If you have a balance on multiple credit cards with high-interest rates, and you are struggling to pay more than the monthly minimum payments, it can take years to pay off your credit card debts, and you can pay a lot of money on interest during that time.
One of the best ways to save money on interest payments and get out of debt fast is to negotiate a lower interest rate on your credit cards. If you have more than one card, negotiate for a lower rate on the card with the highest interest first.
When you call your credit card company and ask for a lower interest rate, they may say "no" to your request, but you can negotiate to get a lower rate if you have always made your credit card payments on time and every time and your credit score has improved since you opened your account.
If the interest rate on your current credit card is higher than the average credit card interest rate, and you are wondering how to negotiate a lower interest rate on your credit cards, taking the following steps can help you get a lower rate on your credit cards.
Do your research before making the call
Before you pick up the phone and make the call to your credit card company, you should first know where you stand as a customer by having the following information on hand:
the length of time you have been with your credit card company
your current balance
the APR you are paying
your payment history
How you negotiate with your credit card company will depend on your current circ*mstances, so make sure you have done all your homework before you make the call to your credit card company to negotiate for a lower rate.
Understand your credit card company's perspective
Before you negotiate, it is important to understand what factors credit companies look at to determine if someone is eligible for a lower interest rate.
Here are some important factors your credit card company will usually look at to determine if you are eligible for a lower interest rate:
your payment history
your credit utilization ratio
The length of time you have been with the credit card company
your credit score
Your credit card company will be more willing to offer you a lower rate if you have made regular, on-time payments in the past. Making more than the minimum monthly payments whenever you can will demonstrate how serious you are about keeping your balance low and can increase your chances of getting a more favorable interest rate.
You can better negotiate if you have a positive payment history and a low credit utilization ratio. Your card issuer may also look at your credit history before making a decision on your request for a lower interest rate.
Check your credit score
When you request a lower interest rate, the issuer of your credit card will usually look at your credit history to see if you are eligible to get a lower interest rate on your card.
A strong credit score is a good indicator that you are more likely to pay back what you owe. This can only help increase the chances of having your interest rate lowered. So check your credit score before you make the call.
Improve your odds
If your current circ*mstances do not meet your credit card company's requirements, you will need to improve your odds before making the call to ask for a lower rate.
For example, if your credit score is lower than you would like, it might be best to spend some time working to improve it. Try to keep your credit utilization ratio at 30% or less, by making more than the minimum payment every month to pay down your balance.
If your score has taken a hit due to a missed or late payment recently, try to make consistent payments on your credit card for at least the next six months. Once it has gone up, then you can make the call. This way it would be easier to convince the credit card company to offer you a lower interest rate.
Your odds of successfully negotiating for a lower rate will increase if you can show the issuer of your card that you have managed your credit with discipline for at least the last six months.
Find competitor rates
The competition between credit card companies is fierce and you can use this as leverage if you can find similar credit cards with lower rates that are available in the market. If you have been offered a better rate from a competing credit card company than the rate you are currently paying on your current card, then the chances are that your current credit card company will reduce your interest rate to keep your business.
So check out for new credit card offers with lower rates before you make the call to negotiate. If you can get a lower rate on a similar card in comparison to your current card, negotiations get easier.
Make the call
Once you have done all your homework, and you are in a much better position to succeed, it is time to make the call. It may feel nerve-wracking, but remember that the person on the other end of the phone is a human just like you. Pick up that phone, call your credit card company, and ask them to lower your interest rate. Once you make the call, you will probably have a representative on the line. Let them know you would like to talk about lowering the interest rate on your credit card.
When you call your credit card company, mention how long you have been with the company and the regular, on-time payments you have made. You can use this information as leverage to negotiate a lower interest rate.
You can also mention if you need a lower interest rate due to financial hardship. For example, if you can no longer make payments because of a financial hardship, like a job loss or a reduction in income, you can state that when you call your credit card company.
If you get a no, then politely ask to speak with a manager or someone who has decision-making power. Be polite but persistent. Being polite to the person on the other end of the phone is most likely to help you get the result you want.
Try again
If negotiating does not work, consider calling again in the future within a few weeks or months to ask again for a lower rate. Make sure to make your minimum monthly payments on your card on time and every time in the meantime. Keeping your balance low in the meantime will increase the chances of having your interest rate lowered.
Do not be afraid to walk away
If after all your negotiation, they still reject your application, state that you are going to pay off your balance and move on to another credit card company. If you have a good credit history, have better offers from competing credit card companies, then tell the issuer of your current card why it is important for them to keep your business.
Remember, credit card companies want to retain their existing customers. So your credit card company might be willing to reduce your interest rate in order to keep your business if you have been a loyal customer of the current credit card company for at least six months.
Conclusion
Knowing how to negotiate a lower interest rate on your credit cards can help you get your rate lowered which will save you a lot of money on interest payments and help you get out of debt fast. If you currently have a balance on a high-APR credit card, you should definitely try negotiating for a lower interest rate to save money on interest payments and reduce your debt.
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Disclaimer: the content presented in this article is for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.
