Lesson Five: Lower Your Interest Rates
A major consumer group conducted a study to find out how easy it is to get a lower credit card interest rate. Fifty-seven percent (57%) of those who simply telephoned their credit card company and asked for a lower interest rate got one instantly. This rate was anywhere from 7 to 10 points lower than their current rate.
Getting your interest rate lowered depends on various factors. They are more willing to say “yes” if you meet most or all of the following conditions:
(1) You have a good credit rating — meaning no late pay notations on your credit report and a good credit score;
(2) You do not have a high debt-to-income ratio and you do not carry a big balance on your card;
(3) You do not send in just the minimum payment required each month;
(4) You have an excellent payment record with that particular creditor;
(5) The credit card is not one that is categorized as “sub-prime”, meaning it is not a secured credit card or one marketed exclusively to those with bad credit.
Many people are surprised at how easy and quick it can be to get their credit card interest rates lowered. How easy is it? Just pick up the phone and call the appropriate number that appears on your credit card statement and ask for a lower rate. But before dialing, you need to make sure you are a good candidate
for this strategy by doing some research. Visit the websites of the largest credit card issuers listed below to compare various credit card offers. Keep in mind that the interest rates they advertise prominently on their websites are reserved for those who earn a median income and have excellent credit –
www.bankofamerica.com www.capitalone.com
www.americanexpress.com www.mbna.com
www.discovercard.com www.fleet.com
www.citibank.com www.chase.com
www.wellsfargo.com www.firstunion.com
www.bankone.com
When you call and ask for a lower rate, your reasoning should be based on an argument such as you deserve it because you’re an excellent customer or you’re getting better offers from other banks.
Telephone Scripts
Script 1: I’ve visited the websites of several of your competitors, the ______ Bank and ______ Bank, and found that they are offering a _____ interest rate on purchases which is _____ points lower than what I’m paying on my credit card. Are you willing to give me that rate?
Script 2: I am requesting that you reduce my current interest rate of 16.9% to 8.9% so that it is in line with what is available in the current market. I feel this is a fair rate since at least three major credit card issuers, _________, _________, and _________ are offering it to new customers like me who have an excellent credit rating.
Script 3: [Find out the current rate being offered at a credit card website and then lie and say] I have received a pre-approved offer in the mail from _______Bank offering me a ____ interest rate card. Can you beat or match that offer or do I have to transfer my balance to their credit card?
Script 4: I visited your website and noticed that you are offering a ____ rate to attract new customers. I have been an excellent customer of yours for __ years and would like to receive the same rate being offered to new customers.
Script 5: I was about to sign up for a new credit card at the _______ website and thought I would call you and ask for a lower rate before doing so. If you don’t give me that rate today I will transfer my balance from your card to theirs as soon as I hang up the phone.
Letters
If a telephone call won’t work, odds are that a letter won’t work either. We provide letters only because some people prefer sending a letter instead of phoning a credit card company, but note that sending a letter gives them a better opportunity to respond with a canned response refusing to lower your credit card interest rate.
Letter 1: Threaten to Transfer Balance To Another Card
Letter 2: Followup Letter When Phone Request For a Lower Rate is Denied
Letter 3: Request They Match or Beat a Competitor’s Offer
Ask to Speak to a Supervisor
Credit card companies are aware that being are people advised to call and ask for a lower credit card interest rate so they have instructed their phone representatives to give callers a canned response claiming they can’t lower the rate any further. If this happens to you, ask to speak to a supervisor. There is no guarantee, but odds are higher you will get better results with a supervisor. And remember, just because they say no today, doesn’t mean they will say no six months from now or a year from now.
If they say no, then transfer the balance to another card if you qualify to do so. If you don’t qualify for a transfer because your credit score isn’t high enough, then spend the next six months paying down as much debt as you can and paying all of your bills on time so that you can raise your credit score and qualify for a better interest rate. Keep calling and asking for a lower rate every six months and work while you work on improving your credit score.
