9 tips to help negotiate a lower interest rate

With credit card bills rolling in from the holidays, it's as good a time as any to find the best rate for your borrowing. From credit cards to credit lines, it never hurts to ask for a lower rate.

Start with the math and it’s a no brainer: even a slight reduction can save you big bucks. Say you’re carrying a $1,000 balance on a credit card. Even a one-per cent reduction will save you $10 a year. If you get a 5-per cent cut on a balance of $5,000, that’s $250 a year.

Asking for a lower rate isn’t likely to work if you rarely ever carry a balance. Rather, this strategy is reserved for those who have a lot of debt, and it works best if you’re threatening to move your balance to another account or institution.

For proof, look no further than the results of a 2002 survey by the U.S. Public Interest Research Group. Fifty consumers phoned credit card issuers and asked for lower rates, and 56 per cent of them scored a lower rate.

The 28 consumers who landed lower rates saw the drop from an average of 16 per cent to 10.47 per cent.

All it takes is a single call. Keep these tips in mind and pick up the phone:

Start with your oldest credit card

Being a long-time, loyal customer helps — as long as you have a good, established credit history. If you’ve missed several payments, chances are slim the company is going to do you any favours.

Make sure you’ve got the right person on the other end of the line

A lot of people who pick up calls from bank or credit-card customers don’t have any authority to reduce interest rates, so ask politely for someone who can.

Rehearse your script

Remember that whoever you’re dealing with is going to try to reject your plea. Be prepared by rehearsing. Here’s an example.

“Hello. I’ve been a customer with [name of institution here] for several years. I’m looking to reduce my interest rate and I’ve just been offered a new credit card with a rate of 4.25 per cent. Right now, I’m paying 19 per cent with you. I’d like to stay with this company and am calling today to ask you to lower my rate, please.”

Be prepared to hear “No”

If you strike out the first time, ask to speak to that representative’s supervisor and try again. It’s possible that person will give you a counter offer. Pause and try saying “Hmm. I was really hoping for a better break. Is that the best you can do?”

Even if you don’t get the rate you were hoping for, take the lower rate offered anyway.

Try again

If you didn’t get anywhere with your request, try again in a few days or weeks. Chances are you’ll get another customer service agent who’ll put you through to a different supervisor.

Be polite

Now’s not the time to act haughty. People who answer phones deal with a lot of attitude. Be nice and treat others with respect.

Be realistic

If your rate is already below about 9 per cent, it’s not likely you’ll get much of a break. Asking for a reduction works better if your interest rate is at least above 13 per cent, which shouldn't be difficult for more credit cards or department store cards.

Seek out balance-transfer offers

You can move your balance to another card. Some companies offer zero per cent, 1.99 and 2.99 per cent. Be careful of the term, though, which tend to expire within a year. If you stay on top of things, you can keep transferring balances to keep getting super low rates.

Pay your debts

It’s great to have a low interest rate, but it’s even better not to owe on credit at all. Always fork over more than the minimum payment, even if it’s an increase of $10, to clear those debts faster.