Ask The Money Coach

Posts Tagged ‘credit card reform’

I Have a Zero Balance on a Credit Card But It Has a Fairly High APR. How Can I Get the Interest Rate Decreased?

Sometimes, one easy phone call is all it takes to get the interest rate on a credit card lowered. However, many people are reluctant to make that call, because they mistakenly believe that creditors won’t be willing to negotiate. Even amid the credit crunch, however, banks and other credit card issuers are willing to consider your requests – for everything from getting a lower rate, to having late fees eliminated, to waiving over-the-limit charges. Your chances are better, of course, if you have a solid track record of paying your credit card bill on time, as well as a good credit rating overall. But even if your credit record isn’t pristine, here are some tips that can help anyone looking to negotiate with a credit card company.

14 Negotiating Strategies To Use With Your Creditors

If you find yourself calling your creditors for any reason to negotiate the terms of your credit cards, here are some time-tested strategies you should use:

Call in the morning

Don’t call at the end of the day when customer service representatives are tired, more stressed and have been dealing all day with irate cardholders. Also avoid calling on the weekends; there may not be a supervisor there if you need one.

Be polite in making any requests

Get the conversation off to a good start by using good manners. Say “hello” or “good morning” to the person you’re talking to and call her by name, as in “Good morning, Susan, this is Kim Jones, I’m calling about my account.” Make sure your tone sounds like you are making requests, not demands. Be friendly and conversational, not adversarial, to establish a good rapport and get the cooperation of the person on the other end of telephone.

Request to speak to a supervisor if necessary

If you get nowhere with the person you’re talking to, don’t be afraid to “escalate” your phone call by asking to speak with a supervisor. Even if the conversation isn’t confrontational or negative, you may require a manager because some employees will say they don’t have the power to honor your request.

Point out your length of time as a customer

For those of you who’ve been with a credit card company for a number of years, use your long-term status as leverage in asking for what you want. This can really work in your favor because most banks value loyal, long-term customers; they don’t want to lose them.

Emphasize how much business you’ve done

Many of you might have racked up a lot of charges over time. If you’ve been a valued customer by virtue of having charged many goods and services, make that known. And state that you also value the relationship with your creditor and would like to remain a customer in good standing.

Stress your willingness pay what you owe

Creditors may not be inclined to be flexible with individuals they perceive as trying to “get over.” The worst thing you can do is to convey the impression that you’re a “deadbeat” who is out to weasel out of paying your obligations. A better strategy: stress that you are, in fact, willing and desirous of paying your bills.

Reveal any extenuating circumstances

In cases where there have been out of the ordinary circumstances, let your creditors know this. For instance, if you lost your job, suffered a death in the family or something major happened in your life that caused you to miss a payment, tell them. Also make it clear if something happened that prevented you from getting your bills, such as you moved addresses or got divorced and your ex-got the statements. Creditors may be willing to waive late fees in such cases.

Directly refer to your credit report

Don’t be ashamed to say that a negative mark from the creditor could hurt your credit report – especially if you’re in the market for a new car or house. Tell them your situation, and say something like, “I’d hate for this one blemish from your company to damage my credit standing or my ability to get a loan.” Tip: only do this with your original creditors, who will likely be more sensitive to your predicament. Don’t try this tactic with collection agents. That’s giving them too much information, and they’ll just turn that information against you, saying, in effect: “If you don’t pay up, you won’t get that new house.”

Make “first-time” cases work in your favor

If you’ve never been late before or you’ve never had an over-the limit fee assessed, ask directly for a removal of a late fee or over-the-limit charge. A little-known fact is that most credit card companies give their employees the authority (without even getting a supervisor’s approval) of waiving late fees once every 12 months. If this is the case for you, do ask to get those fees removed. You might be surprised at how easily they will agree.

Mention their competition

As a last resort, when you’re negotiating for a lower interest rate mention that you might be inclined to take your business elsewhere. The point here is not to make an idle threat. And I wouldn’t start the conversation off with talk about you possibly going to a competitor. But you’d certainly be justified in exploring your options – and telling the creditor about other companies’ balance transfer deals or lower interest-rate offers – if they won’t budge on high interest rate cards.

Document all conversations in writing

In the event you have to go back and get something corrected, or removed, it helps your case if you can refer to your written notes and say, “I spoke to XYZ person on this date, and was told such and such.”

Initiate requests immediately

Anytime you see there’s an issue you want resolved, contact your creditor immediately. Don’t wait a couple weeks, or even worse, a few months to ask for a rate reduction or removal of late fees. That works against you because it seems like you didn’t care enough about the situation to do take instant action. It also reflects well on you when you initiate the call regarding late payments, as opposed to them having to contact you.