A five-minute phone call to your credit card issuer could save you hundreds, even thousands, of dollars in interest charges.
“There’s no incentive for them to lower your rate unless you call. The squeaky wheel gets the oil,” says Brad Dakake, a consumer advocate with Massachusetts Public Interest Research Group.
Not convinced that a credit card company will give you a lower interest rate just because you call and ask nicely?
Check out the results of a national survey conducted by the U.S. Public Interest Research Group in March 2002. Fifty consumers of all credit backgrounds called credit card issuers and asked for lower rates on their credit cards. More than half, 56 percent, scored lower rates. How low did the rates go?
The 28 consumers who landed lower rates saw the APRs on their cards drop from an average of 16 percent to 10.47 percent.
Slicing interest rates by more than one-third by making a quick phone call is pretty impressive. A handful of consumers did exceptionally well.
One cardholder from Colorado saw his 14.99 percent rate reduced to zero for six months. That’s quite a deal.
Another cardholder from New Mexico saw the APR on her credit card drop from 31.12 percent to 14.65 percent. Until she called, she had no idea she’d been paying a penalty interest rate.
“She didn’t realize that for six months she was paying this outrageous 31 percent interest rate,” says Dakake, the principal author of the rate reduction survey and study.
It can’t hurt to ask
Why are card issuers so willing to cut interest rates for so many of their customers? For one thing, competition in the credit card industry is fierce. If you’re a good customer, a card company is going to want to hang on to you.
“It costs them a couple hundred bucks to acquire a new customer and it’s not so easy anymore,” says Howard Strong, author of What Every Credit Card User Needs to Know.
And thanks to Alan Greenspan, issuers can afford to make rate cuts for their customers. The Federal Reserve continues to cut interest rates, making it much cheaper for issuers to borrow the money they lend to customers.
“They can afford to give consumers a break,” Dakake says. “And they’ll do it to keep your business.”
And while it’s not quite a matter of ask and ye shall receive a lower credit card rate, it’s pretty darn close. All the consumers who participated in the PIRG survey were given the following sample script.
Hi, my name is [Your Name]. I am a good customer, but I have received several offers in the mail from other credit card companies with lower APRs. I want a lower rate on my card, or I will cancel my card and switch companies.
And that’s it. Even folks who dread confrontations ought to be able to handle that. You only need to be assertive for a matter of seconds.
“Additionally, a lot of people would ask for a 10-point reduction,” Dakake says. “A lot of people aren’t going to get that, but I think it’s important to shoot high.”
Persistence really pays. Strong, who teaches a class for people with credit problems, encourages all of his students to call their credit card issuers and ask for lower rates. Many do just that. How many are successful?
“I would say three out of four easy,” Strong says.
He encourages folks who are denied rate reductions to try again another day. You may reach a more cooperative customer service rep. You may be sent to an agent who specializes in keeping customers who are threatening to leave.
Be persistent and make it clear that you’ll close your account if your interest rate is not lowered.
“Persistence pays in these matters,” Strong says. “If the rep won’t do it for you, ask for a supervisor.”
Keep your request simple.
“I personally like the line, ‘What can you do to help me out?’ ” Strong says. “Another classic negotiating line is ‘Can you do any better?’ ”
If your card company won’t budge, it’s time to start looking for a better deal. This search engine from Bankrate.com can help you search for card deals from issuers from around the country. This worksheet shows you how to transfer a balance to a lower rate card without a hitch.
“You have to be prepared to move your account if they don’t do anything for you,” Strong says. “Some of these places are really hard line.”
Not everyone who asks is going to get a lower interest rate. But long-time customers may have a better chance than newer customers.
The consumers in the PIRG survey who saw their rates reduced had been with their card companies an average of four years. They were also using only 27 percent of their credit lines.
Newer customers with higher balances may have a tougher time getting their interest rates knocked down. But it’s still worth a shot. ”It’s well worth a five-minute phone call,” Dakake says. “Why would you want to pay even $10 more to your credit card company if you don’t have to?”