Matthew Gates 10m 2,569 #creditcards
The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
Using The Best of Credit
Credit and Credit Cards
After having good credit for so many years, not to brag, but it is just something I take personal pride in: paying all my bills on time and being that person who never misses a payment. Most people are given the chance to experience credit in their lifetimes. There are plenty of people who understand how credit works, while others think it is free money without conditions. If you have learned anything in your life, no matter how young or how old you are, you should have learned this lesson by now: Nothing in life is free.
No matter what a credit card company you, no matter how good the offer sounds, there is usually some type of catch, whether it is a 0% APR introductory rate, which balloons to 30% after 12 months or whether it is 0% APR for 60 months, it all still means that you will owe or promise to pay money. No company on this Earth is here to give you something because the world owes you it. No company from America, Canada, Australia, India, Korea, or Nigeria. There are no free handouts of money. With that being said, credit cards are basically a plastic card that gives you access to a specified amount of money that the bank or company promises to lend you while you promise to pay it back with interest, usually by the end of the month or by the payment due date.
Credit Card companies normally lend you this money with the intention that you will pay it back. If you do not pay it back, these companies made you sign a contract that you would be responsible for paying fees, interest, and the original amount of money that you borrowed. If you do not pay it back, your credit score will drop severely. A credit score is the businesses use to determine whether you are a responsible adult or not. There is only one thing that companies who lend money care about: Will you pay it back or not?
For some people, the thought of being given money goes to their head, and they may spend the money without thinking or understanding that they have to pay it back. The best way to use a credit card is to use it to buy several items, but ensure that the money you borrowed is in your bank account by a certain date, usually several days before the actual due date of the credit card. I personally prefer to use credit cards instead of cash because I am more likely to spend cash if it is in my hand, than if I just have a card. I put it on the credit card and by the end of the month, I pay it off in full. You could say that credit cards hate me because they earn no money on me.
Credit card companies make their money on people who spend more than what they actually have. If you use a credit card and do not have all the money to pay that company back, but pay back the minimum amount due, or more than the minimum amount due, they will charge you a small percentage of what interest on what you borrowed. For example, if you have a standard APR of 17% and you borrowed $500 from a credit card company, but were making payments on that $500, than you would end up paying the credit card company, you would end up paying about $20 in interest, give or take a few dollars, for each month that you left that $500 balance on your credit card.
Negotiating for a Lower APR
If you do happen to be a responsible adult, you are more likely to be trusted by credit card companies who will offer you a lower interest rate. In other words, they might lower your interest rate to the national average of about 14%, which would shed off a few dollars in interest per month when borrowing and having an outstanding balance on your statement. Unfortunately, it is rare for companies to just lower your interest or APR automatically, and therefore, you must call them to see what type of benefits your credit may allow.
How I Negotiated For A Low APR From The Top Credit Card Companies
Please Note: You will only be able to truly negotiate your APR if you have exceptional credit, no history of late payments, and you have managed to pay off your credit cards, or have 0% utilization of nearly all lines of credit. If you do not have this yet, continue working on it, and in a few years, when your accounts are in the clear and you have no debt, feel free to negotiate with a representative.
Please Note: If you have great credit, it does not guarantee you anything. You may still be locked into a high APR rate, at which point, you either threaten to cancel the credit card, or you deal with it. With that being said, be as polite as possible to the representative. If they tell you there is nothing they can do about the APR, they are probably not lying to you. The company may have a set of calculations that keep you locked at that rate. Be courtesy and tell them you understand and ask them for advice on how to lower your APR in the future, if possible.
Considering I just bought a house, I knew I would have to have some credit available to me. In other words, I would be buying more than I could afford temporarily, such as furniture, bedding, a washer, a drier, etc. If I waited to pay for all this stuff, I would be sleeping on the floor for a few months, wearing my dirty clothes every day, and sitting on the kitchen floor to eat. Rather than do this, I use my credit cards to purchase the things that I need for my house.
Before I did this, however, I needed to know APR on all the credit cards I owned. For now and for security purposes, we will label these credit cards A, B, C, D, and E. I called each company and asked them what my current APR was. For the purposes of this demonstration, the APRs have been rounded to the nearest whole number, however, in real life, most APRs come as a decimal number, usually with something like 18.39% or 23.98%. Rates are always changing and much of it depends on your credit, which affects that number. It is actually rare to get a whole number without a decimal.
Anyways, here were the results, and all these credit cards come with no annual fee:
- A: 19%
- B: 17%
- C: 14%
- D: 24%
- E: 23%
I told them I had not used the credit card in quite some time, but was interested in using it again, and would be making a few large purchases for the next few months. I then asked if there was anything they could do to lower my APR, specifically, if my account was eligible to get a better rate. The representative of A told me my APR was currently 19% and quoted me that a new APR was available at 18%, but then put me on hold. She came back with more exciting news, telling me that my new APR would be 15%. I was as polite as I could be and she did want chocolates from me because she made it happen. She was joking, of course, but the rate was definitely a good one.
