Lowering your CC interest Rate

[terrih]

I am trying to help a family member with some credit card debt and one of the first things we are trying to do is get a lower interest rate. Way back when (10 years ago) when I once had CC debt all I did was call the card company and they would either do it or not for me (and i would call back a few days later and another rep would help me). That is what I thought still happens even today. However, when she contacted Discover they sent her an e-mail with a few things they wanted her to comment on (have you been late in the last 12 months with payment, etc). She is to reply to that e-mail and they will make a determination in the next 30 days.

Has anyone heard of them e-mailing you this type of request. It seems a little fishy to me and I can't find anything on the internet that indicates this is a normal procedure now.

Really appreciate any input.

Thanks,
-Terri

[DevilWearsPrada]

For anything financial, or credit related........... call into the Clark Howard radio show. Or go online to his website. Clark Howard is also on HLN on Sat and Sunday. You can email in, also. He has wonderful advice on his radio show, and website.

[Reisen]

If she initiated the request, and they emailed her as a result, it should be legit. Still, it sounds a little goofy, as they know very well whether she has been late or not in the past 12 months.

I wouldn't count on a huge drop in the interest rate, however. The government has really limited the fees CC companies can charge under the CARD ACT, so I suspect Discover may need to make up for some of that with higher interest rates (many card issuers have raised rates in the past 18 months).

[budwom]

Shop around. Depending upon one's credit, there are some great rates available now (since the big banks can borrow from The Gov for close to nothing).
I currently have a Capital One Mastercard with a 4.24% rate, and a local credit union Visa at 5.15%.

[Reisen]

Shop around. Depending upon one's credit, there are some great rates available now (since the big banks can borrow from The Gov for close to nothing).
I currently have a Capital One Mastercard with a 4.24% rate, and a local credit union Visa at 5.15%.

I assume that's a variable rate? Prime plus 4.24%?

[terrih]

Thanks for all the info. I went ahead and had her call the CC company back again a
few days ago to confirm that this was their process. Figuring she would be talking with another
representative and sure enough, the person said it was their process to e-mail. I agree, they
already know the answers to those questions, seems stupid, but whatever. They then have a
committee that meets (supposedly) to decide if they will change the rate. I have never heard of all that but that is the story we are being told - so we will wait for the outcome. It if isn't favorable, i will be helping her look at other CCs.

Thanks again.

[budwom]

I assume that's a variable rate? Prime plus 4.24%?

No, it's not prime plus 4.24%, it's 4.24% period. Now of course all credit card rates, to my knowledge, are variable, i.e. they can change your rate (though they have to notify you, and there are certain restrictions). And my other card's rate is 5.15%.

This surprised me, too, but by shopping around this is what you can get.

[Reisen]

No, it's not prime plus 4.24%, it's 4.24% period. Now of course all credit card rates, to my knowledge, are variable, i.e. they can change your rate (though they have to notify you, and there are certain restrictions). And my other card's rate is 5.15%.

This surprised me, too, but by shopping around this is what you can get.

Yes and no. Part of the CARD ACT is that you now have the right to opt out of a rate increase if it's not due to your actions. Your CC company may decide to cancel your card in response, but they cannot increase the rate on your existing balance.

That said, when you talk about variable vs fixed rates, you're talking about whether or not the rate changes with prime. The industry trend is toward variable rates at the moment.

Lastly, those numbers above are very, very low. I'm certainly not calling you a liar or saying deals like that have never existed, but I would caution people not to go to their cc company expecting rates like that on an unsecured loan in today's environment (ie. all the mass defaults recently). I feel pretty secure saying that Discover is not giving rates anywhere near that low to anyone today, and I doubt many, if any, other companies are either. In contrast, you've seen a well-publicized significant rate increase in recent years as a result of all the write-offs issuers are taking...

[budwom]

Yes and no. Part of the CARD ACT is that you now have the right to opt out of a rate increase if it's not due to your actions. Your CC company may decide to cancel your card in response, but they cannot increase the rate on your existing balance.

That said, when you talk about variable vs fixed rates, you're talking about whether or not the rate changes with prime. The industry trend is toward variable rates at the moment.

Lastly, those numbers above are very, very low. I'm certainly not calling you a liar or saying deals like that have never existed, but I would caution people not to go to their cc company expecting rates like that on an unsecured loan in today's environment (ie. all the mass defaults recently). I feel pretty secure saying that Discover is not giving rates anywhere near that low to anyone today, and I doubt many, if any, other companies are either. In contrast, you've seen a well-publicized significant rate increase in recent years as a result of all the write-offs issuers are taking...

Well, you can call me anything you want, but you don't seem to be terribly well informed on the subject. I was a banker for quite a long time, I've worked in finance for a few decades, so yes, I DO happen to know what rate I have: 4.24% and 5.15%.
Despite the fact that I never run a balance on my credit cards, I looked into getting a better rate about two or three years ago when my primary card, a Chase VISA with the Duke logo, featured a rate of something like 16 or 17 percent. But it seemed like every day in the mail I was getting offers for lower rates.
So just for the hell of it, I shopped around to see what I could get. (I called Chase, told them I was a long time customer and would like a lower rate. They said no. So I now longer use that card).
Capital one offered me 4.24%. The New England Federal Credit Union offered me 5.15%. I've had both cards for several years. If you would like to make a bet that somehow I don't know what rate I have, lets put some money on it and we'll choose a board luminary to arbitrate.
I'm actually going to run a few thousand dollar balance on the Capital One card now (for a few months) as I have some investments which earn more than 4.24% and I want to leave them alone.
The moral: seek and ye shall find.
p.s. I do agree, I have good credit and it may take some looking to find a good rate, but good rates ARE available if your credit is good.

