Credit card companies typically charge anywhere from 0% to 29% in interest depending on one’s credit history. Do you feel like you’re paying too much? If so, you might be right. Most creditors, however, won’t automatically lower your interest rate when your credit history warrants it – you likely have to ask.
A survey conducted by the U.S. Public Interest Research Group found that 50 consumers, all different credit backgrounds, called credit card companies asking for a lower rate. Over half, about 56 percent, successfully reduced their interest rate. The odds are in your favor for securing a better rate, it might just take a phone call.
Pick the Right Credit Card
Related: Review our guide to navigating credit card offers in a newly regulated environment.
The best place to start is with the credit card you’ve had the longest. With this strategy, your creditor has a reason to retain your business. It’s more expensive to replace your business, than retain you. Also, if you can, select a card that doesn’t have a history of late payments. There’s no quicker way to get denied for a lower interest rate, than a poor payment history.
Shop the Competitors
Arm yourself with the lowest rates in the industry, before approaching your lender. This gives you a starting point for negotiations. Shop multiple credit card companies at once with our online comparison tools. Keep this list handy, in case your creditor won’t agree to a lower interest rate. Competitors are usually happy to have your business.
Request a Lower Interest Rate
As cliche as it might sound, a five minute phone call could really save you hundreds or thousands of dollars in interest payments over the life of your card. Try to explain you found a great interest rate of 5.9% APR through a community credit union (avg. low APR credit card rate from credit unions) and you’d like them to match it. Advise them that you don’t really want to change cards, since you’ve had such a wonderful experience with the company. But, you’ll need to transfer your balance if they can’t lower your rate.
Statistics show over half the time you’ll secure a better rate. But, what if they say no? Ask for a supervisor. If you have an excellent payment history there is a very good chance he/she will end up lowering your rate.
Transfer your Balance
Credit card companies offer balance transfer rates as low as 0% for a limited time. And a rate that low will significantly reduce your interest payments for that period (usually 6 or 12 months). After the promotional period expires, it reverts to the company’s regular interest rate. So, before this happens, consider transferring the balance to a different card with a lower interest rate.
Also, compare balance transfer fees, which are a percentage of your total balance up to 3%. For example, you might transfer a balance of $1,000 and pay 1% of the total balance, which is $10.
If your creditor won’t lower your interest rate, it’s time to move on. Remember the list you made, with companies offering super low interest rates? It’s time to use it, by opening a new account. However, if you have credit challenges, consider a different approach. Make timely payments on your existing credit card for several months and pay down your balance. Then, call back and request a lower interest rate. You’ll likely have better luck.
Did you successfully reduce your credit card interest rate? If so, please share your strategies in the comments below!