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The cost of borrowing can skyrocket when using a credit card compared to other types of loans. Paying a fee to borrow money longer than a billing cycle remains unavoidable in most cases and we always recommend paying your balance in full each month to avoid incurring interest, but for those who need carry a balance, interest rates may seem less like an inconvenience to be avoided and more of a major budget item to be accounted for.
Cards with high APRs of 25% to 30% make carrying a balance an expensive undertaking, but even an APR of 10% can be high compared to other forms of borrowing. While it is true that interest rates are often fixed, few are fixed. It is possible, with some effort, to negotiate or renegotiate your interest rate(s). Results may vary based on your credit history, outstanding balance, and other factors, but if you’re ready and ask at the right time, you may have a good chance of lowering your rate and saving a lot of money. the money.
Find the best balance transfer credit cards of 2022
knowledge is power
Evaluate the health of your credit before making a big request to a lender. Generally, a higher credit rating equals lower interest rates. Likewise, income may be taken into consideration when determining your interest rate. Since people with low incomes and low credit scores are considered higher risk borrowers, card issuers and other lenders will be less likely to offer offers. In fact, for many low-income, low-credit applicants, opening an unsecured credit account is enough. with many transmitters can be difficult, if not impossible.
Make sure your credit report is accurate and up to date. Make sure you haven’t missed any payments in the last twelve months. A late repayment history can make lenders less likely to give you an adjusted rate. You’ll also want to make sure you pay off as much of any outstanding debt as possible before contacting your lender. Try to aim for less than 30% of your total credit limit (also called utilization rate).
Even if your credit isn’t great, there can still be hope. If your score has recently increased or your income has increased, you may be in a good position to renegotiate. Conversely, if you suddenly encounter financial difficulties, such as an unexpected illness or unemployment, you can also benefit from an adjusted rate. Card issuers often announce their understanding of the crisis.
Next, identify the rate(s) you are currently paying. If you have multiple cards, you will need to do this for each one. Search your credit statement for “annual percentage rate” (APR). This number reflects a factor of the amount you pay on your outstanding debt each billing cycle. To learn more about APR, read our in-depth guide.
It’s also a good idea to make sure you fully understand your own financial situation. During any negotiation for a better interest rate, collecting information about your normal income, expenses, assets and liabilities can help you see yourself as a potential lender, which can help improve your position and to become a better candidate for a rate improvement.
Also do some research to understand the market. Check competitors’ credit cards and see what kind of offers they are offering. If you discover that a competing company is offering a better rate than the one you are currently receiving, you may be able to take advantage of this information when negotiating, even if you don’t want to switch lenders. Other companies pre-approving you for better rates can also be a likely indicator that your credit rating has improved.
Negotiate with a lender
When asking for a lower rate, it’s important to have a general idea of what you mean, so we can’t stress enough the importance of being prepared. Once you have all your information in order and you have a good idea of what you want and need, you will be ready to trade. Start by calling the account you’ve had the longest, as the longevity and history of the account can provide you with some leverage. Your bank may recognize you as a profitable customer if you have been doing business with them for a long time.
Be sure to emphasize your stellar reimbursement record, any best offers from competing companies, and/or your unexpected financial difficulties. Present your case with respect, but be firm about your needs. Don’t be discouraged if the representative tells you there is nothing they can do. Politely ask to be directed to a supervisor, and if you’re still being told a reduction isn’t possible, consider asking for a temporary change. They may be more likely to allow a temporary change, which can help you find a better option or a new company to do business with.
As a last resort, you can suggest closing your account if you don’t qualify for a lower rate. This is not a threat to be taken lightly, as you still have to pay any outstanding debt before you can close an account. If your card has a large outstanding balance, this tactic won’t carry much weight.
Balance transfer as an alternative to a lower rate
For credit cardholders facing carried over balances with high interest rates, a balance transfer card option can help lower a rate or, with the right account, provide a few months of interest relief. A balance transfer moves a balance to a new card, ideally with a lower interest rate. There is often a balance transfer fee from a new card issuer, but many issuers offer 0% introductory APRs on balance transfer for a few months to entice customers trying to get out of their debts. To learn more about how to do a balance transfer, read our guide.
Also check out our list of the best balance transfer cards.
Find the best balance transfer credit cards of 2022
If you maintain good credit and a good payment history, you can often qualify for a lower interest rate. Even if you don’t, don’t give up. Keep making your payments on time, reduce outstanding debt, and make a plan to try again in three to six months. Improving your credit health will help you make your case next time. People like to help people who help themselves, and credit card companies want your business. If you give the company a profitable reason to help you, they often will. It’s just a matter of making sure you’re in as strong a position as possible when you make your request.