[Rich]

Well, you can call me anything you want, but you don't seem to be terribly well informed on the subject. I was a banker for quite a long time, I've worked in finance for a few decades, so yes, I DO happen to know what rate I have: 4.24% and 5.15%.
Despite the fact that I never run a balance on my credit cards, I looked into getting a better rate about two or three years ago when my primary card, a Chase VISA with the Duke logo, featured a rate of something like 16 or 17 percent. But it seemed like every day in the mail I was getting offers for lower rates.
So just for the hell of it, I shopped around to see what I could get. (I called Chase, told them I was a long time customer and would like a lower rate. They said no. So I now longer use that card).
Capital one offered me 4.24%. The New England Federal Credit Union offered me 5.15%. I've had both cards for several years. If you would like to make a bet that somehow I don't know what rate I have, lets put some money on it and we'll choose a board luminary to arbitrate.
I'm actually going to run a few thousand dollar balance on the Capital One card now (for a few months) as I have some investments which earn more than 4.24% and I want to leave them alone.
The moral: seek and ye shall find.
p.s. I do agree, I have good credit and it may take some looking to find a good rate, but good rates ARE available if your credit is good.

I have excellent credit and a Capital One card and have nowhere near that rate despite my calls to the company. I used to have close to that as a fixed rate, but Capital One jacked it up a few years ago and turned it into a variable rate. I just went on the Capital One website and they're not offering anything lower than 11.9%. I'm sorry, but there must be some sort of catch. Are you paying yearly fees?

[budwom]

I have excellent credit and a Capital One card and have nowhere near that rate despite my calls to the company. I used to have close to that as a fixed rate, but Capital One jacked it up a few years ago and turned it into a variable rate. I just went on the Capital One website and they're not offering anything lower than 11.9%. I'm sorry, but there must be some sort of catch. Are you paying yearly fees?

I pay no fees for any credit cards. Never have.
Like I said, Chase wouldn't offer me a decent rate at all. But Capital One and my credit union did. They're not about to tell you how good a rate someone else is getting...they're just going to tell how good a rate they'll give you.
You and Reisen are evidently unpersuadable, and that's OK with me.
But if you want to challenge my credibility further, my offer still stands: we'll choose a local arbiter (like Julio) and the loser pays into the DBR writer's fund, or the American Cancer Society, or whatever.

[budwom]

One more note for the Doubting Thomas brigade:
Just go to the home page for the New England Federal Credit Union (google it).
Hit the VISA tab on the top of the page.
Read the description for their Visa Platinum card.
5.15 % ANNUAL rate; no fees, no hidden costs, no tricks.
I've had this rate for several years now.
Maybe this will help convince you that there ARE a number of other low rates out there, such as Capital One's 4.24% rate.
A lot of things have changed over the past three years if you haven't stayed current.

[Reisen]

That New England Federal Credit Union offer is a variable rate, not fixed. It looks like it is prime + 1.9%. So it may be 5.15% today, but it changes monthly, and will rise if interest rates rise (and they have nowhere to go but up) to a max of 15%.

Also, if you never carry a balance, it would be in your financial best-interest to get a rewards card instead (NEFC has a rewards version of your card for 200 basis points higher). Right now, you're basically giving up a 100 basis point discount on all your purchases (a good estimate for a rewards card. It can be much, much higher if you know what you're doing) in exchange for a low interest rate, which does little for you if you don't carry a balance.

[budwom]

That New England Federal Credit Union offer is a variable rate, not fixed. It looks like it is prime + 1.9%. So it may be 5.15% today, but it changes monthly, and will rise if interest rates rise (and they have nowhere to go but up) to a max of 15%.

Also, if you never carry a balance, it would be in your financial best-interest to get a rewards card instead (NEFC has a rewards version of your card for 200 basis points higher). Right now, you're basically giving up a 100 basis point discount on all your purchases (a good estimate for a rewards card. It can be much, much higher if you know what you're doing) in exchange for a low interest rate, which does little for you if you don't carry a balance.

It's been 5.15% for at least two years. No one said it was a fixed rate. First you doubted the rate even existed. Now that I prove it exists, you say it can't last.
Whatever. Given your knowledge of the subject, I don't think you should be giving advice.

[Kimist]

Interesting discussion.

As the rates quoted seemed ridiculously low, I decided to check on my own: 13.24% APR with Citi card and 20.99% APR with Discover.

I've never paid any finance charges, nor had any late payments.

Both cards have a cash bonus (give or take 1%) award, and I basically use the cards for everything including college tuition payments. The "rebates" can quickly mount up over time.

While I'm certainly in no position to dispute the quoted <5% APR rate, that does sound too good to be true even in today's low interest markets. Perhaps a short-term teaser rate and/or strings attached?

k

[budwom]

Interesting discussion.

As the rates quoted seemed ridiculously low, I decided to check on my own: 13.24% APR with Citi card and 20.99% APR with Discover.

I've never paid any finance charges, nor had any late payments.

