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The Effect of Lower Credit Card Interest Rates

Getting buried in credit card debt is an easy thing to do. Perhaps you were paying for school, taking care of medical emergencies, or simply using your credit card for purchases that were within your means at the time but suffered a setback in the workplace. No matter the reason, the result is the same, you ended up with credit card debt. Making the minimum payments only ensures that you will be paying off your credit card debt for many years to come and the high interest rates many credit card companies charge make it difficult to pay much more than the bare minimum.

Fortunately, because it is typically the high interest rates that make credit card bills so challenging, lowering your interest rates will make it far easier to take control of your credit card debt. Lowering your interest rates will lower the amount you have to pay each month, the amount of time until you completely pay off the debt, or a combination of the two. In addition, lowering your credit card interest rates can put a significant amount of money back in your pockets that you do not have to pay in interest payments.

As an example, consider a $20,000 credit card debt that you want to pay off in 5 years time. As the chart below indicates, if you have an 18% interest rate on your credit card, you will have to pay just over $500 per month and will end up paying over $10,000 in total interest payments by the time you have completely paid off the debt. Conversely, with an 8% interest rate, you will pay almost $100 less per month and save almost $6,000 in total interest payments.

$20,000 credit card debt paid off in 5 years

For credit card users who are finding it difficult to make monthly payments, the chart above shows how you can significantly lower your payments by lowering the interest rates. In fact, lowering your interest rates by only a few points may be the difference between not being able to make payments on time and having a little extra money to spare after paying your bills.

You do not need a large difference in interest rates to see the effects

Of course, if you do not have trouble making your current payments, you can continue to pay the same amount each month and by lowering your interest rates, pay off your credit card debt in less time. This will double the benefit because not only will you be making smaller interest payments every month, but you will not have to make them for as long.

The chart below shows how you can benefit by lowering your interest rates and shortening the amount of time you have to work on paying down your credit card debt.

$20,000 credit card debt with $500 monthly payment
18%5 years$10,021.75
16%4 years, 9 months$8,207.73
14%4 years, 6 months$6,665.07
12%4 years, 3 months$5,338.73
10%4 years, 1 month$4,181.16
8%3 years, 11 months$3,158.73

Compare the two charts and you can see how you get even more benefit from lowering your credit card interest rates if you are able to continue making the same monthly payments.

How to lower your credit card interest rates

At this point it is clear that there is benefit to lowering your credit card interest rates which begs the question; how do I lower my interest rates. The answer is that there are a few methods for lowering your interest rates. In your particular case there may be a single best solution or a combination of methods that help you achieve your goal.

Consolidate Your Credit Card Debt

If you own a home, you may be able to completely pay off your credit card debt by including it in a mortgage refinancing loan. Doing so will convert your existing unsecured credit card debt into a secured debt with a lower interest rate. You will still end up with the same amount of overall debt, but will end up saving in interest payments.

If you do not own a home or are able or willing to secure your credit card debt, you may still be able to get approved for a debt consolidation loan with a lower interest rate than your current credit card interest rates.

Transfer Balances to Lower Interest Rate Credit Cards

If you have multiple credit cards, it makes sense to move your credit card balances to cards with lower interest rates. Just be careful when doing so that you are not simply transferring your debt to avoid making payments, especially when this involves opening new credit card accounts.

Improve Your Credit Score

Improving your credit can be a powerful tool to turn around a less than desirable financial situation

Your interest rates are primarily dictated by your credit score. Improving your credit score will in turn allow you to qualify for credit cards and other loans with lower interest rates. When used in conjunction with debt consolidation loan, improving your credit can be a powerful tool to turn around a less than desirable financial situation.

There are a variety of methods for improving your credit score, a practice that is loosely defined as credit repair. These methods range from reorganizing your existing credit accounts to disputing your credit reports to working with your individual creditors to change the way they report to the credit bureaus. You can work to repair your credit on your own or repair your credit with the help of a reputable credit repair company.

Get Help From a Debt Counseling Company

A debt counseling company will work directly with credit card companies and other creditors to negotiate lower interest rates on your credit accounts. This may be the best solution if you are unable to otherwise secure your debts. Debt counseling is ideal when your credit card and other unsecured debts are making it hard for you to make your current payments because it can keep you from have to resort to more extreme measures such as debt settlement and possibly bankruptcy. Get online debt relief now at

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