5 Proven Tips to Reduce Credit Card Finance Charges

Credit card finance charges can drastically increase the expense of every payment you make on the card. Borrowers easily forget they are using credit, which is a form of loan, when they use credit cards. Each purchase is made a little bit pricier already due to this fact, and breaking the golden rules of credit management can make the expense even greater.

#1 Pay down Balances

Credit card interest rates use compounded interest. This means interest is actually charged on the interest at the end of each billing cycle. Most credit cards have monthly billing cycles with monthly compounding interest. Any balance remaining on the card will be assessed a higher interest rate if it is allowed to revolve, or rollover, onto the next month's bill. The solution is easy: pay down the balance each month. If it is not possible to pay the balance at the end of the month, start a payment plan to estimate when the balance can be totally zeroed out.

#2 Pay Attention to Rates

People have a tendency to ignore credit card statements in the mail. Not only does this lead to a higher chance of missing a payment, it can also lead to missing important announcements about rates. As soon as a credit card announcement comes through the mail, open it. If there is any information about a rate change, contact the creditor to ask why rates are being raised and what you can do to prevent the hike.

#3 Report Fraudulent Charges

Checking a credit card balance will also make a borrower aware of fraudulent charges on the card. If there are any unfamiliar charges, it is important to be proactive and not delay contacting the company. Once a charge has been on a credit card for over 30 days, it is very difficult to get the charge removed and avoid paying interest on this item.

#4 Use the Card

It may seem counter-intuitive, but using a card can actually help lower interest rates on the card. Using a card responsibly and paying down balances will help raise credit. Once a credit score is high enough, a borrower can ask for a limit increase on the card or a lower rate. Establishing a good rapport with the company is the best way to gain these advantages, and using the card wisely is the best way to create the rapport needed.

#5 Stop Charging

It is best to avoid using the card entirely if balances get too high. The ideal balance on a card is 10% or less, but during the month, this balance may be higher. If balance is well over 10% at the end of the month for several months, it is time to cut back on the spending and work to reduce the balance. Paying off credit card debt should be a higher priority than saving money because credit cards carry interest. Switch priorities if the balance is too high; stop spending, apply funds to the card, and work to reduce the balance.


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