Guest Post: Asking For A Lower APR Is Worth The Risk, If You Have Decent Credit

As nearly all credit card holders have found out, credit card interest rates have been spiraling upwards over the past few years.

A lower interest rate on a credit card has the potential to save hundreds of dollars a year, depending on the current credit card balance.

With a credit card balance of $10,000, charged 25 percent annually, for example, that balance will cost north of $2,800 in interest annually, due to monthly compounding. If you could get the interest rate lowered from 25 percent to 15 percent, annual savings would be around $1,200.

Is there a risk to asking for a lower rate?
When you call the card company to request lower rates, the call may trigger an account review. If you are getting a better rate than you should, this could end up blowing up in your face. This is why it’s important to understand how your rates compare to national averages.

Who should ask for a lower rate?
If your credit history is in decent shape, and if you are paying over the national average, it is certainly worth a shot.

In 2008, the average percentage rate (APR) was roughly 11.4 percent compared to 14.9 percent this year, according to Bankrate.com. Today almost 75 percent of all households have a credit card, with close to half, (46.2 percent), carrying a credit balance. If you have good credit and your APR is higher than about 12-13%, your chances are great.

Also, if you are nearing the end of a 0% introductory APR window, we’d note that many of our users have had success extending their 0% introductory period simply by calling and asking.

Step 1: Do your homework
The first step to reducing your credit card rates is to understand how your history and debt look to a creditor, as well as how they perceive competitors’ rates. Write down your current rate, your competitor rate, and how many years you have been with the company. If you have stellar payment history, remember to note that as well.

Also, don’t forget to consider promotional periods as an alternative too. There are now plenty of cards with 0 percent balance transfer offers of up to 21 months. That works out to an effective interest rate of less than about 3% over the first 2 years, even including the balance transfer fee.

Step 2: Point out your great history, point out lower competitive rates, and make threats to leave

The second step is to call the company and tell them you want a lower rate. This step could be done quite easily as it just takes getting the right information in your hands and the right person on the telephone. The key to lowering your rate is to plead your case and your alternatives.

Be persistent and to remember that the credit card business is fiercely competitive. Use an online low apr credit card or balance transfer credit card search tool for a list of hundreds of competitive rates, and use this information as fodder for negotiation.

While your issuer may not match the competitor's rate, it may still agree to significantly lower your rate. Even so, negotiating a lower rate with a credit card company may not prove easy for everyone.

If customer service does not agree to lower your APR, threaten to cancel your card. The threat is worth making, because you don’t have to go through with the cancellation – you can bluff.Then you will be transferred to a customer retention department that has more latitude to give you concessions.

About the Author:
This is a guest post written by Barbara Gengler for the website NerdWallet. If you are interested in writing a guest post, please contact PF Stock at the Email address listed in the sidebar.