How to Negotiate Interest Rate Reductions With Credit Card Companies

Understand leverage before negotiating an interest rate with your credit card company.

Understand leverage before negotiating an interest rate with your credit card company.

Negotiating with a credit card company to lower your interest rate can be as simple as asking. However, you’ll get the best results if you have some leverage. If you have other credit cards that offer lower interest rates, the credit card company may be willing to match that interest rate. If you carry a monthly balance on the credit card, the company has probably made good money on interest and won’t want to lose it.

Look up the interest rates of the credit cards you currently hold. You can look at your statement for the annual percentage rate, or APR. Credit card companies are required to display the APR. Choose the lowest interest rate as your target interest rate, although when talking to the company, you may want to start lower.

Look up the going rate for balance transfers for competing credit cards. Most credit card companies offer a low APR for transferring balances to their card. However, be aware that they assess a one-time percentage fee ranging from 1 to 5 percent. However, you can use this rate as a negotiating tool. Your credit card company may ask you to transfer any balances on other cards to their company in return for the lower rate. Ask for the lowest rate you’ve seen. Also, ask the company to waive the balance transfer fee for your transfer, if applicable.

Calculate the total dollar amount of interest you’ve paid to your credit card company. If you’ve had your credit card for over a year, calculating the total amount of interest you’ve paid to them can be a powerful negotiating tool. If you have been a lucrative customer, your credit card company will want to continue the profitable relationship, assuming you’ve made timely payments. If you haven’t made timely payments, this information can still carry some weight, although now the credit card company has some leverage, too.

Call your credit card company, armed with the information you've gathered. Politely ask to speak to someone about reducing your interest rate. Credit card companies have customer service representatives dedicated to retaining good customers, and they will be prepared to negotiate. The primary negotiation tools they have are your credit rating and your previous payment behavior with them. If you’ve had some credit problems in the past, reiterate that there are other companies willing to take your business at lower rates. A good faith gesture can also go a long way. Offer to have your payment deducted automatically. Most banks offer this feature and can set up auto-payments over the phone.

 

About the Author

Sara Huter is a professor of economics. Her background also includes risk management in the banking and energy industries with expertise in credit scores. Huter received an M.B.A. in finance from Texas A&M University and a B.S. in information systems from Kansas State University. She has been writing for over five years with work at Popsyndicate.com, WickedWordSmith.com and Simplejoy.com.

Photo Credits

  • Goodshoot/Goodshoot/Getty Images