wiseGEEK: How can I get my Credit Card Interest Rate Lowered?

Getting your credit card interest rate lowered can be a great way to not only save money but also improve your credit score. It should certainly not be your first step, however, if you are attempting to fix bad credit, as it will simply not be possible. You may be surprised, though, at how easy it is to get your interest rate lowered if you have relatively good credit.

The simplest way to get a lower interest rate on your credit card is to call your creditor and ask. Most creditors would rather keep your business by giving you a lower interest rate than lose you to another creditor offering lower rates. However, you need to be realistic when asking to get your interest rate lowered.

If you pay your bills on time, maintain a low or zero balance, and have had a long relationship with the company, you are much more likely to get your interest rate lowered. If you have been late with payments, have astronomical balances, or are a relatively new customer, the creditor is under no obligation to work with you and give you a lower credit rate. In fact, you may notice that your interest rate is increasing or your available credit is decreasing due to irresponsible spending habits.

The best way to prevent that from happening is to practice good debt management strategies, including paying your bills on time, always paying more than the minimum payment required, and maintaining a household budget. You need to learn to control your debt yourself before a credit card company will do it for you. Once you have proven yourself a responsible person, it will be much easier to receive lower interest rates and loans.

If you feel that you have been responsible, paid your debts on time and deserve to have your interest rate lowered, but your credit card company will not work with you, you can shop around for credit cards. Look for credit cards that offer low, fixed interest rates. Many credit cards now offer cashback rewards, points, or airline miles for paying on time. Be wary of credit cards that offer low introductory rates, however, as once the introductory period is over, the interest rate can be quite high. If you are denied a credit card, you are entitled to an explanation in writing, which can alert you to any possible errors or problems on your credit report.

Getting your credit card interest rate lowered is a simple and easy way to signify potential lenders and credit bureaus that you are a responsible person. This can make it much easier in the future to acquire loans, such as a mortgage or car loan. Checking your credit report regularly is one of the best things you can do to assure your good credit.

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Many rewards credit cards offer enticing deals to get people to sign up, including 0% APR the first year. When that 12 month honeymoon is over, however, card with variable APRs can jump as high as 30% or more depending on your credit score. What are some ways to lower the interest rate on your credit card? Depending on which credit card you use, how often you use it, and what your credit score is, there can be many ways to lower the interest rate on your credit card.

If you always pay your bills on time and are committed to improving your credit score, the credit card companies will notice. Still, that doesn’t mean that doesn’t mean that they will make it easy for you if you want to lower the interest rate on your credit card. When you try to lower the interest rate on your credit card, you are figuratively taking food out of the mouths of these credit card companies… but something tells me that they will survive.

Here are some of the best ways to lower the interest rate on your credit card.

If you have even a little bit of debit with a credit card then reducing your APR by even 5% will save you on average $1,000 a year, if not more.

A survey of 983 cardholders with debt on Creditcards.com found that 656 of the people who asked for to lower the interest rate on your credit card were approved. Although more than half of those who are approved for a lower interest rate take home over $75,000 every year, those with lower incomes still have a good chance of getting approved.

Because there are so many credit card companies out there today, you may be able to lower the interest rate on your credit card if you offer your credit card company an ultimatum. By collecting those credit card applications you get in the mail and sending them to your current credit card company along with a professional-looking appeal, you have a much better chance to lower the interest rate on your credit card than a simple phone call.

Lastly, because we all know how tricky credit card companies can be, if they do end up offering you a lower interest rate, make sure to read all of the fine print and make sure that what you are getting is actually a better deal before agreeing to the terms. In a worst-case scenario, you could always find a card with better terms.

How to Reduce the Interest Rate on your Credit Card

Most people intend to pay off their credit card balance every month. In reality, 60% of people carry a balance on their credit card every month. The 40% of people who are able to pay off their cards have an iron resolve when it comes to budgeting and are able to anticipate their cash flow perfectly. For the rest of us, paying rates in the high 20% and low 30% range is both an insult and financial suicide. Luckily, there are ways to reduce the amount of interest that you pay. If you carry a balance on your card, this article should help save you a few dollars.

Do you remember when you first applied for your credit card? Chances are that you picked a card with the lowest annual fee. This is a great strategy for those who don't carry a balance, but for the 'other 60%', the rates charged on the 'no fee' cards are prohibitive. The monthly interest charge on $1,000 at 28.9% is $24.08. This may not seem all that outrageous in dollar terms until you realize that a car loan is roughly 1/3 this amount and a mortgage is around 1/6.

Here are some suggestions for people who carry a balance:

The credit card business reminds me a little of the cell phone business - both are ultra competitive and both have launched a mind-blowing number of products and features over the last few years to entice new customers. If any more than 1 year has passed since you first applied for your card, chances are that your provider has new features available for purchase. Some of these features include airmiles, cash back and/or rate buy downs.

