Monthly credit card payments on high interest credit cards can quickly derail a consumer from a fiscally responsible path and throw even the best budget out the window.
Once compounding interest begins accruing on a consumer’s credit card balance, the race to minimize the damage begins as the balance grows and the amount of the monthly payment applied to the principle declines. But, there are a few ways to cut down on your monthly credit card interest payment and save you money.
Balance Transfers. Transferring your high interest credit card balance to a new credit card with a low 0% interest rate will give you the opportunity to pay off the balance much sooner as well as saving you thousands of dollars in interest payments.
Pay early and often. The monthly interest fee which your credit card company charges you is calculated by your average daily balance. The sooner you make your payment, the less you will you will owe in interest. In fact, making multiple small monthly payments as often as you can will also lower the amount of interest that you are charged.
Pay on-line. Due to the fact that mailing and processing of your payment may take 3-5 days, that’s an extra 3-5 days that your account accrues interest. Paying your bills on-line will save you money by assuring you that you payment is processed immediately.
Ask for a special financing. Your current credit card company can actually give you the same promotional offer that others extend to new clients. This means that you can get a 0% APR for a fixed term from your current credit card company, just ask them.
Ask for a lower interest rate. If your credit card company isn’t willing to offer you special financing, request a lower interest rate. Just make sure that your account is in good standing and that your utilization rate is 30% or less. (Meaning that your balance is 30% or less than the credit limit.)
Follow these tips to save money and get out of credit card debt.
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Today, many Americans are carrying debts across a number of accounts and loan types, and their balances can sometimes grow as a result of significant interest rates. Fortunately, there are a number of ways consumers can reduce these charges.
When consumers have large interest rates on their various loan types, they can often pay more into their added charges as a result of those APRs than they do into their principals, according to a report from Kiplinger’s Money Power. Therefore, it can be a good idea for consumers to look into ways to reduce the interest rates they pay on their accounts.
One of the easiest ways to do this for credit cards can be to call up a lender and ask, the report said. Consumers with strong borrowing histories who may find themselves a little overburdened by their current rates can have some success with this method, particularly if they are persistent about doing so. But if they aren’t, it may be a good idea to find a balance transfer credit card that will allow them to move their debt to a new account that provides them with a 0 percent introductory rate for the first six to 18 months they have the new card.
Of course, there is also the popular option of refinancing a home loan, the report said. This can be a bit of an arduous and complicated process, but the result for those who are successful in their attempt is extremely beneficial. A refinance can save consumers hundreds of dollars per month or more on their monthly mortgage bills, and reduce the interest rate on their remaining balance by a few percentage points, saving them more in the long-run as well.
And a less well-known type of refinance comes in the form of auto loans, the report said. As with mortgage refinances, seeking this for an auto loan can significantly reduce both the amount a driver pays per month and the interest rate that balance carries. However, many auto financing lenders have penalties built into their loan agreements for consumers who pay off their balance early, which might be costly for those looking to refinance.
Another great way consumers can get out from under their debt is by increasing the value of their monthly payments so that they eliminate their balances more quickly.