Lowering your rate on credit cards

Pick up the phone, look at the latest credit card offers and keep repeating this: The bank needs me more than I need it.

Say it so you believe it, OK?

Odd as it might seem, it is possible to negotiate a lower rate on credit cards — even during the credit crunch, troubling credit card delinquencies and the fallout from the mortgage mess.

Credit card customers are a valuable commodity, especially if they pay on time, have a job and use their cards.

“You have to keep in mind that the market is extremely competitive right now — and they don’t want to lose you as a customer,” said Gerri Detweiler, credit adviser for Credit.com in San Francisco.

What you have to do is make a phone call. Maybe a few phone calls. But if you’re persistent and polite, you’ve got at least a 50-50 shot at a lower rate.

Think it’s not worth your time? Think again.

Take $10,000 in credit card debt. If you make a payment of $250 a month, it could take you more than eight years and about $16,000 in interest to pay it off if your annual interest rate is consistently 27 percent.

But you’d save nearly $14,000 in interest if you got that rate down to 10 percent. You’d pay that $10,000 off in about four years — and pay about $2,200 in interest — if the rate remained at 10 percent.

The average variable rate credit card is currently 11.35 percent, according to Bankrate.com.

Or, looked at another way, consumers could save $50 to $150 a month in interest if they dump an extra-high or penalty rate and lock in a lower rate.

First, pull out your credit card statements.

“Look at the bill and see what you’re paying,” said Ed Mierzwinski, the consumer program director of the U.S. Public Interest Research Group in Washington.

You want to know the annualized percentage rate, or APR, that you’ve paid in recent months.

It’s possible that the rate is far higher than what you remember it was, especially if you were late with a payment or your credit score dropped.

Yet if you’ve been paying bills on time for the last six months to a year, you could be eligible to switch from a high-cost penalty rate to a lower interest rate.

Mierzwinski noted that in most cases, though, the customer must phone the credit card issuer to get that rate lowered, even after months of good behavior.

Consider the policy for Chase credit card holders. Chase has a program in which the customer who has experienced a rate increase can take action and sign up for automatic payment of that credit card. If the customer has automatic payment and makes on-time payments for 12 consecutive months, Chase will automatically lower the penalty rate back to the lower, original nonpromotional rate.

Automatic payments from a bank account must be for the minimum payment, but individuals also can set them up for larger amounts. The payments are made on the due date.

Before you call, see the kinds of credit card offers that are available to you. As you talk with the issuer, you can mention that you’re getting offers for lower rates.

“You need a deal breaker, no matter what your situation is,” said Scott Bilker, author of “Talk Your Way Out of Credit Card Debt” ($19.95, Press One Pub.) and creator of DebtSmart.com.

Or Bilker suggests that if you plan to take a big vacation, call the credit card issuer and ask: “Should I use your card at Disney?”

It’s not unusual now to see some cards offer zero percent. I received one offer from a credit union for zero percent for 12 billing cycles for all purchases and balances that are transferred with the application.

Bilker said you might be able to negotiate zero percent on your existing card for new purchases for three to six months, if you want. (For fun, I made one call to try this with my card. It did not work. She suggested that I could apply for another card at the same issuer with a short-term zero percent offer.)

XSusan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at stompor@freepress.com.