Reducing Credit Card Interest Rates 101

These days, credit cards are used and over-used more than ever! That’s why interest rates are more important than ever. The truth is, your interest rates are the highest fee that you will pay on your credit cards if you carry a balance from month to month. But, wouldn’t it be great if you could pay lower rates in times of financial hardship? What about if you could pay lower interest rates by proving you are a good customer? Well, you can! There are 3 great ways to reduce interest rates on credit cards, each designed for a specific group of consumers. The best way to use this guide is to start with option one and work your way to option 3 to make sure that you have the lowest interest rate possible. Here’s how it all works…

Option #1: Ask Your Lender For A Lower Rate

If you’ve had your credit card for a while and, have been good to your lender, there’s a good chance that your lender will reduce your interest rate to keep you happy! The truth is, these lenders need us. Without consumers swiping their cards, lenders have nothing. With that said, if you ask for a lower interest rate in the right way, chances are, you will get it if you’ve been a good customer! Here are the steps to take:

Step #1: Create A List Of Your Outstanding Credit Card Debts – Starting with your highest interest rate balance, list the lender name, interest rate, balance and customer service phone number. Continue to list all of your credit cards in order from highest interest rate to lowest.

Step #2: Call The Lender That Charges You The Highest Interest Rate – The best way to go about getting reductions is to go in order from highest interest rate to lowest. This allows you to say something like, “I was going through my credit cards and noticed that you charge me the highest interest rate I’m paying…”. When you call your lender, you will most likely have to navigate an automated system. Once you have made it to a live representative, explain to them that you are unhappy with your current rate but happy with their services. You want to keep their card but with such a high rate, the balance transfer credit cards being offered to you are starting to be more appealing.

Step #3: Be Honest And Polite As You Finish The Conversation – In most cases, at this point, you will be asked to hold while the representative checks to see if you qualify for a lower rate. If you do qualify, they will tell you, if not, they will explain why. Listen closely to the explanation, if they tell you that you do not qualify because you have missed too many payments, don’t worry, Option #2 will be great for you. If they say that there is currently a freeze on interest rates, you may not be a candidate for Option #2 and may want to jump to Option #3! If the lender does reduce your interest rate, Great! Mission accomplished! Continue to negotiate with the rest if you are successful or you have not been told that you did not qualify!

Option #2: Credit Card Hardship Programs

If you don’t qualify for a lower interest rate because you’ve missed too many payments, chances are, you are dealing with a financial hardship. You didn’t mean to miss the payments, you simply could not afford them. And, it’s OK! Many lenders have created financial hardship departments to assist consumers in your shoes. The financial hardship departments help to create credit card hardship programs that will reduce interest rates and payments. Here are the steps to applying for a credit card hardship program:

Step #1: Get Prepared – To get prepared for applying for credit card hardship programs, you will need to create a couple of lists. The first list that you make should be a list of your income sources. Alimony and child support however, do not count as income that should be used for paying off debts. Therefore, you should leave these income sources out of your list. Next, you should create a list of your expenses. When you make this list, think of everything that you pay for on a usual month to month basis. Everything from rent to food expenses and everything in between should be listed!

Step #2: Using Your List From Option #1, Start Calling Your Lenders – Now, it’s time to call your lenders and see how much help they are willing to provide. Once you make it past the automated system, and you are asked what they can help you with, explain to your lender that you have all intentions of paying your debts but you cannot afford to keep paying at the rate you are paying now. Ask them if there is anything they can do to help.

Step #3: Answer Questions Honestly – At this point, you will most likely be transferred to a financial hardship department of some sort and asked several questions with regard to your income and expenses. Luckily for you, you will be prepared with the answers on the lists you’ve created earlier! Don’t try to fluff income, decrease expenses or vice versa. These questions are designed to gauge your level of financial hardship and give the lender an idea of how they can help. Honesty is key here!

Option #3: Balance Transfer Credit Cards

Balance transfer credit cards are another great way to reduce your interest rates. If your lender is not willing to reduce it and, you are not going through a financial hardship, this may just be the best option for you. To learn more about this option, please take the time read the balance transfer credit cards article I recently for FatWallet.

Final Thoughts

If you are fed up with high interest rates on your credit cards, you don’t have to pay them. There are several ways to reduce your interest rates and each is designed for a different group of consumers in a different financial position. The key is finding the best option for you and taking advantage of it!

This article was written by Joshua Rodriguez, proud owner and founder of and avid freelance personal finance writer. Join the conversation about this article or any personal finance topic of your choice on Google+!

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