Credit cards can be nice to have. Which other lending institution in the world will give you a credit card with which you can pay for just about anything, without having to pay principal or interest for a whole 30 days! This and reward points is what people get hooked to, when they initially sign up for credit cards.
But then, reality is a whole different story. You need money to pay for other bills and you make just a “minimum” payment on your credit card. Nothing wrong with that except that even a few hundred dollars in a credit card balance can take two decades or more (yes, twenty years!) to pay off, if you only paid the minimum dues.
If you are making small payments towards your credit card, it probably means that you are just paying off interest costs and not a lot of principal when you make payments. This is particularly true when your credit card carries a high interest rate, say in excess of 15%.
It is highly recommended that you pay off your credit card aggressively, to pare down credit card debt and also get out of credit card debt. But, if you are in a tough crunch in life and not able to pay off your credit card aggressively, you must at least try to bring down your credit card’s interest rate.
How to lower the APR on my credit card?
It is very doable. There are a couple of popular approaches. One is negotiation and the other is switching the balance from one card to a new card with a lower APR or an introductory 0% balance transfer APR.
Negotiating your credit card’s interest rate
Call your credit card customer line. Yes. It requires you to make a call! Calling any customer service is never an experience to look forward to but a simple phone call can potentially save you hundreds or even thousands in interest costs, over the long run.
But first, before you call, make sure you go through your recent mail to find credit card offers that have come your way. You must particularly try to find credit card offers that come with a lower APR than what you are paying now. Credit card offers with an introductory period 0% balance transfer period will also work.
If you haven’t received such offers in the mail mail, try online to see if somebody with your credit score can secure a credit card with a lesser APR than what you are paying now. Don’t go ahead and apply for it as any applications to credit card companies will result in a credit pull, something that can adversely affect your credit score. Remember, a lower credit score most probably means even higher interest rates.
We are trying to lower your credit card interest rate here, not increase it!
When you get on the phone, immediately choose the option that lets you speak to a customer service agent. Try and follow the following script when you do make the call.
“Hello. My name is xxx and I am calling about the APR on my credit card. I have been a loyal credit card customer since xxxx and I think I deserve to qualify for a lower APR. Can you please tell me if you have the authority to change my APR”
If the representative says he or she cannot change your APR, politely ask to be transferred to someone who can. It is very important to be polite. Getting all bossy with the credit card company will never help your cause.
Once you get someone with authority to change your APR on the phone, continue with the following script.
“Hello, My name is xxx and I am calling about the APR on my credit card. I have been a very loyal customer since xxxx and I recently received a few or xxx credit card offer(s) with applicable APRs that are much lower than what your credit card is charging me at the moment.
I have been a loyal customer and I wish to continue to be a loyal customer if you can give me a similar APR on my credit card”
Now, you have entered a phase where the ball in primarily in their court. You are going to get a variety of answers. Some will say that you do qualify for a lower APR and give you a break right away. Some will however say that they need time to review your request with their boss. Some will also flat out say that there is nothing they can do with your credit card APR.
Whatever response you receive, please try to be polite and don’t take anything personally. If someone stonewalls you, ask to speak with a higher authority. If they are completely uncooperative, hang up and try after a couple of weeks.
It will typically take at least a few phone calls before you are able to successfully slash down the APR on your credit card. Of course, it really helps if you have never made late payments or when you have been paying more than just minimum balances on your credit card. Having had a credit card for a few years or longer will also definitely help your case.
Knocking down your APR by even one or two percentage points can significantly reduce your interest costs, especially if you are only making minimum payments towards your card.
Make the call and see how well it can pay off!
Moving your credit card balance over to another card
If negotiations to reduce your credit card interest rate fail or if your existing credit card bank just doesn’t see you as a candidate who can get an APR break, you can go ahead and try to balance transfer your outstanding credit card loan amount. Balance transfer offers will typically allow you to balance transfer the entire balance from one card over to the new card, with 0% applicable interest.
Just be wary that such introductory 0% APR or low APR offers will only apply on your balance transfers. The moment you start using the new card to make purchases, you are probably going to rack up high interest charges on any new purchases you make.
You must also be wary of credit cards with very attractive balance transfer options but those that are cards that come with high annual fees. Paying an annual fee for a credit card just doesn’t make any sense at all. Also remember that balance transfer introductory offers eventually expire. They typically run out after 12 or 18 months, meaning that you must try to make the most of the introductory period to zero out or bring down your credit card balance.
Keeping your credit card interest rate low for life
The above steps were to show you how to reduce your credit card interest in the short term. But, there are several steps you can take for the long term as well.
First, pay off your balances on time. Making late payments will mean your credit score is negatively affected and that credit card companies automatically put you on the radar as a high-risk customer. High-risk means that you will pay more interest costs or that you definitely won’t qualify for lower interest rates.
Also, try not to make a habit of carrying a high balance on your card all the time. Purchasing items and paying it off within a billing cycle is perfectly fine. But, isn’t ideal to always carry 70% or more of your credit card’s limit as a balance. It doesn’t do any good to your credit utilization ratios. . A healthy debt utilization ratio will again improve your credit scores, meaning that you will automatically qualify for lower and lower interests, when you shop for other credit cards.