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How to Lower Your Credit Card Interest Rate

How to Lower Your Credit Card Interest Rate

*Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated Aug 24, 2020. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.

If you’re working hard to become debt-free, high credit card interest rates can make your journey all the more difficult as interest charges can significantly impede your progress.

The good news? You may be able to request a lower interest rate from your bank or credit union, which will allow more of your payments to be applied to your debt principal instead of principal plus interest. However, not all requests are successful, or the interest rate reduction may be just temporary.

There are numerous strategies you can implement for saving on high interest charges. It just boils down to which option is best for your situation.

Negotiate with your credit card issuer for a lower APR

Who does this strategy work best for? If you’ve been a reliable customer who’s always paid on time and hasn’t maxed out their credit card, your issuer is more likely to consider the request. The longer you’ve been with the financial institution, the better — it’s in the best interest of banks and credit unions to keep their loyal customers happy.

Know you might not get exactly what you are asking for. The issuer might offer a temporary rate reduction rather than a permanent one, for instance. Or the issuer might deny your request for a lower rate entirely. In that case, you’ll need to consider options such as applying for a balance transfer card or taking out a debt consolidation loan instead.

However, a study by CompareCards found that of the one in five cardholders who tried asking their credit card issuer for a lower interest rate, 81% of those who had asked were successful.

“People have way more power than they think they do over their credit card issuer,” said Matt Schulz, chief credit analyst at CompareCards. “If you’re a good customer, card issuers want to keep you around and develop a long-term relationship with you.”

Still, granting your request may be tougher while lenders are being more cautious due to the economic ramifications of the coronavirus.

“Prior to the pandemic, there was an excellent chance they’d work with you,” Schulz said. “Your chances aren’t as good right now, but it’s still worth asking.”

Here are the steps you need to take before you pick up the phone:

1. Prepare competing credit card offers head of time

You may not have paid attention to the credit card prequalification offers you’ve received via email or snail mail, but now’s the time to do so if you want to negotiate a lower interest rate.

“You can use those offers to frame the negotiation,” Schulz said. “For example, you can say, ‘I’ve been a good customer for years and I like my card, but I’ve been offered a different card with a lower rate. Would you be able to match that rate?’”

You can even use an online prequalification tool offered by another card issuer to see what offers pop up. You can take a screenshot of the offer and use it as a negotiating tool.

2. Know the credit card APR you’re looking for

You should know your current APR and the specific APR you want to ask for.

“Don’t just say you want a lower rate, be specific about the exact rate you want,” Schulz said.

If you don’t know your current APR, you can find it on your monthly credit card statement. You should also be able to check the statement to see how much interest you’ve been charged in a billing period, and how much interest you’ve been charged during the calendar year.

Be prepared that when you call, your issuer may offer a permanent lower rate, a temporary lower rate, a promotional 0% APR period, a refund on recent interest charges or deny your request.

3. Make the call

When you call the number on the back of your card, start by asking for the customer service representative’s name and direct line in case you need to call back. Explain that you’re calling to ask for a lower APR on your card, and make your case demonstrating your value as a customer.

If the representative initially tells you there are no offers on your account, this is where you can mention the competing offers you’re considering, and emphasize that you’d rather stay with your current issuer if you can get a lower rate. But just like with anything, the way you approach the negotiation matters.

“The representative on the other end of the phone is a person just like you,” Schulz said. “If you’re too pushy or if you’re rude, you’re much less likely to get your way than if you treat the person politely and with kindness. Now, that doesn’t mean you should be a pushover — just don’t be a jerk.”

At this point, if you’re told there’s nothing that can be done, ask politely to speak to a manager. The representative who first takes your call may not have the authority to grant your request.

If you are successful in negotiating a lower rate, ask to have it confirmed in writing and make sure you understand the fine print. For example, ask if the lower rate applies to both your existing balance and new purchases or just to one or the other.

However, if the call comes to an end with no offers, it may be time to consider a new card, a loan or one of the other methods outlined below for paying off your credit card debt.

