Negotiate Your Credit Card Rate

By Neal A. Deutsch, CFP

A five-minute phone call to your credit card issuer could save you hundreds, maybe 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 card company will give you a lower rate just because you call and ask nicely? Check out the results of a recent, national survey by the U.S. Public Interest Research Group. Fifty consumers of all credit backgrounds called credit card issuers and asked for lower rates. More than half, 56 percent, scored lower rates. How low did the rates go? The 28 consumers who landed lower rates saw the APR’s 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.

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, which can be beneficial to you as the consumer! If you are a good customer, or with them for a long time, they want to hang on to you. In a general business sense, it is more costly to bring in a new customer than to retain the existing ones. Of course, the best way to use your credit card is to pay off the balance at the end of the month, incurring no interest rate cost.

Thanks to Alan Greenspan, issuers can afford to make rate cuts for their customers. The Fed cut interest rates 11 times in 2001, making it much cheaper for the issuers to borrow the money they lend to customers. But how many cuts did you see? While it’s not quite a matter of just asking, it’s pretty close. A sample script might read "Hi. My name is (insert name). I am a pretty good customer of yours, and I have a number of offers from other issuers with rates substantially lower than yours. I really don’t want to leave you, but I would like you to lower my rate to be more competitive.”

And that’s it! Even if you are not a confrontational person, it only takes less than a minute, and the savings may be quite substantial. If you are denied, wait a day and call back, and try it with another operator. You may just speak to a more cooperative service rep, or get transferred to a specialist who will try to convince you to stay, and offer you a compromise. If the rep won’t do it, ask for a supervisor. Be polite, but firm. And don’t pay the credit card companies more than you have to!