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. Here are some balance transfer credit cards that may fit the bill:
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Be aware that there are two key components to moving your balance over 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:
- National Foundation For Credit Counseling for credit counseling
- Debtor’s Anonymous for providing support and fellowship among recovering debtors
- Debt Consolidation Care for your debt consolidation needs
- Lower My Bills for home refinancing, debt consolidation and debt management
- Home Foreclosure Fighter for loan modification services
- for mortgage refinancing and personal loan needs
From the list above, I’d like to point out that the National Foundation of Credit Counseling (or NFCC) can help you find a legitimate credit counseling agency. They can direct you to an agency that is licensed in your area that will provide you with the proper educational and counseling services. I used this method for three of my credit cards and was able to cut each interest rate by 10%.
So if you’re having issues with managing your credit card debt, know that there are avenues you can take to work things out.
Contributing Writer: Selena
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{ 8 comments… read them below or add one }
Yes, you’ve got to be real careful when you do a balance transfer!
I disagree, a balance transfer can be a complete life saver but yes you do have to be careful and definitely keep on top with what you are doing otherwise you can end up much worse off.
Honestly, I just ask. I’ve reduced rates by 5% or more on a couple cards in the past. It’s that easy.
I’m not a big fan of balance transfers. I think Financial Samurai has it right. Why not just ask? If you’re looking to get out of debt without turning to a financial source, do it DIY and just ask. What can it hurt? And you might end up getting out of it more than you thought you would!
Thanks for the info.
I tried the “hardship” suggestion and it worked.
I currently have 9 credit cards and tons of medical bills:( I did balance transfer a few years ago and I wasn’t careful and racked up more debt. This is a HARD lesson to learn. You got to be really careful!
So, I’m currently going on some kind of hardship program with 3 of my creditors today (Bank of America, AMEX, and Citi Visa) they raised my APR in the 20’s% and lowered my credit limit to a point I’ll max out! I just called and they are setting me up with their hardship program. Two other ones told me I can’t because I’m in good standings on paying my bills on time and want me to “skip” my next payment and call back but that will hurt my FICO score. I can pay off my 4 remaining ones (little payments that I can pay off in the next few months).
At the same time, I’m working with a Debt Management program called Money Management International (moneymanagement.org). This was referred by one of my creditors that they “work with”. They also take medical loans too which I have:) There’s a $35 monthly Admin fee but I’m going to try to get that lowered or hopefully waived because of my financial struggles. I owe people money (personal loans).
Ok status update. Spoke with one of my creditors and they told me that typically I can only be on one program (Hardship Internally) or the other (Debt Management Program outsource). I can’t do one then the other because they will deny me either way.
He suggested that the DMP will get me a better rate and payment because I’m combining my creditors together into one payment plan. If you know that you can’t pay off all your cards then go on a DMP. My friend suggested this company that she used as well: ClearPoint Credit Counseling Solutions.
Remember there’s always a way, God Bless!
Life can be tough at times, i only have one credit card with a $2,000 balance but am taking forever to pay it off.