How You Can Negotiate Better Interest Rates

The rule of thumb when it comes to credit card interest rates is: Ask and you shall receive! In a 2002 US Public Interest Group survey, fifty consumers of all different credit backgrounds called their creditors to request lower interest rates and 56% got just that! More than half of those surveyed dropped their rates from 16% down to 10% after a quick, five-minute phone call.

One borrower had his interest rate cut from 14.99% to 0% for six months using one of the cardholder’s new promotions. Another borrower found her company was mistakenly overcharging her a penalty rate of 31.12% for six months, instead of the 14.65% it was supposed to drop back to after a month.

When calling, use lines like, “What can you do to help me out,” and “Can you do any better?” If at first you don’t succeed, call, call again. Eventually you’ll find a sympathetic rep willing to assist you. It also pays to do a little bargain hunting and let them know you’re thinking of transferring your business elsewhere if they can’t budge and work with you.

Video: Just Ask For A Lower Rate

When to Clip Your Card

When you’ve cut yourself, you get a band-aid to stop the bleeding. If it soaks through, you get another. Over time, your wounds are magically healed. Unfortunately, stopping the financial bleeding isn’t so straightforward. Often times we don’t realize we’re bleeding our finances dry until it’s too late and we’re left reeling, wondering how we’ve blown through thousands in just a few months! Here are some classic signs that you’re spending too much:

1. Have you ever gone over your limits? Check your credit card limits for all your cards. You should not be using more than 30% of your limit. So if your card limit is $1,000, be sure you don’t have more than $300 in charges on that card. Once you begin surpassing your limit, it’s not just the balance that escalates – but your credit score too! In fact, the total amount of credit you’re using accounts for 30% of your overall score.

2. Are you seemingly broke all the time? If payday isn’t for another five days and you’re already itching for cash, this is a sign of a big spending problem. More than likely you’re not even sure where you’re money has gone: a couple dollars here, a couple dollars there. Start tracking your expenses to determine where all your money is going to illuminate your spending patterns. You might be surprised by how much you’re spending on entertainment. In fact, a 2007 Bureau of Labor Statistics study found the average household’s largest expense increase – more than transportation, health care and food – was entertainment.

3. Do you use credit cards to pay off other credit cards? It seems so easy to just use your MasterCard to pay off your store charge card or to play the balance transfer game. When the old cards max out, just sign up for a new one, right? This is a dangerous game, indeed, and accounts for a lot of consumer debt escalation.

4. Do you have any savings? Everyone should have at least $1,000 in an emergency savings fund to cover sudden medical, car or home repair emergencies. Once you’ve saved that initial thousand, you should then start saving up a few months’ living expenses in case you suddenly lose your job. Unfortunately, many Americans are living penny to penny. If you’re charging more each month than you’re making, then you have a problem.

5. Do you owe people money?  If you’ve borrowed from mom, dad, grandma and your best friend, you may have a problem on your hands – one that goes far beyond finances. The longer you owe your loved ones money, the more they will view you use irresponsible and selfish. Before you know, they will be unable to look you in the eye and they will grow to resent you. If the situation is really bad, you may even find yourself lying about your spending or acting out-of-character.

You may want to visit the Debtors Anonymous website to determine the severity of your debt problem. While it’s not advisable for your credit’s sake, some people may find it advantageous to cut up their cards to break these terrible spending habits.

Why Sharing Cards Is Risky Business

You may have fallen head over heels in love with someone and trust that person implicitly with your heart. Yet trusting another person with your finances is another story. Even if you have a joint bank account with your spouse, think twice before sharing a credit card. Money can do strange things to people, making them act outside the norm in pursuit of status symbols. Your spouse may not call you before booking a $500 plane ticket, dropping $200 on a pair of shoes or taking the guys out for $300 in drinks after work. A 2008 Creditcards.com poll found that 19% of respondents who shared a credit card admitted to fighting over some of the charges and 7% cancelled the card due to relationship problems. These little expenses can quickly escalate from fights into court battles. In the case of a divorce, the credit expenses will likely be split down the middle. However, if your ex doesn’t pay up, your credit rating will suffer and debt collectors can still hound you relentlessly! Letting your teenager or college student share a card can be even costlier. You may be able to ground your kids for buying frivolous items online, but at the end of the day, it’s your credit and financial future on the line!

Video: Sharing a Credit Card is Bad News

Ask Your Creditor to Remove Penalties

There’s really no magic to getting penalties and late fees removed. The most important thing is that you at least make your minimum monthly payments on-time each month. This gives you a very powerful bargaining chip. When you call, politely explain your circumstance and point out that you pay on-time every month and that you are a loyal customer. If your bill is rather high, offer to make a payment through your bank account online right then and there to show you didn’t intend to skip on paying. Remember you can always ask to speak with a supervisor if the rep refuses to remove the charge.

Debt Consolidation Company Resources:

Alabama Central Credit Union
Birmingham, AL
205-595-5523

Colorado Credit Counseling
Arvada, CO
303-425-1502

Capital City Credit Company
West Hartford, CT
860-236-0641

The Credit Counseling Foundation
Fort Lauderdale, FL
1-800-790-3882

Aloha Credit Counselors
Honolulu, HI
808-942-9030

Accutrac Incorporated
Anderson, IN
765-608-5050

Credit & Debt Counseling Service
Lawrence, KS
785-749-5306

Dun & Bradstreet Incorporated
St. Matthews, KY
502-899-4716

Credit Cleaners
Metairie, LA
504-454-6548

American Debt Counseling
Center Line, MI
586-759-1900

Credit Advisors Foundation
Omaha, NE
402-393-3100

Debt Free Counseling Centers
South Fargo, ND
701-298-3514

The Finance Journal
Greenwich, RI
401-886-9119

Eagle Financial Resources
American Fork, UT
801-763-9660

Credit Bureau Service of Vermont
South Burlington, VT
802-863-2589