The Best Interest Rate Is 0%
Sure, there are plenty of credit cards that will offer you a 0% interest rate. ;That’s not what I’m talking about here.
The best 0% interest rate is the one you get by not having credit cards at all! ;Yeah, I know that sounds kind of crazy to some people. But what have credit card companies done for you lately?
Seriously, you probably wouldn’t be reading this post if you were perfectly happy with your relationship with credit cards.
The best thing you can do is pay those credit cards off for good and transition to a cash only lifestyle. ;Angie and I have been doing it for a dozen years now, and I can tell you there is no better way to live your financial life. Our eventual goal is to live without a credit score once we get our house paid off.
We haven’t stressed out or fought about credit card debt in over a dozen years now. ;It’s brought more peace to our marriage and our finances, and that’s worth its weight in gold!
How To Negotiate A Lower Credit Card Rate
Lets get something straight: credit cards are a useful tool in your wallet.
They offer fraud protection on purchases, rewards such as points or cash back, and the ability to purchase something interest-free for 30 days. You start paying interest after those 30 days are up. And the interest is high; most credit card interest rates are between 9.9% and 30%. If you pay off your credit card every month, maybe the high interest rate isnt a concern. If you dont, youll be paying a lot of interest over a lot of years.
Lets assume you have $1,500 on your credit card with an interest rate of 19% and you pay the minimum of $10 a month. It will take you almost 13 years to pay off that original $1,500, which will include an extra $1,448 in interest. Thats double the original amount on the credit card.
Fortunately, most Canadians pay off their credit card every month. For those who cant and for those who want a lower rate, there are ways to pay less interest while youre paying off your credit card.
Do the research
Knowledge is power so before you ask for a lower rate, know whats out there and know your credit score. Youll need both.
Start with your credit history and your credit score. You can get a copy from Equifax or TransUnion with minimal fees. This will provide a breakdown of your credit history.
Once youve done your research, its time to get a lower rate.
Make the call
Make the switch
Research Competing Credit Cards
Credit card companies want to keep you as a customer, even if you don’t have excellent credit. These companies make money each time you use their card due to transaction fees and interest fees .
Taking the time to compare competitor credit card rates gives you more leverage when negotiating a lower rate with your credit card issuer. Make sure that you compare cards that are similar to yours. If you find a similar card with a better rate, note the card name, bank name and terms. Your current company may be willing to match the competitor’s card offer.;
Your Script For Seeking A Lower Apr
YOU: Hello. My name is ____, and Ive been a customer for years.
I feel Ive been a good customer over the years, and Id like to keep doing business with you, but my APR seems high and Id like to talk with someone about that. Is that something you have the authority to change?
CUSTOMER SERVICE REPRESENTATIVE: No.
YOU: In that case, could I please speak with a supervisor?
CSR: Just a moment.
YOU: Hi, my name is _____, and Im interested in talking with someone about lowering my interest rate. May I ask whom Im speaking with?
S: This is Jerry.
YOU: And Jerry, whats your last name and direct telephone number?
S: Jerry Smith, and Im at .
YOU: Thank you, Jerry. Heres why I feel my APR should be lowered. Id like a rate closer to 10 percent.
From here, the conversation could go several ways. If they agree to what you want, say thank you, ask for written notification of the change and the date you should expect to receive it, hang up and do a victory dance. If not, know in advance where you want to compromise.
YOU: Well, is there a lower rate that you could give me?
S: Well, let me see what we can do for you. Yes, I could give you an APR of 12.5 percent for the next 12 months.
If they refuse to lower your APR and you and it makes financial sense for you, move to cancel the card.
YOU: Id hoped wed be able to reach an agreement on this, but if you really cant give me a better rate, then Id like to close the account and finish paying off my balance.
Consider A Balance Transfer Credit Card Instead
Balance transfer cards may provide you an alternative for getting a lower interest rate on your current credit card debt. This may allow you to consolidate your existing balances from multiple cards onto a single, new card.
Youll want to use a credit card with a 0% introductory annual percentage rate, or APR, offer for balance transfers to save money on your debt repayment. Here are some cards to consider.
