Know how to lower credit card interest rate to get the lowest possible interest rate on your credit card.
Credit cards have become an everyday diet for consumers. Where these cards were exclusive before, now anyone with income can get one. It also means that the market has flourished and that you have a sea of providers to choose from.
When it comes to getting a credit card – whether it’s a first or just a new one – there are many things to keep in mind. You need to look at the benefits, the terms, the credit line you can get granted and the credit card company itself. But it is also important to get a low interest rate on the card.
Have you looked at the possibility of getting a lower apr on credit card? Read on, and we’ll tell you why it’s so important to get the lowest possible interest rate on your credit card.
That is why the interest rate on credit cards is so high
First and foremost, you have certainly noticed that the interest rate on credit cards is high. When we talk about interest rates, this is about the rate that takes effect if you do not pay your credit card bill on time. This is when interest on the outstanding debt will begin to be calculated.
It is important to remember that when you use your credit card, you actually take out a loan. It is a short-term loan, and if you are a responsible consumer, you always pay on time. But you still borrow money from the credit card company when you pull the card in the store.
When you apply for a credit card, it is further so that no other security requirements are set than your income. The bank only takes into account your ability to pay, should you end up with credit card debt. Unlike secured loans, where the security is in a home or car, this means that the card issuer takes a high risk with the credit card.
This is also the reason why interest rates are so high. The risk the lender takes will always be expressed in the offer of the effective interest rate you receive. When you borrow without security, you have to pay a lot for the loan, which credit cards in practice give you access to.
The difference between nominal and effective interest rates
Furthermore, it is also important to familiarize yourself with the difference between nominal and effective interest rates on credit cards. Card issuers will usually advertise with the former. But it is the latter you will have to pay.
Nominal interest can be compared to the rent you pay in an apartment, without other expenses. This is the sole price for borrowing the money from the bank. And just like in an apartment, there are other bills to consider.
The effective interest rate includes things such as the establishment fee, term fee, interest rate and any other expenses on your loan. In an apartment, this would have been expenses for internet, caretaker, electricity and the like.
Therefore, the effective interest rate will be a few percentage points higher than the nominal one. The only way to get a real interest rate quote is by applying to relevant credit card providers. Then you can also start comparing your offers.
Repayment period and effective interest rate on credit cards
If you are stuck with credit card debt, there is one other factor in particular that you need to be aware of. It is not just effective interest rates that will make your debt expensive. How much time you spend getting rid of it will also have a lot to say.
This period is called the repayment period. But where you have a fixed repayment period on a regular loan, it is up to you on the credit card to pay down the debt. You can in principle choose to defer it for a longer period of time, and only pay the monthly minimum amount to the creditor.
This is where the repayment period becomes important considering the total cost of your debt. Credit card debt works exactly like annuity loans, where the interest rate is calculated at each term. If you then spend 1 or 2 years longer on getting rid of the debt, the credit card company receives 12-24 times as many interest amounts.
Therefore, it is important that you always consider the effective interest rate and repayment period against each other. If you should be left with credit card debt, it is important to repay it as quickly as your personal finances can.
Credit score and effective interest rate on credit cards
The last factor you need to keep in mind when trying to obtain a low interest rate on your credit card is your credit score. This is a score that credit information agencies have on all adult with income.
The score is an expression of how likely it is that you will incur a payment remark within the next 12 months. Providers of unsecured loans, both credit cards and consumer loans, do not approve applications that come from someone with a registered payment remark.
At the same time, your score will also have a lot to say for the effective interest rate you are offered. There are several things that affect this:
- your age
- frequent address change
- your income level
- change in your income level
- whether you are self-employed
There is no one who has the exact formula for credit scores – except for the credit bureaus. But what is certain is that a strong personal finances will give you a higher credit score, and thus a lower interest rate.
How to rate credit cards against each other
Hopefully you have no plans to be stuck with credit card debt. With the help of the interest-free payment deferral to the credit card companies, you have the opportunity to borrow money for free. As long as you pay your invoice on time, the credit card will not cost you anything.
It also means that you have to make sure to look for other things on the credit card than just interest. With such a competitive market, there is a huge selection of credit cards. The providers have tailored their cards to suit different uses.
You usually get discounts on your credit card – with all kinds of percentages and structures. Therefore, in addition to a low effective interest rate, you should look for the following on a new credit card:
- good discounts – where you need them
- insurance included (travel insurance, ID theft insurance and the like)
- long interest-free deferred payment
- other benefits, such as access to airport lounges, priority space at restaurant or hotel chains, etc.
Find out what you should use your credit card for the most, and you can apply for the one that best suits your needs. Then it will also be easier to limit the amount of credit cards you have to apply for in order to get the best possible interest rate offer.
Use a quote page to get the lowest possible interest rate on your credit card
No matter what type of credit card you are applying for, you should use a bidding page for the application process. These are services that allow you to apply for multiple credit cards with a single application.
Once you have filled in the required information, the tender service will forward it to its partners. These then carry out a credit check of you and you receive the best offers in return.
A tender page will give you a good overview of your choice options when you need a new credit card. At the same time, they are both free and non-binding to use – a perfect opportunity to find the lowest possible interest rate on your new credit card.
You can often be offered a lower interest rate if you maintain good credit and a clean payment history. Don’t give up even if you don’t get it. Continue to make timely payments, reduce outstanding debt, and plan to try again in three to six months. Improving your credit health will help you stand your ground next time. People love helping people who help themselves, and credit card companies want your business. It’s just a matter of making sure you’re in as strong a position as possible when you ask your question. In this article we have covered all the required answers to resolve following important questions:
- How to lower credit card interest rate
- How to lower interest rate on credit cards
- How to get lower interest rate on credit card
- How to reduce credit card interest rates
- How to lower apr on credit card
- How to get lower apr on credit card
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