Did you know that the easiest way to reduce the interest rates on your current debt is simply to call your card issuer and ask for a lower rate? It’s true. Most of us think of balance transfers, but these often have high balance transfer fees and applying for new credit will lower your credit score. For this reason, your first course of action should be to negotiate lower rate.
What’s the Impact?
Research done by a Massachusetts consumer advocacy group shows that with one 5-minute phone call, 56 percent of consumers who called their credit card company lowered their APRs. Those who were successful reduced their APRs by an average of more than one-third, from an average of 16% to an average of 10.5%. Factors improving the caller’s success rate included a longer length of time with a particular card, a low unpaid balance compared to credit limit (being less “maxed out”), and a history of no late payments.
Amazing, right?
Making the Call
Calling to negotiate lower rates does not have to be stressful. Plan out your strategy and talking points. Collect competitive offers so that you can speak convincingly about your alternatives. You will have more success with lenders where you are are current on your payments and have relatively low balances, so try these first. Here is a script that you can use:
Hello, my name is _______________. I have been a valuable customer since ____. I am taking an more active role with my debt and am working to minimize my interest rates. I have received several credit card offers at a lower interest rate that what I currently pay you. I would like to keep my business with you, but will do so only if you are willing to reduce my interest rates. Are you authorized to adjust my interest rate? I know that you offer users like me interest rate reductions–will you offer me this same reduction as an incentive to retain my business?
If your initial representative is unwilling or cannot lower your rates, ask to speak to a supervisor or someone else who is authorized to lower your rate. If all else fails, you may need to threaten to cancel your card. You should keep in mind that you do not actually wish to cancel your card or transfer balance at this point (we will cover this in a later step). Rather, youre just using this as a negotiating point. If they refuse to lower your rate, simply tell them that you will transfer your balance out and close your card at a later time.
Although this is obvious, remember that the customer service representative has a difficult job and deserves to be treated with respect. Be nice to them and they will generally be more willing to work with you.
Making the Most of Your Savings
If you can negotiate lower rates, don’t just lower your payment against your debt. Take the money you save each month and apply it to your highest-interest debt. This will save you thousands of dollars in interest over the lifetime of your debt. DebtGoal.com can help you negotiate lower rates by showing the interest rates reductions that others have negotiated and can assist you in managing your debt payments so that you can easily apply these savings to accelerate your debt payment.
Scott Crawford is CEO of DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
