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How To Lower Your Credit Card Interest Rates

October 4, 2009 by Guest Blogger

I’ve been noticing that many creditors have been raising interest rates on credit cards to “make it” in the bad economy. That’s the lingo they use anyway to justify raising rates that can go up to a whopping 30%. Some have begun to ask, is this legal? Well, of course it is, because as consumers, we all signed a little document with our credit card application that stated that our credit card companies can do whatever they want with the interest rates. However, there are ways to fight back. I’ve actually got some experience with lowering my rates by using the following methods.

3 Effective Ways To Lower Your Credit Card Interest Rates

1. Ask about a hardship program.

The first method is to call each of your creditors and ask if they have a “hardship program.” Many consumers do not realize that creditors offer such programs to clients that may be cutting it close when it comes to paying their credit card bills each month. You want to call the number on the back of the card, express your concern that you may not be able to pay your bill next month, and ask if there is any type of hardship program they can offer you. Typically, these programs last from 3 months to 1 year.

Many times the creditor will cut your interest rate in half or even take it down to 0% for the first 6 months. The only drawback, for some, is that the use of your credit card is suspended. In this situation, you’ll not be able to continue using the card. However, if you want to get out of debt, this is exactly what you need to do anyway. I asked for a hardship program with my American Express rewards card and received a 0% interest rate for the first 6 months, and 9.9% for the remaining 6 months of the program. This was a pretty good deal for me.

2. Do a balance transfer.

The second method for lowering your credit card rates is to complete a balance transfer to a low interest credit card. However, there are two key components to doing this successfully:

• First, you want to make sure you do not start racking up a balance on the card which you’ve already cleared (e.g. whose balance you’ve transferred elsewhere). Many consumers fall into this trap. Once they clear the debt on one card, they start charging it back up again. The whole purpose of performing the balance transfer is to get a lower rate so that more of your money can go towards the principal balance. If you charge up the original card again, you are going to remain in debt.
• Secondly, you should read the fine print on your card. Look at the balance transfer fee on the new card and read its terms carefully. Find out how long you’ll be paying the lower interest rate. You’ll also want to know what your card’s regular rate will be once the intro rate expires. Transferring to a 0% APR credit card that goes to 24% in 6 months is not a good deal, unless you can pay it off in 6 months; and for many people, this is highly unlikely.

3. Get credit counseling.

The final option to reduce your interest rates is to call a credit counseling agency. While there are many agencies and outfits out there that will help you manage your debt for a fee, make sure that you start on this route by dealing with a legitimate, non-profit credit counseling agency.

You may want to consider signing up with a debt management program rather than with a debt settlement company. With a debt management program, you’ll rework your payments to your creditors in some capacity. If you do decide to work with such a program, you’ll also want to make sure that the company you are dealing with does not “hold” on to your first or third payment (to creditors) for their fee. Doing so will cause you to fall more than 30 days behind on your cards, which will have a negative impact on your credit report.

So where can you go for help on your debt situation? Here’s a short list of resources you can check:

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