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How to Get a Lower APR on Your Credit Card

Last updated 04/09/2024 by

There are obvious advantages to having a lower APR on your credit card. A low interest rate can result in huge savings, and you still enjoy the benefits of making convenient purchases and building up your credit history at the same time.
Would you switch credit cards if you could get a better interest rate? But would that lower your credit score? Is there any way to get a lower APR without switching cards at all?
These are good questions to ask if you are one of the 44 percent of Americans who carry a balance on their credit card every month (source). Lower interest rates can save you significant money over time, especially if you carry a high balance on your card month over month.

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The interest rate on your card matters

Most credit cards have a grace period, which means, if you make a purchase with your card and pay that purchase off in full when you get your credit card bill, you will not incur any interest. If you never carry a balance from one month to the next, it does not matter what your card’s interest rate is because that rate will never come into play.
On the other hand, if you ever carry a balance on your card, you will accrue interest charges at the specified APR on that balance until you pay your balance in full.
The average annual percentage rate (APR) on credit cards today is 13.51 percent (source). To give you an idea of how that affects your wallet, if you carry a balance of $5,000 on your card and you have an APR of 13.51 percent, over one year, you will pay $675.50 in interest alone, not accounting for the compounding of interest. (More on that later.)

How much can you save with a lower rate?

Finding a card with a lower rate can add up to substantial savings quickly. For instance, if you carry a balance of $5,000 and you have an APR of 9.99 percent, you will only pay interest of $499.50 in a year. Even better, if you find a card with a 0 percent rate, you pay no interest at all. So, it makes sense to get the lowest interest rate you can find for a credit card if you intend to carry a balance on that card.
An excellent reason for paying your balance off every month is that you avoid paying compound interest. What is that? Here is a simple explanation:
Your unpaid balance determines the amount of interest charged. The interest amount that you do not pay every month becomes a part of your new balance. This means that you end up paying interest on a portion of your interest from previous months. That is how your interest compounds.
The bottom line: The longer you wait to pay off your balance, the more interest accrues. For that reason, it is best to pay your balance in full if possible.

You can negotiate a lower interest rate

What if you have a credit card with a high APR? Does that mean you are stuck with it forever? Not at all. According to one recent survey, 78 percent of cardholders who contacted their credit card company and asked for a lower rate scored a rate reduction.
Before you pick up the phone, though, there are some things you should do to help your chances of success. First, you need to decide what rate will be acceptable to you. To arrive at a reasonable rate request, you might want to do some research to see what interest rates other credit card companies are offering to people with credit scores like yours.
Check out credit card offers you already get in the mail. That should give you a ballpark idea of the kind of rate you can expect to receive.
Then, it is a good idea to check your credit report just to be sure that everything is in order. If your credit score looks good, you have a good shot at negotiating with your credit card company for a better rate.

Credit cards issuers consider will consider this:

  • How long you have been a loyal customer.
  • Your payment history.
  • Your credit limit.
  • How much you owe on your card compared to your credit limit.
When it is time to ask for a lower interest rate, contact customer service for your credit card company and explain why you are calling. You can say something like:
“I have been your loyal customer for X years, and I am receiving multiple credit card offers from other companies advertising much lower rates than the rate I am paying with your card. I would like to request a lower rate on the card I have with you because I would really prefer to stay with your company rather than accept a lower rate from one of your competitors. What can you do to help?”
In some cases, that simple conversation will help you get a lower rate for your card. If you don’t get the results you want, you can always ask to speak to a manager or supervisor. Or, simply hang up and try to call again at a later time. Sometimes, persistence can pay off.

Lower your rate with a balance transfer card

Another way to lower your interest rate is to use a balance transfer card that has a more favorable rate. If your credit score is high, you can look for a balance transfer card with a 0 percent introductory rate. Try to find a card with a long introductory rate of 15 or 18 months. This will give you a bit longer to pay off your balance before interest rates start to apply.
There are two critical factors to keep in mind when using a balance transfer card, however.
  • First, most credit cards charge a 3 percent fee for transferring a balance. This could significantly cut into the overall amount you save.
  • Second, making just one late payment can void your introductory offer, and then the card’s interest rate will go to a non-promotional, potentially high interest rate.

The connection between credit scores & interest rates

If you have ever read the fine print on a credit card offer you have received in the mail, you may have noticed that the interest rate portion of the disclosure may say something like “13.99 percent to 24.99 percent APR. ”
The reason for the range of APRs given is that the credit card company determines your actual APR, in part, by your credit score at the time you apply for the card. Generally, the higher your credit score, the lower your interest rate will be.
Credit card companies do not advertise what credit scores correspond with what interest rates, however. So, the only way to know what your rate will be is to apply for the card.

Improve your credit score and get a lower interest rate

The best way to get a lower interest rate is to have excellent credit. If you do not have excellent credit, you can improve your credit score before applying for a credit card. Here’s how:
  • Pay all your bills on time, every time.
  • Pay down balances on credit cards you already have to reduce your credit card utilization percentage.
  • Check your credit score annually to ensure that it is correct.
  • Wait at least six months between credit card applications.
  • Only apply for the credit you need.

Avoid the penalty interest rate on your card

Typically, there are three circumstances under which you incur a penalty in the form of a higher interest rate than the regular interest rate for your card. They are:
  • You make late payments.
  • You exceed your spending limit.
  • A payment bounces because of insufficient funds in your bank account.
If you avoid making these mistakes, the penalty interest rate will not apply. It’s essential to read your cardholder agreement carefully to determine the APR applied in the event you make one of these mistakes. Information about how high your interest rate can potentially go will be a great incentive to avoid mismanaging your credit card account in any way.

Find a card with a good interest rate

If you’re looking for a card with a better interest rate than the card(s) you have, you might start by contacting your local bank or credit union. Additionally, you may receive credit card offers in the mail which have attractive rates and terms. When looking at these offers, however, be sure to read all the fine print so that you understand precisely what the offer is.
You can also find more competitive rates by researching credit card offers online. SuperMoney makes it easy for you to comparison shop for your credit card, weigh your options, and read what other cardholders have to say about their experiences. Check out the user reviews and search the best credit card offers here.

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