How To Lower Your Credit Card Interest Rate

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If you're one of the 38 percent of all American households that carry credit card debt, then you may be looking for ways to cut your monthly credit card bill.

It is surprisingly easy to lower your interest rates with your credit card companies. Follow these five steps to lower your credit card interest rate and save money.

The chart below shows two APR scenarios—15% and 20%—which are common fees when opening a credit card.

Check Your Credit Card Statements

First, gather your credit card statements together. It's important to know your credit history, payment schedule, and other important details before calling your credit card company and asking for a reduced rate. It is also important to note your current interest rate so you can negotiate.

On the statement, you will see a customer service number. Call the number and key in the option to speak to an operator. The operator should be able to connect you with the correct person who can negotiate your rate.

Although physically picking up the phone and calling your credit card company may seem like a time-consuming process, think of it this way: This hour-long phone call could potentially save you hundreds – maybe even thousands – of dollars on your credit card payments.

Ask to Have the Credit Card Interest Rate Lowered

Once you are connected with a representative, this is the time to begin negotiating your rate. You may want to mention your good payment history, your loyalty to the company, or a high credit score, if you have one.

You should always be polite when asking for an interest rate change. If you yell or become belligerent, then the customer service representative will not be as willing to help you. Politeness goes a long way in situations like these, though it is important to be persistent.

Keep in mind that you may run into difficulties getting a reduced rate if you have a history of late payments, a low credit score, or a lot of outstanding debt.

Your credit card company wants to continue to make money off of your account, so generally, they will not bring your interest rate down to zero. However, they want to prevent you from transferring all of your debt to a lower interest credit card, so they will likely decrease your interest rate if you ask.

Ask for Information on Qualifying for a Lower Interest Rate

If you are unsuccessfully in getting a lower interest rate, you should ask for more information. If it is because of late payments, ask the representative what you can do to qualify for a lower interest rate in the future. You may simply need to wait a few more months and make payments on time in order to become eligible.

You can also try to call again in a few weeks. By calling consistently, you are more likely to get your rate lowered. You may want to mention that you have a zero percent or another low-interest card that you can transfer the money to.

Try Again if Needed

If you are successful in getting your interest rate reduced, don't stop there. Try again in a few months, because they may be willing to offer an even lower interest rate. If you have an initial rate of 18 percent they may lower it to 12 percent. When you call again they may lower it to 9 percent. This could save you a lot of money over the long term.

But this may be dependent on the current financial climate, how interest rates are doing, or the state of the economy.

Make Your Payments in Full and On Time

Always make your payments in full and on time. Credit cards can raise your rates if you fail to pay on time. They will be less likely to lower your interest rates if this is the case as well. That's why it's important to consistently pay your bills on time and in full. If you are considered a credit risk, you will not qualify for a lower interest rate.

Putting it simply, the steps for lowering your credit card interest rate are very similar to that of raising your credit score. For example, you should focus on making your payments on time and work on getting your balance lower so that you are not too near the credit limit.

Other Tips:

  • Don’t give up if you don’t immediately get a lower interest rate. Call your credit card company monthly and keep asking. Improving your credit score will help you, as well.
  • Always speak to the credit card representatives in a respectful manner, and be polite, even if you don't get what you want. Remember, the customer service representative is only doing his job, and you should treat her with the respect you would like to receive at work. They also will be less likely to help you if you are rude.
  • If all else fails, you can open a new credit card account with a zero of low initial interest rate and transfer your credit card balance to your new account. Some banks may offer a lower interest rate if you switch bank accounts. You may also take out a personal loan to get a better rate. Be sure to look for other ways to save interest on the loan
  • Consider taking out a consolidation loan to lower your interest rates. If you choose this option, you will need to stop using your credit cards completely so that you do not end up having payments on your consolidation loan and your credit cards at the same time. 

Updated by Rachel Morgan Cautero.