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How To Lower Your Credit Card Interest Rate

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Lowering Your Credit Card Interest Rate: A Complete Guide
Reading Time: 4 Min

Are you burdened by high interest rates on your credit card? Do you find yourself struggling to make a dent in your debt due to the hefty interest charges? 

If this sounds like you, don’t worry. There are steps you can take to lower your credit card’s interest rate to help you get back on track and pay off your debt faster. This comprehensive guide outlines valuable insights and strategies to help you negotiate a lower interest rate on your credit card.

Before immediately trying to lower your credit card interest rate, first determine if it’s necessary and achievable by reading the following section. 

When Is It Necessary To Lower Credit Card Interest Rates?

When a credit card carries a balance, you’ll pay 18-22% interest or APR(Annual Percentage Rate) on this balance. When you carry a balance on your card with a high APR, a larger portion of your payments go toward interest rather than reducing the principal balance. This means it takes longer to pay off your debt and can lead to a never-ending cycle of revolving credit.

Lowering your credit card interest rate can provide several benefits:

  • Saving Money: By reducing your interest rate, you’ll pay less in interest charges over time, allowing you to save money.
  •  
  • Accelerated Debt Repayment: With a lower interest rate, more of your payment will go towards paying down the principal balance, helping you get out of debt faster.
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  • Improved Credit Score: Paying off your debt more quickly can positively impact your credit score, demonstrating responsible financial behaviour to potential lenders.
  •  

Now that you understand the significance of lowering your credit card interest rate, let’s dive into the strategies you can use to negotiate for a better rate.

1. Assess Your Current Situation

Before initiating any negotiations, it’s essential to evaluate your current credit card terms and your overall financial situation. Take the following steps:

1.1 Review Your Credit Card Terms

Familiarize yourself with the specific terms of your credit card, including:

  •         Annual Percentage Rate (APR).
  •         Grace period.
  •         Statement due date.
  •         Current credit card balance.

 

Knowing your current terms will help you during the negotiation process. 

1.2 Check Your Credit Score

Get a copy of your credit report and check your credit score. Your Credit Score determines your interest rate. If it’s too low, you may have to work on improving it first. While checking your credit report, check for errors or inconsistencies that may lower your score. 

1.3 Research Competing Credit Card Offers

Find three or four alternative credit cards and make a note of the card’s name, company and terms to reference during negotiations. Look specifically for:

  •         Credit Cards that offer introductory 0% APR periods for balance transfers or 
  •         purchases.
  •  
  •         Lower interest rates for balance transfers or new credit cards. 

2. Build Your Credit

If your credit score is less than optimal, aim to improve it before negotiating for a lower interest rate. Here are some strategies to enhance your credit health:

2.1 Maintain a Low Credit Utilization Rate

Keep your credit utilization rate— the percentage of your credit limit that you’re using— below 30%. Aim to have a utilization rate of 30% or less to demonstrate responsible credit usage to potential lenders.

2.2 Make Payments on Time

Consistently make your credit card payments on time to establish a track record of responsible financial behaviour. You can set up automatic payments to make sure you make timely payments.

2.3 Pay Down Existing Debt

Reduce your outstanding debt as much as possible before negotiating for a lower interest rate.

3. Understand The Credit Card Company's Perspective

It helps to see the other side to understand what a credit card company expects from customers to offer lower interest rates. Banks and issuers want to ensure their customers are low-risk borrowers and are more likely to lower rates if they see you as someone who can reliably repay debt. 

Ask yourself if your recent payments and credit history reflect a reliable pattern and if you can use this to your advantage.

4. Initiate The Negotiation Process

Armed with knowledge and research, it’s time to contact your credit card issuer and initiate the negotiation process. Here’s how to approach the conversation:

  1. Be Prepared: Gather all the necessary information, including your credit card terms, competing offers, and credit history.
  2.  
  3. Call Customer Service: Explain that you would like to request a lower interest rate on your credit card and provide reasons why you believe you deserve a reduction.
  4.  
  5. Highlight your credit history: If you have a history of on-time payments and responsible credit usage, emphasize this to the representative.
  6.  
  7. Mention competing offers: Share the information you gathered about other credit card offers with lower interest rates. Let the representative know you are considering switching to a different card if your current issuer cannot provide a better rate.
  8.  
  9. Be polite and firm: Clearly express your request for a lower interest rate and be firm in your position. Remember, the worst they can say is “no.”

5. Be Prepared To Negotiate Again

If your initial request for a lower interest rate is declined, don’t be discouraged. Follow up in a few months and try again. Credit card companies may be more willing to negotiate after seeing your continued responsible credit behaviour.

Alternatives To Lowering Your Credit Card Interest Rates

If, despite your best efforts, you cannot lower your credit card interest rates, there are a few options to consider:

  • Consider a balance transfer credit card. These offer a 0% APR for a specific period (6-18 months), after which you will have to pay interest again. These cards may give you valuable time to pay off as much balance as you can.
  •  
  • Get a lower-interest credit card. While this card may not have a 0% APR rate, the interest may be more manageable, allowing you to pay off your debt more quickly.
  •  
  • Make multiple payments on your current credit card a month. Making multiple smaller payments may help you negotiate a lower interest rate later. 

Conclusion

If credit card interest rates are getting you down, then trying to lower the rates is a worthwhile endeavour. Ensure you are well-prepared before starting your negotiations by familiarizing yourself with your current credit card terms and the other choices on the market. Also, aim to work on your credit history and demonstrate your favourable track record during negotiations. If you cannot lower the interest rate on your current credit card, consider changing to a credit card with a lower interest rate or a balance transfer credit card to pay off your debt faster.

Author Bio

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Mohamed Konate

Mohamed Konate is a personal finance expert, blogger, and marketing consultant based out of Toronto. He is a former financial services professional who worked for many years at major Canadian financial institutions where he managed the marketing strategy around various financial products ranging from credit cards to lines of credit. Mohamed is passionate about personal finance and holds a Bachelor in Business Administration from the University of Quebec (Montreal) and a Master in International Business from the University of Sherbrooke (Quebec).He is also the author of the Canadian Credit Card Guidebook. Read his full author bio

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