How to Reduce Your Credit Card Interest Rate

If you're unhappy with your credit card's interest rate—commonly referred to as the annual percentage rate or APR—you might be able to negotiate a lower rate simply by asking your issuer.

While your request could be turned down, there's no harm in asking. If you have a track record of timely payments and responsible use of your credit, you can use these points to strengthen your case.

Continue reading for more insights.

Assess Your Current Situation

Securing a lower interest rate can save you money over time, making it worthwhile to inquire. In some cases, you might even qualify for a 0% APR on a credit card for a limited duration. However, keep in mind that such offers usually require good or excellent credit.

When evaluating whether your credit card's APR is fair, remember that the average credit card interest rate is currently over 20%. If your APR is significantly above this national average, it’s wise to seek a lower rate when you're ready to negotiate.

Explore Competitive Credit Card Offers

Credit card companies strive to retain customers and stay competitive with other issuers. To assess whether your credit card's interest rate is competitive, research similar cards and compare their APRs. If you find a comparable card with a better APR, make a note of it to mention when you contact your card issuer.

However, it's essential to ensure that the offer you’re comparing is genuinely competitive. For example, if your credit score is low, it wouldn’t make sense to compare your credit card's APR to one that requires excellent credit. Evaluate your own creditworthiness and the specific criteria of the cards you’re considering to make a fair comparison.

Reach Out to Your Card Issuer

Start by contacting your credit card issuer to request a lower interest rate. It's important to be well-prepared and clear about what you want. Familiarize yourself with your current credit card details, such as the APR, grace period, statement due date, and current balance. Use this information to support your discussion, and research competing lenders as well. Remember: it never hurts to ask.

If you find a better offer from another issuer, share that information with the representative. Indicating that you might take your business elsewhere could increase their willingness to negotiate.

If you’ve kept a consistent record of timely payments and responsible credit management with your current issuer, they may consider reducing your interest rate to keep your business. Remember, the worst outcome is simply a 'no.'

Also, note that your account's longevity is important. If you've been a customer for a long time, be sure to emphasize this during your negotiation.

If your first attempt doesn’t yield the desired result, consider hanging up and calling back. A different customer service representative may be more willing to accommodate your request.

Enhance Your Credit Score

Whether you're applying for a new credit card or trying to negotiate a lower APR on your existing card, improving your credit score is an effective strategy for securing a better interest rate. One of the easiest ways to boost your credit rating is by consistently paying your credit card bill early or on time each month.

Additionally, it's wise to refrain from opening multiple new accounts, as this leads to several hard inquiries on your credit report. Closing accounts can also raise your credit utilization, potentially harming your credit score.

If you carry a substantial amount of debt relative to your credit limit, paying down that debt can positively influence your credit score. Experts typically recommend keeping your credit utilization ratio below 30% for optimal results. By adhering to these practices, you can work towards improving your credit score and enhance your chances of obtaining a more favorable interest rate.

If Rejected, Consider a Balance Transfer Card

To lower your interest payments for a limited time, think about applying for a balance transfer credit card. Many of these cards provide an introductory 0% APR for up to 21 months on transferred balances. Keep in mind that these offers typically come with a balance transfer fee, so the 0% APR isn’t entirely free.

However, choosing a balance transfer credit card is a smart strategy to consolidate your debt without further harming your credit.

Be aware that a transfer fee of 3% to 5% (with a minimum of $5) will apply, and you usually need to complete a balance transfer within the first 60 to 120 days to take advantage of the introductory rate.

Key Takeaway

You can take several effective measures to completely avoid paying credit card interest. By only making purchases you can afford and consistently paying your credit card bill in full each month, you can sidestep any interest charges.

If you find yourself with credit card debt, it's essential to pursue the lowest possible interest rate. Requesting a lower APR from your current issuer can be a simple way to reach this goal. In some cases, transferring your balance to a new credit card with a 0% APR offer might be even more beneficial.

Finally, it's worthwhile to understand the difference between APR and interest rates more thoroughly.