This was nearly identical to Company A and I had told them I had not used the credit card since 2010 but was interested in using it again. I asked for my current APR and inquired about a better rate. They gave me a choice:
- 0% APR for 12 months as a promotional offer
- 17% APR to 14% APR
As much as the first offer sounded very appealing, I chose the second offer, as that was more permanent. The difference might only make a few dollars or a hundred, depending on how much I utilize the credit card, but the offer to lower the APR sounded much more appealing than a temporary solution. And so, I chose the better rate and I shared my joy with the representative.
Using the same exact tactic at Company C as the first two companies, I was met with a bit of hesitation, although the representative had not revealed my APR to me at first. Instead, he simply said, “I do not think there is anything we can do for you, but I can connect you with the personal loans department.” I told the representative that would not be necessary, but to reveal to me my current APR. He said, “It is 14%” and I told him that is what I had hoped for and expected, as that is the national average rate.
I called company D and figured that because Company A and B were successful, Company D was going to be a piece of cake. Unfortunately, while the representative was very friendly, he immediately met me with: “Company D has a strict policy of not negotiating APRs.” I said, “Thank you for your time.” And we both hung up.
Company E has been my credit card for over a decade. They were my first credit card ever granted to me and helped to establish credit. The credit limit was $500 and has ever since remained just that. I stopped using this credit card many years ago when Company C credit card replaced it for having this newly established rewards and points system. Company E offered to upgrade my existing credit card with them, as it was very old and had no points or rewards system on it. I upgraded it and before I used it, I decided to call them to see what the APR was and if they would change it.
I got on the phone with a representative and asked her about my APR and she revealed to me that it was 23%. I reminded her that I was a “loyal customer” and even revealed to her the exact year I signed up, which was in 2005. She then revealed to me the exact month of that year I signed up. I told her that I had been a customer of this credit card company for over a decade. She told me that she was happy that I was a loyal customer for so long and would check to see what she could do.
She got back on the phone and revealed to me that she could lower my APR to 20% for 7 months, and then it would return to 23%. I reminded her again, figuring I could use the self-entitlement of good credit and a long history of on-time payments with the company as my bargaining chip. She was not having it and simply said that was the best she could do. I approved of the change, but this is not a credit card I plan on using at that rate.
The companies listed above from A to E included all the major credit card banks, so typing in “credit cards 2016” or something similar will reveal to you exactly the top companies that are the major credit card providers.
With most credit card companies, there are a great number of perks that you probably do not know about. The better your credit score, the better the perks usually are, as those are the types of credit cards you are eligible for. Many credit cards offer a 5% cashbask on purchases of up to $1,500. Others offer double points back on specific stores or purchases at gas stations during certain quarters of the year. There are credit cards that offer flight miles and even insurance on the product you buy using the card. These benefits and rewards can add up and save you a lot of money, whether they give you cashback, or reward you in some other ways.
If you have never done it, and your credit score is worthy of being proud of, than you should probably call all your credit card companies and see if you can negotiate a better rate at a better deal. You may pay off your credit card at the end of every month, but it will still be nice, for those times where you have to spend a bit more than you have at the moment, but you can continue making payments on a slightly lower interest rate, rather than having to worry about a larger one because you did not ask for the better rate. The worst that any of these companies can tell you is that you are not eligible for any better rates, and at that point, it may be best to shop around or figure out how to increase your credit score so you can be eligible for those better credit cards.
Don’t settle for a credit card company that will not lower your APR below the national average if you have relatively great credit, have always paid on time and never missed a payment, and have a history with the credit card company. If these companies do not respect your demands, than stop using the credit card. It will be years before they even attempt to close the account, and even if you are worried about whether they will or not, pull it out once a year and charge less than $5 on the card to keep it active and your credit line in good standing.
There are many great credit cards out there with new offers and new credit cards each year. Settle for the best because you can. You have earned it with being a responsible adult that pays their bills. You are the one who can now make reasonable demands once you have that established credit, not the credit card companies (for obvious reasons, as credit card companies are in the business to make money, not lose it, you cannot make a demand such as lowering the APR beyond the national average, though you may bargain a percentage point or two below the national average). If they are unwilling to negotiate and come to an agreement with you, stop giving them any business at all. Remember that you are the “paying customer” and if they are not supplying you with the proper business to suit your needs that you expect and deserve, there is no reason for you to continue being a customer.
Unfortunately, these companies are so gigantic that they will have no issues with you not remaining a customer or not using their credit card all. It is the nature of the game, but the lucky credit card company that meets your demands will obvious get your business, and even if you pay off the credit card every month, there may be that one time, where they finally make money on you from interest accrued. Don’t feel bad being picky about your credit card company. You don’t seem to feel bad about shopping at one grocery store over another, so be as picky as you want, and get the credit card that meets your needs and your demands!