Today’s money hack is related to debt repayment.
Credit card debt is particularly difficult to pay off because interest rates charged on short-term consumer debt is particularly high, compared to interest rates on long-term debt, such as mortgages. As a credit card user surrounded with credit card debt, you will do everything in your power to become debt free.
You may simply plan to allocate as much cash as possible towards debt repayment each month to lower your outstanding balance. Consumers should simultaneously attempt to reduce the interest rate on their credit card to further get their credit card debt under control.
Credit card companies often agree to reduce interest rates for different reasons, listed below.
1. Simply ask for a reduction in the interest rate
Research by CreditCards.com shows that around 75% of the requests made by consumers to have their credit card interest rates lowered are actually approved. Similar results were revealed for requests to cancel late payment fees.
2. Inform the credit card company that a lower interest rate will prevent a default on your part
Credit card companies need debtors to repay their loans rather than default in their payments. If your credit card debt is being charged a high interest rate, tell the company that you will be unable to repay outstanding dues altogether, let alone monthly payments, if the interest rate is not reduced. In order to recover their money, credit card companies are likely to cut your interest rate for your credit card debt. Read our full article about this tip here.
3. Leverage your loyalty to the credit card company to lower the interest rate
If you have been using the same credit card for a few years, it may be something that works in your favor when trying to get the interest rate lowered on your debt. Talk to your manager and tell them you would like the company to reduce the interest rate charged on your credit card debt as a reward for your loyalty over the years. Read the full article about using customer loyalty as a negotiation technique.
4. Leverage your good track record as a customer to cut your credit card interest rate
This tip is similar to the previous one in that you highlight your behavior as a credit card user. This technique requires that you emphasize that you have always been prompt with your payments and stayed well within the spending, and any other consistent behavior that prove you are a good, responsible credit card user and would, as a reward, want a concession on the interest rate that the company charges you. Read our article full about this tip here.
5. Use market research to get a more competitive interest rate in your credit card
The credit card market has an over supply problem, which is why companies are very competitive when it comes to attracting customers. There are numerous perks offered on credit cards these days, such as reward points, cash back programs, flier miles, and so on. The interest rates also vary on credit cards and they usually depict the risk profile of the credit card holder. You may, however, still be able to bargain a reduction in the interest rate if you tell your company that many other credit cards charge a lower interest rate and you too would like to be charged less in order to find your deal/package more attractive. Read our full articl here.
6. Switch to a zero rate balance transfer card
If the above tips fail to work or do not deliver a substantial benefit, credit card consumers can pursue the idea of switching their credit cards to get a lower the interest rate. There are some caveats in this case that debtors should be aware of:
- The zero interest rate only applies for a limited promotional period and the subsequent rate may be higher than the one you originally paid on your credit card debt.
- Moving debt to a zero rate balance transfer card will negatively impact your credit score. Fortunately, there are many ways to improve that score.
Read our full article about zero balance credit cards here.
Reference: Student legal assistance – Northern Illinois University