One of our readers, Teresa, sent us this question:

I don’t have any delinquent cards. In fact, my credit score is about 680. I simply have too many credit cards and would like to pay them off before any trouble arises being the economy is what it is.

I would like to achieve a higher credit score, pay lower apr’s and reduce my monthly payments on those credit cards.

Can I reduce my apr’s by simply calling the creditor and asking them to lower my apr? If they refuse to; should I threaten to close the account? I ask about the threat process because that is usually when they take you serious and then pass you along to management with authority to negotiate.

I can follow through on account closure threat up to about $5,000. I have some accounts with 26.9% APR and a max credit line of $1,000. My highest major credit card line is $7,000 and the APR is 14.9%. My current balance is about $4,500. All the other cards are $1,000 less with higher APR’s.

I am willing to pay off up to $5,000 in debt on the higher interest cards but I would rather negotiate lower APR’s, get the payments reduced and then pay them off. Is that possible with the threat process? Where do I start? How should I professionally and seriously approach the creditor?

Thanks for your question Teresa!

You can absolutely call your credit card companies to have your APR lowered. There are a few key things to keep in mind when you do:

1) The better your payment history is, the better chance you have to get your APR lowered- If you have been a customer in good standing for a while, and you do not have a history of late payments, this this will be a pretty standard procedure.

2) You are probably going to have to talk to a manager, no matter what you do - General “customer service” representatives probably do not have the authority to do anything to help you.

3) Keep your cool, and be prepared to call back multiple times if necessary - If you get an unhelpful rep, don’t be rude. Just ask to speak with a manager. If the manager does not help you, then don’t be afraid to hang up, and call back a little later to speak with someone else. Don’t let a rude rep, or a manager who is having a bad day keep you from saving money. After all, this is your money we are talking about not theirs, so you are obviously going to care more about the situation than they do. Be friendly, professional and above all, persistent until you can come to an agreement.

Now, about threatening to close the account. I would not do this unless you have no other recourse. The problem here is that if you close out the account you will be stuck with the high interest rate, and no account. The best thing to do here is to tell them that you have several attractive balance transfer offers (whether you do or not.)

From the bank’s perspective: Whether or not you close the account, they get to collect your balance and your interest. However, if you balance transfer they lose your debt and all the interest that they would have been able to charge you. So the best thing to do is not threaten to close the account, but threaten to transfer the balance.

Also, you do not have to accept the first rate reduction that they offer you. At first, they might be willing to knock off two to five points. Be prepared to negotiate further. Keep telling them about your good payment history, how happy you have been with the company, and how you really hate to have to transfer the balance, but if they can’t work with you a little more then that is what you are going to have to do.

The best thing that you can have happen is to be transfered to an account manager, or to someone in their retention department. Just be calm, polite and keep negotiating until you get the best rate they can offer you.

Also, you need to be very sure that when they lower your APR that it is a permanent change, not an “introductory rate”.

You can also ask them to simply move you to a new account with a better interest rate. In other words, see if they can upgrade your card completely.

I cannot stress enough that just being firm, and keeping your cool will win out. Since you have some cash on hand, you can also offer to pay your balance in full on a couple of these cards - especially if they are willing to upgrade you to a new card with better terms.

Also, be sure that you get your last statement together before you call them since it will reflect your most current information.

As a final note, if you are trying to raise your credit score, then do not close out any of your accounts unless you absolutely have to. It will be a very bad thing because it will lower the average age of your accounts, and increase your debt to credit ratio. If you have to you have to, but it would be best for your credit score to leave them open.

Hope this helps, good luck in your negotiations!

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This entry was posted on Wednesday, September 17th, 2008 at 9:45 am and is filed under Credit Card Debt, Saving Tips. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.