I Don't Love Capital One - How to Get a Lower APR, or Possibly Not

By Andrea Karim. Last updated 10 June 2007. 26 comments

I knew there was a reason that I chose capitalone-bites-the-big-one772 as my log in name for my online credit card account. It's because, well, Capital One bites. I'm a good customer of Capital One; I keep a revolving balance that should make them happy, and I pay my bill religiously.

Now, 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 my Capital One credit card.

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 Capital One totally 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 Capital One probably 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. Capital One 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?

As usual, Capital One managed to disappoint. 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.

What type of credit card are you interested in?
How much do you spend per month?
Do you carry a balance?

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 now charge 4% of the balance with a cap of $90, Arnold says. Notably, Bank of America recently eliminated the cap on its 3% fee. So on a $10,000 transfer, you'd be hit with a $300 charge.

Also:

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). Using Bankrate.com's credit pay down calculator, I determined that by paying my minimum payment every month (which is what Capital One helpfully hints that I should do when I pay my bill online) 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, Capital One 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 going towards Capital One. 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, Capital One! Take that. I'm taking $300 out of your coffers and giving $75 to another company! Yes!

It is a bitter victory indeed.

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Will Chen's picture

I know it doesn't sound like you saved a ton of money, but ultimately you were able to punish the company that didn't treat you with respect.  And that counts for a lot in my book!

 

Guest's picture
Guest

i kno after writing that you must have felt pretty victorious....your not. you know nothing and thats all i have to say. maybe you should research the other end a bit eh?

the agent you spoke to obviously wasnt the ceo of the company so i dnt kno why you would put them on a pedastol in your little head thinking they have the power to do whatever you want. do you understand? ill put it like this, your computer breaks and you call in they arnt goin to put bill gates on the phone cuz your **** broke.
the companies offer THEIR money at THEIR terms not yours

whats the deal?

Andrea Karim's picture

I don't think that anyone wins in the credit card wars. Oh, wait. Except the credit card companies. I guess that they win.

I was totally expecting this article to end on a cheery note. But then I found all those balance transfer hidden fees articles and realized that I didn't have a lot to tell people.

Lynn Truong's picture

i have a few thousand in credit card debt that i keep in cards dedicated to the transfer balance. a few things to note:

if you use a credit card (charge and pay off balance in full every month), after a while, your good payment record will give the company incentive to offer you better balance transfer rates (usually 3.99% or 4.99% balance transfer rate for life).

you can then use that offer and transfer any debt from other cards w/higher rates and just leave it on that card. don't ever use the card again until you've paid off the balance transfer completely.

what most people don't know: let's say you transfer $2000 at 5%. but your regular rate for new purchases is $17% (typical of all cards). if you charge something for $100, and then that month pay $100, your payment does not go to that $100 you just charged. it goes to your balance transfer payment. so now you have $1900 at 5%, and $100 at 17%.

also, because only a few big companies own all the CCs out there, make sure you're not signing up for a new credit card that is owned by the same CC you are planning to balance transfer. most won't allow you to balance transfer from 2 CCs of the same company.

i know you're planning on paying off your debt within the next year, so you might never have to face these issues again.

Andrea Karim's picture

Yes, I quit spending on the cards a while ago. Just made a habit of not using them. So this new one, I won't even touch it before it's cut in half. So no new fees. A lot of the articles that I linked to covered that info - very disturbing to see how it works.

One thing that I tried to research but couldn't seem to determine was really where the money goes, or who it goes to. Is VISA really behind every VISA card? Or does Capital One get most of the money and just give a cut? Does switching a balance from one card to another do you any good (in terms of vengence, I guess)?

Lynn Truong's picture

what my bf told me was that wall street buys up a lot of the debt.  years ago, it was difficult to get credit cause the banks only had a certain amount of money to lend, so their application process was strict.  now, it seems wall street will buy up all this debt so that the banks essentially become the middle men between the lenders and the lendees.  they buy up debt and the banks have more money to offer new clients.  i'm going to find out where he read this and maybe it'll be a good info post.  i'm guessiing more credit = more consumer spending and it somehow benefits wall street.  that's just my guess though.  and this may not apply to all banks, maybe just the ones that give out cc the most - like captial one.  maybe banks like american express or discover don't do that.  again, just my guesses.

Guest's picture
bookseller

Try a credit union, there rates are usually much lower and some have no balance transfer fee. I am at Bellco they have been great.

Andrea Karim's picture

Bookseller, that's an exceelent point. I might start work on a credit union post in a week or so. I belong to BECU (I have my car loan through them), and I agree, they have some great rates. It's only been recently that credit unions have opened up to people outside of small circles - for instance, BECU used to allow only Boeing Employees to bank there. Likewise, many credit unions are aimed at specific groups, like teachers. My own mother, a financially savvy woman if there ever was one, didn't know she could join any.

It's definitely something that I want to research.

Guest's picture
Ryan

Investment banks and hedge funds do buy up debt. It is called an Asset Backed Security. They do it with Credit Cards, Mortgages, etc. They then sell bond-like "notes" that will pay back the capital + a set interest rate at a certain time. They make these notes by slicing up the debt in terms of how long it usually takes the average consumer to pay back. Depending on what slice of the pie you get determines how high the interest rate is. Since it is based on consumer debt, it is considered a rather high risk investment because if people start busting up their credit, they bust up your investment...atleast that's how it works with mortgages...

Read this for more info http://en.wikipedia.org/wiki/Asset-backed_security

Andrea Karim's picture

That China owns much of our debt through Wall Street investments. I knew I should have stayed in Beijing! I'd own debt, rather than owing it!

