Lowering Your Credit Card Interest

Quick, write down the name of each credit card you have as well as the interest rate you are charged on any balance you carry. Go on, do it from memory.

How did that go?

If you are like most Americans, you probably have no real idea what your credit card interest rate is. Did you know that you probably have as many as three different interest rates on those cards of yours? It's true! Most credit cards have one interest rate for balance transfers, one interest rate for balances that are carried over from one period to another, and another interest rate for money you have withdrawn as cash.

Keeping track of these interest rates can be a real challenge, particularly if you have multiple cards.

Before I go any further, I am not going to advise you to cut up all of your cards and live a cash life. From my view, this strategy is naive, simply because the world we live in runs on credit and you must have a credit history for you to have a credit score. These two things affect your insurance rates and buying power.

Now, even though it might be difficult to keep track of your credit card interest rates, you still want to do it. What's more, even if you are one of those people who pays off your balances every month, you still need to keep track of your interest rates, especially if you want to lower them. Usually you can find details of your interest rate on your statements. However, if you can't decipher all of that fine print, you can always just call your credit card company and ask them what your current rate is.

The best way to track your interest rate is by using some kind of money management/spreadsheet system. There's no need to name these programs here, but it can be very quick and easy to create an entry for each credit card and then input the different interest rates.

Once you've started keeping track of your rates, lowering them is deceptively easy.

How to Lower Rates Essentially, to lower your rates, you just have to contact your credit card company and ask them to do it.

In fact, a study conducted by a major consumer group reports that 57 percent of people who called their credit card company about lowering their interest rate were able to have their rate lowered immediately. You know what else? The new rate these people achieved was anywhere from 7 to 10 points lower than the rate they had at the time.

Not too shabby.

There are a few factors that your credit card company will look at. They're more likely to lower your rate if you meet some or all of these.

  • A good credit history and score
  • Your debt-to-income ratio is not too high
  • You don't carry high balances on the card
  • An excellent payment history
  • The card can't be "sub-prime," meaning that it can't be a secured card that is marketed only to people with bad credit.
If you meet these conditions, your chances of getting a lower rate are much increased.

Furthermore, it helps if you go into that telephone call armed with some knowledge, which will give you leverage. This leverage comes in the form of knowing what rates are available out there. So if your credit card has an interest rate of 19 percent, you want to see if other major cards offer deals with lower interest rates. If they do, you can take that knowledge into your phone call and use it as leverage.

Finding out what other credit card companies are offering is not very difficult. You only need to go to their main websites and their best offers are usually clearly shown on their homepage. Try these companies' websites:

www.capitalone.com www.americanexpress.com www.mbna.com www.discovercard.com www.fleet.com www.citibank.com www.chase.com www.wellsfargo.com www.firstunion.com

On the Phone Armed with some leverage, you are ready to talk to your credit card company. Here are a few scripts you might use when you make those calls.

(Note: These scripts assume that you are a great customer and that you have a good credit history.)

Script 1: I've been visiting several of your competitors' websites, the ______ Bank and ______ Bank. I've found out that they are offering a _____ interest rate on purchases. This is _____ points lower than what I'm paying on my credit card with your company. Are you willing to give me that rate?

Script 2: I'm calling to request that you reduce my current interest rate of 16.9 percent to 8.9 percent so that it matches what is available in the current market. I feel like this is a fair rate since at least three major credit card issuers, _________, _________, and _________ are offering it to new customers like me who have an excellent credit rating.

Script 3: I visited your website and saw that you are offering a rate of ____ to attract new customers. I've been an excellent customer of yours for ____ years and would like to receive the same rate that you are offering new customers.

Script 4 (Be ready to follow through with this): I was about to sign up for a new credit card at the _______ website and thought I would call you and ask for a lower rate beforehand. I would like to ask you to give me this lower rate. If you can't do this, I will go ahead and transfer my balance from your card to theirs as soon as I hang up the phone.

It's possible that the customer service representative you initially speak to will be trained to stonewall you. In today's age of better-informed consumers, many credit card companies know that they are going to be called about lowering rates. Obviously, they don't really want to do this, so representatives are trained to say that they simply can't change your rate.

If this happens, ask firmly to speak to a supervisor. Insist on it if the representative stonewalls you some more. When you get the supervisor on the phone, be sure to make a point of getting their first and last name. Then explain your request and ask them to give you a lower rate.

The supervisor might stonewall as well. If this is the case, find out why they won't lower your rate. If they say your credit history is not good enough, or you carry too-high balances, or provide some other substantive reason, thank them and hang up. Now you have an idea for exactly what you need to do over the next few months in order to qualify for a lower rate.

Letters I include this section only so you know one thing: letters just don't work. This is the case about 99.5 percent of the time. When a credit card company receives a letter requesting a lower rate, the pressure is off because you're not talking to them directly. Thus, they can just send out a canned response. Then they expect you to drop it.

So if you want to lower your credit card interest rates, plan on making phone calls. Even if you are not good on the phone, you can do this. I've provided four effective scripts that you can use, so you are ready to give it a go.

Keep in mind, it's perfectly possible that when you contact your credit card company, they will say "No." If they insist on not lowering your rates, you may be better off cutting your losses and marking a date on your calendar about six months in the future to call them back and try again. During that time, make every effort to be an excellent customer, improve your credit history, and get the right balance in your debt-to-income ratio.

Remember that in today's financial climate, you are more likely than ever to be able to get lower interest rates on your credit cards. With interest rates at nearly all-time lows, this is a great opportunity. Also don't forget that lowering interest rates is just one useful strategy in a robust approach to getting out of debt. Loan modifications, consolidating debt, accelerating your mortgage pay-off: these are all facets of a larger plan to free yourself from debt.

Jared Garrett is a professional writer, business marketer, and consultant. To contact him, e-mail jgarrett@wexlbusiness.com, or visit his blog at personalfinancegym.blogspot.com.

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