Explain online payment discrepancies

If you were paying a bill online and for some reason payment didn’t go through, that could be a legitimate reason for late fees to get removed. Another possibility: say you were making minimum payments on a credit card that had a teaser rate of 0% interest for six months. And assume you were paying $100 a month on that card via automatic online payments. Six months later, your teaser rate expired and the normal 14.9% rate kicked in. All of a sudden, your new minimum payment might be $115 a month. If you weren’t keeping up with things, you would still be automatically sending in $100 payments online. The first time that happened, you’d likely get dinged with a late payment, for being $15 short in your payment. If you call the credit card company and point this out to them, they’ll see your online payment history and will likely waive the late fee.

Use the 6-month rule

Lastly, if all these efforts fail, you can always ask for a review of your account again in a few months. For example, if your request for a lower rate is denied, ask a supervisor if he or she would be willing to reconsider their position in, say, three or six months. If they agree, document the person’s name, and put a reminder on your calendar to call back at the appropriate time. And here’s some good news: If your interest rate was high because you made a late payment in the past, some relief is on the way. That’s because in May 2009, President Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act, also known as the Credit CARD Reform Act. One provision of the law, effective as of Feb. 22, 2010, imposes limits on how long banks can slap you with so-called “default rates” (i.e. higher interest rates) after you’ve been late paying a bill. Under the law, default rates can only be charged for six months, provided you pay your credit card bill on time during that period. After six months, your credit card issuer must restore your rate to its previous level.

So don’t fall into the trap of thinking that you don’t have leverage in negotiating with your creditors. Follow these tips and you should be fine when trying to wring lower interest rates and other concessions out of your creditors.

How Will the Credit Card Reform Act Impact Me?

Author: The Money Coach

Consumers scored a big win in 2009, when President Barack Obama signed the Credit CARD Act, which consumer advocates say will stop or prevent unfair or deceptive lending practices by banks and credit card issuers. The law is formally called the Credit Card Accountability, Responsibility and Disclosure Act.

Key Parts of Credit Card Reform

In August 2009, two provisions of the legislation were adopted. The first required your credit card company to give you 45-days notice before an interest rate hike, up from 15 days notice. You have the option to reject a rate hike and close the account. Under this scenario, you would have the right to pay off the debt over five years at your original interest rate. However, there’s one big loophole in this change to the law. The 45-days advanced notice requirement applies only to credit cards with fixed interest rates. Unfortunately, more than 90% of all credit cards issued are variable-rate cards. Additionally, just before the 45-day rule took effect in 2009, many issuers of fixed-rate cards started notifying customers that their cards were being converted to variable-rate cards.

Another change resulting from the Credit CARD Act is that credit card companies must also give you more time to pay your bills, by mailing your bills 21 days before due date; not 14 days, as was previously the case.

Even bigger credit card changes begin February 2010, when a host of other rules take place. For example, the credit card reform law prohibits credit cards from being issued to individuals under 18, and prevents credit cad issuers from retroactively increasing your interest rate, unless you’ve been 60 days or more late paying your credit card bill. Also, effective July 2010, new rules from the Federal Reserve require banks to provide better disclosure to their credit card customers.

Banks React to Credit Card Reform By Tightening Credit and Their Policies

Given all these changes, you may have already noticed changes from your credit card company. Many have began imposing various fees, raising interest rates, slashing credit lines or canceling accounts altogether in an effort to manage risk, offset reduced profits, and generate new revenue streams. According to CreditCards.com, in mid-December 2009, the national average interest rate for “bad credit cards” (i.e. cards issued to those with bad credit) was 13.74%. But rates on various cards can go much higher.

One Bank Is Offering a Credit Card With an 80% Interest Rate

Industry observers say the highest-rate card known in 2009 came from First Premier Bank. It began offering a subprime credit card with a whopping 79.9% interest rate. That card, marketed to people with bad credit, had just a $300 credit limit. In a statement, the company’s CEO Miles Beacom defended the unusually high interest rate, saying it was “based on the risk associated with this market.”

But in response to the onslaught of new fees and other activities by banks, members of Congress considered accelerating the adoption of the new credit card laws, making them effective in December 2009, instead of February and July 2010. While that never happened, lawmakers did continue to debate a bill introduced in December 2009 in the U.S. House of Representatives to cap credit card interest rates at 16%. Currently, banks can charge whatever interest rate they like on credit cards, as long as the information is fully disclosed to consumers. Therefore, First Premier’s 79.9% interest rate card is perfectly legally. The company’s CEO said the bank will “allow the customer to make the decision whether they want the product or not.”

Competition, Regulation and Political Forces Will Ultimately Keep Banks In Check

While the banking industry’s move toward more careful risk management and more scrutiny of credit applicants will be a longer-term trend, I expect that the rise of fees and interest rates, and other punitive actions such as arbitrarily closing accounts, will be a short-term phenomenon. Only time will tell. But I predict that political forces, regulatory oversight and competition factors will all help keep banks in check.

