How to Get a Lower APR, or Possibly Not
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I don't have the best credit history. A few years ago, when I was unemployed for a few months, I had to consolidate a few credit cards. Also, I totally went crazy back in college and rang up some terrible balances paying for other people's stuff. Despite this, I always paid off the high balances, and because I've been so responsible since, and because I make a decent income, I have a good credit score, much better than the American average.
Despite this, I still pay roughly 17% APR on one of my credit cards.
So last Friday, when I heard NPR's Morning Edition giving totally unoriginal advice about how to lower your credit card costs, I thought, I should try that.
If you don't feel like listening to the broadcast, I'll give you the gist: Paying a high APR? Why not call the company and ask them to lower your interest rate? They'll probably do it. If they don't, threaten to transfer your balance to another card! Or talk to the manager!
Lots of people seem to think that you can get out of debt with mere words. I've actually tried this method before, and they called my bluff.
"I'll transer my balance!", I shrieked to the customer service rep 2 years ago. When I applied for another card, I got rejected. Mind you, I wasn't making much money at the time, but still, maybe the bank has a little note on my file that says "Ignore requests for lower interest rate - she can't get one. Bwahahahaha!".
But, I reasoned, I make good money now. I have a mortgage. They will have to respect me. Just to be on the safe side, I applied for a credit card with 0% APR on balance transfers for the first 12 months, and 7.9% thereafter. I only have a couple thousand to pay off, but still, the APR makes a difference to me. And besides, I'd never missed a payment, never been late, and long ago stopped adding to my credit debt. So, they'd be sure to oblige this time, right?
Nope. I was informed that "There isn't another interest rate that we can apply to your card" as though 1 and 7 were the only numbers on her keypad, and bygummit, they could only be entered in that exact order. I asked to speak to a manager, and an equally unmovable person got on the line to inform me that there was no way in which my rate could be lowered.
"I'll transfer my balance!", I shrieked, experiencing a keen sense of deja vu. The rep was unconcerned.
Sadly, it seems like I'm not alone in my rejection.
Negotiating Power Back in 2003, a study by the U.S. Public Interest Research Group, a Washington, D.C., a consumer advocacy group, found that 56% of the consumers who called their credit-card companies to ask for a lower interest rate were able to get it within five minutes. That may not be as easy today, says US PIRG consumer program director Ed Mierzwinski. "They are being much more difficult because they're trying even harder to squeeze the last dollar out of your pocket," he says. "But if you're a good customer you should understand they don't want to lose you because the cost of acquiring new customers is very high."
I did apply for a new credit card, and was accepted, but then I read this:
But be wary of balance transfer fees, which lately have also been on the rise.... While most fees used to be 3% of the transferred balance, up to a cap of $50 to $75, many card issuers have eliminated the cap. So on a $10,000 transfer, you'd be hit with a $300 charge.
What's particularly troubling... is that most consumers probably won't realize there's no maximum fee because it's completely absent in the fine print. Up to now, the balance-transfer fee listed in the terms and conditions usually notes a maximum, but in some of the latest offers, there's absolutely no mention of any maximum. And that could mean you may have to pay the entire 3 percent charge. Best advice: Call and ask about all balance-transfer fees, including maximums, before accepting any new card offer.
This is important to note: when I applied for my credit card online, there was no immediate or obvious information about transfer fees. What was written was this:
We include Transaction Fees when computing finance charges. Incurring Fees results in an APR exceeding 0% for the billing statement on which Fees appear. The Daily Periodic Rate (DPR) will remain 0% as disclosed.
Is it just me, or is that wording not exactly straight-forward?
Now, I could just pay off the credit card (this may seem logical to people whose brains are not addled by consumer greed and shoe lust). I determined that by paying my minimum payment every month it will take me 43 months to pay off a debt of $2500. If I pay $400 a month (tough, but doable), it will take me 7 months.
But even in that case, the bank still gets $300 in interest from me.
Anyway, when I called and spoke to my new credit card company this morning, it turns out that my transfer fee for balances would amount to roughly $75. Which is much better than $300. I could then take my sweet time (11 months at $250 a month) to pay off the card, which would be easier to swing than $400 a month.
So take THAT! I'm taking $300 out of your coffers and giving $75 to another company! Yes!
It is a bitter victory indeed.