Can I Lower the Interest Rate on My Credit Card?

There have been many changes with the recent Credit Card Act of 2009 that recently went into force.  Many card holders saw their credit limits drastically reduced or closed all together.  Many credit card holders that have high balances were hoping to be able to lower the rate that they have.  And that’s a common question that many have: Can you lower the interest rate on your credit card?


The simple answer is: Maybe.  Or put another way,  you’ll never know unless you ask, BUT it might not be a good idea (I”ll explain more in a bit).  A study conducted by the U.S. Public Interest Research Group found that more than half (57%) of those who called their credit card issuer and requested a lower interest rate were successful. On average, the rate was lowered by between 7 and 10 percentage points.  Now that is pretty compelling, but it doesn’t always work that way.

How to Get a “Yes” When Asking to Lower Your Rate

While the following don’t guarantee your chances, they will definitely give you a fighting chance.

  • Keep a good credit score. A good rating applies both in terms of your payment history with the card issuer and your overall credit score. You are entitled to a free copy of your credit report every year from each of the three major credit-reporting agencies: Experian, Equifax and TransUnion. To save time, log on to www.annualcreditreport.com to access reports from all three. For a small fee, these agencies also provide personal credit scores.
  • Don’t let your card balances get too high. You have a history of paying off the entire balance or paying more than the minimum required each month.
  • How long have you had the card?. You have held the card for a year or two before requesting the rate change.
  • Don’t be labeled “subprime.” The credit card is not marketed solely to consumers with bad credit.

Why You Should Not Always Ask to Lower Your Rate

While the notion of having a lower interest sounds enticing, it might not always be the best strategy.   If your credit history doesn’t have a stellar past, it may be best to keep quiet.   When you do call and inquire about a lower rate, it may trigger the credit card company to do an account review.  That could lead to the opposite effect desired.  Your card company could jack up your interest rate or even cut your limit.   If you are hard pressed to decrease your rate, it would be a good idea to have a backup card that you could transfer the balance to in case your plan backfires.

Tim Chen from NerdWallet adds, “If customer service does not agree to lower your APR, always threaten to cancel the card. You don’t have to go through with the cancellation, because you will be transferred to a customer retention department that has more latitude to give you concessions.”

The Law of Averages

To negotiate successfully with the credit card company, you will have to be prepared. Know what your current interest rate is and make sure that it is not a promotional rate that will expire within a matter of months. Also research what other banks and credit card companies are charging their customers. According to the Federal Reserve, the average interest rate on existing credit card balances is approximately 13.5%.

After you’ve done your research and you have concluded that your interest rate is way too high, it’s time to pick up the phone.  When you first make contact with the customer service rep, be sure to nice but assertive.  There’s no place to wishy washy here.  If you’re met with rejection, don’t give up yet.  There’s always a manager to speak to.  Ask for them and continue to plead your case.  Have all your facts ready: what you can get at the competitor.  Numbers don’t lie and they can’t contest it.  Mention you are going to the competition unless they oblige.  If they balk, then it’s time to make a switch.

Remember: the better your payment record with the card issuer and the higher your credit score, the better your bargaining position.

Doing Your Homework

One final word of advice: Be careful about getting overly zealous in your search for the lowest rate card. Applying for multiple new cards at the same time (three or more inquiries in one month) could cause your credit score to be lowered.

Recently on the blog we had a guest post and interview with Tim Chen from NerdWallet.   His site provides an excellent resource for consumers that are looking for credit cards to suit their needs including the best balance transfer cards.  Tim also advises, “”Always ask to extend your introductory APR period. Some of our users have gotten introductory APR offers repeated 2-3 times in a row.”

Creative Commons License photo credit: TheTruthAbout…

This post is featured in Clear Choice Credit Card Carnival

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