A commonly given bit of financial advice is to call up your credit card company and pressure them into lowering your interest rate. This, the advice goes, will save you a pile of money.
The advice is good, as far as it goes. Unfortunately, it doesn’t go far enough. Yes, if you are carrying a balance on your credit cards it is to your benefit to lower the interest charges. The thing is, though, you are better off not carrying a balance in the first place. THAT is the advice you want. If you cut your interest rate from 20% to 10%, you haven’t saved anything. You’re still paying, just not as much.
I could get lower interest rates on my credit cards if I wanted to. I don’t care. I don’t even know what the interest rates are on any of them. I don’t want to lower the rates. Doing that plants the seed in your mind that it’s OK to carry a balance. You think you’ve done your part and saved yourself some money. Depending on whether or not you currently have a balance on your card it’s either a half measure that delays or prevents you doing what you really have to do, or a first step out onto the slippery slope. You start to think, “Ten percent is much better than twenty. If I were to let the balance slide for a month that wouldn’t be so bad….” That’s why the credit card companies are willing to do it; they know they’re going to keep getting your money. You keep bleeding, just more slowly.
If the balances on your credit cards are so high that you can’t pay them off in the immediate future, by all means get the rates lowered if you can. That’ll make it easier to pay them off. But don’t think that the job is done there. If your car gets a flat tire and you stop by the side of the road to put on that dinky little temporary spare, that’s not the end of the job. You still have to fix or replace the regular tire and re-mount it. The same with your credit cards. Lowering the interest rate is a stop-gap measure to help get the cards paid off, but never loose sight of the real goal: A zero balance.
Once you’ve gotten the cards paid off, keep paying off the full balance each month and never worry about credit card interest rates again.
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