How to Lower Credit Card Rates and Pay off Your Debt

How To Lower Credit Card Rates

Over 56% of all Americans are trying to figure out how to lower credit card rates. Why? Because in December 2018, U.S. credit card debt hit a record-high.

The average credit card percentage was 18%, though many people end up paying 20 to 30%. The high rates make it extremely challenging to pay off large debts. This means that a lot of people could benefit from getting lower credit card rates.

Credit card companies aren’t out to do you any favors. However, the good news is that with some judicious negotiation, they might be willing to grant a lower interest rate.

Most people don’t know this, which is why only 5% make the request. A lot of people assume that the credit card company will simply tell them “no” before even asking the question.

In reality, credit card companies waive annual fees 91% of the time, late fees 87% of the time and raised credit limits 79% of the time.

Credit Card Interest Rates and APR

Before you get into learning how to lower credit card rates, you need to make sure you understand the what credit card rates entail.

When we talk about interest rate, we mean the price charged on taking out a loan or credit card. This does not take any other additional expenses into account and is specified by a percentage.

The annual percentage rate or the APR consists of the interest rate plus all the fees and other costs associated with receiving a loan from a bank or lending agency.

Currently, the average APR for all cards fluctuates between 16.94% to 23.94%. So, make sure you check what the average is before you call the bank.

Also, credit card companies are required by law to disclose the applicable interest rates beforehand. However, not many people read the fine print, and end up paying astronomical rates.

Paying Minimum Credit Card Rates

Paying very low, introductory rates can actually be a ticking time bomb. When you only pay a minimum monthly amount against your credit, your interest keeps piling up.

After 12 to 18 months, the interest rate will jump to 15% or even higher. Soon, you will not be able to pay off your monthly balances, and the duration it will take you to fully settle your debt will keep increasing. This can lead to uncontrollable credit card rates.

The strategy to lower your APR is simple. Pay your bills on time and keep your credit balances low. This is the only way you can avoid blowing up your debt to astronomical proportions.

How Much Can You Save on Credit Card Interests?

If you negotiate intelligently and persistently, you can convince your creditors to lower your credit card rate. This can result in you saving some serious cash.

To put things into perspective, take a look at the example below:

If you owe $10,000 on a credit card with an APR of 18.3% and you make monthly payments of $350, you will spend three years and two months paying off your debt with a total interest payoff of $3,232.66.

However, if you can negotiate with your creditor and drive down the interest rate to 15.00, you can save $783.

You can increase the amount of monthly payment to lower your credit card interest, as well.

The Federal Reserve found that the total credit card debt exceeded $1 trillion, making it the highest ever number in history.

This has lead to people taking more interest in how to lower credit card rates and pay off their debts fast.

How to Lower Credit Card Rates

Lowering Credit Card Rates Can Save Hundreds of Dollars

Negotiating a lower credit card rate takes finesse and patience. This makes it worth it, particularly since the reward is a lot of saved money.

Here are some of the top things you should keep in mind when deciding how to lower credit card rates:

Looking At Your Finances

Before you run to the bank to take out a loan, make sure you understand your finances. Getting as much information as you can about your financial situation can help you be better prepared.

You should start by asking yourself questions about how you ended up in debt. Many people find themselves in debt when they spend excessively. But, most people usually get into debt due to medical emergencies, or circumstances beyond their control.

By understanding how you accrued debt you can stop yourself from falling into the same trap again in the future. This can mean setting up an emergency fund or getting yourself a side gig to pay for your extra expenses.

Another thing that you need to do is to review your credit history. If you have a good credit score, you will have some leverage with the creditors. If you are negotiating for more than one card, focus first on the one with the highest interest rate.

Some of the information that you need to have on hand includes your current credit card terms and your accrued debt. Knowing about interest rates from different loan sources can help you determine whether your creditors are offering you fair rates or not.

Keep track of these numbers and as you pay off your debt, you will see an improvement in these numbers.

Improving Your Credit Score

Although it may not be the easiest or the fastest method, improving your credit score is a surefire way to get lower credit card rates consistently.

Interest rates are not etched in stone and creditors take a look at your financial risk to determine your credit card rates. Hence, the ones with the best credit scores also receive the lowest interest rates. It is as simple as that.

The credit card company will also look for how much debt you owe on the card, what your credit limit is and the comparison between the two. They will also compare the amount you owe on all your cards compared with all their credit limits.

