My credit card is costing me too much — what actually helps?

Four pages in this library take a piece of this question. Your card’s interest rate is worth one call is the phone call to the card company. Find the date the no-interest deal ends is the ‘no interest if paid in full’ offer made at the vet, the dentist or a shop counter. Keep some cash, then let the interest rate decide is the savings-or-debt question. Pay the card off and keep it open is the card once it is paid off. All four are written from the United States, and the lines they give for readers outside it are at the end.

If you carry a balance on a credit card, call the card company and ask, in plain words, for a lower interest rate. Your card’s interest rate is worth one call is for someone who carries a balance and can make the payments. Many people say they asked, and the rate came down; one person’s went from 19 percent to 12, a drop of seven percentage points, which the page’s own arithmetic puts at roughly $210 less interest on a balance of $3,000 carried for a year. Three conversations say that mentioning a real offer from another card, or that you are thinking of leaving, makes a match more likely. Find the rate first: it is on your statement as the APR, near the interest charge. Then call the number on the back of the card and ask, before they process anything, whether the request involves a credit check; Experian, one of the three US credit bureaus, says it depends on the company.

The call can go the other way. Some people describe the company lowering the credit limit or coming back with a worse rate instead. US rules make one of those risks smaller than it sounds. The consumer-finance regulator says a card company generally cannot raise the rate on the balance you already owe, except in listed cases, a promotional rate ending, a variable rate following its index, a payment more than 60 days late, breaking the terms of a hardship or workout plan you agreed to, or military-service rate protections ending, and it must give you 45 days’ notice before a higher rate applies to new purchases. The other risk is real: a card company can lower your limit, as long as it sends you a notice saying so, and it cannot charge you an over-limit fee or a penalty rate for going over the new limit until 45 days after that notice. A lower limit leaves you less room if an emergency comes, and the same balance becomes a bigger share of your limit, which can lower your credit score; if your limit is what stands between you and a bad month, the page says to weigh that before you call. If the answer is no, write down the date; Experian suggests trying again in three to six months, especially if you keep paying on time.

If the payments themselves are more than you have, the page says the call to make is a different one. Some people say card companies have hardship programs that can cut or pause the interest during a crisis, and that you have to ask for them by name, because they are seldom offered first. The US regulator describes the same thing under several names, loss mitigation, forbearance, hardship programs, which may let you postpone some payments or pay a smaller amount at a lower rate for a set time, and its advice is to get whatever you agree to in writing. A hardship program is for people at real risk of missing payments, not a way to get cheaper credit while you are paying on time; it can close or freeze the card; and the lower rate is usually temporary, going back to normal, the regulator says, when the program ends. No federal law makes a card company offer one, so ask; do not demand. If the company will not help, a nonprofit credit counselling agency can set up a debt management plan, which the regulator describes: you make one payment a month to the agency, and the counsellor may get the companies to lower the interest. The Federal Trade Commission adds that you might have to agree not to apply for or use any more credit until the plan is finished, and that a plan can take four years or more. The Resource Bank here has the National Foundation for Credit Counseling, which connects you with a trained nonprofit credit counselor who looks at your whole money picture with you and helps you make a plan for debt and bills; the first session is free and private. Keep all of this apart from debt settlement: one person warns settling a debt will wreck your score and cost you the credit line, and the regulator says settlement companies often charge 20 to 25 percent of the debt they settle and ask you to stop paying while they negotiate, which can hurt your credit and bring a lawsuit.

With a ‘no interest if paid in full’ deal, interest is added up from the day you buy, and you are only let off it if you pay every dollar before the end date. Find the date the no-interest deal ends calls this deferred interest, and says it is not the same as interest-free. The Consumer Financial Protection Bureau, the US federal regulator for consumer credit, says that if you do not pay the entire balance off in time, you are charged interest for each month of the offer on the balance you owed in that month, and that the same happens if you are more than 60 days late with a minimum payment. It all arrives at once, at the card’s full rate, which one person puts at 28 per cent. Paying most of it down shrinks that back-interest, the page says, but only paying all of it makes it disappear. The trap is the minimum payment, and the regulator puts it bluntly: ‘Your minimum payments probably won’t be enough’ to clear the balance before the offer ends.

Some people give the fix, and the page sets it out in five steps. Find the end date, which the regulator says is on the front page of your bill, and put it in your calendar. Divide the balance by the number of payments left before the end date, and pay that number, not the minimum; the page adds a margin of its own, to aim to finish a month early. Set up an automatic payment, as some people do, for the amount from the step before, not the minimum. Keep new spending off that card, because the regulator warns that carrying a promotional balance can cost you the usual interest-free month on new purchases made with the same card. And if there is more than one balance on the card, ask where your extra payments go: under the federal rules, money you pay above the minimum goes first to whichever balance has the highest rate, which may not be the one on the deadline, until the last two billing cycles before the offer ends, when it must go to the deferred balance. The card company may put it where you ask before then, but it does not have to.

If the interest has already landed, some people say it is worth calling to say you did not know when the interest would start, offering to pay off the original balance, and asking for the back-interest to be taken off; some who did it had it waived. Say only what is true. Some people warn that a waiver is possible but not guaranteed, and one of them says it took a reason beyond the ordinary. One warning stands on its own: do not take a high-cost loan to escape a high-cost card.

