’d rather not add another credit card to your wallet. Debt consolidation loans are popular since they often have more affordable interest rates. As an added bonus, the regular monthly payments and established terms can help you better plan your finances as you work to eliminate debt.

One way to use this strategy is to use a personal loan to settle outstanding credit card debt. After that, you may stop stressing over your credit card’s potentially unstable interest rate and instead concentrate on making your regular monthly payment.

Bottom Line

If used wisely, a credit card may help you manage your money. A high interest rate on your credit card bill, though, might throw a kink into your long-term objectives.

Fortunately, it is feasible to secure a reduced interest rate. For example, you may try to negotiate a reduced interest rate with your existing credit card company, switch to a new card with a better rate, or apply for a debt consolidation loan.

Whatever you do, make paying off your credit card amount a priority so that you may eventually be debt-free. If you pay off your monthly balance in full before the due date each month, you won’t be affected by your credit card company’s interest rates at all.

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