How to Lower the Interest Rate on a Credit Card

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1Improving Your Credit Score

2Negotiating with Credit Card Companies

3Transferring Your Balance

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Article Summary

High interest rates can lock you in a debt spiral, especially if you carry a balance on your credit cards. Those interest rates aren't locked in stone, however. Because interest rates are based in large part on your credit score, build your credit before attempting to negotiate with your credit card company. If your negotiations are unsuccessful, you may still be able to land a lower interest rate with a balance transfer to another credit card company.

Steps

Method 1

Method 1 of 3:

Improving Your Credit Score

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   Check your credit report. If you haven't checked your credit report recently, get reports from all 3 credit bureaus – Equifax, TransUnion, and Experian – before you start contacting credit card companies to lower your interest rate.

   • You are entitled by law to 1 free credit report each year. Go to https://www.annualcreditreport.com/index.action to get yours. This website is the only one authorized by the federal government.
   • You may also want to create an account at a free credit report website, such as Credit Karma or Credit Sesame. These websites also have tools and resources for evaluating and managing your credit.
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   Correct any errors on your credit report. Once you have credit reports from all 3 bureaus, go through them carefully. Discrepancies could indicate an error. Also make sure your name and other information about you is correct.

   • If you see possible errors, make a note of them and gather information so you can dispute the error. Generally, you can contact the credit bureau, although you can also have errors corrected by contacting the lender that reported the error.
   • If there is an error that appears across all 3 credit reports, you would need to contact all 3 credit bureaus to dispute that error. In this situation, it may be more efficient for you to work with the lender that reported the error and have them correct the error. Then you only have to make one phone call.
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   Pay off balances to lower your utilization ratio. A big part of your credit score is the percentage of credit available to you that you actually use. Generally, keep this utilization ratio under 30 percent for a good credit score.

   • If you have a higher utilization ratio, you might want to call your credit card companies and ask if they'll increase your credit limit. However, the better option is simply to pay down those balances.
   • Your chances of getting a lower interest rate will greatly improve if you have a low utilization rate. You will not look like you're requesting a lower interest rate out of desperation, or because you're over-extended.
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   Avoid opening any new cards you don't need. It may seem like you could lower your overall utilization ratio by opening new cards, but this method can backfire. Too many recent inquiries on your report can lower your score and will make you look desperate to credit card companies.

   • Instead of opening new cards, you might consider asking for a credit limit increase with your existing cards. This typically won't result in a hard inquiry on your credit report.
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   Make payments on time. Late payments not only result in additional fees, they go on your credit report. Too many late payments can have a negative impact on your score. Credit card companies will be less likely to lower your interest rate if you have a spotty payment history.

   • Set reminders on your computer or smart phone so you don't forget to make payments. You can also set up automatic payments, so you don't have to worry about it. Include any automatic payments in your budget.
   • Whenever possible, try to make more than the minimum payment if you're carrying a balance – even if it's only a few dollars. You'll pay down your balance much faster.
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Method 2

Method 2 of 3:

Negotiating with Credit Card Companies

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   Research credit card terms and rates. Before you negotiate for a lower rate, you need to know what rates are being offered by rival credit card companies. Compare your credit score to the average score for which that rate is available. Then you'll have an idea what rate is realistic to you.

   • If you can find a card with a lower rate that you have a high probability of being approved for, you can present that card to your credit card company. Credit card companies are a lot more likely to match a competitor's rate if they fear they'll lose your business.
   • Websites such as Credit Karma and Credit Sesame have tools that can help you compare credit cards and rates. If you have an account, you can also determine the likelihood that you would be approved for those cards.
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   Put yourself in the credit card company's shoes. Your interest rate is based on how risky the credit card company believes it would be to loan you money. They determine this risk based on your credit score, your income, employment, and other factors.

   • To convince your credit card company to lower the interest rate on your credit card, you need to convince them that you are less of a risk than you seemed when the original rate was set.
   • If you've had the card for several years, never had a late payment, and never had any other issues with the credit card company, you can likely prove that you are worthy of a lower rate.
   • You'll also likely get a lower rate if you can show that your credit score has increased dramatically since you were first issued the card.
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   Draft a script to use when negotiating. If you have a written script, you'll be better able to make your points when you negotiate. It will be easier for you to stay focused and say what you want to say, without getting distracted or emotional.

   • For example, you might write "Hi, I've been a loyal customer for 5 years, and I really appreciate this card. My credit score wasn't very high when I was issued this card, and I appreciate you taking a chance on me. Since then, my credit score has increased by 200 points. I've always had a good relationship with you and have never had a late payment. Would you consider lowering the interest rate on my card from 18.5% to 12%?"
   • If you don't feel comfortable writing out complete sentences, or want your conversation to sound more natural, at least write down a list of points you want to raise when you call the credit card company.
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   Start with established accounts. You'll have better chances at negotiating a lower interest rate with credit cards that you've had open for several years. If you have an established history with the company, you can better demonstrate that you are a low risk.

   • Credit card companies are also more willing to work with longer term customers because they want to keep your business.
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   Call the customer service number. Take out your credit card and call the toll-free number listed on the back of the card for customer service. You'll likely have to navigate through an automated menu system to reach a live representative.

