One unfortunate side effect of the recession is that many people have had to turn to credit cards (one hopes temporarily) to supplement missing income from loss of wages, lack of loans (for students, in particular), or revenue on investments. And while most credit card companies offer you low rates to start, many have measures in place to jack up the rates astronomically in the event of late- or non-payments, over-limit spending, or even simply because a certain amount of time has passed. It pays to read the fine print, but even the most methodical of money-spenders may eventually find themselves in hot water when it comes to dealing with crippling interest rates on credit cards. However, you needn’t be so quick to reach for the scissors. There are plenty of ways to lower your rates and manage your debt without swearing off credit altogether.
1. Ask. It sounds too simple to work, doesn’t it? And yet, more than half of people who contact their credit card companies with this direct request are rewarded with just what they ask for. If they say no, you may want to grease the wheels a bit by threatening to close accounts (although this will only really be effective if you have a fairly reliable credit history). You may have trouble making headway with an operator, but don’t give up. Plead your case to a supervisor to see if you can get what you want…it’s worth the effort.
2. Consolidate. Debt consolidation, always a big industry, has no doubt grown in tandem with the recession. And while it can be difficult to secure loans for this purpose just now, it is worth trying since services will often negotiate to pay less to creditors as well as giving you a better overall interest rate to help lower your monthly payments substantially.
3. Transfer. Most adults have more than one credit card, generally with a variety of interest rates attached. If you are not aware of which cards carry the highest rates, you may be spending a lot more than you ever intended. So if you’re having some trouble paying off your debts and you feel that a high interest rate is to blame, transfer existing debt on one card to whichever company offers the best rate as a possible short-term solution. You may even be able to use this tactic to negotiate a better rate with the card you are transferring to, especially if you are a good customer.
4. Pay on principle. When you’re short on cash, it can be tempting to carry a high balance on your credit card and pay the minimum each month. This is a huge mistake. You should always try to pay off your card as quickly as possible (even if it’s only $20 more than the minimum payment), and not just to avoid paying more in interest than you spent on the original items you purchased. Holding less debt gives you a better bargaining chip to reduce your current interest rates or go after new cards that offer even lower rates.
5. Remove black marks. Unfortunately, paying off a collection agency does not necessarily remove the offending item from your credit report, which could lead to all kinds of financial hurdles down the road, especially when it comes to lowering interest rates. So make sure to call lenders and have them remove these incidents from your credit history before you attempt to negotiate lower rates.
Sarah Danielson writes for a discount vouchers website where you can find Argos.co.uk discount vouchers and PC World discount codes.