One way to lower your credit card interest rate is to apply for a new card that offers a 0% intro rate. You can also try negotiating with your current card issuer to lower the interest rate on your existing credit card, though you’re generally more likely to get a fee waived than a lower interest rate. However, it doesn’t hurt to try.
- Improve your credit score.
Creditors often grant rate reductions to consumers who’ve improved their credit standing in recent months or years, especially those who’ve managed to consistently pay at least the minimum amount required by the due date. Regardless, you have the upper hand in this situation because your credit profile is attractive enough to warrant improved terms relative to your current card elsewhere on the market. So don’t be content with a simple rate reduction if far more attractive offers are attainable.
- Compare credit card offers.
If you have good or excellent credit, your first step should always be to compare other available credit cards in order to find one that would better meet your needs and then ask your current creditor if they can match that deal.
- Negotiate with your current credit card company.
With a higher credit score and the ability to prove you are a responsible customer, you can negotiate with your current credit card company to lower your interest rate. A WalletHub survey found that 77% of people who’ve asked their credit card company to improve their account terms or risk losing them as a customer have been successful. Plus, if your creditor says no now, it doesn’t stop you from asking again in the future.
- Get a new 0% APR credit card.
If negotiating with your credit card company fails, you can get a lower rate by applying for a new card that offers an intro 0% APR. The best 0% APR credit cards may offer 0% interest for the first 6-21 months. If your new card comes with a 0% introductory APR on balance transfers, you can move your existing debt to your new card and then pay back your debt at a reduced interest rate.If you are able to pay off your debt before the introductory period is over, regular interest rates won’t be much of a concern. However, they can quickly eat away at your savings if you don’t pay down at least the majority of your balance during the introductory period.
- Improve your credit score.
Seriously indebted consumers aren’t out of options even after striking out on a balance transfer or requesting a lower rate with their card issuer. The remaining options aren’t all that attractive, though, and should only be considered if you absolutely cannot afford even your minimum payments and have exhausted all other potential recourses. They basically boil down to:
- Debt Management: Debt management is when you negotiate an amended payment plan with your card’s issuer in order to make monthly payments more manageable by lengthening the repayment term, lowering the interest rate, or waiving certain fees. This may sound like a great way to get a lower interest rate, but your issuer will report to the credit bureaus that you are on a debt management plan. This can signal to other lenders that you are experiencing, or have experienced, financial difficulties. However, the account’s status on your credit report will change once you have paid back your debts.
- Debt Settlement: When you choose credit card debt settlement, you withhold payments from your credit card companies, intentionally defaulting on your account. Doing this will destroy your credit score and may also trigger a lawsuit, but it’s done with the hope that your credit card issuers won’t sue and will be willing to settle for much less than what you currently owe them. This may be the riskiest option at your disposal due to its uncertainty.
- Bankruptcy: Bankruptcy should be considered if you find it impossible to make the minimum payments not only on your credit card accounts, but also on other types of debt (i.e. mortgage, car loan, medical bills, etc.). If you go this route, remember that bankruptcy will destroy your credit score and will stay on your credit report for up to 10 years.
You can check out our interest rates guide for a more detailed discussion of credit card interest rate changes, but it’s important to touch on them briefly here as well because they provide the framework necessary to understand your rights and strategies when it comes to getting a lower interest rate. So, here are a few of the most common reasons that interest rates change:
- Rates aren’t always fixed: Variable interest rates change with the Prime Rate.
- Credit cards often have introductory rates: Many credit cards offer lower interest rates for the first few months before a regular APR kicks in. The introductory rates may apply to balance transfers, new purchases, or both.
- For future transactions, they just have to warn us: Credit card companies have the right to raise your interest rates on future purchases for any reason, provided they give you 45-days’ notice of the change taking effect.
- Rates rise when we screw up: Creditors can begin applying a penalty interest rate to your entire balance if you become 60 days late on a payment.