Depending on your credit score, you can pay a small annual fee to lower your rate. The following chart shows the extra ANNUAL interest that you are paying for every $1,000 in month end balance to stay with a no-fee card:

If the price to buy down your interest rate is less than the amount shown, you should investigate this option immediately. Remember that the numbers above are per thousand - if you are carrying a $5,000 balance and are going from 28.9% to 12.9%, you need to multiply the $160 by 5 to calculate your interest differential. In this case, you will save $800/yr by dropping to the lower tier. A typical fee to buy down the rate is $30-$75; therefore, this is something that would make financial sense.

As mentioned above, the credit card business is extremely competitive. For people with decent credit and don't mind the hastle of switching, several credit card companies allow you to transfer your balance and pay a reduced rate for a specified period of time. For example, Bank of America will charge you 3% of your balance to transfer your business, but not charge you any interest for 15 months. For every $1,000 transferred to this program, you would save between $159 (if your current card is at 18.9%) and $259 (if your rate is 28.9%). The downside is that after 15 months, you could well end up in the same situation of having your rate increase and need to find another card.

If you are constantly making the minimum payments on your credit card and not feeling like you are moving ahead, a consolidation loan may be worth considering. Your Bank or Credit Union will normally give a better rate on unsecured loans than your credit card company (if the amount is over $5,000), and will certainly be able to give you a better rate if you are providing some form of security (vehicle less than 4 model years old, second mortgage, assignment of stocks, etc).

Every institution is a little different in terms of their qualification requirements, but in general:

  • your total debt load (car loans, credit card/line of credit minimum payments, mortgage or rent costs) together with the consolidation loan payment can not exceed 40% of your total income; and
  • your credit score has to be decent.

Once you have gone to the trouble of lowering your rate (or getting a consolidation loan), your best case scenario is to use the money that you would have been paying in higher interest costs to permanently pay down your balance. Here are some other tips to help keep your credit card spending under control:

  • Know the outstanding balance on your card. Not knowing the balance can be extremely stressful and will eventually lead to hitting the limit.
  • Make good purchase decisions with your card and know the difference between something you WANT versus something you NEED.

wiseGEEK: What is a Good Interest Rate on a Credit Card?

It’s very difficult to define a good interest rate on a credit card because there are so many factors that can determine the value of any one card. In the United States, there are rates that range between approximately 6% APR to nearly 40% APR. It might help to know that most department store cards have slightly less than 20% APR. Other countries may pay much higher interest rate amounts; Mexico may charge rates of between 30-50%, especially for store issued cards. As a result, defining “good” may be partly based upon a person’s location in the world.

In the US, the lowest rates that are not introductory offers usually sit at about 6%, and these are often offered to people with secured credit. This means that credit is usually backed by equity in homes or businesses. People looking for unsecured credit may be able to find cards with a rate of about 10%, though this is subject to change. These rates are not expected when people’s credit is less than perfect. Even with imperfect credit, many people can get cards that loan at about a 20% rate, and it probably isn’t a good idea to accept a card that charges more than that.

This doesn’t include introductory rates, which may be offered at 0% or a much lower fixed rate than is average. A 0% interest rate may apply to balance transfers or new purchases only, and these offers are usually time sensitive. People tempted by offers with no to low interest need to evaluate the actual rate once the introductory period is over.

Interest rates alone don’t determine a good credit card. Sometimes, a credit card with a higher rate allows people to accumulate lots of frequent flier miles, or gives cash back on purchases. It’s occasionally worth it to have a slightly higher rate if there are benefits that compensate for it, though this should be weighed carefully.

Not all low rates mean that people are getting superior cards. Consumers need to check for hidden fees, including those charged if the card isn’t used enough, for overuse of the card, additional charges for withdrawing cash, and exorbitant late payment amounts. Exceeding the credit limit may also kick fees into high gear.

When people always pay their cards off at the end of the month, a few points in interest rate, provided there is a grace period, really don’t matter. This figure becomes considerably more important when a person maintains a balance on a card. Higher balances do translate to greater cost to borrow money. Those with poor credit will typically pay higher rates, and they may have more trouble paying off balances. It may still be possible, if credit is imperfect, to get a slightly lower rate by scanning through credit offers and looking online.

5) I have a credit card that has 0.00 percent interest. It was an introductory rate that has never changed. I've had the card for maybe 10 years and never paid any interest. I absolutely carry balances from month to month. My max credit is $15k. I think the most I've carried was about $5k - it took maybe a year to pay that down. Other than no interest rate, it has no other perks.

How is this possible? I'm afraid to ask them.

4) I have an American Express credit card with 10 percent interest that gives me rewards that I can use towards travel, credits on my statement, or gift cards.

