How To Lower Credit Card Interest

Written by Will Lyon on 1 July 2019

Do you feel you were sucked in by an introductory interest rate? Have these rates risen to a point where you’re struggling to make the repayments?

There are a number of things you can do to lower your interest rate and reduce the chances of credit card debt. Be it asking your credit card company to lower your rate, to switching providers altogether, you should never accept a high interest rate as a certainty.

What is credit card interest?

Credit card interest is the main way that credit card providers generate revenue. If you’ve paid off anything less than the minimum amount on your credit card, you’ll likely be charged interest.

How are credit card interest rates quantified?

Interest is usually expressed as APR (Annual Percentage Rate). Let’s say your credit card has an APR of 10%, if you spend £1000 and don’t pay it back within a year, you will be charged £100. So, you’d end up owing £1100 in total.

I’ve never had a credit card before, how do I spot a good deal?

Before making your first credit card application, bear in mind that most providers will offer a 0% introductory interest rate.

The length of the introductory rate will depend on the providers. It does have to be a minimum of 6 months, although it can extend anywhere up to 21. Even further, in some cases.

It’s important to be mindful of such interest rates however.

Late payments can result in your introductory rate prematurely expiring. If this happens, you’ll likely be moved into the penalty rate bracket. Typically 29.99%, this is the highest interest rate available.

Stacking up arrears at such an interest rate may lead to severe credit card debts, and should be avoided if possible.

Looking for a way out of credit card debt?

If you’re looking for a new credit card, try to find one with little or no annual fees.

An annual fee is the amount you pay for using the card, as well as all the rewards and benefits that come with it. Some companies will include this, some won’t, so it’s worthwhile doing your research.

How can I improve my credit score?

The best interest rates and credit card offers are usually offered to those with good credit scores. If you find yours is sub-par it may be worth taking some time to build your credit score up.

You can do this by watching your credit utilisation rate (the proportion of your credit card limit that you’re using). By keeping it at 30% or less, you’ll appear more creditworthy to potential lenders.

Don’t worry if you’ve never had a credit card before. There’s a number of ways you can improve your score without drawing credit. Registering to vote, making any repayments in a timely manner, or cutting financial links to others for example.

Looking for more ways to improve your credit score?

How can I negotiate a lower interest rate with my own credit card provider?

  • If you have multiple credit cards with the same provider, start with your oldest card first. Credit card issuers are more likely to reward the loyalty of a good customer.
  • Be prepared for the conversation you’re about to have with customer service. Assess your personal finances, and arm yourself with information. It’ll stand you in good stead should you get asked any jargon-based questions.
  • It’s also worth doing some competitor research before you pick up the phone to your card issuer. If you’re equipped with deals from competing providers, you may be able to leverage this to your advantage. They’ll likely offer you a matching rate. Maybe even a lower one.

Transferring your balance

Rather not go through the trouble of calling your credit card provider? Maybe they’ve already refused to lower your interest rate? A balance transfer card could be the perfect alternative.

Transferring your balance means moving your existing balance from one card to another, ideally one that has a better interest rate. Balance transfer cards are also a good way of paying off credit card debt.

Moving your balance to a card with a 0% interest rate will put a stop to any interest you might be paying, preventing your debt from rising any further.

Furthermore, in most cases you can consolidate multiple credit card debts and transfer them all to one card. Dealing with one large debt rather than several smaller ones may be easier to manage. As such, consolidating and simplifying your debt is worth considering if you’re struggling to keep track of multiple payments.

Do you feel like you’re paying too much interest on your credit card? Perhaps you’re struggling to make repayments as a result? Get in touch with PayPlan today for FREE impartial debt advice.

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Filed under Money Management

This article was checked and deemed to be correct as at the above publication date, but please be aware that some things may have changed between then and now. So please don't rely on any of this information as a statement of fact, especially if the article was published some time ago.

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