The prime interest rate has just dropped to an all time low, so you'd think your credit-card interest rates would be down, too. But they've actually been rising as banks try to shore up lost mortgage revenue. But there are ways to get a lower rate.
Lynn Murphy turned to a credit counselor after she found herself buried under $20,000 in credit-card debt. Her introductory rate had expired and the interest had skyrocketed. "We just had too much credit-card debt," Lynn remembers.
Curtis Arnold advises people on how to negotiate with credit-card companies.
"It can be a little intimidating," he admits. "But educate yourself, don't be intimidated. The issuers, it's in their vested interest to work out a payment plan with you."
Lynn qualified for the bank's hardship program and was able to bring her interest rate down to 4.5 per cent. Even if you're not in dire straits, negotiating with your credit-card companies can really pay off, and you can be your own advocate. Call the number on the back of your card and ask to speak to someone about reducing your interest rate.
"Be persistent," advises Consumer Reports' Andrea Rock." If the first person you talk to can't help, ask to speak to a supervisor or someone in the customer-retention department."
Beware of companies that claim to repair your credit for a fee.
They can't do anything you can't do for yourself
Before you contact your credit card company, it's important to know your credit score. You have to pay to get it. But it will indicate what kind of bargaining position you have. The higher your score, the better chance you have of getting a rate reduction.
At the same time, order your credit report from the major credit bureaus: Equifax and TransUnion. Look for the free report option you can have mailed to you. Your report may contain errors that are affecting your credit rating and credit score, errors that are costing you money.
"Depending on your credit rating, you could lower your rate to less than 8.5 per cent, and these days, anything below 10 per cent is pretty good," says Rock.
Lynn's finance charges dropped from $290 to $84 a month. She'll be able to pay off her debt in just five years, as opposed to the 38 years it would have taken her.
"I did not realize that you could get the credit cards to go lower on their rates," admits Lynn.
Here's how to improve your credit score. Pay all your bills on time before their due date, either in full or at least make the minimum payment. Don't go over the limit on your credit card and don't apply for any new cards because every application knocks down your score.
With a report by CTV British Columbia's Chris Olsen
