Six Ways to Negotiate a Better Credit Card Interest Rate
Nearly half of Americans (47 percent) are currently in credit card debt. For nearly 120 million people in the US, this means that credit card companies have a firm hand not only in their pockets, but in their financial decisions as well.
While building up credit card debt poses a huge financial risk, building up credit has the opposite effect; and toward that end, credit cards can provide an invaluable tool in your economic planning and budgeting, especially if you keep you interest rates as low as possible. With a lower interest rate, you can leverage the power of your credit to prioritize payments, make important purchases and built up your credit for major investments such as a home or car.
Toward this end, here’s a look at six ways you can negotiate a lower interest rate on your credit cards. Depending on your credit score and payment history, some of these methods may be more successful than others, but they’re all definitely worth pursuing.
1. Familiarize yourself with your credit history and payment track record
If you were going to start a polar expedition, you’d find out a bit about the terrain first — and by researching your credit history, you’re getting valuable information on where the land lies in your financial status. This insight can put you on the right track toward your financial future. Here’s what you need to do:
a) Call your bank and credit card issuers to find out your current balances and past payment record, as well as any information about late payments or penalties.
b) Get your current credit score. You can do this for free through a number of online credit companies — just make sure to use one that’s reputable.
2. Check your credit utilization rate
One way to maintain a higher credit score is to check your credit utilization rate, which is used by lenders to calculate lending risk. Credit card utilization refers to the amount of available credit you have on your cards. You can calculate this by dividing your balances by your credit card limits. The resulting percentage determines your overall credit utilization rate. According to the experts, a total credit card utilization rate below 30 percent will give you a higher credit score.
3. Start your strategy with the credit cards you’ve had the longest
Credit card companies value customer loyalty, and chances are that your best negotiating tools will be the credit cards you’ve had the longest. Once you’ve gathered together your oldest pieces of plastic, it’s time to go into action.
4. Call the issuer of each card and cite reasons why you deserve a better interest rate
This is where your research will serve you well. By having a thorough knowledge of your credit history, you can cite advantages such as having a first-rate payment record with few or no late payments.
If you’re talking to the issuer of your oldest card, make the most of this by emphasizing how many years you’ve been a loyal customer. Since credit card companies are built on customer loyalty, they’re only too happy to reward it — which means they’ll do everything they can to prevent you from going over to the competition.
5. Shop around for credit cards with a lower interest rate
Fortunately for consumers, credit card companies are fiercely competitive, and are all too happy to hear from customers who are dissatisfied with their competitors. If you’re not getting the appreciation (in terms of lower interest rates and other perks) you feel you deserve, it’s time to move on to a company that will value your business more. A new card issuer will do their best to lure you with lower interest rates, waived fees and other perks like cash-back and rewards points.
Likewise, if they’re afraid of losing you, your existing lender might bend over backwards to try and keep your business, so it’s a good idea to let them know first before you leave.
6. Get a balance transfer card
Balance transfer cards can provide an excellent opportunity to get a lower interest rate for the balance of your loan. A balance transfer card enables you to essentially start your loan all over again on a different card, and at a lower interest rate. The process is easy — all you have to do is transfer the balance to the new card — but you’ll need to follow a few protocols if you want to maximize your benefits.
First, make sure to keep that card only for balance transfers, nothing else. That way, once you’ve paid the first balance off, you’ll have it open and available again to use for another high-interest balance. Second, if the card offers low-interest transfers for only a limited number of months, your interest will increase once the period is over, so be sure to keep up with expiration dates.
What’s the best credit card interest rate?
According to creditcards.com (November 2020),the average interest rate on a newly-issued card is 16.04 percent. However, for credit cards in general, according to Investopedia the average interest rate is 19.24 percent.
You’ll want to try to get a rate under 16 percent if you can. Again, your chances are best with the cards you’ve had the longest; but you might be able to get a brand new lower-rate card if the issuer is offering a special deal for new cardholders. Be aware, however, that these low-interest deals are usually available for only a limited time.
By keeping tabs on your credit score and doing a bit of negotiating with your lenders, over time you can potentially save thousands of dollars on the life of your credit card loans. Even if you don’t succeed with every card, it’s a good idea to check back periodically to see if they’re willing to negotiate at a later date. In the end, it’s well worth investing the time and effort, because any interest you save now will translate into more money for your financial future.
