Wednesday, July 8, 2009

Negotiate a Lower APR on Credit Cards

Yesterday a report by the American Bankers Association showed that delinquencies on bank credit cards rose to a record 4.75%, compared with 4.52% in the fourth quarter of 2008. The percentage of borrowers at least 30 days late paying a balance is the highest since the group began keeping records in 1974.

"This could indicate that consumers are using bank cards to bridge temporary income loss, especially as falling housing prices continue to punish home equity", Chief Economist James Chessen said in a statement.

Chessen also supposed that rising consumer debt delinquency is "a natural consequence of mounting job losses in a weakening economy."

I've just started reading Ramit Sethi's I Will Teach You to be Rich. I expect to have a full review for you coming soon. But hearing the ABA's report got me thinking that I've just got to share something from this book right now.

So often you'll read that one way to manage credit card debt is by asking for a lower interest rate on your high interest cards. This sounds brilliant in theory, but have you actually tried it? That's where I Will Teach You to be Rich comes in. Sethi gives you a script to follow that can counteract nearly any telephone customer service rep.

I feel compelled to share this with you now. Consider it an exerpt from the book. I know Ramit Sethi has shared this on several blogs as well, so I don't feel I'm giving away his secrets. It's just one of the tips that can be found in the book.

Negotiate down the APR:
You: Hi, I'm going to be paying off my credit card debt more aggressively beginning next week and I'd like a lower APR.

Credit Card Rep: Uh, why?

You: I've decided to be more aggressive about paying off my debt, and that's why I'd like a lower APR. Other cards are offering me rates at half what you're offering. Can you lower my rate by 50% or only 40%?

Credit Card Rep: Hmm...after reviewing your account, I'm afraid we can't offer you a lower APR. We can offer you a credit limit increase, however.

You: No, that won't work for me. Like I mentioned, other credit cards are offering me zero percent introductory rates for twelve months, as well as APRs of half of what you're offering. I've been a customer for X years, and I'd prefer not to switch my balance over to a low-interest card. Can you match the other credit card rates, or can you go lower?

Credit Card Rep: I see...Hmm, let me pull something up here. Fortunately, the system is suddenly letting me offer you a reduced APR. That is effective immediately.

What I like about this script is that it's believable. But I'm sure it can't work every time. I used it to call two credit card companies: Chase and Amex. With Chase there was almost no need to negotiate, they lowered the rate significantly within seconds. Amex was not so easy.

A lot of course depends on you. You must be calm and undemanding, yet persistent. If it works, great! If it doesn't you haven't really lost anything.

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