Getting debt at the lowest ratesWednesday Jun 16, 2010
The one four-letter word that will drag down even the best credit scores is DEBT. Debt drags you into an abyss of higher interest rates and extra fees, but debt can be tamed.
The first step in getting debt at a low interest rate is finding the right credit card. First, you need to shop around. Don’t just open the first offer you find, and be weary of any pre-approved offers in the mail. Good interest rates are in the single digits (6-9%), but with all of the new regulations on companies you might have to settle with a rate in the low teens (10-14%). College students need to be extra careful, credit card companies know you might not be educated on your credit or worried about debt so they will off your student credit cards with large maximums partnered with outrageous interest rates.
If you’ve been a loyal customer to a credit card company for a few years and you’re carrying a balance on your card, negotiation is your best tool to lower your debt. Educate yourself on the current rate you’re paying, along with any annual fees you’re being charged. Next, call the company and speak with a representative. Tell that person you want a lower rate and caution them that you will move your debt to another company if they can’t deliver. You can’t expect a miracle, but they should lower your rate and even dismiss your annual charges if they believe you are a valuable customer.
Also, try to keep your debt on a general credit card instead of store cards. Stores offer rates as high as 30% and most people don’t read the fine print before signing up. These cards can also charge outrageous over-limit and annual fees, so remember to ask questions before participating in their “quick 30 second approval process.”
Before signing up for a new card you need to think about this:
- Understand that missing a payment with one creditor can affect the rates you are paying on other cards. Notice of this preemptive strike is buried in the fine print of the credit card agreement.
- Look for finance charges and terms, and understand when they can change.
- Understand all the rate terms.
- Figure out the penalty rates and when they can kick in. There are differences between creditors and when they will push the button on a penalty rate and how high rates can go.
- Get a handle on how the minimum monthly payment is calculated, even though you'll conscientiously want to pay more than the minimum each month.
- Know what the grace period is (if any) before interest charges set in.
If you stick to these few easy tips and remember to always pay your bills on time, there’s no reason why you can tame your debt quickly and effectively.
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