How to Negotiate Lower Interest Rates
by Jennifer Delcamp

Credit card companies make billions of dollars in interest and fees. They need to keep you as a customer. While you may not be able to get them to stop your interest completely, you do have the power to get it reduced. Here are some tips to negotiate lower rates.

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You realize that you have made mistakes when it came to charging on credit cards. You’re already in debt so, now what? If you are current on all of your credit cards, you may have a lot more power than you think. Credit card companies make billions of dollars in interest and fees. They need to keep you as a customer. While you may not be able to get them to stop your interest completely, you do have the power to get it reduced. Here are some tips to negotiate lower rates.

Before you start, make sure you have an excellent pay history: If you have paid late, you won’t necessarily have the upper hand. While they still want to keep you as a customer, they want to cater to customers who are most likely to pay on time and to carry a balance.

Don’t threaten them: Negotiating is a delicate art. Be subtle. Say, "I really don’t want to have to stop being your customer but I have been offered a better deal with another company". This will make them less defensive and more likely to help you.

Don’t tell them that you are going to have to file bankruptcy if they don’t help you: This completely blows the image of a long-time valuable customer that you want to project in this situation. You never want to threaten to file bankruptcy unless you really are in trouble. If you are in over your head, a non-profit debt counseling agency such as our Consumer Credit Counseling Service may be able to help you get your rates reduced.

Negotiate for the lowest fixed rate: Most people in the industry know that introductory rates are just a way to lure you away from other companies. While very low introductory rates can help you reduce your debt, the key is what the fixed rate will be after the introductory period expires.

Make them an offer: A fixed interest rate around the prime rate (currently about 8.5%) is a good rate to shoot for. Some offer fixed rates as low as 7%. If you cannot get them to go this low, even 9% and 10% may be acceptable.

Don’t bluff: If your credit card company is unwilling to help you, shopping around for a better rate with another company may not be a bad idea. This is only recommended if you already have credit card debt that you just need to pay off and NEVER will rack them up again. Just to be safe, shred the checks they send and chop up the new cards when they arrive. Credit card pieces make great garden mulch (just kidding). Do not fall into the balance transfer trap. If you choose this option, only do it for a low fixed rate and pay it off as soon as possible.

Snip, snip, snip: If you have made the effort to negotiate lower rates, you must be serious about becoming debt-free. If you haven’t done so yet, cut up all credit cards. You don’t need one "for emergencies" if you have emergency money saved. In most cases, you do not need one to hold a hotel reservation (debit card, anyone?) or one to rent a car (think cash deposit).

Once you get your rates lowered, you will be debt-free much sooner and save yourself thousands of dollars in interest. Send extra to get them paid off in no time. You have worked hard to earn your money so why don’t you keep some of it?

Copyright © 2001 by Jennifer Delcamp.  All rights reserved.

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