Apply for a balance transfer card with an intro 0% APR

Who does this strategy work best for? You need to have good or excellent credit to qualify for a balance transfer card. Using a balance transfer deal allows you to move debt from a high-interest card to one offering an introductory rate, often 0% APR for 12 to 18 months. There’s typically a 3% to 5% balance transfer fee that is applied to the amount transferred. Note that you can’t move balances between cards from the same issuer.

There is a risk of not being approved for a high-enough credit limit to transfer all of your existing balance. Or, depending on the issuer, there might be a cap on how much you can transfer. In that case, you may wish to transfer as much as you can and pay the remainder down quickly on the high-interest card, or you may decide to take out a loan to cover the rest.

Below are some cards worth considering for lengthy balance transfer offers:

Citi Simplicity® Card - No Late Fees Ever

The Citi Simplicity® Card - No Late Fees Ever is exactly what its name implies: A simple card with a great introductory period for balance transfers. Here are the details:

Intro balance transfer APR: 0% for 18 months on balance transfers. After, a 14.74% - 24.74% (variable) APR applies.

Balance transfer fee: Balance transfer fee – either $5 or 3% of the amount of each transfer, whichever is greater.

Other card details: There’s a $0 annual fee, and the card has no late fees and no penalty APR.

Citi Simplicity® Card - No Late Fees Ever Review

Discover it® Cash Back

  • 0% for 14 months on purchases and Balance Transfers, then 11.99% - 22.99% Variable.

  • Earn 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases – automatically. *

  • Get a dollar-for-dollar match of all the cash back you've earned at the end of your first year, automatically*

  • INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.
  • Earn 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate.
  • Plus, earn unlimited 1% cash back on all other purchases - automatically.
  • Redeem cash back in any amount, any time. Rewards never expire.
  • Use your rewards at Amazon.com checkout.
  • Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
  • No annual fee.
  • See Rates & Fees

See additional details for Discover it® Cash Back

More Info

With the Discover it® Cash Back, cardholders get a reasonable intro APR period and great rewards. Here are the details:

Intro balance transfer APR: 0% for 14 months. After, a 11.99% - 22.99% variable APR applies.

Balance transfer fee: 3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*.

Other card details: Earn 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases – automatically. The annual fee is $0.

Discover it® Cash Back Review

Wells Fargo Platinum card

The Wells Fargo Platinum card is a no-frills card with a lengthy intro APR offer on balance transfers, as well as some helpful benefits. Here are the details:

Intro balance transfer APR: 0% for 18 months on qualifying balance transfers. After, a 15.49%-24.99% (variable) APR applies.

Balance transfer fee: 3% for 120 days, then 5%.

Other card details: Benefits include cellphone protection, an auto rental collision damage waiver and roadside dispatch. The annual fee is $0.

Wells Fargo Platinum card Review

Pay off credit card debt with a debt consolidation loan

Who does this strategy work best for? Consumers who don’t want to open a new credit card or have a credit score too low to get a balance transfer card, or those who may be carrying too much debt to move to a balance transfer card, paying off credit card debt with a loan could be the right move. Plus, a personal loan allows consumers who may have debt spread out across multiple cards to consolidate debt into one loan and only have one monthly payment to deal with.

Financial institutions that issue personal loans include banks, credit unions and online lenders.

Personal loans may be unsecured or secured, with secured loans requiring collateral to protect the financial institution in case the borrower defaults. Assets that can often be used as collateral include your home, your automobile and your savings.

The APR for a typical unsecured personal loan may go as high as 36%, but can be much lower for consumers with great credit — for example, Wells Fargo offers personal loans with APRs as low as 5.74%.

With secured loans, the maximum APR is generally 36%, though federal credit unions cap most of their loans at 18% APR. Because you put up collateral when taking out a secured loan, it’s less risky for the financial institution than an unsecured loan, and you may be able to get a lower rate for this reason.

Should you opt for a secured personal loan to pay off credit card debt, craft a budget at the very beginning of the process that you can realistically stick to. It’s crucial to be on time with every payment, so you don’t risk losing something as essential as your vehicle or your house.

Finally, be aware that some personal loans may charge an origination fee or a prepayment penalty if you pay the loan off before its due date.

Ask about a credit card hardship program

Who does this strategy work best for? If you’re struggling with finances because of a misfortune outside your control, call up your credit card company and ask about a hardship program.

