If you have a high interest rate on your credit card, it can be difficult to pay down your balance. So much of your payment goes toward interest that you might not make a lot of headway in terms of actually reducing your debt.
In the simplest of examples, if you have a credit card with a balance of $3,500, and an APR of 19.99% compounded monthly, you would end up paying $58.30 in interest for the month. If you have a minimum payment of $105, more than half of your payment goes toward interest, leaving only $46.70 to go toward actually reducing your balance.
At that rate, it’s no wonder things are moving at a slow pace. Even if you pay more than the minimum each month, a high interest rate can slow you down. Negotiating a lower interest rate can be one way to help you save money in interest over the life of your credit card balance.
Asking for a Lower Interest Rate
If you want a lower credit card interest rate, in many cases all you have to do is ask. However, you need to make sure that you have a credit card account in good standing. You need to make most of your payments on time, and not be over your credit limit. If you are a long time accountholder with good habits, the credit issuer is more likely to work with you.
Once you have established that you are a good customer, you can call and ask for your lower rate. Ask the first representative you speak to. In some cases, you might be able to get your rate lowered by as much as 3%. If you were able to get your rate lowered to 16.99%, you would only be paying $49.55 in interest. That’s a savings of almost $10. Over time, that could start to add up.
If the first representative you talk to can’t help you by lowering your rate, politely ask to speak to a supervisor. It’s important throughout to speak calmly and politely, no matter how many people you have to talk to. Ask if there is a special promotional rate you can be switched to.
Another option is to ask to be re-evaluated on the basis of improved credit. You will have to be prepared for the credit issuer to pull your credit, though. If your credit has improved, you might be eligible for the next tier down. If your good credit can qualify you for a rate of 13.99%, the interest portion of your payment in our simple scenario drops to $40.80. Now you are saving right around $18 a month in interest.
Transfer Your Balance
Another option is to transfer your balance. If you have promotional checks from another credit issuer, and you have the room for a balance transfer, you can move your balance to a card with a very low APR, such as 3.99% (bringing the interest portion down to $11.64). Once you have that low of a rate, you can really make progress with your debt repayment. However, these promotional rates don’t usually last more than six to 12 months, so you have to be prepared to make the most of it and pay down your balance quickly.