Negotiating a Lower Interest Rate
Written by Kristina Lee   

If credit cards are like Santa Claus, then the interest rates are the Grinch. See, credit cards are there to make life easier: less cash to carry, one big monthly payment after payday (if set up correctly), limited liability, etc. The interest rates are the cost – the thing that takes all of the fun out of credit cards. Once you fall behind in one payment, the interest rates assessed are enormous and can bring the whole house of cards tumbling down. So how do you limit the Grinch’s damper on your pocketbook? Negotiate your way out of the exorbitant rate, and into a more reasonable one.


If You Are Just Starting Out

Consumers who are applying for credit cards should do their homework: check the APR of every credit card offered to you by every major credit card company and bank. Good ones to check are credit cards from Wells Fargo, Chase, American Express, CitiBank, and US Bank. Look for the lowest rate there.

Once you narrow your choices for credit cards down to a few, call up the companies and start negotiating. Make sure that they know you are choosing between many different companies – make them compete for your business. Since you’ve done your homework, explain to them that company X is offering you a certain rate with a specified application bonus (and rewards points to boot!), and ask if they can match or beat that. Answers will vary, but if it is reasonable enough the company may match the offer, or offer more, to entice you to stay with them. Make sure to get the representative’s name and phone number so that you can reach them again if you decide on that company. Once you have your offers from each company, compare them and pick the best one. Then call the representative back to apply.


If You Already Have a Credit Card In Good Standing

Consumers who already have a credit card can also negotiate their way into a lower interest rate. Credit card companies would rather keep their existing customers, rather than lose them to the competition and be forced to advertise more to attract more new customers. So, if you are in good standing, call up your credit card company and ask for an interest rate reduction. Like a new customer, you should have done your research, and have it prepared to bargain with. Tell the representative that you have been a customer in good standing for X amount of years, and that you have never had a late payment (if you haven’t). Then explain that you have found a better interest rate at a different company, but would like to stay with them if possible. Ask if they can match or beat that interest rate. The representative will probably pull your record, verify your claims, and speak with a supervisor, as the companies hate losing customers to the competition.


If You Have an Outstanding Balance

Credit card companies thrive off of customers who carry a balance and have to pay their high interest rates. If you call to ask for a better rate, stating that company X has offered you a much lower rate than Y, and that you are contemplating paying off your old debt with this new card, and moving to a different company, your creditor just might grant you the lower rate. Also, if you are nearing bankruptcy and continuously missing payments, with debt racking up and never decreasing, the credit card company might be inclined to reduce your interest rate to induce you to make minimum payments. They would rather have smaller payments and a smaller profit margin than nothing at all, which could be the case if you file for bankruptcy.

Tips and Tricks
  • Do your research! Know exactly what you can get from what company – this will be great leverage for speaking with credit card companies.
     
  • Stay calm! It is important to be friendly and polite, as well as to establish rapport and break the ice with the representative you are talking to. The representative is more likely to grant a request for a friendly client who seems to care about him or her, rather than an irritated one.
     
  • Don’t lose your temper! Becoming impatient or too demanding will often annoy the representative you are speaking with, and may disqualify you for an interest rate reduction immediately, regardless of history or reason.
Of course, no interest rate reduction is guaranteed. So, your best bet to avoid interest rates all together is to simply pay off your balance in full every month. This effectively earns you a 0% interest rate, as there is nothing to assess the fee on.




Last Updated on Tuesday, 21 December 2010 05:12