3) Credit unions are often very easy to join. Some credit unions only require that you, or a family member, are faculty, staff, or a student at a certain school or school district. Others require that you, or a family member, are a state employee or resident of a certain state.

Many credit unions also form networks with other credit unions across the country, allowing members to access basic services free at network locations.

I have credit cards from a credit union and the interest rates and services are great.

2) @ ValleyFiah- Credit unions are a great place to get credit. Many credit unions have adjustable rate cards that change with the prime rate. This usually works in favor of the members because the rates stay as low as possible.

Many credit unions may offer rates as low as prime plus the margin, and cap their rates at 20%. The reason that they do this is because credit unions are cooperatives, owned by their members. Their business structure is designed to benefit the members, in turn offering them the best services for the lowest rates.

Fees and interest rates are normally less than for profit banks. Credit unions are also more involved in local community, and often offer things like scholarships and favorable loan terms for their members.

1) I am a full time student and I have fair to good credit. My credit is not perfect by any means, but I have an unsecured visa platinum with an 8% interest rate. The credit Union also caps my maximum APR at 18%, far less than the 29% + allowed under current federal law. I also have no annual fees and my credit limit is eligible for yearly review. The secret is credit unions.

My card is not a rewards card, but if it were, my terms would be the same except for a 10% interest rate. The reason I do not have a rewards card is that I carry a 30-40% balance, so the two percent increase in interest would negate the one percent gain from the rewards program.

I also have my vehicle loan through the same credit union and I was able to get a rate that was 6 points less than the big national and multinational banks.

What’s an Average Credit Card Interest Rate? (And How to Get a Lower One)

How to reduce your credit card interest rate? That is the question.

One of the problems with credit cards is that the interest rates can result in expensive fees. According to Bankrate.com, the national average for credit card interest rates on November 29, 2012 was 14.02% for a fixed rate loan and 14.58% for a variable rate loan.

When you consider that many cards compound interest on the average daily balance, you can see how carrying a high balance can get expensive. And, if you are trying to pay down your debt, it can be difficult to make progress when a big portion of your monthly payment goes toward interest, rather than reducing the principal. That’s why it is important to try to reduce your interest rate.

However, the interest rate you end up with isn’t just about the national average. What rate you pay depends on the issuer, and on your credit score. When you apply for a credit card, the issuer looks at your score and determines which interest you will end up with. The better your credit score, the lower your interest rate.

Many credit card issuers feature three different tiers: Fair, Good, and Excellent. Others just offer two tiers, one for those with excellent credit, and another for those with less than excellent credit. You can look at the information located in the box of terms to find out what interest rates are available at different credit score levels.

In general, though, you can expect to get an interest rate of between 9.99% and 13.99% if you have excellent credit, which includes a score of at least 720. Realize, too, that you might need excellent credit just to qualify for some of the better cards, particularly credit cards with a generous rewards program.

If you have good credit, such as a score between 680 and 719, you can usually qualify for a card with an interest rate of between 13.99% and 19.99%. Finally, if you have fair credit, which is a score of between 620 and 679, you will probably have an interest rate of 21.99% or 22.99%.

If you have a score of less than 620, you will likely have a hard time qualifying, and you might pay a rate of up to 36% if you can find a subprime credit card.

Keep in mind, though, that these are general ranges, and that what interest rate you actually end up with depends largely on the issuer, and the rates offered on different credit cards.

One of the most common ways to lower your interest rate is to call and ask for a better rate. In order to get a lower rate, though, you generally have to meet a few requirements:

  • Be a credit card customer in good standing. You shouldn’t have missed payments, or paid late.
  • Be a long-time customer. It helps if you have been a customer for at least a year or so.
  • Show improvement in your credit score. If you have worked to better your credit score, you are more likely to get the lower rate you ask for.
  • Threaten to transfer your balance. If you have another card to fall back on, and can make good on your threat, you can mention that you will transfer your balance and close your account. Many credit card issuers would rather keep earning interest from you at a lower rate than give up the source of income altogether.

Many credit card issuers give representatives the ability to lower your interest rate 1% to 3% if you are a good customer that simply asks. You can also speak with someone higher up if you need to.

Before you call, though, make sure you have a backup plan in place. You have to be able to move your money around if some sort of compromise isn’t reached. And really, if you aren’t able to get a lower rate with your current company then it may be worth looking around for a better rate from another company anyway. Reducing your interest rate can help your finances a lot.

Just remember, no interest rate – no matter how low – is a reason to continue carrying credit card debt! If you haven’t already signed up for ReadyForZero then sign up and get started on paying off your credit card debt.

Let us know any questions you have in the comments below and we’ll try to answer them!

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Lower your interest rate on credit cards

This post was published by Miranda, ReadyForZero Writer for » ReadyForZero. ReadyForZero is a company that helps people get out of debt on their own with a simple and free online tool that can automate and track your debt paydown.