If you’re carrying a balance, cutting your APR is the best way to save money on interest payments – or even shave several months off your projected pay-down timeline.
A $3,000 balance at a 17 percent APR for example, will cost you $472 in interest over 12 months. With an APR of 13 percent, that same timeline and balance will cost you $359.
“It all comes down to money,” says Mike Sullivan, director of education at Take Charge America. “If you have a credit card that’s costing you more money than another card would cost you, you either need to change the terms on your current card or get a different card.”
So how do you go about convincing your issuer to lower your APR? We asked the experts to recommend some strategies.
How to ask for a lower APR
While none of the tips below will guarantee victory, they’ll maximize your chances.
- Do your homework: When you make your request, the bank is going to look up your history – and if you’re a good customer, you’re in a stronger position to negotiate. So, before you call, look up how long you’ve been with your bank and your payment record, suggests Crystal Stemberger, owner and writer of the blog Budgeting in the Fun Stuff and author of the e-book “Managing Your Monthly Nut.”
Another effective bargaining chip is knowing what your bank’s competitors are willing to offer you – or consumers like you.
“I’d also see if I qualify for a competitor’s card or even a competitor’s 0 percent interest deal for signing up,” Stemberger says. “Information is power.”
If you’re getting card offers in the mail, compare the rates you’re being offered with that of your current card, Sullivan suggests. No offers? Check your credit scores and research online which interest rates you’re qualified for. For example, if you find you have fair credit, research online for cards for fair credit and look at the range of APRs they offer.
“You want the best rate you’re entitled to,” Sullivan says. “That may not be the best possible rate.”
- Be direct: The bank representative doesn’t want to waste time any more than you do. So be upfront with your request (a lower APR) and your reason (you think you can do better).
“For example,” Sulivan says, “you might say, ‘I just got an offer for a credit card that has an 11 percent APR. And I notice the card I have with you has a 15 percent APR. I would appreciate if you would match that 11 percent.'”
Providing a specific reason isn’t just about talking big. The representative likely has to give their employer a reason for granting your request. Handing them one on a platter makes their job easier.
“They can’t just say, ‘I decided to give this person a break today,'” Sullivan says. “So give them a reason.”
- Be polite: Don’t lead with rudeness — or with a threat to close your card.
“Sometimes there’s some leeway the rep or supervisor has depending on how they feel about you,” Sullivan says.
- Be careful about playing the sympathy card: Many banks have hardship programs for those having trouble making payments due to a crisis. These programs may lower your interest rate for a certain period of time. But don’t exaggerate a hardship just to lower your interest rate – because the other side of the hardship-program coin is shutting off access to your card.
“You better really need it,” Sullivan says. “It’s quite possible, when you do that, that they’re going to cut off your credit. They certainly don’t want you to take on more debt if you’re having trouble paying off the debt you have.”
- Escalate if necessary: If your request is refused, or the representative doesn’t offer you a big enough decrease, politely ask to speak with a supervisor.
“Supervisors almost always have more authority to give more concessions than the first person you talk to,” Sullivan says.
Still getting “no” for an answer?
“Point out your positive history with the bank and let them know that you will be forced to cancel your card with them if this can’t be worked out,” Stemberger says. ” You can ask to be transferred to their retention department if they don’t do that automatically at that point.”
If, even then, your bank won’t work with you, it might be time to move on.
“If your credit is good enough that you should be able to get a better deal somewhere else, you do have the option of getting another card,” Sullivan says.
Why not just go for a new card in the first place?
If you prefer to avoid conflict, applying for a new card with a better rate or trying to get a 0 percent balance transfer deal might seem more palatable than bargaining with your issuer.
But, asks Stemberger, “Is your fear of confrontation more important than your financial health?”
“If so, then find a better deal elsewhere and move on,” she says. “But your options may be limited and your other financial and life priorities may be the motivation you need to ask for a better situation for yourself.”
In fact, there are plenty of advantages to getting a better rate on a card you already have instead of applying for a new card.
For one thing, older, long-standing accounts have a positive effect on credit scores, while opening new accounts dings them temporarily. Convenience is another factor. Replacing a card means re-configuring any automatic payments you have tied to the old card, Sullivan says. Your card may also be part of a larger relationship you have with your bank that includes your mortgage, savings account and auto loan.
Need more encouragement? It’s often in the bank’s best interest to work with you.
“Banks really really like to keep customers,” Sullivan says. “It costs a lot of money for a bank to attract a new customer. They all understand that you’re far better off keeping the client you have.”
Of course the best way to avoid wheedling with your bank about interest is to not carry a balance at all. No matter how low you can get your rate to go, not paying a dime in interest while earning rewards is the ideal way to use credit cards.
“The long-term goal should be to aim to never carry a balance, so APR’s wouldn’t matter,” Stemberger says. “… It’s better to hold power over your money than to be paying interest for using it.