Your credit card’s interest rate affects how much you pay to carry a balance from month to month. The higher your interest rate, the higher your finance charges. Higher finance charges also mean that more of your payment goes toward interest than reducing your credit card balance.
A lower interest rate would help tremendously when you’re trying to pay off your credit card balance, so, if your rates are high, you should call your creditor and ask them to lower your interest rate.
Depending on your credit history and your credit card standing, the creditor may agree. For example, if you have good credit and you qualify for low interest rates with other credit card issuers, your current creditor may be willing to lower your interest rate. Unfortunately, creditors don’t always agree to lower interest rates, even for cardholders with great credit scores and timely payment history with the creditor.
If you’ve asked your credit card issuer to lower your interest rate and they won’t budge, you have a few options.
Leave the Balance and Pay it Off
You could leave your balance where it is and pay more aggressively on that credit card balance. Pay just the minimum on all your other credit cards and make higher monthly lump sum payments toward the high interest rate balance. The more you can pay toward your balance, the faster you can pay it down.
Wait and Try Again in a Few months
After several months, you can ask your credit card issuer again to reduce your rate. If they still refuse, continue your payments and try again in another several months.
Transfer to Another Credit Card
Another option is to transfer your balance to a credit card with a lower interest rate, preferably a 0% introductory interest rate. The 0% APR will give you a chance to make significant progress on reducing your balance, possibly even pay it all off. Make sure you don’t make any purchases on your 0% APR balance transfer credit card, even if you have a promotional rate on purchases. Use this credit card only for paying off your balance transfer.
Seek Consumer Credit Counseling
If you’re having trouble making your regular credit card payments, consider consumer credit counseling. The credit counselor may determine that you’ll be better able to pay off your debt on a debt management plan (DMP), which is a type of hardship arrangement with your creditors. Your interest rate and minimum payment are typically lowered on the DMP, but the drawback is that you can’t use your credit cards during this time.
Being on a DMP doesn’t hurt your credit score, but it is noted on your credit report. Note that if you default on your DMP payments, you can lose your lower APR. The interest rate will go back to what it was before you entered the DMP.
When Must Creditors Lower Your Rate
Creditors only have to lower your rate if you previously received the penalty rate after becoming more than 60 days past due on your payment. There’s a catch: credit card issuers are only required to lower the rate on existing balance. Purchases made after the penalty rate became effective may still receive the higher penalty rate. Avoid making new charges on your credit card after you’ve received the penalty rate.
Watchout for Interest Rate Reduction Scams
Beware of scams from companies who say they can lower your interest rate, specifically those who ask for upfront payment or guarantee they can lower your rate. The Federal Trade Commission warns consumers that previous customers who’ve paid for these services didn’t receive the benefits that were promised and were not given the requested refunds.
Unfortunately, you don’t have the most attractive options for dealing with a creditor who won’t budge on the interest rate. The best solutions are to just pay off the balance at the higher rate or move it to a credit card with a better interest rate, if you qualify for one.