How to Save Money on Your Credit Cards
Are you tired of dragging around huge balances on your credit cards? Are interest payments taking a huge scoop out of your budget? There are several ways to save money on your credit cards, ranging from the quick to the complex.
The most straightforward method is to pay a little extra each month. If you have a balance of $7,000 and a 14% interest rate, paying $150 per month will pay off your credit card in 68 months and cost you $10,200. Just $25 per month added to your payments will reduce the payoff time by over a year, to 54 months, and the final sum you will pay will be $9,450. That’s $750 in savings.
“If I could afford to pay extra, I would already have paid my credit card off!” you say. Fair enough. Most of us aren’t interested in saving money on our credit cards over time; what we want is lower monthly payments. To drop the amount of your monthly payment, you need to get a lower interest rate. You have a few methods to choose from:
* Roll your debt onto a card with a lower interest rate. Watch out for rollover fees. They can easily reach 3% of your balance, which can amount to a considerable charge. If you can, find an offer that waives rollover fees. The best way to roll over a balance is to find a card that offers a very low interest rate on balances rolled over or charged to the card during an introductory grace period, then maintains the low interest rate for that balance until you have paid it off.
* Call and ask your current credit card company for a lower interest rate. You have the best chance of succeeding with this method if you have a good credit history, have been with the issuer for a year or two, and have a few credit card offers from other companies that offer substantially lower interest rates. Explain to the customer service representative that you have better offers and are considering switching. Often, the representative will be able to negotiate a better deal with you. (If the first representative who answers isn’t able to help you, politely thank them, and call again at a different time. Other representatives may have more leeway or may know a loophole in the regulations that the first representative didn’t know about.) In the worst case scenario, the credit card company cannot lower your rates, so you simply go on paying them as before and find a better card to switch to.
* Call your credit card company and ask for help. If your financial situation is extremely bad and you are unable to make your monthly payments, the credit card company may be willing to work out an emergency arrangement with you in which they lower your monthly payments for a set period. This is only for use in the worst circumstances, when you are at risk of defaulting on your credit card otherwise. You may face severe penalties, such as a reduction in your available credit or a closing of your credit line, and your credit rating will suffer. However, it is a better and more responsible solution than defaulting, and can squeak you through a tough period.
Saving money on your credit cards will take a little time, patience, and persistence. However, soon you will have a better deal, and will be on your way to considerable savings and greater peace of mind.