Credit card interest rates are based on a matrix of four different factors: credit rating, debt to income ratio, employment history, and payment history. In order to qualify for the best interest rate possible, you must ensure that these factors are working to your advantage. Active management of your relationship with the credit card company will have a definite impact on your credit card interest rate.
Your credit rating is the most important aspect of the credit card interest rate decision. The credit rating, or score, is created based on your credit history. This information is maintained and reported by a credit rating company. It is used by all credit granting firms to determine the amount of other credit you have, your payment history over the last seven years, and to evaluate the likelihood of you defaulting on your current debt. The credit card interest rate is not shown on the credit report, but the total amount owed and the monthly payment is.
Income level is an important consideration when applying for any credit. For a credit card, the income alone is not important, but rather your debt to credit ratio. The credit card company adds up all your monthly payments and divides it by your monthly income to determine how much of your income is allocated to debt repayment. The lower the ratio, the less a risk you are.
Employment history is a strong indicator of your past behavior as a predictor of future behavior. A continuous employment history indicates stability and an ongoing ability to pay your debts. Payment history is indicated by your credit ratings, which shows how many late payments you have, how late they were, and indicates the priority of bill payment in your character.
The combination of these factors provides an indicator of your level of risk to the credit card company. The better you score on these items, the lower the credit card interest rate you will qualify for. To obtain a lower rate than your current rate, make all your payments on time.
The credit card company will not automatically lower your credit card interest rate. Call the credit card company and tell them that you want a lower credit card interest rate. Speak with the credit manager and explain that this is a priority for you.
It is very common for the credit card company to counter-offer with an increased limit instead. Turn them down and demand the lower credit card interest rate. Lowering the credit card interest rate is to the customer's benefit,not the company's.
Be an active consumer. Compare your credit card to others in the same product line. Some offer a lower interest rate, instead of points or air miles and others offer a lower credit limit with a corresponding lower credit card interest rate. Shop around and compare the benefits of the different cards to get a product that best meets your needs.