The cost of borrowing money can skyrocket when using a credit card. Paying some fee to borrow money for longer than a billing cycle remains unavoidable in most circumstances, and we always recommend paying your balance in full each month to avoid incurring interest. But for those who must carry a balance, interest rates can seem less like an inconvenience to avoid and more like a significant budget line item to account for.
Cards with high 25% to 30% APRs make carrying a balance an expensive endeavor, but even a 10% APR can be high compared to other forms of borrowing. While it is true the lender sets your interest rate when you open a card, few are immovable. With some effort, it is possible to negotiate or renegotiate your interest rate(s). Results may vary depending on your credit history, outstanding balance and other factors, but if you’re prepared and ask at the right time, you may stand a good chance of lowering your rate and saving yourself money.
Knowledge Is Power
Assess your credit health before making any big ask of a lender. Typically, a higher credit score equates to lower interest rates. Likewise, since income is a determining factor for your credit application, it may also be considered when determining your interest rate. Because those with lower income and lower credit scores are seen as higher-risk borrowers, card issuers and other lenders will be less inclined to offer deals. In fact, for many low-income, low-credit applicants, just opening an unsecured credit account with many issuers can be difficult, if not impossible.
Ensure your credit report is accurate and up to date and that you haven’t missed any payments within the last 12 months—a history of late repayment may make lenders less inclined to give you an adjusted rate. You’ll also want to pay down any outstanding debt as much as possible before contacting your lender. Aim for less than 30% of your total credit limit (also known as your utilization rate).
Even if your credit isn’t excellent, there may still be hope. If your score has recently increased or your income has grown, you may be able to renegotiate. Conversely, if you’ve suddenly experienced a financial hardship—like an unexpected medical illness or unemployment—you may also be able to get an adjusted rate. Card issuers often advertise understanding in the face of a crisis.
Next, identify the rate or rates you’re currently paying. If you have multiple cards, you’ll have to do this for each one. Search your credit statement for the annual percentage rate; it’s usually at the top of your card’s terms and conditions. This number reflects a factor of the amount you pay on your outstanding debt each billing cycle. Read our extensive guide to learn more about APR.
Make sure you fully understand your financial position. During any negotiation for a better interest rate, gathering information about your income, expenses, total assets and liabilities can help you see yourself how a potential lender will, which can help you improve your position and become a better candidate for a rate improvement.
Also, do some research to understand the market. Check competitor credit cards and see what kind of deals they offer. If you discover a rival company offers a better rate than you receive, you may be able to leverage this information when negotiating—even if you don’t want to switch lenders. Other companies preapproving you for better rates may also indicate your credit standing has improved.
Negotiating With a Lender
When you ask for a lower rate, have a general idea of what you want to say—be prepared. Once all your information is in order and you have a good idea of what you want—and what you need—you’ll be ready to negotiate. Begin by calling the account you’ve had the longest; account longevity and history may provide you some leverage. Your bank may recognize you as a profitable customer if you’ve been banking with it for a long time.
Emphasize your stellar repayment record, any better offers from rival companies and your unexpected financial hardship. Make your case respectfully, but be firm about your needs. Don’t be discouraged if the rep tells you they can’t do anything. Politely ask to be directed to a supervisor and if you’re still told a reduction isn’t possible, consider asking for a temporary change. They may be more likely to allow a temporary change, which may help you find a better option or a new company to do business with.
As a last resort, suggest you will close your account if you do not receive a lower rate. This is not a threat to make lightly, as you still have to pay any outstanding debt before you can close an account. If your card has a large outstanding balance, this tactic won’t hold much weight at all.
Balance Transfer as an Alternative to a Lower Rate
For credit cardholders facing high interest rates, a balance transfer card option may help reduce a rate or, with the right account, provide a few months of reprieve from interest altogether. A balance transfer moves a balance to a new card—ideally with a lower interest rate. There is often a balance transfer fee from a new card issuer, but many issuers offer 0% introductory APRs on balance transfers for a year or longer to attract customers trying to dig themselves out of debt. Learn more about how to do a balance transfer in our guide.
Bottom Line
You can often be granted a lower interest rate if you maintain good credit and a consistent on-time payment history. Even if you aren’t able to, don’t give up; continue to make payments on time, reduce outstanding debt and make a plan to try again in three to six months. Improving your credit health will help you make your case next time. People like to help people who help themselves, and credit card companies want your business. If you give the company a profitable reason to help you, it will often do so. It’s just a matter of ensuring you’re in as strong a position as possible when you ask.
