Credit Cards

Can I Negotiate a Lower Interest Rate on My Credit Card?

Many credit cards come with variable interest rates, which means they can fluctuate as the prime rate changes. The Federal Reserve has been steadily raising interest rates over the last few years and, according to some reports, is likely to keep increasing them. If you carry credit card debt, rising rates means you will pay more money on that debt.

Your credit card issuer may also increase the interest rates on your credit card if you miss a payment or have not paid off the balance in full after the period for a credit card balance transfer expires.

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How Higher Interest Rates Can Impact Your Credit Card Debt

Double-digit interest rates can make it difficult for consumers who are trying to paying off their monthly balance but also carry a balance from month to month. That means more of their payment is going toward the interest portion of their debt rather than the principal.

Negotiating a lower interest rate from your credit card issuer can help consumers lower their overall debt so they can pay it off more quickly. Consider these strategies when asking your credit card issuer for a decrease on your card's interest rate:

1. Use Loyalty to Your Advantage

If you've had a card for a while and always pay it on time, your track record gives you some leverage. Determine which card you have owned the longest and start by calling the issuer of that card first. If you are facing a new financial burden such as the loss of a job, a decrease in salary, or unexpected bills such as a medical emergency or home or auto repair, let the issuer know. Mention that you have made on-time payments for several years and ask whether they would consider reducing your interest rate by a few points.

2. Focus on the Highest Interest Rate

Determine the interest rate on all your cards, including the department store and gasoline station credit cards. Start by calling the issuer of the card that carries the highest interest rate first. Any decrease of your interest rate will reduce the amount you are paying in interest the most, allowing more of your payment to go toward paying off the principal.

Of course, this assumes that you're carrying similar balances on all cards. Alternatively, if you have a number of credit cards only one or two cards with the majority of the balance, consider trying to get those interest rates reduced first, even if they aren't the highest.

3. Call All the Issuers

Even if you have a card whose debt is much lower compared to your other ones, call the credit card issuer and ask if they can offer a decrease in your current interest rate. You never know which one will agree with your request. Any money you save from a lower rate should be used to make extra or larger payments on credit cards with higher interest rates.

4. Ask for a Temporary Break

Ask your credit card issuer for a reprieve or to lower your interest rate by 1 to 3 percentage points for the next year, rather than permanently. When you call the credit card issuer, be prepared to offer something in return. If you have always paid your monthly payments on time or paid more than the minimum, mention those facts to the customer service representative.

5. Try Again

Keep detailed notes. If a credit card issuer is unable to offer a decrease in your current interest rate, try calling again in three or six months. New offers crop up often and calling the company again will not hurt, especially if you continue to make your payments on time.

6. Cancel the Card

If you are close to paying off the balance or have already done so and the company refuses to lower the interest rate for future purchases, consider canceling the card. Keep in mind that if you don't replace that card with a new one, it could negatively impact your credit scores.

When you cancel a credit card, you're reducing the amount of available credit you have, which means at any given time you could be using more of your available credit (a.k.a., your credit utilization rate). A higher credit utilization rate can hurt your credit scores.

Lowering the interest rate on even one credit card will help you pay off your debt much sooner and help you take action to increase your credit scores. Avoid charging more purchases unless they are necessary or an emergency. Be patient and continue to call the credit card issuers periodically to see if they will agree to your request.