Both cards have a cash bonus (give or take 1%) award, and I basically use the cards for everything including college tuition payments. The "rebates" can quickly mount up over time.

While I'm certainly in no position to dispute the quoted <5% APR rate, that does sound too good to be true even in today's low interest markets. Perhaps a short-term teaser rate and/or strings attached?

k

I've had the card with that rate for several years now. (I even have an old bill from May 2009 clearly showing that rate.) So no, it's not a teaser. No strings attached, no fees (but I don't get 1% back or anything like that..but I do get airline miles).
As I've said, I'll gladly share my statements from Capital One with an arbiter here.
Yes, this surprised me at the time I got it, too (as did my 5.15% rate, which I've had for years, from NEFCU mentioned above). I never would have known about such rates if I hadn't shopped around after the Chase Duke card guys refused to give me anything less than something like 16% or so...not that I run a balance, I guess it was just the principle.
Right now I'm actually running a $3k balance on the 4.24% card for the next few months for cash flow reasons...
What you have to keep in mind is how the cost of money for these credit card companies now is so ultra low. Before the crash, they offered depositors rates of more than 5% for five year certificates of deposit, for example.
Right now, if you go to the Capital One website, this is what they're paying for CD rates, including jumbo ($100k or more) CDs"
1 yr: .5%
2 yr: .75%
3 yr: 1.09%
4 yr: 1.24%
5 yr: 1.73%.

And of course saving accounts and money market accounts are paying far, far less.
And as mentioned above, just go to the NEFCU home page, click on VISA, and check out the 5.15% rate for yourself. I've had that for about two years now, too, and as you'll see, so can anyone else in their lending area. No fees, no catches.

Feel free to PM me if you want more details.

[Jarhead]

This is all very interesting, but just now is the first time I have looked at what the interest rate is on our two credit card accounts in twenty, thirty or more years. Some of you have mentioned the concept of paying balances in full. That ought to be everybody's rule, but if it was then the credit card companies would have no incentive to give those bonuses. So, keep it up folks. I enjoy those bonuses, and we charge everything we spend to maximize them.

For many years we used just one card, but we joined Costco last year, and they accept only Amex. Their bonuses are 3% on gasoline and restaurants, 2% on travel, and 1% on everything else. We get a rebate of 1.5% on all purchases from our Visa card from First Citizens, but the rebate can only be used for domestic air travel. That suits us, since it covers just about all of our domestic air travel. We select the flights, and they make the reservations and pay for them. Neat, huh? None of the trickery with air miles.

Interest on both accounts is high, in the two figure range, but who cares? Not us. We get back about 2% of our total consumption, and add about another 1.5% from coupons. That's a nice hunk of pocket change, and we haven't paid a penny of interest on any of it. Trust me. Keep your credit debt within your monthly resources. Borrow from a credit union if you must, but don't use credit cards for borrowing. Use them solely as a convenience, but don't fall for the debit card rigamarole that's out there.

Another little bonus -- watch other credit card people in the check out lines. They move through faster than the people who pay with currency or checks.

[budwom]

This is all very interesting, but just now is the first time I have looked at what the interest rate is on our two credit card accounts in twenty, thirty or more years. Some of you have mentioned the concept of paying balances in full. That ought to be everybody's rule, but if it was then the credit card companies would have no incentive to give those bonuses. So, keep it up folks. I enjoy those bonuses, and we charge everything we spend to maximize them.

For many years we used just one card, but we joined Costco last year, and they accept only Amex. Their bonuses are 3% on gasoline and restaurants, 2% on travel, and 1% on everything else. We get a rebate of 1.5% on all purchases from our Visa card from First Citizens, but the rebate can only be used for domestic air travel. That suits us, since it covers just about all of our domestic air travel. We select the flights, and they make the reservations and pay for them. Neat, huh? None of the trickery with air miles.

Interest on both accounts is high, in the two figure range, but who cares? Not us. We get back about 2% of our total consumption, and add about another 1.5% from coupons. That's a nice hunk of pocket change, and we haven't paid a penny of interest on any of it. Trust me. Keep your credit debt within your monthly resources. Borrow from a credit union if you must, but don't use credit cards for borrowing. Use them solely as a convenience, but don't fall for the debit card rigamarole that's out there.

Another little bonus -- watch other credit card people in the check out lines. They move through faster than the people who pay with currency or checks.

I agree, with two questions: 1) what is the "debit card rigamarole" you refer to? I use my debit card a fair amount. It's quick and costs me nothing. 2) In checkout lines (including Costco) paying with cash seems to me somewhat faster than using a credit card, but both are pretty quick. Check writers ARE pretty slow. Why do you find paying with cash to be slow?

[77devil]

I agree, with two questions: 1) what is the "debit card rigamarole" you refer to? I use my debit card a fair amount. It's quick and costs me nothing. 2) In checkout lines (including Costco) paying with cash seems to me somewhat faster than using a credit card, but both are pretty quick. Check writers ARE pretty slow. Why do you find paying with cash to be slow?

As a former banker, I'm sure you know what I'm about to write and I'll let Jarhead speak for himself. I have always refused a debit card, check card, etc notwithstanding banks repeated attempts to convince me otherwise, and advise others the same, because they do not have the same protection in the event of fraudulent use that credit cards have. When a debit card is used inappropriately, funds are drained from one's bank account and the burden is on the individual to work with the bank to recover them. ATM cards without the debit feature can only be used for cash withdrawal and most banks have daily limits providing a cap on fraudulent use. With a credit card, the individual has protection against fraud by federal law and as a practical matter, i.e., the cc company is out the money. Finally from a purely economic standpoint, why would anyone use a debit card when they can have free money for 30-60 days by using a cc instead? (Hint-this question is partly rhetorical.)

