Posted by: thecreditmaven | December 4, 2008

Tired of Paying High Interest Rates On Your Credit Cards?…Try This

Do you know what the current interest rate is on your credit card? Is it fixed? Variable? Have you ever made a late payment on your card? Do you know the definition for “universal default”?

Universal default is a little clause many credit card companies include in the contractual agreement. In a nutshell, it allows the issuer to change the terms of the agreement to the “default terms”.

For a more detailed explanation of universal default, CLICK HERE.

What this means is that if a consumer is ever late making a payment on the credit card then the issuer can ‘jack up’ the interest rate to 19%, 27%, 30% or even higher. Talk about pouring salt in a wound. In addition, the credit score tanks. Now the salt really gets JACK HAMMERED in.

And get this – a late payment on one credit card can trigger the default charge on a different credit card that has NEVER had a late payment.

Unreal, you say? Impossible – Illegal – Immoral – Unethical – My thoughts exactly.

In my opinion (and this is just my opinion) this is legalized, modern-day loan sharking. Due to the deregulation of the industry back in the 1990’s, credit card companies starting using universal default as a way of offsetting risk. Keep in mind that most credit cards are considered “unsecured debt”. That is, it’s not secured against anything like a house, car or boat.

What can a consumer do to LOWER the interest rate on a credit card?

I was talking to a good friend of mine the other day (by the way, he was the fastest guy in the 110 high hurdles from Missouri in 1978) and he was concerned about the high interest rates that his credit card company was charging him. In other words, the universal default charge had kicked in.

Here’s the advice I offered:

  1. Call customer service and say the following –

Hi, my name is ____________ and I need your assistance. I’ve had my _________ credit card for _______ years and it has served me very well. It has gotten me out of several tough situations, made my vacations more enjoyable and helped brighten other people’s lives. I can’t continue to pay the high interest rate on this credit card. What can be done to lower my interest rate? If my interest rate can’t be lowered, I will have to take my business to another company. You wouldn’t want that to happen would you?    (Remain silent and wait for an answer)

You’ll probably be told there is nothing that can be done.

Continue – Since you are unable to help me with this situation, I want to speak with your Supervisor or Team Leader.

When you talk with the Supervisor or Team Leader, repeat the same information to them as you did the customer service Rep.

Remind them that you are a GOOD CUSTOMER, pay on time, and enjoy the use of the card. However, they are not the only credit card company in town. Leverage your loyalty to them – make them feel indebted to you because you do business with them. (A little reverse psychology). Be persistent and sincere.

I know several people who have used this strategy with good results. One person told me that she called her local bank and had the interest rate on her Home Equity Line of Credit reduced. WOW!!

Be careful what you ask for………..you may get it. The good book says it, “Ask and ye shall receive”. All it takes is a little time. What do you have to lose? Nada.

If you don’t have any luck with the strategy, then you may want to consider moving your business to another credit card company. There are many to choose from and some exclude the “universal default” charge from their agreement.

A credit card is a two-edged sword. It can be a valuable tool if used properly. By properly I mean with thought and purpose. On the other hand (or should I say edge), it can cause you to start bleeding (sending $$$ every month for payments) profusely.

One final thought – Borrow when you don’t need it.

To Your Credit Enhancement!

CM

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