How to Negotiate with Credit Card Companies
Learn how to negotiate with credit card companies to lower your debt and end their harassing calls. If you are paying an interest rate that is through the roof, you need to know that you have lots of room to negotiate with your credit card company. Most people don’t realize that you, as the consumer, have a lot of leverage and power against your credit card company.
Credit card companies spend a lot of time and money trying to convince you that they’re the biggest man in the room and that you’re going to have to capitulate to them. That’s not true.
They don’t do this all in your best interest of course. All creditors benefit from a customer making and keeping their account current and by maintaining a relationship with a customer who makes payments on time. Credit card companies even negotiate on their own with some borrowers when it is in the best financial interest of the creditor to do so.
The way to negotiate with a credit card company on a better interest rate is to convince the creditor that you are one customer they can benefit from negotiating with. Paying off your debt is better than you totally defaulting on the loan, right?
Take a lesson from Machiavelli, who argued against a strong prince making an alliance with a weak prince. He said the weak prince (or state) has all the power, because it can always threaten to collapse. The stronger state therefore becomes the slave of the weaker party, even if the weaker one is bumbling and incompetent.
It’s the same with you and your credit card company, but on an economic and not political level. The two of you have entered into an economic agreement, but you, as the weaker of the two, have the power. You can always threaten to collapse financially, wherein the credit card company doesn’t see one red cent from you.
Tell your credit card company you’re considering bankruptcy and they’re likely going to renegotiate with you.
Some Tips for Negotiating Better Interest Rates
First and foremost, don’t tell any sob stories. The people who work in collections for these creditors are analyzed to ensure their hearts pump ice water. Even if they came into the business with a soft heart, they’ve heard it all by now. This just won’t work.
If your account is current (or “in good standing”) and there is some history of “on time” and “full payments”, it is more than likely that your credit card company will volunteer to reduce your interest rate.
Force the issue if you know you match these credentials. Tell them you want your rate lowered – now. Being aggressive means you can usually negotiate a lower interest rate, even if your account is a bit in default.
Negotiation isn’t just for perfect credit. These creditors know that your new lower interest rate means you can be expected to pay off your loan in a more manageable way, rather than defaulting. While you’re at it, ask the creditor to waive any late fees you’ve built up.
Asking doesn’t hurt. What’s the worst thing they can do? Say no?
Prove You Have Options
For customers in better standing whose creditors are unlikely to believe when they talk about filing for bankruptcy, you still have the power. You always have the option of taking your debt elsewhere.
Show your credit card company that you have alternatives for service by saving up a variety of low-interest credit card offers that you get in the mail. We all get hundreds of these things a year, and your credit card company needs to know that you’re considering changing services.
Once again, this is a good tactic for the person with bad credit history, because your creditors can expect to be paid high rates of interest. If you have a high balance or a bit of a rocky history, they don’t want to lose your potential payments to their competitor. This is a powerful negotiation tool.
Be Firm With Your Creditor
Don’t be nasty on the phone, but don’t take a simple “no” for an answer. If you are really ready to negotiate, just come out with it and ask for a better interest rate. The first trick the creditor will pull is to tell you that the rate is non-negotiable, and may even try to use your rocky credit history against you.
Take a deep breath and ask to speak to a supervisor with the proper authority to negotiate the interest rate. Don’t take “no” for an answer.
When you get to the supervisor, be honest about your history and your expectations. Tell the supervisor why you should get a lower interest rate (now would be a good time to mention switching creditors) and demand a lower interest rate. You may be shot down initially, but try again next month.
Your interest rate is really up to you. If you are paying a rate that you just can’t afford, or if you just want to spend a little less cash every month, call your creditor today and make your case for a lower interest rate.