How to Reduce the Interest Rate on Your Credit Card

There is a real cost to carrying a balance on a credit card, even though they can be an excellent tool for benefiting from consumer protections and earning rewards.

Credit card interest rates are the cost of that, and they can be anything from excessive to higher than you should really be paying. Because of the ongoing inflation, the Federal Reserve is unlikely to cut the federal interest rate, and the average annual percentage rate on credit cards is currently over 20%. Furthermore, many of the greatest rewards credit cards have much higher fees than the 20% average.

However, if you want to keep your current credit card, there are ways to lower your interest rate.

Things to consider before asking for a lower interest rate on a credit card

We advise doing some homework in advance of negotiating with your credit card company over the phone.

Discover your credit score

Your credit card company will first review your credit score and payment history if you’re trying to get your interest rate lowered. You should check your credit score before taking any further action because it can be helpful to know where you stand before you ask for a lower APR.

Your credit card may provide you with access to your credit score. For instance, Capital One has Capital One CreditWise, and Chase offers Chase Credit Journey. To benefit from either, you don’t need to have a Capital One or Chase credit card.

Additionally, you ought to routinely review your credit reports to look for errors and to view information about your payment history and debt-to-income ratio, or DTI. You can gauge your level of assertiveness when requesting a lower rate by looking over your report and looking for any late payments or other issues. You can dispute inaccurate information with the credit bureaus if you come across it.

How do issuers calculate the interest rate on your card?

Your credit range when you applied for the card, or at least your creditworthiness and credit score, determine your current interest rate.

Fair credit or imperfect credit almost always translates into higher rates, whereas having good or excellent credit usually translates into qualifying for lower rates in a card’s advertised range—credit cards typically provide a range of what your interest rate could be.

When it comes to negotiating a lower interest rate on your credit card, this is just one more piece of the puzzle. You could argue that you deserve a better rate now if your credit has improved since you applied for the card in the first place.

Compare competing offers

Examine a few of the top credit cards to learn about the interest rates offered by rival cards. To find out what other offers are out there, save any preapproval emails or physical mailers you receive or search for cards that are comparable but have lower rates.

Having as much information as possible when you enter the conversation will put you in a better negotiating position.

How to ask for a lower interest rate from your credit card company

The negotiation process can start as soon as you’re comfortable approaching your card issuer to request a lower interest rate. To help you get a better interest rate on a credit card you already own, follow these four steps.

1. Call your card provider

If you would like your interest rate to be lowered, get in touch with your credit card issuer by calling the number found on the back of the card. Commence by summarizing your employment history with the company, mentioning your excellent credit history and punctual payment history.

Mention any reduced credit card rates you have discovered during your research or that you have been offered. For instance, you can inquire about a better competitor’s rate with your card issuer and see if they will match it.

2. Don’t settle if your request is denied

You don’t have to accept a resolution that falls short of your expectations, even if the credit card company initially rejects your request or offers a new rate that is still higher than you had hoped.

It’s always possible to ask again or to get a decision explanation. The HUCA method (hang up, call again) can help you get better results with a manager or another representative if you feel like you’re not getting anywhere on your first call.

3. Ask for a different benefit

Look for other ways the company can retain your business if it declines to reduce your interest rate. If you inquire, you never know if a customer service representative has the power to provide extra incentives or bonus points in place of a reduced rate.

4. Ask for a brief decrease in rate

Ask for a brief reprieve if you’re concerned about paying off a debt at your current interest rate. For a brief period of time, the issuer may provide you with a lower interest rate. Getting a lower interest rate in the short term could help protect your finances while you decide what to do next, even though it might not be the best long-term solution.

Alternatives to think about

If you want a lower interest rate but your card issuer won’t budge, think about these other options.

1. Apply for a credit card with a balance transfer

For a brief period, typically between 15 and 21 months, a balance transfer credit card has an introductory 0% APR. After that, the APR will rise to the standard variable rate. It can provide you some breathing room to pay off as much debt as possible before the standard rate kicks in, as you have up to 21 months without paying any interest.

Balance transfer fees (usually 3% to 5% of the transferred balance) frequently apply if you choose to apply for a balance transfer credit card. Additionally, keep in mind that approval for many of the best balance transfer credit cards requires good to excellent credit.

2. Request a loan for debt consolidation

Moreover, a personal loan with a fixed monthly payment that won’t fluctuate until the loan term is over and a lower fixed interest rate can assist you in paying off credit card debt.

On a balance transfer credit card, loan terms typically last years longer than the introductory period. Even though personal loan interest rates aren’t as low as 0%, they can still be significantly lower than credit card APRs, with rates for personal loans often falling below 9%.

With a debt consolidation loan, you could combine multiple credit card balances into a single loan with a reduced interest rate, pay off the loan entirely each month, and cease using credit cards until you have paid off all of your debt.

3. Create a debt repayment plan

Making a plan to pay off your credit card debt more quickly and creating a budget, if you don’t want to apply for another credit card or loan, can be helpful. Use the avalanche method to pay off your credit card debt if you have several balances. Pay the minimum amount due on each card and use any remaining cash to pay off the card with the highest interest rate first.

From there, as you pay off each bill, more money will “avalanche” into your account, allowing you to pay off your debts one by one until they are paid off.

What interest rate on a credit card is good?

Obtaining a rate less than the current average of over 20% on credit card interest could be deemed favorable. That being said, your credit score affects your credit card APR. A person with excellent credit will usually be eligible for a lower annual percentage rate (APR) than someone with fair or “bad” credit.

Additionally, keep in mind that certain credit cards have a temporary 0% APR introductory offer. Finding a credit card that offers an introductory 0% APR on purchases, balance transfers, or both for as long as possible can help you save the most interest.

If at all possible, try to avoid paying interest altogether so that you won’t have to worry if your interest rate increases in the future, regardless of the APR you are eligible for.

How your finances can benefit from a lower interest rate

Paying a lower interest rate on a credit card balance can benefit your finances in multiple ways.

First off, getting a credit card with a lower interest rate can help you pay off debt more quickly because a larger portion of each monthly payment will go toward the principal balance rather than interest. Secondly, a reduced interest rate implies a reduction in the total amount you pay in interest.

The best advice: Avoid credit card interest altogether

Making it a habit to pay off your credit card balances each month is the best defense against high-interest rates. To make things easier, you can also sign up for automatic payments, which will be made each time your card is used. To help prevent carrying a balance, it’s a good idea to use your credit card like a debit card.

Conclusion

Saving money when using credit is best achieved by avoiding credit card interest altogether, but this isn’t always feasible. Nonetheless, you should still make an effort to stay away from circumstances in which you are paying more interest than is necessary or in which you are carrying a balance without a clear plan to pay it off.

In the latter case, you might be able to negotiate a lower interest rate with your card issuer. Another option is to take advantage of a balance transfer offer, which offers a temporary 0% APR.

If you’re not careful, credit card interest can sneak up on you, and even the best 0% intro APR offers don’t last forever. Regardless of whether you occasionally carry a balance, it’s always a good idea to monitor your debt and make an effort to borrow as little as possible.