Friday, August 19, 2011

Living Big on a Small Budget - Interest Rate Decrease

The following is a guest post from Pamela Olsen. Pamela is a stay-at-home mom with three boys and a girl all six years and under. She is the owner of The Busy Woman’s Guide to Surviving Motherhood, a blog filled with all sorts of information intended to make life as a women and mother easier in some small way. Her hobbies include blogging, couponing, scrapbooking, reading, gardening, writing and volunteering. When people ask her when she has the time for all that she simply says “I am a planner!”

When you look at your credit card bill you are probably always shocked by the amount next to “Interest”. And it is highly unlikely that a credit card or loan company is going to just offer up a lower interest rate because they are nice. The interest is how they make their money – why would they willingly give that up? However, it never hurts to call up and ask for a decrease because even one or two percent can be a big savings. If you have been paying at least the minimum due, on time every month for the last six months or more, you may qualify for a lower interest rate. When you call, politely ask to speak with someone that is authorized to lower your interest rate – some companies require that you speak with a supervisor. Some companies require you to submit your request in writing via snail mail while others might ask that you submit your request at their website. You may have noticed that sometimes after an extended period of good standing with a creditor, the company increases your spending limit. This is the perfect time to call and ask for a rate decrease instead. They have already made the decision that they “like” you so just ask to be rewarded in a different way. If you want to play a bit of hardball – mention the number of offers you get in the mail each day offering a lower interest rate and 0% on balance transfers. Often they will oblige your request in fear of losing your business. You may be wondering why it would be important to have your interest rate lowered. It can save your hundreds, even thousands of dollars over time. If you have a credit card balance of $5000 at a rate of 12% you will pay a minimum of $600 in interest each year. If you lowered your interest rate to 10% you could save $100 in that year.

It truly does not hurt to ask the creditor to lower your interest rate. The worse that can happen is that they will say “no”. Then you are no worse off than you were before your called. Should you get a “no”, ask what you would have to do to get a lower interest rate. Some times you just have to wait a few more months. Or maybe if you pay $5-$10 over you minimum each month for a period of time, they will give you a percent or two.

A quick note about those offers you get in the mail – practically daily, these days. First, always read the fine print! It might offer a 0% introductory APR – but read further, because it could shoot up to a whopping 23% after one year. Also keep an eye out for “annual fees” – as much as $100 you pay each year, just to carry the card in your wallet. And if you are not interested in the offer, don’t just toss it but shred or burn it – this is how thieves get credit in your name!


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