Credit cards can be a great tool if used wisely. Along with the flexibility to pay for purchases later, credit cards offer rewards and cashback that cardholders can redeem later while traveling or shopping. That said, credit cards have high interest charges, which come into play when cardholders don’t pay the bill on time. To avoid overspending on a credit card, cardholders can always negotiate the interest rate in addition to making smart spending choices.
1. Use loyalty as leverage
Long-time cardholders can negotiate and lower credit card interest rates by highlighting their commitment to stick with their card issuer. To use this tactic, one must have all their bills and receipts close at hand before reaching out to their card issuers. Then, using the credit card usage data, one can highlight that they frequently use their credit cards to make payments over several years and would like to continue doing so with a lower interest rate.
Frequent card users generate significant revenue for credit card companies every year. This is why the issuers are likely to lower interest rates on bill repayments for such cardholders. This can help card companies retain their most loyal customers and encourage them to continue using their credit cards as frequently as before.
2. Look up competing credit card offers
Credit card companies compete with one another to capture and control the largest market share. To draw new audiences, credit card issuers and banks offer lucrative repayment interest rates and appealing rewards on their credit cards. So, if one is unhappy with their current credit card interest rate, one can look up the interest rate or annual percentage rate (APR) other credit card companies are offering. While looking for this information, one must make a note of the name of the companies, the exact interest rates, and the offer terms. Then, one can contact their card company and use this information to negotiate a lower interest rate. To retain existing users, card companies are likely to feel obligated to offer competitive interest rates.
3. Improve the credit score
One must possess some leverage to negotiate a favorable interest rate with their credit card issuer. A good credit score can be a solid leverage. If one’s creditworthiness is less-than-ideal, they can use a few tried-and-tested strategies to improve it.
- Maintaining low credit card balances
- Paying bills on time
- Diversifying the credit mix
- Keeping overall credit utilization low
- Seeking advice from credit counselors to come up with a robust credit improvement strategy
- Paying off old debts as soon as possible
Those with good credit scores, a proven track record of repaying balance amounts, and a healthy credit history are likely to be trusted more when negotiating a lower APR. So, one must review their existing credit score and boost it to give them an upper hand during interest rate reduction negotiations.
4. Enroll in a debt management program
One can hire a reputable credit counseling agency to create a personal debt management program. Such a program can provide one with an actionable roadmap to pay off debts bit by bit and gradually improve their credit score. More importantly, these counselors communicate with card companies to negotiate lower interest rates and fees on the cardholder’s behalf. This move can also be beneficial in a few other ways.
- Access to sound financial advice from experienced credit counselors
- Facilitation of consolidated monthly payments to simplify debt repayments
- High likelihood of getting significantly reduced interest rates on multiple credit cards
A debt management program is often seen as a last resort option for cardholders with several high-interest credit cards and for those who prefer having representatives negotiate for them. The only downside to this tactic is counselors frequently ask one to close their credit card accounts. So, before getting in touch with counselors, cardholders must determine if this option aligns with their personal financial goals.
5. Consider a balance transfer
Another way to reduce interest rates is to look for a balance transfer credit card with a low promotional APR. Such a card allows one to move their high-interest outstanding debt from one or more credit cards to this low-interest card. To get the most out of this move, one must select a balance transfer card that comes with a 0% introductory APR. Then, after moving their balance, one must avoid using this card for making purchases and, instead, use it to completely pay off their transferred balance before the low interest rate period concludes. If one is unable to do that, then their remaining balance is likely to have a high APR once the promotional period ends.
Opening a new card might impact one’s credit score. Additionally, one may have to pay a balance transfer fee. Despite these issues, a balance transfer can improve the credit score and financial well-being in the long run.
If still unsure of how to decrease credit card APR, one can simply speak to their card issuer and see if there is any wiggle room to change the interest rate. Sometimes, just asking the credit card company might be the solution.
