Current Balance: Enter the credit card's balance as of today (call them up to get the current balance, as it has certainly gone up since your last statement).
Interest Rate 1: Enter your current credit card's APR as a percentage.
Interest Rate 2: Enter a target lower interest rate for your credit card, as a percentage.
Current Monthly Payment: Enter the amount you pay on average each month toward your balance. Be realistic.
New Charges/Month: Enter the average amount you charge to your credit card each month. Again, it's important to be realistic.
Major Purchase: If you will be using your credit card to make a purchase that's much larger than your monthly average, enter the amount of the purchase.
Months From Now: Enter the number of months from now you will make this major purchase. If you are making the purchase in this billing cycle, enter "0."
Credit Cards and Credit Card Interest Explained
Credit card debt is such expensive debt because of the credit card interest, usually calculated as an APR (annual percentage rate). No, it's not just that the interest on credit cards is so high (though that's a big part of it). The fact is that you never just pay interest on your balance. If you aren't paying off the entire balance within each grace period, you're paying interest on the interest that accumulated in the previous month. Next month, you're paying interest on the interest on the interest. With credit cards, the more you owe this month, the more you'll owe next month.
Getting a Lower Credit Card Interest Rate (APR)
Despite what the credit card issuers might want you to believe, your credit card interest rate is not etched in stone. The credit card issuer can lower it, and you can get them to lower it for you. How? By asking. And if that doesnít work, by threatening.
- Telephone: you can call a representative of the credit card company's customer service department and simply ask them to reduce your interest rate. But this may be frustrating and a waste of time. After all, if there's one skill these workers have, it's how to talk customers out of getting what they want and into getting what the credit card company wants them to get. Besides, if you've ever called a credit card customer service line, you know very well just how long it can take to get anywhere. The customer service department may not have the authority to reduce your rate anyway.
- Email/online forums: similar to telephone, credit card companies' customer service departments work hard at making sure that whatever contacts come through online are handled the way the company wants them to be handled, quickly, efficiently, and impersonally. Still, it's faster than making a telephone call and sitting on hold.
- Writing a letter: this avenue takes the most effort, which is why it's likeliest to make an impression on the credit card companies. While mail isn't always the best route at every company, in general, credit card issuers are still pretty old-fashioned when it comes to handling mail. Legal disputes still generally go through the mail, so paper letters may get looked at more carefully, and in turn get to the appropriate people in the company faster than email or telephone messages.
Asking for a Lower Credit Card Rate: Talking Points
Credit card companies make a ton of money off of anyone who carries a balance for any length of time. They are terrified of losing your account. Use their fear to your advantage. Here are some subtle, polite, but effective threats to get the credit card issuer to give you a lower rate:
- I just got an offer in the mail for a much lower interest rate credit card, but I'd still like to continue my relationship with you.
- My credit has been really great recently, and my research tells me that a better credit rating justifies a lower interest rate.
- I am in the process of saving for retirement, and I've realized that without a lower interest rate, I won't be able to use my credit card for purchases as often, or carry a balance as often.
Just remember: as a cardholder, you do more for them than they do for you, and in the end, they need you more than you need them. Credit card issuers don't want to send out all that junk mail just to lose as many customers as they gain.