Your credit cards aren’t as inflexible as you may think. In most cases you can negotiate a due date that aligns to your paycheck schedule and in some instances you can even negotiate your credit card interest rate, also known as your APR. If you are carrying balances on your credit cards, even a small reduction in interest can make an impactful difference on your short-term payments and long-term financial solvency. Here’s what you need to know from money experts regarding methods on how to lower credit card interest rates.
What is credit card APR?
The annual percentage rate (APR) is the cost of borrowing money on an annual basis. “Credit card APRs do not reflect fees and since a credit card has no set loan amount or fixed repayment term, its APR is simply its interest rate,” explains Alia Dudum, money expert at LendingClub.
How does a credit card’s APR affect what the cardholder pays?
What you pay depends on two factors: the APR percentage itself and the balance that you carry. “If a cardholder does not pay off their balance in full each month, they’ll be charged interest on the unpaid balance, and interest will start to accrue on any new purchases from the transaction date until the balance is paid in full,” says Dudum.
Credit cards have several APRs that may apply to different transactions or account activities, including:
Purchase APR: The rate you pay for purchases.
Balance transfer APR: The rate applied if you use a card to pay down balances on other credit cards or loans.
Cash advance APR: The rate charged on ATM withdrawals or cash-equivalent transactions, like money-order purchases.
Introductory APR: A promotional interest rate for a limited period of time that is lower than the card’s regular APR, sometimes as low as 0%.
➤ SEE MORE:Best 0% APR credit cards
Penalty APR: A higher-than-normal rate that results from violating a card’s terms of service.
Will credit card companies lower your interest rate if you ask?
Most credit cards have variable APRs, which means the interest rate is tied to an underlying index — such as the federal prime rate — and the rate may increase or decrease over time based on market conditions, says Dudum. But, lowering an APR is sometimes possible, and your first step is finding what your current APR is.
To determine your current APR, check your online account or credit card statements, or call your credit card issuer directly. Then, you can simply ask for a lower rate. If you are in good standing with your issuer and have a history of paying your accounts on time and in full or are making regular payments, this may work in your favor and your credit card issuer could consider approving your request.
Predictably, a strong credit score can increase your chances of obtaining a lower APR. You can achieve this by always making payments on time, paying down debt regularly and consistently reviewing credit reports for any errors that could be impacting your score, Dudum explains.
➤ SEE MORE:What is a good credit score?
Another way to try to boost your chances is to have competing credit cards on hand to mention while requesting a lower APR.
“Want to know an ultra-secret way to lower your APR? Try this insider secret: Just call the bank and ask,” says Monica Eaton, CEO of Chargebacks 911, a financial consultant firm. “Seriously, retaining cardholders is super important to their financial model, and if it’s within their power to make you happy, they’re very motivated to do so.”
But before you call your issuing bank, do your due diligence. “Are there similar credit cards that offer superior rates for people with your credit score and financial profile? If so, that’s great info — it gives you negotiating leverage,” Eaton continues. “Clear, concise, honest communication is critically important.”
What are the benefits of a lower credit card APR?
Three benefits include saving money on interest if someone is carrying a balance, having more money available to pay down that debt, and having additional cash for other financial necessities like a savings account or emergencies, Dudum explains.
What can you do if your issuer won’t grant a lower APR?
If requesting a lower APR directly does not work, considering a balance transfer credit card is also an option. “Many credit cards offer a promotion with 0% interest rates and no monthly fees for 6-12 months,” says Dudum. Just remember, if you opt for a balance transfer card, it’s important that you pay close attention to the expiration date on the introductory rate, as many of these cards will come with high interest and fees after the promotional period ends.
