Nearly ninety percent of credit card users assume that credit card interest rates are non-negotiable. While it is true that the process has become much more difficult than it used to be, theoretically it may still be possible to work with your credit card company to lower your interest rates. Think about it: If you can negotiate even a nominal one percent reduction in your credit card interest rate, you could end up saving hundreds of dollars every year if you carry a substantial balance. Over a period of time, these savings add up.
While there is no guarantee that your lender may agree, here are some common sense approaches you may want to consider:
What causes credit card interest rates to go up
Unlike variable interest rate credit cards, if you have opted for a fixed interest rate credit card, generally the rates should not increase very often. If they do, you provider will mail you an advance notice. The notice will give you the option to accept the changes or dispute them. There is a catch, however. If you do not agree with the changes, your credit card provider may ask you to repay the full balance owed to them and also close your account.
Now, if you have a variable interest rate credit card the story is completely different. With variable interest rate credit cards, your interest rate is tied to a market index — generally, the prime rate. Every time this index changes your rate may go up, often without an advance notice. The terms should disclose how this process works.
Apart from market forces and company policies, there is one more factor that may cause your credit card interest rate to spike. There are certain trigger points (such as late payments, over-the-limit transactions, and delinquencies) that may cause your interest rate to go up.
Do your homework
You will need to understand some basic credit card related terms, such as grace period, APR, billing cycle, and other basic financial terminologies. It would also help if you know what competing credit card companies are offering to individuals within your credit score range.
Prepare scripts for two layers of calls
Call your company to initiate the process. Your initial calls [yes, calls] will be answered by the customer service department. You may not achieve much success during this first layer of your efforts. Be prepared for a “No!”
Don’t give up, though. Politely, but firmly request the customer service representative to transfer your call to a supervisor. This is where your second script will come in handy. Explain to the supervisor that you have always made your payments on time and have otherwise been a good customer. Firmly request that your interest should be lowered. If the supervisor denies, ask for a second layer of escalation.
Every organization is different and with some companies you may have to go through the hoops until you finally reach an executive who may be able to assist you. Be persistent!
If the company denies your request, ask for a promotional rate
Credit card companies float promotional offers periodically. If your negotiation request fails, ask the company to consider you for a promotional program. These short-term promotions could lower your rates for a period of three months to as much as eighteen months. Even a short-term reduction will allow you to pay off a significant portion of your principal balance at a low interest rate.
Some non-profit organizations could assist you as well
If you are under financial strain or have suffered a financial emergency (such as a layoff), several non-profit organizations could assist you with the negotiation process. These organizations have substantial experience in working with credit card companies and may be able to empower you with a large pool of resources. Their expertise and experience could make all the difference. Given their size, clout, and legal knowledge, credit card companies may be more receptive to their requests.
If all else fails
It is possible that the above steps could fail. If so, you need a backup plan. If your credit is good, the easiest way to get a low APR or 0% APR credit card would be to transfer your balances to a credit card that offers low interest rates for an introductory period. Click here to compare low interest and 0% APR credit cards.
Joining a credit union or a large association that offers low interest rate credit lines could be a good option as well.
Let us know if this article has helped you. As always, don’t forget to share this information with your friends.
Leave a Reply