Q: I have an excellent record for payments on all my cards, but I'm paying as high as 29 percent interest. How can I lower the rate?
Lots of factors could contribute to your relatively high finance charge, ranging from the relationship you've got with your bank to the way you manage your balances.
In the wake of the Credit CARD Act's passage, consumers wondered what happened to the "protections" lawmakers promised them. After all, hiking the minimum payments and bumping interest rates into the high double digits didn't really feel like protection. Your interest rate's a casualty of new rules designed to force us to use credit cards more responsibly, even as other regulations protect us from the worst habits of the banking industry. If you really want to lower your credit card interest rates, try some of these suggestions:
- Rebalance your balances. Late payments aren't the only reason your interest rate might go up. Credit reporting bureaus also score your "credit utilization" across all of your accounts, as well as on individual accounts. You'll get the best interest rates if you use no more than half your available limit on any given credit card. Use balance transfer credit card offers to spread your debt evenly across accounts. Use our credit card payoff calculator to help you make a plan to knock down your biggest balance.
- Kill your worst credit card, unless it's your oldest. Your credit score goes down as you open more accounts, but that same score goes up as your accounts get older. If you've got a relatively new account that you opened on a whim, like a retail store credit card, consider transferring that balance and closing the account. Even if your oldest credit card account carries a stupidly high interest rate, you probably want to keep it open to anchor your credit report.
- Check your credit report for errors. If you haven't checked your annual free credit report recently, a lurking mistake could be contributing to your high interest rates. Follow the procedure find and fix credit report errors and get incorrect information eliminated from your records.
Every case is unique, so other factors might play into your high interest rate. After you've taken the steps listed above, ask your credit card issuer whether you qualify for a rate reduction or for another low interest credit card.