When I was near my financial low point, I was literally paying hundreds a month in finance charges on my credit cards. That money was an enormous burden at the time, since I didn’t have any savings built up and I was also dealing with the “startup” expenses of having a new baby in the home.
I didn’t know at the time that it’s actually not too hard to get your interest rates reduced on your credit cards, particularly if you’re in a situation like I was in. All you have to do is get your information together, call the credit card company, and be willing to play a little hardball on the phone, and you’ll often get a nice reduction in your interest rate. That will directly help your bottom line.
In fact, if I had been able to get a reduction in all of my credit cards when I was in real trouble, I would have easily saved $100 a month. That money, if used properly at the start of a financial turnaround, can make all the difference in the world. It can be the foundation of an emergency fund, light a fire under a debt repayment plan, repay a family member for a debt, and countless other little things that can make all the difference when you’re trying to turn your finances around.
Is This For You?
This tactic works best if you have a substantial amount of debt sitting on credit cards and have largely been able to make your payments up to this point. A few late payments are quite all right, but if you’re being chased by collection agencies, negotiating with the credit card companies won’t really help.
If you’re not carrying a balance on your card or don’t carry a balance regularly, the credit card company is not going to be particularly interested in helping you out because as a customer, you’re not putting much money into their coffers. Simply put, this tactic works best if you have some leverage – you’re currently paying finance charges on your card and you’re threatening to move it to another account.
Another important factor is your current interest rate. If your rate is already around 7.99% or so, there’s not much the credit card company can do to lower the rate. This tactic works best if you have a rate above 13% or so.
Remember, though, any interest rate reduction will help if you’re carrying a balance. A 1% reduction on a card where you’re carrying a $1,000 balance will save you $10 a year. If your balance is higher, you save more. If your interest rate reduction is higher, you save more. For example, if you have a $5,000 balance and get a 5% rate reduction, you’re saving $250 a year from a single phone call – well worth your while.
Preparing for the Call
While you might be tempted to just flip over your credit card and call the card issuer’s number on the back, you’ll have a much greater chance at success if you prepare just a bit in advance.
First, have a copy of your most recent statement with you. Make sure you know what your current interest rate is and also have your account number handy and easy to read. The statement should also provide you with the phone number you need to call.
Next, collect any other offers you might have available to you. See if you have any zero interest or low interest balance transfer offers available to you – in other words, check your recent “junk mail” and/or log on to your online access for your credit card and see what’s available. Get a quote on a personal loan from your local credit union’s website. These will be used as leverage to get your rate reduced.
You should also figure out a target rate to shoot for on the phone. I recommend shooting for 9.9%, but you’ll likely not get a rate that low.
Finally, get in the right mindset. Drink a glass of water. Get yourself calm (because getting worked up on the phone won’t help you), yet motivated to make this work. Then pick up the phone and dial.
Making the Call
The first thing you need to do is get someone on the phone that actually has the authority to change your interest rate. Likely, the first customer service representative that you speak to won’t be able to do that.
So, start off by navigating through their menu until you can speak to a representative. As soon as you can, ask the big question: “Do you have the authority to change my interest rate?” If the answer is no, simply ask, “May I speak to someone who can? Your supervisor, perhaps? Thank you!”
Once you’ve got a person on the phone who has the authority to change your rates, make your case as clearly and succinctly as possible. Here’s a potential script:
“Hello. Lately, I’ve been really having to stretch my finances to make the monthly payments on this credit card, and I need to reduce the interest rate somehow. It would be convenient to keep the balance on this card, but I have some other options that could really save me some money – a zero interest balance transfer offer is sitting right here, for one. Could you reduce the interest rate on my account to, say, 9.9%?”
This puts the ball firmly in their court – and at that point, it’s largely out of your hands. The typical response is a reduction in rate, but not a reduction all the way down to the rate you requested.
Regardless of what you get out of the call, be polite. Say “thank you” for any rate reduction and don’t get enraged if you don’t immediately get a big reduction.
Sometimes, you’ll get a rate reduction that makes you happy. At other times, you may not get much of a rate reduction at all – and in that case, you’ll want to do something else. Here are some options.
Seek out balance transfer offers. Moving your balance to another card can help get the finance charge monkey off your back – a useful short term solution.
Seek out another type of debt. Investigate getting a personal loan at your local credit union. A home equity loan is a possibility, but it’s generally a poor idea to change unsecured debt (like your credit card) to secured debt (like a home equity loan).
Lower the offending debt rapidly. Focus all your energies on getting rid of that high interest debt as fast as you can. You might want to work a second job, sell some stuff, or start a side business to generate extra money – and learning how to live cheaper is always a big plus.
For most people with credit card debt, the possibility of success (and the savings that go along with it) with attempting to get your rate reduced is worth the effort involved in picking up the phone and doing it. Good luck!