Your chosen credit card company will more likely give you favorable interest rates if you do not miss payments, make late payments, or max out cards. If your credit score is low because of these red flags, credit agencies will probably not entertain your request.

Since credit is extremely personalized, the exact measures you can take to improve your score depends on your credit situation. However, the best way is to address each important factor that goes into calculating your credit score.

FICO Scores

FICO scores are the most widely used credit scoring model, and your payment history accounts for 35% of the overall score. This aspect takes a look at whether you pay your debts as agreed. Late or missed payments can damage the score.

Debt Utilization

Another important element is the total debt and utilization. This factor looks into the amount of total debt and how much available credit you use. To improve your score, you can pay back necessary debts and keep your card balance low.

Once your bank or credit card dealer realizes you are making a concerted effort to change your bad habits, they may become more open for negotiation.

Letting your creditors know that you can handle credit over a long period of time can give you the leverage you need to lower your credit card rates. Also, keep the number of your credit applications low to ensure you perform well in the new credit accounts and average account age factors.

Ask Your Issuer Directly for a Reduced Rate

If you want to pay off your debt as quickly as possible, getting a lower interest rate is important. The less interest rate you have, the lesser amount will be added to your monthly balance. This can help you pay off debt faster and with less money.

A 2017 survey from found that 69% of people that asked for a reduced rate got one. Therefore, don’t hesitate to call your issuer and request a decreased interest rate.

Let them know that you have been a loyal customer for years and have good credit standing. If you don’t, however, don’t lie.

Your credit card company may also be more open to lowering your rates if you ask for a reasonable cut. Hardly any company will drop your credit rate to zero, no matter how nicely you ask them to. They are in the business of making money.

To determine what a reasonable rate is, see what rates your issuer is offering on your card. Most cards have a pre-fixed range, which can cover 10 percentage points or even more.

Your creditor will perform a risk analysis first. And then determine whether your interest rate should be placed on the lower or higher end of the spectrum.

For example, a credit card could have an APR range of 13.99% to 24.99%. If your credit score is excellent, you will probably receive an interest rate closer to 13.99%. If you have a not-so-stellar credit score, you may get a credit card rate closer to 24.99%.

Use Shot-term Solutions to Keep Up With Your Debt

If you are experiencing a temporary problem that you expect will be resolved soon, let your creditor know. Let them know if you have stopped using your credit cards, have sold items in your home to help with the payment, or have taken up a second job.

Explain to them that although your finances are improving, you need to decrease the monthly payment. Let them know exactly how much you can afford to pay and also make sure to get the name and designation of the person you are talking to.

Be Polite and Persistent

If you are dealing with a representative on call and the rep says no, don’t give up hope. Call another time and maybe another customer service representative might give you a favorable answer.

But this doesn’t mean getting yourself blacklisted by calling every few hours. Place a few calls spaced out over the month. This way you will be on your credit card company’s radar.

If the representative you are speaking to does not have the power to change your credit card rates, don’t yell at them. Politely ask them to transfer the call to someone who has authority in these matters. If you have a sensible reason for lowering your interest rate, a person in a supervisory position may be on board.

Always remember to be civil. Even though speaking calmly may be hard during stressful times and may not guarantee you a reduced credit card rate, lack of civility is a sure way to get shot down.

Look for Competing Offers

Canceling a credit card in favor of another creditor

Credit card companies are in the business of making money and you may need to play hardball with them to get them to reduce your credit card rates. Don’t put yourself at the mercy of your creditors. Instead, do your research the most competitive rates available from other creditors.

Once you have made a list of competitors who are willing to offer you great interest rates and rewards, call your credit card company and ask them to reduce your rates.

Let them know that you have received offers from the competition, and ask if your current company would be willing to match it.

If you have been a loyal customer for several years and your company still won’t give you better rates, you can cancel your cards and take your business elsewhere.

Open a Balance Transfer Card

No matter how low your current credit card company is charging you, nobody would refuse if they have an interest rate at zero percent.

Credit cards which come with 0% interest rate enable you to carry a balance without paying a single penny towards interest for the length of the introductory period. This means whatever you pay will go towards settling your balance and can help you get debt-free much faster.

Balance transfer cards allow you to pay off your debt with accruing interest. This type of card allows you to transfer your balance from an existing credit card and then pay off that balance interest-free.

