Everyone pays attention to the interest rate when shopping around for credit cards, but Finance Charge policies are rarely glanced at. Are credit card company’s are really charging you 83.3% interest? The normal credit card APR ranges from 12%-29%. When a customer receives a $1000 loan from a bank, the bank in turn has the legal right to charge interest on the rate you borrowed the loan. If, for example, the interest rate were a fixed 10%, cost of borrowing the original $1000 would be at least $1100, in other words, the $1000 loan + $100 finance charge. Banks and credit card companies don’t expect most customers to borrow the loan and pay it back right away, and nor do most people pay on time every month. The bank allows customers a few days after that date to pay their bill, which is called a grace period. Payments received after the grace period can be assessed as late fees or additional finance charges stated by the federal Truth-in-Lending Act. Learning how to increase your credit score will help you get lower rates.
What Can You Do?
Don’t accept it!
You can phone into your credit card company and ask for them to lower your rate, or your finance charges to be minimized. The key to getting compliance with your credit card companies is to go in with a plan before asking. If you have a poor payment method, chances are very slim that you will get your rate lowered, or any additional favors added into that mix. BUT, if you do make your payments on time, that is a huge card you can play. You have to think of a plan before phoning. Think of your conversation as a give and take.
“I have made my payments on time for the last year, and I am hoping to pay off my credit card in the next 8 months, can you do better on the interest rate? ”
The bank is going to give up a lot of money of interest and finance charges they would otherwise make off of you, so why would they lower your rate?
Most often, it involves a promise to make a certain amount of payments of some sort of give on your end. We have an additional article that explains how to phone in and lower your credit cards here. The # 1 success tip is to think in advance what positives you have on your side. What cards do you hold in your hand? Do you have a job that is consistent? Have you paid on time? Are you eager to make your payments on time? Are you excited about paying off your credit card?
When we phoned in to our credit card companies asking for a low rate we had success and failure. One credit card gave us 0% interest for one whole year. We were jumping up and down after that phone call, while the other card, flat out said NO, after talking to a number of representatives. We decided to move our credit card balance to another card, because some companies will refuse to work with customers who are willing to pay off their debt. Keep in mind, we did pay on time the entire time we had our card. Some companies JUST will refuse to take a loss on their bottom line of making money.
The last card, we had to wait on hold on the phone for the manager as the customer representative declined to lower our rate. One big tip we can pass on is don’t give up on the phone. Many people are phoning in and asking for a lower rate, so their customer reps are educated to decline customers. Most customers think, no means no, so they give up and hang up. Ask to speak to the manager in charge. If you do so, be sure to have a plan that details why they should give it to you, and what you will promise in return for a lower rate.