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How to Get Low Interest on a Credit Card

Credit cards are powerful tools to leverage when faced with unexpected situations. They give you instant cash, which you can use now, then pay later. However, it can even cost you more when you miss paying your monthly dues and start having to pay high-interest rates.

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It can be challenging to get out of debt if your credit cards continue to incur interest rates. Fortunately, there is a trick to doing it. Here is a three-step plan to get a lower interest on your credit cards.

Step 1: Assess Your Financial Standing

Knowing where you financially stand can help you negotiate for a lower interest on your credit card. So, the following are some things you should consider to get lower interest rates on your credit card.

Credit Score

Generally, a higher credit score allows you to have lower interest rates. Your credit score acts as your credibility card. It shows how good of a payer you are and the length of your credit history. That is why you have to make sure your credit report is always up-to-date.

All of your payments within the 12-month time frame should be included in your credit report. However, take note that any history of late repayments may affect your request for a lower interest rate. So before talking to your card issuer, ensure you have already paid off 30% of your outstanding credit limit.

Let’s say you are experiencing some financial struggles. Is there still hope of getting a lower interest rate? Definitely! Some credit card issuers understand their customers’ needs during difficult times. Trying it won’t hurt you.

Annual Percentage Rate (APR)

The Annual Percentage Rate (APR) is the cost you pay annually for borrowed money, including other fees. So, it is usually higher than the interest rate. Your APR is a complete picture of what you must pay when you take a loan from a bank or credit card company.

If you have multiple credit cards, you must know each of your card’s APR so that you can compare them with possible new credit cards. Generally, it is recommended to target the credit cards with the highest APR.

Sources of Income

When you get better financially because of additional cash flow, your card issuers may think that you can pay easier than before. Your request for a lower interest rate may be approved if you show the card issuer proof of improvements in your income stream. Aside from that, your card issuer may also consider your request if you suddenly lose a job or face unfortunate financial trouble.

Step 2: Talk to Your Credit Card Issuer

It may sound impossible, but your credit card issuer can consider your appeal for a lower interest rate. Some cards have a variable interest rate, meaning it’s not fixed and can be changed. Depending on your lender’s discretion, you can get the reduction that you are requesting.

The trick is to choose the credit card that you have had for the longest. Most likely, you have a good standing with this card and have been paying on time consistently. Since you have a stable payment history with this issuer, the issuer will understand if you request a rate deduction for reasons such as unemployment or other money struggles.

When you talk to your card issuer, you must prove that you are worthy of a lower-rate approval.

Step 3: Do a Balance Transfer

If you already did steps 1 and 2 and still got rejected, there’s still another chance. The next step is to consider a balance transfer. A balance transfer is an effective method to pay off your debt faster by getting a card with a lower interest rate or other better rewards.

Generally, you only need to call your card issuer and request a balance transfer. This can be done by phone or online and usually takes two weeks or longer once you get approved. Then, an additional 3%-5% transfer fee will be added to your outstanding balance.

Bonus Step: Find Competitive Credit Card Offers

Whether you are getting a new one or just doing a balance transfer, finding competitive credit card offers is an important step. For example, you can apply for a low rate credit card with Great Southern Bank and get a card with 0% APR within the first 12-24 months. If doing a balance transfer, you can also get 0% APR for your first 18 months with your new card issuer.

Why Do You Need to Get a Lower Interest Rate?

Even the smallest penny matters when it comes to winning a debt battle. Imagine this scenario:

Your credit card has an outstanding balance of $20,000 with an interest rate of 25%. That will cost you $5000 a year. Let’s say you’re able to reduce the rate to 10%. It will only cost you $2000 and a total annual savings of $3000 a year. This amount can be put into other debts you have or other expenses.

Why Do Credit Card Companies Approve My Request?

Credit card companies value their customers. These companies consider you and your money as their assets, so the company will do everything to keep you. As a matter of fact, these companies make bigger profits from customers by charging interest rates. The bigger money you owe the company, the bigger profit is generated.

It’s Worth the Try

The idea of talking to a lender when you owe a huge amount might scare you. However, this is the most effective way to get a lower interest rate. When you fully prepare yourself for a negotiation, there’s a big chance your request will be approved.

The end goal here is to be debt-free. Realizing that everything is worth a try and having a positive mindset can give you the feeling of being free again financially. You can focus on enjoying life and achieving your personal goals through savings.

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