Renegotiating Your Credit Card Rate

Q: I just got walloped with a huge credit card bill after the holidays. What should I do? -- K.G., via the Internet

A: K.G., you're not alone. Americans will pay more than $7 billion in interest from holiday season credit card spending, according to credit card tracker CardWeb. Here is one thing that you can do today -- right now! -- to save yourself the anguish of paying interest for 63 years on that selection of scented soaps, CDs and feet pajamas you bought for your family: Renegotiate your interest rate.

That's right, like hookah pipes at a Mediterranean bazaar, the interest rate from your First Bank of Firstness lender is entirely negotiable. Just call!

Are you eligible to renegotiate? If you carry a balance on your card, you betcha. You're a very valued paying customer, not one of those freeloading Fools who uses a credit card for a free short-term loan by paying the balance in full every month. Heck, even if you are one of those freeloading Fools, if you pay an annual fee, that's up for negotiation, too.

What's reasonable to expect? If your current interest rate is in the 16 percent to 18 percent range (the nation's average), 12 percent is a fine number to shoot for. We know of Fools who have managed to talk their lenders down to an 8.9 percent or even 6.9 percent interest rate. Your lender may give you a "special low interest rate" available only as long as you make your payments on time. One late payment, and it's back up to 2,463 percent.

Here's a sample dialogue:

Fool: "I just got this an offer from First Union BancUSA Nation's Edge Gold Choice for a card with a fixed APR of just 9.9 percent. Can you match this interest rate?"

Operator: (The sound of computer keys tapping and your payment history being scrutinized.) "At this time we can offer you an interest rate of 12.5 percent as long as you continue to make your payments on time."

Fool: "Can you do any better than that? I get better offers every day in the mail."

Operator: "Let me check with my supervisor to see if we have any special promotions. (Sound of somebody putting you on hold while pretending to talk to a supervisor.) All right, I'm back. Unfortunately we can't do better than 12.5 percent at this time. We can, however, waive your annual fee."

What if it doesn't work? If you have a solid track record with your lender, you should be able to negotiate a lower lending rate. If you get a dud operator who isn't feeling generous, politely ask to speak to a supervisor. Or call again. You may get completely different results with another operator.

If you're perpetually late with your payments or employ an outrageously pretentious false French accent, your lender may prefer to let you walk. So be prepared to follow through with the First Union BancUSA Nation's Edge Gold Choice. Cancel your old card, remember to close the old account, and have it noted that it was closed "at the cardholder's request."

What Now? Once you've negotiated for a lower rate, pay it off, Fool! Visit www.fool.com/credit for Eight Ways to Pay It Back and reader tips on handling credit.