# 1 – See if they will cut the rate.
Sometimes just calling the company and asking for a reduction of the interest rate will work. The market for credit cards is aggressive and strategies to match interest rates with competitive companies are common. If a company has already offered you a cheaper rate then that should help get their price down too.
Call the company and say something like:
"I really do not want to leave your service, but I need a cheaper debt"
This usually works as credit card companies have customer retention reps, those staff members have the power to authorize deals such as this.
Make it a win-win situation – Do not call up simply assuming they'll reduce your rate. If your current rate is 11% for instance, and you've found another product on the market with an interest rate of 10%, use this as leverage. State that you will change to X bank if you do not get a lower interest rate. Only one of two things can happen: You will get your requested lower rate, or at least you will change to a new cheaper card anyway.
# 2 – Move debts around balance transfer offers.
Moving the balance of a credit card means you move the debts to one card from another for a cheaper artificial rate. Why pay 15% on your current credit card balance when you can transfer it and pay 0% pa on it for 6 months?
Low cost balance transfers were previously exclusive introduction for new cardholders, but now credit card companies have started fighting to keep customers so a lot of them now have balance transfer offers for existing cardholders too.
This means the huge debts that you might have on a card can be cheaply and easily moved across. In Australia, the 3 most common offers are:
– 0% pa for 6 months
– 2.9% pa for 12 months
– 4.9% pa for life.
The 3rd option may have your concern. What exactly does 'for life' means when referring to balance transfer credit cards? As long as your credit card account remains open, you can take as long as you wish to repay your balance at a low 4.9% pa Other factors need to be taken into account however, such as the typically high annual fee associated with credit cards that feature 'for life' balance transfers.
Check what offers your company has before calling them.
Some companies target individuals and make a plan for their needs, others have official set rates, and before you call it is vital to be prepared.
The steps to success:
Call your provider and ask these questions:
Can I transfer my debts from other cards to you? What's the APR if I do?
What is my credit limit? (If the transfer rate is good ask to increase it)
If the customer service person on the line can not help you, request a supervisor or somebody with the "power to change your interest rate."
# 3 – Transfer the Balances!
At this stage it is vital to take notes on the situation, take down all of your debts in a list.
After you've written down all your debts ensure you have an overdraft included too, it's probably a more expensive debt than your cards. If you want to include personal loans you can do that too, but be wary as moving to a lower interest rate can mean you pay more. Learn to cut the costs of your existing loans before you do so.
Also include whatever new cards you've opened, or are thinking about opening; This should clear some space to make this step work more effectively.
Move the debt to where you pay the least.
What we're trying to do here is take advantage of the customer transfer offers. This will require some planning.
Even if they do not offer any special rates, move the money to a card with the cheapest normal interest rate.
Here's a trick which is practically imperative to not get spoken in a balance transfer trap. Do not under make any purchases on your new credit card which has had a balance transferred on to it. The transferred balance will essentially become 'locked in' until the purchase or cash advance is paid off. This is a common method employed by credit card companies to prolong your debt. They hope the consumer will end up with their balance past the promotional period and ending up paying interest.
Keep a back-up plan as well. Do not assume that your credit card application will be approved no matter what. Applying for new credit cards in rapid success may trigger a red flag over your credit rating, which may jeopardize your succeeding credit card application approvals.
# 4 – Repay your debts with the Highest Interest, followed by Highest Balance.
This could have been the most important part of this scheme.
Star the repayments, targeting as much money as possible on the bigger debts first! You should pay the minimum repayments on all your other less expensive cards and use as much spare cash as you can to pay off the larger debts. Once it's paid target the next highest rate card and keep doing this method until you are free of all debts.
Include your overdrafts. With a 19% overdraft and a 14% credit card you are better off spending with the card, paying the minimum monthly payments and using your spare funds to pay the overdraft because it's a more expensive debt. Balance transfers are really amazing credit card consolidation techniques, but only if utilized correctly and managed with careful precision.