If you tend to carry a balance on your credit card, it pays to get your interest rate lowered. The average credit card has an interest rate of more than 15% while the typical household has more than $16,000 in credit card debt. Paying just the minimum, it would take almost 32 years to pay off that balance at 15% interest with a total cost of $19,500 in interest alone. With the same monthly payment and an interest rate just 5% lower, you will save about $6,500 in interest.
Want to get your interest rate reduced to save money and pay down your debt faster? Here are 8 methods you can try.
#1. Compare your rate to the national average
One method you can try to negotiate a lower rate with your credit card issuer is comparing the rate you’re paying to the average for consumers with your credit rating. For example, if you have a cash back credit card, you can expect an interest rate around 13% if you have very good credit but 23% if you have bad credit. If your credit is average, your interest rate should be around 18-21%.
#2. Ask about a forbearance program
If you are struggling to pay your credit card bill due to a hardship like job loss or illness, your credit card company may be willing to temporarily reduce or cut your interest rate and/or stop new finance charges. Your credit card company can also work with you to restructure the debt in other ways, such as lowering your minimum payments.
#3. Improve your credit score
Your credit score is the biggest factor influencing the interest rate you pay. If you have trouble qualifying for a credit card with a low interest rate, take steps to improve your credit by paying down your debt, establishing a history of on-time payments, avoiding new credit accounts, and getting collection accounts removed from your record.
#4. Shop for a balance transfer offer
If your credit card company will not reduce your interest rate, or you want to pay down your debt faster, you can look for a balance transfer credit card. These cards typically offer a long 0% APR introductory period of up to 21 months, during which time you will pay no interest on the balance. There is usually a fee of 3-4% to transfer the balance, but you can use a balance transfer calculator to make sure the decision makes financial sense.
#5. Negotiate with your credit card issuer
An easy place to start is negotiating a lower rate with your current card issuer. This strategy works best if you have been a long-time customer who pays on time as the bank will want to keep your business. Be polite when speaking to the customer service representative and explain why you deserve a better rate, such as a history of on-time payments or that you have received better offers from other card issuers.
#6. Call back if you don’t have success
According to a 2016 survey from CreditCards.com, 78% of credit cardholders received an interest rate reduction when they asked for one, but not everyone had success the first time. If you don’t get the reduced rate after the first phone call, wait a week and try again.
#7. Shop for other credit card offers
When you call your card issuer to negotiate a better rate, it’s best to arm yourself with information. Don’t assume you can get a better rate elsewhere; comparison shop for other credit cards and let your credit card company know if other banks are willing to give you a lower interest rate.
#8. Discuss bankruptcy
While you shouldn’t threaten bankruptcy if it’s not something you intend to do, it can help during negotiation with the credit card company to mention that you are struggling with debt and considering bankruptcy — if it’s true. Your credit card company knows it will gain absolutely nothing and the debt will be fully discharged if you file for bankruptcy protection so they may be more willing to lower your interest rate if it means you will continue paying your bill.