5 Steps for Negotiating a Lower Credit Card Interest Rate

If you carry a credit card balance month to month, securing a lower interest rate can help you save money. Most credit card interest rates are variable, meaning they fluctuate based on a variety of factors. If you have a healthy credit score and history, getting a better interest rate can be as simple as requesting one from your lender. In this article, we’ll cover why you might want to negotiate a lower rate, how you can negotiate a better rate, and other ways to decrease your debt, such as the debt snowball method. 

Why you might want to negotiate a lower interest rate

Carrying a high interest rate month-to-month can make it more difficult to pay off your debt. More of your money will go toward interest, meaning you’ll have less money to put toward other financial goals, such as a retirement fund. Plus, when you’re paying high amounts of interest, it takes longer to pay down your principal balance. 

Steps for negotiating a lower interest rate

Here are 5 steps you can follow to negotiate a lower interest rate. 

1. Understand your current credit situation

Learn as much as possible about figures like your credit card terms, current balance, and due dates. The more you know ahead of time, the better you’ll be able to negotiate with your lender.  

2. Check your credit score

Check your credit score ahead of time. A good or excellent score can give you leverage in negotiating a reduced rate. A high credit score indicates that you’re likely to repay your credit card bill, making you an attractive borrower to lenders. 

3. Improve your score if necessary

If you find that your credit score isn’t as high as you’d like, you may want to take some time to raise it before you request an interest rate change. To boost your score, focus on paying your bills in full and on-time, as well as maintaining a low credit utilization ratio. Your credit utilization ratio is a comparison of the amount of credit you’re using versus the total amount of credit you have available. Try to keep your ratio at 30% or lower. 

4. Look into different offers

Do your due diligence and consider card offers from your lender as well as from other companies. If you see a more favorable offer, write it down. You can use it as a bargaining tool when you call your lender. 

5. Call to request a lower rate

You’ve done your research and now it’s time to call the customer service number on the back of your card. Be polite and tell the representative that you’re interested in getting a lower interest rate on your credit card. 

Start with the company you’ve had your account with the longest, especially if you’ve used your card and paid your bills responsibly. Remember, the more leverage you have, the better your odds of getting approved for that lower rate. Mention your credit score (assuming it’s in the higher range) and other offers you’ve seen. 

What to do if you’re rejected for a lower interest rate

If you’re rejected for a lower interest rate, you have a few options:

• Ask what you can do to improve your odds in the future: It’s perfectly okay to ask your issuer what you can do to qualify for a lower rate in the future. 
• Request a temporary reduction: Try asking for a temporary reduction of a percentage point or two. 
• Call again in 3 to 6 months: Wait a little and then try again. If you exhibit positive credit habits, you’re more likely to get approved. 

Alternative ways to pay down debt

Here are three alternative ways to pay down debt if you aren’t approved for a lower rate.

Debt snowball method

With the debt snowball method, you focus on paying off your debts in order of smallest to largest. You’ll make minimum payments on all your balances but put extra money toward the smallest one. Once that’s paid off, you’ll put extra toward the second smallest balance. The debt snowball method is ideal for people who need a little extra motivation for paying off debt. 

Debt avalanche method

With the debt avalanche method, you focus on paying off your debts in order of highest to lowest interest rate. You’ll make minimum payments on all your balances, but you’ll put extra toward the balance with the highest rate. Once that’s paid off, you’ll focus on paying off the next highest interest rate. The debt avalanche can help you save more money overall since you’re saving on interest. 

Balance transfer

A credit card balance transfer is when you move outstanding debts from several cards onto a new card that ideally has a lower interest rate. A balance transfer can help simplify bill paying each month—since you only need to worry about one balance—and help you save on interest. 

By following the steps above, you might be able to negotiate a lower credit card interest rate. If you don’t get approved at first, you can improve your credit habits and try again later. You can also try one of the DIY debt payoff methods or a balance transfer. Whichever method you select, the most important thing is that you exhibit healthy financial habits and reduce your debt. Best of luck!