3 Ways To Lower Credit Card Interest Rates

Lower credit card interest rates equal less time and interest charges when it comes to paying off your debts. Sounds like a win-win situation to me. Let's look at 3 techniques that you can use starting today to lower the interest rates on your credit cards.

Low Or Zero Interest Credit Card Transfer

How would you like to get the interest rates on your credit cards not only lowered, but wiped out all together? Yes, I'm talking about 0% interest rate credit cards... and they do exist.

Credit card companies want your business. And in order to attract that business, many offer low interest rate (or even zero interest rate) introductory offers to entice you to make the switch to their card. Here's how it works.

Let's say you find a credit card offer that promises 0% interest on all balance transfers for the first 12 months after you sign up. You currently have two credit cards, each with $6,000 balances and 21% interest rates. You decide that you will sign up for the new card and transfer over your existing balances. Smart move. Here's why.

If you left the balances on your current credit cards and made the minimum monthly payments (calculated at 2% of the outstanding balance) on those cards for the next twelve months, here is what you would pay...

Total Payments: $2,840.71

Total Interest Paid: $2,485.62

Balance After 12 Months: $11,644.91

On the other hand, if you transferred those $6,000 balances over to a new zero interest card, and again, paid the 2% minimum balance each month, here is what the numbers would look like...

Total Payments: $2,660.90

Total Interest Paid: $300 (balance transfer fee)

Balance After 12 Months: $9,699.10

And here is a summary of what you would save...

$179.81 - saved on payment amounts

$2,185.62 - saved on interest charges

$1,945.81 - additional decrease in overall debt

One thing you may be wondering about is the $300 balance transfer fee that I have listed above. Some credit card companies (not all though) charge this balance transfer fee and it is calculated as a percentage (usually 3%) of the total balance that you move to the new card. I have classified it as "interest" because that's really what it amounts to.

Finally, if you really want to leverage this strategy to lower credit card interest rates, once the introductory period expires you can simply shift the balance over to another credit card that offers a low or zero interest introductory offer.

Debt Consolidation To Lower Credit Card Interest Rates

One drawback to transferring your balances to a new, lower interest rate credit card, is that if you don't have decent credit and a good payment history, you may not qualify for a new low or zero interest credit card. If this is the case, your next best bet is to work with a debt counseling company.

A debt counseling company, or "debt consolidation" company as they are also known, negotiates with your creditors on your behalf in order to get you lower credit card interest rates. Once the new rates have been set, you send one "consolidated" debt payment to the debt counselor each month, who in turn makes sure that your creditors get paid the proper amounts.

An added benefit to this option is that you receive a thorough financial analysis and personal or family budget from the counselor in order to enhance your ability to get out of debt quicker and stay out of debt in the future. In fact, this service is arguably more valuable than getting your interest rates lowered, as having a solid budget should be the foundation of any debt relief program.

Do-It-Yourself Lower Credit Card Interest Rates

Why not "do-it-yourself" and negotiate with your creditors directly? This is absolutely a possibility. The most effective way to negotiate lower interest rates with your credit card company is to call them up and ask what the best rate is that they can offer you. If they say they can't lower your rate, then "suggest" that you would like to close your account and move the balance to another company.

Now don't worry. They are not going to cancel your account on the spot. (Although, if you are a very high risk customer, jump to the next paragraph.) They will forward you to their customer acquisition department where they are more likely to be in a generous mood. In all likelihood, they will lower your rates in order to keep your account.

In any negotiation you must have some "strengths" to base your side of the argument on. If you are behind on your payments, have missed payments in the past or have poor credit, your credit card company will know this and will not likely be in any mood to offer you lower credit card interest rates. Why? Well, they know that it is unlikely that you will find another company that will offer a better rate than you have right now. And if they are worried that you may default on your debt, they may just welcome the fact that you are threatening to close your account and pay off the balance. In other words, they may call your bluff. In this type of situation you would be much better off using a debt counselor or even considering a debt settlement program.

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