Hey Gourmet People!
I figure we'd stick with the financial theme this month before moving on to more exciting topics like the upcoming elections or politics in general.
Enjoy,
The Chef
A Guide to Negotiating a Better Interest Rate on Your Credit Cards
A simple phone call to your credit card company could save you lots of money.
By Trent Hamm
When you carry a balance on a typical credit card, the credit card company is simply extracting money from your wallet. If you carry a $2,500 balance for a year on a typical 20 percent APR card, that means you're giving the credit card company $500 of your hard-earned cash just to keep that $2,500 balance. That's $500 that just blows away in the wind. The higher the balance, the worse it is – and the higher the APR, the worse it is, too.
One of the best money-saving strategies is to simply reduce that interest rate. If you knock an interest rate down from 20 percent to 10 percent, you save $250 a year in the example above. That's a lot of money.
The first step is easy: Just call the number on the back of your card. But you might need some help once you're actually on the phone. Here are some tips for negotiating a better rate on your credit card.
Make sure you have a position to negotiate from. Have you been a customer of this company for years? Do you pay your bills? Do you also maintain a balance on this card? Could you financially survive if this credit card were to be closed out? Do you have better interest rate offers on the table?
If you're answering "yes" to those questions, then you're in good shape to negotiate a better interest rate. If not, you don't have much leverage to negotiate.
Credit card companies want to keep customers who consistently pay their bills (a few days late on occasion is fine, but skipping months isn't), but also maintain a balance on their card. Those are the ideal customers. Is that you? If not, then the credit card companies won't do much to keep you around, as you're not worth much to them as a customer.
Similarly, you need to be in a position where you could survive without this card. Do you need this card to make ends meet each month? One potential outcome of this type of negotiation is that you end up closing your account – or the credit card company ends up closing it.
Be polite, always. No matter what happens during the phone call, refrain from getting angry. Don't raise your voice. Don't ever skip over polite phrases in your speech. Don't start calling the person on the phone names.
The second you resort to these tactics, your chances of getting a better interest rate drop to zero. The person on the other end will stop cooperating with you and you'll be left with your current rate.
If you're frustrated, simply say, "Thank you for your time!" and end the call, then vent your anger once you're off the phone.
Make sure the representative actually has the power to lower your interest rate. When you start speaking with a customer service representative, you should first make sure that the person you're talking to actually has the ability to lower your interest rate.
As always, be polite. Try saying something like this: "I have been a good customer, and I'd like to keep doing business with you. However, my interest rate seems high, and I'd like to talk with someone about that. Do you have the authority to change my interest rate?"
If they answer yes, then keep talking. If not, politely ask if you can be transferred to someone who does have that power. Say something like: "In that case, could I please speak to a supervisor who does have that authority?"
Use other offers for leverage. If you've done your homework, you should have a credit card offer with a lower interest rate than the card you're negotiating. Even better, you may already have another card with a lower interest rate. Use that as leverage when negotiating on this card.
Say something to the effect of this: "This card currently has a 19.9 percent APR. However, my other card, a Visa issued by Citigroup, has a 13.9 percent APR. I would prefer to use your card rather than the Citigroup card if they had the same interest rate."
Offer to transfer a balance. Another tool you have in your arsenal is the suggestion of transferring a balance to the card you're negotiating. If you're successful in getting a lower rate than the card you would be transferring from, this will save you money and entice the company to lower your rate.
Say something to the effect of this: "I currently carry a balance on my Citigroup Visa. If you were willing to lower the interest rate below the rate on that card, I would transfer my balance to your card."
Be willing to play hardball. If they won't help you at all, don't hesitate to close the card. There's no reason continuing to do business with a company that does not appreciate you.
If your attempts are denied, try saying something to the effect of this: "In that case, I would like to close my account with you and pay off my balance." If they don't respond with a good offer, make sure that they send you written notification of the account closure.
Carrying a credit card balance puts a real strain on your finances. While paying the balances off is the best solution, negotiating a better interest rate is a powerful interim step that can keep money in your pocket – where it belongs.
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