Credit Cards: How to Keep Your Good Interest Rate

A low credit card interest rate is hard to get and easy to lose. If you have a good enough credit history to qualify for a low interest rate, make sure you keep up the good habits required to keep that good rate.

Make your payments on time. One of the easiest ways to avoid losing your interest rate is to make your payments on time. Thankfully, the 2009 credit card law gave consumers more leniency concerning penalty rate increases after a late payment. Credit card issuers can only impose the penalty rate after you’re 60 days delinquent. Even then, they must reduce your rate after you’ve made six consecutive timely payments. If you fall behind on your payment by a few days, catch up quickly and you can avoid a rate increase.

If you have a promotional interest rate, it’s even more important that you don’t miss your payments. Creditors can’t enact the penalty rate for delinquencies shorter than 60 days, but they can take away your promotional rate even if you’re just five minutes late on your payment. So, to protect your 0% promotional rate, be sure to make your payment on time, ahead of time is even better.

Make sure there’s enough money in your checking account to cover the payment. If you write a check to cover your credit card payment and that check is returned for nonsufficient funds, your card issuer may impose the penalty rate and charge you a fee. So, before you send your payment, make sure you can cover it. That means also considering any outstanding transactions that haven’t cleared yet.

Don’t exceed your credit limit. Many credit card issuers no longer charge over-the-limit fees, but they can raise your rate if you go over the credit limit. Before you can exceed your credit limit, however, you have to give your credit card issuer permission to process transactions that would push you over the limit. Opting-out of these types of transactions will keep you from going over the credit limit and help protect your interest rate.

Rate Increases You Can’t Control

While you do have the power to control penalty rate increases, there are rate increases you can’t prevent. For example, there’s probably nothing you can do to stop an expiring promotional rate. And, if your credit card issuer chooses to raise your interest rate for business or economic reasons, you can only opt-out of the rate increase, but you may lose your credit card in the process. Finally, variable credit card interest rates will adjust up and down based on the LIBOR or prime rate and your credit card issuer doesn’t have to warn you about these rate increases.