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How Can I lower My APR?
When was the last time you took a look at your credit card APR (Annual Percentage Rate)? You may think you know what the bank is charging you for the use of their money, but you might be surprised to find that terms have changed and you’re now paying as much as 18 to 20%. The U.S. average is around 18%, and I believe that is much more than you have to pay—especially when you’ve been a good customer with that bank.
So what do you do if you discover that you are paying too much for your loans? Well, quite simply, make the bank lower your rate. Sound impossible? More than half of the time I’ve been able to make my banks lower their interest rates. The trick is to have the right deal-breaker.
A deal-breaker or BATNA (best alternative to a negotiated agreement), as William Ury, author of “Getting Past No,” would say, is what you will do if you don’t get your way. It’s the threat of leaving the car dealership if they don’t agree to your price, or the I’ll-call-my-lawyer option if you can’t settle a dispute.
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Some of you might be thinking, “What kind of threat can I deliver to my credit-card bank to make them lower my rate? What deal-breaker do I have?” Realize that there are options, and start taking advantage of them. The first place to look is in your mailbox.
You know those low-rate transfer credit-card offers that go from your mailbox straight to the “circular file”? Banks attempting to get you to switch sent out more than 3 billion transfer offers last year, so I know you’ve seen them. Take a closer look at the next one that arrives—probably today. The best part about that offer is that you need not apply for the new credit line in order to make good use of it.
What that offer becomes to you is the deal-breaker—the leverage you might need to persuade your current bank to lower its APR on your account. How?
Take out your credit card, flip it over, and call the customer-service number on the back. After you’re done going through the torture of entering your credit card-number and information in the automated voice menu, choose the option that gets you to a human. Remember to be calm yet firm. Your conversation could go something like this:
Account rep: “How can I help you today?”
You: “I’ve been looking closely at my credit-card statement, and I’ve noticed that your bank has been charging me like 18% interest for a while now. I don’t believe I should be paying that much interest.”
Account rep: “What would you like me to do?”
You: “Lower my APR to something more reasonable, like 6.9%.”
That might be all it takes to make them lower your rate, but I want to prepare you for a bigger battle.
Account rep: “I can’t do that?”
You: “Who can?”
Account rep: “Nobody really, we can’t just change rates like that.”
You: “Can I speak to your supervisor, please?”
Account rep: “Sure, please hold.”
Supervisor: “Can I help you?”
You: “Your bank is charging me way too much interest, and I want it lowered to something like 6.9%. This is the deal: I’m holding a credit offer in my hand from [name the bank]. And they’re willing to give me 4.9% for 6 months, no annual fee [read the offer terms]. I bet your bank has better offers for new, unproven customers than they do for established profitable ones, don’t they? I see no reason to stay with [name] if they’re not willing to treat me better. I have plenty of other banks to choose from.”
Supervisor: “You know that if you take that offer, the rate will go up in six months.”
You: “Well, I’ll worry about that six months from now. And that’s six months without any high interest charges from your bank. Or six months that your bank doesn’t make any money from my account.”
Supervisor: “What can I do for you?”
You: “Look, I’m not asking for you to lower my rate to 4.9%, but I do need a reason to keep my balance with your bank. How about 6.9% or 7.9%?”
Now, at this point your chances are 50/50 as to whether they are going to lower your rate. Your bank, may come back with an offer like 7.9% for six months or a low-annual-fee card at a lower rate. In general, you should always take the lower rate, even if there’s a time limit. You can always call back in six months and do this again.
Remember that you need a real credit offer to do this. Without a deal-breaker you’re just begging, and you won’t win by begging. Success here may also depend on how good you’ve been at handling your account—paying on time. But no matter what your credit history is, you should make that call, because you may be surprised to find that the bank really wants to keep you as a customer.
It cost banks plenty of money to find a new customer. The competition for a piece of your credit business is intense. Banks are fighting to get you to switch, so it is truly in their best interest to keep you, a proven and profitable customer.
