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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 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]. 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] 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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