Autumn is upon us. I hope everyone enjoyed the summer. As we prepare for a change in seasons and refocus (if you’ve fallen off) on eliminating debt, I encourage you to review your rates. What interest rates are you carrying on existing balances? Have you been penalized with penalty interest rates due to late payments? Did a teaser introductory rate expire and convert to exorbitant highs? Working a debt snowball can create tunnel vision. The smallest debt may receive all of your attention. However, before the hustle and bustle of the holiday madness sets in, let’s make sure interest rates are in the best possible position.
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1. First step – call your existing credit card companies and ask for a rate reduction. The average interest rate as of 2014 is 12.73% (creditcards.com). You can do this every 6 months. All they can say is no!
2. Introductory teaser rates need to be considered thoroughly. Identify when the teaser rate ends. Determine how much the balance transfer fee will be. Currently those fees range from 2-5% of the transferred balance. Figure out how much interest you will likely save based on your debt snowball schedule to ensure the numbers work for you.
3. Are you paying an annual credit card fee? Would you pay less with a non-annual fee card comparing interest rates and transfer fees?
4. Consider cards with no penalty interest rates.
5. Set up automatic payments to help you stay current on payments.
The focus on rates is important. Keep in mind the goal is working aggressively to pay off debt. Lowering your interest rates (through paying on time, transferring to a low rate card, or requesting your rate reduction) will help accelerate your debt dumping schedule by paying down your balance faster. The ultimate goal is debt freedom!