Debt Free Article

How to reduce debt by keeping your interest rates low

Today, we want to address some of the most popular question our debt free writers are asked regarding debt reduction through lower interest rates. Now that the Holiday Season is gone, many of our debt free article readers are faced with new debt. Most of this debt is from credit cards during the shopping season and others are thinking of debt consolidation loans and such to eliminate credit card debt.

This article will cover other ways you can bring your debt level down by using lower interest rates.

Below you will find a few questions and answers to the most commonly asked questions we get regarding debt reduction through lower rates of interest. Enjoy

Question:

I have opened and closed several accounts in the past few years because I like to seek out the good credit card deals (low introductory rates). Because I open these accounts and close them after the intro rate is over, can it hurt my credit rating?

Answer:

While common, this is a great question. Honestly, ther is nothing wrong with going for the great deals. However, you have to be sure that you actually close the accounts when you are ready to move on. Many credit card debt consumers think that paying the debt off and moving it to another new lower rate account automatically closes the other credit card account. It does not. Most times, you have to write a letter of request or phone the debtor to get the account officially closed. By not doing so, your credit rate will be affected as high debt to income levels because all of these accounts are still open – even though they have no balances. Too much available credit is almost as bad as bad credit itself. Debt to income ratios are important to understand. Also, watch the fine print on these low interest deals. Remember the idea is to become debt free not too far into debt.

Question:

One of my credit card accounts includes purchases, balance transfers, cash advances all in different sections on my monthly statement, why is this?

Answer:

It is because you are paying a different rate of interest fro each type of transaction on your credit card. This is where credit card debt gets dicey. Cash advances carry astronomical rates of interest that you have to pay. Stay away from this at all times if you are trying to become debt free. Balance transfers usually have a lower interest rate for a period of time and that interest rate will be different from your purchases, which have your original interest rate tacked on. So, all of these types of transactions are different. So many people in credit card debt do not pay attention to their statements in detail. Good question indeed.

Question:

I signed up for a new credit card that offers me a 7.9% rate of interest. Soon after, I got another offer in the mail for the same card with a 5.9% rate of interest. What do I do?

Answer:

Call your credit card company and ask for that lower rate you were offered after the original deal. You should be able to most times – after all, they do not want to lose an existing customer. If you get this type of offer, you are a valued credit card holder. It will cost your credit card company more money to get another customer than it will to drop your rate to the new amount. Stick to your guns when seeking the new rate too.

Always remember that it is much easier to become debt free with lower rate of interest. Credit card debt is a huge reason that so many people seek debt consolidation loans and even bankruptcies.

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