5 ways to save money on interest

Paying attention to changes in interest rates, monthly bills could prevent costly credit card hits

Spending more money than you absolutely have to on interest is dumb, dumb, dumb. And yet Canadians fork over billions of dollars in interest every year because a) they won’t negotiate with their lenders, or b) they can’t negotiate with them. Why can’t they? Well, if you’ve been a naughty borrower, it’ll show on your credit report, and it’ll tell lenders that you’re less credit worthy.

Want to save on interest? Follow these five rules:

Pay your bills on time. Being a day late and a dollar short is just as bad as missing by a mile. Set up automatic payments for most of your bills. For the ones you need to check each month, make sure you pay ’em at least five working days before the due date.

Review your monthly bills. Hey, mistakes are made all the time. If you aren’t checking over your bank statement and credit card statements, you’re a dope.

Know how much you’re paying in fees and interest. People assume nothing changes, so they stop looking how much interest they are paying and any additional fees that may be tacked on. But changes happen all the time. It doesn’t even take a change in the Bank of Canada’s prime lending rate for you to see changes on your accounts. Lenders can come up with a dozen reasons to raise your rate. Pay attention!

Don’t go over your credit limit. Your credit score will take an immediate hit and drive your interest rates up if that happens. Ditto dipping into your overdraft protection too often or using more than 50 per cent of your limit on any credit card.

Lose the retail credit cards. Why would you carry a wallet-full of cards that charge exorbitant interest rates and can muck about with your credit bureau report willy-nilly. You may not realize it, but the credit bureaus take the word of the credit granters when they report on your credit behaviour.

Here’s a story to illustrate my point: When I lost a department store credit card from what used to be a Canadian department store, they allowed automatic charges to go through on the card even though I’d reported it lost. Since I had moved and never received the goods, I refused to pay. They dinged my credit history. (Yeah, I fought it, but all they had to do was stick to their story that I was a deadbeat and the credit bureau threw up its arms.) Since I don’t carry a balance on my credit card, it was no biggie for me. If I’d been up to my eyeballs in hock, I would have been paying more in interest immediately.

Of course, the biggest way to save is to get your debt paid off lickety-split. Paying no interest at all is the best revenge on lenders.