Many consumers use their credit cards to make big purchases, such as when buying a refrigerator or a big screen TV. Others will use their credit account for everyday purchases when they don’t have cash to make ends meet. There are many reasons why you may pull out your charge card rather than your debit card or checkbook when making a purchase, but there is a cost associated with using your card. Unless you pay your account balance off in full with each billing cycle, you will accrue interest charges on the outstanding balance on your account. New interest charges will post to your account regularly each month until the balance is paid in full. With this in mind, it makes sense to lower your interest rate, if possible. Lowering your rate can reduce your interest charges and can make it easier to pay your balance off. There are a few different strategies that you may put to use.
Your Current Rate
Before you can lower your interest rate on your credit account, you first need to know what your current rate is. Analyze your last billing statement to determine what your interest rate is on your account as well as what your monthly interest charges are. This information can help you to determine how much money you may save each month by reducing your acccount rate.
Request a Lower Rate
Perhaps the easiest way to get a lower interest rate is to simply ask your financier to lower the rate on your behalf. If you have made payments regularly and are not over your credit limit, your request may be honored. However, if you have made your payment even a day or two late within the last six to 12 months, your request may not be honored. You can take the next few months to make your payments on time. Then, you can make the same request again, and your request may be honored at that time.
Shop For a New Credit Card
Another option available to you is to shop for a new credit account. Many financial institutions would love to have you transfer your outstanding balance to them, and they may offer you a lower introductory rate or other special offers simply for opening a new account. If you do open a new account and transfer balances, pay attention to both the introductory rate as well as the rate that your account will adjust to after the introductory period is over. The last thing you may want is to have an even higher rate on your new account than you currently have. Keep in mind that you can first request a lower interest rate from your current financial institution. Then, you can shop for a lower rate to determine if you can save even more money in interest charges with a different financial institution.
Improve Your Credit Rating
Your ability to obtain a lower interest rate on your credit account will be dependent in large part on your credit rating. Whether you are requesting your current financial institution to lower your rate or you plan to open a new account, one of the best steps that you can take is to improve your credit rating. This is typically done over a period of months rather than weeks, so you should be patient with the process. To improve your credit rating, consider taking steps to ensure that all of your payments are made on time. Also, avoid making new charges to your accounts, and focus your efforts on paying down outstanding balances. These combined efforts may result in your ability to qualify for a better rate.
Interest charges on your credit accounts can quickly mount up, but taking steps to reduce your interest rate can keep the cost of using your credit cards lower. Follow these tips to enjoy the ability to lower your rate for great savings!
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This article was written Wayne Lee, a part-time finance blogger. Click here to read more about his work.