   • When you reach a customer service representative, they'll likely ask some questions to establish your identity and bring up your account. Then they'll ask how they can help you.
   • Be polite and calm when talking to the representative. They will likely listen to your request and say they can't help you. Don't push them or get angry with them. Do write down their name in case you need to identify them later.
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   Ask to speak to a supervisor. If the customer service representative doesn't agree to lower your interest rate, speak to someone over them who has more authority. A supervisor typically has more leeway to negotiate than a customer service representative does.

   • When you reach the supervisor, immediately ask for their first and last name, and get a direct phone number or extension.
   • Politely repeat your script. The supervisor may offer you additional perks, or a higher credit line, instead of a lower interest rate. Don't be rude, but be firm and insistent that you want a lower interest rate and believe you deserve it.
   • If you have rates from other credit card companies, present them to the supervisor. If you're contemplating taking your business to one of those competitors, say so – but don't threaten to close your account unless you actually intend to do that if you don't get a lower interest rate.
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   Get a written confirmation of any agreement. If the supervisor agrees to lower the interest rate on your credit card, ask them to send you a letter confirming the terms of that agreement. Keep this letter for your records in case your interest rate isn't lowered as agreed.

   • While you may not be able to get a lower interest rate permanently, most credit cards will agree to give you a lower rate for at least a year. Make sure the written letter includes the date the new rate will take affect, and how long it will be in affect.
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   Get an explanation for a refusal. If the credit card company isn't willing to lower your interest rate, find out why. It may be something you can work on. Once that issue is cleared, you can call and negotiate for a lower rate again.

   • For example, if the supervisor says that you have not had an account with them long enough, find out how long you need to keep the account open before they'll be willing to negotiate a lower interest rate. At that point you can call that same person again directly and remind them of the conversation (assuming they're still working there).
   • If they want you to have a higher credit score, find out what the minimum score is for them to consider lowering the interest rate. You can work on improving your credit score and then call again.
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   Cancel the card if it makes sense for you financially. If the credit card company refuses to lower your interest rate and you think you can get a better deal elsewhere, it might make sense to cancel the card. However, keep in mind that closing credit accounts can negatively impact your credit score.

   • Typically you'll have to pay off your balance in full before the credit card company will close your account. However, the person you speak with should make a notation on your account that your account is to be closed when the balance is paid.
   • If you do decide to close the account, make sure the person you speak with sends you a written letter confirming that your account will be closed after the balance is paid in full. Keep the letter for your records in case you have any problems or the account isn't closed as agreed.
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Method 3

Method 3 of 3:

Transferring Your Balance

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   Research balance transfer options. Most major credit card companies offer balance transfer programs for qualified applicants. Typically a minimum credit score and a favorable credit history are required if you want to take advantage of this option.

   • You can use websites such as Credit Karma or Credit Sesame to research balance transfer cards that are available. These websites also have tools that allow you to compare the terms of different options and evaluate your likelihood of approval.
   • You can also look at the websites for major credit card companies and assess balance transfer options individually. This option will take a little longer than using a credit reporting website, and you may miss some options.
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   Apply for a card with a 0% balance transfer rate. Major credit card companies often offer a 0% APR (annual percentage rate) on balance transfers for a limited period of time (typically a year, sometimes 2 years). If you can get approved for one of these cards, you'll be in a better position to pay down your balance.

   • Even if you can't get approved for a card with 0% APR for balance transfers, you can still come out ahead if the interest rate is substantially lower than what you're currently paying on your credit card.
   • Typically you'll be approved to transfer balances up to a certain amount. That amount will be based on that credit card company's assessment of your credit history, credit score, and other factors.
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   Gather information about the balances you want to transfer. If you're approved and decide to go through with the balance transfer, you'll need account information, as well as the exact amount of your balance.

   • If you don't want to transfer the entire balance, figure out the amount that you want to transfer – up to the total amount you've been approved for.
   • If you have multiple balances you want to transfer, you'll need the same information for each account. Be cautious when transferring multiple balances, and make sure you can pay the entire amount off before the promotional rate ends, or you'll be right back in the same boat.
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   Call the customer service number for your new card. Once you have your information together, call the toll-free customer service number on the back of your new card to complete the balance transfer. You will likely have to navigate an automated menu. You may be able to simply enter the amounts and account numbers yourself, or you may need to talk to a representative.

   • Some major credit card companies will look up this information for you when you set up an online account. The credit card company will pull accounts from your credit report and provide a list of eligible account balances that you can transfer.
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   Create a plan to pay off your debt. Even if you're able to get your balance transferred to a 0% APR card, you're still not entirely in the clear until you've paid that balance off. Rather than making the minimum payments on your new card each month, try to pay off the balance as quickly as possible.

   • Set a budget and figure out how much you can pay on your transferred balance each month. Pay that entire amount on your transferred balance, rather than simply making the minimum payment.
   • If you are still carrying balances on credit cards that charge interest, try the debt avalanche method. Make minimum payments on all cards, and apply the remainder of your budgeted amount to the balance on the card with the highest interest rate. When it's paid off, move that money to the account with the next highest interest rate.
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