July 18, 2013

Negotiate Better Interest Rates

It seems like almost everyone these days has debt somewhere. Whether it's an overdraft or credit card, chances are they you're paying too much interest on it. Switching debt around can be a lot of hassle and can affect your credit rating, but the good news is that you can often save money without even switching who you owe money to.

Most people with credit card debt who want to save money go for balance transfer deals. These can often offer over two years of interest free credit with just a fee of between 2% and 3%. Balance transfers aren't available to everyone however - applying for them is reliant on you having a good credit score. Even if you can do a balance transfer you might not want to, as applying for cards to do it could affect your credit rating. If you're looking to take out other credit such as a mortgage it's best to keep your credit score as high as possible. Thankfully there's other ways to reduce out interest.

Haggling is a great way to get your interest rate reduced. Call up the credit card company and ask to speak to the customer retention department. The key is to present them with a believable and imminent desire to switch away from them to a better deal elsewhere. If you've been given an offer from another company of a balance transfer tells them about it. If you have another card with a lower interest rate tell them. They want to keep you as a customer as you're making them money, and the compliance department often has significant power to reduce your interest rate or offer interest free periods.

An alternative is to do a balance transfer between existing cards. This won't typically involve increasing your credit limit with them, so you'll need to have enough available credit to transfer debt from another card. What each card company will offer differs from company to company, but you'll either be offered an interest free for a set period transfer or a lower interest rate for the duration of the balance. Typically the 0% periods are much lower than balance transfer cards, usually being less than a year.

If you don't think you can pay off the balance in this period going for a set fee for the life of balance - typically between 5% and 7%, plus a 3% fee - could be a superior option. The good thing about doing balance transfers between existing accounts is you don't alter your credit profile significantly. The credit ratings agencies will see the shift in balances, but they don't know if this came from you doing a balance transfer or simply paying off one card and making new purchases on the other.

Even if you're not given any special offers by your credit cards, it could still be a good idea to transfer. If one of your cards has a higher interest rate than the other, transferring balance from it to the other card can save you money. Remember you should always repay the most expensive debts first. Don't forget to include non-credit card debt in the calculation; as if your overdraft has a higher interest rate than your credit card it's best to pay this first.

Even moving money between existing cards can save you hundreds and sometimes thousands of pounds each year. Not looking to save money on debt is like voluntarily taking a pay cut or paying more tax than you need to. Although it's often easier not to think about your debt, doing things to save you money will tell you pay it off and give you a good feeling of having done something about the situation.

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