finding the balance between living and saving

Negotiate a better interest rate on your credit card

Negotiate a better interest rate on your credit card

It has come to my attention that some folks aren’t aware that you can get your credit card issuer to lower your interest rate. This is especially true of twenty-somethings I’ve chatted with. Chances are your financial situation has improved since you were approved for your first credit card, and so should your interest rate.

If you’re into your early to mid-twenties (or older, for that matter) and have used a credit card for a few years now, there is ZERO reason you should be paying the standard issue 18%+ interest rate. The first time I switched cards, my rate dropped from 18% to 12.5%. The second time, to prime + 5%.

First, let’s do some reflecting on your credit history. Do you pay your bills on time? Have you ever missed a payment on something? If you carry a balance on your credit card, what percentage of your available credit does that balance represent? Basically, have you demonstrated to lenders that you’re a reliable human who pays their damn bills on time? To be certain, you can request a copy of your consumer disclosure report for free. In Canada, you can request your report from TransUnion online (instantly) or from Equifax by snail mail (obviously not instantly). This report doesn’t contain your magic 3 digit credit score, but it’s still a good document to review and reflect on. You should also be reviewing this once every year or two in order to catch any fraudulent or erroneous activity.

If your borrowing and billing history is alright, then chances are your credit score is a-okay and you should be on your way to a lower interest rate. You can also pay TransUnion or Equifax for online access to your credit score and monthly monitoring. In my opinion, it’s helpful to get a baseline idea of where you’re starting out, but quite unnecessary to shell out for the monthly subscriptions they’re hawking. The first time I learned my credit score was when a lender let it slip in the process of consolidating some debt. This is technically not permitted, but exhibiting a little healthy curiousity may work in your favour next time you’re sitting across the desk from a lender.

From here you’re ready to shop around. You can loosely determine whether you’ll be eligible for a card advertising an attractive rate with RateHub, especially if you know your credit score. Now you have a little negotiating leverage. So get your card out. Phone the number on the back, and repeat after me:

“I’ve had ______ card with ______ bank for______years. I’m shopping around for better interest rates, but I’d like to stay with ______bank if possible. ______ bank is offering ______ rate and/or I’ve been pre-approved for ______ rate with _______bank. What’s the lowest you can offer me?”

That’s it. Be polite. The customer service agents talk to dickheads all day long, so being a breath of fresh air certainly doesn’t hurt. If there’s nothing they can do for you, ask to be transferred to someone else who can. The worst they can say is “no” and you’re no worse off than where you started.

If you do get a “no,” or there are offers out there which suit you better than what your current bank could offer, it’s time to consider getting a new card. If you happen to carry a balance, you will probably be eligible a balance transfer. Many promotions feature even lower rates on the amount of your initial balance transfer to sweeten the incentive to switch. Remember that if you do get a new card, you don’t necessarily need to close your old one out. Your credit score takes into account your total credit utilization. Having multiple cards increases your available credit, and decreases your credit utilization, leading to a higher score. The key is keeping utilization low, regardless of how many open cards you have.

Badda bing, badda boom, you just hustled yourself into a lower interest rate. How’s that for some adulting?

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