Things I’ve learned about credit card debt

Last night’s post got me to thinking. You would be astonished at how few people know that you can work with credit card companies to remove late fees, lower interest rates, and eliminate balance transfer fees on credit card debt. Now, most of these things have gotten a lot harder since the credit market tightened up as a result of the bad economy (and defaults), but there are still things that you can do to make paying your credit cards a little easier. These are the things I’ve learned over the years. (Note to skeptics: Yes, none of this would be necessary if you didn’t buy on credit. But a whole lot of people do, so for those of you who don’t, give yourself a huge pat on the back and go read something else on this site and leave the rest of us to talk and learn.)

Most credit card companies will work with you. For the most part, I’ve found that most credit card companies are willing to help you make paying your credit cards a little easier. They’ll knock off a late payment, or a couple of dollars in interest on a card you thought you zeroed out, change a payment due date to accommodate your pay schedule, and many other things. It never hurts to call and ask. Sometimes, you have to ask for a manager. Sometimes even the manager won’t be able to get what you want done. But in the end, the worst thing you’ve lost is a few minutes of your time. Remember to always be polite, even if they say no. And expect to hear “No” a lot more often now. But polite persistence may just pay off. Try more than once. Credit rates and deals change on a frequent basis. Wait a few weeks and ask again. That worked for me on my most stubborn creditor.

Sometimes you can lower your interest rate by simply asking. When my interest rates popped up on cards that I had been steadily (and promptly) paying down, I would call up and ask if I could get a better rate. Each time, I’ve had my interest rate knocked down to something reasonable by the credit card company. (Again, this all happened before the market tightened up. But it still doesn’t hurt to ask.)

If you’re late, you don’t always have to pay a late fee. Every once in a while, I’d forget to pay a card by the payment due date. It happens. But each time, I would call the company, pay over the phone (or pay online and then call the company), explain that I simply forgot, and ask if there was anything I could do about the late fee. If you don’t have a late payment in the previous six months, most credit card companies will abate the late fee for you—IF you ask. It doesn’t get done by wishing it so.

Read the balance transfer agreement carefully before making one. Back when I moved all of my credit card debt to 3.99% and 4.99% interest rate cards, the payment was a percentage of the balance OR a specified amount. And many had no balance transfer fee at all. Now the transfer fee is 3-4% of your balance. That’s $30-$40 per thousand. Transferring $5,000 will cost you $150-$200. Calculate the interest you’re currently paying first to see if it’s worth changing, say, a 12% interest rate card to a 9% interest rate card. It isn’t always worth it. Of course, if you can change a large balance at 21% to 9%, then yes, it’s worth it. Also, beware of 0% and .99% offers. These are ALWAYS limited-time deals, and can balloon up to horrifically high interest rates if you screw up only once. I bought a TV from Circuit City with one of those deals, and then worried every month that I’d mess up the payment and be liable for the ghost interest accruing, lying in wait for the day I was a minute late with my payment. The interest amounted to hundreds of dollars before I finally paid off the card (and no, I didn’t mess up and wind up paying it). If you can’t be sure you’ll make every payment on time, don’t take one of those deals.

If the credit card companies start offering low-interest life-of-the-loan deals, then jump on them. Those are the ones worth paying the transfer fee for. Just remember that ultimately, your credit card company controls the agreement, and the fine print says they can change it at any time. The government may have changed the laws regarding credit, but they still allow credit card companies to penalize us with a 28% interest rate if we miss only one payment on a zero percent short-term agreement.

Every credit card company has its own horror stories: Credit card companies that have been simply wonderful to me have been horrible to friends of mine, and vice-versa. You really can’t go by your friends’ experiences unless all of your friends have had a horrible experience with the same credit card company. So if your friends tell you not to go to Company X, or not to expect Company Y to work with you, ignore them and try anyway.

I’m not a credit advisor, I only play one on this blog. Since I am only telling you what worked for me, and since much of what I did happened before the economic meltdown, it may not work for you. But I think at the very least you will be able to use the late fee and interest advice. Remember that yes, the economy is bad, and yes, credit has tightened considerably, but the credit card companies still need customers, and they want to keep you, even at a lower interest rate. So good luck, and pay down those cards! I’m only a few months away from credit card freedom, and looking forward to it.

Instalink! Thanks, Glenn.

And a link from Megan McArdle. Thanks, Megan!

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11 Responses to Things I’ve learned about credit card debt

  1. sabbahillel says:

    Nowadays, many credit cards will enable you to set up a future payment online. That way you can pay on line as soon as the bill is available but set it up for the money to be taken out of your account on a specific day. For example, if you get the bill on the first of the month and the due date is the 25th of the month. You can go online (as early as the first) to the credit card account and arrange to have the money taken from your checking account on the 25th. That way you no longer have to remember to mail in the check and rely on the post office to get it there or remember to go online to pay it.

