Saturday, June 4, 2011

How to Reduce Your Credit Card Interest Rates.

F.A.M.E. -- The 'F' in FAME stands for 'Financial Advisor'

by Monroe Mann, MBA

Guess what?  You are probably needlessly paying more in credit card interest than you legally have to.  And by simply reducing your interest rates, you will end up with more money in your pocket at the end of each month.   Sounds great, right?

Well then, just follow these three simple steps, and voila, your interest rates should drop:
a) Take out one of your credit cards from your wallet/purse.
b) Call the customer service number on the back.
c) When someone answers the phone, say these words, "Hi, I am calling about lowering my interest rate.  May I please speak to someone about that?"

If you do this with each of your credit cards, the odds are in your favor that they will have the authority to decrease your interest rates on the spot.  How do I know this works?  Because I have done it numerous times.  In fact, I did this just today with my Capital One credit card, and had one of my interest rates reduced by over 5%.  This is a significant amount if your balance is high.  This is still a significant amount even if your balance is low--cause why should you pay for interest you don't have to pay?

Are there exceptions to this three-step system?  Yes, of course.  Sometimes I call up and they say, "I'm sorry, we don't have any interest rate reduction offers at this time."  In that case, ask to speak with a supervisor.  Often, the front-line customer service reps are not authorized to reduce your interest rate, but a supervisor can.

You might be wondering: "Why would they agree to reduce my interest rate?"  The answer is simple: they want to keep you as a customer.  By lowering your interest rate, they encourage you to pay off more of your credit card balance.  The more of that balance that is paid off, the more likely you will again use that credit card to make purchases.  The more often you use that credit card to make purchases, the more interest income the credit card companies will make.  See--they are not lowering the rates just to be nice; they are lowering the rates in an effort to woo you as a customer.  If you close the account due to a high interest rate, they will lose you as an interest paying customer.  They would rather appease you in the short term than lose you in the long term, and that's just good business no matter what country you are from.

If after all your efforts, they still say no--do not give up.  Just wait two months, and call them again, and ask the same question.  I can virtually guarantee that eventually, you will receive an interest rate reduction if you keep asking.

Sometimes, the interest rate reduction is permanent.  Sometimes it is only for a short period of time (three to seven months).  If you receive a short-term reduction, be sure to mark in your calendar when the interest rate is scheduled to increase again--that's your cue to call them back again and--once again--ask for an interest rate reduction.

One other strategy: if you do receive a short-term reduction, work your butt off to pay off as much of that credit card balance as possible during that time.  With the lower rate, your payments will have more bang for the buck, and when/if the rate jumps back up again, you will end up paying less overall because the balance is now much lower than it was when the rate originally was reduced.

I hope this is helpful!

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