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How to Negotiate a Lower Credit Card Rate

Let’s get something straight: credit cards are a useful tool in your wallet.

They offer fraud protection on purchases, rewards such as points or cash back, and the ability to purchase something interest-free for 30 days. You start paying interest after those 30 days are up. And the interest is high; most credit card interest rates are between 9.9% and 30%. If you pay off your credit card every month, maybe the high interest rate isn’t a concern. If you don’t, you’ll be paying a lot of interest over a lot of years.

Let’s assume you have $1,500 on your credit card with an interest rate of 19% and you pay the minimum of $10 a month. It will take you almost 13 years to pay off that original $1,500, which will include an extra $1,448 in interest. That’s double the original amount on the credit card.

Fortunately, most Canadians pay off their credit card every month. For those who can’t and for those who want a lower rate, there are ways to pay less interest while you’re paying off your credit card.

Do the research

Knowledge is power so before you ask for a lower rate, know what’s out there and know your credit score. You’ll need both.

Start with your credit history and your credit score. You can get a copy from Equifax or TransUnion with minimal fees. This will provide a breakdown of your credit history.

The next thing to do is to do some research on the credit cards that are available to you. There are dozens of cards, all offering different rates and rewards and you can use credit card comparison tools to figure out what card might be the right one for you. These tools let you plug in your preferred interest rate, preferred annual fee, and preferred rewards.

Once you’ve done your research, it’s time to get a lower rate.

Make the call

Ask and you shall receive a lower rate. It can be as simple as making a call to your credit card provider. “It’s about asking for a better rate,” says Kerry Taylor of the personal finance blog, Squawkfox. “Most don’t ask.”

The CBC did an experiment where they asked 10 people to negotiate their credit card rates. There were skeptics but all of them called their credit card companies and got that lower rate. One participant got his rate cut in half!

While there are no guarantees that asking will get you a lower rate, there are some things that can help: a history of on-time, regular payments (which you’ll have from your credit history) and the length of time as a customer. This puts you in the best possible light and gives you the support you need to open negotiations.

If you’re feeling intimidated by what to say, it’s natural—that call could save you hundreds or thousands of dollars in interest payments. Just be persistent and don’t give up at the first no. Ask to speak to a supervisor and work your way up the ladder until you get a yes.

Make the switch

This is where your credit card research helps. Banks and credit card companies are interested in keeping you satisfied because it’s a competitive industry and it’s easier to keep a client than to get a new one. That means they’re willing to work with you to find a solution. One of these solutions is to suggest a card within the same family but with a lower interest rate.

Most banks and credit card companies have a range of credit card offerings with varying interest rates. This includes low-interest credit cards that offer 9.9% interest. Switching from a higher-interest rate card to a lower rate can save hundreds of dollars over the years. Let’s look at the math:

That original $1,500 at 19% would cost you $1,448 in interest. If you switched to a card with a 9.9% interest rate, you would pay $500 in interest. That’s a difference of $948 over the same period of time!

If you don’t pay off your balance every month, lowering your credit card interest rate will save you so much money, but that’s only if you commit to paying off your cards as quickly as possible. After all, the best interest rate is no interest at all.

Flickr: frankieleon