Sunday 23 March 2008

Talk Your Way Out of Credit Card Fees and Interest

Guest Post

Many people take high interest rates and extra charges lying down. But if you have a good credit history you can negotiate better rates and lower fees just by picking up your phone. Credit card companies don’t tell you this, but it’s true.

There is a rule in marketing that attracting a new customer costs 10 times as much as keeping an existing customer. Because competition is so fierce in the credit card industry, you’re an attractive asset to their business and it makes sense and cents to keep you in the fold.

Here are some examples of what you can get with a simple, polite phone call to your credit card company:

  • Late payment fee? If it’s your first “offense,” a simple call to your credit card company will likely win you a reversal of the charge.
  • High interest rate? Simply call and request a switch to get your interest rate lowered – but if they offer you a lower rate with an annual fee, refuse to accept the annual fee, providing an example of a competitor’s offer without an annual fee. To keep your business, your creditor will likely waive your fee and give you a lower rate.
  • Low credit limit? An easy way to boost your credit score is to request an increase in your spending limit, which will automatically lower your debt-to-credit ratio. The debt-to-credit ratio is how much credit you are using out of your available credit and is a factor in your attractiveness to other credit lenders. Just make sure you don’t use the increase as a license to spend more!
  • Did your credit card company jack your interest rate without much notice? Credit card lenders are only required to give you 2 weeks’ notice when they increase your interest rate. If you have a solid track record and can easily get a competitor’s lower rate, call up your credit card to negotiate a lower rate.

Tips for dealing with banks over the phone:

  • Call as soon as possible after your bill arrives if you’re disputing a fee
  • Have your statement on hand when you call with numbers and figures, and older statements that show your good history as a customer
  • Be prepared with “deal breakers” – you’ve had other offers, you’ll transfer or close your accounts
  • Be calm and polite, don’t be a jerk about it
  • Don’t blame the representative for mistakes
  • Don’t close your account right away before giving your bank a chance to resolve your issue

About the guest author:

Linda Bustos is a contributor to Creditor Web, where you can learn more about credit cards, banks and how to use plastic money wisely.

Copyright Enough Wealth 2007


Debt Dieter said...

This seems to be very common information for the US, but I've never seen it work in Australia, do you have any suggestions for dealing with Australian banks? said...

I've had luck phoning banks about cancelling a late fee when I've made a payment electronically on the due date which then wasn't recorded as paid until the next day. But I was a very good customer so getting them to remove a small penalty fee wasn't much of a victory.

As Australia doesn't have a "credit score" equivalent to the US FICO score, interest rates are standardised for all customers of a particular bank product and don't usually get varied according to individual circumstances. Here it is more important to shop around for a card with the best rate (if you plan on carrying a balance) or number of interest free days (if you're confident of paying the balance in full each month) when you open a CC account. After that it's a question of never doing stupid things like paying late or taking out a cash advance (both of which things will result in you losing your interest-free days on all outstanding purchase amounts).

If you're really in trouble (eg. can't make minimum monthly repayment amounts) it is still worth talking to Australian banks rather than just ignoring reminders and hoping for the best - from what I've read they can be willing to provide temporary relief via reduced monthly repayments in distressed situations.

Dave @ Rebuild FICO said...

This is about negotiation skills, here are two tips concerning negotiation. The first tip is: Negotiate everything! and the second tip is: Everything is negotiable.
Companies and people will go toward you to avoid 'conflict'. While for them a small tweak to the fee is nothing, for you it is worth much more.
The power of the negotiator is to be able to have alternatives.
If you walk to your bank and arrive with papers of another bank in your hands (brochures you just picked up walking in to that other bank). You sit in front of the banker and request 'to see all the fees I am being charge here'.. Once you see them ask "Is there any chance to get HERE lower fees?"
Just because you have the others bank papers in your lap, will make the banker offer better fees!
This is the power of alternatives, by the banker perception, you have the power to leave them!