Need advice for dealing w/ credit card (reducing rates)

Discussion in 'After Hours Lounge (Off Topic)' started by Todd K, May 3, 2003.

  1. Todd K

    Todd K Second Unit

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    Hello,

    I was on hold with one of my credit card companies and I decided I would be wise to consult here first.

    I have three credit cards. The one I've had the longest (since summer 99) has the highest rate (like 18%). Two months ago, my balance was at about $3,000 and now it's at $600. I just got a new job and within about 10 days I will have the ability to pay off the remaining balance.

    What I would like to do is reduce the rate on this card so I can use it for purchases (the other two cards I have are nearly maxed out). So, should I:

    1) Try to talk to the card company to lower my rate (and if so, what do I say), or

    2) Pay the remaining balance, and try to find a different card with lower rates (and if so, should I cancel my existing card, in the case that other companies would take it into account when offering me a new card)?

    Well, that about sums it up. I would be very appreciative for any advice.

    Todd
     
  2. Eric_L

    Eric_L Screenwriter

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    My first advice is to put off the purchases. Credit card debt sux. Work at paying off the other cards. A human only needs one credit card.

    If you must, then depending on what you intend to purchase, you may qualify for a 90 days same as cash. That means no interest for 90 days, but usually ONLY if you pay in full by then - otherwise they charge it RETROACTIVE. Talk about motivation!

    Avoid the borrow/consume cycle. It is the financial spiral of death. great job of paying down and almost off the card, now don't throw away that accomplishment.

    I worked in collections years ago - I can tell you from VAST experience that debt is like drink: A little bit does not hurt, and it may even feel good, but without discretion it can slowly take over until all you are doing is nursing your debt.

    Credit cards were never meant to become personal loans. They are conviniences for paying for stuff, like checks. Instead of looking at APR look at perks like air miles or car downpayment or stuff then pay it off each month.
     
  3. Jay Heyl

    Jay Heyl Stunt Coordinator

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    If you like the current company and want to continue doing business with them, just ask them to reduce the rate. For the last couple years I've been practically bombarded by offers for cards at rates much lower than you mention. Many of them have no yearly fees, introductory 0% interest (sometimes for a year or more), 0% balance transfer rates (they want the balance you currently owe someone else), and other assorted goodies. IOW, it's a buyers market with credit cards right now. Might as well take advantage of it.

    In the past I've gotten several of my credit card companies to lower their rate, sometimes by a pretty remarkable amount. From where you are now, you should be able to easily get that rate cut in half. I wasn't even subtle about it when I called them. I just said, "What can you do about my interest rate?" Not all of them were cooperative. I'm no longer doing business with the ones who weren't. If you want to be a bit slicker you can try to find a good deal elsewhere and ask your current company to match it.
     
  4. Jay Heyl

    Jay Heyl Stunt Coordinator

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  5. Todd K

    Todd K Second Unit

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    I understand that credit card debt is bad. There were some unforseen circumstances that caused my debt to accumulate -- I went through a period of unemployment, then made some home theater purchases, unaware that another stretch of unemployment was around the corner. The debt is well under control now since I can now allocate large amounts for monthly payments.

    This company has treated me well and since I have been with them the longest, I somehow have this instinctive feeling that having good standing for such a period of time would look good to entities checking out my credit report.

    However, if they don't grant me a rate reduction, I would like to seek another (lower rate) card for emergency purposes. So if they don't grant me the reduction, should I keep or ditch the existing (and soon to be no balance) card while I am applying for another? I guess that is the basic question I am now getting at.
     
  6. Michael Silla

    Michael Silla Second Unit

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    What Jay said - good advice.

    I recently got my Credit card company to permanently lower my rate after taking advantage of another companies 0% offer. It is about to expire (it was only 6 months) but I plan to transfer back the remaining balance to my original CC company becuase of the low permanent rate.

    The other day a got another 0% balance transfer offer for what amounts to 18 months interest free. I was thinking about taking advantage of it. What I am wondering is if it looks bad to credit scoring agencies if I open another line of credit?. I plan on closing #2 as soon as the offer expires.

    Michael.
     
  7. KyleS

    KyleS Screenwriter

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    Michael,

    It always looks worse if you have more credit because it is a possible liability to yourself. Now if you get the new card and then cancel the old card then you are no different then you were before. You dont want to get in a habit of opening lines of credit without closing others or worse get in a habit of getting zero interest cards and never paying down your debt.

