In an age where credit card balances are reaching record highs, many consumers find themselves trapped in a cycle of debt, with a credit card interest rate often soaring close to 30 percent. If you’re carrying a balance month after month, those high rates make it incredibly difficult to pay off what you owe, causing your debt to grow quickly. What if there was a surprisingly simple, yet often overlooked, way to significantly reduce your credit card burden? The answer lies in a straightforward tactic: contacting your credit card company directly and asking for an interest rate reduction.
You might imagine it requires some “secret sauce” or complex negotiation, but experts agree that lowering your credit card interest rate and fees can often be achieved with a single phone call. In fact, recent data shows that this tactic works wonders, with a remarkably high approval rate.
The power of asking: What the data shows
LendingTree, an online marketplace for loans, reports that an astonishing 83 percent of credit cardholders who requested a lower interest rate had their request approved. This marks the highest approval rate since the company began tracking these requests in 2021, and a significant 7 percent increase in approval in 2024 alone.
It’s not just a credit card interest rate that sees high approval. The same report found that:
- 95 percent of cardholder requests to waive annual card fees or reduce the amount were approved.
- Requests for waived late fees were approved 89 percent of the time.
- Requests for higher credit limits were approved 86 percent of the time, with an average card limit increase of $2,670, an all-time high.
Despite these encouraging statistics, a significant portion of cardholders, 31 percent, reported that they didn’t even know they could ask for these reductions. This highlights the vast potential for savings that many are missing out on.
Full transparency
Let’s address the elephant in the room with these stats. Unfortunately, there hasn’t been a recent survey to collect these stats for Canadians, so these numbers are from US consumers. That being said, Canadian online financial news source MoneySense reported on these statistics in 2015 and came to the same conclusion. Their results showed that the majority, 65%, of those who asked got a lower rate. That being the case, it’s not much of a stretch to believe that the numbers from LendingTree are relevant enough to Canadians to take notice. In the end, this is a simple matter of a phone call, so does it hurt to give it try?
Why a lower APR matters (and how much you can save)
A lower interest rate creates a powerful ripple effect on your finances, reducing the total amount you owe and helping you pay off balances more efficiently. For example, if you have a $5,000 balance on a card with a 20% APR and manage to get it down to 15%, you could save over $250 in interest over a year. Reducing a $5,000 balance from 25.99% APR to 24% APR could save you approximately $58 in interest over a single year. These savings free up funds that could be used for an emergency fund, additional expenses, or even retirement investments.
Credit card companies are in business to make a profit, primarily through annual fees, transaction processing fees, penalties, and, most notably, interest charges. They generally prefer to keep you as a paying, recurring customer rather than have you default on your payments. If you can demonstrate that you’re a responsible cardholder who will continue to generate revenue through other means and aren’t at risk of missing payments, they have a good incentive to lower your rate.
The catch
While you are free up funds to use right now, you will likely be paying off the card for a longer time. Let’s use the example from earlier of reducing a card with a $5,000 balance from 20% to 15%. If you pay the minimum payment ($84) on this card at 20%, the card will be paid off in 24 years and 5 months. The same card with a 15% rate, paying the minimum ($63), would take 32 years and 6 months. That’s an extra 6 years to your debt payment timeframe! Although it’s important to note, you will still be paying slightly less interest overall by reducing the rate. At 20%, you’ll end up paying $19,579 in interest costs, compared to $19,525 at 15%. That’s a savings of about $54 over the lifespan of the debt.
Is it worth it?
All this begs the question: Is saving a few dollars a month and $54 over the lifespan of a debt worth paying the debt for another 6 years? For many of us, probably not.
Let’s explore when lowering your interest rate can really make a difference. We’ll keep going with the same example.
What if you lower the interest rate to 15%, but instead of paying the minimum for that rate ($63), you continue to pay the minimum at the 20% rate ($84)? No, you wouldn’t be freeing up the extra $21 a month, but you would save $4,215.05 in interest. You’ll also be debt-free in 9 years and 2 months.
What about my credit score?
