can be a convenient way to pay for things while and . Those benefits, however, can be acutely undermined by a high interest rate. Credit card rates typically sit at a whopping 15% to 20%. At those rate, paying off a balance of $10,000 would cost you thousands of dollars over just a few years.
An open secret of the industry is that credit card interest rates are negotiable. And we'll tell you exactly how to do it.
What you need to know first
Before calling up your credit card company and starting a negotiation, we recommend some advance preparation.
Figure out your credit score
Some of the first things your credit card company will look at are your payment history and credit score. You can order a free annual credit report to ensure it's accurate and to see your payment history and debt-to-income ratio (DTI). Reviewing the report -- checking for late payments or other blemishes -- will give you a sense of how assertive you can be when asking for a lower rate.
Collect competing offers
You'll also want to research rates competing credit cards are offering. (We recommend checking out ourlists to see the most competitive offerings right now.) Save any preapproval emails or postcards you receive, or look for to learn what other offers are available. Coming to the conversation with information ammunition will give you a stronger position for negotiation.
How to ask your credit card provider for a lower interest rate
Once you feel ready to ask for a lower rate, the negotiation can begin. Here are four steps you could take to negotiate a lower interest rate.
Call your card provider: Contact your credit card issuer and explain why you would like an interest rate reduction. You could start by pointing out your history with the company and mention your good credit or on-time payment history. Now is the time to mention any lower credit card rates you've been offered or found in your research.
Don't settle: The credit card company might initially deny your request or offer a minimal reduction -- but you don't have to settle if the resolution doesn't meet your expectations. You can always ask for more or an explanation of the decision. If you feel like you're not getting anywhere on your first phone call, be diligent. Call back another time and try your luck with a different representative or ask to speak to a manager and make your case to a higher authority.
Ask for a different benefit: If the company refuses to lower your interest rate, ask what else it could do to keep you as a customer; reps might offer bonus points or additional incentives.
Request a temporary rate reduction: If you're worried about paying down a balance with your current high-interest rate, ask for a temporary reprieve, which could offer you a lower interest rate for a short period of time.
Alternatives to consider
If your credit card company doesn't provide you with the reduction you were hoping for, there are alternatives.
Apply for a balance transfer credit card: Manyhave no or low introductory APRs for a certain period, after which the APR will dramatically increase. But it could buy you some time. That noted, balance transfer cards always charge a fee for transferring debt -- usually between 3% and 5% -- so make sure your potential savings outweigh the cost.
Create a debt repayment plan:(or tighten your existing one) and make a plan to pay off your credit card debt faster. If you have multiple card balances, employ the avalanche method by making the minimum payment on all cards -- using any extra funds to pay down the card with the highest interest rate first. Work your way down until they're all paid off.
Apply for a debt consolidation loan: Amay be a practical way to pay off high-interest credit card debt. In the case of a , you could roll the balances of several cards into one loan with a lower interest rate.
The best advice: Avoid credit card interest altogether
The best way to avoid high interest rates is to eliminate paying interest in the first place. Get into the habit of paying your credit card balances off every month, so you never have to worry about how high your interest rate is. Enroll in automatic payments to pay your balance in full each month or make payments each time you use your card.