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The coronavirus has had a tremendous effect on the economy, with unemployment claims skyrocketing to 26.5 million in a few short weeks. Under the circumstances, you may be in desperate need of money and resorting to credit cards to help you get the bills paid.
Unfortunately, your financial health could take a destructive blow due to the “snowballing” nature of high-interest credit card rates. Sky high rates of 15, 20 and 25 percent can become a treacherous impediment to your financial future.
Thankfully, with lockdowns underway worldwide, credit card companies are being more flexible than ever before with borrowers.
This means you can and should decide your own fate by pursuing a lower credit card interest rate.
How to Lower Your Credit Card Interest Rate
In most cases, contacting your credit card company is enough to get the job done, but many people avoid making the call due to the fear of possible rejection. The answer “no” is notorious for breaking hearts, dreams, and lives. But, what if they say “yes”?
Keep reading to find out how to lower your credit card interest rate during COVID-19.
1. Find out What Actions Your Bank Is Taking
Oddly enough , you may or may not have already had a decreased interest in the current circumstances.
Many banks in Canada have already proposed and enforced lower credit card interest rates at 50% of the previous value. Select U.S. banks are now following suit.
To see if you’ve benefited from these changes, log into your credit card account to check the APR noted on your latest statement. You’ll also want to peek at your “Messsages” folder.
Depending on who provides your credit card services, the opportunities, deferrals, assistance will be variable.
2. Leverage Your Credit Score
When seeking to lower your credit card interest rate, there’s one thing you can make use of: your credit score.
Before you contact the bank, check out your credit rating to find out where you stand.
Having strong or reasonable credit is your bargaining chip, so take note of it and mention it early during your conversation with your card issuer.
If you don’t have strong credit, you should still give your credit card issuer a call to find out how you can make use of COVID-19 to get flexibility on your rates—even if it’s only temporary.
If you’re looking to improve your credit score as quickly as possible, things like paying off your balances and debts are certain to help. Increasing your total available credit will as well.
If you’ve got a credit score at or above 650, you’re in a good position. If you have a credit score of 750+, you’ll have enormous bargaining power in this conversation.
3. Compare Other Credit Card Offers
Before you stretch your hand out and make the call, go over other cards and check out their rates. If you received offers over email, mail, or any other means – know who is providing them and list their rates.
Create a short sheet of comparison: fees, terms, policies, and rates.
A card issuer is more likely to continue business with you if you provide a reasonable reason to leave them. They won’t lose a customer over chump change, because it costs them a substantial amount to acquire new customers.
If you need help, Nerd Wallet has compiled a nice list of 0% and low interest credit card offers here.
4. Who to Call First
If you don’t know which card to call first, start with your oldest card.
If you have two cards that have been open for the same length of time, call the card on which you’ve made the most on time payments.
You’ll want to call the credit card company that will view your track record to date as favorable and see you as a loyal customer.
5. Your Call Script
In any discussion, the person with verifiable information will have the upper hand.
When preparing for the call with your card issuer, take note of all that you owe and what you paid off (interest included). Have your credit score and income/debt ratio noted in front of you.
Next, determine how you will seamlessly integrate this information in the conversation by creating a small script for yourself.
Your script should have the following sections:
- A brief (20-30 second) explanation of your history with the credit card company
- A mention of your credit score and D/I ratio
- A mention of your track history of on-time payments (if you’ve made them)
- Ask for what options the credit card issue may have for lowering interest rates during COVID-19
If you’ve recently lost your job or been furloughed, it is worth mentioning this, because some credit card companies are now allowing borrowers to skip one or more months of minimum payments.
In total, your script should only take about 60 seconds. Then, take time to listen and respond thoughtfully to their questions.
6. Avoid Over-Sharing
When you’re talking with your credit card issuer, don’t “vomit up” information that is irrelevant or ramble on. That won’t help and will make you sound desperate.
The card issuer can verify all of this, so be truthful. They will be asking you questions if you propose a lower interest rate – so be transparent. Use verifiable information and be reasonable.
7. Describe Why You’re a Low Risk Borrower
When you speak with your credit card issuer, they’re likely to ask about your current income sources and amounts. This is so they can assess whether you are a low, moderate or high risk borrower.
Depending on your recent financial transactions—such as paying off your car, lowering your student debt, or moving to another home—you could have a higher or lower debt-to-income (D/I) ratio.
The lower your debt to income ratio, the lower-risk you will be seen as a borrower.
However, losing your job, an income decrease, or loss of personal property – can all affect your D/I ratio.
In any case, performing a bold move that decreases your expenses or increases your income will show up in their system, and increase your chances of getting granted a lower credit card interest rate.
8. Execute the Deal
In reality, calling your credit card company to request a lower interest rate is nothing but a simple conversation. State your case and mention the alternatives noted in your comparison sheet.
You are not there to demand, you are there to request. Politeness, transparency, and information go a long way.
If you want to speak to somebody higher up on the work chain, ask for this politely.
If you get declined, ask them how you can improve your chances, and they should be able to tell you.
Backup Option #1: Request a Payment Deferral
If they can’t lower your credit card interest rate, then request a payment deferral instead. This will let you postpone your monthly payments until you can get back on your feet financially.
While you’ll still accrue interest during this time, it is a lot better than missing a credit card payment, because it won’t count against your credit score.
Backup Option #2: Do a Balance Transfer to a 0% APR Card
In the off chance that you end up being turned down, don’t feel defeated. If your current card company has determined you to be a high risk borrower, they may not want to grant you a lower interest rate.
Thankfully, you now have a nice list of credit card issuers with better offers. You told them you would switch, so switch!
Due to COVID-19, many banks are offering 0% introductory interest rates on any balance transfer for a year or more. In some cases, there is a balance transfer fee, but it is usually negligible.
If you’re looking for credit cards offering a long 0% intro annual percentage rate (APR) period, I’d suggest you consider one of the following:
- U.S. Bank Visa® Platinum Card – a 0% introductory APR* on purchases for 20 billing cycles
- Wells Fargo Platinum card – 0% intro APR for 18 months
- Quicksilver® from Capital One® – 0% intro APR for 15 months
Transfer your balance and try hard to pay if off before interest payments take effect.
A Lower Credit Card Interest Rate, Your Way
Now that you know how to lower your credit card interest rate during COVID-19, you’re ready to act.
So don’t overthink it, just spent 20-30 minutes preparing and then dial. Stay safe and good luck!
Up Next: How to Start Investing Even If You’re Broke
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*Disclaimer: I have no financial relationships with the credit card companies listed above. Always consult your accountant or a qualified adviser before making financial decisions.