How to Lower Your Credit Card Interest Rate

Interest rates on credit cards can be a debilitating drain on your bank account. The interest rates on credit cards are much higher than the rate you would receive when getting a mortgage for a new home or a loan on a new car. With rates that can frequently reach over 30%, it can be all too easy to be stuck in a vicious cycle of carrying a credit card balance each month.

So how can you lower your credit card interest rate? One of the well-kept secrets of the business is that you can negotiate a lower rate with your cardholder. Your lender, of course, can always say no, but below, we’ll go over the steps you can take to successfully lower your credit card interest rate. By preparing yourself in advance, you will have a much better chance of achieving a lower interest rate. And if negotiations prove futile, you still have other options that we’ll go over below.

Start With Your Oldest Card

It is a smart idea to call for a lower interest rate on all of your credit cards. But you are going to be most likely to have success on the card you’ve had the longest. This is especially true if you’ve been consistently paying the minimum balance on your card each month.

If your oldest card also happens to be the one that you have the worst payment history on, then you can ignore this step. But if all else is equal, the company you’ve been with the longest will likely see you as a customer they want to retain and keep happy.

Do Your Homework and Know Your Numbers

Before picking up the phone and calling the number on the back of your card, you should know the important numbers you will be discussing. These numbers include your credit card terms, your current balance, your on-time payment history, and your credit score.

Build Your Credit Score First

Having a strong credit card is just as important as having a long history of on-time payments. If your score is over 680, that is considered good credit by most companies. There are many tips and tricks for improving your credit score. Try using a free app like Credit Karma to track your score and discover what factors have the most significant impact.

One of the ways to increase your credit score is to keep your credit utilization rate below a certain threshold. Aim for a credit utilization below 30%.

In addition to on-time payments, another factor is the age of your credit history. The way this number is calculated is an average of the age of your credit cards. For example, if you’ve had one card for 14 years and another card for two years, the average age of your credit would be eight years. For this reason, you should avoid opening up new credit cards because they will lower the age of your credit.

Time It Right

Have you just paid off your car, student loans, or another significant loan? When you pay off a significant debt, it can have a huge positive impact on your credit score. Calling your card company after eliminating one of your debts can result in the perfect timing for lowering your interest rate. If you know you will be paying off a big debt in the near future, wait to call your card issuer until after you have made the payment.

Find Competing Credit Card Offers

The competition for credit cards is fierce. With so many companies offering a variety of different cards, the customer becomes the winner, as each company offers better rates to win your business. If you can find a card that is similar to yours that has a better rate, note the company and the terms. When you call your card issuer, you can use these numbers to your advantage.

Make the Call

Once your credit score is in a good place, you know your numbers, and you have found competing offers, it’s time to make the call. If the initial representative you talk to says no, do not give up. Ask to speak with their manager. Be polite and friendly on the phone. Being rude will not help your chances of success.

Do not settle for an answer of “no” without an explanation. Find out why the answer is no and what you would need to do in order to change the answer to “yes.” It’s alright if your first call fails. If you continue to improve your credit and make on-time payments, try calling again in the near future.

Negotiate More Than Once

A credit card company is more likely to lower your interest rate if you have shown at least six straight months of on-time payments. Even if you have already lowered your rate in the past, if you have another six-month stretch of on-time payments, do not be afraid to call and ask for another decrease. If you have found competing offers that are still better than your current rate, your credit card company will not want to lose you over a few nominal points.

Try a Balance Transfer Card Instead

If you have tried everything above and the answer is still no, you can make good on your threat to change credit card companies by making a balance transfer. Many cards are available with 0% introductory inters rates on a balance transfer. That 0% interest rate can last for a year, or even longer in some cases. You will likely have to pay a fee, though, to make the balance transfer. So shop around for the company offering the best total package.

The Bottom Line on Lowering Credit Card Interest

You do not have to be a world-class negotiator to lower the interest rate on your credit card. While calling your card issuer and asking for a lower rate may seem like a daunting process, if you go in prepared, the call will go much smoother than you may imagine. If your company says no to your request for a lower rate, don’t worry about it. You have other options and will feel good moving your business to a new company while enjoying a 0% introductory rate.