Asking for a Lower Credit Card Rate

In theory, borrowers should benefit from this week's Federal Reserve move to cut rates. The Fed sets the rate banks charge each other on overnight loans and the one at which banks borrow directly from the central bank. So, in general, lower rates mean cheaper money. But consumers with credit card debt hoping to lower their monthly interest payments will have to take matters into their own hands if they want to see those savings show up in their own bank accounts. U.S. News spoke with Bill Hardekopf, chief executive of LowCards.com, a website that lets consumers compare credit card rates, about how to gain from the Fed's move.

Will people with credit card debt see their interest rates go down?

It depends on what kind of card you have. If you have a fixed-rate card, the interest rate will not change. If you have a variable-rate card [most cards have variable rates], then it would stand to reason that to stay competitive, they will have to lower their interest rate.

[But] even though the rate cut sounds good and may make consumers feel good, the half-point cut will not make a real difference in saving money on interest payments. A consumer with a $5,000 credit card balance will save about $2 per month on a half-percent interest rate decrease. Unfortunately, this will not lead to a substantial savings for consumers with credit card debt.

[Even for the half-percent cut], it might take one, two, three months for consumers to see that lower rate on their billing statement. It takes businesses time to react to changes.

Is there anything consumers can do to get lower rates more quickly?

Requesting a lower rate is pretty simple, even if you don't like negotiating and this seems out of your comfort zone. A lot of consumers don't know the power that they have. You get inundated with credit card offers.... Credit card companies want to keep you as a customer.

Call the number on the back of your credit card or bill. Tell them you have been a good customer but you would like a lower rate. Mention that you have received several offers with lower rates in the mail and have researched cards with lower rates online. You want a lower rate on your card, or you will switch to another card with a lower rate. Ask what can they do to help you.

If the first person tells you that they can't lower it, call back in a month. This is one area where persistence may pay off. If they tell you they can't lower your rate, remind them that there are other cards available.

Can anyone do that and expect the company to say yes?

They are more likely to say yes if you meet certain criteria. If you have a good payment history, if your interest rate is over 12 percent [the average rate is around 14.9 percent], if you've had the same card for a number of years, and if your balance is under 30 percent of your credit limit, that's a good sign. You might be able to get your interest rate lowered if you meet some of that.

It truly should be viewed like shopping for a car or a house. When you go and shop for a car, if they say $15,000, most people don't say, "OK." On a credit card rate, a lot of people don't know that you can negotiate that rate. Issuers won't necessarily volunteer to lower your rate. You need to be proactive. If your interest rate is lowered by 4 points, from 18 to 14 percent, in the first year you will save $200 on a $5,000 balance.

What else can people do to lower their rate?

The No. 1 thing you can do is to continually research if there's a card out there that's better. It depends on what kind of card you're looking for. If you pay your balance every month, you need to have some kind of card that pays you cash rewards or airline miles. It's important for you to figure out, "What kind of credit card customer am I?" You should go and find the card that does you the most good right off the bat before you even order a card.