There are several dangers of having a high credit card rate and they can affect all aspects of your financial lifestyle. High credit card rates don’t just dictate how much your minimum monthly payment will be, they also place you in a specific category or risk group. The financial institutions use this information in addition to other data to judge your creditworthiness.
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High credit card rates means you will consistently pay more to your credit card company for purchases, balance transfers and cash advances. Since the National APR average is approximately 15%, your rates can soar as high as 20% or even 29% or more. Although the CARD Act of 2009 did make improvements that assist consumers, some issues remain the same.
A quick review of the Federal Reserve’s website shows the changes affecting APRs and high interest credit cards. The companies must provide ample communication and there are limits on certain fees, but they can still control the APR percentage.
This means customers with high interest rates really received little relief. Depending upon how high your credit card interest rate is and your current balance, it could take years before you repay the entire amount in full.
High credit card rates also damage your credit history and can affect your credit score. Your credit card company reports your information to all three credit bureaus and this is how your credit score changes.
If the data is positive, your score increases; negative reports cause your score to drop. This takes a toll on any other types of loans you may be interested in applying for, like a bank loan for a new home purchase or a car loan.
Applying for an apartment and even new utilities may prove to be increasingly difficult, simply because your high credit card rate suggests you are not responsible with finances.
Getting Your Interest Rates Lowered
If you reviewed your credit card statement and found a recent increase you don’t understand, it is essential that you contact your credit card company immediately. By law, you must receive notice of an increase within 45-days before it can take effect. They must also advise why they increased your rates. This is to give you an opportunity to pay the balance and close the account, if you choose.
If your credit card rates were not recently increased and you have been with your credit card company for a while, you may qualify for a decrease in your APR.
You will need to call your credit card company and ask for a decrease directly. Make sure you have a few comparable credit card offers close by to refer to. If they value your business and you have a good history, they may comply.
You can also escalate your request to the corporate business level where they excel at resolving customer complaints. If you decide to take this step, be sure you record all dates, times and names of the representatives you speak with. Most credit card companies have a 30-day resolution time frame. They will review your request, account history, their current policies, and apply a comparable APR.
Updating Your Credit Report
Because you may not know how often your credit card company reports their information to the credit bureaus, you may need to contact them yourself to update your credit report. This is especially important if you need to make a large purchase soon.
Once your credit card company agrees to lower your APR, you should wait one billing cycle, or approximately 30 days. When your new statement is received and reflects the lower APR, you can then contact the credit bureaus and advise them of the changes. They will confirm with the credit card company and complete the updates as requested.
Rebuilding Your Credit History
If you are unable to lower your credit rates because of delinquent payments, you still have the opportunity to rebuild your credit history and repair the damage to your credit score. It will take some time, but there are a few ways you can start immediately.
Begin with reviewing your credit report and note all of the negative entries separately. Here is where you focus the majority of your finances. Contact every creditor listed and ask for a payment plan or settlement amount; if the accounts are in collections, they usually accept a settlement amount.
Once you establish your additional financial responsibilities, remove anything from your budget that is non-essential. This will help provide the cushion for the extra payments you make.
You can sign-up for a secured credit card with a low minimum balance.
The secured credit card will help you establish a level of positive credit while helping you maintain your finances, realistically.
Knowing how to recognize the dangers of high credit card rates is extremely important in today’s finance-based world. Having good credit requires discipline and patience, but the rewards are always recognized.
If you are struggling with a high interest rate credit card, take the steps you need to rid yourself of the weight you are carrying. Whether you transfer the balance to a low-interest credit card or go agree to payment arrangements. Having a credit card with high interest is not a wise move.
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