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How to Pay Less Interest on Credit Card Balances

Written by prositesfinancialMay 15 • 4 minute read

credit card balance

No one enjoys being in debt, yet credit card debt remains one of the most common financial concerns for most Americans. Over 40 percent of credit cardholders carry a monthly balance, and the average balance is over $6000. If you have accrued credit card debt, it is important to pay it off as quickly as possible to minimize the amount of interest you will pay.

For most of us, it will take a while to pay down those credit balances. So what are we to do in the meantime? How can we reduce the amount of interest we pay, so the debt on those credit cards isn’t quite so painful? Here are five different options for how to reduce the amount of interest you will pay on credit card balances.

1. Request a Reduced Rate

As long as you remain a good customer – that is, one with a history of making payments on time and in full – you should be able to ask your credit card issuer for a lower interest rate than what you are paying now. Amazingly, only about 25 percent of credit cardholders have asked their credit card provider for a reduced interest rate, yet around 65 percent of those who asked received a rate reduction!

Of those who requested a rate reduction, they received an average reduction of 5.5 percentage points on their interest rates, according to data from

2. Always Pay Your Monthly Credit Card Bill on Time

One of the most important things you can do to prevent the interest rates you already have from going up is to make sure you pay your monthly bills on time. The vast majority of (if not all) credit card companies have fine print in their cardholder agreements that state that they can raise interest rates dramatically if you are more than 30 days late on a payment.

Most credit card companies will not instate the higher interest rate until after you’ve been more than 30 days delinquent on a payment. However, there is no free lunch, as most of these companies also have an immediate late payment charge that takes effect right away when they don’t receive your payment on the due date. This payment can often be quite steep, but only affects you for that month, whereas higher interest rates will affect you every month after that.

3. Research Better Cards With Lower Rates and Competitive Balance Transfer Offers

Many credit card companies have balance transfer offers, where you can pay lower interest rates on balances transferred from other company’s credit cards. This can be an easy way to reduce your balances quickly, even if your existing credit card provider declines your request for a reduced rate. You could even use the lower rates offered by competitors as an incentive for them to reduce the rates they are charging you.

Keep in mind that a lower interest rate on a new card is not a good excuse to spend more money and increase the balance on that card. One of the biggest pitfalls that can occur when you do a balance transfer the tempation to spend more on the new card. This is exactly what these companies want and why they offer these low-interest rates on balance transfers, so keep this in mind when you use them!

Remember that a balance transfer is a tool to use in the process of eliminating your debts, not an excuse to delay paying them off in the first place, or worse yet, increase them. You may even choose to go as far as cutting up that new balance transfer offer card when they send it to you or storing it in a safe place well away from your wallet or computer, where you will not be tempted to use it. This way, you will remember only to use the new card as a debt repayment tool, and not as yet another credit card to rack up debt.

4. Make Paying Down Your Balances Quickly Your Primary Objective

The dollar amount you pay in interest is directly based on the amount of outstanding balance you have on your account. Therefore, the lower the remaining balance, the less interest you pay. It’s that simple. If you are trying to reduce the amount of interest you are paying, there is quite simply no better way to do that than reducing the balance itself.

Now, it can still be very helpful to take some of the other steps in this list as well. For example, you could negotiate a lower rate on one card, transfer the balance of another card to a new card with a lower interest rate on balance transfers, and then use the savings to increase your monthly payments on your balance principal. This will allow you to reach a zero balance faster than you would have been able to otherwise.

5. Use the Snowball Method To Repay Balances From Smallest To Largest

Another tip recommended by many debt experts is to use the snowball method, which is very simple. With the snowball method, you make the largest monthly payments you can afford each month on the lowest balance you have. The goal is to pay off that balance as quickly as possible, in order to reduce the total number of accounts that have outstanding balances on them.

Next, use all the money you had been using on the smallest balance, combined with the money you were using to pay the minimum on the next smallest balance, to pay that second smallest balance off quickly. You will now be paying even more on the second balance than you had been on the first one. With each progressive balance that is paid off, you are able to make larger and larger payments on the larger and larger balances. Many people have used this method successfully to eliminate their consumer debt.

How to Begin

The first step in this journey to debt elimination is to make sure to examine each of your current credit card statements. Assess in detail how much you owe on each account, and what your current interest rates are. Then, go through the list above and consider which steps you can take to begin reducing the interest you pay. If you have any other tips or suggestions that could prove helpful to others on a similar path, feel free to share them in the comments below!

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