The sneaky credit card interest rate trap
From Aaron’s YouTube: “This seems dodgy.”
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Posted 23 August 2026
The short version
- Some credit card companies offer lower interest rates when you try to pay off your card, as an incentive to keep it open.
- This tactic can be used strategically - the money you planned to pay off the card could instead go towards higher-interest debt.
- While tempting, accepting a lower rate may not be the best move if your goal is to be debt-free.
- Always verify any financial offers like this - as Aaron notes, tactics that seem 'helpful' often benefit the lender most.
The credit card company's offer
As Aaron explains, some credit card companies have a surprising response when clients try to pay off their card. Rather than happily accepting the repayment, they may offer a lower interest rate to keep the card open and the debt active. In one case, a client with a 20% rate was offered a cheaper deal when they attempted to clear their balance.
This creates an odd situation where doing the financially responsible thing (paying off debt) triggers what looks like a perk. But as Aaron points out, it's actually the bank trying to maintain their revenue stream from your interest payments. It's a 'dodgy' tactic dressed up as a favour.
When to use this to your advantage
There is one scenario where this offer could work for you. If you have multiple debts, the money you were going to use to pay off the credit card could instead be directed towards a higher-interest debt (like a personal loan). By taking the card company's lower rate, you free up cash to tackle more expensive obligations first.
However, Aaron cautions that this only makes sense if you're certain about sticking to your debt repayment plan. Many people intend to redirect the savings but get stuck in a cycle of minimum payments. The psychological win of closing an account often outweighs small rate reductions.
The smarter play
The most straightforward path is usually the best. Banks wouldn't offer these deals unless they benefited in the long run. What looks like 'saving' 5% on interest now may cost you more over time if it keeps you in debt longer.
Aaron's advice? Verify any unusual offers like this (ask in mortgage forums or groups), then stay the course. Paying off debt, especially high-interest credit cards, almost always beats playing rate negotiation games. Your future mortgage application will thank you for the clean credit history.
This is general information, not personalised financial advice. For advice on your situation, talk to Aaron.
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