Like Jarhead, I have never paid a dime of interest or a fee in my 30 plus years using credit cards, so I've always paid more attention to other features. In the early 80's, I professed my use of credit cards philosophy, that they are a convenience not a line of credit, to a commercial banker friend of mine who responded in jest, but truthfully, that banks didn't like customers like me. And that was when most states had usury laws. When I think about that conversation in light of the credit card debt burden our society has accumulated, and the bank's culpability, I shake my head in disbelief.

Now I'll get off my soapbox.

[budwom]

As a former banker, I'm sure you know what I'm about to write and I'll let Jarhead speak for himself. I have always refused a debit card, check card, etc notwithstanding banks repeated attempts to convince me otherwise, and advise others the same, because they do not have the same protection in the event of fraudulent use that credit cards have. When a debit card is used inappropriately, funds are drained from one's bank account and the burden is on the individual to work with the bank to recover them. ATM cards without the debit feature can only be used for cash withdrawal and most banks have daily limits providing a cap on fraudulent use. With a credit card, the individual has protection against fraud by federal law and as a practical matter, i.e., the cc company is out the money. Finally from a purely economic standpoint, why would anyone use a debit card when they can have free money for 30-60 days by using a cc instead? (Hint-this question is partly rhetorical.)

Like Jarhead, I have never paid a dime of interest or a fee in my 30 plus years using credit cards, so I've always paid more attention to other features. In the early 80's, I professed my use of credit cards philosophy, that they are a convenience not a line of credit, to a commercial banker friend of mine who responded in jest, but truthfully, that banks didn't like customers like me. And that was when most states had usury laws. When I think about that conversation in light of the credit card debt burden our society has accumulated, and the bank's culpability, I shake my head in disbelief.

Now I'll get off my soapbox.

As a former banker myself, I hear you. I use my debit card from a relatively small account where I don't keep that much money. I never use it for major purposes...
I still like using cash.
I can't believe how often I'm in line at convenience store behind people paying for a bag of chips and a soda with a credit or debit card. Slow...possibly because a lot of our small town merchants have prehistoric credit card processing equipment.
Yes, 77, in a complete perversion of the term, guys like us who pay no interest at now known as "deadbeats."

[cato]

I can't believe how often I'm in line at convenience store behind people paying for a bag of chips and a soda with a credit or debit card. Slow...possibly because a lot of our small town merchants have prehistoric credit card processing equipment.

It must be the equipment/connections. In the vast majority of places I go, credit card transactions are much faster. The receipt prints just moments after the card is swiped. That is probably faster than the customer counting out the money to hand over, let along the "cashier" making change.

Another point about debit cards: never use them at the pump at gas stations. They seem to be a much more popular target for thieves who install card readers into the card reader, catch your pin, and make new debit cards for their own use.

[Acymetric]

As a former banker, I'm sure you know what I'm about to write and I'll let Jarhead speak for himself. I have always refused a debit card, check card, etc notwithstanding banks repeated attempts to convince me otherwise, and advise others the same, because they do not have the same protection in the event of fraudulent use that credit cards have. When a debit card is used inappropriately, funds are drained from one's bank account and the burden is on the individual to work with the bank to recover them.

Are you sure that's the case? I have no real knowledge of banking outside of my own personal experience, but 5 years ago when I was in school I had my wallet stolen out of my dorm. I thought it was just stuck somewhere in my room until the next day when charges showed up when I looked online.

I called and reported my debit card (Wachovia/Visa) and my credit card (US Bank/Visa) stolen. Spent all the money in my checking account and maxed the credit card. Called the cardmember service numbers for each card, explained what happened, and filed a police report. Got all my money back and the charges wiped from the credit card, and never had to do a thing outside of a few phone calls right when I realized what had happened.

Maybe there was something unusual about my case, but I had no trouble getting the money back for the stolen debit card.

[Jarhead]

As a former banker, I'm sure you know what I'm about to write and I'll let Jarhead speak for himself. I have always refused a debit card, check card, etc notwithstanding banks repeated attempts to convince me otherwise, and advise others the same, because they do not have the same protection in the event of fraudulent use that credit cards have. When a debit card is used inappropriately, funds are drained from one's bank account and the burden is on the individual to work with the bank to recover them. ATM cards without the debit feature can only be used for cash withdrawal and most banks have daily limits providing a cap on fraudulent use. With a credit card, the individual has protection against fraud by federal law and as a practical matter, i.e., the cc company is out the money. Finally from a purely economic standpoint, why would anyone use a debit card when they can have free money for 30-60 days by using a cc instead? (Hint-this question is partly rhetorical.)

Like Jarhead, I have never paid a dime of interest or a fee in my 30 plus years using credit cards, so I've always paid more attention to other features. In the early 80's, I professed my use of credit cards philosophy, that they are a convenience not a line of credit, to a commercial banker friend of mine who responded in jest, but truthfully, that banks didn't like customers like me. And that was when most states had usury laws. When I think about that conversation in light of the credit card debt burden our society has accumulated, and the bank's culpability, I shake my head in disbelief.

