4 Strategies to Save on Credit Card Interest (One Woman Saved $12K!)

woman using phone and credit cards
Carmen Mandato/The Penny Hoarder

We get it: Those credit card interest rates can really screw you.

These days, average rates hover close to 20%. That means the monthly payments you’re making aren’t actually going entirely toward paying down your debt, because you’re hustling to cover interest, too.

That means it could take you even longer to pay off your debt… and you’re paying more than you initially accumulated, too.

Cool! Thanks, interest!

Luckily, there are ways to fight back against your credit card company — ways to save money on sky-high interest rates.

Here are a few simple strategies to save money on interest rates:

1. Let This Company Lower Your Interest Rates For You

TPH photo editor, Alexa Vincent, in various scenes showing credit card debt, consolidation and bankruptcy on August 14, 2018
Aileen Perilla/The Penny Hoarder

One of the simplest ways to save on credit card interest rates is to refinance or consolidate your debt with a personal loan. You’re basically shifting what you owe to another form of debt — but one with ideally lower interest rates.

That’s where a company like Fiona can be helpful. It will show you all the lenders willing to help you pay off your credit card and eliminate the headache of paying bills by allowing you to make one payment each month.

If your credit score is at least 620, you can borrow up to $100,000 (no collateral needed) and compare interest rates, which start at 4.99%. The idea is to secure a loan at a lower interest rate, potentially helping you save thousands. Repayment plans range from 24 to 84 months.

Take, for example, Katherine, who faced $12,000 in credit-card debt. Holding her back? The 15.24% interest rate. By refinancing with a 5%-interest, seven-year personal loan, she saved $12,000 in interest.

If she’d kept on the same road, she would have paid something like $14,000 in interest alone over 25 years. Yikes.

So even if you’re simply curious about what’s out there, know that checking rates on Fiona won’t hurt your credit score — and can probably save you in interest.

2. Take Strides to Improve Your Credit Score

Dana Sitar with partner Stefan Davis spend some time reviewing credit sesame both on their phone and on personal laptop. St Petersburg, Fla.
Carmen Mandato/The Penny Hoarder

This is a tricky one, because paying down your debt will help you improve your credit score. And improving your credit score can help your pay down your debt.

OK, OK. Enough of that brain teaser. Here’s what you need to remember: The higher your credit score, the better your chances are of finding lower interest rates. So if you’re struggling to refinance or consolidate, take some time to improve your credit score.

Get your credit score and a “credit report card” for free from Credit Sesame. It breaks down exactly what’s on your credit report in layman’s terms, how it affects your score and how to address it.

Once your score starts steadily increasing, you should be able to find better loan terms.

3. Cut Your Other Bills and Shove Your Savings in Your Debt’s Face

paying for bills
Carmen Mandato/The Penny Hoarder

We get it: You have other monthly bills that need tending to as well. But take some strides to cut those down. Any savings you gather, go ahead and put it directly toward you debt so you can get that off your plate ASAP. The faster you pay it off, after all, the less interest you’ll have to pay.

A good place to start is with your car insurance. When’s the last time you compared rates from the 20 largest auto insurers that do business in your area? That sounds kind of difficult and time-consuming, doesn’t it?

Fortunately, a service called Gabi will do it for you, and you don’t even have to fill out any forms. Simply link your insurance account and provide your driver’s license number, and Gabi will go to work.

Once you link your insurance account to Gabi, it will:

  • Scan your existing insurance plan.
  • Analyze what coverage you have.
  • Compare the major insurers’ rates for that same coverage.
  • Help you switch on the spot if it finds you a better rate.

Gabi says it finds an average savings of $720 per year for its customers.

It is a true apples-to-apples comparison at the same coverage levels and deductibles you currently have. Once you sign up, you never have to shop again. Gabi’s software has your policy on file and keeps on monitoring for savings as your life changes.

4. Find a Credit Card Company That Treats You Better

phone and credit card on table
ArisSu/Getty Images

Well, you can always jump ship.

If your credit card company is screwing you over with interest rates, see if you can find a solid zero-interest balance-transfer credit card.

How does that work? Pay off your existing credit card debt with another credit card… one that has lower — or no — interest.

Just be sure to keep an eye on the fine print. Fees and time limits might apply.

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