Getting lower interest rates on credit cards seems like a no-brainer. After all, with lower interest rates, you spend less of your hard-earned money on interest. What could go wrong? Maybe not that much, but let’s dig a little deeper and see what the consequences are if you try.
Will a demand for lower rates trigger a deadlift?
The hard truth is: maybe, maybe not.
That’s the difference. If the creditor sees the request as a mere request, then a soft request or even no request at all is sufficient. However, if the lender sees your request as an account change (such as a request for a higher credit limit or another card with a lower interest rate), a tough request may be made.
It ultimately depends on believers what their rules are and what kind of relationship you have with them. Best to ask your creditors if asking for a rate cut would mean a big hit.
The tough move usually happens when you ask for more credit and assume you’re ready to take on additional debt. But when you’re asking for lower credit card interest, don’t ask for more credit.
We reached out to Capital One, Discover and Citi to find out how they handle such requests, and the representatives all said they would not accept credit reports when customers ask for a price reduction. However, the reality is that each creditor has its own set of rules, which the customer may or may not know.
A word of caution: If you have a short credit history, or so-called “thin file,” the request may be more serious. If you have a limited history or a low score, a few points may influence a lender’s decision more than someone with a high score and a long history.
Can a lower card APR help your score in any way?
Calculated rates are not a rating factor, but lower rates may indirectly affect your rating. Keep in mind that lower credit card APRs allow you to deposit the majority of your payments into the primary balance on the card. As you repay your principal, your available balance increases. This increases the usage percentage of the score. So if you are successful, you can quickly overcome the blow you take from the tough move (if taken). It makes financial sense to pay less for the money you borrow.
How to Avoid Paying Credit Card Interest
There are ways to avoid paying credit card interest altogether. If you only charge the amount you know you can pay by the due date, you will not incur any interest charges.
For example, your household budget should set aside a certain amount for groceries. When you use your credit card to buy groceries, the money in your monthly budget can be used to pay your bills in full. Again, you must make sure to pay the bill by the due date. For greater impact on your score, please try to pay your account in full before your next billing cycle. This gives the lowest credit utilization.
This strategy works especially well with rewards cards. If you end up paying interest on fees, your outlay is likely to exceed the value of your premium. So, paying this card monthly is a win-win in terms of rewards earned and your finances.
Finally, try to use the same strategy for all cards, regardless of interest rate. You also don’t have to worry about high interest rates if you only charge what you can afford to repay each month. At the end of the day, if you always pay your balance in full and on time, your interest rate really doesn’t matter.
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All in all, the impact of calling for a rate cut is minimal. But if you’re asking because you can’t make your monthly payment, ignore the elephant in the room, or as we call it in New England, “the moose on the table.” If you’re asking out of necessity, look at your expenses and income to try to balance the two.
When you have too many bills and not enough money, it’s time to take action. Alternatively, contacting a nonprofit credit agency for a budget and subsequent debt management plan would have greater benefits than the impact of a potentially harsh credit report.
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