Now I'll get off my soapbox.


As a former banker myself, I hear you. I use my debit card from a relatively small account where I don't keep that much money. I never use it for major purposes...
I still like using cash.
I can't believe how often I'm in line at convenience store behind people paying for a bag of chips and a soda with a credit or debit card. Slow...possibly because a lot of our small town merchants have prehistoric credit card processing equipment.
Yes, 77, in a complete perversion of the term, guys like us who pay no interest at now known as "deadbeats."

77devil, excellent job on your soap box. Budwom, it's nice being a deadbeat if Amex and Visa keep all those bonuses coming in. It's also nice around here in small town Southern Pines, NC buying a bag of almonds, swiping my card, and accepting the receipt from the cashier in half the time it takes the cashier to make change of a twenty. The process doesn't require a signature for small purchases. Oh, another thing, if someone gets a hold of your debit card you are at risk of overdraft penalties. I don't worry about them. Overdrafts are pretty common with deadbeats, aren't they?http://crazietalk.net/ourhouse/images/smilies/21.gif

[77devil]

As a former banker myself, I hear you. I use my debit card from a relatively small account where I don't keep that much money. I never use it for major purposes...
I still like using cash.
I can't believe how often I'm in line at convenience store behind people paying for a bag of chips and a soda with a credit or debit card. Slow...possibly because a lot of our small town merchants have prehistoric credit card processing equipment.
Yes, 77, in a complete perversion of the term, guys like us who pay no interest at now known as "deadbeats."

Didn't mean to imply that I was a former banker. Was referring to your attribution earlier. My comments were for everyone while acknowledging that you would know the stuff having been in the profession.


Are you sure that's the case? I have no real knowledge of banking outside of my own personal experience, but 5 years ago when I was in school I had my wallet stolen out of my dorm. I thought it was just stuck somewhere in my room until the next day when charges showed up when I looked online.

I called and reported my debit card (Wachovia/Visa) and my credit card (US Bank/Visa) stolen. Spent all the money in my checking account and maxed the credit card. Called the cardmember service numbers for each card, explained what happened, and filed a police report. Got all my money back and the charges wiped from the credit card, and never had to do a thing outside of a few phone calls right when I realized what had happened.

Maybe there was something unusual about my case, but I had no trouble getting the money back for the stolen debit card.

Fed regs may have evolved and I have no certainty whether your state laws offer protection, and fortunately you had a good experience regardless. I did not intend to imply that banks will not cooperate or are difficult to deal with on debit card fraud.
I still prefer the safety of a credit card in that the perpetrator is defrauding the bank instead of my bank account.

Jarhead brought up another important point below about debit card exposure that I forgot which is overdraft. If one has a line of credit linked to a checking account to avoid overdraft fees, the exposure increases from the balance in the checking account to the limit on the credit line.


77devil, excellent job on your soap box. Budwom, it's nice being a deadbeat if Amex and Visa keep all those bonuses coming in. It's also nice around here in small town Southern Pines, NC buying a bag of almonds, swiping my card, and accepting the receipt from the cashier in half the time it takes the cashier to make change of a twenty. The process doesn't require a signature for small purchases. Oh, another thing, if someone gets a hold of your debit card you are at risk of overdraft penalties. I don't worry about them. Overdrafts are pretty common with deadbeats, aren't they?http://crazietalk.net/ourhouse/images/smilies/21.gif

[budwom]

Good stuff. I'm not current on the debit card rules these days, but I suspect some companies may provide protection. But to avoid exposure, we've always made major purchases with credit cards because of the protections you guys point out.

The credit card protection rules are really good. I've used the process half a dozen times or so, and it works.

[Reisen]

Whatever. Given your knowledge of the subject, I don't think you should be giving advice.

While I readily admit I am not a former banker, I do happen to be a current credit card executive for a DOW component...

I can assure you, prime + 1.9% is an incredibly low rate for a credit card, even with excellent credit, and your Capital One rate is nearly a full percentage point lower. My point was not to challenge you and make you defensive, but to caveat to the OP and the board, as someone that works in the industry, and is familiar with industry pricing, not to expect most firms to lower an existing rate to anywhere near that. Sort of like the guy that finds a two-year old BMW M3 with 11,000 miles, perfect paint and interior, for $19,000. Could it and does it happen? Sure. But should people be surprised when their local dealership wants more than double that? No. I think most board members who check their cc interest rates will find, as the other posters have, that they are at more than double yours. It doesn't make theirs a bad deal, it just makes yours an exceedingly great one.

The advertised rate you have is from a credit union. Local and regional credit unions are great places to find low rates on cards because they have to price lower than large national firms. Of course, there are drawbacks, as well. My wife and I banked through a tiny bank in VA for years and found their rates extremely competitive for both DDA and lending accounts, but they probably won't have some of the same services a large firm will. Trying to export data to anything (Quicken, MINT.com, etc) was a nightmare, and there were several issues over the years with their website losing data, issues with the cards being compromised, etc. etc. Obviously, some small credit unions and banks will be better than others.

The bigger issue, though, is that it is a very different thing to open up a new account at a certain rate and start charging, versus either asking an existing creditor to slash your rate at which you already have a balance, or trying to transfer that balance to a new bank. As a former banker, you obviously know that banks price according to risk, and a bank is going to need to account for the above when pricing you.