Credit Card Reform Levels the Playing Field

For starters, the outcry of consumer opposition to objectionable bank practices is being heard more clearly now than ever. Additionally, politicians and regulators alike are under pressure to rein in unfair banking activities that unjustly enrich financial institutions at the expense of the public. And finally, sheer economic forces will emerge. Banks will become more competitive in the long-run, and try to stand out by dropping excessive fees and unnecessarily high interest rates for good customers. And when one bank stops imposing annual fees, and that practice starts to win over new business, then the rest of the industry will take note and try to do the same thing. On balance, therefore, credit card reform has created a more level playing field, and can be expected to bring more fairness into credit card lending and marketing practices.

How Credit Card Reform Impacts You

Author: The Money Coach

By Lynnette Khalfani-Cox, The Money Coach

Starting today, big changes will impact you and your credit cards, thanks to the credit card reform legislation that President Obama signed into law earlier this year.

The goal of credit card reform was to stop or prevent unfair or deceptive lending practices by banks and credit card issuers.

The two provisions of the legislation that kick in today are:

Banks and credit card issuers will now be required to give you 45-days notice before an interest rate hike. (Currently, they only have to give you 15-days notice)
- NOTE: If you reject a rate hike, you will have the right to pay off the debt over 5 years at your original rate)
Credit card companies must give you more time to pay your bills because banks must now mail your bills 21 days before due date; not 14 days, as is currently the case.

Even bigger changes will come in February 2010, when you’ll see a host of other benefits. For example, in the future, the credit card reform law:

bans retroactive interest rate increases (unless you’re 60 days or more late paying your credit card)
restricts default rates to 6 months if customers pay on time
outlaws universal default (although this is officially banned starting Feb. 2010, but many banks have already stopped this)
mandates that payments be first applied to the highest rate balances (this will really hit bank profits; but again, it’s not mandatory until Feb. 2010)
requires anyone under 21 to have a co-signer to get a credit card
forbids credit cards from being issued to people under 18
sets rules for how quickly banks must apply payments
prohibits fees on payments made via phone and the Internet
puts a 5-year lifespan on gift cards and eliminate their hidden fees
requires better disclosure of payment due dates and late payment penalties
prevents issuers from establishing early morning payment deadline (no due dates before 5 p.m. on any business day; starting in Feb. 2010)

Here’s my take on the new law:

The downsides – or potential risks – to consumers include:

limited or no grace periods
more credit cards with annual fees
stricter credit practices (harder to qualify for cards, higher rates, slashed credit lines or outright closing of accounts)
creative fees or questionable practices until 2010
more junk mail in your mailbox (because banks will try to make up for lost profits by attracting certain new customers.)

Overall, I think credit card reform is a huge win for consumers.

I don’t buy the banking industry’s contention that it will be unjustifiably hurt by the changes. Sure, they’ll have diminished profits. But that’s after having reaped many billions of dollars in profits based on questionable fees and unfair practices.

Nor do I accept the industry’s claims that “low income” people will be the most to suffer, because of reduced access to credit.

Only time will tell, but my best guess is that banks will tighten up the rules, as they’ve been doing lately, and hit customers with more fees in the short run …

Banks compete
But in the long run, banks will become more competitive with one another, and try to stand out to consumers by dropping those fees, etc.

And when one bank stops imposing annual fees, or quits nickel and diming credit card customers, and that starts to win over clients, then the rest of the industry will take notice and try to do the same.

Lastly, it’s important to note that banks still exert a lot of power. For example, they can close your account any time they want, without notice and for any reason.

And they can also still lower your credit line without advance notice — providing they don’t impose any fees or hike your interest rate.

So credit card reform is essentially a way to create a more level playing field, and to bring more fairness into credit card lending and marketing practices.

The Upside to Credit Card Reform

Author: The Money Coach

By Lynnette Khalfani-Cox, The Money Coach

A major overhaul is underway to change the way credit cards work and are marketed in the United States. Congress has passed The Credit Card Reform Act and is awaiting President Obama’s approval, which might happen later today. The Act’s goal: to stop or prevent unfair or deceptive lending practices by banks and credit card issuers.

The Bill contains some downsides for consumers, but it has more than a dozen great benefits for consumers. As proposed, the Bill would:

ban retroactive interest rate increases (unless you’re 60 days or more late paying your credit card)
require 45-days notice before a rate hike
restrict default rates to 6 months if customers pay on time
outlaw universal default
mandate that payments be first applied to the highest rate balances
require anyone under 21 to have a co-signer to get a credit card
forbid credit cards from being issued to people under 18
set rules for how quickly banks must apply payments
give consumers a minimum amount of time to pay bills
prohibit fees on payments made via phone and the Internet
put a 5-year lifespan on gift cards and eliminate their hidden fees
require better disclosure of payment due dates and late payment penalties
prevent issuers from establishing early morning payment deadline

All of these provisions boil down to one thing: bringing more fairness into credit card lending and marketing practices.