Insider Strategies For Negotiating Lower Credit Card Rates

Posted on by Forest in Budgeting, Debt, Saving Money & Finances

This is a post by guest blogger Michael, the founder of Credit Card Forum.

When the balance is paid in full every month, credit cards can be a useful financial tool. However, the second you start carrying a balance, they often turn into an ugly nightmare due to all the interest charges. As the founder/operator of a credit card forum, here are the best strategies I’ve learned over the years for how to get a lower rate.

Strategy #1: Ask the right person, the right question

A couple years ago an ex-employee of a top 5 bank came on the forum to spill the beans about how to ask for a rate reduction. He was a senior manager for their credit card call center, so he definitely knew the system inside and out!

Depending on your request, there are different divisions your call might be routed to. To start out with you will probably be talking with the lowest tier of service reps. He said they may be able to help, but they are specifically instructed to not lower your rates unless you explicitly ask them. So if you say “my rate is really high” they won’t lower it, but if you ask “can you please lower my rate” then they might be able to do something.

However if that first rep can’t help you, he said the absolute best department to talk to is the one which handles balance transfers (if you are willing to do one). Why? Because they usually get paid a commission, so they are VERY motivated to help you. Ask to be connected with the balance transfer department and once you are connected, say something like “I’m interested in doing a balance transfer, but don’t feel comfortable doing it because my current APR is too high. Can we lower my rate first?”

Strategy #2: Pit one bank against another

This is a technique that I have personally used and it worked like a charm! I was unhappy with the interest rate on my Starwood Preferred Guest card so I called up American Express (the issuer) and just laid out to them the honest truth: “I am really unhappy with the rate you guys are charging me. Both my Citi and Chase cards have lower rates. If you can’t match or beat their rates then I am going to stop using my Starwood Preferred Guest credit card altogether.” That wasn’t a bluff either, it was the truth and guess what happened? They lowered my rate to 1% below my other two cards! I’ve always experienced stellar customer service like that with American Express but please understand, other banks may not always be so helpful.

Even if you don’t have a card with a lower rate at a different bank, you still may be able to use this technique by mentioning a pre-approved offer you got in the mail, and that you are going to switch to that card if they won’t match the standard APR it has. If you’re a long time customer (and if you are, make sure you emphasize that) then your bank would be foolish to lose you over a few percentage points.

Strategy #3: Call and cancel your card

This is another approach you can take: Just throw in the towel and call up customer service to cancel your card! They will transfer you to the retention department. Their job is to do whatever it takes to keep you on as a customer. The rep will ask why you want to cancel and just politely tell them the truth like “I have been a customer for X number of years and have enjoyed being your customer, but the bottom line is it comes down to money. My interest rate is too high.”

More often than not, the rep will try and negotiate with you for a lower rate if you agree to not cancel your card. However, please be aware that accounts are categorized in their systems by profitability and risk factor. If their formula deems you to be a lower profit, higher risk customer, the computer might tell the rep to let you cancel the card. So this is not a guaranteed solution but if all else fails, you should probably be canceling the card anyway if your current APR is excessive.

The bottom line

Remember… everything is negotiable! It’s a common phrase that holds true for most things in life, including credit cards. Even in today’s rough economy, banks are still competing for your business. The bottom line is unless your credit is absolutely horrible, you do have options so don’t be afraid to use them to your advantage. This thread about negotiating credit card interest rates is an oldie but goodie with quite a few tips.

Tags: credit card tips, credit cards, lower rates