5 Creative Ways to Reduce Your Credit Card Interest Rate

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Are you struggling each month to pay credit card bills that carry outrageous interest rates? It can feel as if you’ll never pay off your balance.

Is there anything legal that an honest, hardworking person can do to get a lower credit card interest rate? Fortunately, there is.

In fact, there are a number of steps you can take. We’ll give you five tried-and-true methods. You choose the one that best suits your circumstances.

But keep in mind that these tactics will only work if you put them to use. So, after reading our tips and choosing your favorite, be prepared to spring into action.

1. Use Your Good Credit to Get a Lower Credit Card Interest Rate

A credit card company is typically willing to offer a new interest rate if you are a long-time customer in good standing. However, you want to review your credit history so that you’ll have a clear idea of where you stand.

Review Your Credit History

To get started, it’s a good idea to request a free credit report. Your credit card company may provide one. You can also receive a free credit report as required by law from AnnualCreditReport.com. This is a joint project between the three major credit reporting agencies Experian, TransUnion, and Equifax.

Getting reports from all three agencies allows you to see yourself the way your credit card company does. There will likely be errors in at least one of the reports. It’s not uncommon. Those errors could be obstacles to getting a lower interest rate. After all, your credit card company wouldn’t know that the information isn’t factual.

Get Rid of Mistakes on Your Credit Report

You want to correct any errors before you begin talking with your credit card company. You should report the errors to both the credit reporting agency that recorded the wrong information as well as the company that submitted the error to the agency. You will find sample letters to use for both instances at the government’s Federal Trade Commission website.

Sometimes the problem is more severe than a simple error. For example, your credit rating may be suffering because you have become the victim of identity theft. If so, you’re going to want to delay talking to your credit card company about your interest rate until you’ve reported the theft online at the government’s special site for identity theft victims.

It may take a while, but once you’ve cleared up your credit problems, you’ll be in a far stronger position when you request a lower interest rate.

Now you want to comparison shop. Find several credit cards that offer a lower interest rate than your present card. You’ll use this information as leverage.

Politely ask the credit card company if it’s willing to discuss how to reduce credit card interest. Let the company know that if that’s not the case, you’ll have to take a closer look at their competitors’ products. That’s when you quote the offers from the other cards.

Resist the urge to stretch the truth about the offer. Your credit card company is probably well aware of the latest offers from its rivals. However, it will come as a surprise to them that you’re just as well-informed.

If you’ve cleaned up your credit report and done your homework on competing offers, there’s a good chance that your credit card company will do all it can to keep you as a customer. That includes, of course, lowering your credit card interest rate.

2. Make Use of a Hardship Option

Credit card companies realize that unforeseen economic downturns can happen to anyone. Therefore, they extend hardship solutions to their customers who need help managing their debt.

Usually, you don’t need to have a sterling credit report to qualify for consideration. However, it is best to inquire about the hardship option before your economic situation makes it impossible to meet your current monthly minimum payment.

Once again, you want to perform your due diligence before speaking with your lender. Make a list of your monthly sources of income as well as monthly expenditures. Outline what has changed in your life.

For example, did your employer reduce your hours? Do you now have expensive prescriptions to refill every few weeks? Has your rent dramatically increased?

Your credit card company is going to want to know precisely the reasons that you can no longer meet your obligations. If you can express those reasons clearly and cite numbers, you increase the likelihood of qualifying for a hardship offer. Let the company know that reducing your credit card interest rates would make it much easier for you to remain one of their customers.

3. Become an Even Better Customer

If you have neither outstanding credit nor poor credit, you might consider lowering your interest rate using another method. Creditors prefer to see their customers use their cards responsibly. That means that you should strive to use only a small percentage of the credit available to you.

The standard recommendation is that you use less than 30% of your credit line. Examine your statements for each of your credit cards to see how well you’re doing in this regard. Set a goal to lower your credit utilization until you’ve surpassed the 30% mark.

Reaching your goal may require some sacrifices. For starters, you’ll have to pay larger monthly payments to cover the interest and reduce the principal. However, your hard work will pay off as your credit score rises.

A better credit score and low credit utilization make you highly attractive to credit card companies. Then you will likely find little objection when requesting lower credit card interest rates.

4. Sign Up For a Balance Transfer Card

If your discussions with your credit card company don’t get you the interest rate you want, you can take your business elsewhere by transferring one or more of your balances to a new card. Some credit cards specialize in offering sweetheart deals to new customers to lure them away from their old cards. They’re called balance transfer cards.

One of the primary attractions of these seductive cards is their incredibly low introductory interest rates. It’s not uncommon to see 0% interest for the first year.

To take full advantage of this offer, try to find a card that also allows you to transfer your balances for free. Sometimes, the company will allow you a specific amount of time to make the transfers without cost. After that time period, you can expect the fee to be somewhere in the neighborhood of 3-5% of the balance that you’re transferring.

5. Open a New Line of Credit

One quick way to lower your interest rate is to open a line of credit and use the available credit to catch up or pay off the balances on one or more of your cards.

The interest rate on lines of credit is lower than that on credit cards, so you would have a far easier time making the regular payments on the line of credit than you had meeting the monthly obligation of your credit cards. You would also have only one payment to make each month instead of multiple payments to several different card companies.

For most people, a line of credit works better than a standard personal loan. You receive the money as needed rather than in a lump sum upfront, so you’re not immediately paying off the entire amount.

Opening a line of credit can save you not only money but also time and anxiety. If you’d like to consider opening a line of credit to lower credit card interest rates, contact the experts at Debthunch, who will help you explore the debt consolidation option that’s best for you.

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