Tuesday, July 8, 2008

Cut Your Credit Card Interest Rate In 5 Simple Steps

By jforrest

Lowering your credit card interest rates is one of the simplest secrets to financial savings. With one simple call to your credit card company, you can achieve a lower your rate, effective immediately. Credit card companies may set high rates for you, but you don’t have to accept high rates. Interest rates are always changing. Credit card companies are banking on the fact that most people don’t understand that they can ask for lower rates.

Would you like to pay yourself instead of your creditors? Want better financial results today? If you’re a customer with good credit standing and you are not at your credit limit (you can also ask to have your limit raised), you have a good chance of lowering your annual percentage rate by quite a bit.

I recently called my credit card company when I saw they had raised my annual interest rate. I stated that I had been making timely payments in full and they apologized and immediately returned my rate to the previous low rate. That phone call saved me potentially hundreds of dollars in interest if I would have had an emergency and needed to charge up my card to the full limit. When it comes to your dollars, pay close attention. Try the following tips.

(1) Check Your Credit Card Statements

Make sure you know the annual percentage rate you are paying for each and every one of your credit cards. Many credit card issuers have a policy that states they can raise your rates if you fail to pay one or two bills on time, even an unrelated bill, such as your water or electric bill. This is called Universal Default. You will not be informed if you are subject to universal default. Your credit card company does not have to warn you. So always keep an eye on your interest rate. If you see a rise, call and ask what can be done about it. If one customer service representative says they can’t help you, keep calling until you find a representative who will help you. If you have trouble keeping up with more than one card, consider consolidating your debt into one low-interest card. Find out how much each card charges for late, over-limit or any other extra fees and what the interest rates are on balance transfers from other cards.

(2) Compare the Rates of Other Companies

You will be amazed at how many attractive credit card rates are out there for you. Companies want your business and your debt, so they will offer low or even zero percent introductory interest rates for a specific time period. Make sure to look for cards that offer 0% balance transfers and no annual fee. Also, be sure you know what the interest rate will jump to after the introductory period. The more you know about what other credit card companies offer, the better spot you are in to leverage the results you want with your current card. Tell them you are looking at switching to another company unless they can match the rate you have found. Even if you threaten to close your account, however, do not actually have the account closed unless you have other cards that can uphold your best credit standing. As length of credit history is 15% of your credit score, you want to keep your old accounts open even if they are not active. Your company may not get you the rate you want but they may say to check back in a month as approved rates fluctuate from month to month. I was once told to call back in a month for a better rate once, which I thought was just a way to get me to give up. But after several calls and then calling a month later, I learned that it was true, sometimes you have to wait for rates to change.

(3) Call Your Credit Card Issuer

Always call your credit card’s customer service representative when you are feeling calm and positive. No matter how the phone call goes, remind yourself to stay professional and polite. It never hurts to remind your operator what a good customer you have been. Rather than threatening to cancel your account, be clear (for your own lack of stress and trouble) that you would like nothing else but to continue your relationship with the company. Point out the fact you pay your account in full each month, or that you pay on time consistently. If you have success in lowering your interest rate, you don't have to stop there. There is nothing to say that you can’t call again in a few months to ask for an even lower rate. In other words, getting your credit card interest rate lowered is something you can do periodically as long as you’re a good customer. For free scripts to use when calling, search the Internet for “Ask for a lower interest rate – sample letters”.

(4) Don’t Give Up

If the first person you speak to says they’re not authorized to lower your interest rate, that means there is someone who is! Ask to speak with a manager with the understanding that they have more authority to help you. Again, remember to be polite when asking to speak with upper management. I like to tell representatives how well they have served me and that I am going to tell their managers what a good job they have done – and I do. Happy people produce happy results. For whatever reason, if at this point they are still unable to grant you a lower rate ask the reasons for the denial and inquire as to when you should call again to request a lower rate. Ask them to make notes of your request in the computer as a reference for the next time you call.

Ask your representative to make notes in the computer each time you call to let the company know you’re serious.

(5) Pay off Your Debt

What better way to save on interest than to pay off debt? See how much you can cut back on spending each month while setting goals to slice your debt inch by inch. Every extra dollar you put towards your credit card balance means you pay less in interest rates.

One major consumer group study showes that fifty-seven percent (57%) of those who simply telephoned their credit card company and asked for a lower interest rate got one instantly. This rate was anywhere from 7 to 10 points lower than their current credit card interest rate. Imagine the savings if all of us called for better rates.

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