Editorial Policy

How to Negotiate a Lower Interest Rate

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By Eva Norlyk Smith, Ph.D.
May 22, 2009

Concerned about high interest charges on credit card debt? You’re not alone. With credit card interest rates at record levels, millions of Americans are paying thousands of dollars each year in interest charges.

Fortunately, if you play your cards right, it’s often possible to negotiate a lower interest rate on your credit cards. This not only saves you money on interest charges, it also gets you out of debt faster since more of the monthly payments will go toward paying down principal instead of interest charges.

Most people know that it’s possible to negotiate a lower interest rate on credit cards, but many are reluctant to try. In a recent survey from Lending Club, 93 percent of those surveyed said that they were aware that it may be possible to negotiate lower credit card interest rates. However, only 29 percent had actually called their card issuer to do so. Significantly, among the 29 percent who made the call, two-thirds were successful.

If  you’re struggling with high interest debt, it’s well worth investing a bit of time in getting your rates lowered. Follow the steps below to optimize your chances of success when negotiating a lower rate.

1. Know your credit score.
First, pull your credit score to get an idea of what your chances are for getting your interest rate lowered and by how much.

“Your credit card issuer won’t be interested in lowering your rate unless you have good credit,” says Sandy Shore a senior counselor with Novadebt, a nonprofit credit counseling agency in Freehold, N.J. “Before you even try to call, look at your credit score and make sure you’re in a strong position.”

Unfortunately, if you have bad credit, such as a credit score below 660, you probably won’t have much luck getting your card issuer to lower your rate. For people with bad credit, it’s typically more useful to improve your credit score first before you try to negotiate a lower interest rate.

2. Prepare in advance
If your credit score meets the above criteria, it’s time to do your research. Since you have good credit, chances are that you receive credit card offers in the mail on a regular basis. Pick out three or four card offers with lower rates. In addition, go online to check what rates the card issuer is offering to new customers. This will give you a realistic idea of what rate the issuer should be able to give you.

If your credit score is excellent (above 720-730), you should be paying an interest rate that is at the lowest end of the spectrum offered by the card issuer. Even someone with a good credit score (from around 660 to 720) should never pay interest rates that are at the high end of the offered range.

3. Persistence pays off
Call the customer service number on the back of your credit card and explain that you’re looking for ways to lower the interest rate on your credit card. Tell them that you have offers for other credit cards with lower rates and explain that you hesitate to transfer your credit card balance because you enjoy doing business with them. Then ask the customer service representative if the issuer would be able to lower the interest rate on your credit card.

There’s a good chance that the representative will be able to offer you a lower rate then and there. If not, or if the decrease he or she proposes is too small, ask to speak to a supervisor. Supervisors typically have more power to make decisions about individual accounts and can give you better results.

4. Follow up
If your card issuer agrees to decrease the interest rate, be sure to review the terms of the ensuing bills carefully. Sometimes, card issuers promise one thing on the phone, but fail to follow through because paperwork gets messed up. Or, the card issuer may agree to nominally change your rate, but they may lower the rate so little that you’re still paying unacceptably high interest charges.

5. If all else fails, seek outside assistance
If you can’t seem to negotiate an acceptable credit card interest rate, it can often be helpful to seek the advice of a credit counselor. Credit counselors work with card issuers all the time to seek better terms for clients, and they often know what rates a specific card issuer is willing to offer and under what circumstances.

“A lot of people think that you have to be in serious problems to speak to a credit counselor,” says Mike Sullivan, Director of Education at Take Charge America. “However, credit counselors can help you simply manage your finances better. I always suggest that people call a credit counseling agency even if they have no problems, and are simply looking for ways to manage their personal finances better.”

Credit counselors working for nonprofit agencies offer free services, so you have nothing to lose. By looking at your financial situation, a credit counselor will be able to see why you can’t get the rate lowered and suggest other approaches and options.

To find a legitimate credit counselor, look for someone working with an agency affiliated with either The National Foundation for Credit Counseling. or the The Association of Independent Consumer Credit Counseling Agencies.