Cut that high credit card interest rate down to size
While increased competition in the credit card industry means tough times for credit card issuers, it could mean savings for you. The reason is that as the battle for customers heats up, credit card companies are more willing to accommodate their existing customers, rather than lose them to the competition. One way they are doing this is by granting consumers' requests to lower the interest rates on their credit cards.
Although they tend not to discuss it publicly, some credit card companies are lowering interest rates for their best customers at the customer's request. For credit card users, a decrease in just several interest rate percentage points can add up to thousands of dollars in annual savings.
Approximately one-third of credit card users have asked to have their interest rate cut, with about 75 percent of those consumers reporting that their wish was granted, according to a September 2006 survey by research firm Synergistics Research Corp. In this setting, it is customers who have the power. Synergistics notes that credit card issuers have two options: either agree to lower interest rates or lose customers.
The Government Accountability Office reported that 11 percent of U.S. consumers who carried a major credit card in 2005 incurred interest rates of at least 25 percent, up substantially from just 5 percent of credit card users in 2003. The GAO report added that at least 50 percent of consumers revolve a balance on their credit cards, with the six major credit card issuers stating that about half of their active accounts paying no finance charges for most of 2005.
For customers looking to get their credit card interest rates lowered, there are a few steps that experts recommend. First, it is a good idea to look over your credit report for any problems you may not be aware of. Next, avoid making late payments on any other credit cards you carry, since that could give an issuer a reason to boost the rate on their credit card.
When you call your credit card issue to ask for a lower interest rate, keep calm and be polite. When you get a representative on the phone, U.S. PIRG recommends you state your name, adding that you are a good customer. You can then indicate that you have received offers for lower interest credit cards and that you want a lower rate or will cancel your credit card and switch to another issuer.
Consumers with a history of paying their credit card bill on time and who are not maxed out on their credit limit have the most likelihood of getting their interest rate lowered. Cardholders who maintain a balance on their credit card from month to month probably have the best chance of seeing their rates lowered, as the interest charges on that balance provide a steady revenue stream to the credit card issuer.
For those consumers who are unable to get a lower rate, a balance transfer to a low interest credit card is another option. If you decide to go this route, be aware that closing your original credit card account could hurt your credit score, since it tends to raise the proportion of total available credit you are using.
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