If this was a credit card payment, my interest would've went up to 29.99%. Ha.
At a former job, I once had a co-worker who mentioned that he was burdened by his credit card debt but in the calmest manner. The kind that's like, well, I know I have debt, but what's the big deal when everyone has debt. IMPO, I think that's an even more dangerous school of thought than ignoring your debt altogether.
Because in this situation, he acknowledged the debt but didn't feel the urgency to do anything about it. I figured that maybe the only reason he didn't feel the need to was because he must've had a super duper lower interest rate. When I asked, "If you don't mind me asking, do you know what your interest rate is?"
He replied, "I'm not really sure, I think 18%. Not too bad huh."
NOT TOO BAD?!? I was freaking out in my head FOR HIM.
Suuuuure, it wasn't too bad when you compared to the highest I had ever paid for interest (which was 21%). However, by the time this conversation took place, my interest had been lowered to 9.24%.
I was excited that I could share with him how he could lower his interest rate, but he didn't seem to care. I couldn't tell if it's because he thought 18% was an average interest rate one could have, or if it really was indifference, or maybe just hubris at play. Either way, it's hard to help someone if they want to help themselves first.
Do you know what you would be paying in interest over time and how long it would take?!
Use this nifty credit card calculator for an idea. However, if you've signed up for Mint.com like I had talked about in my last entry, their calculator works with your numbers and you can make it a goal for it to track your progress.
If I had my $10,000 debt at 21%, this is how much I would be paying:
It would have taken me 10 years and I would've ended up paying more in interest than what I would have actually owed! No wonder my $200 payment a month barely made a dent. Then I was able to lower it to 15%, which made a difference:
I saved myself 3 years of time down to 7 years and the interest is now a little over half of what I owe.
(Just so you guys know, over time, I went down from 21% to 15% to 12% to 10% to 9.24%)
So how did I go from 21% in interest to 9.24%?
Easy. I just asked the credit card to lower it.
If you pay regularly, and it's been at least a year since your last late payments, it's really that simple. You know that saying, "You never know unless you asked?" I almost think it was invented for these situations!
At first, I used scripts to talk to credit card reps. There's plenty out there. The first time I came across one was from Oprah's Debt Diet.
I've modified mine over time and have used improv skills to get super creative, so I'll post my dialogue here too. In no time, you'll see how fun it is to see how low you can get away with it. I do love a good game, especially one I can win at.
1. Awesome credit card offers: Either get these from your junk mail or look up a few online. These should either say something along the lines of 0% APR for the first 13 months. Have it in front of your face. Or you can make it up. Let's be real here, EVERYONE has these offers.
2. Confidence/improv skills: Think...THEATRE. You can make up whatever scenario you need to get what you need.
3. Your sweetness: The person on the other side is just like you. He/she probably has credit card debt and is working to pay off that debt. They have a family and maybe a few kids. Little ones. With super cute puppy eyes. And maybe their mom is living with them because she recently got into an accident. Be nice to them. People are more likely to help you if you sound relatable, down to earth and you mean well in life.
4. Your current APR: You've got to know the exact number that you're trying to lower here.
5. 15 minutes of your time: I swear, it doesn't take long. For the purpose of this entry I actually called CitiCards to see if I could lower my already really low interest rate. Below is a screenshot of how long the conversation took--13 minutes with 2 reps.
If this was past Isabelle, I just saved myself $629 in interest paid for every minute I was on the phone with them! (I breakdown everything in my life like this now by the way, lol)
What you're going to do is call up your credit cards and tell them that you've had other credit card offers (be specific) and you were thinking of transferring over your balance to them. But before you want to do that, you wanted to see if you could lower your interest over here first. They'll look over your account and if they say no, you ask for the supervisor and repeat the conversation.
THE SCRIPT & 2 GATES OF THE CUSTOMER REPS:
I've done my share of cold calls on the phone and when I first start out, I would write out what I would say beforehand and then use it as a reading reference. Notice how I say "reference". Try your best not to read it word by word off your script only because you want to sound natural and not like you're reading off of a prompter here. Feel free to use my basic script.
To me, there are two gates within the credit card customer service realm. The first is within their outsourced call center, usually the Philippines. I've come to realize that they're really not authorized to lower your interest. I've never ever gotten my interest lowered with my first rep. Sure, they'll say they've spoken to "their supervisor", but they too are also in the same call center and don't have that power.
The supervisor you'll want to speak to afterwards is someone they'll transfer you to in the States--your second gate. I usually always get South Dakota or Kentucky. And this is where I always have my interest lowered. I have a feeling that this person usually doesn't have any higher of a status of the previous rep, but because they're on the home turf, they have more authorization.
So again, feel free to use the following.
Credit Card: Hi there! How are you doing today?
You: I'm great! How are you doing? (I always ask about the other person even if I know the answer)
Credit Card: I'm great! Thanks for asking! What can I do for you?
You: I actually recently received an offer from the Chase Slate card that offers 0% APR for 15 months and no balance transfer fee. I was thinking about transferring over my balance over there. But before I do that, I wanted to see if I could lower my interest over here first.
***BONUS: If you've had this credit card more than 2 years or have been paying it on time for at least a year, say this: "I've been with your guys' credit card the longest actually" "If you look at my account, you can see that I've been making regularly on time payments"
Even if it really isn't the card you've been with the longest, say that they are anyways. The reason why you would bring this up is because it shows loyalty and gives them more reason to trust that you'll stay with them and continue to pay. And like any business, they like that. They'll be more likely to lower your interest.
