Can You Lower Your Interest Rate?

When it comes to managing your credit, obtaining the lowest interest rates you can qualify for is a big component of any successful financial plan. Most American families have as many as 12 or 13 credit cards, and lowering the interest rate that applies toward your account balances can save literally thousands of dollars over the course of paying off debt.

Your credit score determines your interest rate

The interest rates you qualify for with any given credit card company or lender are based strictly on your credit score. Credit scores range from 350 on the low end to 850 for sterling credit. Your scores are derived from the information contained in each of your credit reports from the country’s credit bureaus: TransUnion, Experian, and Equifax. Assessing such data as the payment history on your accounts, how much you owe on your credit cards, how long you’ve had credit, and if you’ve opened new accounts in recent months, the credit bureaus compute your credit score.

If you want to improve your credit score and qualify for lower interest rates on your credit cards, make sure you send your payments in on time and pay down the balances on your cards as best you can. It’s most desirable to keep your balances at less than 50 percent of your credit lines to ensure a higher credit score.

Asking your credit card company to lower your rate

Of course, you can always ask your credit card company to lower your interest rate. Given the fact that the credit card industry is a highly competitive marketplace, your lender may drop your rate, especially if you can qualify for lower interest rates with other companies. Bear in mind that you’ll be more likely to receive an interest rate reduction if you have a perfect payment record with the company and if your balance is not too high.

Lowering your interest rate through balance transfers

Probably the most popular way to lower the interest rate you pay on your credit cards is to transfer all or part of an existing credit card balance to a card with a lower rate. Balance transfers have become an effective means of reducing debt payments and interest rates, and can be invaluable in managing your finances.