How to Negotiate a Lower Rate for Your Credit Card
Roughly 41 percent of American households have credit card debt, while the average credit card balance is $5,700.1 Eliminating this debt can help you improve your credit, free up room in your budget and save you money. The hard part is actually paying it off and staying out of debt.
It gets even more difficult if your interest rate is high, and you can’t really make progress on reducing your balance. The longer you carry a balance, the more you’ll end up paying in interest, making it even more difficult to eliminate debt.
While it may take time and a little bit of research, there are ways to lower your credit card interest rates. We’ll walk you through how to negotiate a lower interest rate on your credit cards.
Why Would I Want a Lower Credit Card Rate?
Whenever you borrow money, you can expect to pay interest. Credit card interest rates may have a significant impact on your total credit card payments, particularly when your balance is high.
Think your monthly payments are all applied towards your principal? Think again! In fact, your credit card payments cover any fees or interest that you may owe, and the remainder of the payment is applied to your balance. If your balance is very high, minimum payments may barely cover the interest on your account. Additionally, paying just the minimum amount due each month can keep you in debt longer.
Who Can Qualify for a Lower Credit Card Rate?
If you have an older credit card account and have raised your credit score over time, you may qualify for a lower interest rate! Your credit score has a major impact on your ability to get a reduced credit card interest rate. Lenders want to see a positive credit history since your credit score measures your creditworthiness, or your history with debt repayments. If you don’t have a good credit card repayment history, you might not be able to convince your lender to reduce your interest rate.
What’s the Average Credit Card Interest Rate?
According to recent data, the average credit card interest rate is roughly 20 percent.2 If you have a good or great credit score, you may be able to find low-interest cards at around 14 percent, or those with a 0 percent introductory rate, which help you save money. Keep in mind that balance transfer cards usually have lower interest during the introductory period, and a standard interest rate applies thereafter.
What Steps Can I Take to Negotiate a Lower Interest Rate?
1. Check Your Credit
Make sure to review all of your credit reports before you pick up the phone. Your lender will review your credit, so you’ll want to make sure there are no red flags that can prevent you from getting a lower interest rate. Here’s what to look for on your credit report:
- Note your oldest account. If you have more than one credit card, you may have more luck with your oldest card, particularly if you have a good credit history with that lender.
- Look for any issues. Do you see late payments? Are there any problems with your credit card accounts? You’ll want to resolve any red flags in this category before calling your credit card company.
- Comb through all sections of your report to ensure that it’s accurate. While credit reporting mistakes and identity fraud are rare occurrences, they do happen from time to time. Follow these steps to find (and resolve) any errors on your credit report.
2. Improve Your Credit (If Necessary)
If your credit score is low, or if you have late payments on any credit card account, you might want to work on these issues before requesting a lower interest rate. You can improve your credit score by paying bills on time and reducing your revolving debt. Your credit score may take a few months to reflect these efforts, but they should help you improve your score over time.
Creditors want to hang on to their best customers. If you have a good history of borrowing and repaying money, you’ll look like a better, more responsible candidate to your lender.
3. Do Your Research
Now that you know your credit score, locate your current credit card interest rate on your most recent credit card statement. Use your current rates to find more competitive credit card interest rates. For example, search on the internet for “competitive credit cards for XXX credit score” to see if there are specific companies or credit cards with lower rates that may help you save you money. If you have any pre-qualified credit card offers, keep these for future reference. You may want to reference these rates or offers when calling your credit card company.
4. Pick Up the Phone
You’ll need to contact your credit card company to speak with a customer service representative. Keep your request simple and straight to the point. Make sure to be firm, but polite to the customer service representative. While it’s not guaranteed your creditor will lower your interest rate, it never hurts to ask.
Use the customer service phone number (also found on your monthly statement) and make your case for a lower interest rate. You can simply use the following script:
Hi, my name is ____. I’m calling because I want to lower my interest rate. I’m currently paying a rate of _____ percent. I have been a loyal customer for ____ years, and I have a positive payment history with your company.
I see that there are more competitive rates at other companies. I’ve also received a few offers in the mail for lower interest rates, and I’m requesting that you match these offers for ____ interest rate. If you’re not willing to meet these rates, I’ll look to cancel my credit card.
The operator will then review your account and credit history. If you’re a good customer, they’ll want you to stay with their company. If they cannot or will not lower your interest rate, ask to speak with a supervisor. Repeat your script, and try again.
If you’re still unsuccessful, you may have luck again in a few days with a different representative. While it may help to speak with someone else, improving your credit score is one of the most effective ways to get a lower interest rate.
5. Carefully Consider Your Options
Although you may have offers for lower credit card interest rates, make sure to carefully review your options and read all the fine print before you cancel a credit card or apply for new credit. Making changes to your credit may impact or lower your credit score.
Cancelling a credit card can lower your credit score since you’re reducing your revolving credit limit. And while the effect is temporary and less severe, applying for a new line of credit can also reduce your score since it makes a hard credit inquiry on your report. You should only cancel a credit card if you’re sure that it will benefit you and/or save you money.
1Resendiz, J. (2020). Average Credit Card Debt in America: July 2020.
2Kossman, S. (2020). Average Credit Card Interest Rate Is Now 20.09%.