Debt and credit

How to Negotiate a Better Credit Card Rate

One of the most important features of your credit card is the interest rate—the percentage of your existing balance that you’ll pay in interest per year (though usually compounded more frequently). This rate plays a major role in determining how quickly you can pay off your debts, and how much total interest you’ll pay over the course of that debt.

It may not seem like it, but the power of compound interest means that even just a few percentage points—or fractions of a percentage point—can end up costing you thousands of dollars or more in the long run. It’s therefore in your best interest to get the best interest rate you can. But how can you go about negotiating for a better rate?

How Your Rate Is Determined

Credit card companies use a variety of factors to determine your interest rate. In general, the riskier you are as a customer, the higher the rate you’re going to face. The longer and more loyal you’ve been a customer, the lower your rate will be.

One of the biggest considering factors is your credit score—the three-digit number that summarizes your financial trustworthiness. If you have a credit score below the “good” range (under 700), you’ll probably see a higher interest rate than your contemporaries. If your credit score is excessively low, you may not qualify for some cards at all, and may be forced to seek out a credit card option specifically for people with bad credit.

Knowing that, you can take measures to lower your credit card interest rate.

Shopping for a Better Card

Your first step should be shopping around for a better card. Not all credit cards are the same, and some companies will rely more heavily on some factors of trustworthiness than others. For example, one company may charge you a 25 percent interest rate if you have a poor credit score, while another might focus more on your payment history and charge you 20 percent.

The national average credit card APR is 17.55 percent. If you can find a card with a better rate, you should consider taking advantage of it. Do your research and find a provider with low interest rates, and make sure there aren’t other terms and conditions that make those low interest rates possible. You may also want to speak with a representative over the phone so you can learn about all the options available to customers.

If you’re struggling to get a viable interest rate, you may need to spend some time improving your credit score. There are several strategies to increase your credit score, but unfortunately, all of them take time to manifest. You’ll need to start paying all your bills on time consistently, and work on paying off your debts. It’s also wise to avoid opening new lines of credit or doing “hard” credit pulls. Only after months of consistent payments and debt reduction will your credit score improve significantly.

Negotiating for a Better Rate

If you have a credit card currently, you may be able to negotiate for a better rate. Call your credit card company and simply ask for a better rate. In some cases, you’ll get one outright. Explain that you’re trying to reduce your total amount of debt and that your spending and payment habits have improved over the years. If your credit score has improved significantly since you first opened the account, you’ll have even more grounds for the request.

If your credit card company refuses to lower your interest rate, explain that you’re considering transferring the balance to another card with lower interest. This may incentivize them to take action. Still, don’t be surprised if the company doesn’t budge; they may not have the flexibility to give you a better rate at this time.

Transferring Your Balances

If you’re unable to negotiate a better interest rate for your current card, all hope is not lost. You also have the option of signing up for a new card—potentially with a different company—that has a lower rate. Assuming your credit limit isn’t a barrier, you should be able to transfer your balance from the high-interest card to the lower-interest one. Again, even a few percentage points can make a significant difference in both your regular payments and the total amount you’ll pay over the lifetime of your debt.

Millions of Americans are currently suffering from excessive levels of credit card debt, but you don’t have to be one of them. Reducing your interest rate is one of the best first steps you can take to reduce your total debt, and whether you negotiate, shop around, or spend time improving your credit score, you’ll have the opportunity to do it.

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