I would certainly recommend anyone with a credit card balance ask their bank about lowering their rate, and to shop around for a balance transfer to another bank at a lower rate, no question. I just think, for all the reasons mentioned above, you may have a hard time getting that balance priced at 1% above prime.

[Reisen]

For Bud, 77, and Jarhead, I won't get all marketing-ey and argue credit vs debit, but I can assure you that your respective credit card companies like that spend, and are happy to dole out those reward points to you. Remember, whether or not you pay interest, the merchant pays your bank every time you swipe.

[budwom]

That's reasonable.
Yes, I did get pretty defensive, because you seemed to question the veracity of what I told you at least several times. The "I'm not calling you a liar but..." line wasn't particularly well received. Now I'm over it :)

I have no idea what rate I could get from most companies these days. I strongly suspect that 4.24% would be hard to find, but then again I NEVER expected to get a rate like that two years ago or so when I got it. I just picked up the phone (pissed at Chase for keeping me at 16% or so) and called a few places. Only criteria were: no fees, credit line of at least $20,000, and a low rate. The credit union gave me 5.15% with a $21,000 limit (obviously still available...and their software compatibility works well), and CapitalOne gave me $30,000 at 4.24%.

I might call up the credit union and ask them why their rates are so attractive....I still get lots of mailings each week for cards with rates in the mid-teens and higher.

I think the economic turmoil of the past two years has produced a number of changes in banking. My original point way back when was that some truisms we all thought (me included) were still in effect (e.g. rates in the teens) aren't necessarily still operable.

p.s. I was also pissed at Chase for changing the color of my Duke Visa card from Duke blue to horrific you-know-what blue. I don't use it any more.

[Rich]

While I readily admit I am not a former banker, I do happen to be a current credit card executive for a DOW component...

I can assure you, prime + 1.9% is an incredibly low rate for a credit card, even with excellent credit, and your Capital One rate is nearly a full percentage point lower. My point was not to challenge you and make you defensive, but to caveat to the OP and the board, as someone that works in the industry, and is familiar with industry pricing, not to expect most firms to lower an existing rate to anywhere near that. Sort of like the guy that finds a two-year old BMW M3 with 11,000 miles, perfect paint and interior, for $19,000. Could it and does it happen? Sure. But should people be surprised when their local dealership wants more than double that? No. I think most board members who check their cc interest rates will find, as the other posters have, that they are at more than double yours. It doesn't make theirs a bad deal, it just makes yours an exceedingly great one.

The advertised rate you have is from a credit union. Local and regional credit unions are great places to find low rates on cards because they have to price lower than large national firms. Of course, there are drawbacks, as well. My wife and I banked through a tiny bank in VA for years and found their rates extremely competitive for both DDA and lending accounts, but they probably won't have some of the same services a large firm will. Trying to export data to anything (Quicken, MINT.com, etc) was a nightmare, and there were several issues over the years with their website losing data, issues with the cards being compromised, etc. etc. Obviously, some small credit unions and banks will be better than others.

The bigger issue, though, is that it is a very different thing to open up a new account at a certain rate and start charging, versus either asking an existing creditor to slash your rate at which you already have a balance, or trying to transfer that balance to a new bank. As a former banker, you obviously know that banks price according to risk, and a bank is going to need to account for the above when pricing you.

I would certainly recommend anyone with a credit card balance ask their bank about lowering their rate, and to shop around for a balance transfer to another bank at a lower rate, no question. I just think, for all the reasons mentioned above, you may have a hard time getting that balance priced at 1% above prime.

Thanks Reisen. Your points are well taken. Because of this discussion I called Capital One, with whom I have a double-digit-% miles card and asked to be converted to a non-miles card and a reduction in rate due to my excellent credit, and they agreed to a reduction (still in low double-digits though) of my current terms for a 6 month promotional period, at which time it goes back up to my old rate. I asked them why I couldn't get a permanent reduction and go to a non-miles card and they said I was free to submit an application for a new card.

I also called Bank of America, from whom I received a decent offer for a card with 1% cash back, but they won't give me a credit limit until they check my credit scores. While I don't have an issue shopping around for rates, I understand (but hate) that everyone has to do a credit check before you can get the details of the card. If I go through the application process for a bunch of cards to see what the details are, aren't all those credit checks going to affect my credit? Seems ironic (and circuitous) that just by trying to find the best offer on a credit card, there will be a decrease in your credit, which could affect the terms of the credit line they give you.

[77devil]

For Bud, 77, and Jarhead, I won't get all marketing-ey and argue credit vs debit, but I can assure you that your respective credit card companies like that spend, and are happy to dole out those reward points to you. Remember, whether or not you pay interest, the merchant pays your bank every time you swipe.

Obviously the card companies charge transaction fees and would prefer to reward me to use their card as an alternative to cash/debit, but so what? As a " credit card executive of a DOW component," you know very well that the big money is made on customers who carry balances and incur fees. I don't get your point.

[Rich]

Obviously the card companies charge transaction fees and would prefer to reward me to use their card as an alternative to cash/debit, but so what? As a " credit card executive of a DOW component," you know very well that the big money is made on customers who carry balances and incur fees. I don't get your point.

I believe his point is that whether you carry a balance or not, they're making money off of your use of the credit card. They may make more off of those carrying a balance and incurring fees, but don't be naive in thinking that you're not making them money as well just because you pay off your bill every month.

