How to help lower your credit card interest rate
A credit card’s interest rate is the price you pay for borrowing money. And the lower your interest rate, the less you might pay to borrow.
Learn about steps that could help you get a lower credit card interest rate. And find some tips to reduce and avoid interest charges.
What you’ll learn:
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There are a number of different ways you might be able to lower your credit card interest rate, including improving your credit scores and transferring your balance to a new issuer.
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The better your credit history and scores, the lower your credit card interest rate might be.
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You may be able to reduce or avoid credit card interest charges by paying off your entire balance by the due date each month.
How to reduce or avoid credit card interest charges altogether
If you pay your balance off in full by the due date every month, you can avoid paying interest on new purchases. Even if you can’t pay off the entire balance, making more than the minimum payment on time may still help you reduce how much interest you pay.
One way to pay more than the minimum is to make multiple payments throughout your billing cycle instead of waiting until you receive the bill. But check with your bank first to be sure that’s allowed—and that there are no fees or penalties for doing so. After you hit the minimum, extra payments will help decrease your balance. And that can help you reduce how much interest is charged over time.
3 ways to get a lower credit card interest rate
If you’re looking for a lower annual percentage rate (APR) on your credit card, there might be steps you can take to get a lower credit card interest rate.
1. Work on improving your credit scores
Having a good credit score may help you qualify for credit cards with lower rates—among other things.
Here are a few steps you can take to monitor and improve your credit scores:
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Make on-time payments. Paying all your bills on time shows issuers you’re a responsible borrower. Setting up automatic payments or electronic reminders may help.
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Stay below your credit limit. Generally, using a lot of your available credit could be a red flag to issuers. The Consumer Financial Protection Bureau (CFPB) recommends keeping your credit utilization ratio at 30% or less.
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Only apply for credit you need. Credit applications may result in hard inquiries, which can temporarily lower your credit scores. Applying for several cards over a short period may also give lenders the impression that you’re dealing with financial setbacks, the CFPB says.
- Check your credit reports. Monitoring your credit report could help you spot errors and track progress as you build credit. CreditWise from Capital One can help you keep an eye on your credit. It’s free to everyone. And using it won’t affect your credit score. You can also access free copies of your credit reports at AnnualCreditReport.com.
2. Ask your credit card issuer for a lower interest rate
If you’ve worked on improving your credit scores, you could ask your credit card issuer to lower your interest rate. If you’re a Capital One cardholder, you can sign in to your account online and ask Eno, your Capital One assistant.
Remember, one way to avoid interest charges on new purchases is to pay off your statement balance by the due date every month.
3. Shop around for other credit cards
A balance transfer credit card lets you move debt from one credit card to another.
Some new cards offer introductory rates that may apply to balance transfers, purchases or both. It’s not the same as lowering your interest rate permanently, but it can temporarily give you a lower rate. And you might be able to use that time to pay off your balance.
When the promotional APR period ends, the credit card’s APR typically increases to the standard APR. You’ll have to pay that standard rate on any remaining balance, so it’s a good idea to make sure the standard APR on a balance transfer is lower than your current credit card’s rate. It’s also worth checking for any balance transfer fees.
You can compare Capital One credit cards to find one with an interest rate and benefits that are right for you and see if you’re pre-approved before you apply. Pre-approval is quick and easy and won’t harm your credit scores.
How APR can affect your interest charges
Your credit card’s APR affects how much you’ll pay in interest over time when you’re carrying a balance. So a lower rate, even by a few percentage points, could lead to noticeable savings in the long run.
Near the bottom of this page you’ll find a calculator that can help you estimate options for paying off your credit card balance.
The table below is based on the calculator. It shows how different APRs and payments can affect how much interest you might pay.
| Balance | APR | Monthly payments | Months to pay off | Total interest paid |
| $2,000 | 29% | $100 | 28 months | $765.67 |
| $2,000 | 19% | $100 | 25 months | $424.01 |
| $2,000 | 19% | $2,000 | 1 month | $0 |
Keep an eye out for interest rate scams
When it comes to credit, there are no quick fixes. And the Federal Trade Commission (FTC) has warned of interest rate reduction scams that make those kinds of promises.
Here’s how some of these scams work: A company calls, saying it can negotiate with your issuer on your behalf, claiming they have a special relationship. It may offer money-back guarantees and say it’s a limited-time offer to get you to sign up.
But the company charges fees and requires you to supply personal information. Once it has your information, it can make purchases with your card or sell the information to others. The FTC says not to give out personal or financial information and to hang up if you get a call like this.
How to lower your credit card interest rate FAQ
Here are some frequently asked questions about lowering your credit card interest rate.
What do credit card companies consider when setting interest rates?
Every credit card issuer sets its own credit card interest rates. And issuers usually determine rates based on two main factors:
- The prime rate: Most lenders set their interest rates based on the prime rate. The prime rate is an index that’s closely tied to the federal funds rate—the rate banks charge each other for borrowing money. Lenders typically add a certain margin to the prime rate when setting their own credit card interest rates. If the prime rate is 3% and the bank’s margin is 12%, for example, the interest rate might be 15%.
- The cardholder’s credit: Credit card issuers may base their interest rates on a person’s credit history. Generally, the better your credit history and the higher your credit scores, the lower your interest rate might be.
What’s an average credit card interest rate?
The Federal Reserve regularly reports the national average credit card interest rate. You can visit the Fed’s website to see the latest reports and other credit metrics.
Why is my APR so high when I have good credit?
Issuers typically consider credit scores and other financial factors when making lending decisions. And having a higher score may help you get a lower interest rate.
But even if you have an excellent credit score, certain actions such as late payments could trigger a higher penalty APR depending on your card agreement. Paying on time, making at least the minimum payment and staying below your credit limit are a few ways to help avoid penalty APRs.
Are there different types of interest rates?
Yes, different types of APRs can be applied in different situations. Here are some examples of different credit card APRs:
- Introductory APR: An intro APR is a promotional rate given to new cardholders. These balance-transfer APRs are promotional rates that apply to a set period of time. After that period, the APR changes to a standard rate.
- Cash advance APR: If you use your credit card to withdraw cash, your card issuer may categorize the transaction as a cash advance and apply a higher APR to it. Other types of transactions can be classified as cash advances too. They include using your credit card to transfer money to friends, paying other debt, using a third-party bill pay service, buying casino chips or lottery tickets, and exchanging dollars for foreign currency.
- Penalty APR: Your issuer might apply a penalty rate to your account if you violate your credit card’s terms and conditions.
Key takeaways: How to help lower your credit card interest rate
A good credit history and credit scores may help you get a lower interest rate. And paying off your bill in full every month might help you avoid interest charges altogether.
To get an idea of how long it might take you to pay off your current credit cards, try using the calculator below. Just enter a few pieces of information, including your current APR. You can then explore options for paying off your cards. You can even enter different APRs to see how a lower rate might affect things.
If you’ve been improving your credit, it may be time to look for a lower rate. You could compare credit cards or consider a credit card balance transfer.
