Carrying a large balance on a credit card with a high-interest rate can really drag you down, to the point where it may be hard to even meet the minimum payments due each month. But don't despair: There are a number of paths you can take to help lower your Annual Percentage Rate (APR).
How can I lower my credit card APR?
Here are some tips on how you can lower your credit card APR:
Improve your credit score
An improvement in your credit score is critical if you want to start reducing the APR you're being offered by lenders on credit card applications. The two ways of improving your credit score are:
- Paying your bills on time
- Keeping your balances low
Negotiate with your credit card issuer
If you've maintained a good relationship with your credit card issuer, then you could try to negotiate a lower APR. Negotiating for a lower rate on an existing card poses little risk to your credit score, unlike when you apply for a new credit card with a lower rate. Keep in mind there are regulations that your bank has to follow before they can increase/reduce your APR, but it wouldn't hurt to find out if you qualify for a reduced rate.
Consider a balance transfer
Before your balances build up, consider looking for a credit card with a 0% or low promotional rate on balance transfers. Yes, opening a new card might impact your credit score, and there may be a balance transfer fee involved, but in the long run, your score and your own financial well-being may benefit from nipping that interest rate in the bud.
Steps to performing a balance transfer:
Apply for a balance transfer credit card with a zero or low-interest promotional period. Then, don't use the card for purchases. Instead you should work out how much you have to pay each month so you completely pay off your transferred balance before the zero or lower interest rate period ends. If you don't pay off your entire balance before the promotional period ends, your remaining balance will likely have a higher APR when your promotional period ends.
Pay off your balance
If you are in a position where you can pay off your entire balance, then that's a no brainer. It will not only get you out of a cycle of accruing interest charges every month, but may also put you in good standing for negotiating a lower APR if you qualify.
Tips for paying off balance:
Limit your purchases on the card and set up an automatic payment that's large enough to make a good dent in your balance every month.