High interest rates are a huge hurdle to overcome, especially if you carry over large credit card balances from month to month. According to research from the National Foundation for Credit Counseling (NFCC), 35% of Americans carry credit card debt from month to month. The average American household carries $15,561 in credit card debt, making up a large part of the $3.9 trillion in consumer debt in the U.S.
Depending on your credit and other factors, you may qualify for an interest rate reduction on your credit cards. While there are no guarantees, you can request a rate reduction from your credit card issuer or bank, which could potentially slash hundreds of dollars off of your credit card bills.
How to Lower Your Credit Card Interest Rate
Getting a rate reduction may only require a quick call to your credit card provider. There are some things you need to know before you contact them, though, to improve your chances of a successful rate reduction.
Know Your Creditworthiness
Since your interest rate is based primarily on your creditworthiness, you need to know where you stand. You can do that by checking your credit and credit score. Many credit cards come with access to free credit scores. You can also get free access to your credit score through Experian, one of the three major credit reporting bureaus.
Your credit score is a snapshot of your credit health, but for a deeper dive, you should also look at your credit reports. You can get your Experian, Equifax, and TransUnion credit reports for free annually at AnnualCreditReport.com. Analyze your reports to find anything that can help your cause, like a history of on-time payments.
Understand What a Good APR Is
APR, or annual percentage rate, is the interest rate that reflects all the costs of a loan over a year. You should know your current APR, but you should also understand what a good APR is and why it makes a difference. According to the Federal Reserve, the average APR on credit card accounts that charge interest as of February 2021 was 15.91%.
A good APR depends on the type of credit card you have since some categories, like rewards credit cards, typically come with higher interest rates than others.
Do some research to determine what similar credit cards offer to new cardholders. This is often listed on the bank's website on the sales pages of their credit cards. Each card will typically have a range of APRs a new cardholder can expect to qualify for.
By understanding what offers are currently available, you can ask for a new rate that is better in line with the rest of the industry.
You May Qualify For Lower Rates if You're in the Military
The federal government created the Servicemembers Civil Relief Act to protect active military members. The law caps interest on certain debts, including credit cards, at 6% for military members during active duty.
If you are in the military, check with your card issuer on how to claim this rate reduction. You may need to call, but some card issuers allow you to do this online too.
Call and Negotiate Your Rate
Once you're ready, you need to call your card issuer's customer service department using the number on the back of the card. You can ask the customer service representative for a rate reduction, but they may need to elevate your request to someone in the company with more authority over those types of decisions.
What to Say to Lower Your Credit Card Interest Rate
Negotiating a successful interest rate reduction will depend primarily on your credit, but there are things you can do during your phone call to help your cause.
1. Be Polite
As the saying goes, you can catch more flies with honey than with vinegar. When you call to request a rate reduction, make a conscious effort to be calm, patient, and polite. Customer service reps rarely get calls of a positive nature, so a little extra effort on your part could go a long way.
2. Request a Rate Reduction and Explain Why You Should Qualify.
Explain to the representative that you would like your interest rate reduced. Be prepared to give concrete reasons why you should be eligible for a reduction. This is where your preparation comes into play. This is the time to share details of your credit history, such as no late payments for a specific time frame or your current credit score. Being nice isn't enough to get them to change your rate -- they want proof that you deserve it.
3. Don't Lie
Credit card companies can easily access your credit information. Lying about details of your credit history will only hurt your chances. Be honest with the representative, highlighting areas of improvement that will help your cause. You can mention other credit card offers or moving your balance to another bank, but only do this if you're willing to back it up with action if they say no.
4. Ask To Speak To A Manager if Necessary
Sometimes the representative who answers the phone isn't the person with the authority to make decisions on rate reductions. Don't be afraid to ask to speak to someone higher up in the company, like a manager, who can make that determination.
5. Ask if You Can Switch to a Different Card with a Lower Rate
As we said above, some types of cards have higher interest rates than others. So you may be able to switch to a different card that has a lower interest rate.
Keep in mind you may be giving up some rewards or perks in exchange for the lower interest rate. But if your goal is to get out of debt, that could certainly be worth it.
6. Don't Be Afraid to Try Again if Your First Attempt is Unsuccessful
If you get a no, don't worry. Sometimes you can just call and get another representative that is more helpful. This isn't always the case since the decision is usually based on company policy, not a specific individual.
Don't leave the conversation at no, either. Get some clarity on why your request was denied. If you know the specific reason you were denied, you can try again later after you work to improve your situation.
7. Consider Closing the Card
You may need to threaten to close the card if you can't get a lower interest rate. But this also goes back to #3 - don't lie.
Don't threaten to close the card unless you are serious. One thing you can say is that you are considering closing the account if they don't offer a more competitive rate. That way you aren't locked into closing it if you aren't sure.
But if you are sure, you can certainly say so.
What to do if the Bank Won't Lower Your Interest Rate
Wanting an interest rate reduction isn't always enough to make it happen. Don't lose hope If the bank won't lower your interest rate right now.
The best thing for you to do is keep paying your credit card bills and work to boost your credit, and try again once you've made improvements.
Another option to consider is to transfer your credit card debt over to a balance transfer credit card. The best balance transfer cards come with lengthy introductory 0% APR offers, sometimes as long as 18 to 24 months.
Using a balance transfer card could help you pay off your debt over time without the worries of added interest charges. Keep in mind that most balance transfer cards charge transfer fees, usually a percentage of the total balance being transferred. The fees, though, could still be less than what you would pay in interest charges over that time. Do the math to see if it's a good option for you.