Are you sitting on credit card debt? Do you have a decent credit history? If so, chances are good that you can negotiate a better interest rate simply by making a phone call and asking. Credit card companies know their competitors’ offers and if you play your cards right, you could find yourself on the receiving end of a lower interest rate.
Simply put, today is a very good day for negotiating a lower rate because banks and credit card issuers are very hungry for new business and even hungrier to retain their existing customers. The costs associated with customer retention are lower than those associated with customer acquisition so that can put YOU in the driver’s seat.
Don’t sell yourself short: banks have multiple interest rate programs they’re willing to offer if they think they’re going to lose your business IF you have a good credit history, payment history and credit score. But beware: a debtor with a maxed-out credit limit or a poor payment history is unlikely to get a better interest rate.
The person who typically succeeds in negotiating a lower-interest rate is one who maintains a credit card balance under their limit but who consistently makes an on-time payment every month. Credit card companies can’t afford to lose these money-generating customers.
Balance transfer troubles
If you plan to transfer your balance to take advantage of low or zero percent rates, be very careful. Watch out for cards with steep transfer fees and know that just one late or partial payment could skyrocket your interest rate to 21, 25, or even 29.99 percent … or more.
If you do take advantage of a zero (or very low) interest rate during an introductory period, use it to pay your balance down. The most common mistake people make when enjoying a zero percent rate is doing nothing to lower their balance or making only minimum payments during the introductory period. Use that time to continue making payments and reduce your credit card debt while the interest is essentially free.
Tips to increase your chances of negotiating a lower credit card rate:
1. Know what you’re talking about. Don’t just call and ask for better terms. Quote a specific offer you want the company to match. Know what offers are available in the marketplace and name your own terms.
2. Do they value current customers as much as new ones? Ask about the current introductory rate for your card and ask to have your rate reduced to that rate. Banks and credit card companies won’t call you when they have new or introductory rates for existing cards, so it’s up to you to ask about them. The best way to find this information is by logging on to the company’s website and seeing what’s being offered or by going to my credit card page and searching there. You can easily search for the best card for you and even compare cards side by side.
3. Threaten a cancellation. If you have a credit card you don’t use or use only on very rare occasions, tell the company you’ll cancel it unless you get a lower rate. Inform them that you don’t plan to use the card with the current rate and if they want you to use it, they need to adjust the rate down.
4. Know your credit score BEFORE you call. The best way to get your FREE CREDIT SCORE is by going to GoFreeCredit.com and signing up (read my review of GoFreeCredit.com). Also, make sure you get your free credit reports from the three bureaus at www.annualcreditreport.com. If you can fix inaccurate information, your credit score will go up and you’ll be eligible for better rates.
5. Be confident but always be polite and firm. Negotiating doesn’t mean busting through the front door like a bull in a china shop. Just remember that in the end, it’s the creditor’s call to offer you a new rate — or not.
What if they say no?
Just because a creditor says no to lowering your rate doesn’t mean there aren’t other ways to get something. There are other perks out there! Companies often will consider eliminating annual fees or a one-time late fee for customers they value. But that’s the key: being a customer they value. If you’re habitually late, or if you constantly go over your limit, or if you miss a payment, you aren’t in that category.
But even if you’ve been a late-payer, try paying on time for a few months to increase your credit score and improve your chances of getting a better rate.
For those in serious financial trouble and in danger of defaulting, ask about filing a hardship claim with the credit card company. If you’re unemployed or facing a medical emergency or divorce, for example, some creditors will take that into consideration and waive your interest rate for several months. It never hurts to ask, but be aware that your creditor may give you a negative rating for the arrangement. I recommend hardship claims only when the alternative — no payment at all — is worse.