How to Negotiate Your Credit Card Interest Rate

If you carry a balance on your credit card, you likely find it difficult to pay off, especially with the elevated interest rates that credit cards typically charge. In Canada, the average Annual Percentage Rate (APR), or the annual interest rate you pay on any credit card balance is 20.77%.

If this is your rate then you don’t need me to tell you that it can feel impossible to get ahead. What you might not realize is that this interest rate is often negotiable. And you don’t have to be a financial expert to ask for a better deal either. In this article, I will walk you through when you should ask for a lower rate, how to prepare confidently for the request, and what to do if you don’t get the rate that you want.

Why You Should Try Negotiating Your Interest Rate

If you carry a balance on your credit card then even a small reduction in your interest rate can lead to big savings. Let’s look at an example: Imagine you have a $2,000 balance on a credit card that charges 19.99%. If you manage to get your interest rate lowered by 4% to 15.99%, that means a difference of over $70 during the course of a year.

While we will spare you the calculations for the interest savings, I encourage you to think about the impact these savings could have on your debt repayment plan. If you put them directly towards paying down your balance then it could ultimately help you get out of debt faster.

When to Ask for a Lower Interest Rate

I might have convinced you to try negotiating your rate, but when is the right time to ask? You might be struggling with your payments now, but consider waiting. At least until you’ve had the card for six to twelve months that is. Also, make sure you have a history of making on-time payments. In this case, you are in a strong position to negotiate so it’s the perfect time to ask. Has your credit improved since you opened the card? Even better! Lenders typically reward consistency and financial responsibility since it signals that you are a low-risk borrower.

Another time when it might make sense to ask for a lower rate is when you have a competing offer from another bank (or the option to switch to another card). If you have an offer and are seriously considering it, then it doesn’t hurt to ask for those same terms on your existing card.

Finally, if you're finding it hard to manage your payments because of factors like changing credit card interest rates, now might be the right time to reach out for support. Be honest. Your bank may be able to offer you assistance through their hardship programs or even provide a temporary interest rate reduction.

Getting Ready to Call Your Bank

Before you call your credit card provider, you will want to prepare yourself first. Begin with a bit of research. Look up your credit card balance and the rate that you are currently paying on the card. You can find this information on your most recent credit card statement or through your online banking. Then compare that rate to the ones offered by competitors. If it’s lower then you can bring it up to your bank.

Next, check your credit score. Many banks in Canada now provide free access to look up your credit score through their website or mobile app. Knowing this information can help because a high score strengthens your negotiating position. If you have a good score, then say so. And if you never miss a payment? Say that too. A consistent track record or a long customer history can help make your case to the bank. These details matter.

What to Say: Tips for Negotiating Successfully

Now that you have done the prep work, it’s time to call. It’s often best to make your request up front while mentioning your history of on-time payments. You can also mention competing credit cards if need be.

What you say is just as important as how you say it. Maintain a confident yet polite tone. Treat the customer service representative with kindness. Being rude certainly won’t get you anywhere.

If you’re nervous, then you might benefit from writing out a script (or bullet points) ahead of time. This will help you remember the important arguments and could give you the extra confidence you need to make the request. And it can help you from feeling overwhelmed in the moment. Just remember to keep things polite.

What to Do If Your Request Gets Denied

You might have asked for a lower interest rate, and that is a great first step. But what happens if the bank turns you down? Before you hang up, calmly ask the representative what would qualify you in the future. They can provide you with guidance. Perhaps, for example, they tell you that you need to focus on improving your credit score. Then, you have a new goal and can reapply for a lower rate (or a different credit card) in six months when you have a higher score.

Remember, this is not the end of the world. It might be less than ideal but you still have options. For example, you can consider using a great balance transfer credit card. Or perhaps take out a personal loan at a lower rate then use the proceeds to pay off your credit card.

Additional Strategies

If you don’t get approved for a lower rate, you can still work to get a handle on your credit card debt. For example, you can always get ahead by making on time payments for more than the minimum. Late fees will only add to your existing balance.

Read More: How to Get Out of Credit Card Debt

Any windfalls can also help you pay down your high-interest debt. For example, if you receive a tax refund or a year-end employment bonus, consider putting that lump sum directly on your credit card debt. If you receive an inheritance, think about doing the same. As you decrease your outstanding balance you are also lowering the cost of maintaining your debt.

Read More: Tips For Managing Credit Card Debt

While these habits can help to lower your debt, you may still find yourself with an outstanding balance. If that is the case, consider switching to one of the best low-interest credit cards in Canada or 0% interest Credit Cards. These options prevent you from receiving excessive interest charges and allow you the chance to pay off your credit card at a faster pace.

Final Thoughts

Many people don’t realize that negotiating your interest rate can work. It often does. Best case? You get a lower rate. Even a slight decrease can mean significant savings over time. And, if your request gets denied, remember that you didn’t hurt your credit score by asking. Call your issuer today to start the conversation.

Not approved for a lower interest rate? Use FinlyWealth’s credit card comparison tool to see if there may be a lower interest rate option that fits your needs.