DISCOVER

# How to Freeze Interest Payments on Credit Cards

Updated February 21, 2017

The Credit Card Protection Act has many provisions to protect consumers from sudden rate changes and relieves them of honeymoon interest rate increases. But the unintended consequences have come along with it, prior to the Credit Card Protection Act being passed, credit card companies, in order to avoid losses, raised interest rates and imposed fees ahead of the law. For consumers struggling with credit card debt, there are options to more effectively amortise balances, such as freezing interest payments to focus on the principal.

Contact the credit card company and request a full itemisation of the principal balance, interest rate estimate and any fees associated with card privileges (such as annual fees and over-the-limit fees). This statement as it applies to secured credit is known as a payoff statement. If the company does not provide such a service, most of this information can be found on the monthly statement.

Phone the credit card company and ask to speak with a supervisor or manager. Ask them if they would consider a temporary interest payment freeze. Explain why you are making the request, for instance, if you have become unemployed or have an illness that would leave you unable to work. If you are already behind on payments or are considering bankruptcy, they will try to accommodate in order to collect.

Write a letter to the credit card company requesting they freeze the interest rate so you may pay off the balance. Include the creditor's name, address, phone number, account number, your name and address. Also include the name of the individual you spoke with and request reconsideration of the freeze. Ask that they reply via mail with a freeze approval and payment instructions.

#### Tip

Calculate your interest by taking the annual percentage rate and dividing it by 365. Then take the average daily balance (the principal divided by 365) and multiply the two amounts, this will yield the daily average balance with the period interest included. Multiply this number by the number of days in the month. For a rough estimate, multiply that number by 12. This will give you an estimate on how much the minimum payment reduces the balance.

#### Warning

Credit card companies make their money on the interest rate, consequently, interest freezes are not usually granted. Credit card companies will not typically negotiate balances or interest on cards that are current with payments. Should the freeze be granted, the likely stipulation is the balance be paid in full in one lump sum.

#### Things You'll Need

• Request to freeze interest letter