When (and how) to ask for a lower interest rate

Written by
Joe Taylor Jr.
Terms apply; see the online credit card application for full terms and conditions of offers and rewards.

Even though we’re experiencing some of the lowest credit card APRs from the past few decades, you might still be able to save money on finance charges by asking the right question at the right time. Despite competition among banks, it’s not always easy to qualify for a balance transfer offer. Besides, you might love all of your existing card’s current features — just not its price. Follow these tips to learn how you can shave a few percentage points from your credit card’s APR just by making a request.

Understand how banks set finance charges

Each bank usually divides its customer base into three or four broad categories based on potential risk and reward. Your risk level determines your “spread,” the number of percentage points added to the published prime lending rate to arrive at your card’s annual percentage rate. For instance, on the terms and conditions statement for a typical rewards credit card, you might see variable APRs that land at 13 percent, 16 percent, 19 percent and 22 percent.

If you’ve paid your bills on time for over a year and you’ve maintained a solid credit history, it’s not unreasonable to ask your bank to shift your account into the next lower pricing bucket. Believe it or not, your bank might even agree with you. It may cost them less to give you a better deal than to pay for the marketing they’ll need to attract a new customer to replace you if you leave.

Convert your account into a profit center

Your bank knows whether you’re profitable because of what you pay in finance charges and service fees, or because of the transaction revenues you generate for your bank. You want to fall into that second category. When you pay your bill in full each month, your bank’s profit comes from their share of the fees merchants pay when processing transactions.

Before 2008, this behavior annoyed some bankers, because it generates a fraction of what they earn from finance charges. However, since the overhaul of banking regulations after the credit crunch, banks have realized that transaction processing is a high-profit, low-risk business. Push lots of transactions through a single account, and a bank has more incentive to give you a preferential APR.

Ask firmly, but politely

Don’t get nervous when asking for something from your bank. There’s no need. The professionals on the other end of the phone won’t share your emotional investment in your account status. Their job is to provide clear, accurate answers to your questions, then to get you off the phone as fast as they can.

Your bank has probably pre-loaded your account with offers designed just for this moment. Instead of loading yourself up a with a big story to justify your request, simply start your conversation with a friendly greeting and ask, “can you review my account for any available offers that would lower my interest rate?”

When your agent’s got a deal for you, they’re happy to let you know. They don’t get penalized for saving you money, so you don’t need to prepare yourself for a fight. You’ll either qualify for a rate reduction on an existing account, or on a new account with a lower rate. Banks make this decision based on their product lineup: some banks reserve lower APRs for accounts with fewer perks, designed for balance transfers, debt reduction and emergency lines of credit.

Know the right person to ask for a second chance

Let’s be clear. Unless your last name is Trump, it’s unlikely that your bank’s going to break a sweat about losing your business. Don’t let that upset you, though. Instead of getting upset and asking for a supervisor, ask your customer service agent when they can schedule you a phone call from a credit analyst.

This distinction will earn you some points at the call center. Typically, a supervisor’s just better at getting people to stop yelling. A credit analyst actually has the ability to look at your history and make a decision about your account. Credit analysts generally don’t work at call centers, and they usually work 9-to-5. Therefore, it’s more likely that your agent will assign you a case number and put you into an analyst’s queue for a call back.

Prepare to give a little to get a lot

Prepare for some give-and-take, based on your bank’s procedures. Your bank may reserve lower rates for customers who also maintain deposit accounts. Your credit analyst should explain what they can do for you, and what they might want you to do for them. If you’re unable to speak to a credit analyst, ask for a retention agent.

These specialized professionals determine whether you’re too valuable to lose as a customer. You don’t need to make empty threats, either. Tell that agent about a competitive offer for which you’re likely to get approved. If it’s from one of their rivals, a retention agent gets a little more wiggle room to prevent their competitor from winning your account.

Think of this as a bit of ballet: some performance art designed to test your loyalty and your bank’s commitment to your ongoing business together. Especially if you ever need to carry a balance, the right approach to asking for help can prevent you from paying hundreds of dollars a year in extra finance charges.

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