During a time of rising rates, you might think it’s impossible to get a lower interest rate on your credit card. It’s certainly more difficult to get a lower credit card interest rate, but it’s far from impossible.
Up ahead:
— How to lower your credit card interest rate.
— What to do if you’re denied.
— How to avoid paying interest on a credit card.
[Read: Best Balance Transfer Cards]
How to Lower Your Credit Card Interest Rate
Consumers with excellent credit scores and stellar payment histories have a chance to get a lower rate. But before you start the process, find your credit score, if you haven’t already.
How to Find Your Credit Score
There are numerous ways to find a free score. Here are a few places where you might find your score:
— Your credit card issuer.
— Your bank.
— Websites that offer educational credit scores.
— Money management apps.
Be aware that some of the free scores that are available are VantageScores, not FICO scores. Both types of scores range from 300 to 850, but they weigh the factors a little bit differently. Most lenders use FICO scores, but seeing your VantageScore still gives you important information about the health of your credit.
You want to know your score so you can use it in negotiations for a lower interest rate on your credit card. On the other hand, if your score is less than desirable, you need to work on boosting your score before you ask for a lower rate.
Look for Competitive Credit Card Offers
If you’re getting credit card offers in the mail, start reviewing the interest rates of the cards. Credit card issuers target consumers that they believe have good enough credit to get approved for the card being promoted.
Are the rates lower than what you have with a similar card? If so, use this information to negotiate with your issuer.
Another way to compare interest rates is by researching cards online that fit within your credit range. And do make sure you’re comparing apples to apples. It won’t help you at all to look at cards for exceptional credit when your score barely makes it into good credit territory.
Call Your Credit Card Issuer
OK, you know your credit score and you’ve researched competitive rates. Make a list of credit-related superlatives that describe you. For instance, point out that you’ve never made a late payment or that your credit score is very good.
But be honest above all. If you have made a late payment, say what you’ve done differently to make sure it never happens again. By the way, if you do have an imperfect payment history or your score has recently dropped, don’t call attention to yourself. You want to be in good credit shape before you ask for a lower credit card interest rate.
[Read: Best Credit Cards with High Credit Limits.]
What to Do If You’re Denied
Ask for the reason so you’ll know what you need to work on. It could be that your score is too low or that you have a lot of hard inquiries. When a lender sees that you’ve been applying for a lot of credit cards, it’s a red flag. The company may worry that you’re in trouble, and that’s why you appear desperate for credit. Whatever the reason, spend some time fixing it.
An alternative option is to use a balance transfer credit card. Honestly, if you have a very good credit score, this is actually a better short-term solution to your high-interest-rate problem.
With a balance transfer card, you get a 0% introductory annual percentage rate for 12 to 21 months, depending on the card. You make monthly payments on your debt with the goal of paying it off during the intro period. Another benefit is that as you pay down credit card debt, your score will increase.
[Read: Best Low-Interest Credit Cards.]
How to Avoid Paying Interest on a Credit Card
The best way to avoid paying compound interest on a credit card is to not carry a balance at all. Pay your balance in full by the due date, and your high interest rate is no longer an issue.
Here are some tips for staying out of debt with your credit cards:
— Use a budget. This is the first part of your financial foundation. Note on your budget when you plan to use a credit card to cover an expense. For example, let’s say you use a cash back card to pay for your groceries. Make a note on your budget that you use a specific credit card to pay for purchases. Your budgeted amount for groceries becomes the amount you can spend on groceries using that card.
— Track your expenses. This is the second part of your financial foundation. Once you have a budget in place, set up a way to track your spending. You can do it on your own and create a spreadsheet. But there are also free apps as well as online money management tools that can do the work for you.
— Understand the grace period. This is the key to avoiding paying interest on your purchases. Grace periods range from 21 to 25 days on consumer credit cards. If you pay your bill in full during this time, you don’t have to pay interest.
— Pay in full by the due date. If you carry a balance, you need to figure out how it happened. Investigate and readjust your budget. Credit cards have compound interest, and this can increase your balance quickly. Always pay your balance in full by the due date, and you’ll stay out of credit card debt and build an excellent credit score.
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How to Lower Your Credit Card Interest Rate originally appeared on usnews.com
