Make your credit card work to keep you!
It’s a curious human trait that we value things that we must work hard to obtain (and maintain) and take for granted that which is given freely. With a bit of finesse you can use this knowledge to get yourself a better deal.
The trick is to make your credit card issuer know that they can’t take your business for granted. As it happens, it may not be as hard to convince them as you may think.
‘Valued Customer’ – Not just marketing speak…
Credit cards are lucrative. Really lucrative. Last year banks made over 50 billion dollars in revenue from late payment, over-the-limit and balance transfer fees. And that’s not including the money they make collecting interest payments on America’s one trillion dollar revolving debt.
Indeed, to banks, credit card users are worth their weight in gold. The market is extremely competitive. The ubiquitous 0% balance transfer offer is ostensibly nothing more than a bribe to induce you away from a competitor. Then of course there’s that tree each American gets sent over the course of the year – credit card issuers mailed out just under a billion credit card offers in 2007 alone.
Did you know credit card companies routinely spend upwards of $200 just to acquire a single customer?
Ask and ye shall receive
The bottom line is that your patronage is worth a great deal. So much so that, most of the time, getting a better deal on your card is as simple as calling up your issuer and asking. In a survey conducted by the U.S. Public Interest Research Group, 56% of participants reported getting an interest rate decrease simply by calling and asking for one.
In addition to asking to have your APR reduced you can also ask for a fee to be waived, a deadline to be extended, or a credit limit to be increased (a CLI, provided you don’t also increase your level of revolving debt, reduces your credit utilization and thus improves your Fico score)
Your chances of success depend on a few factors:
* Your credit rating - A higher Fico score will make you a more attractive borrower, so the banks will work twice as hard to keep you.
* Your personal history with that credit card – The longer you’ve held that card the better. If you always pay on time and keep your credit utilization reasonably low you’re a very valuable customer indeed.
* Prevailing market conditions – Most cards have a variable interest rate, meaning the rate you pay changes depending on what’s happening in the economy. Banks will be less likely to give you a better APR if monetary policy is tight (i.e. the prime rate is high and predicted to increase).
Negotiation 101
We’re not used to haggling – especially not with big companies, and they prey on that. Here are a few basic tips that should increase your chances of a successful negotiation.
* Be persistent. If at first you don’t succeed, try and try again. If you get turned down, call again a day or 2 later and you’ll be speaking to someone else. Don’t forget that the worst they can do is say no.
* Be polite. Don’t start acting like a jerk, since you’ll initially be talking to someone who has no vested interest in keeping you as a customer. Keep cool and simply tell them you don’t think your current terms are fair considering how good a customer you are. Tell them you’d love to stay with them, but you’ve received a couple of very enticing offers from their competitors.
* Be firm. Remember that the bank’s ultimate goal is to keep your patronage whilst conceding as little as possible. If you’re unhappy with what you’re hearing, tell them you’re going to have to close the account – and mean it. Chances are you’ll be transferred to a supervisor who can tell you something you do want to hear.
* Be smart. Try to think of ways you can out-fox the competition This often means thinking outside the box. A friend of mine tried unsuccessfully to get his 18.99% APR on purchases reduced. A few days later he called back and asked them if they’d be willing to offer him a good rate on balance transfers, since he had some debt from another card he’d like to move over. Naturally they were happy to oblige him with a very generous 0% for 12 months. He promptly moved the debt to another card and then immediately transferred it back, scoring himself a year long interest free loan!
Your business is worth a great deal to the bank – don’t be afraid to make them work for it.
Related posts:
- Five Ways to Make Your Credit Work for You
- Balance Transfers: How They Work and Do They Help?
- Debit Card Disputes and How They Work
- Gas Rebate Cards: Better than walking to work!
- Too Fat To Work? Let the Government Pay Your Way!
I like the ‘be smart’ tip. I once used something like this with a credit card company and although I did not get 0%, I did get a MUCH lower rate than what both cards initially offered.
Interesting story about the person who transferred their debt to another card, then back to the original card with the 0% balance transfer offer. I’m kind of surprised it worked, given how many “gotcha” moves card companies seem to have.