Credit card payments can take a toll on your finances. Getting a lower payment on your credit cards can help free up cash for your other bills.
There are several ways that you can get lower credit card payments than you currently have. Getting a lower interest rate will generally lower your minimum payment due. This is due to the way credit card minimum payments are now calculated.
Get Lower Interest Rates
Beginning in 2006, credit card issuers were required to use a different method to calculate your minimum payment. The change forced creditors to require minimum payments that included the full amount of monthly interest plus a percentage, usually 1%, of the outstanding balance on the card.
The end result is that many people saw their minimum payments jump from 2% to 3 or 4% of the balance. If you had $400 in minimum payments each month, your minimum payments may have jumped to $600 or more.
To get a lower interest rate, you can transfer the balance to a lower rate card. This may save you some, but beware of the balance transfer fees. These fees began skyrocketing in the second half of 2006.
You can also just ask your creditor for a lower rate. Credit card issuers frequently grant you a lower rate if you show financial strength. Making higher than minimum payments for at least three consecutive months is one way to do this. If you have been late on a payment, then you may need to overpay for six consecutive months to be able to negotiate a lower interest rate.
Once you get a lower interest rate on your credit card, then the minimum payment will also drop. This can help you lower your credit card payments.
Use a Debt Management Plan
A debt management plan can help you get lower credit card payments. It is an especially good option when you cannot afford to pay more than the minimum payments on your credit cards.
A credit counseling agency can help you set up a debt management plan that better fits within your budget. Instead of mailing multiple checks every month, you can have one automatic payment each month on the date that you need that covers all of your credit card payments. Depending on your situation, this consolidated payment can sometimes be anywhere from 10% to 60% lower than amounts you currently owe as minimum payments.
Best of all, you can be debt free within three to five years and have an improved credit score. Many families are successful on a debt management plan because of the lower payment they make. All of this is possible without having to qualify for a loan.
Get a Debt Consolidation Loan
If you have good credit, then you may be able to get a debt consolidation loan. These unsecured loans can be taken out to pay off your credit card balances.
To qualify for a debt consolidation loan, your credit must be in good shape and you should be able to prove steady income. Most debt consolidation loans are for a few thousand dollars which can be used to repay modest credit card debt.
Get a Home Equity Loan
If you have high credit card debt, then a home equity loan may be necessary to get enough money to pay off your balances. A home equity loan could have a much lower payment and much lower interest rate also. These frequently are available as a home equity line of credit (HELOC) which can be tapped periodically to pay off higher interest rate debt. If you take out a home equity loan, then you should ask your tax adviser to ensure that you get the proper deduction for the interest that you do pay.
Getting a home equity loan requires that you have good credit, a fair amount of equity in your home and steady income. If any of these are not met, then you may wish to try credit counseling instead.
If you have trouble lowering your credit card payments, then consider speaking with an Accredited Financial Counselor (AFC®). AFCs are trained to identify opportunities for helping you lower your credit card payments and eliminate debt. You can get the help you need without taking harmful shortcuts that would cost you in the long run.