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Tired of paying high interest rates on your credit card balances? Feel like you’re drowning in debt and can’t seem to make any progress? You’re not alone.
Many people struggle with credit card debt. But the good news is that there are steps you can take to reduce your interest rates and save money. Sometimes, you can simply call and ask for a lower rate.
Here are some ways to lower your credit card interest rate.
What you need to know about credit card interest rates first
When you carry a balance on your credit card from month to month, you’re charged interest on that balance. The higher your interest rate, the more you’ll pay in interest charges over time. This can make it difficult to pay off your debt, especially if you’re only making minimum payments.
The current credit card interest rate is 20.75% as of April 2024. But, your actual interest rate may be higher, depending on the card you have and your credit score.
Let’s say you have a credit card with a balance of $5,000 and an interest rate of 20%. If you only make a minimum payment of $100 per month, it will take you over nine years to pay off your debt. You’ll end up paying around $5,800 in interest charges alone. That’s more than the original balance itself!
Check your credit score
The first step in lowering your credit card interest rate is to check your credit score. Lenders use your credit score to determine whether to approve you for credit and at what interest rate. The higher your credit score, the more likely you’ll qualify for lower interest rates.
You can request a copy of your credit report for free from one of the three major credit bureaus (Experian, Equifax, or TransUnion). Your bank also may provide a free credit score on their online portal. If your credit score is low, you can take steps to improve it over time.
You have some options if you’re dealing with high credit card interest. You can apply for an intro 0% APR credit card and transfer your balance. Or, you can try calling your card issuer and asking for a credit interest decrease. Here’s a look at each option.
How to negotiate your credit card interest rate
Before you call your credit card issuer, gather all the necessary information. This includes your account number, current interest rate, and the amount of your outstanding balance. You should also have a clear idea of the target interest rate you’d like to negotiate.
Calling your credit card issuer
It’s time to make the call. This may sound intimidating, but it’s a common request that credit card companies receive all the time. Here are some tips for making the call:
- Be polite: When you call, be polite and respectful to the customer service representative. Remember, they’re just doing their job, and being rude or aggressive won’t help your case.
- Explain your situation: Let the representative know why you’re requesting a lower interest rate. If you’ve been a loyal customer for years or have a good payment history, mention that. If you’ve received offers from other credit card companies with lower rates, you can also use that as leverage.
- Be persistent: Don’t give up if the representative says no to your request. Ask to speak with a supervisor or someone in the retention department who may have more authority to change your account.
- Follow up: If you successfully negotiate a lower rate, follow up with an email or letter confirming the change. This way, you have a written record of the agreement.
Other ways to lower your credit card interest rate
If negotiating with your current credit card issuer doesn’t work, there are other options.
Consider a balance transfer credit card
You may be able to transfer your balance to a new balance transfer card with a lower rate. Many card companies offer balance transfer cards with 0% APR for a set period of time, usually 12-18 months.
You’ll need to apply for a new card and request a balance transfer during the application process. Remember that balance transfers often come with a fee, usually around 3%-5% of the total amount being transferred. But, if you can pay off your debt during the promotional period, you can save a hefty amount on interest charges.
Some balance transfer cards restrict the types of balances that can be transferred. It’s also important to plan to pay off your debt before the promotional period ends, as the interest rate will likely increase afterward.
Get a new credit card with a lower interest rate
Another option to lower your interest rate is to get a new credit card with a lower interest rate. But you should pay off your balance on the old card first before closing it and switching to the new card.
When looking for a new credit card, look for cards that offer a low ongoing APR rather than just an introductory rate. A recent Consumer Financial Protection Bureau study found that smaller issuers — small banks and credit unions — offer cheaper interest rates than the largest 25 credit card companies.
For example, the average interest rate for someone with good credit — a credit score between 620 and 719 — is:
- Small institution: 18.15%
- Large institution: 28.20%
According to the study, the difference in interest rates between the biggest and smallest issuers translated to an average savings of $400-$500 a year for someone with an average balance of $5,000.
Remember that qualifying for a new credit card with a lower interest rate may depend on your credit score. If your credit score is low, you may not be approved for the best offers. In that case, it may be better to focus on improving your credit score before applying for a new card.
If you decide to get a new credit card with a lower interest rate, use it responsibly. Don’t max out your new credit limit, and always make your payments on time to avoid damaging your credit score further.
How to improve your credit score
If you have poor credit, qualifying for lower interest rates or balance transfer offers can be hard. However, there are steps you can take to improve your credit score over time:
- Pay your bills on time: Payment history is the most important factor in determining your credit score, so it’s crucial to make all of your payments on time, every time.
- Reduce your credit utilization: Credit utilization refers to the amount of credit you use compared to your credit limit. Ideally, you should aim to keep your credit utilization below 30%. If you have high balances on your credit cards, work on paying them down as much as possible.
- Don’t close old accounts: The length of your credit history is another important factor in your credit score. Closing old accounts can actually hurt your score, so it’s best to keep them open even if you’re not using them regularly.
- Limit new credit applications: Every time you apply for new credit, it results in a hard inquiry on your credit report, which can temporarily lower your score. Try to limit new credit applications as much as possible, especially if you’re planning to apply for a mortgage or car loan in the near future.
The bottom line
Lowering your credit card interest rate can be a way to save money and pay off your debt faster. By following these tips, you can take control of your finances.
Remember, the first step is to check your credit score and understand where you stand. From there, you can call your credit card issuer and negotiate a lower rate, consider a balance transfer, and take steps to improve your credit score over time.
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