Credit card interest rates can be manageable for some people but a real challenge for others. According to the Federal Reserve's Consumer Credit December 2023 G.19 report, the average interest rate for all credit card accounts was 21.19 percent. However, depending on your card type, credit score, and other factors, card rates can vary anywhere from 19.49 to 29.99 percent. At the higher end of the spectrum, getting yourself out of debt may be more of a challenge. It does not necessarily have to be that way, though. You have some power to reduce your interest rates in many cases.
These steps can help you reduce your credit card interest rates so you can pay back your debts before it becomes out of control.
Negotiating with Your Credit Card Issuer
One of the first things you can do is contact the credit card issuer for your card to try to negotiate a lower interest rate. It is that simple, though you will want to do a little homework first. For instance, find out what rates other competing credit card companies offer and have a list of top offers to bring to the table with your negotiations.
The Simple Dollar recommends a few critical considerations for your negotiations, including these:
- Begin with your oldest card. You have the longest history with this card, and credit card companies are more likely to honor older, loyal customers with rate reductions than people with more limited relationships.
- You catch more flies with honey. Even if they initially tell you no, keep the conversation and tone friendly and kind.
- Be persistent. If lenders say no, ask to speak to a supervisor. If you cannot do so, wait a few weeks, then try again. Make attempts every few weeks until you get a favorable response.
If that does not work, there are still other options available to you, though it might be worth your while to keep trying every few months until you get a more favorable answer. Remember that a history of late payments or high amounts of debt will make your plight less desirable for the credit card company. Attempt to pay down some balance and be more consistent with monthly payments while seeking an interest rate reduction.
Consider Balance Transfer Offers
Many credit card companies allow you to transfer your balances from another card to their cards with very low, if not zero, introductory rates. That provides an excellent opportunity to reduce your overall debt by thousands of dollars if you manage to meet all the "fine print" requirements.
Before you decide this is the route for you, do your homework on the cards you are considering and the relevant details about the balance transfer process. Some details you will want to have in mind include:
- Balance transfer limits. Some cards limit the funds to a specific dollar amount. Will that amount be sufficient to eliminate all of your debt with your existing credit card company?
- Annual fees. These fees can be surprisingly high. You need to know what they are before you decide to transfer a balance so you can maintain the relationship with this provider as long as possible.
- Balance transfer fees. These fees happen whenever you transfer balances to the new credit card. While the benefit of reducing your interest rate burden from 20 percent or more to something south of one percent is enormous, you need to be aware of the balance transfer fees and how they will affect your payments.
Knowledge is power when considering a balance transfer. The more you know about the offer and its potential benefits, the better-informed decisions you can make.
Keeping Your Rate Low for the Long Haul
Asking for a lower rate is sometimes all it takes.
- Have facts and numbers in front of you if the credit card company is reluctant to grant your request.
- Be pleasant in all your dealings with the credit card company.
- Build goodwill with the credit card company before attempting to lower your credit card interest.
- Be mindful of possible fees and strings before making a large balance transfer.
Keep these things in mind, and you should be able to find a way to reduce your credit card debt substantially by lowering your credit card rates.