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How To Get A Low Interest Rate APR on Credit Card Debt

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List of Credit Card Debt I’ve been getting a lot of stories of people struggling to get out of debt because of the recent How to Fight a Debt Collector series. They haven’t reached the point of fighting debt collectors yet and they want to keep it that way. As much as others like to malign those deep in debt, the vast majority of debtors want to make good on what they owe.

If you’re in heavy credit card debt, the first thing you need to do is take stock of your financial situation and stop spending. You need to get yourself on a budget and stop the bleeding. Once you get that under control, the next step is to restructure your debts so you can make up lost ground. That’s where this post comes in.

The problem with credit card debt in particular is that the interest rate is always so high. We’re so used to seeing mortgage rates in the single digits that we forget that credit card interest rates are in double digits. Double digits! How is someone who has made spending mistakes going to recover if they need to pay 15-20% each year in interest?

They can’t. Once you’re on a budget and making regular payments, the next step is to lower the interest rate on your credit card debt. The answer, though, isn’t to go out and apply for low APR credit cards. That’s part of the answer, but that’s not step one.

Ask for A Lower Rate

Before you apply for a low interest rate credit card, try calling your current credit card issuer and asking for a lower APR. If you have been making regular on-time payments, there’s a possibility your credit card will just lower your interest rate. Since it costs you only your time to make the phone call to ask, I don’t see why you wouldn’t want to try this first. If they won’t budge, be persistent and say that you see better credit card offers available and you’re thinking about transferring your balance. The worst thing they can say is “no” and you lose nothing except a bit of time.

Consider Prosper, Lending Club

Peer to peer lending networks like Lending Club and Prosper are great places to try to get a loan if you have good credit. Both peer to peer lending networks require a fairly high FICO credit score (FICO 640+) and the loan funding process can take about a month, since investors are bidding down the interest rate on your loan, it’s an option if you have time. With average interest rates in the single digits, these are usually very attractive compared to the rates on credit card debt.

Another benefit, or drawback depending on your perspective, is that the loans are for three years so you will be finished in a set period of time. Finally, if you do get a loan, you don’t have to get one for the full amount of your debt. If you owe $5,000, you can always opt for a smaller loan, say $1,000, so that you can convert part of the credit card debt to something lower.

Apply for Low Interest Credit Cards

From here, you can start looking for cards that have a low APR and willing to let you do a balance transfer. I’d check this list of credit cards with 0% balance transfers to see if you can get a 1-2 punch of 0% APR for a year and then a low APR after the 0% promotional period.

If those don’t fit the bill, here are some cards that offer rates lower than the average (currently around 15-16%). The key is that you need the rate to be lower than your current rate. I don’t list the rates on this page because they are frequently changing but they will be listed in the card’s terms & conditions:

  • Citi ForwardCiti Forward – This card has a low variable interest rate pegged to the Wall Street Journal’s published prime rates and it has a special program that lowers your APR when you use credit wisely. If you make a purchase, stay under your credit limit, and pay on time for 3 billing cycles in a row, your interest rate will be reduced by 0.25%. You can get this benefit 8 times for a total of 2% reduction in your interest rate! You also get 6,000 ThankYou points after $250 in purchases within 3 months, 2,500 points when you sign up for paperless statements within 3 months, and a favorable points reward schedule without an annual fee,
  • Citi Platinum Select Card – The Citi Platinum Select has a 0% APR on purchases and balance transfers for a limited time without an annual fee. Citi also uses the Prime Rate published in The Wall Street Journal two days before the statement/closing date.

So to recap, first you need to stop the accumulation of debt. After you’ve achieved that, which is no small feat, go to each of your cards and try to negotiate down the interest rate. After that, consider going to a peer to peer lending network to get a lower interest loan for part or all of your debt. Then, if you can’t get it lower that way, try a 0% balance transfer or transferring to a card with a lower rate. Keep in mind that cards will usually charge you a fee to transfer a balance, so the interest rate difference needs to take that into account.

Good luck!

(Photo: pumpkinjuice)

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6 Responses to “How To Get A Low Interest Rate APR on Credit Card Debt”

  1. zapeta says:

    Also note that if you do transfer a balance, you will end up paying 3% to 5% as a balance transfer fee in a lot of cases. That can eat up a lot of the interest savings so run the numbers before you transfer a balance.

    Happy Thanksgiving all!

  2. CK says:

    Talk to your credit union if you are a member as well.

  3. Dylan says:

    “Before you apply for a low interest rate credit card, try calling your current credit card issuer and asking for a lower APR. If you have been making regular on-time payments, there’s a possibility your credit card will just lower your interest rate. Since it costs you only your time to make the phone call to ask, I don’t see why you wouldn’t want to try this first. If they won’t budge, be persistent and say that you see better credit card offers available and you’re thinking about transferring your balance. The worst thing they can say is “no” and you lose nothing except a bit of time.”

    Jim, I’ve heard from several people about having accounts closed by the issuer or credit limits lowered as a result of asking for a lower rate. So, they can do worse than saying “no,” and it may cost more than the time to place that call. It didn’t used to be this way, but I think banks are more on edge lately.

  4. eric says:

    It definitely isn’t as easy as it used to be to find good balance transfer options. The days of 12 or 15 months 0% APR with no transfer fees are long gone…

  5. Izalot says:

    If a credit card company closes you for asking about getting a better rate then it’s time to move on to a better company. If the company is that draconian in their business practice what else are they doing? Although, I would venture to say that most readers of this blog probably pay off their credit card debt monthly and high interest rates are moot. I say show me the credit card with the best reward structure!

  6. Wilma says:

    I’ve played the 0% interest transfer game going on 5 years now and I’ve found it to be well worth it. you must use it wisely though and make your payments on time. I’ve purchased several high ticket items this way. It’s nice to see a balance go down when you send in money.


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