Here’s the hypothetical scenario (the actual numbers are not important – they’re made up for the example):
I have two credit cards – Card A and Card B. I have a $1000 balance on each. Card A charges me 15% interest while Card B charges 10%.
I get a $900 bonus, which I plan to use to pay off the cards. Common sense tells me that I should send it all to Card A, as they are charging the higher rate.
However, suppose I call the Customer Service dept at Bank of Card A and I tell them as follows:
"Hi! I have this nice little check for $900 that I plan to use to lower my credit card balances. Now, I owe $1000 to you and I also owe $1000 to another bank that charges a lower rate than you do.
“So, here’s the deal. If you’re willing to lower my rate to match the other bank, I’ll split this check between the two banks and I’ll keep $550 on balance with you now and give the other half to Bank B. However, if you don’t lower my rate to match the other bank, I’ll send all $900 to you, making it possible for me to completely pay off my balance to you next month and wiping out any future interest you may earn.”
Logic tells me that the bank would try to lower my rate to match so as to keep some of the balance and earn interest off of it. However, I also realize that perhaps I don’t always think like a bank does. Perhaps they’d be happy to see the $900 check coming in and simply refuse to change my rate.
What would most banks do? Would they try to match the rate (taking my creditworthiness into account, of course), or would they say “so send us the money?”
I sincerely doubt you’ll be seeing any credit card companies lowering interest rates given the current economic situation. Card companies are raising rates on their best customers, there’s not much reason to think they’d do you any differently. It never hurts to ask, but don’t hold your breath.
I don’t think you need to go into all that much detail. All you need to do is say “If you can’t give me a 10% APR, I will be closing my account today.” If they say no, close your account.
Threatening to close your account will get you farther than trying to tantalize them with money. You still legally owe them that $1000 no matter when you decide to pay it. If you close your account, that $1000 will never go up (via spending).
In the current economic climate, the credit card company may want the cash more than your continued business. It would probably depend on your credit score whether they’d take the bait.
If I was the 15% company I would tell you to take a hike since I WANT you to carry a high interest rate balance and not pay it down.
I would, though, call up the 10% company and see if they offer a balance transfer option so that I can pay off the 15% company by transferring the balance over to the lower rate company. That way my $900 will go to the company I want to keep working with… unless you really want two CC companies instead of one.
Keep in mind closing your account will negatively impact your credit score. Especially if you don’t pay the balance off in conjunction with the closed account.
I doubt any CC company would bother negotiating with you over a measly $900 debt. In the real world, the CC customer service droid that answers the phone when you call would not understand what you’re asking, and if by chance they did, would tell you they can’t do that. You’d then ask to speak to their supervisor, where exactly the same thing would happen. Then you’d ask to speak to their supervisor, and they’d act like they were forwarding the call, but you’d get disconnected.
There’s a slim chance someone at the supervisor level might have a standing option to reduce your rate if you say a precise set of magic words about moving to a different card issuer, but seems unlikely.
Now if you had a $900,000 debt, negotiations are probably worthwhile for both sides in normal times, and you’d probably be able to talk to someone who can make decisions like that.
I got nearly 8% shaved off my APR just by saying “Amex just send me a solicitation for a card with a more favorable rate and 6 months 0% APR with balance transfer. I’d like to stay with BoA, but you’re going to need to match this deal.”
They’ll refer you to a separate department, but after the one transfer, I was able to deal with someone who could–and did–give me a lower rate.
You do not need to give them elaborate ultimatums (which I think will piss them off), rather, just say you have a better terms with someone else (Bank B) but that you like dealing with Bank A. If you’ve been a good customer of theirs, they’ll usually throw something your way.
Not if paid off, unless it’s significantly your oldest account. Even so, more than 20yo doesn’t really mean much.
To answer the OP, the way to get them to lower the interest is to pay it off, then call and ask to close the account. Most of the time you’ll be forwarded to a dude whose job it is to keep you as a customer. That could include lowering the rate, or even a 0% interest transfer to pay off the other CC.
The Times had an article about someone who was behind on a debt much lower than this and got the credit card company to take about less than 50 cents on a dollar for it. (They had offered less of an incentive before.)
Credit card companies have to write off debt over six months old (cite) so it appears that in some cases they are more willing to settle for less at this point. The Times article mentioned that in at least some cases the first level customer rep is authorized to do the writeoff without a lot of going up the chain of command.
One thing it mentioned was the collection agencies have so much unpaid debt now that they have either stopped taking more or reduced what they’ll pay for it.