[Jarhead]

For Bud, 77, and Jarhead, I won't get all marketing-ey and argue credit vs debit, but I can assure you that your respective credit card companies like that spend, and are happy to dole out those reward points to you. Remember, whether or not you pay interest, the merchant pays your bank every time you swipe.


Obviously the card companies charge transaction fees and would prefer to reward me to use their card as an alternative to cash/debit, but so what? As a " credit card executive of a DOW component," you know very well that the big money is made on customers who carry balances and incur fees. I don't get your point.

Anytime a provider of a service is willing to provide me a service with bonuses for using that service while collecting fees from someone else, that sounds like a no-brainer to me. I hate run on sentences.

Let somebody else pay those fees, an I'll gladly collect those bonuses. One other point -- if I were a merchant I'd gladly pay that fee that the CC companies charge them. Most merchants could not survive on a cash only basis, so they need credit sales. For that small fee the CC companies absorb the merchant's billing and bad debt management costs including collection costs and bad debt expense accruals on their periodic income statements.

[Reisen]

As a " credit card executive of a DOW component," you know very well that the big money is made on customers who carry balances and incur fees. I don't get your point.

This totally depends on the company. It is nowhere near true for mine (it's actually several multiples smaller), and several others. For some, it probably is true.

Regardless of how their income breaks down, there's a not a firm out there that doesn't want to see charge volume on their cards. Even if you don't pay a dime on interest or fees, my point was the firm is still generating profit from the merchant. Further, that's near riskless profit (although not totally, ie. bankrupt airlines) compared with write-off rates that were in the double digits last year on balances.

Lastly, pretty much every firm is going to see their fee revenue as a percentage of total revenue decline due to the CARD ACT. The idea that credit card companies only want customers who max out their cards and pay late every month is simply not true. The customers they lose money on are either A- Customers who rarely use their cards, and constantly call in / dispute charges / lose their cards, etc., or B- Customers who stop paying on their balances and the firm has to try to collect /sell the debt for pennies on the dollar to a collection agency.

Several of the big-name companies in this thread make a huge amount of their profit off of people like Jarhead, that never pay a dime in interest or penalty fees. Every one of them has premium rewards cards with affluent bases that tend to pay off their cards and not get hit with fees. I could go on and on about loyalty to airline/hotel programs, how those customers help balance out subprime risk, probability to open profitable DDA/brokerage/mortgage accounts as a result of the CC relationship, etc., etc., but suffice it to say there's not a credit card company out there that doesn't want a customer like Jarhead.

[devil84]

Are you sure that's the case? I have no real knowledge of banking outside of my own personal experience, but 5 years ago when I was in school I had my wallet stolen out of my dorm. I thought it was just stuck somewhere in my room until the next day when charges showed up when I looked online.

I called and reported my debit card (Wachovia/Visa) and my credit card (US Bank/Visa) stolen. Spent all the money in my checking account and maxed the credit card. Called the cardmember service numbers for each card, explained what happened, and filed a police report. Got all my money back and the charges wiped from the credit card, and never had to do a thing outside of a few phone calls right when I realized what had happened.

Maybe there was something unusual about my case, but I had no trouble getting the money back for the stolen debit card.

My husband works at a credit union, and is contemplating removing check cards from our checking account because of how easily our account can be drained with very little ability to get our money back. This is a particular problem for people who have large savings accounts, or worse, Home Equity Lines of Credit, attached to their checking accounts for overdraft. It's to the point where we might keep a separate account for the sole purpose of getting cash from an ATM, something we do far less than once a month (a perk of working at the credit union is the ability to cash checks without a special trip). Some banks may cover you like Wachovia did, but I don't think I'd count on it, particularly since the economic landscape has changed in the last five years.

Discover is ABSOLUTELY AMAZING at detecting charges that aren't in your normal spending pattern. The latest was when I went to Indy for the Final Four. We drove up there using other cards for the gas and meals, so there was no indication that we were traveling. I charged lunch, then went to a favorite candy store not available in NC, then went to Meijer for some forgotten items. Total elapsed time: 1 hour. As I walked out of Meijer, Discover called me asking if those three charges were legit. Most of the time when they call, the charges are legit, but they have found fraudulent uses. The most amazing one was a charge on the other side of Raleigh at a gas station. Given that we were all over the state for band and Girl Scout events charging gas that year, I'm amazed that they picked up something in an area of town we don't frequent.

Between that and the wonderful cash back, we're solid credit card users over check cards.

[77devil]

I believe his point is that whether you carry a balance or not, they're making money off of your use of the credit card. They may make more off of those carrying a balance and incurring fees, but don't be naive in thinking that you're not making them money as well just because you pay off your bill every month.

Naive? I understand perfectly well how credit card programs operate and what the OP wrote, but it was/is superfluous to the discussion in my opinion. Furthermore, it was not the primary card strategy of banks, in my experience during the last 15 years, to grow profits by collect thin transaction fees from merchants.


This totally depends on the company. It is nowhere near true for mine (it's actually several multiples smaller), and several others. For some, it probably is true.

Regardless of how their income breaks down, there's a not a firm out there that doesn't want to see charge volume on their cards. Even if you don't pay a dime on interest or fees, my point was the firm is still generating profit from the merchant. Further, that's near riskless profit (although not totally, ie. bankrupt airlines) compared with write-off rates that were in the double digits last year on balances.