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Sample Letter: How To Ask For A Lower Interest Rate
With the recent incidents of credit card companies raising interest rates, even on the accounts of excellent customers,many consumers have begun to fight back and are working to get a reduction. Getting a reduction on your credit card interest is not impossible, provided you are a good customer, you pay on time all the time, you have a good credit score, you pay more than the minimum each month, and you do not have a high debt-to-income ratio.
Here is a sample of a letter you can modify and send to your credit card company to request a lower interest rate:
Re: Account Number #_____________________
I am writing this letter to request a reduction in my current interest rate of ___% to a more reasonable rate of ___% so it is more inline with the current market rate. It has come to my attention that my interest rate has jumped from ___% to ___% in a period of ________ months.
I have visited the websites of several competitors and notice that they are offering an interest rate much lower than what I am currently receiving.
I have been a solid, long-standing customer with your company for ___ years and would appreciate your consideration of a lower rate on my account. I feel the increased rate is unfair considering my long-standing history. You will find that I maintain not only a good credit history in general but I have an excellent history of payment with your company.
Find Competing Card Offers
Tell your credit card company that you can get a lower rate from someone else. They dont want to lose your business if youre a good customer. You need actual offers to give this leverage. One place to start looking ;is your mailbox. If you use credit cards, you should be getting competing offers online and by snail mail.
There are chances you receive some new credit card offers with zero APR introductory rates in your junk mail, Abramson, of OverdraftApps, says. But dont try to bluff your way through make sure to have one of these offers handy in case the agent asks for more details.
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How To Reduce Your Credit Card Interest Rate
One of the most depressing things about having credit card debt is the fact that the high interest rate can mean that most of your monthly payment goes to paying interest, rather than reducing your principal. This can mean a long, slow slog as you try to pay off debt.
However, you might not have to keep paying that interest rate. In some cases its possible for you to reduce your credit card interest rate just by asking.
No Means A New Opportunity
Of course, there is still the chance the answer is no. After exhausting all possible venues, and still receiving a no from your current card company, your next move is to find a new credit card company.
Make good on your promise of switching issuers by exploring other offers. Several cards have a 0% interest introductory offer on balance transfers for 12, 15 or even 18 months. Note that some of these cards do charge balance transfer fees, so its important to research which ones best fit your current financial situation.
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Lower Your Credit Card Interest Rate Today
With credit card interest rates at some of their lowest levels in years, there’s no better time to learn how to lower your credit card interest rate. Considering that more than 75% of those who ask for a lower rate end up receiving it, there’s no harm in trying to negotiate with your credit card company.;
Before doing so, youll want to check your interest rate as well as the terms and conditions of the credit card. Also, look up competitor interest rates so that you have additional information to support your case for a lower rate.
If your credit card company initially denies your request, don’t be afraid to keep trying. You can also consider alternative options like balance transfer cards to help lower your rate. If that doesnt work, consider a credit card payoff app like Tally to help pay down your debt and improve your financial standing. Ultimately, youll be in a better position to ask for a rate reduction and increase your chances of getting it.
Lines of credit issued by Cross River Bank or Tally Technologies, Inc. , as identified in your line of credit agreement. Loans made by Tally pursuant to California FLL license or other state laws.
6The portion of your credit line that can be paid to your cards will be reduced by the amount of the annual fee.
Call Your Card Issuer
Once youve gathered enough information to argue your case, call your card issuer and politely ask to speak with a representative about lowering the APR on your card. Make sure you have your notes in front of you and be prepared to bring up your research or additional details about your personal experience if a customer service representative is slow to offer you a better deal. If you get a no, dont be afraid to call back another time or ask to speak with someone else. A different representative or supervisor may be more receptive.
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Ask To Have The Card Interest Rate Lowered
Once you are connected with a representative, this is the time to begin negotiating your rate. You may want to mention your good payment history, your loyalty to the company, or a high , if you have one.
You should be polite when asking for an interest rate change. If you yell or become belligerent, then the customer service representative will not be as willing to help you. Politeness goes a long way in situations like these, though it is important to be persistent.
Keep in mind that you may run into difficulties getting a reduced rate if you have a history of late payments, a low credit score, or a lot of outstanding debt.
