How to lower your credit card interest rate
Editor's Note
If you're dissatisfied with the interest rate on your credit card — also known as the annual percentage rate or APR — you might be able to secure a lower rate, believe it or not, by simply asking your issuer.
While it's possible your request may be declined, it doesn't hurt to ask. If you've maintained a history of making timely payments and demonstrated responsible behavior with the issuer, you can leverage these factors to your advantage.
Keep reading to learn more.
Related: What is a purchase APR on a credit card?
Evaluate your current situation
Obtaining a lower interest rate can result in paying less interest over time, making it more than worthwhile to ask. In some cases, you may even qualify for a 0% APR on a credit card for a limited period. However, it is important to note that you typically must have good or excellent credit to qualify for such offers.
If you are considering whether your credit card's APR is reasonable, keep in mind that the average credit card interest rate currently hovers above 20%. If your credit card has an APR significantly higher than the national average, aim for a lower rate when you are ready to negotiate.
Related: What does 0% APR mean?
Find competitive credit card offers
Credit card companies always try to retain customers and remain competitive among other issuers. To determine if your credit card's interest rate is competitive, seek out similar credit cards and compare their APRs. If you come across a card that is similar to yours but offers a better APR, take note of that information and mention it when contacting your card issuer.
It's crucial to ensure that the offer you are comparing is genuinely competitive, however. For instance, if you have a poor credit score, it wouldn't be logical to compare your credit card's APR to that of a card that requires excellent credit. Consider your own creditworthiness and the specific requirements of the cards you are comparing to make an accurate assessment.
Related: 6 things to do to improve your credit score
Call your card issuer and ask
To begin, consider reaching out directly to your credit card issuer and requesting a lower interest rate. It's crucial to be well prepared and know exactly what you need from your issuer. Familiarize yourself with your current credit card terms, such as the APR, grace period, statement due date and current balance. Utilize this knowledge to your advantage by discussing your findings and by researching competing lenders. Remember: It never hurts to ask.
If you happen to find a more favorable offer from another issuer, communicate that information to the representative. Showing that you are considering taking your business elsewhere may increase their willingness to negotiate.
If you have maintained a track record of timely payments and responsible credit usage with your current issuer, they may consider lowering your interest rate to retain your business. Remember, the worst they can say is no.
Also, keep in mind that account longevity holds value. If you have been a customer with your issuer for a significant amount of time, make sure to highlight this during the negotiation process.
If you don't succeed on your first try, we recommend simply hanging up and calling again. It's possible that a second or third customer service rep will be more accommodating to your request.
Related: Are you paying enough attention to your credit card's APR?
Build your credit score
Whether you are applying for a new credit card or attempting to negotiate a lower APR on your current card, one effective way to secure a better interest rate is to improve your credit score. One of the simplest ways to enhance your credit rating is to consistently pay your credit card bill early or on time each month.
Moreover, it is advisable to avoid opening numerous new accounts, as this results in multiple hard inquiries on your credit report. Additionally, closing accounts can increase your credit utilization, which can negatively affect your credit score.
If you have a significant amount of debt relative to your credit limit, paying off your debt can also have a positive impact on your credit score. Experts generally recommend maintaining a credit utilization ratio below 30% for optimal results. By following these guidelines, you can work toward improving your credit score and increase your chances of obtaining a more favorable interest rate.
Read more: How do credit scores work?
If denied, apply for a balance transfer card
To reduce the amount you pay in interest during a limited period, consider applying for a balance transfer credit card. Many of these cards offer an introductory 0% APR for up to 21 months on transferred balances. It's important to note that these offers usually come with a balance transfer fee, so the 0% APR is not entirely free.
Nonetheless, opting for a balance transfer credit card is an excellent way to consolidate your debt without further negatively affecting your credit.
Remember that a 3% to 5% fee (with a minimum of $5) will apply to these transfers, and you often must complete a balance transfer within the first 60 to 120 days to benefit from the introductory rate.
Related: What is a balance transfer?
Bottom line
You can take several reliable steps to help you completely avoid paying credit card interest. By only making purchases that you can afford and consistently paying your credit card bill in full every month, you can prevent any interest charges.
However, if you do find yourself with credit card debt, it is crucial to aim for the lowest possible interest rate. Requesting a lower APR from your current credit card issuer might be a straightforward way to achieve this goal. Alternatively, in certain situations, it may be more advantageous to transfer your balance to a new credit card with an offer of 0% APR.
Lastly, it's not a bad idea to learn more about the difference between APR and interest rates.
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