If you're one of those credit card holders, you can take steps to make your debt more manageable. One of them is to reduce your interest rate, which allows more of your money to go toward paying off the debt.
Now is a great time to reduce the interest rates on your credit card, as interest rates, in general, are headed upward.1 Below are five strategies that every consumer can use to lessen their debt burden.
1. Never miss a payment
Once you've been more than 30 days late on a payment, your credit card issuer can adjust your interest rate to charge you a “default" rate, which can be 10 percentage points (or more) higher than the standard rate, according to ValuePenguin.com. Make sure you never miss a payment by setting up automatic monthly payments for the minimum amount due, or more. Some issuers also raise your rate for going over your credit limit, so set up text reminders to alert you if you're getting close.
2. Talk to your current issuer
If you regularly pay your credit card bills on time, ask your credit card issuers whether they'll lower your rate. You might also be eligible for a better rate if your credit score has significantly improved since you opened the account.
Visit ftc.gov/faq/consumer-protection/get-my-free-credit-report to see how you can get a free copy of your credit report.
Only a quarter of credit card holders have asked their lender for a lower rate, but of those who asked, nearly two-thirds received a rate reduction of an average 5.5 percentage points, according to CompareCards.com.
3. Shop around for better offers
If your card issuer won't lower your rate — or if you're still unhappy with the rate you're paying — shop around to see whether you can find a better rate from another lender. Ideally, you'll find a card that has a lower overall interest rate and a low or 0% interest on balance transfers for new customers.
Before signing up, however, read the fine print carefully. Most balance transfer offers also charge a balance transfer fee of a few percentage points of the balance, and the low introductory rate only lasts for a set period of time, such as one year. If the fee is lower than the interest you're currently paying, it may still be a good deal, especially if you can pay off the balance before the interest rate resets.