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Can Credit Card Companies Lower Your Interest Rates?

Saving just a few percentage points of interest can translate into big savings.

Justin Cupler

Contributing Writer at Tally

March 31, 2021

There are no laws limiting credit card interest rates, and some cards charge over 30% interest. So you may be wondering if there’s a way to get lower interest rates on your credit cards. With lower interest rates, you can save cash each month, get out of debt quicker, and meet other key financial goals. 

Will credit card companies lower interest rates, or are they locked in once you sign the agreement? We'll cover that and more below. 

What Is an Interest Rate?

Your credit card interest rate is also known as the annual percentage rate (APR). This is the cost to borrow money and is expressed as a percentage. 

There are two key types of credit card interest rates, or APRs: variable and fixed. They share some similarities, but there are also some significant distinctions.  

Variable APR

A variable APR credit card means the interest rate isn’t static — it’ll periodically increase or decrease. 

Variable credit card APRs generally rise and fall with the prime rate — the Wall Street Journal-published base interest rate lenders and banks use to guide their consumer interest rates. The prime rate often fluctuates with the Federal Reserve rate, which is the interest rate banks charge each other for overnight loans. 

Credit card companies calculate their variable APR as the prime rate plus a percentage margin. For example, if the current prime rate is 12.4% and the percentage margin is 7.5%, then your interest rate during that period will be 19.9%. 

The credit card issuer determines the percentage margin based on your credit score and credit history. If you have good credit, you'll usually get a lower margin. With bad credit, you'll get a higher margin. 

You can find the margin in your credit card terms and agreements. 

Fixed APR

Fixed credit card APR means the cardholder will have the same interest rate at every billing cycle. The credit card issuer determines this interest rate when you apply for the credit card, and it bases the interest rate on your credit score and credit history. 

This rate will remain the same at every statement period unless you renegotiate the interest rate down the road. 

Will Credit Card Companies

This depends on the credit card issuer, as some are more than willing to discuss your APR and if they can lower it. Other credit card companies have a firm no-negotiating policy when it comes to your APR. 

The only way to determine if this is possible is to call the customer service number on the back of your credit card and tell the customer service representative you'd like a lower credit card interest rate. The worst they can say is "no." And even if they won't negotiate your interest rate, they may offer an alternative, like raising your credit limit, waiving past late fees or reducing the annual fee

What's the Best Way to Successfully Lower Your APR?

You're often at the mercy of the credit card company's negotiation policies, but these tips can help increase the chances of successfully lowering your credit card interest. 

Let Your Credit Score Grow First

When you initially get a credit card, your interest rate is based on your credit report and credit score. To get the upper hand on negotiations, wait until your FICO credit score increases before negotiating your interest rate. 

With a higher credit score, you're a lower risk to the credit card issuer, and it may be willing to lower your current interest rate because of this. 

Start With Your Oldest Account

Credit card companies put a lot of stock in your relationship with them, and the longer the relationship, the more valuable that stock becomes. Sometimes, you can use this long relationship as a negotiating tool to help lower your rate. 

For example, if you've had a credit card for five years and never had a late payment, the credit card company may see you as a lower risk now than you were five years ago. This could make it easier to negotiate a better rate, but make sure to lead with your longevity when calling the credit card company. 

Have Card Offers in Hand

Credit card companies negotiate interest rates to convince you to keep your account open and keep you swiping their card. When calling the credit card company, make sure you have new card offers in hand and tell the company you're considering moving your balance to a lower-APR competing card. 

Because the credit card issuer would prefer to collect some interest charges than none at all, some will lower your current credit card interest rate to just below your lowest offer.

Balance transfer offers are beneficial because they often provide no interest or super-low-interest promotions for a set period. These can potentially save you tons of cash on interest charges. Plus, if your current credit card company is willing to meet the promotional balance transfer offer, you won't have to pay the 3% to 5% balance transfer fee to transfer your balance from one card to the other. 

Get Debt Consolidation Offers

If you can get approved for a debt consolidation loan or line of credit, you can use this personal loan or line of credit as a negotiating tactic. Go to the credit card company with your debt consolidation loan offer and see if the credit card company will match it for the loan term. 

For example, if you have a 36-month debt consolidation offer at 11.9% and a credit card at 19.9% APR, the card issuer may be willing to offer a rate reduction to 11.9% APR for the next 36 months. As we mentioned, the credit card issuer would prefer to collect some interest charges than none at all. 

What will a Lower Interest Rate Do for You?

Reducing your credit card interest rate can help you get out of debt quicker or free up some extra cash every month. 

Quick Debt Repayment

A lower interest rate means fewer fees each month, which can speed up your personal finance goal of getting debt-free. 

For example, if you pay $200 per month on a 19.9% APR credit card with a $10,000 balance, you'll pay it off in 108 months and pay $11,488 in interest. If you get that rate down to 11.9% APR, you'd pay off the same balance in 70 months and pay just $3,881 in interest. 

Monthly Cash Flow Increase

A lower interest rate can also increase your cash flow each month while still meeting your personal finance goals

For example, if you have $7,000 in credit card debt at 19.9% APR, and your goal is to pay it off in 50 months, you'd have to pay $207 per month to meet that goal. If your credit card company dropped the rate to 11.9%, you'd only pay $178 per month to pay it off in the same time frame, saving you $29 per month. 

Negotiate Your Way To Savings

If you've grown tired of high-interest credit cards, you can save with a quick call to the credit card company and careful negotiations. Yes, some credit card companies will negotiate their interest rates to keep you as a customer, and there are a few tips to help along the way: 

  • Wait for notable credit improvements.

  • Negotiate with companies you have a long history with first.

  • Use competing credit card offers to your advantage.

  • Leverage personal loans and lines of credit to force credit card issuers' hands.

With a lower interest rate, you can save big on interest charges, repay your debt quicker and free up extra cash flow each month.