    If you are paying down a card by a fixed amount each month, you can set up the automatic recurring payment for that amount on any specific day of the month.

  2. Tzvi says:

    I may be the a credit card company’s worst customer. I pay the full amount just before the due date at the bank. It is only a short walk to the same shopping centre where I would have to buy stamps anyway.

    In addition to the interest charged, there is a charge to the merchant. One very large chain here in Canada, specializing in automotive goods, does provide a small discount to customers paying by credit card or cash, but in an indirect way. For some merchants they may be tempted to discount in return for cash.

  3. sabbahillel says:

    Originally, that was the normal procedure here in the U.S., however, the credit card companies managed to get a law passed making it illegal to “discriminate” against credit card user’s by charging them a higher price. Instead of lowering the prices for everyone, cash customers got charged the higher price.

  4. scott says:

    yeah, well, i tried all that with bank of you-know-who, and, nothin’ doin. i called and asked in advance for 3 extra days to pay a bill (i’ve never missed a payment), and they lowered my avail credit right there on the spot, and wouldn’t budge on my first late payment, sending my APR from 10% to 25%.

    good luck.

  5. dpwiener says:

    I want to emphasize that you have to ASK. On rare occasions I’ve forgotten a payment or sent in the wrong amount, so I’ve called up the bank to try to avoid the late fee and interest. I can explain the problem all I want, and the service representative will sympathize with me, but the representative usually has instructions not to volunteer anything. You have to explicitly say “Is there anything you can do about it?” or words to that effect, before the representative will agree to reverse the fee and interest.

  6. George S. says:

    I, too, have avoided late fees by calling the credit card company. In almost all cases, I had mailed the check before or on the due date. Once I could not pay onine overnight, but scheduled the payment for the next day, then called them the next day to make sure a late fee would not be applied. In one case where the bank refused to rescind the late fee over the phone (post-Lehman Brothers collapse), I was polite & then the next day went in person to the bank & got them to agree there to rescind the late fee. If you have a good history, you can get out of the late fees.

  7. Ken Willis says:

    There is one other thing that you might be able to do with a credit card company that will be difficult or well nigh impossible with any other creditor that is a subscriber to any of the three credit reporting companies (Equifax, Transunion, or Experian). If you make a payment more than 30 days late it will go on your credit history. You might be able to get the credit card company to remove that entry from your credit history. Clients of mine have gotten it done. My best advice is for them to talk to the credit card company themselves, and not for me or any other lawyer to do it. I have had several of them achieve success with this. Remember, you cannot threaten the credit card company in any way because they absolutely do not have to do it. You have to persuade them, and they are persuadable.

    This is in contrast to every other creditor I have ever dealt with. Getting any relief at all from them on your credit report is usually a frustrating waste of time. Getting them to correct their own mistakes is just about as difficult. Most people think their state attorney general’s office will help them with getting mistakes removed from their credit report. That has certainly not been my experience trying to help clients. The federal laws on this are too much in favor of the credit agencies and creditors for state attorney generals to be of much help. If Democrats were really for the little guy they would change this now, and they never would have allowed it in the first place. The most recent federal legislation on credit card debt puts a burden on credit card companies without doing anything of substance to help debtors.

  8. Ed says:

    dont link autopayments for a credit card to your checking account. Fraud in the card will be automatically paid and anyone cleaning out you credit card will have access to your checking account. this is true if you electronically link any two accounts. BUT….use the online banking to pay your bills. I always had late fees and penalites until I signed up for on-line banking. Its so easy to pay bills that now I never put it off and the record keeping by the bank is just great. No this is not at ad. I haven’t had a late fee on my credit cards in ages and my credit score is now over 800 cause now I pay my bills in time.

    And yes your advice about calling to lower rates, fees etc is spot on. One additional item. If your credit score is good, don’t be afraid to close an account if they won’t give you an inch. You would be suprised to see how fast they come around because they know you can always get another card elsewhere and, in the end, they really do want your business.

  9. ThomasD says:

    I’ll agree with pretty much everything here. Although in my own experience the days of low rate (2.99-5.99), life-of-the-loan type offers ended a little less than a year ago (and I doubt it is specific to me, as my overall debt load has only declined during that same period.)

    But yes, the card companies will go to great lengths to please if you have a solid credit rating and they think you have the resources available to settle up and cancel the account or move your debt elsewhere.

  10. I hope you can switch the debt to a different card. Go check with your bank to see about a debt consolidation loan. And don’t give up on calling the credit card company again and seeing if they’ll reconsider. Have you been paying on time since then?

    Good luck.

  11. Koblog says:

    Pay the balance in full every month.

    Better yet, use a Discover card or Costco American Express. They pay you to use the card if you don’t carry a balance.

    Costco AMEX downside: you have to spend your cashback reward at Costco. Discover gives it to you in cash.

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