    KyleS
     
  8. Jose Arellano

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    With all due respect Kyle, you could not be more wrong. You would not be in the same situation if you opened up a new credit card and closed an old one. I work for the mortgage industry and have become very familiar with credit reports and have gone to seminars put on by the credit bureaus.

    Once you open a card, you have already done whatever damage, if any, that that would do to your credit. What having these cards mean, is that you have a longer credit history. If you got a card in 1990 that has a $500 limit, a second card in 1998 for $1500, and now can get a new card for $20000, and won't need to use the first one ever again, don't cancel it. If these were your only three credit accounts, and you closed the first card, you would have your credit history only go back to 1998, 5 years, as opposed to having credit showing for 13 years.

    Furthermore, if you were to have 3 cards with a $5000 limit each, and you have $4500 in debt on them, it is better to have 3 accounts with $1500 on them each than one card with $4500 and the rest at zero. A huge chunk of your credit score is derived from the % of available credit you use, and if it shows you using 90% on one card as opposed to 30% on each of three cards, although the amounts are the same, your credit suffers.

    One other thing that was told to us is that American Express Cards are detrimental to your credit through no real fault of their own. Since they have no high limit, each month, the percentage used is calculated based on what AE reported the month before. For example, since AE cards are paid off from month to month, you might have a lower limit the previous month reported than what your current balance is. If you charged $400 last month on that card, then your credit report would show a $400 balance on a $400 limit. The limit actually changes month to month, but to calculate the %, they use what AE reports, so if you charge $800 this month, and your limit shows $400, although there is no limit, it causes a detrimental effect on your credit.

    Anyway, my point is don't close credit cards, spread out your debts on these cards if the rates are comparable, and if you open a new one, don't close the older ones. Also, don't apply for too many new ones, as more than 6-10 inquiries in a year hurt your scores.

    If you want, I can answer further questions regarding this. LEt me know. Thanks!
     
  9. Todd K

    Todd K Second Unit

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    Very insightful, Jose. I appreciate this advice. I will keep my credit card in question open, and if all goes well and they lower my rate, I can transfer some balance from my two near-maxed cards.
     
  10. Carl Miller

    Carl Miller Screenwriter

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    Jose, I have to ask this because it is the exact opposite of what actually happened to my wife and I when we bought our first house in 02'.

    We applied for a mortgage and were rejected, according to the lender because the unclosed credit card accounts we had were potential liabilities. We hadn't used them in years, carried no balance on any and had a total of 3. One from my wife with a limit of $5,500, and two from me total limit just under $10,000 combined. In addition we each had zero balance active cards with a limit totaling $20,000 combined.

    We were told that these inactive accounts were harmful to our credit report, advised to cancel them and reapply in 90 days. We lost that house because of this but got a mortgage 3 months later with the same bank.

    I'm not doubting your advice, but I am curious about why this happened to us? Was it our age in that we're late thirties and had longer credit histories such as paid car loans, student loans etc? Too much total credit? Combination of reasons?
     
  11. DaveF

    DaveF Moderator
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    Hmm... a good deal of conflicting advice. Well, here's my two cents worth [​IMG]

    My understanding is that the total amount of available credit is considered by lenders when applying for loans, such as a mortgage. Unused, but available credit cards are considered as part of your available credit and could negatively affect your credit rating.

    Hopping credit cards (frequently switching from card to card by opening and closing new accounts) negatively affects your credit history.

    Credit histories with the reporting agencies (Equifax, TransUnion, etc.) only go back seven years. So it's good to cancel those unused cards and let them fall off the financial radar.

    Jose - perhaps you could elaborate on your comments. Your advice seems contrary to what I've heard previously from people in the industry.
     
  12. Malcolm R

    Malcolm R Executive Producer

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    If you use this "clean" card for monthly purchases, then pay the bill in full every month, you don't need to worry about the interest rate.

    Just pay off this card every month, while you're chipping away at your other two cards.

    The only reason to worry about the interest rate is if you intend to run it up to its limit again (which would be a bad thing, obviously).
     
  13. Todd K

    Todd K Second Unit

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    Well, I think the point Jose made that is most relevant to me is that since the card in question is the one I have had the longest, I should hang on to it.

    And Malcolm, you are correct and that's what I plan to do. However, I want to get a fixed low rate card that I can use for any means. One of the two remaining cards is currently at a promotional rate and will skyrocket in October. The other one is fixed for the current balance, but new purchases will be at a higher rate come October as well. If I can just deal with one card at one low rate, I'd have a lot less hassle.
     