Your credit card company wants to continue to make money off of your account, so generally, it will not bring your interest rate down to zero. However, it probably also wants to prevent you from defaulting, so it may decrease your interest rate if you make a good case.
Whats A Good Interest Rate
A good interest rate is subjective, and it depends a lot on the credit rating of the individual applying. For example, you may be able to qualify for a lower than the average rate if your FICO score is in the very good range of 740 to 799 or the exceptional range, which includes FICO scores of 800 or higher.
Most lenders also consider FICO scores in the 670 to 739 range as being good; however, other factors can come into play and impact the interest rate youre charged, such as your income or current debt-to-income ratio.
Because what it means to secure a good interest rate is so subjective, you should aim for one that matches your credit rating and that makes it possible to carry debt without financial hardship. Ideally, youll pay the lowest interest rate you can possibly qualify for.
Look Out For Interest
When it comes to credit, there are no quick fixes. And the Federal Trade Commission has warned of interest rate reduction scams that make those kinds of promises.
Hereâs how these scams often work: A company calls saying it can negotiate with your issuer on your behalf, claiming they have a special relationship. It may offer money-back guarantees and say itâs a limited-time offer to get you to sign up.;
But the company charges fees and requires you to supply personal information. Once it has your information, it can make purchases with your card or sell the information to others. The FTC says not to give out personal or financial information and to hang up if you get a call like this.
Do Understand Your Limits
Every credit card company sets standards on interest rates which are based on your credit history. If you dont qualify for a lower rate, then you cant count on a phone call for a quick fix. Work on building your credit, and then ask again once youre in a better financial position.
If youre running into challenges working with creditors on your own, our free Credit Counseling may be able to help you make progress.
Improve Your Chances Of Getting Approved
Since interest charges are a big moneymaker for credit card issuers, a reduced rate is a big ask. Credit card companies will likely only be willing to bend for their best customers, so youll first want to do everything you can to set yourself up for success.
This means ensuring your credit score is in tip-top shapespecifically, a good FICO rating or better. Aim for a FICO score of at least 670 before you ask for an interest rate reduction, although you may want to aim for 740 to bump yourself up to the very good bracket.
Youll also want to ensure you have a reliable history of on-time payments. If youve had a shaky history of missed or late payments, you may want to focus on making on-time payments for a year before you ask for a reduced interest rate.
Improving your credit standing, especially if youve previously struggled with negative items, is a process that takes time. Rather than looking for a quick-fix solution, focus on building good habitsit can only help when it comes time to ask for a reduced interest rate.
What To Do After A Decision
If you are able to get your rate lowered, it’s time to supercharge your journey to eliminating debt. First, try to get the credit card company’s agreement to lower your rate, as well as the related fine print, in writing. Plenty of people get a promise of some kind from a customer service rep only to discover that the rates have not been changed. Additionally, a credit card company’s agreement to lower rates can be loaded with conditions that will raise your rate as high as it was or even higher than before if you fail to pay your bill on time or keep your balance under the;.
Second, make sure the money you save on interest goes toward reducing your credit card or other debt. This isn’t the time to go on a shopping spree or blow off some steam in Miami with the extra money you’re saving. Continue making payments in the same amount you were making before your rate was reduced.
If your credit card company says no, ask them about their procedures for rate reductions. Also see if there is a time period for consideration or reconsideration. Ultimately, if better rates and/or terms are offered somewhere else, it may be best to take advantage of them, potentially through balance transfer promotions.
Who Is Take Charge America
Since 1987, weve helped more than 1.6 million people take charge of their finances and pay off their credit card debt. We have long-standing relationships with hundreds of creditors, which allow us to achieve lower interest rates for our clients. As a nonprofit agency with an emphasis on financial education, our goal is to help you become debt-free and stay that way.
Contact Your Credit Card Company
Now, it’s time to reach out to the company that issues your credit card. Whether you prefer phone, email or chat, this is your chance to make the case for a lower interest rate.
There’s nothing wrong with being honest and telling the bank that you are struggling. You can explain that you want to make your payments, but that if the interest rate isn’t lowered, you are likely to default. If you have a long relationship and good track record with the bank, it will be more likely to grant your request. It’s costly for the bank for customers to default, too, so the customer service rep may be willing to work with you.
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