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How To Negotiate your Credit Card Interest Rate

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[The following is a guest post by Ornella Grosz is a personal finance expert, personal finance writer, speaker, and the author of Moneylicious: A Financial Clue for Generation Y. She blogs about paying off credit card debt and more at Moneylicious Blog. She has been featured as a financial expert on top radio stations across the country, CBS, NBC, ABC, FOX, MainStreet.com, TheStreet.com, Financial Advisor Magazine, Mainstreet.com, WalletPop, Daily Finance,CreditCards.com, and more.]

Wouldn’t it be nice to take a pill to relieve ourselves from debt worries?  Seventy percent of Americans live paycheck to paycheck.  This is not a new statement and I’m not by any means trying to diminish anyone’s livelihood.  According to the Federal Reserve data, at the end of 2010 the nation’s household debt amount to about $13.4 trillion which means consumers owe almost as much as the federal government ($14.3 trillion).   Are we addicted to debt?  It’s not the credit card companies and other lenders job to solve consumer overspending.  According to Creditcards.com, average credit card debt per household (with credit card debt) is $14,687!
Before coming up with a debt payoff plan, have you thought about negotiating your interest rates?  Tackling our credit card debt can prove to be an overwhelming experience. Or maybe it’s as tortuous as having to watch paint dry on the walls. We have to acknowledge the amount of debt owed. The perverse situation of debt leads to a hang-up to achieving your financial goals.  

Be honest: Let’s be honest with ourselves.  How much debt do you owe?  One of the most important things before negotiating is know where you stand. Get organized.   It’s as simple as using pen and paper or if you want an Excel spreadsheet. Here are some of columns that I suggest:

Name of Creditor
Interest Rate
Min. Payment
Balance Owe
Offers to new clients (I will explain a little later why you need this. You don’t need to fill it in right now.)

A few simple questions: Once you have organized your debt, answer a few simple questions. Be honest. Give as much vivid details as possible.

    Why do you want to be debt free?

    How did you get into the amount of debt you have today?

    What (financial) goals couldn’t be realized if you don’t pay off your debt?

The purpose of answering these questions is not to belittle you or make you feel incompetent.  Millions of Americans are in debt.  So, you are not alone.  I don’t want you to feel ashamed.  The purpose is to provide you with self-motivation, to be honest with yourself, and to decisively start dealing with your debt.

Negotiating your credit card interest rate could happen as quickly as in 5 minutes or you may have to do some extra work.  There may be some credit card companies that will not lower the rate the rate, but it’s worth a shot. Once you have contacted all of the credit card companies and negotiated a lower rate, then you come up with a debt payment plan.   In order for you to negotiate lower interest rates on your credit cards you need to do a little homework. 
Research: The good thing is you have already done part of the homework by identifying how much interest rate you are charged.  Next, you want to find out what your credit card company is offering new clients. It could be as easy as going to the company’s website or calling the company. Fill in the last column (Offers to new clients).  Furthermore, I’m sure you have seen or received new offers from different credit companies.  I would strongly urge you to write those offers down, too.   You will then compare what the other credit card companies are offering to what your credit card companies are offering new clients. This will help you to negotiate a lower rate.

What to say on the call: With your homework in front of you, contact each of your current credit card companies and ask them if they can offer you a lower rate.  The first customer service representative you speak to is generally trained to lower interest rates no less than a certain threshold, if they even lower the rate.  They may even tell you that’s all they can do for you. Don’t take this as a final answer.  Get their name and ask to speak to their supervisor immediately.  If that supervisor doesn’t lower the rate, then ask for their supervisor. 

What are you telling them on the call?  Your job is to explain your situation and ask why your rate is higher.   Discuss the comparison of your rate and what competitors are offering.  And, simply, have the courage to ask if they would be willing to work out a better deal with you, otherwise you will transfer your money to the better competing offer. (Truthfully, you might not, but it does let them know you are serious)
Once you have finished with negotiations, write down all your new (or not new) offers. The card with the highest interest rate (typically, tends to have the highest balance) could be transferred to new credit card offering you a lower rate.  Keep in mind there’s a transfer balance fee usually in the neighborhood of three percent.

Don’t give up. It may take multiple calls to lower your rate. The effort could pay itself off in the end.  If all else fails, you could ask the credit card company about programs for people who are in financial hardships.  If you qualify for such a program, please, please read the contract.   A downside to enrolling in hardship programs is that your credit card company might report it the credit bureaus –Equifax, Experian, and TransUnion.  If they do, it will lower your credit score.  However, it’s better than falling behind on your credit card payments affecting your credit over the long term.

Resources to help with your research:

  • Bankrate
  • Cardtrak (scroll down on the screen and on your left hand side you will see a chart showing different rates for each type of borrower.   You can use this toward your advantage when negotiating your rate.)
  • CreditCards.com
  • Cardweb

Last updated on August 11, 2011.

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Credit, Credit Cards

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One Response to “How To Negotiate your Credit Card Interest Rate”

  1. Like you said soo many people are in bad debit now days. Its really sad. Luckily i have stayed away from those nasty credit cards. However, i know many people who would benefit from this article. I will be recommending this article to my friends. Good job!

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