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August 23, 2023

With Credit Card Rates Rising Fast, Here’s How to Ask for a Better Deal

Learn how to lower credit card interest rates amid rising trends. Negotiate with credit card companies effectively for a better deal. Take control of your finances now!

Cartoon showing credit cards and their rates
Written by

Jennifer Moore

Are you noticing that your credit card interest rates are going up? You're not alone. The average interest rate on credit cards has jumped to 24.69%, which is higher than it was in May 2023 when it was 22.16%. This increase is happening when credit card debt in the United States has crossed the $1 trillion mark for the first time.

Many Americans are swiping their credit cards for everyday purchases, especially with prices increasing significantly. On average, people who own credit cards owe around $6,000. Having big balances on your card and those high-interest rates can cause money problems. It can make it tough to pay off what you owe. That's why it's smart to talk to your credit card company and ask them to lower your interest rate. This article will explain how you can do just that.

A person looking for a better deal on their credit card rate

Have a high-interest rate on your credit card? Seek lower credit card interest.

You’ve probably noticed from the news that vehicle financing interest rates are on the rise. And, your credit card's interest rate is climbing higher, too, which may leave you facing a common financial challenge. Think of your credit card debt like water in a leaky bucket. The more you owe, the faster it drips away due to the high-interest rate. Navigating these rising rates is essential to prevent your hard-earned money from slipping away and to regain control of your financial well-being.

Understanding the impact of rising credit card rates

So why is your credit card's interest rate so much higher than the current federal funds rate, 5.25% to 5.50%? As of mid-July 2023, the average credit card interest rate has surged above 20%. This considerable difference is due to several factors contributing to this hefty markup.

Why the markup?

Let’s explore some reasons behind this substantial increase in your credit card’s APR. 

  • Unsecured debt: Unlike loans backed by collateral (like your house or car), credit card debt is unsecured. If you can't pay, the lender has nothing to take back. This lack of security for the lender leads to higher interest rates.
  • Delinquency rates: Credit card loans have higher delinquency rates than other types of consumer loans. In the first quarter of 2023, the delinquency rate for credit card loans was 2.43%, compared to 2.23% for all consumer loans. Lenders increase rates to cover potential losses from missed payments.
  • Consumer protections: The CARD Act of 2009 offers more safeguards for consumers. While beneficial, these protections increase the risks for card issuers. They respond by charging higher interest rates to mitigate potential loss

Impact of higher interest rates

But, unfortunately, even for the best-intentioned consumer, these rising credit card rates can wreak havoc on your financial stability and your ability to manage your debt.

  • Slower debt paydown: With a higher interest rate, a larger portion of your payments goes toward interest rather than reducing your principal debt.
  • Higher total payments: Over time, you'll pay more in interest, making your purchases more expensive.
  • Financial stress: High rates can strain your budget, leading to financial stress and potentially missed payments.
  • Longer repayment period: It takes longer to pay off your balance, trapping you in debt for an extended period.
  • Reduced savings: Money that could go into savings or investments is spent on interest payments, limiting your financial growth.

Navigating these challenges requires action. Seeking a lower interest rate through negotiation can alleviate some of the burdens and help you regain control over your financial well-being.

Preparing for negotiation

Did you know that you can actually ask your credit card company for a better deal? Most cardholders aren't aware of this option, but it's a powerful tool to improve your financial situation.Especially when faced with rising credit card rates, negotiating a lower interest rate is a proactive step to counter the financial challenges we explored earlier.

Here's a reassuring fact: more than three in every four cardholders who took the initiative and asked for a lower interest rate in the past year were successful, according to a recent LendingTree survey.

But, before you dial that number to negotiate, take some time to get ready. These steps will help you prepare for the call:

  • Research interest rates: Understand the current credit card interest rates and market trends. Knowledge is your ally when discussing a lower rate.
  • Collect your personal information: Gather details about your creditworthiness, including your payment history. This information can strengthen your negotiation stance.
  • Know your current credit score: Maintain a good credit score—it reflects your creditworthiness and can influence the interest rate you're offered. And know what it is when you make the call, as you might be able to leverage this information.
  • Review card usage: Have a clear picture of your card usage, payment patterns, and any loyalty you've shown to the company.
  • Prepare talking points: Outline why you deserve a lower rate, such as being a responsible cardholder and comparing rates with other cards.
  • Choose the right time: Call from a quiet place, where you can ensure you can stay calm, to ensure you can focus on the conversation without interruptions.

Negotiating a lower interest rate might feel like a challenge, but armed with information and a solid strategy, you're more likely to succeed and secure a better deal for yourself.

