How to help lower your credit card interest rate
Interest is the price you pay to borrow money. And when it comes to credit cards, interest rates and annual percentage rate (APR) are often the same thing. And the lower your interest rate, the less you might pay to borrow.
Learn about steps that could help you get a lower credit card interest rate, which could lower your APR. And find some tips to reduce and avoid interest charges.
What you’ll learn:
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There are a number of different ways you might be able to lower your credit card interest rate, including improving your credit scores and transferring your balance to a new issuer.
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The better your credit history and scores, the lower your credit card interest rate might be.
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You may be able to reduce or avoid credit card interest charges by paying off your entire balance by the due date each month.
3 ways to get a lower interest rate on a credit card
If you’re looking for a lower APR on your credit card, these three steps could help.
1. Improve your credit scores
Having a good credit score could help you qualify for credit cards with lower rates. You might be able to improve your credit scores if you:
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Make on-time payments. Paying all your bills on time shows issuers you’re a responsible borrower. Setting up automatic payments or electronic reminders may help.
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Stay below your credit limit. Generally, using a lot of your available credit could be a red flag to issuers. The Consumer Financial Protection Bureau (CFPB) recommends keeping your credit utilization ratio at 30% or less.
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Only apply for credit you need. Credit applications may result in hard inquiries, which can temporarily lower your credit scores. Applying for several cards over a short period may also give lenders the impression that you’re dealing with financial setbacks, the CFPB says.
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Check your credit reports. Monitoring your credit reports could help you spot errors and track progress as you build credit. CreditWise from Capital One can help you keep an eye on your credit. It’s free, and using it won’t affect your credit score. You can also access free copies of your credit reports at AnnualCreditReport.com.
2. Ask your credit card issuer for a lower interest rate
If you’ve worked on improving your credit scores, you could ask your credit card issuer to lower your interest rate. If you’re a Capital One cardholder, you can sign in to your account online and ask Eno, your Capital One assistant.
3. Consider promotional or introductory rates
A balance transfer credit card lets you move debt from one credit card to another. Some cards offer introductory rates that may apply to balance transfers, purchases or both. This could temporarily give you a lower rate. And you might be able to use that time to pay off your balance. Some card issuers even offer promotional rates on balance transfers to current cardholders.
When this promotional APR period ends, the credit card’s APR typically increases to the standard rate, which might apply to any balance remaining from the balance transfer. Before transferring, it’s worth checking for any balance transfer fees and understanding what the standard rate will be.
How to reduce or avoid credit card interest charges altogether
If you pay your balance off in full by the due date every month, you can avoid paying interest on new purchases. Even if you can’t pay off the entire balance, making more than the minimum payment on time may still help you reduce the interest you pay.
One way to pay more than the minimum is to make multiple payments throughout your billing cycle instead of waiting until the bill comes. Check with your issuer first to be sure that’s allowed and that there are no fees or penalties for doing so. After you hit the minimum, extra payments could help decrease your balance. And that can help reduce the amount of interest charged over time.
Avoid interest rate scams
There are no quick fixes for credit, and the Federal Trade Commission (FTC) has warned of interest rate reduction scams that promise otherwise.
According to the FTC, many of these scams involve a company claiming it can negotiate with your issuer because of a “special relationship.” They may offer money-back guarantees or say the deal is only available for a limited time. But they may charge fees and ask for personal information, which can put the borrower at financial risk. The FTC advises never sharing personal or financial details with anyone who calls you that you don’t know.
How to lower your credit card interest rate FAQ
Here are some frequently asked questions about lowering your credit card interest rate.
What’s an average credit card interest rate?
The Federal Reserve regularly reports the national average credit card interest rate. You can visit the Fed’s website to see the latest reports and other credit metrics.
Why is my APR so high when I have good credit?
Issuers typically consider credit scores and other financial factors when making lending decisions. And having a higher score may help you get a lower interest rate.
Even if you have an excellent credit score, certain actions, such as late payments, could trigger a higher penalty APR. Paying at least the minimum payment on time every month and staying below your credit limit are a few ways to help avoid penalty APRs.
Does paying twice a month reduce interest on a credit card?
If you’re carrying a balance on your credit card month to month, you might owe interest. This interest could accrue daily depending on the issuer’s policies. By making multiple payments, you can reduce the amount of interest that compounds. Depending on your balance, this could result in savings.
Key takeaways: How to help lower your credit card interest rate
A good credit history and credit scores may help you get a lower interest rate. And paying off your bill in full every month might help you avoid interest charges altogether.
If you’ve been improving your credit, it may be time to look for a lower rate. You could compare credit cards or consider a credit card balance transfer.
