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How to lower your credit card interest rate and save money

Lowering your credit card interest rate minimizes debt and makes it easier to start saving money.

Chris Scott

Contributing Writer at Tally

October 22, 2020

The average credit card annual percentage rate (APR) has dropped to its lowest rate in more than three years. If your credit card has a high APR, now is the time to secure a lower rate. 

A lower interest rate can reduce your long-term credit card debt, making it easier to pay off your balances and start saving money. Below, you’ll learn what steps to take so you know how to lower your credit card interest rate.

How to lower your credit card interest

Getting a lower credit card interest rate is easier than you may think. Here’s how to make it happen.

Review your situation and check your interest rate

Before trying to get a lower interest rate, make sure that you need a lower rate in the first place. If you pay your credit card balance in full every month by the due date, your APR doesn't matter since you don’t accrue interest. Asking for a better rate may be unnecessary and more trouble than it's worth. 

However, if you only make minimum payments or carry credit card debt from month to month, you’ll want to know what your APR is. You can find your interest rate on your monthly billing statement. 

Also, review your spending habits. Did you have a one-time expense, such as an unexpected medical bill? Or have you been overspending and making late monthly payments? Your credit history and spending habits strongly determine whether you're eligible for a better rate. 

A good credit score (a FICO score of 670 or above) can help you secure a lower interest rate with your credit card company. Be sure to check your credit score when crafting your request. 

Before you request a lower interest rate, make sure you know the credit card terms, such as: 

  • Current APR

  • Current balance 

  • Grace period

  • Statement due date

The more details you can gather about the terms of your credit card, the better position you'll be in when negotiating a rate reduction. 

Research competing credit cards 

Credit card companies want to keep you as a customer, even if you don't have excellent credit. These companies make money each time you use their card due to transaction fees (charged to businesses that accept credit card transactions) and interest fees (charged to you if the balance isn’t paid in full every month).

Taking the time to compare competitor credit card rates gives you more leverage when negotiating a lower rate with your credit card issuer. Make sure that you compare cards that are similar to yours. If you find a similar card with a better rate, note the card name, bank name and terms. Your current company may be willing to match the competitor's card offer. 

Call and ask for a lower rate 

After doing your homework, it's time to call your credit card company and ask for a lower rate. This may be intimidating, but there’s no harm in asking. More than 3 out of 4 cardholders who ask for a lower rate receive it.

That’s right: You can negotiate your credit card APR.

You can find the customer service number on your monthly billing statement or the back of your credit card. When you reach a customer service representative, kindly explain the reason for your call. If you can, lay the groundwork for your request by outlining details that reflect positively on you, such as being a good customer for years who makes timely monthly payments. 

If your request is denied, ask to speak to a supervisor. When you reach the supervisor, have a specific number in mind when you present your case. Know the precise interest rate you want. This will demonstrate that you're knowledgeable and have done your homework. 

You may not get your exact target number, but you could get close. If your current APR is 18% and you ask for 12%, the credit card issuer may meet you in the middle at 15%. Consider this a win, as shaving even just a couple of percentage points off your current rate can help. 

Also, remember to be polite and put your negotiating skills to work. If you do your research beforehand and lay out a solid case, your credit card issuer should make reasonable efforts to work with you. 

If you don't have success after the first call, don't feel defeated. It may take some persistence before your rate is lowered. Try making on-time payments for six consecutive months and then going back to your credit card issuer to make another request. 

Use a balance transfer credit card

If your request for a lower interest rate is denied, you may want to consider opening a new credit card, specifically a balance transfer card. A balance transfer card lets you transfer your existing credit card balances onto a single low-interest (and sometimes no-interest) credit card. Keep in mind that you typically need a good credit score to obtain a balance transfer card. 

The new card will have an introductory APR, typically as low as 0% for the first 12 to 18 months. During this time, you can pay down your existing debt without collecting interest. However, after the introductory rate expires, you could face high interest rates. So, make sure you can pay off as much credit card debt as possible during the introductory period. 

There are balance transfer fees associated with these cards, typically ranging between 3% and 5% of the amount transferred. This is a one-time fee and isn’t a recurring APR. If you currently have a high APR, like 20%, the one-time transfer fee is well worth the money you’ll save in interest. 

Consider a credit card payoff app

If the above options don’t work, focus on paying down your credit card debt and improving your credit score. One way to do so is with a credit card payoff app like Tally

Tally pays your credit cards for you and helps you save money on interest. Using Tally, you won’t have to worry about high APRs or late fees, and you can improve your credit score thanks to on-time payments and a lower credit utilization rate.

Lower your credit card interest rate today 

With credit card interest rates at some of their lowest levels in years, there's no better time to learn how to lower your credit card interest rate. Considering that more than 75% of those who ask for a lower rate end up receiving it, there's no harm in trying to negotiate with your credit card company. 

Before doing so, you’ll want to check your interest rate as well as the terms and conditions of the credit card. Also, look up competitor interest rates so that you have additional information to support your case for a lower rate.

If your credit card company initially denies your request, don't be afraid to keep trying. You can also consider alternative options like balance transfer cards to help lower your rate. If that doesn’t work, consider a credit card payoff app like Tally to help pay down your debt and improve your financial standing. Ultimately, you’ll be in a better position to ask for a rate reduction and increase your chances of getting it.