Balance transfer cards atypically offer you 15 to 21 months of 0% APR, which gives you over a year to pay off your other debt. The good part is that you can transfer debts from multiple cards, which means that you can pay off multiple credit card debts simultaneously.

Note, however, that every time you transfer a balance, you will be charged a fee which is equal to 3 to 5% of the balance amount being transferred. However, this is small change for many people who want to pay off their debt without worrying about the accruing interest.

Another thing to remember is that once the introductory period expires, the credit card company will start charging you double-digit interest rates. So it is in your best interest to settle your debt before the interest-free period comes to an end.

Moreover, 0% APR credit cards also allow you to earn reward points on your purchases while enjoying interest–free payments.

Opening up a balance transfer card can have a great effect on your credit score by decreasing your credit utilization ratio. As you pay off the debt, your credit utilization ratio will only get better.

Keeping Your Interest Rates Low

Once you have gotten a lower credit card rate, don’t just kick back and relax. There is more to do. You need to make sure your credit rates remain low for a long period of time.

Keep Yourself Updated

Once you have successfully wheedled a lower interest rate from your credit card issuer or switched to another creditor, make sure to keep yourself updated with the current credit rates.

Every few months check up on where the industry rates are, and whether you have leeway to reduce your interest payment even more.

Remember, you can negotiate your interest rates more than once. So, don’t be afraid to ask for a better rate if you feel you are unable to keep up with your debt.

Focus on Paying Off your Debt

Reducing your debt will require you to make a budget to make payments against your outstanding debts. Try to pay them off as quickly as you can, especially if you are still being charged an interest rate on your balance.

First, you will need to tally how much money you spend on everyday expenses, including utility bills, grocery, and entertainment. Then you will need to determine if you can cut down some of these expenses. This will help you calculate how much cash you have left over to put towards your debt.

You can create a budget for yourself by registering to budgeting apps like Mint or YNAB or simply create your own budgeting spreadsheet using Microsoft Excel or Numbers. This will help you remind how much money you need to save to pay off your debt.

A good practice to make your credit card payment is right after your pay comes in. This can ensure that you don’t have a chance to spend your money on anything else before you settle the month’s debt. If you find you have saved some extra money at the end of the month, you can put it towards paying your debt too.

Try not to put any new purchases on a credit card until the debt is paid off. If you have more than one card, you can make your purchases on the other cards as you pay down the debt on the first card — as long as you don’t incur any new debt.

This way, you can still benefit from credit card rewards while making your way towards becoming debt-free.

Tracking Your Payment Progress

You Can Track Your Credit Card Payments through Mint or YNAB

If you need any added incentive to pay off your debt, keep tracking your progress. Software like Mint and YNAB can do this automatically for you. However, they are not necessary tools.

You can make your own debt-payoff chart yourself, and update it every time you pay off a portion of the debt. Also keep checking if you have enough money left over to make two debt payments, instead of a single one. Keep pushing yourself to increase your debt paying ability by a few percents every month.

Every time you accomplish a payment milestone, you can go out and give yourself a small, fun reward. This can help you to not just stay motivated towards paying off your debt but will drive you to get rid of your debt quickly.

Late Payment Waiver

Most credit card companies will waive your late fee 87% of the time.

If you forget to pay your monthly payment on time, don’t panic. It can be remedied. You can dispute your increased interest rate, and argue with them to have your extra charges removed.

Call your customer service representative and explain it was accidental, and that you are fully prepared to pay your payment immediately. Make sure you are polite, friendly, and civil. Once you convince your creditor to waive off the late payment charges, pay your monthly payment at once.

Keep Within Your Credit Limit

A general rule-of-the-thumb is to not exceed 35% of your credit limit. Your interest rate and your credit score is determined by your utilization rate.

If you max out your credit cards, it can have a bad impact on your credit score. People with the best credit scores have a low utilization rate of 10% and no late payments.

Track Your Credit Score

You Can Track Your Credit Score through A Government-Approved Source

Make sure you get a credit report each year through a government-approved source. Knowing your own credit score can arm you for future potential negotiations.

More importantly, it can make you aware of any issues, like dangerously low credits or even identity theft.

Last Words…

It is not uncommon to find yourself deep in credit card debt. However, that doesn’t mean you need to be stuck with high interest rates as you struggle to pay it off.

Calling your creditor to negotiate better rates, or switching to another credit card company are feasible options you can pursue. Making a sensible budget to quickly and smartly pay off your debt can also do wonders for you.

Remember, a Lannister always pays their debts.