Keep some cash whatever you decide, then let two things settle the rest: how high the debt’s interest rate is, and how steady your income is. Keep some cash, then let the interest rate decide is built from conversations held between 2011 and 2020, when savings accounts paid very little, so it gives you the comparison and not the answer. Three conversations say that high-interest debt, credit cards above all, should generally be paid before you build large savings, because interest you stop paying is a guaranteed return that savings rarely match. One person’s rule of thumb was that at around 6 percent or less, keeping the savings and paying the minimum is reasonable, and that at a rate like 19 percent, paying it off is urgent. Some people tie the choice to job security: with stable jobs and a reliable car, pay down the debt; if things are shaky, keep cash. And one person’s correction comes before either number: if your job matches retirement contributions, take the match first. Some people say to keep a small starter fund before attacking debt, so that the next car repair or medical bill does not land straight on a card; the dollar figures people used, a thousand or two, are years old, so size yours by what a common emergency would cost you now. How big the cushion should be is the page’s fork: one side saves three to six months of living costs before paying extra on any debt that is not urgent; the other keeps only a minimal starter fund and puts nearly everything else on the high-interest debt. What decides it, people say, is the debt’s interest rate and your own tolerance for risk and job stability, and they add that high-interest card debt usually favours the second side, and low-interest student loans might favour the first.

A credit limit is not a cushion, the page says. Banks can cut or cancel a limit, and people say it happens after high balances, a job loss or a health problem, which is exactly when you would reach for it, and some people say limits get cut after debts are paid off. One warning is plain: do not rely on cards as your only emergency money unless you can pay the balance in full each month.

You were right to pay off the card, and you never need to leave money owing on it to build your score; what usually costs the points is closing the account. Pay the card off and keep it open is for the person whose score fell after paying off or closing a card or a loan, and it names the one belief to get right, because the idea costs real money. The US consumer-finance regulator, the CFPB, lists by name as a myth the idea that carrying a balance on your cards improves your score, and says paying them in full every month is the best way to build a good score or keep one. Using the card and then paying the whole statement by the due date costs no interest; carrying a balance means paying less than the full amount, and then interest is added, worked out on what you owe day by day, one person explains, so paying a bit more than the minimum does not stop it being added. Once it is paid off, closing it is what can cost points: a card that is open with nothing owing adds its whole limit to your total, and the regulator says closing it while you still owe the same amount elsewhere means you are using a bigger share of the credit you have left, which can lower your scores. The regulator adds that closing a card you do not use can make sense for other reasons, to stop yourself spending or to protect against identity theft; only do not expect it to raise your score. To keep a card open when you hardly use it, some people move one small bill they already pay onto it and pay the statement in full, because an unused card can be closed for you; Experian says some card companies close an account after several months of no activity and others after a year. Three separate conversations say being free of the debt is worth more than the points, because the interest is gone for good and the hit to the score is short-term.

Who these pages are not for. If you pay the whole statement every month, the rate-call page says the rate on your card does not reach you. If your income does not cover even the minimum payments, a lower rate will not close that gap, some people said plainly; the hardship route and a nonprofit credit counsellor are the places to begin, and the savings page says that if you cannot make the minimum payments, or a debt has already gone to a collector, its question is not yours yet. If the rate you want to lower is on federal student loans, refinancing them into a private loan to get a lower rate gives up their federal protections, including income-driven repayment and the forgiveness programs, as the US federal student aid office confirms. If you already know you cannot pay the whole of a no-interest deal before the end date, the page says it is not a free loan for you but a high-rate loan with the bill delayed. The pay-off page is not for someone whose score is low because their cards are close to their limits and a lender has turned down a loan to pay them off; three of the answers to that question said a loan that pays off cards you keep using leaves you owing on both; the answers that question got said the balances are what hold the score down, so paying them down is what raises it, and the page names a nonprofit credit counsellor as a free place to start. And if a debt is in collections, the regulator’s protective line is that making a partial payment on an old debt, or saying you owe it, may restart the time a collector has to sue you, in some states, though it does not restart the seven years a debt can stay on a US credit report, which federal law counts from when you first fell behind; check the debt is yours, and how old it is, before you pay anything.

Outside the United States: in the UK, under the Financial Conduct Authority’s rules since 2018, card companies must act when you have paid more in interest and charges than off the balance for eighteen months, and after thirty-six months they must offer you a way to clear it in a reasonable time, and if you cannot afford that, show forbearance, which can include reducing, waiving or cancelling interest, fees or charges. The Financial Conduct Authority also says one kind of buy-now-pay-later plan charges interest if you do not repay within a set time, so the part of your own agreement to read is what happens at the end. On credit scores, the pay-off page says three UK credit reference agencies each keep a file on you, lenders decide from roughly the last six years of it, you can get your statutory credit report from each agency free, and the US rules on that page do not carry over. Elsewhere, your own country’s consumer rules decide what a card company must do, and the savings page says its comparison still holds: what the debt costs, what the savings earn, and how steady the money coming in is.