Issuers may work with cardholders to provide temporary relief due to factors such as:

  • Job loss
  • Medical bills
  • Natural disasters
  • Pandemics

The specific relief offered will vary by issuer. However, you may be offered a lower interest rate, deferred or reduced payments, waived fees or increased credit limits.

“Hardship programs can be extremely helpful to victims of disaster, but it is important to know that banks probably won’t come to you offering help,” Schulz said. “You’ll likely have to pursue it yourself.”

There’s also assistance from many credit card issuers specifically for customers struggling due to the coronavirus pandemic. Some of the assistance offered includes payment deferrals, waived or refunded fees and extended time to earn a sign-up bonus on a recently opened card.

Enter into a debt management program

Who does this strategy work best for? People with balances on multiple high-interest credit cards who are struggling to make even minimum payments, or are falling behind on payments, may need to consider a debt management program.

These programs are available through nonprofit credit counseling agencies, and are typically available at a low monthly fee.

Once you enroll in a debt management program, you’ll make one monthly payment to the credit counselor you’re working with, who will then pay your creditors. The counselor may be able to negotiate lower interest rates and fees on your debts as well. While in the program, you generally can’t open new credit accounts, and you might have to close your existing credit cards. It typically takes from three to five years to complete a debt management program.

Note that you can enroll unsecured debts — for example, credit cards and medical debts — in such a program, but not secured debts like mortgages or auto loans.

To ensure you’re dealing with a legitimate nonprofit credit counselor, check that they’re affiliated with either the National Foundation for Credit Counseling or the Financial Counseling Association of America.

In addition, as you consider this option, make sure you don’t confuse debt management for debt settlement. The latter is a risky process where the settlement company instructs you to stop paying your creditors while they attempt to negotiate a lower debt amount. Your credit score will tank, and your accounts will likely be assessed late fees and penalty rates. There’s no guarantee the company’s negotiations will be successful, and you could even be sued for what you owe.

In short, a debt management plan could help you pay off high-interest credit card debt, but do your homework first and be ready to commit to a process that will take years to complete.

Borrow against the equity in your home

Who does this strategy work best for? Homeowners whose homes are worth more than what’s owed on a mortgage have home equity, and can tap these funds in a variety of ways. However, when leveraging home equity to pay off credit card debt, it’s key to remember that you could lose your home if you default — so proceed with caution and stick to a strict repayment plan.

Here are three ways you can tap your home equity for debt relief:

1. Cash-out refinance

Put simply, with a cash-out refinance, you take out a new mortgage that’s larger than your existing one, with the difference being what you’d use to pay down your credit card debt.

Typically, you can access up to 80% of your home’s value with a cash-out refi. For example, if your home is worth $400,000 and you owe $200,000, you could borrow up to $320,000 — receiving $120,000 in cash.

The new mortgage replaces the old one, and in the right circumstances, you may be able to qualify for a lower interest rate than you had on the original, though you may also have to pay closing costs with that.

The interest rate on a cash-out refi may be fixed or variable.

2. Home equity line of credit

With a home equity line of credit, or HELOC, you take out a line of credit against your home’s equity that you can borrow from as needed and repay as you go.

There’s a draw period — typically 10 years — where you can borrow against the HELOC. After the draw period ends, you’ll no longer be able to borrow and will have a set amount of time to pay off any outstanding debt.

What you can borrow with a HELOC is typically limited to 85% of your home’s equity. The interest rate on a HELOC is variable, meaning it’s tied to an index such as the prime rate.

3. Home equity loan

Like a HELOC, a home equity loan borrows against your home’s equity, but it’s a lump sum rather than a line of credit you can borrow and repay from repeatedly. It’s considered a second mortgage, and will have its own terms and repayment schedule separate from the original mortgage.

Generally, the maximum you can borrow with a home equity loan is limited to 85% of your home’s equity. Length of the loan varies by lender but is typically between five and 15 years.

The interest rate on a home equity loan is fixed.

The information related to the Citi Simplicity® Card - No Late Fees Ever has been independently collected by CompareCards and has not been reviewed or provided by the issuer of this card prior to publication.

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