The Art of the Credit Card Deal
A fast food chain once used the slogan, Have it your way. Ever wonder why credit card companies don’t use it? If you glance over a few credit card agreements, you’ll quickly see that issuers write them to pretty much have things their way. But not always. Some things are negotiable. We’ll fill you in today on MoneyWise. We’ve talked before about how Americans are a bit too complacent. We don’t like to haggle over prices, which is a way of life in many countries around the world. We might walk away if we don’t like the price of something, but we usually don’t think to ask for a better deal. Now, when it comes to credit cards, it would be a good idea to get over that reluctance. The Federal Reserve says that Americans owe nearly $1 trillion in credit card debt. The average household balance is over $8000. Obviously, the best solution is to pay down credit card debt, but while you’re doing that, you can do a few things to make it easier. And we’re certainly not talking about negotiating to have your balance lowered. That’s called a settlement, and while folks sometimes find themselves in a financial predicament where they have to negotiate a settlement, we always want to avoid that and pay our debts in full. Proverbs 37: 21 reads, The wicked borrows but does not pay back So just what can you negotiate with credit card companies? And actually, there’s really not a lot of negotiating required. For the most part, we’re really talking about just asking for something and waiting for a yes or no. So it’s a pretty simple process. So let’s look at interest rates and fees. The plastic in your wallet is a great convenience at times, but it’s not cheap, even if you pay your balance in full every month. The typical credit card may come with as many as four different fees, and the biggest money maker for the issuers is the late fee, which could run as high as $35 every time you’re late making a payment. The vast majority of people simply pay it, not realizing there may be a better way to handle it. And that would be simply making a phone call to your credit card issuer and asking to have the fee waived. The number’s right on the back of the card. And we have some pretty good data on how effective this can be. CreditCards.comasked 1600 cardholders about their experience when calling their issuer and simply asking for a better deal. They focused on three areas: reversing a late fee, waiving or reducing an annual fee, and a really important request lowering the interest rate. The survey revealed something quite surprising. A full 85% of cardholders who made at least one request got what they wanted. It was also surprising to learn that not a lot of people know this because only three out of five cardholders in the survey reported making such a request. The survey broke down the success rates for each type of request: late fees, annual fees, and lower interest rates. In each case, the results were largely positive. Those asking to have a late fee waived were successful about 85% of the time. More than half were able to get their interest rate lowered, again, just by asking. But maybe more surprising, almost 3/4 of those asking to have their annual fee waived were successful. It’s true that only about 30 percent of credit cards have an annual fee, but for those that do, they’re pretty high, averaging well over $100. But again, the survey showed that not many people are aware that a simple phone call might get their annual fee eliminated. Only 18% of those polled had ever asked for it. Even more disturbing, they were much more likely to ask for a credit limit increase. Okay, the numbers clearly show that your chances of success are more than 50-50, sometimes a lot more. But why are credit card companies so willing to give in? Two words for you there: balance transfer. They know all too well that most of their cardholders can simply take their business elsewhere by transferring their balance to another issuer’s card. And they don’t want to lose you even if you pay off your balance every month, because they still make a lot of money in vendor fees when you use their card. So they have a vested interest in keeping you happy. One final thought: in these days of inflation and rising interest rates, it may be more difficult to get a lower rate, but it’s all the more important to try. On today’s program, Rob also answers listener questions: ● Would you have to pay a gift tax after receiving a large gift from a family member? ● At age 62 with adult children, do you still need life insurance? ● Would it make sense to refinance your first home and use equity to purchase a second property?