Want to save hundreds or thousands for only one hour of your time? Call your credit card company to negotiate for a lower rate. Depending on your balance, minimal effort on your part could save you BIG TIME for the life of your card. If credit card debt has been weighing you down, do something about it today!
According to CNNMoney.com, the average American carries family carries $8,000-$10,000 in credit card debt. For the average American whose credit card debt is $10,000, if they negotiate their 14% rate down just two points to 12%, they will be saving $200/year! If you owe more than average, or can negotiate an even better deal on your rate, the saving could be phenomenal.
Research, Research, Research
While research is always important in any negotiation situation, it is absolutely critical here! Ignorance in this situation can end up costing you. Here are three things you need to know before calling to negotiate your rate:
Your Credit History
Know your complete credit history before asking for a lower rate. The best way of doing this is by ordering an up to date credit report to give you all the juicy details. Due to the recent law enacted by the Federal Trade Commission, you are entitled to receive one free credit report every twelve months. If there is something on there that is surprising, or a plain mistake, try to get it resolved well before asking for a lower rate. Calling with new blemishes on your record will harm more than help. When your bank finds out they may actually increase your interest rate, something I’m sure you want to avoid.
Your Payment History
Equally important as being aware of your overall credit picture, is being aware of your credit card payment history. Consistently making your payments on time, or even early, can hold a lot of weight and ultimately strengthen your position. The credit card company wants to know that you pose minimal risk to them by never being late. If you have been late on your payments in the past, don’t count on them agreeing to lower your rate unless your financial situation has drastically improved or the offenses were made eons ago.
Your Current Financial Picture
Be prepared to answer questions about your current financial situation, because they will ask. The credit specialist you speak with may ask you about your household income, mortgage or rent payments, car payments, alimony, child support, you name it! This is one situation where you need to be comfortable talking about money. Don’t forget to mention any positive financial information that may help your cause like raises at work, additional household income, or a hefty amount in savings.
The Bank’s Perspective
The number one thing banks turn to when deciding on your credit card rate is risk. In other words, how sure they are you will pay back what you’ve borrowed. They use the above information, such as credit history, payment history, and your current financial picture to analyze the risk you pose. The lower the risk, the lower your interest rate. Similarly, the higher the risk, the higher the rate.
Negotiation Strategies
Just Ask
Sometimes the easiest way to get what you want is to just ask. Call your credit card company, work through the system to be connected with someone who has the authority to help you, and tell them what you want. If you have been a loyal customer and pose minimal risk to them, they will probably comply with your request and lower your rate.
“There’s no incentive for them to lower your rate unless you call. The squeaky wheel gets the oil,” says Brad Dakake, a consumer advocate with Massachusetts Public Interest Research Group.
Threaten to Leave
If politely asking doesn’t do the trick, bluntly tell them that you will leave unless they do what you want. Pull out offers you have received from other credit card companies and ask them to beat the rate. If they think you’re serious, they may back-down and decrease your interest rate. Then again, they may not, and you could be forced to follow through with your threat to cancel your card.
USE CAUTION HERE! If you do end up canceling your credit card carrying a balance, the bank can rightfully demand to be paid immediately. You need to have a back-up offer credit card offer waiting so you can quickly transfer the balances onto your new card without incurring penalties.
Persistence Pays
“If at first you don’t succeed, try, try again.”—Thomas H. Palmer
Sometimes the best strategy is not to give up. Simply calling back to ask again can do the trick. If you discover on your first attempt to lower your rate that there are things the bank would like to see changed to lower your risk, do what you can to improve your situation and call back. Don’t settle until you’re satisfied.
Depending on how much you owe on your cards, the effort you put forth in negotiating for a better credit card rate can save you thousands per year! After looking at it in this light, I think that you will agree it is well worth the time.
Have you attempted to negotiate your VISA, MASTERCARD, or AMERICAN EXPRESS credit card rate? What was your experience?
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