There may be some who worry that asking for a reduction would affect them negatively in some way, for example, lowering their credit score. To set the record straight, negotiating directly with your credit card company generally won’t hurt your credit score. While applying for new credit can cause a slight dip due to hard inquiries, the act of simply asking for a lower credit card interest rate does not. There’s no strict rule on how often you can negotiate, but waiting six months to a year, especially after improving your financial situation or credit score, is a good guideline.
Getting to ‘Yes’: Preparing for your call
Before you pick up the phone, some preparation can significantly boost your chances of success.
1. Gather your information: Have the following details ready:
- Your current interest rate, found on your monthly statement.
- Your history of on-time payments.
- How many years you’ve been using the credit card.
- Details about your income, expenses, total assets, and liabilities.
- Any changes in the rate over the past one to five years (if you keep old statements handy).
2. Check your credit report and score: Your credit health plays a significant role, as the best interest rates are typically reserved for those with good credit. You’re entitled to a free copy of your credit report annually from each of the credit bureaus (Equifax and TransUnion).
- A good credit score, generally around 700 or above, provides valuable leverage.
- Look for any missed or late payments, bankruptcies, or consumer proposals.
- Dispute any errors on your report immediately, as they could negatively impact your perceived creditworthiness.
- If your score needs improvement, focus on paying bills on time and keeping your credit utilization below 30%. You can also use credit-building loans can also help boost scores quicker.
3. Comparison shop: Research similar credit cards offered by other lenders. Note if they offer lower introductory rates, 0% balance transfers, lower annual fees, or better rewards.
4. Set your expectations: Based on your research, determine a realistic target interest rate. Aim for a favourable reduction, but leave room for negotiation.
Making your pitch: The call itself
When you call the customer service line, be polite and use a conversational tone. Politely inform the representative that you’d like to reduce your interest rate and state your desired target rate.
Key points to mention:
Your loyalty: “I have been a customer for [X] years and have always made my payments on time and in full”.
Your good credit: “I’ve checked my credit report, which indicates I have a good credit rating”.
Competitive offers: “Other lenders are offering [X] for similar products, or even zero percent on balance transfers”.
Frame it as a mutual benefit: Explain that you want to make your debt more affordable and prefer to remain a client despite seeing better offers elsewhere.
If the representative says no, don’t be discouraged.
- Ask for a counteroffer.
- Inquire what they typically consider when lowering rates and what you could do on your end.
- Ask if the agent has the authority to lower rates. If not, ask to speak with a supervisor, who is generally in a better position to grant your request.
- Try again another day if needed; you might reach a more receptive representative. Sometimes we aren’t as clear in our explanation the first time, and a day to reflect can help.
If your request is approved, always ask for written confirmation of the new terms.
What if negotiation doesn’t work? Other powerful options
Even if your initial attempts to negotiate don’t yield the desired outcome, you still have powerful options to tackle high-interest debt.
1. Balance transfer cards: These cards allow you to move an existing balance from one card to a new one, often offering an introductory 0% APR for a set period.
2. Debt consolidation loans: If you have multiple debts, a debt consolidation loan combines them into a single loan with a fixed, potentially lower interest rate. This can simplify payments and reduce the total interest paid over time.
3. Debt Management Programs (DMPs): For those struggling to keep up with credit card payments, a Debt Management Program can help. In a DMP, the agency negotiates with your creditors on your behalf. They work to create a personalized repayment plan, often arranging lower rates and waived fees. To learn more about DMPs, call one of our Credit Counsellors for a free consultation.
4. Consumer Proposal or Bankruptcy: For those with more significant debt, a Consumer Proposal or Bankruptcy may be appropriate. Both of these options are legally binding agreements arranged through a Licensed Insolvency Trustee. While they both cut debt down drastically, it’s important to be well-informed about them before moving forward, as they come with severe repercussions.
Ultimately, the goal is to pay off your debt. Whether you successfully negotiate a lower rate or choose an alternative, having a clear plan to become debt-free is paramount. The first step, however, might just be simpler than you think: just ask.
