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How to Lower Interest Rates on Credit Cards

Interest rates can make a $3 cup of coffee cost a lot more in the long run. Find out how to lower interest rates on credit cards so you can pay off your debts with fewer interest payments.

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Interest rates vary significantly between credit cards. It’s not uncommon to pay 15 to 25 percent interest on some cards, and even credit cards with awesome introductory rates will probably skyrocket. Spending your money on high interest fees is an easy way to drain your finances. Suddenly that cup of coffee or night on the town costs triple what it would have if you had paid your balance in full. At one point or another, you’ll probably carry a balance on your credit card, so it makes sense to lock in a lower interest rate now before your fees start to escalate. Here’s how to lower interest rates on credit cards.

How to negotiate lower interest rates

Not all credit card companies will negotiate a lower interest rate, but you’ll never know if you can score a lower rate if you don’t ask. Picking up the phone and calling your card’s customer service representative is probably the easiest way to score a lower interest rate, but you should probably do a bit of homework beforehand. Before you try and negotiate another rate, take a few steps to prepare.

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  • Shop around. Find out what kind of interest rates competitors are offering and use it as leverage with your own company. Banks want your business, so if they can get you a better rate, they usually will.
  • Make sure you are in good standing with your credit card company. If you’re nearing your credit limit or have been late with your payments, you probably shouldn’t ask for a lower rate just yet. Spend a few months paying down your balance before you call your bank.
  • Check your credit report. You are entitled to one free credit report annually from each of the three credit reporting bureaus: Equifax, Experian and TransUnion. Check your credit report before calling your bank. If you have excellent credit, you will have more leverage in negotiating.
  • Approach card companies you’ve been with the longest. If you have a long history with some of your credit card providers, call those companies first. Your longstanding commitment and loyalty will be more likely to earn you a better rate.

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Asking for lower interest rates

Very few people actually call their credit card issuers to ask for better rates, but those customer service representatives are there for a reason. Find the number on the back of your credit card and give them a call. Remember, it never hurts to ask!

Be polite, but persistent. Tell the representative that you have been a customer for many years, that you have very good credit, and that many of their competitors are offering much lower rates. You can let them know that you are not interested in switching to another card because you are very happy with the one you are using. Perhaps they would be willing to match their competitor’s offer.

You may not succeed with the first person you speak with. If your representative can’t help you, ask to speak with their supervisor. If that person can’t lower your rate, call again after a month. If you are persistent, there’s a good chance that you will score a lower rate. If you try a few times without success, move onto plan B.

Transfer your balance to a card with lower interest rates

If your card’s customer service department isn’t willing to negotiate a lower interest rate on your credit cards, it might be time to switch to a card with a better rate. Many credit cards offer introductory rates as low as 0 percent, at least for a period of time. The rate usually increases after a period of six months or a year, so it’s important to read the fine print before deciding to apply for a balance transfer card.

Transferring a large balance to a card with a lower interest rate can be a good way make headway on reducing your debt without paying a lot in interest. Before applying for a new card, be sure to check the introductory APR, the APR after the introductory rate expires and the balance transfer fees. Figure out if you can pay off your balance before the introductory rate expires or opt for a card that offers a low fixed rate. Your balance transfer fee will be a percentage of your total balance.

If the annual percentage rate of your balance transfer card is much lower than what you’re paying now, it’s probably worth making the switch. Once you’ve switched over, it’s important to pay down your balance as soon as possible so your debt doesn’t continue to grow.

Lower interest rates will go a long way toward minimizing your monthly payments and your overall debt.

Have you successfully learned how to lower interest rates on credit cards? Have you transferred your balance to lower your fees? Let us know in the comments section.

To learn about the AAA Member Rewards Visa Signature® card, visit AAA.com/CreditCards. To learn more about all the financial services AAA offers, visit AAA.com/Financial

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