Here’s a Secret for How to Lower Your Credit Card Interest Rate

Credit card companies on average charge anywhere from 4.99% to 29.99% interest rates to their customers.? Depending how large of a balance you keep on your credit card this can add up to some big interest expense so today we’re going to talk about two ways you could potentially lower your credit card interest rate.

The first way is pretty obvious when you think about it but a lot of people never consider it… you can call up your credit card company and ask them to lower your rate.? The customer service rep is not making a determination, what they are doing is hitting a button on their screen that says “Lower Rate Request”.? The computer system will go through some sort of detailed calculation and come back with either a Yes or a No.? If you call and get a Yes but you aren’t happy with the lower rate and want it further reduced you can tell them that.? They will hit a second button and the computer system will tell them if the rate can be further reduced.? I’ve seen someone’s rate go from 19.99% to 11.99% to 7.99% on one phone call doing exactly what we just talked about (I worked in a credit card customer service department when I was in college).

Now, if you are unlucky and they tell you that you cannot get your rate lowered there are a few items that may be causing this that you could impact.? The first is your credit score.? If you have a poor credit score the credit card company views you as a risk and since they are taking on a risk they are going to charge as much interest as possible.? Anything you can do to increase your credit score will help when you call back and ask them to lower your rate again (back in the day you were allowed to request them to lower your rate once per month).? The second thing you can do is to lower your credit card balance with the company.? If you have a lower balance with them they view you as less risky and they may be more likely to give you a lower rate.? Of course, both of these options can be hard to achieve if you are in a financially tight situation.? There is an alternative that may work for you.

Credit card companies are always fighting to get customers and to take customers away from their competitors.? One way that they frequently do this is by offering 0% APR balance transfers.? These introductory rates usually last anywhere from 6 months to 18 months (the length will be stated up front).? After the introductory rate expires whatever your balance is will be at the new rate (again, this is stated up front).? Let’s do some quick math to see how much this option could save you.

Assumptions for our Example:

$10,000 credit card balance

19.99% interest rate at current credit card company

0% APR balance transfer rate at new credit card company

19.99% interest rate at new credit card company after introductory rate expires

3% fee to do the balance transfer

This assumptions here are pretty standard.? You can take whatever your specific information is and plug it in.? Now let’s calculate our savings.

If we stay at our current credit card company after 1 year (assuming we pay the minimum payment) we’ll have been charged 19.99% interest on a $10K balance which is $2k in interest for the year.? Ouch.? That is $2k that we basically flushed down the drain and have nothing to show for it.

If we do the balance transfer to the new credit card company they will charge us 3% of the balance transfer amount which is $10k x 3% = $300.? This $300 fee gets added to our balance.? For the year we’ll get charged 0% on a balance of $10,300 which of course is $0 in interest.

Looking at the two options it is easy to see that the second option is going to save us $1,700 this year.? Unless you are Bill Gates this is a very nice savings which took all of 20 minutes of your time to accomplish.? After the year is up and the rate goes up so you’ll be in the same boat at a 19.9% APR (unless they offered you something better), BUT since you were not accruing interest during this year every payment you made decreased your balance so if you were paying $200/month at the end of the year your balance would be $10,300 less $2,400 in payments, so $7,900.? Now with this lowered balance you can ask them to lower your interest rate and you have a higher probability of this happening.

Hopefully these tips have helped you.? Being in credit card debt is no fun and trying to work your way out of it can be a big challenge especially when the credit card companies charge such high interest rates.? If this article did help you please feel free to pass it along through the social media buttons at the top of the article so your friends and family can save some money too.

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