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Yes, you can negotiate your credit card APR

And your credit limit, too.

Morgan Sliff

Contributing Writer at Tally

October 29, 2019

You’ve been a loyal customer for a while now. You consistently pay your monthly bill on time and never exceed your credit limit.

If this sounds like you, you may be able to lower your Annual Percentage Rate (APR) or increase your credit limit — and if it doesn’t sound like you, these options could still be available from your credit card provider.

Whether you need a higher credit limit for larger purchases, want to save money on interest or are forming a plan of action to pay off your debt, the flexibility in these terms of your account can be valuable tools for finding financial freedom. And the thing is, many people don’t realize there’s a simple way to boost your limit or lower your APR: 

Ask for it. 

That’s right. Just like negotiating the price and terms of buying a car or asking your boss for a raise, you can also negotiate your credit card APR and credit limit with your card issuer. Simply pick up the phone, speak to a customer service representative and make an earnest inquiry. Odds are, they’ll do whatever they can to help you out.

And if you’re going to negotiate these things, you want to walk into that exchange equipped with the best possible plan.

How can an increased credit line or lower APR help? 

Before calling your credit card issuer, make sure you’re crystal clear on how negotiating your credit card APR will help you:

  • Have you been disciplined with your card?

  • Will an increased credit limit quickly turn into more debt?

  • Will a higher credit line give you more space between your current balance and your ceiling?

  • Is a potential hard inquiry to your credit history worth the payoff?

Know what you plan to do with this new perk so you can formulate a plan of action once you get that “yes.”

What's a ‘good’ APR?

Don’t be ashamed if you didn’t know whether or not you were getting a “good” interest rate when you first accepted that credit card offer. Many companies offer low introductory rates for the first year — or even 0% interest for an introductory period — making it easy to overlook when that rate suddenly bumped up above 24%.

If you want to negotiate your credit card APR, you need to know what your current rate is and what your credit rating can reasonably qualify you for. A general rule is that credit cards around 10% APR are considered low-interest. Travel rewards cards, however, often carry 18% APR and above.

If you have a great credit score, you may see offers with lower than 15% APR, while a “fair” credit scores around 650 can get you an APR around 26%. Most millennials between 22 and 35 years old are near this credit score range, but there’s no rule from your credit card provider.

Remember: There are factors beyond your credit score you can use as a negotiating tool. 

Should I consider a balance transfer? 

If you’ve ever let yourself fall into the trap of just making the minimum payment on your credit card every month , then you’ve learned firsthand that significantly lowering those balances is no easy task. You make your payments on time but can’t seem to make much progress, and we have interest to thank for sending us into this tailspin.

Wouldn’t it be easier if you could just get a lower interest rate? 

This logic is a major factor in many people taking advantage of balance transfer cards, taking the money owed on one high-interest credit card and moving it to a new line of credit with a lower rate. This can be a viable option for some, but it’s not always your best choice in the long term.

Every new line of credit counts as a hard inquiry, affecting your credit score and potentially raising interest rates you qualify for anyway. On top of this, the transfer fees on these cards can just continue the never-ending cycle of paying off balances.

But here’s where a lower APR helps: Requesting a lower APR won’t count as a hard inquiry against your credit history, so it never hurts to ask. Your issuer may decline or counter-offer, in which case, your best tactic may simply be to keep asking until you get what you want.

Knowing which offers are available to you can be a valuable bargaining chip. Sure, it keeps in the know, but it also gives you something to bring to the negotiating table. A balance transfer may be your best option, but don’t necessarily treat it as your first choice.

Meanwhile, keep in mind that it’s in your credit card company’s best interest to keep you as a customer. That’s exactly why they’re more likely to offer you a lower rate if you simply show them you’re informed.

What are the benefits of a higher credit limit? 

Your overall available credit — also known as your credit utilization rate — is a major determining factor in your credit score. Paying down your balance will always help you keep a top-shelf credit score, but so will an increase to your credit limit.

Card issuers often increase credit limits at their discretion, as long as you’ve established good spending and payment habits. This scenario is ideal: A credit limit increase will only help your credit score, and there’s no hard inquiry on your credit report when card issuers do it on their own. 

However, when you ask them for an increase, your credit report receives a hard inquiry. Your credit score may drop slightly due to the hard inquiry. And if you apply for new lines of credit or ask for increases on your existing accounts frequently, those small drops can add up pretty fast.

How to negotiate your APR and credit limit

The negotiation process can vary, depending on your card issuer. Some make things easy by directing you to an online request process. Others want you to speak to a representative one-on-one.

When you finally get around to speaking with someone, remember that you’re taking to another human. They’re more willing to help you if they know they have an honest customer on the line. If you convey your desire for a credit limit increase or reduced APR for the reason of working toward a better credit score, they will likely respect that you’re taking your credit seriously.

It’s also important to consult your issuer’s policy on limit increases and APR reductions. Every company has a different policy on how frequently requests can be made, as well as how much they’re willing to extend your credit line or lower your APR.

Just like any other negotiation with your card issuer, it’s important to equip yourself with all your options (or lack of them) to have a productive conversation.