Guest's picture
Guest

LOWER MY INTEREST RATE CAPITAL ONE.

THANKS.

Guest's picture
gwen of Plano, TX

I have done onling banking with Capital One for a few months and was having overdraft charges so I decided to watch every day and just got hit again. The balance they show is not the correct balance. I had a deposit come in and they took away all the checks coming in before they input the deposit. This is how they are making money.

I even had over 3000.00 in another account and they did not transfer any monies. They charged me 300.00 in NF charges. I just withdrew all my money from this bank.

Guest's picture
Guest

CapitalOne is sending out letters, raising the interest rate 10% after the 3 billion dollar bail out they got from us. Cut up your Capital One Card!! Lets hit them where it hurts the most, there wallet. Obama did bring change, a 10% interest rate increase sure is change. Write your elected leader!!

Guest's picture
Guest

I used a credit card consolidation program last year. Capital One was one of the cards I placed on my plan; if you are familiar with consolidation programs, they take what you owe and your interest rate on each card and negotiate with each CC to lower your monthly payment. The consolidation company did this, but two months in a row, the company underestimated what Cap One would accept as a payment... by $1.50 one month and $1.25 the next. The result? An APR increase from 11.9 to 23.9 because I did not make my payment in full for 2 months. After speaking to both the consolidation company and Capital One, each denied blame and Cap One absolutely refused to budge on my APR despite my ALWAYS on-time and often payment in full I provided to Cap One over the past 7 years. By all means, avoid Cap One. And Bank of America as well.

Guest's picture
Jay

Do you really honestly believe they care that you left Cap One? If you threaten to close your account and they dont offer you anything, it means your not a good enough customer to keep. So First off, you only pay interest if you dont pay your bills in full, so dont carry a balance, secondly, you initially signed up for the card at that rate so you can only blame yourself, as well cap one is a business, and they are there to make money, its very simple, the people that work there arent as stupid as you all would like to believe, and almost all credit card companies are the same. The reason everyone's rates are so high is because everyones neighbours and sons and friends and so forth keep defaulting on their cards which means someone is going to foot the bill and its not going to the company, so blame the next person you see that says they cant afford to pay their bills, its their fault. Stop complaining and read the fine print... Yes the stuff you dont read, usually when the writing is small it means its probably important... so ignorant.

Guest's picture
Mr Me

actually Jay I work in banking. I've worked for various companies. Capital One bought my company after our CEO retired. They actually are running a business, that's true. But not a very good one from a customer service standpoint. They truly are taking advantage of "trapped credit". You see, when 2008s crisis was at a peak many credit issuers tightened their lending and canceled unused lines, thereby putting people in a newly minted bad situation of having a high % of "available credit" being used. Capital One knows these customers are good customers. They know their customers that pay more then then minimums are trapped there for a couple of years, and they are LOVING the 17% interest rate. Sure they do have every right to do this. But when things get better and cards get paid off guess where these customers are going? I called chase and they lowered my rate to 12% from 15.99%, would I have liked lower, sure, but hey, at least they "did something". Capital One will always have the niche market of college kids and first time credit users, but if they continue having robots in India spit out scripted answers they'll probably pay for it in the long haul, not just on the credit side, but their retail banking side as well. I now work for an institution that has renowned customer service and is not a recipient of bail out $$$.

Guest's picture
smartstuff

No one's asking whether they care. I say just don't pay. If no one pays, then we can call these lame brains-and yes they are stupid-out on usury.

Guest's picture
Guest

Why do people even wish to carry a balance on a credit card in the first place? It's a disaster waiting to happen, no matter what. Credit cards are only meant to be used as credit builders and reap benefits from using there money and paying it off with your money. Bottom line don't use money you don't have sitting in the bank. And if you need to carry a balance get a unsecured line of credit with your bank. I don't mean to judge, but credit card companies are never on your side or 'your friend'. They are in the most simplest of terms, a business. Live in symbiosis with it and you'll be fine, in fact you end up coming out better, but if you use it with little regard what else would you expect?

Guest's picture
Guest

Wow, what stories. I work in their IT and we spend, spend and spend millions of dollars for equipment I see where this money comes from. Buy Cisco stock!

Guest's picture
Guest

I just had my interest rate on a CapitalOne card lowered by 8% for seven months. I called and was nice. Talked to two people and they gave me the little reprieve. Is this a new policy or am I just that nice?

Andrea Karim's picture

It could be that you are a big bowl of sunshine. :) Or it could be that Capital One has changed their tune since this article was written many years ago. Hard to say. But being polite never hurts, that's for sure.

Guest's picture
Guest

credit period is an illegal scam to begin with in the usa, but then again these days who doesnt really on credit?

Guest's picture
smartstuff

Eh. You can't go to debtor's prison. When collectors call, just go on and on about the state of the economy. Say you know for a fact the dollar will crash again, only worse (cause it will). Tell em that you're waiting til then, because that will make your debt too negligible for anyone to bother collecting cash on it. Credit cards are all scams, and more than just the irresponsible get a raw deal. Nuts to any fool who blames the victims-the people. That is the hallmark of a psychopath. Just let the creditors know that you know your stuff. Don't give.

Guest's picture
Guest

You mentioned that one and seven were the only numbers available on cap one's screen in only that order sarcastically. Would you prefer to have the numbers reversed for a 71% APR? LOL

Andrea Karim's picture

Um. No. LOL?

Guest's picture
Guest

what cc company were you able to get to change to?