How to Get a Lower Credit Card Interest Rate

Credit card debt can be crippling, costing you thousands of dollars on top of your original balance and taking money away from your mortgage payments, savings account, and other expenses that can improve your net worth. However, it’s possible to get a lower rate by making a few simple changes and requests.

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How to Get a Lower Credit Card Interest Rate

Nothing is set in stone and cardholders can negotiate with their credit card company to get a lower interest rate, potentially saving hundreds of dollars over the term. Follow these tips to get a better rate and improve your financial situation.

1. Assess Your Situation

The first step is to know exactly where you stand. Check your credit report and your credit score, calculate your debt-to-income ratio, and see how all of this compares to when you first agreed to those credit card offers.

It’s also important to understand your credit card terms and conditions, including your payment due date, your existing balance, current card rates, and grace periods. This information will better prepare you for when you eventually contact your credit card issuer.

2. Improve Your Credit Score

If you have excellent credit, you can skip this step. If, however, your credit history is weak, your FICO score is low, and there is room for improvement, it’s time to work on building your score. Fortunately, this doesn’t have to take long and with a little effort and commitment you can achieve a very good credit score in just a few months:

  • Payment History: Accounting for 35% of your score, your payment history is a record of all successful payments, as well as all missed and late payments. This improves slowly, but it can turn sour quickly, so keep meeting those payments to avoid taking a hit that will undo all your hard work.
  • Credit Utilization: You can improve your credit utilization score by increasing the credit limit on your credit card, repaying debt, and avoiding maxing those cards out. However, if you’re going to increase your credit limit, make sure it happens at least a few months before you move onto the next step as that may hurt your chances of getting a lower interest rate. Becoming an authorized user will also improve this aspect of your credit score.
  • Stop Applying: Avoid applying for new credit at all costs. Not only will it leave a hard credit check on your account, but a new account can also reduce your score. You can often improve your score by avoiding new accounts as it will increase the average age of those accounts.
  • Pay More: Every time you pay the minimum amount, you’re repaying a substantial amount of interest and a small amount of the principal. By increasing the minimum payment, you’ll clear more of the principal, thus greatly reducing your credit card balance and improving your credit score.

3. Contact Your Credit Card Issue

The next step is to contact your credit card company and request a lower rate. It may seem like a lost cause, but it’s important to understand things from their perspective. Their ultimate goal is to recover the money they have lent you, after which every extra dollar they receive is a bonus.

Many debts go into collections, which means they are sold cheaply, and the creditor doesn’t get the full balance. If a rate change means they can increase the chance of a full payback on a credit card account, they’ll be more than happy to help. You need to show that you will make all reasonable efforts to cover your credit card payment but may struggle without the rate reduction.

You can find the customer service number on the back of your credit card. This number will put you in contact with a customer service representative that can help you bring those high-interest rates down.

4. Offer an Incentive

If they won’t budge when you ask them nicely, offer them an incentive in the form of a lump sum cash payment. If you have any savings, offer to pay down a large sum in exchange for a reduced interest rate. 

It might not seem like it will benefit them, due to the fact you’ll pay less interest and therefore give them less profit. But credit card companies always run the risk of defaults and unpaid debts, and if they can clear those debts in one fell swoop, they’ll be happy to help.

5. Persist

If your credit card provider refuses to reduce your rate, they may provide some temporary reprieve, reducing your rate by a point or two for a few months or a year. And if they refuse to help you, even with your improved financial situation, make a note and try again in a few months. You may find a more receptive customer service representative, or your situation could have improved further. 

In any case, it’s not the end and there are still plenty of options at your disposal.

6. Look into Other Options

The easiest way to reduce your current interest rate is to get rid of those cards altogether. This will save you a few dollars every month, improve your credit score, and allow you to put that extra cash to something more useful. There are a few ways you can clear this debt, none of which require you to complete any of the above steps first:

Debt Payoff Strategies

Debt accumulates quickly, especially if you have been increasing outgoings on a rewards card just to get more points or cash back. But when it comes to paying that debt off, everything seems to be move slowly, and that can be very deflating.

However, if you persist then you’ll get there in the end. Debt pay off strategies like Debt Avalanche and Debt Snowball help you to chip away at the balance and can clear the average credit card debt in just a couple years. 

For these strategies to work, you need to make on time payments every money and put whatever extra money you have toward the monthly payment, thus clearing more of the principal and reducing your debt one credit card at a time.

Balance Transfer Credit Card

A balance transfer card is designed to help you move a balance from one or more cards to a new card, one that offers an introductory rate lasting anywhere from 6 to 18 months. During this introductory period, you will pay 0% on your balance, which means more of your minimum payment will go towards your principal.

Just make sure you check the annual fee and the typical annual percentage rate, as you may be hit with higher fees and charges once the introductory period ends. You will also be asked to pay a balance transfer fee, but this is typically just 3% to 5% and is nowhere near enough to offset the benefits. 

Check balance transfer offers carefully, make sure they cover all outstanding balances on all credit cards, and avoid incurring any additional interest charges by making new purchases or failing to meet your monthly payment.

Debt Settlement

Debt settlement companies offer your creditors reduced settlement sums in exchange for clearing the debts. A $10,000 credit card debt that has defaulted, for instance, could be cleared for $4,000 to $5,000. 

However, to make this work, you need to stop making payments every month, thus scaring your creditors into believing they won’t get their money and making them more likely to settle for less.

Debt Management

Debt management is basically a carefully managed debt consolidation program, with your monthly payments going to the debt management company, before being distributed to your creditors. 

You will be required to make some sacrifices though. For instance, the debt management company may insist that you avoid signing on for a new credit card until after the program has finalized and that you close all but one of your cards.