Lowering Interest Rates

I'm getting ready to pay off some of my credit cards. But before I do that, I'm considering how to get some of my interest rates reduced. I have two cards with over 24%! I don't intend to not pay off my bills in full in the future, but regardless, I think it would be beneficial to secure some more manageable rates.

Would it best to (1) pay the cards off first and then ask for the reduction; (2) ask for the reduction now without paying anything; or (3) pay off half the balance and then ask for a reduction?

What's worked and not worked for you guys?

Edit: I'm not planning to cancel any of my cards. The ones with the highest interest rates are also, unfortunately, the oldest. But if there was some big emergency and I had to rack up a balance again, I don't want to be faced with the same high rates.

Edit2: I'm just going to call them and see what happens. I'll report back on my success or failure. :)


Sarah said...

that's a good question... im not sure but I am thinking of doing the same thing. It might be best to pay of 1/2 and ask them than and if not than pay it off in full and ask again ... if they say no ask them to cancle the account.

Anonymous said...

I think if you're already carrying a balance there isn't much the interest rate can do because you've already been charged for that billing cycle. However, you plan to pay off the balance I would say just go ahead and pay off the full balance and then cancel the card. Only if you pay off the balance they may lower the rate. But you never know. I'd just call and ask them.

j. said...

I'll assume you already have a snazzy piece of paper with all your different interest rates and how long it's been since an "oops" on each account. Try calling them before paying anything off.

I know you said you don't want to cancel any cards, but I have to agree with Sarah. Most card co's want to *keep* customers. If you're paid off, they have no way to keep you except through interest rates. It's a strong negotiating position (relatively speaking...). Worst case you may have to close one account. Best case they drop the interest. You should be able to drop *one* card without it cutting into your credit rating or "emergency" coverage too much.

If one of the high interest cards is through Chase, don't expect much. I made *extra* payments and they still wouldn't lower my rate. Once or twice they even raised it.

Also- you're holding onto a cash emergency fund too, right? CC's aren't *always* there.

Kristine said...

This is what I did: I applied for a low-interest card and transferred the balance (actually I split the balance between one card and a line of credit which was had a much lower interest than the original credit card). I still have my high interest cards but I did reduce the credit limit (with VISA, from $30 000 to $5000!) because I don't ever want to carry a high balance ever again. I hope to have a cash emergency fund to handle emergencies rather than cards.

Grace. said...

Do be careful NOT to use more than half of your new lower-interest card's credit line, though. Going higher dings your credit rating (as does getting a new card, but not nearly a much as using more than half of your available credit.

Sunflowers said...

I don't have a problem threatening cancellation, but I do have a problem canceling... at least with 1 card in particular - it's 10 yrs old, while the rest are no older than 6.

I don't have any "oops" on any of the accounts. But, I usually pay the min or just a bit more. I saw a list somewhere online that said that paying more than the mins works in your favor when asking for a reduction, as does having a good credit score. Unfortunately don't have that right now. :(

@Grace: I heard that it's best to use no more than 30% of your combined credit lines? I also heard it doesn't matter how much is on each individual card, just as long as the balance is less than 30% of your available credit. Unfortunately, I'm using 90%. :p

I'm just going to call them and see what happens. :)

Cedes said...

My suggestion was going to be to call them now and see if they can reduce the rates. If you have been making payments on them and are in good standing hopefully they will look at that as a good thing and reduce your rates. Threatening to leave probably wont do much because you are still on the hook for what you have currently racked up, and at the current interest rate. Let us know how it goes though!

MyATM said...

I think it's best to pay the cards off then when you're done with that you can ask for reduction because it would be unfair for them if you ask for reduction now before paying. Remember, you are aware of the interest rates before using those cards. :)

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