Effective negotiation techniques to secure lower credit card interest

When negotiating a lower interest rate on your credit card, having a plan can make all the difference. Start by focusing on the card you've held the longest, especially if you have a consistent record of on-time payments. This track record can provide valuable leverage in your negotiation.Here are some techniques to help you secure a better deal:

  • Explain your situation: Communicate why you're seeking a rate reduction. Whether due to unexpected financial challenges, a focus on debt repayment, or competitive offers from other cards, sharing your reasons can show your seriousness and provide context.
  • Loyalty and reliability: Highlight your history of on-time payments over the years. Ask if the issuer would consider lowering your rate to reward your loyalty and responsible credit behavior.
  • Start with the highest rate: Prioritize the card with the highest interest rate. A reduction in this rate will have the most significant impact on reducing your overall interest payments.
  • Leverage competition: Mention any lower-rate offers you've received from other card issuers. This indicates that you're actively exploring your options and might encourage your current issuer to match or beat those offers. P.S. We’ll talk about this more in a subsequent section.
  • Highlight long-term value: Emphasize that you're a valuable customer and you’d like to continue using their card for the long haul. Credit card companies want to retain loyal customers and may be willing to adjust your rate to keep your business.
  • Be polite and persistent: Approach the negotiation with a polite and respectful tone. If the first representative can't help, ask to speak with a supervisor. Persistence can pay off.

Credit card companies value your business and want to keep you as a customer. They understand that satisfied customers are more likely to continue using their cards. Use this fact to your advantage during negotiations. With careful preparation and these effective techniques, you're well-equipped to secure a lower interest rate and take control of your credit card debt.

Be prepared to mention competitive offers

Do you know those pesky credit card offers that clutter your mailbox? It's time to turn annoyance into an advantage.Remember all those alluring promises of balance transfers and low APRs for the first 18 to 24 months? Those offers could hold the key to saving you a bundle. Imagine this: you've got a $6,000 credit card balance. Now, picture the difference between having a 0% APR for 18 months versus chipping away at that debt with a $150 monthly payment at a hefty 24.69% APR. The contrast is big, and the savings are real. 

As you gather those shiny credit card mailers, you're also gathering ammunition for your negotiation. Jot down the details of each offer – the lower APRs and the attractive balance transfer terms. You're armed with options when you're on the phone with your credit card issuer. You're letting them know that the grass might indeed be greener elsewhere.

Switching to a competitor with better terms isn't just a threat – it's a sensible choice. By sharing the enticing offers you've received, you're letting your issuer know that you're informed and ready to act. After all, credit card companies don't want to lose customers to the allure of a better deal. So, remember those mailers – they're not just clutter; they're a tool to potentially save you a small fortune and get your finances back on track.

Express your willingness to close your credit card account

Sometimes, a well-timed hint can work wonders.If you're exploring negotiating a lower interest rate, don't shy away from expressing your willingness to close your credit card account – it can give your credit card issuer something to think about. However, let's be clear: this isn't about making threats. It's about calmly communicating your options.

When you mention the possibility of closing your account, you're not creating stress; you're creating a conversation. Remember all those glossy credit card offers that tempt you from your kitchen counter? Now's your chance to pick one that resonates with you. Let your credit card provider know you're eyeing those options and are ready to take action.

This isn't a high-pressure situation; it's about showing you have choices. Your calm demeanor lets your credit card issuer know you're in control and informed. You're not trying to start a fight –you're having a discussion. By signaling your openness to consider other offers, you invite them to see things from your perspective. So, explore those alluring offers, and let your credit card company know you're ready to seize abetter deal.

Be persistent and patient

We've mentioned it before, and we'll say it again – being persistent and patient is your secret weapon in the world of negotiation. When you're on that call with your credit card issuer, it's natural to feel frustrated if things don't progress as quickly as you'd like or don’t seem to get the outcome you hoped for. Take a deep breath. Remember, you're in control of this conversation.

Instead of getting caught up in frustration, focus on the positives. Think about those other credit card offers sitting right on your desk, waiting for your attention. They're your backup plan, your safety net. You have other options if your credit card issuer doesn't come through and lower your interest rate.

Stay persistent in getting your message across, but stay patient, too. Sometimes, it takes a little time for the gears to start turning. Be polite and firm, reiterating your reasons for requesting a lower rate. Your willingness to consider other offers shows you're a savvy consumer who knows their worth.

By maintaining your cool and steering the conversation, you're more likely to achieve your goal. Remember that this isn't just about getting a lower interest rate – it's about taking control of your financial future. So, be persistent, be patient, and remember, you've got a world of options at your fingertips.

Balance transfer options to lower your credit card interest

Returning to those alluring glossy offers –it's time to turn them into actual savings. Take a closer look at your existing credit card accounts – many companies offer balance transfer options if you open a new account with them. While this might seem like a lot of math, it's a straightforward way to save big. 

Imagine you have a $6,000 credit card balance with a hefty 24.69% APR. Picture this: you explore a balance transfer offer with a new card with a 0% APR for the first 18 months. Even if there's a 3-5%balance transfer fee, the math is on your side:

  • With your current card: You'd pay around$1,476 in interest over a year.
  • With the balance transfer: You might pay around $270 in transfer fees, but you'd save $1,206 in interest over the same time.

That's real money back in your pocket. This strategy can be especially helpful if you have a solid plan to pay down your balance during the introductory 0% APR period. Plus, it simplifies your debt by consolidating it into one card.

Before you leap, read the fine print and make sure you understand the terms. Calculate the potential savings and decide if it aligns with your financial goals. Balance transfers could be your ticket to reducing that burden and gaining control over your credit card interest. For more financial advice and information on auto refinancing, check out the RateWorks insight blog.