By: Mirsad Hasic
In the modern world, economic and financial challenges are a worry for all of us. Of these concerns, the most common one is mounting debt and the biggest form of debt tends to be credit cards.
To understand credit cards, it’s important to know what “Annual Percentage Rate ,” or APR, is. Take a moment to look at your credit card bill, where this should be listed. It’s a contributor in the minimum amount you must pay each month, and if you want your debt to go down, you will need to request a decrease in this rate.
Since credit cards are commonly confusing items, here are a few key items to understand:
You use credit cards to purchase things, and sometimes as a payment method when you don’t have the funds to pay right away. When you slide that card, you’re then responsible for paying back the money you owe. On top of this debt, there’s interest attached to it. This is the money that the credit card company charges for allowing you to use their money.
Usually, a credit card company will charge you interest on any balance that you haven’t paid by the end of the month. Those who have good or excellent credit get a low introductory annual percentage rate compared to those with fair or poor credit . This isn’t always the case though. The average APR is between 3 percent and 30 percent. The better your credit is, the lower your interest rate should be, in theory.
Beware of “Hidden” APR Rates
If you have a credit card, it’s important to note that there are sometimes hidden APRs mixed in with the ones you can clearly see. These are considered to be predatory hidden rates because they’re normally heavy fees and can result in an incredible amount of debt.
Sometimes, a credit card company will lure a person in with a low introductory rate. With this, you get to use your credit card without accruing interest, or in some cases, accruing only a small amount of interest. Make sure you know how long this intro rate lasts and what the APR will jump to afterward.
It’s also important to note that as of August, 2010, introductory rates may be higher since issuing banks can no longer increase a new customer’s interest rate during the first year.
Another APR to be aware of is the high interest rates that convenience checks typically carry. These checks allow you to access cash and in turn, the issuing bank charges you heavily for the convenience.
Understanding the Problem
While you may have a high APR, you aren’t the only one. Credit card companies are for-profit businesses and part of the way they make their money is by assigning a higher
APR for those they determine are a higher risk.
Maybe your hours at work are being cut back. You might experience a personal loss. There are a number of situations where you just can’t pay the full amount due each month. If you are having any of these problems in your life, there is something you can do:
How to Lower Your Credit Card Interest Rate
As you follow these steps, make sure you have the information you need to discuss your account. It’s important that you only provide factual information. Trying to pull one over on the bank can have negative results.
1. Have your account information ready.
2. Know your payment history. If you’re asking for a benefit from your credit card company, then it’s helpful to have a solid and consistent payment history. You may want to consider mentioning the payment history on all your accounts to prove you are paying all your debts as directed.
3. Pull your credit report . and know your credit score before you even begin. When you know what you are working with, you have the upper hand. Not all banks will offer this information to you.
4. Compare your current APR with similar cards so you know where you stand. In cases where you have a similar credit card to use as a comparison, provide this information to the bank as well. This may sway their decision.
5. Be cool, calm and professional. Getting upset with the person you’re asking a favor from won’t help your cause. Stay cool, use facts to make your case and treat the person on the other end of the phone as you would like to be treated.
Take the time to follow each of these steps and you’ll see how easy it can be to get your credit card company to lower the annual percentage rate you pay. In some cases, you may need to submit additional information – so be prepared.
If you’re successful, you’ll find that you have more money in your pocket, which you can use for more important bills in your life. It will also help you avoid negative marks on your credit report for missed and late payments.
Even as your APR is lowered, continue to pay more than the minimum payment due each month. This helps to reduce the amount of interest you accrue, by reducing the principal you owe.
Could your credit score use some tweaking? Find out your potential for credit improvement and how to achieve it at Quizzle.com. And check out these other great money-saving articles:
Mirsad Hasic is the editor of Think Credit Cards , a site where you can get tips on credit card debt relief and learn how to consolidate your cards in an easy way.