How to Lower Your Credit Card Interest Rate

Since June, 2004 the Federal Reserve has been increasing interest rates which has been a windfall for credit card companies and a hardship for consumers who keep balances on their credit cards.  The average American adult carries three bank credit cards.  Most issuers prefer we use variable-rate cards, which carry an average rate of 16.6% as of December, 2006, which is up from 12.5% from December, 2004.  The Government Accountability Office found that 11% of U.S. cardholders incurred interest rates of at least 25% in 2005, compared with only 5% in 2003.

Along with the increase in interest rates, there has been an increase in competition among credit card issuers.  As in most industries, it's much easier to hold on to current customers than to attract new ones; this is also true for the credit card industry.  They want your interest payments, so they are willing to relinquish some revenue so they can at least have a part of it.  It's far better to have some than none at all.

My theory, and it works in this case, is that it doesn't hurt to ask.  All they can do is say "No," in which case you can simply transfer your balance to a card that is offering 0% interest.  Keep in mind this great rate won't last forever.

Bank of America cardholders who call asking for a lower rate are transferred to a "retention specialist."  The key word here is retention.  These "retention specialists" are trained in what the bank calls "judgmental lending," which allows them to consider much more than payment records.  In an article in The Wall Street Journal dated January 9, 2007, success in lowering rates varies on factors ranging from payment history to balance size.  Since balances are what generate the income in the form of interest to the credit card company, someone who carries a balance from month to month is more likely to have their rate lowered.  However, I don't advocate carrying a balance from month to month; interest payments are only making life more expensive for you.

If you are in the situation where you'd like to have your rate lowered, here's a suggested script to follow according to the U.S. Public Interest Research Group:

First of all, be polite and don't lose your temper.  Say, "Hi.  My name is __________.  I am a good customer, but I have received several offers in the mail from other credit card companies with lower APR's.  I want a lower rate on my card, or I will cancel my card and switch companies."

Good luck.  All they can do is say "No."