Negotiate a Better Interest Rate From your Credit Card Company

by : Paul Basco

If you're looking for a new way to save a few bucks each month, and potentially a ton of over time, you may wish to negotiate a better interest rate from your credit card company.

The average American household carries a balance of $10,000 of unsecured credit card debt, and the minimum payment is typically 2% of the total. Unfortunately, lots of folks choose to pay the minimum each month, of which only a tiny fraction is applied against the principal. If you are ever late with a payment, you are giving the credit card companies the green light to hike your interest rate even higher too.

Negotiate From a Position of Strength
Before you make the call to your credit card provider, make sure that you are in a position that will allow you to negotiate from a situation of strength. This is key, because if you have done the following:

  • Consistently paid before the due date
  • Paid off the full balance nearly every month
  • Been a cardholder with the company for longer than 2 years
  • Obtained your current credit score with all 3 major credit bureaus

You will have the tools at your disposal which will make it much more likely that they will honor your request for a lower interest rate.

Shop Around
The credit card business is fiercely competitive and you can use that to your advantage. On average, it costs a credit card company around $300 in marketing costs to attract and retain each steady customer. Given the amount of cards issued in any given year, that's a lot of money and once they have your account, it is in their best interests to keep you happy.

Conduct your own research online, and make a list of the top five cards with the best interest rates. Keep this list handy so that when you call, you can cite specific examples of the cards and rates of competitors. The list will also give you a much better idea of a target rate for your negotiations.

Make Sure That the New Rate is Fixed!
Many times, credit card providers will try to sway you with an unrealistically low rate to steal you from another company. Often called Introductory Rates, these seldom do you any good because after a given period of time, your rate jumps back up to previous levels or above. Before you agree to a rate that seems incredibly low, be certain that it is a fixed rate that will last if your account remains in good standing.

Avoid Threats and Bluffs

Interest rate negotiation has been a hot topic in the media recently, and as a result, there are a lot of people calling their providers about lowering their rates. The credit card companies are very much aware of this trend, and have prepared scripts that their operators use when you call.

When you call, do not make the mistake of threatening to take your business elsewhere. This changes the tenor of the conversation immediately, and frequently puts the person on the other end of the line in defensive mode, where they will be less inclined to help you.

You can say things such as, "I've been very happy with this company for a long time but the rates offered by another outfit are too attractive to ignore. What can you folks offer that will make it easier for me to stay with you?" This implies that you are looking around, but offers them the chance, in a non-confrontational way, to honor your request and keep your account.

Ask to Speak With Someone in the Retention Office

If the person that you are speaking to is obviously reading from a script, and keeps talking in circles without offering a better rate, politely ask to speak with someone in the Retention Office. Most often, these are the folks that will have the final say on your new rate anyway, and if you present your case politely and methodically and your account has been in good standing, you will likely be able to get a rate at or near your target interest rate.