Lower
your credit-card APR right now!
by Scott Bilker
Scott Bilker is the author of the best-selling books, "Talk Your Way Out
of Credit Card Debt", "Credit Card and Debt Management", and "How to be
more Credit Card and Debt Smart". He is also the Editor and publisher of
the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com).
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When was the last
time you took a look at your credit card APR (Annual Percentage
Rate)? You may think you know what the bank is charging you for the
use of their money, but you might be surprised to find that terms have
changed and you're now paying as much as 18 to 20%. The U.S. average
is around 18%, and I believe that is much more than you have to
pay—especially when you've been a good customer with that bank.
So what do you do if you discover that you are paying too much for
your loans? Well, quite simply, make the bank lower your rate. Sound
impossible? More than half of the time I've been able to make my banks
lower their interest rates. The trick is to have the right
deal-breaker.
A deal-breaker or BATNA (best alternative to a negotiated agreement),
as William Ury, author of "Getting Past No," would say, is what you
will do if you don't get your way. It's the threat of leaving the car
dealership if they don't agree to your price, or the
I'll-call-my-lawyer option if you can't settle a dispute.
Some of you might be thinking, "What kind of threat can I deliver to
my credit-card bank to make them lower my rate? What deal-breaker do I
have?" Realize that there are options, and start taking advantage of
them. The first place to look is in your mailbox.
You know those low-rate transfer credit-card offers that go from your
mailbox straight to the "circular file"? Banks attempting to get you
to
switch sent out more than 3 billion transfer offers last year, so I
know you've seen them. Take a closer look at the next one that
arrives—probably today. The best part about that offer is that you
need not apply for the new credit line in order to make good use of
it.
What that offer becomes to you is the deal-breaker—the leverage you
might need to persuade your current bank to lower its APR on your
account. How?
Take out your credit card, flip it over, and call the customer-service
number on the back. After you're done going through the torture of
entering your credit card-number and information in the automated
voice menu, choose the option that gets you to a human. Remember to be
calm yet firm. Your conversation could go something like this:
Account rep: "How can I help you today?"
You: "I've been looking closely at my credit-card statement, and I've
noticed that your bank has been charging me like 18% interest for a
while now. I don't believe I should be paying that much interest."
Account rep: "What would you like me to do?"
You: "Lower my APR to something more reasonable, like 6.9%."
That might be all it takes to make them lower your rate, but I want to
prepare you for a bigger battle.
Account rep: "I can't do that?"
You: "Who can?"
Account rep: "Nobody really, we can't just change rates like that."
You: "Can I speak to your supervisor, please?"
Account rep: "Sure, please hold."
Supervisor: "Can I help you?"
You: "Your bank is charging me way too much interest, and I want it
lowered to something like 6.9%. This is the deal: I'm holding a credit
offer in my hand from [name the bank] bank. And they're willing to
give me 4.9% for 6 months, no annual fee [read the offer terms]. I bet
your
bank has better offers for new, unproven customers than they do for
established profitable ones, don't they? I see no reason to stay with
[name]
bank if they're not willing to treat me better. I have plenty of other
banks to choose from."
Supervisor: "You know that if you take that offer, the rate will go up
in six months."
You: "Well, I'll worry about that six months from now. And that's six
months without any high interest charges from your bank. Or six months
that your bank doesn't make any money from my account."
Supervisor: "What can I do for you?"
You: "Look, I'm not asking for you to lower my rate to 4.9%, but I do
need a reason to keep my balance with your bank. How about 6.9% or
7.9%?"
Now, at this point your chances are 50/50 as to whether they are going
to lower your rate. Your bank, may come back with an offer like 7.9%
for six months or a low-annual-fee card at a lower rate. In general,
you should always take the lower rate, even if there's a time limit.
You
can always call back in six months and do this again.
Remember that you need a real credit offer to do this. Without a
deal-breaker you're just begging, and you won't win by begging.
Success here
may also depend on how good you've been at handling your
account—paying on time. But no matter what your credit history is, you
should make that call, because you may be surprised to find that the
bank really wants to keep you as a customer.
It cost banks plenty of money to find a new customer. The competition
for a piece of your credit business is intense. Banks are fighting to
get you to switch, so it is truly in their best interest to keep you,
a proven and profitable customer.
How much can you save? Here's some incentive to make that call today.
Let's say your current rate is 18%. If you can get your bank to drop
its rate to something even as high as 9.9%, you'll save a bundle! The
dollar amount saved depends on two other factors: (1) how much you owe
and (2) how much you're paying per month.
For example, if you owe $5,000 and you're making payments of $100, at
18% it's going to take 93 months to pay off the card, and it's going
to
cost $9,300. However, at the new rate of 9.9% it takes only 65 months
to pay off the card, for a total cost of $6,500. You save the
difference
between $9,300 and $6,500, which is $2,800!
That's $2,800 for making a phone call—do it now!
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