It's possible to save hundreds of dollars on your credit card bill from making just one call — yet few Americans do it.
More than eight in 10 cardholders who got on the phone with their issuer and requested a lower APR on their credit card in the past year received one, and they averaged a reduction of 6%, according to a recent survey of 1,000 cardholders from CompareCards.com, a credit comparison service.
But only around 20% of those surveyed said they have made the attempt.
Given that the current average interest rate is 17.67%, according to CreditCards.com, this is a call worth making. If you carry a balance, a reduced APR can save you a bundle. Compare Cards breaks it down:
If you have a balance of $5,000 on a card with a 24% APR and pay $250 per month, it'll take 26 months to pay it off and you'll pay about $1,450 in interest. Lower that APR to 18% — a 6-point reduction, equal to the average drop shown in our survey — and you'll save more than $450 in interest and two months in payoff time.
So what could be holding you back from making the call? Most people simply don't know that it's an option, writes Matt Schulz, CompareCards' chief industry analyst.
To obtain the lower rate, try approaching the call the way you'd approach a salary negotiation at work. Schulz advises mentioning pre-approvals you have received in the mail from other issuers. "Come to the call with ammunition in the form of other offers that you've seen," he writes. If the other offer has a lower APR, ask if your current issuer will match it.
The longer you've been with the company and the better your standing with them, the better your chances of obtaining a lower rate.
And if you ask and are denied, the only potential downside is a small, temporary dip in your credit score if the issuer does a hard credit inquiry, Schulz tells CNBC Make It. But, he adds, "that's generally nothing much to worry about, unless you plan to apply for a loan in the very near future."
It's not just the possibility of saving on your current bill that you should take into consideration. The majority of people who asked for a late fee to be waived or for a higher credit limit were also successful.
A credit limit increase is particularly valuable because it could boost your credit score overall. One of the main determinants of a consumer's credit score is your credit utilization ratio, or how much of your available credit you are using at any one time. Experts advise keeping your credit utilization ratio below 30%. Generally, the less you use, the better. So, for example, if your limit is $10,000, ideally you would owe less than $3,000 at any one time.
If you stick to your normal spending patterns but have a higher credit limit, your utilization rate will improve, eventually raising your credit score as well. And a higher credit score means lower interest rates and fees on credit cards, mortgages and more. That could potentially add up to thousands in savings over your lifetime.
That said, you still need to be responsible: Don't use an increased limit as an excuse to spend more, for example. You don't want to end up in debt.
The takeaway, though, is that "you have far more power with your credit card company than you realize," Schulz writes. "You just have to be willing to wield it, and far too few people do."
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