Interest rates are up a little bit, and credit card interest rates are way up. I was a little peeved the other day when I saw that my fixed rate card’s policy had change, and they took this opportunity to jack up my interest rate. I have good credit, make payments on time, and my other two cards have low fixed rates. Who knows why the credit card company chose to make this move. The result, though, is that I am cancelling the card. I don’t always just cancel credit cards when interest rates go up, however. You can negotiate with credit card companies for lower interest rates, if you know how to do it effectively. I haven’t been particularly satisfied with this card for a while, so it’s no big loss. But if I liked a credit card, here is what I would do to negotiate a lower interest rate:
Look for better credit cards
By better credit cards, I do not necessarily mean 0% APR credit cards with an introductory rate. I mean credit cards with lower interest rates in general, after the intro period, and credit cards that offer fixed rates. Look carefully to make sure that both the interest rate for balance transfers and for purchases is the same (some cards offer intro rates on balance transfers and then get you on the purchases). Make a list of what the cards offer, so that you can remember.
Double check your credit score and your payment history
Take another look at your credit score and at your payment history. Look at where you are at in terms of your balance. Your bargaining power is at its greatest when your credit score is at least at the upper end of “fair,” you have a balance, and you have made your payments on time for more than a year. Verify that you are, in fact, a good customer. Credit card companies don’t like to lose people who carry credit card balances and routinely pay at least the minimum on time.
Call the credit card company
Armed with your credentials, other offers and information, call the credit card company. Many operators are authorized to give you two or three points’ reduction in your interest rate. If that is still a lot more than you feel you should be paying in interest, ask if the credit card company will match the other offers you have. You may have to ask, politely, for a supervisor. Make sure you are calm and polite throughout. Explain that you have been generally satisfied with the credit card, but that you are unsure as to why you are suddenly being charged more in interest. Request that your interest rate be reduced. If you are denied, prepare to change your credit card.
Ending the credit card relationship
When you have located an offer that pleases you, and that allows for a balance transfer, apply. Keep paying the minimum payments on your credit card until the balance transfer goes through and you are down to zero on your balance. When that happens, write a letter to the credit card company. Make sure that you politely explain that the reason you are closing the account is due to the high interest rate. You may receive a call for confirmation. You may even be offered your desired rate. It is up to you whether or not you want to retain the credit card at this point. When you receive the confirmation that your credit card account is closed, cut up your old credit card.
Note that initially, when you close a credit card account, your credit score may be impacted. However, the impact is usually fairly small and short-term. Often, the savings in the long run are more than enough to offset this impact on your credit score. Just give it three or four months to rebound back up.