5 Ways to Dump Your High-Interest Credit Card

No one wants to carry a high debt load into retirement, but that is often the case for many Americans. According to NerdWallet, the average American household is carrying $16,748 in debt, and we spend about $1,300 per year on interest. Ouch! That’s a lot of money to throw away, especially considering you could put it to much better use.

One of the first steps to getting out of debt is to dump that high-interest credit card. But how? In some cases you might be locked into a contract of sorts, via annual fees. Dumping that card isn’t as easy as simply cutting it up and forgetting it! Try these five ways to get switched over to a lower interest rate, or get the card canceled altogether.

Ask. Yes, just ask! Most credit card companies don’t want to lose your business to a competitor. If you have a long history of timely payments, it’s possible that they will agree to a lower rate. Of course, before calling customer service you should arm yourself with information. What’s your credit score? Have you received a better offer from another card issuer?

Improve your credit score. If your score has suffered a bit lately, do the work to get it healthy again. Your credit score is absolutely one of the best pieces of financial leverage you have. Work with a credit counselor, if you have to, and put that expert advice to good use. Within six months to a year, you can gain a lot more bargaining power.

Research balance transfers. You might receive an offer to perform a balance transfer, at 0 percent interest for an introductory period of time (usually anywhere from six to eighteen months). However, make sure to read the fine print; you could be charged a balance transfer fee. Do the math, because the deal might still be worth it to get out from under those high-interest payments. If not, keep shopping for a balance transfer deal with lower or no fees.

Don’t apply too hastily. Applying for new credit cards too hastily will result in too many inquiries on your credit report. This can harm your score and make it harder to get a better deal.

Be careful with your new card. When you finally do secure a better credit card, take care of your higher standing. Make payments on time, so that you won’t trigger late fees, higher interest, or harm to your credit score. And as always, watch out for impulse purchases so that you don’t run up a huge balance again. If it’s not an emergency and you can’t pay it off within one billing cycle (to avoid accumulating interest), it’s probably not worth it.

We want to help our clients stay financially healthy at all times, so that you have more freedom in the future. For more financial planning advice or to review your long-term plans, give us a call and we’ll be happy to help.