It’s okay. You can admit that you were sucked in by that 0% introductory interest rate. It happens to the best of us. But what happens when the introductory rate expires, and you’re stuck with rate that skyrockets to 15, 20, or 25%— or (gulp) even higher?
Credit card interest rates drain you of your hard earned money. A $20 meal can easily cost $10 to $15 more if left to linger in an outstanding credit card balance. That’s why well-intended people fall behind on their payments and end up barely able to make the minimums each month, even though it can mean taking years to pay off a burrito and fries.
The reason they’re barely able to cover the minimum payments is because the interest rates are so high. And the interest rates are high because they’re only able to make the minimum payments. It’s a vicious cycle, to say the least.
Fortunately, there are ways to lower interest rates and break out of the debt spiral. It’s actually not as difficult as you might think. Breathe easy, because we’re here to spell it out for you.
There are two primary ways to lower your credit card’s interest rate. One is simply to negotiate a lower rate. The other is to transfer your balance to a lower rate card. Let’s walk through each of those.
Negotiating a Lower Rate
Believe it or not, sticking with a card you already have — and negotiating a lower interest rate on that card — is always better than getting a new card with a lower rate. You can’t run from your credit balance, and every time you open a new card, the inquiry into your credit history can ding your credit score, which in turn leads to higher interest rates. There’s that vicious cycle again.
Here are a number of negotiating tactics that can help you score a lower rate on your existing card:
- Do your homework. Shop around and see if you can find better deals with competing credit card companies. Use this information as negotiation leverage. After all, the credit card company wants your business, so they’ll often agree to a rate that matches (or at least approaches) one offered by their competitors.
- Start with your oldest card first. Loyalty pays. Companies are more eager to work with long-time customers, and it always helps to be able to say, “I’ve been a loyal member of XYZ bank since…”
- Simply call and ask. There’s probably a customer service number on the back of your credit card. Most people ignore this unless they find themselves in a really sticky situation, but customer service is there for a reason. Arm yourself with competitors’ information, know what you’re asking for, and simply make the call. It can’t hurt to ask, right? It seems too simple, and that’s why so few people actually take the initiative to do it.
- Be persistent. If at first you don’t succeed, bother them until you do. Okay, don’t bother them — your goal is to be rational and pleasant. But persistence is key. If you’re told “no,” ask if you can speak with a manager. Keep trying until you are connected with a representative who is willing to work with you. This doesn’t mean calling every day, but there’s nothing wrong with scattering several phone calls throughout a few months. By doing so you’ll be on their radar, but hopefully not on their blacklist.
- Be polite. This should go without saying, but customer service representatives are people, too. They listen to complaints all day long, and a genuinely friendly caller actually stands out from the crowd. After all, as the old saying goes, you catch more flies with honey than you do with vinegar.
Try this script for starters: “Hello, my name is _____. I’ve been a customer of _____ bank since ___, and I’m interested in securing a lower interest rate. I’ve made an effort to make on-time payments, and I funnel ___ dollars per [month/year] through this card. I’ve recently been offered a new credit card with [competing credit card company]. It has a similar structure to yours, but they offer ___% interest rates. I’d like to stay with you based on our history, but the new offer is compelling. Would you be willing to match that offer?”
If negotiation doesn’t prove fruitful, opt for Plan B — transferring your balance to a new card.
Transferring your Balance to get a Lower Rate
In some cases, it might not be possible to secure a lower interest rate through negotiation. Perhaps you haven’t exactly been a stellar customer, or maybe your card’s customer service department isn’t willing to play ball. If all else fails, consider balance transfers. This approach can allow you to shift some of your credit card debt to a card with a lower rate (or at least a low introductory rate.)
You’ll want to shop around for the best transfer deals. It’s worth putting in some effort up front, because deals vary widely. Keep in mind important considerations such as:
- Balance transfer fees
- Annual fees
- Any other strings attached.
In other words, read that fine print.
A few more tips:
- Apply for a new card between loans. If you’re buying a house or car, your credit could suffer after the purchase goes through, but there’s generally a reporting lag in between the moment of purchase and when it actually shows up on your score. That’s the time to apply for a new card.
- Watch those adjusting interest rates like a hawk. If you transfer some of your balance to a card with a low introductory rate that will expire, be sure to pay off your balance before the rate expires.
- To make sure the balance transfer process goes smoothly, include the amount you wish to transfer on the new credit card application.
- For more advice on the balance transfer option, be sure to check out Google-X’s list of Best Balance Transfer Cards.
Keeping a good interest rate low
Once you’ve successfully locked in a lower interest rate, it’s not quite time to sit back and celebrate (sorry). That rate is still subject to a number of variables, most of which are within your control. Here are a few things to remember:
- Pay your balance — in full and on time. Late payments can cause interest rates to shoot up faster than a speeding bullet.
- If the late payment was accidental and quickly remedied, don’t be afraid to call your customer service representative. You can dispute the elevated interest rate and campaign to have the additional charge removed. Just don’t forget our tips on friendliness!
- Try not to exceed 35% of your credit limit. Credit scores are determined, in part, by your ratio of available credit to “consumed” credit. If you’re maxing out your credit limit, it can negatively impact your credit score, which can increase your interest rates.
- Check your credit score annually using a government-approved, reputable source. This is smart both to arm yourself with knowledge that can potentially be useful in negotiations, but also to alert you to any issues, including dangerously low credit or even possible cases of identity theft.
Whatever you do, don’t despair! It may feel like you’re doomed to accept whatever interest rate your credit card company slaps onto your account, but you don’t have to accept it as fate. No matter what your situation, it’s always possible to lower your interest rate and keep it that way. Do your research and speak up for yourself. The payoff will be sweet!