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Asking Companies To Lower Your Rates Can Save You Money On Credit Cards

I always wondered why credit cards have such low minimum monthly payments compared to other type of loans. The reason is simple; they want you to carry a higher balance on your credit cards so they can make more money.

When people have lower minimum monthly payments they tend to just pay the minimum each month. By only paying the minimum it is easier to slip farther into debt the more people use their cards. With credit cards people only have to pay 2% of their balances each month, if they rose that to the rate that most other loans are at it would be around 5%. At 5% it would be less attractive for people to just pay the minimum and they wound not run the risk of falling deeper into debt.

What is making matters worse for many people is that many of the credit cards are starting to raise their interest rates in the wake of the mortgage crisis. When banks started to lose money in the sub-prime mortgage debacle they had to make up that money somehow. So they decided to try to make up their losses by charging their customers that have credit cards. I know it does not sound very fair, but that is exactly what is happening.

With so much public outcry right now, congress decided to pass a law that would limit banks from raising interest rates on credit cards, but as most of us know, when lawmakers get their hands on something they usually end up messing things up. What did the lawmakers do that messed this up? They decided that the laws should go into effect in July of 2010, meaning that from now until then issuers of credit cards are free to raise interest rates.

If you think that your credit cards have too high of an interest rate now, just wait a few months. Luckily there is something you can do now to save yourself money in the long run.

Call all of the companies that you have credit cards with and ask them to lower your interest rates. Sometimes it just as simple as making a couple of phone calls to save yourself hundreds, even thousands of dollars each year. That is what I did, and now I am paying interest on most of my credit cards at a rate that is lower than I was paying when I got the cards in the first place.