  14. Jay Heyl

    Jay Heyl Stunt Coordinator

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    Jose's point about not closing the older, now unused card seemed to be that it would provide a longer credit history. A valid point, but most of the big credit card companies continue to report on you long after you've closed the account. I ran a credit report last year and there were recent updates to accounts I had closed over ten years ago. These places seem to just send their entire records over to the credit agency every month.

    Todd, I really don't think opening another credit card account is going to have any serious impact on your credit rating. If you're really concerned about it, go to the credit agency web sites and get copies of your credit report. When I did this last year one of the places included my credit "score" and had a lot of info on what impact different items had on the score. They even had an area where you could play "what if" with items on your report and immediately view the impact on the score.

    As for the feeling of loyalty you have toward this company since you've been with them a long time -- I fully understand this. But please don't fool yourself into thinking the company has any similar feelings toward you. The instant they think they can get away with raising the rates or changing the terms in their favor, they'll do it. The moment they think you're no longer the kind of credit risk they want to deal with, they'll drop you like a hot potato. Of this, have no doubt. IOW, I would encourage you to put your personal feelings aside and look at it as a strictly business decision. If you can get a better deal elsewhere, do not hesitate to go for it. Do not let your "loyalty" stand in the way of the right business decision. (I say all of this not out of some general hatred toward credit card companies, but from repeated personal experience.)
     
  15. KyleS

    KyleS Screenwriter

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    HMmm Jose what you are saying is Exactly the opposite of what every credit agency has ever told me when applying for large loans like a car or home.

    The amount of time that you have an account is Irrelavant because they look at your credit history over the past 7 years (again according to the people that ran our credit). Accounts that we had in the past did show up and were used to calculate our credit. The cards we had open were used against our credit with the amount of the card. Whether we owed 500 or 5000 didnt matter to the lending institutions. What mattered to them were the limits. So I had 3 cards with 5K limits they planned on me having 15K in debt Available to me. In other words that I could run them up and were considered liabilities against my ability to pay them back.

     
  16. Keith Plucker

    Keith Plucker Screenwriter
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    There are some tips over at myfico.com you may want to look at. They specifically mention to NOT close unused credit card accounts. Average account age is a factor in determining your credit score. If you close your oldest account, it could have a negative affect on your credit rating.

    -Keith
     
  17. Eric_L

    Eric_L Screenwriter

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    At the end of the day, do what is right for you and stop worrying about credit scores, APRs etc.

    For most people, what is right is reducing debt. If you plan to payoff the card every month look for one with perks. Make sure it offers 30 day grace period so you payoff only what you charge.

    Forget about credit score: 90% is haveing it full of R1's and no 30's = means no late payments - ever.

    The rest is easily managed. Don't get caught up in 'paralysis by analysis'.
     
  18. Adam Krogul

    Adam Krogul Stunt Coordinator

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    ok i have a question about my credit cards and i really couldnt find the answer within the post so far. im 25 years old and @ 22~23 i decided it would be a good thing to establish credit so i applied for a visa, i got denied. went to discover and got accepted, now i have 3 (visa, and mastercard).

    i pay my bills off every month and only really use the cards for big purchases, and grocerys. does my way of paying off every month in full establish any credit in my name or should i pay the minimum for 6 months and eat their interest for a while to get a good standing.

    the other question i have is this; one of my cards just recently sent me a letter letting me know that they will be charging a membership fee yearly of 20 bucks. Now i really hate the idea of this, whats the best way (credit report wise) to handle this situation? cancel the card? (if so is there a correct procedure to do this? {anything to watch out for?}),or try to compalin and get the membership fee taken off.

    thanks in advance
     
  19. Reginald Trent

    Reginald Trent Screenwriter

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    Good info can be had ar www.bankrate.com youcan also find cards with no annual fees with loa APR (annual percentage rates).
     
  20. Eric_L

    Eric_L Screenwriter

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    Adam Krogul

    You are well on your way to good credit. Credit is not measured by outstanding balance nearly as much as by pay history, and you are doing excellent.

    Another factor to consider is debt ratio - which is the total of your debt payments divided by your income. With zero revolving debt, your credit is the equivelent of a hot chick at a HTF singles meet - A valued gem indeed.

    If you want to build your credit, You may want to consider zero percent manufacturer financing on your next new car purchase. That is an installment loan, which is treated differently than a revolving credit line when banks consider credit.

    Also, call your $20 annual fee people and tell them where they can put their annual fee. CXL the card.

    Since you paof your cards each month you may want to look also at getting a card with perks (airmiles, etc). Now that you have a few years of good history you should have little trouble qualifying.

    Keep up the good work!
     

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