Lastly, pretty much every firm is going to see their fee revenue as a percentage of total revenue decline due to the CARD ACT. The idea that credit card companies only want customers who max out their cards and pay late every month is simply not true. The customers they lose money on are either A- Customers who rarely use their cards, and constantly call in / dispute charges / lose their cards, etc., or B- Customers who stop paying on their balances and the firm has to try to collect /sell the debt for pennies on the dollar to a collection agency.

Several of the big-name companies in this thread make a huge amount of their profit off of people like Jarhead, that never pay a dime in interest or penalty fees. Every one of them has premium rewards cards with affluent bases that tend to pay off their cards and not get hit with fees. I could go on and on about loyalty to airline/hotel programs, how those customers help balance out subprime risk, probability to open profitable DDA/brokerage/mortgage accounts as a result of the CC relationship, etc., etc., but suffice it to say there's not a credit card company out there that doesn't want a customer like Jarhead.

As I said before, of course the banks are happy to have customers like Jarhead and me use their card instead of debit or cash. A transaction fee from the merchant obviously is better than nothing, although the margin is really thin including the cost of the rewards. Revolving consumer credit however, which is largely credit card debt, grew circa 50% during the last decade to almost a trillion dollars. Aggressive lending at high interest rates and fees appeared to be pretty systemic.

http://www.federalreserve.gov/releases/g19/hist/cc_hist_r.html

[DevilAlumna]

Jarhead brought up another important point below about debit card exposure that I forgot which is overdraft. If one has a line of credit linked to a checking account to avoid overdraft fees, the exposure increases from the balance in the checking account to the limit on the credit line.

Actually, thanks to the CARD ACT, this is no longer true. Banks are no longer allowed to let a debit transaction go through if it will result in an overdraft. Same with credit cards.

[77devil]

Actually, thanks to the CARD ACT, this is no longer true. Banks are no longer allowed to let a debit transaction go through if it will result in an overdraft. Same with credit cards.

I qualified all my comments in a earlier post with respect to the CARD act, but I believe my comment is still accurate. My understanding of the CARD act is that it prohibits over the limit auto overdrafts on which banks historically charged stiff fees. My point was about fraudulent use of debit cards with checking accounts that are linked to a savings account or line of credit as overdraft protection. See the first couple of sentences of Devil84's earlier post. I do not believe that the CARD Act offers any additional protection in this context.

Regardless, I stand by my earlier advice that a credit card should be used as a convenience, not a line of credit, and when managed as such is a superior option to a debit card.

[alteran]

One thing I feel obliged to point out is that credit cards create a burden to (particularly) small businesses. The big banks may think a 3-5% transaction cost is slim pickings, but to a lot of businesses this is actually a big deal and eats up a significant fraction of their profit.

That money doesn't just leave the merchant short, it almost assuredly leaves the community and goes to whatever (generally) big concern is making the money off your card.

Just something to be aware of.

[devil84]

Actually, thanks to the CARD ACT, this is no longer true. Banks are no longer allowed to let a debit transaction go through if it will result in an overdraft. Same with credit cards.

Thanks for posting this, DevilAlumna! Since my experience is that I've never been denied a transaction because it would exceed the limits, but I've definitely used the overdraft protection several times since the CARD ACT has gone through, I looked up the CARD ACT to find out why. It's very rare that we use the debit card for day-to-day transactions, as we chase those cash-back rewards on credit cards. That means all of the transactions causing an overdraft are checks, which are exempt from the CARD ACT.

While someone with good fiscal management wouldn't necessarily use overdraft, because the fees are a whopping FIFTY CENTS at our credit union to access the HELOC via overdraft, we just write the tuition checks and it handles the HELOC access easily, which is the ultimate source of the funds anyway.

So with the debit cards, it looks like thieves can only access the balance in our checking account (and with two kids in college, we don't leave much for the thieves!). I hadn't really thought about the fact that the tuition we pay online exceeds the limits on some of our credit cards, and all the information needed for a purchase of that magnitude is printed concisely on every page in a pad of paper carried in my purse.

That's a little frightening. I don't remember giving any identification that doesn't exist on the check when I pay tax bills or tuition online. Does that mean that an unscrupulous employee, a vendor at the flea market, or the family running the garage sale can copy my check before depositing it and use the information on my check to pay their bills online?

[Reisen]

Actually, thanks to the CARD ACT, this is no longer true. Banks are no longer allowed to let a debit transaction go through if it will result in an overdraft. Same with credit cards.

This is half-correct.

I don't work with debit cards, but I believe you now have to "opt in" to overdraft fees. Not for each transaction, but just give them your permission once, probably over the phone or in your online preferences section.

I also have seen many personal finance gurus advocate opting in, as it mainly covers you on checks. That is, the overdraft fee is generally the lesser evil when compared with the consequences of a bounced check. I actually spoke to Jean Chatzky (Today Show) about this a while back.

In terms of credit cards, it is up to the bank as to whether to allow your transaction to go through if you are over the limit. Again, though, I think the new rule is that you have to opt-in to overlimit fees (ie. the bank can let your transaction through if they want, but can't penalize you for it). I don't know why someone would do this (and suspect few people do). This hasn't personally been an issue I've paid much attention to, as not all banks were even charging overlimit fees before CARD ACT (so, for them, nothing has changed).

These are some of the examples I was talking about when I mentioned that banks are seeing fee revenue declining, and are raising interest rates as a result.