The annual percentage rate (APR) of a credit card represents how much someone pays in interest on an annual basis if they carry a balance on their credit card. The lower their APR is, the less they would pay in interest. Because of this, it makes sense to try to secure the lowest APR possible.
Keep reading to learn how to lower the APR on a credit card.
Table of Contents
Key Points
• Annual percentage rates determine interest costs on credit card balances, making lower APR important for reducing overall interest payments on carried balances.
• Balance transfer cards with lower interest rates and no balance transfer fees may provide opportunities to move high-interest balances and reduce total interest costs.
• Directly requesting APR reductions from credit card issuers may be effective for cardholders with consistent on-time payment histories and responsible credit usage.
• Providing specific reasons like job loss or medical expenses, combined with leveraging competing offers, may strengthen negotiation positions for rate reductions.
• Alternative strategies for lowering interest might include requesting temporary reductions for limited periods or applying for a new low-interest credit card.
What Is Credit Card APR?
A credit card’s APR represents the total cost of borrowing money using a credit card. The APR on a credit card is the interest rate charged to carry a balance, plus any fees. A credit card can have a fixed or variable interest rate, meaning the rate can either stay the same or change over time based on index rates.
Understanding what APR is can help credit card users know how much they’d need to pay in interest if they don’t pay off their credit card balance in full each month. If they don’t carry a balance, they can avoid paying credit card interest.
Recommended: What Is a Charge Card?
Ways a Lower Interest Rate Can Help
Having a good APR for credit cards is important for a number of reasons. A lower interest rate can save you money. In turn, this can make it easier and faster to pay off debt. Doing so is one way to positively impact your credit score.
The higher your interest rate is, the harder it can be to chip away at your credit card balance, as the bulk of credit card payments will go toward interest. This is why achieving a lower credit card APR can make escaping high-interest credit card debt easier.
How to Lower APR on a Credit Card
If you are interested in lowering your credit card APR, there are steps you can take to try to do so.
Apply for a Balance Transfer Card
If your card has a high APR, one option for how to get a better rate can be a balance transfer card with a lower interest rate. You can then transfer your balance from the high-interest credit card to the balance transfer card.
Usually, this new balance transfer credit card can’t be issued by the same company or any affiliates of the original card. Balance transfer cards may offer a 0% APR promotional period. During that period, you won’t pay any interest, which means all of your payments will go toward paying down the principal.
However, once the promotional period ends, a higher APR will kick in (this is one example of what can increase your credit card’s APR). Additionally, a balance transfer fee may apply to moving over your existing credit card balance to the new card. It might make sense to calculate your credit card interest rate on your old card to ensure you’ll save money.
Negotiate With Your Credit Card Issuer
When it comes to figuring out how to get a lower APR on a credit card, it’s possible to simply ask the credit card issuer for an APR reduction. This strategy may be particularly effective if the cardholder has used their credit card responsibly and consistently paid their credit card bill on time — one of the cardinal credit card rules.
You can also provide a reason why you’re requesting a reduction. You may have experienced a job loss or have unexpected medical bills to pay. Maybe you got a raise and you’re really motivated to pay off your debt, and having a lower interest rate would help you do that. It’s also possible to leverage new credit card offers with lower interest rates to try to negotiate a current APR down.
Consumers can try asking for a temporary reprieve if the credit card issuer won’t offer a lower rate indefinitely. For example, it may be possible to request a one-year rate reduction of 1 to 3 percentage points.
Low-Interest Credit Cards
If you can’t get a lower interest rate on a credit card with your current issuer, you could also step away from using that specific credit card and look into different types of credit cards instead. For instance, you might apply for a low-interest credit card to use in lieu of the card with the higher APR.
Cardholders who have consistently made on-time payments and taken other steps to positively impact their credit score may be able to secure a new card with a lower interest rate. As an added bonus, doing so may make it easier to negotiate a lower APR with a current credit card.
The Takeaway
If you pay off your credit card balance in full each month, you generally won’t have to worry about your APR too much. That being said, it’s always smart to try to secure the lowest APR possible in case it’s necessary to carry a balance from time to time.
Having a lower APR on a credit card means the cost of borrowing money is lower. More of your monthly payments can go toward paying down the principal balance instead of interest. In turn, this can help you pay off your debt faster, save money, and even build your credit score.
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FAQ
How can I reduce my credit card interest rate?
There are a few options for lowering the interest rate on a credit card. You can try to negotiate a lower interest rate on any current credit cards by calling your issuer and trying to come to an agreement. If that doesn’t work, you can apply for a new credit card that comes with a lower interest rate or a balance transfer card. If you can secure a lower interest rate on a new credit card, you can choose to use that credit card or take that offer back to your current lender to try to negotiate a lower APR.
Why do credit card issuers charge varying APRs?
Credit card issuers use a consumer’s credit score to help determine what the APR on a credit card for that user should be. The reason that APRs vary is because credit card issuers give a custom APR to each applicant based on their financial history. Generally, the lower someone’s credit score is, the higher their APR will be.
Can a lower APR affect my credit score?
Possibly. If you negotiate a lower interest rate with your lender or apply for a new credit card with a lower interest rate, you may be able to pay off your debt faster, reducing the amount you owe (known as credit utilization), which might indirectly have a positive impact on your credit score. On the other hand, opening a new credit card requires a hard credit check that can cause a slight temporary drop in your credit score.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
Photo credit: iStock/Charday Penn
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Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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