Updated on 02.21.07

Five Minute Finances #2: Call Your Credit Card Company

Trent Hamm

Five Minute FinancesFive Minute Finances is a series of tips on how you can save significant money or reorganize your financial life in just five minutes. These tips appear Monday, Wednesday, and Friday on The Simple Dollar.

Tip #2: Call your credit card company
According to CardWeb, the average American household has approximately $9,200 in credit card debt, with the average interest rate hovering around 16.5%. Just a quick bit of math shows that a household with the average credit card and credit card debt is paying $1,518 in finance charges a year. That’s a lot of dough.

Fortunately, there’s a very simple tactic that anyone can use to reduce those finance charges a bit without damaging your credit report. All it takes is a few minutes on the phone and suddenly your finance charges will be steeply lowered. Here’s what you do.

1. Take your highest interest credit card, flip the card over, and dial the customer service number on the back. Wade through their phone menu until you reach a customer service representative.

2. Ask to speak to a supervisor. At nearly all credit card call centers, the people who first answer the phone have no power to do anything at all.

3. Tell the person that you are having difficulty making payments on time and you are seeking a rate reduction. Usually, most supervisors will approve this request immediately and drop your rate by 5 to 7%, because it’s more cost-effective for the company to drop the rate than have to deal with a customer who may be making late payments.

4. If the supervisor refuses to budge, indicate that you are looking into debt consolidation, whether or not you actually are. Mention the possibility of transferring the balance to another card with a low introductory APR. Again, rather than facing the potential loss of income due to a complete payoff, the supervisor will often reduce the rate at this point.

5. If the supervisor still won’t budge, hang up and call back another time of the day (if you called in the morning, wait until the evening, and vice versa). Some supervisors are simply unwilling to reduce rates for any reason, while others are much more willing.

Some tips:

Don’t repeatedly request rate reductions on the same card. If you get one, consider it good enough and don’t continue to call and ask for further reductions. Why? Many companies maintain databases of “trouble” customers and customer service for these individuals in the database is much more difficult than before.

Don’t hesitate to try this on all your cards, but be aware that the lower the interest rate, the less likely you will see a significant rate drop. If you’ve already got a 7.9% interest rate, this phone call probably won’t do you too much good. Instead, save this tactic for the cards that are above 15%, as those are the cards where this tactic is cost-effective.

If you can’t get a reduction at all, consider another solution. This may include signing up for another card and transferring the balance, even though a new card will ding your credit report a bit in the short term. If a reduction or elimination of interest rates makes it possible for you to pay off your card quickly, this may be the way to go.

Remember, this advice is useless if you don’t also curb your spending. If you can’t afford to buy things, don’t buy them just because you have the plastic!

Time spent: Five minutes
Money saved: $460 (that’s 5% of $9,200)

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  1. Oleg says:

    This is a great little hack to remember. Good thing I have a single credit card with an 8.9 APR which is just peachy for me.

    But in talking about money to my friends, I’ll be sure to link them to this post.

    Thank you.

  2. John says:

    Excellent advice, and perhaps the easiest way to save money EVER.

  3. Wahooo It worked! Thanks Trent for the advice!!! I’m going to submit this post to this comming weeks carnaval of finance. I was able to knock 10% of the interest of one of my cards thanks to b.s.ing my way threw to lower rates.

    I documented the heck out of the whole ordeal and posted it at http://www.moneyvsdebt.com/2007/02/24/death-to-high-interest-rate-credit-cards-me-vs-them-i-won-by-10/

  4. Anne says:

    Yeah, I tried this with the card I’ve had for nearly four years with an 8.9% and they didn’t budge. Oh well, no debt there anyway.

  5. Eugene says:

    I called my American Express and in 2 minutes lowered my 18.24% (9 above prime) to 11.24% (2 above prime) without even arguing about it or speaking to a higher-up representative.

    Excellent advice and I don’t know why I did not do it earlier! Due to a high balance on the card this reduction saves me almost $2000 a year.

  6. Jenn says:

    This almost always works. If you tell them you want to cancel the card and the reason is the interest rate, they usually lower it no problem. They may ask what rate you get on other cards and I have made up some number I want to get on the card I’m calling about and they usually go just below the competitor rate….if not they will sometimes give you a low rate for 3 or 6 months to keep you as a customer.

  7. workingmywayup.com says:

    I wrote about how to do this and also included a fantastic script to use when calling the credit card companies. It tells you word for word on how to lower your APR and also increase your credit limit(which increases your debt to credit limit ratio thus increasing your credit score [hypothetically]). Besides this is so easy that anyone can do it, so there is no reason not to do it!

    It also gives you a good worksheet to fill out while doing it so you can track the changes in the credit limit and APR for each of your credit cards.

    Anyways you can check it out at workingmywayup.com also a direct link to the post is http://workingmywayup.com/2008/02/raise-credit-limit-lower-apr/

    Anyways keep up the great work trent! I am so happy that I stumbled across your site!

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