One of the great misconceptions about credit card debt is that the cards themselves are bad. The truth is, they're really not. Rather, it's the effect of double-digit interest rates that make them so toxic to our personal finances. The exponential growth of the account balance quickly causes purchases we thought we'd easily pay off over a few months to grow into something that seems like it will take years to knock out.

Luckily, ridiculous interest rates don't have to be part of your credit card experience. Like many things in life, they are negotiable for those who know who to talk to and what strings to pull. If you can do a little bit of work to get inside your credit card company's head and are willing to spend 15-20 minutes on the phone, there's at least a 50% chance you can save yourself a few thousand dollars over the next year.

Key Takeaways

  • Customers can negotiate with credit card companies for lower interest rates.
  • Seeking to negotiate a credit card rate can be a good solution in a variety of situations.
  • Requesting a lower rate should not affect your credit score or credit account.

Why Try to Get Your Rate Lowered?

You're probably reading this article because you've decided to step up and do battle with your credit card debt.  With this in mind, it's crucial to realize that even a small cut in your credit card's annual percentage rate (APR) can shorten the amount of time it takes for you to become debt free.

Consider a credit card with a $10,000 balance that is being charged 25% annually. All else being equal, that credit card balance will cost you $2,500 in interest over the coming year. If you could get your interest rate on that credit card lowered from 25% to 15%, this would lead to an annual savings of $1,000, which you could put toward paying down your debt. A lower interest rate can make a huge difference in how long it takes to become debt free.

While this prospect may sound too good to be true, it isn't. The people who can get the right person at the credit card company on the phone often receive a substantial reduction in APR. Even better, there is no risk in asking. Unlike some other balance-reduction techniques, like debt settlement, simply requesting a reduction in your APR does not show up on your credit report, nor does it require hiring a professional to help.

(If you're in over your head, check out A Lifeline for Those Drowning in Debt.)

Understanding Your Credit Card Company

When you owe a large sum of money to a credit card company, it is easy to begin to fear talking to them. Perhaps people think they're going to get yelled at, shamed about the situation, or possibly penalized. The reality is that credit card companies are in business to make a profit, and their biggest profit is made from charging interest to people with unpaid balances. The bigger the balance, the more money the credit card company is able to make. In other words, if you are carrying a large balance, you are one of their best customers. The credit card company should love you and want you to stick around to keep paying interest. This positioning is something you can use in your favor.

Most credit card companies don't want to lose you or your balance, especially if you are paying a rate that's double or triple the historical rate of return in the stock market. In fact, many credit card companies will go to great lengths to keep you happy and keep you spending, lest they go out of business. This fact is your most important piece of leverage when it comes to getting your APR lowered.

(Find out why closing your credit card while carrying a balance is a bad idea in Should You Close Your Credit Card?)

How to Make the Pitch for a Lower Rate

The process of getting your credit card rate lowered only involves a few steps, shouldn't take more than 15-20 minutes, and doesn't require any advanced negotiating skills. It just takes getting the right information in your hands and the right person on the phone.

1.    Assess Your Situation

Every customer’s situation can be different. First, assess your own situation and have a goal for improving it. If you have a solid credit score, you can potentially collect some competitive offers on your interest rate. In other words, show your credit card company that you're serious about taking your balance—its source of profit—elsewhere. You can probably collect a stack of competitive offers simply by letting your junk mail pile up for a week. In that stack, you'll find plenty of balance transfer offers from other credit card companies offering temporarily lowered rates for transferring your balance. You can also spend a few minutes checking the major credit card companies' websites for their balance transfer rates. Ideally, you want to find three to four offers for a long-term rate around 10%. Some offers may also be offered temporarily, like for 12 months or less.

If you are seeking to negotiate your rate as a last resort before bankruptcy or debt settlement, you can let them know that as well. Many people in troubled situations may also be inquiring about closing the account altogether because it is too expensive to maintain.

2.    Ask the Right Person

Next, grab your credit card, flip it over, and call the customer service number on the back. Then, keep hitting zero or whatever it takes to talk to a live person.

Be reasonable with the representative about your concerns. If you have found numerous other offers you are eligible for then let them know. Tell the representative that you've received numerous offers for a much lower interest rate from other credit card companies, but that you don't want to have to move your balance to another company.

If you are calling for assistance as a last resort. You can potentially let them know you are inquiring about closing your account but would rather try to negotiate. Lowering your interest rates as an alternative to other debt settlement solutions can be very helpful when your debt has become overwhelming. Many credit card companies are willing to offer a deal if you are thinking about leaving.

Whatever your situation, you don’t necessarily have to take no for an answer. If a customer service representative says that a lower rate isn't possible, ask to speak to their supervisor. If you are refused, ask for the representative's full name and customer service identification number—this usually places a little fear in the person, and they will want to hand you off as soon as possible.

When you get the customer service manager, which is probably the person you've wanted to talk to from the start, you'll again want to make your pitch. Be even sweeter this time. Be sure to tell the agent how much you've enjoyed having your account with the company and how much you'd like to keep it there. Also explain your case. There's at least a 50% chance, if not better, that your request will be granted. Even if your company won't match a competitor's rate, it may still agree to some rate reduction. Any reduction in the rate will save you money and the more of a reduction that can be agreed on, the better.

(For more ideas on how to reduce your debt load, read Expert Tips for Cutting Credit Card Debt.)

Many people are surprised how easy it can be to get a rate reduction.

What to Do after a Decision

If you are able to get your rate lowered, it's time to supercharge your journey to eliminate debt. First, try to get the credit card company's agreement to lower your rate, as well as the related fine print, in writing. Plenty of people get a promise of some kind from a customer service rep only to discover that the rates have not been changed. Additionally, a credit card company's agreement to lower rates can be loaded with conditions that will raise your rate as high or even higher than before if you fail to pay your bill on time or keep your balance under the credit limit.

Second, make sure the money you save on interest goes toward reducing your credit card or other debt. This isn't the time to go on a shopping spree or blow off some steam in Miami with the extra money you're saving. Continue making the same size of payments you were making before your rate was reduced.

If your credit card company says no, then this will take you down a different path. Ask them about their procedures for rate reductions. Also see if there is a time period for consideration or reconsideration. Ultimately, if better rates and/or terms are offered somewhere else then it may be best to take advantage of them, potentially through balance transfer promotions.

(Learn five simple steps to manage impulsive spending in Get Emotional Spending Under Control.)

The Bottom Line

Remember that in the end, your balance is usually a valuable asset to a credit card company. Without its customers, the company loses the ability to earn a very attractive rate of return. By expressing, in a non-confrontational but direct manner, that you'd like the company's help to keep you as a customer, there's a good chance it will grant your request and lower your rate. Because there's nothing to lose but a little bit of your time, everyone with a substantial credit card balance should give these techniques a shot.

(For further reading, check out Six Major Credit Card Mistakes and Take Control of Your Credit Cards.)