How much can you save? Here’s some incentive to make that call today. Let’s say your current rate is 18%. If you can get your bank to drop its rate to something even as high as 9.9%, you’ll save a bundle! The dollar amount saved depends on two other factors: (1) how much you owe and (2) how much you’re paying per month.
For example, if you owe $5,000 and you’re making payments of $100, at 18% it’s going to take 93 months to pay off the card, and it’s going to cost $9,300. However, at the new rate of 9.9% it takes only 65 months to pay off the card, for a total cost of $6,500. You save the difference between $9,300 and $6,500, which is $2,800!
That’s $2,800 for making a phone call—do it now!
What You Need To Know!
Have you ever seen your credit report? Your employer probably saw it before hiring you. The landlord likely considered it before accepting you as a tenant. And long distance telephone carriers even look at it before giving you a long distance line. And you’ve never even seen your own credit report?! If your answer in no, you’re not alone. In fact, according to a recent study, less than 20% of all Americans have ever seen their credit report. Most people become concerned about their credit report only when they are denied credit. By that time, it’s usually too late.
You should take a look at your credit report at least once every 2 years. This way, information is still accessible and verifiable in the case that you may need to have it corrected. You should also look at your credit report before applying for any credit. This may help to avoid any unwelcome surprises.Allowing you to look at exactly what your loan manager will look at, can prepare you for any questions
If you’ve never had credit problems, you might think that you need not be concerned. But according to a recent government study, one out of every four credit reports contain errors, one out of every six contain errors that could cause denial of credit. Sometimes Credit reports are accidentally combined, and people with similar names or social security numbers actually share a credit report! It’s not at all uncommon for family members to have overlapping data. Nor is it uncommon for a credit card or loan company to accidentally list you as having missed a payment.
Have you ever received a late notice or collection letter on something that you already have paid? I’m sure you made a phone call or two and straightened it out immediately. But what about the monthly report to the credit bureau? You can’t help but wonder if the mistake got corrected on that report. The only way to find out what is actually on your credit report is to look at it for yourself. When you do, you may be surprised to see that your credit record looks quit different than you expected. The past and present credit accounts that you expected to see, may not be listed, and still other accounts that you did not expect to see might be listed. This is not at all uncommon because creditors are not required to report our account to a credit bureau. They are free to report only the information that they see fit. And they can report that information to whichever credit bureau they prefer. Some creditors report all credit account transactions to all of the large credit bureaus. Some creditors prefer to report an account only when it becomes delinquent. And still other creditors do not report to a credit bureau at all. This situation may provide for a pleasant surprise, if a past loan that became delinquent doesn’t show up on your report. It may also provide a very unpleasant surprise, if something you thought unimportant was reported. Like maybe a non paid magazine subscription, or even worse, someone else’s delinquent account record. The only way to find out what is on your report is to see a copy for yourself!
If you have bad marks on your credit report because of some past credit difficulties, I’m sure you’re wondering about credit repair. The advertisements tell you it’s possible, the banks and credit bureaus tell you it’s not! Yes, it IS possible to remove bad marks from your credit report even though the information is true. Yes, legally! However, beware of credit repair clinics and agencies that make exaggerated claims and charge exorbitant prices.
Sample Credit Reporting Act Dispute Letter
Date Your Name Your Address Your City, State, Zip Code
Complaint Department Name of Credit Reporting Agency Address City, State, Zip Code
Dear Sir or Madam:
I am writing to dispute the following information in my file. The items I dispute also are
encircled on the attached copy of the report I received.
(Identify item(s) disputed by name of source, such as creditors or tax court, and identify type
of item, such as credit account, judgment, etc.) This item is (inaccurate or incomplete)
because (describe what is inaccurate or incomplete and why). I am requesting that the item
be deleted (or request another specific change) to correct the information. Enclosed are
copies of (use this sentence if applicable and describe any enclosed documentation, such as
payment records, court documents) supporting my position.
Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon
as possible.
Sincerely,
Your name
Enclosures: (List of whatever you are enclosing)