Banks are bending over backwards right now to attract new customers and keep current ones. Because the market is currently competitive, cardholders have more power than they realize.
In fact, more than 80 percent of American credit card holders who asked to have a late payment fee waived, an annual fee waived or reduced or a credit limit increased had their request granted, according to a new survey by CreditCards.com. Nearly 70 percent of those who asked for a lower annual percentage rate, or APR, got their request granted, too. The problem is that no more than 1 in 4 cardholders make any one of those requests. (Added together, only about half of consumers have made any request at all.) That means that an awful lot of Americans are paying far more on their credit card than they have to.
[See: 12 Habits to Help You Take Control of Your Credit.]
How do you effectively wield all this power? In some cases, it can be as simple as calling the phone number on the back of your credit card and asking politely. (That can often be the case with late payment fees.) Other situations, such as negotiating a lower APR, might require a bit more prep work, including some shopping around.
Don’t let a little extra work deter you, though. There’s a lot of money at stake. For example:
— If you owe $5,000 on a credit card with a 20 percent APR and make payments of $150 per month, it’ll take 50 months and $2,359 in interest to pay it off, according to a debt payoff calculator.
— With that same debt and payment schedule and an APR of 17 percent, it’ll take 46 months and $1,815 to pay the debt down.
— That’s a savings of more than $500 just for moving the APR down 3 percentage points.
[See: 8 Ways to Maximize Your Credit Card Rewards.]
Of course, not everyone gets these breaks — and even if you do get a break, you may not get everything you ask for. Folks with good credit and a long track record with an issuer are more likely to get the benefit of the doubt. However, the fact that such a high percentage of cardholders who ask get their wish indicates that these breaks aren’t just for those with 800-plus credit scores.
Many of those who get these breaks will have to work for them as well. For example, if you want your interest rate reduced, expect a negotiation. The idea of haggling with a bank makes many people uncomfortable, but a little bit of shopping around can make it far easier for you.
[See: 12 Simple Ways to Raise Your Credit Score.]
Say you want to get your interest rate reduced. You could certainly try calling the bank, throwing out a random number and seeing if it will match it. However, there’s a better approach:
1. Watch your snail mail for offers for a few days. (If you have decent credit, chances are you’ll receive some.)
2. Review the terms of those offers — comparing them to your current cards — and keep any that seem interesting.
3. Next, shop for offers at a site like CreditCards.com.
4. Once you’ve done your due diligence, call the phone number on the back of your card and try to make a deal, using those other offers to frame the negotiation.
5. Be persistent and don’t take no for an answer. Be polite. Be courteous. But don’t be afraid to walk away if the bank won’t work with you. Tell the bank that you’d stop using the card — and possibly even close the account — if it isn’t willing to negotiate. As you’ve seen, there are plenty of other fish in the sea.
The conversation could start something like this:
“Hi, I’ve used your card for several years and really like it. However, my card’s interest rate is 20 percent and I’ve gotten some offers recently for cards with rates as low as 15 percent. Would you be able to match that rate? Again, I like your card, but that’s a really big difference in interest rates, especially since I carry a balance sometimes.”
If they ask, get more specific with them about the offers you’ve seen, so they know you’ve done your homework. It can also help to remind them of your good credit and long track record with that issuer (if you have one). Finally, be willing to walk away if they won’t work with you. Don’t be a jerk about it, but be clear that you would consider closing the account altogether.
The truth is that you have nothing to lose by picking up the phone and making this request. The worst thing that can happen is that they turn you down, and the status quo remains. However, as this survey shows, there’s a very real possibility that they will say yes — and that can save you some real money.
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How Shopping for a Credit Card Can Save You Money originally appeared on usnews.com
