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How to lower your credit card interest rate
A massive interest rate on your credit card debt is a crushing blow to your financial freedom. On the low end of the spectrum, just 15% on a $1,000 balance is bad enough, but higher numbers can make that amount appear insurmountable.
It's not impossible, however, to bring those numbers back under control and work your way towards greater financial independence. One of the best ways to achieve this is by contacting your credit card company and requesting they give you a lower interest rate. Cardholders rarely take this step for fear of rejection or the possibility they might have to negotiate their rate down.
At the absolute worst, your card company might say no -- but what if they don't? Here is how to lower your credit card interest rate and take back control of your debt.
Strengthen your credit
Similar to the lenders for buying a home or car, credit card companies want to do business with customers on solid financial footing. Strengthening your credit will lower your risk to the credit card company, which makes them more willing to lower your rate. So before making contact, pull your credit rating to see where your financial health stands.
If your credit is on the upswing, it's an excellent bargaining chip, so sell that point when you call your card issuer. However, if your credit score needs fixing, you might want to delay your call until the numbers are more solid. Look at where you can achieve quick wins. Pay off a smaller balance or pay a sizable portion of a larger debt. Both will push your credit score upwards.
Also: Capital One Platinum Card review: Build positive credit
Always make it a point to make all payments on time because even a few missteps can hurt your credit rating. If you do have an excellent track record of on-time payments, use it as a point in your favor.
Time it correctly
With a credit score above 670 -- which is considered good -- the second variable to consider is timing.
Did you recently pay off a vehicle, vastly lower some student debt or make a move to a less expensive house or apartment? Perhaps you recently received a raise? All of the previous scenarios have one thing in common -- they lower your debt to income ratio, which makes you less of a risk to lenders, including credit card companies.
As with your credit score, monitor your debt to income ratio to ensure you maintain a healthy balance between major monthly obligations and your income. A debt to income ratio of 36% or less is considered good; 28% or less is ideal.
Know your numbers
The best negotiators are the ones that come to the table with useful and factual information; it's no different when speaking with your card issuer. Know what you own and what you've paid -- including the interest. Have your credit score and debt to income ratio handy. Be prepared to explain where your numbers are, what you did to improve them, and how you plan on maintaining them.
The card company will verify everything you tell them. It helps to put a story behind those numbers to prove your commitment to fiscal responsibility. The company will want you to convince them why they should provide you with a lower rate, so be prepared and be honest. State facts and don't embellish. Sooner or later, the card company will know if you're worth the lower rate or not.
Line up other offers
Before calling the card company, the last step is lining the offers of lower rates from other cards. Whether you received them via email, mail or learned of an offer through other means, know what companies are providing to new clients. Create a comparison sheet so you can quickly flex your knowledge.
Also: The best business credit cards with 0% APR
Credit card issuers will avoid losing business with you if you make a great case. Much like big box retail stores and their price matching tactics, a card issuer isn't going to lose a customer over what amounts to a nominal fee.
Make the call
Finally, it's time to make the call. Approach the call as a simple conversation -- a request and not a demand. Be polite, express the purpose for your call and make sure you're speaking to a representative that can help you; if necessary, you can ask for someone who might carry more approval authority than the one with whom you're speaking.
State your case in the order expressed above and mention the other offers you are entertaining. If the initial request is unsuccessful, don't hesitate to ask if there are steps you could take to improve your chances for a lower rate.
"No" means a new opportunity
Of course, there is still the chance the answer is no. After exhausting all possible venues and still receiving a no from your current card company, your next move is to find a new credit card company.
Make good on your promise of switching issuers by exploring other offers. Several cards have a 0% interest introductory offer on balance transfers for 12, 15 or even 18 months. Note that some of these cards do charge balance transfer fees, so it's important to research which ones best fit your current financial situation.
[This article was first published on The Simple Dollar in 2020. It was updated in March 2022.]