If you carry a balance on your credit cards, high interest rates can easily cost you hundreds or thousands every year and make it virtually impossible to pay off your debt with the minimum monthly payments. If you’re stuck paying interest rates of 15-25% or even more, there are steps you can take to lower your rates and break the cycle of debt.
#1. Negotiate a lower rate with your card issuer
The best course of action is sticking with the credit card you already have and negotiating a lower rate rather than trying to get a new card. Start your negotiations with the credit card you’ve had the longest and call the customer service number on your card. Be polite but persistent. If you don’t get a better rate, try asking for a manager. If that doesn’t work, try calling back after a few weeks to try again. According to one recent survey by CreditCards.com, 78% of cardholders who asked for a lower interest rate got one.
#2. Transfer your balance to a new credit card
If you can’t get a lower rate on the card you have, it may be worthwhile to get a new credit card with a better rate and simply transfer your balance, as long as your credit score qualifies. Look for a card with no annual fee and no (or limited) balance transfer fees. The balance transfer fee is usually 3-4% and this can mean adding hundreds in new debt to your balance, but it’s worth it if you’ll pay far less in interest in the long run. Balance transfer cards with a promo 0% APR are a great place to start as you can get up to 18 months with no interest charges to pay down the debt.
#3. Work on boosting your credit score
If you can’t negotiate a better rate and you don’t qualify for a new credit card, it’s time to take action to improve your credit score. Your credit score is one of the biggest factors that determines the interest rate you receive with credit cards and other loan products. There are several ways to boost your score, including paying off debt, lowering the balance on credit cards to below 20% (and no more than 20% on any individual credit card), maintaining a good mix of credit types, and paying your bills on time every month. Over time, your score will improve and you will eventually qualify for better rates.