Two primary reasons:
- Your credit card debt holds no value to you and your family. At least you have a car to back your car loan, and even an education to back your student loan. No, your memories from your trip to Europe that you put on your credit card hold no value to you and your family.
- The interest that you are paying on your credit cards is making you poorer and poorer. Most often, it’s the interest, late payment fees and additional interest that is crippling people, not necessarily the balance.
If you have a variable interest rate, you should be even more motivated to pay your credit card off completely. If you are paying 10% today, while the fed rates are at 0-.25% (essentially the rate at which your bank or credit card company can borrow money) do you think your variable interest rate is going to go up or down in the future? You better pay it off now, because the rate you are paying is as low as it’s ever going to be.
Can I negotiate my credit card rate? Should I?
The answer: Yes and it depends. Negotiating your credit card rate depends on whether or not it is really worth the time and hassle to do it. Remember, the idea of this step is to pay off credit card debt as soon as possible. If you are on track to pay off your cards in 3-6 months, it’s not worth your time to transfer your money or to call and get your 10% rate down to an 8% rate. Your savings don’t outweigh your troubles.
However, if you have a considerable amount of credit card debt (more than $5,000), your interest rate is over 10%, and it will take over a year to pay off based on your monthly bills and buffer zone, you may want to look at this option. Here are some basic steps to negotiating with your credit card company.
- Start collecting other credit card offers in the mail. Keep track of what rates they are offering.
- Calculate the difference in the interactive spreadsheet to determine whether the difference is worth your time.
- Call the credit card company to negotiate. If they fail to negotiate, transfer this money to the company that made the better offer. By the way, don’t ever use that old or new credit card again.