Credit Card: Unfortunately, it looks like I can't lower it anymore. I'm not authorized to do so.
You: I see. The thing is, we both know that after today you guys will send me another offer for a lower rate. Could you look into it again or ask a supervisor? (Repeat the BONUS statement sweetly to kindly remind them of your loyalty)
Credit Card: I've asked and it looks like we can't do anything about it, insert their explanation here.
You: No worries, I'd like to speak to a supervisor please.
They'll transfer you to the second gate, and you repeat the above conversation.
IF THEY REALLY CAN'T LOWER IT.
It's rare, but maybe a recent late payment or low credit score may be a factor. If they really really can't lower it, then two things you can do:
1. Call again in a month. They might even say they review accounts every 6 months and may lower it then, but no-- take this into your own hands and call every month. I did this and I went from 21% to 15%. 15% to 12%. 12% to 10%. 10% to 9.24% where it's been pretty stable. And I still do this pretty often even with no balances on my credit card.
2. Time to transfer some or all of your balance. And depending on your numbers you should do this anyways even if you do get approved for a lower interest. When I say numbers, I mean:
Interest paid in (# of months) of the 0% APR offer from the other competitive credit card offer
Balance transfer fee paid to transfer from Credit Card A to Credit Card B
Right now, the best balance transfer offer is Chase Slate's 0% APR for 15 months and no balance transfer fee whatsoever for the first 60 days. Typically the fees are 3% of the balance, so to not pay a fee and no pay any interest on it for 15 months is AMAZING and RARE. By the way, I'm totally not getting a kickback for advertising that. (I wish!) I'm only mentioning it because I've personally used this card myself to help me get out of credit card debt.
Below is a conversation that took place yesterday. Don't use this if you're trying to lower your rate on your current balance. The sole purpose of this dialogue is to show you guys that you can easily negotiate your rate with credit cards for whatever reason or situation you want. Get them to work for you.
Nowadays, I'm pretty confident with my credit card negotiation skills and with no balance, I omit things in the above script. Some people are satisfied with their already low interest rate and assume that it can't get any lower. Oh yes it can people.
You'll see that I'm more vague because it gets them to ask me questions. When that happens, it means you're the one who's in control of the conversation. And that's where it gets fun, you get to play house.
GATE 1: Hi there! How are you doing today?
Me: I'm great! How are you doing?
GATE 1: I'm great! Thanks for asking! What can I do for you?
Me: I wanted to call to see if I could lower my interest rate.
GATE 1: Sure. I could look into that.
Me: Thanks! (I hear typing on her end)
GATE 1: Ma'am. You're aware that your prime rate is 3.25% and that the bank's margin is 5.99% giving you the variable rate of 9.24%, yes?
GATE 1: Okay, let me see what I can do. (more typing, silence, more typing) Ma'am, I have exhausted my resources and unfortunately that's the lowest it can go. You have no balance on this card, is there a reason why you would want to lower it?
She realizes that I'm not here to do a balance transfer. The lower your current balance is, the more curious the other party will be about as to why you'd want to lower your interest rate.
Me: The thing is, I'm getting ready to make a big purchase and I'm calling all of my credit cards to see what the lowest rate is.
By saying this, I will pique her interest that there will be money to be spent on the card regardless. Which equals, money to be made for the company. But at the time same time, she knows that I will spend it with the card that has the right rate.
GATE 1: Oh, what kind of big purchase are you trying to make?
Me: I need to buy new furniture. And so far Bank of America has given me 8 and something percent but I wanted to see if I could get anything lower than that even.
I say furniture because 1) it's a big purchase 2) it may mean that I'm a new homeowner and I say BOA with 8% because it's a realistic lower rate from my current rate at this point.
GATE 1: I see. Well, what I can do is this, we have a promo offer right now where I can send you a check and you can use it to pay whatever you like with it for only at 1.99% APR for 8 months.
Me: Yeah, no, it's okay. I don't want to get involved with that. That's okay, thanks for your help.
Just as you would haggle at a flea market, pretend to "walk away"
GATE 1: Actually, let me transfer you to my supervisor, maybe he can help you.
Me: Great, thanks!
GATE 2: Hi there Isabelle! This is Andrew from the call center in South Dakota. How are you doing today?
Me: I'm great Andrew! How about yourself?
GATE 2: I'm great, thanks so asking. So I heard from my rep that you were planning on making a big purchase and you wanted to lower your rate.
Me: Yes. And I called around my other cards and Bank of America gave me a lower rate.
GATE 2: If you don't mind me asking, what was the rate?
Me: I can't remember it decimal wise, but it was 8 something percent.
GATE 2: Okay. I see. Well, what I can do is this. I can't do anything about your current balance because it's already at 0. But I can offer you a promo rate of 7.99% on any new purchases for the next 6 months.
Me: That's perfect. Sounds good to me. Thanks so much!
Voila. I went from 9.24% to 7.99% in 13 minutes. And why would they do that? In this situation, it's because they'd rather have me pay a large balance at 7.99% over time than a $0 balance at 9.24%.
In your situation (and Past Isabelle's situation), they would lower the rate because they'd rather have you pay the debt at any interest rate than to lose you as a customer altogether to another credit card.
If I had other cards with balances on them, I would actually go to them and use this new rate of 7.99% as ammo to see if I could negotiate even something lower than that. You should already be doing this in life anyways. Whether it's car washes or an electronics store, see if people can match their competitor's pricing. You'll be pleasantly surprised that they will.
And there you have it. Try it and see what you get. And call again in a month. Break a leg!
Come back on Money Monday for another personal finance entry!