How do I select a new credit card?
August 31, 2004 4:11 PM Subscribe
I have a credit card from a company that I quite like, but they've slowly been raising my APR. Every year, I get a notice that it's gone up a few more points. (Despite that I've got a great credit rating.) Last week, when I got the notice about the increase to 18.9%, that was the final straw. There are a bajillion credit cards out there, and the choices are overwhelming. How do I select a new credit card?
Yeah, I would call them and tell them to knock it down to 8 percent or so.
What are everyone's credit card interest rates?
posted by mecran01 at 4:26 PM on August 31, 2004
What are everyone's credit card interest rates?
posted by mecran01 at 4:26 PM on August 31, 2004
Response by poster: I should mention that I'm aware of my credit rating because paid something like 12 bucks to find out from FICO a few months ago, via their website. Anybody who is considering a mortgage or a car loan in the next few years would do well to be aware of their credit score and take steps to raise it, if necessary. A good credit rating can save you a lot of money.
posted by waldo at 4:30 PM on August 31, 2004
posted by waldo at 4:30 PM on August 31, 2004
It doesn't matter what the card's interest rate is. If you are carrying a balance, any interest rate is too high and you should pay it off immediately. And if you're not carrying a balance, well, 18.9% of nothing is nothing.
posted by kindall at 5:09 PM on August 31, 2004
posted by kindall at 5:09 PM on August 31, 2004
Response by poster: I am a late-in-life college student living on savings and the smallest amount of income that I can generate, and my budget is contingent on carrying a small balance for a few months, paying it off...wash, rinse, repeat.
Yes, carrying a balance is undesirable (I don't have a bad-ass credit rating for nothing), but I've had to learn to suck it up and deal with it for the past six months. December will bring relief.
posted by waldo at 5:33 PM on August 31, 2004
Yes, carrying a balance is undesirable (I don't have a bad-ass credit rating for nothing), but I've had to learn to suck it up and deal with it for the past six months. December will bring relief.
posted by waldo at 5:33 PM on August 31, 2004
Almost all credit card companies will lower your APR if you have a good payment history. Just threaten to cancel the card, and you could see your APR drop by over 50%.
posted by gokart4xmas at 5:44 PM on August 31, 2004
posted by gokart4xmas at 5:44 PM on August 31, 2004
My card company raised my rates, I called them up to cancel, they instantly asked me if 8% was good enough to change my mind. The increased rate might because I carry a 0 balance on it which also means that technically a 19% rate wouldn't cost me anything. I didn't want to end up in an emergency situation where I did have an outstanding balance and no immediate means to pay it and a 19% interest rate.
posted by substrate at 5:58 PM on August 31, 2004
posted by substrate at 5:58 PM on August 31, 2004
Think of it as a test of your attention span. The card companies raise their rates periodically, knowing that a few customers will balk but most won't notice or at least not make a fuss. The quiet ones' high rates subsidize fat discounts for the squeaky wheels.
Always, always call as soon as they raise rates or change other terms (annual fee, late fee, bonus programs, etc.). Be blunt: you like their card but their terms are no longer worthwhile to you and if they cannot make a significantly better offer you'll have to cancel. There are always cards willing to offer 0% for six months, and similar intro goodies. Everyone in the industry knows that's what they're competing against to retain customers. Whatever the rep suggests they can do for you, consider it merely an opening offer. Negotiate. If you regularly carry a balance you are a highly desirable customer (interest=profit) and with a bit of persistence you can walk away with a rate better than before and possibly some nice extras (higher limit, upgrade to gold or platinum, reward miles, no-fee transfers, etc.) as incentive to stay put.
With prime rate still hovering near the lowest in decades, 19% is highway robbery for someone with good credit. You can certainly do better elsewhere if they don't give you what you want. Remember that they can afford to drop that rate 10% right now and still making a handsome profit off you.
posted by nakedcodemonkey at 7:03 PM on August 31, 2004
Always, always call as soon as they raise rates or change other terms (annual fee, late fee, bonus programs, etc.). Be blunt: you like their card but their terms are no longer worthwhile to you and if they cannot make a significantly better offer you'll have to cancel. There are always cards willing to offer 0% for six months, and similar intro goodies. Everyone in the industry knows that's what they're competing against to retain customers. Whatever the rep suggests they can do for you, consider it merely an opening offer. Negotiate. If you regularly carry a balance you are a highly desirable customer (interest=profit) and with a bit of persistence you can walk away with a rate better than before and possibly some nice extras (higher limit, upgrade to gold or platinum, reward miles, no-fee transfers, etc.) as incentive to stay put.
With prime rate still hovering near the lowest in decades, 19% is highway robbery for someone with good credit. You can certainly do better elsewhere if they don't give you what you want. Remember that they can afford to drop that rate 10% right now and still making a handsome profit off you.
posted by nakedcodemonkey at 7:03 PM on August 31, 2004
Well, Gromco.com hosts a site called Credit Card Menu that lets you set some criteria and then lists the cards that fit. Might give it a whirl.
posted by willpie at 8:05 PM on August 31, 2004
posted by willpie at 8:05 PM on August 31, 2004
Run, do not walk, to your nearest credit union. Or bank, if you don't have one. They have permanent -- not introductory -- rates that will kick the trash out of any offer you will get in the mail.
I recently just had an experience with two credit card companies -- large big name ones (MBNA and Bank 1) -- that convinced me they are predatory lenders. 2-3 years ago I went through a rough period of unemployment. A bit over a year ago I finally started getting back on my feet, but not after incuring about $5000 of credit card debt.
Anyway, around the time that I apparently reached the point where the amount of unsecured debt I had was near 20% of my income (I touched 18% briefly), MBNA and Bank 1 raised my rates to 26%. And I have to figure the reason they did it was because when I got that unsecured debt to income ratio, I found it difficult to get another card account I could transfer to. In short, it looked like I was stuck with them and they knew it. I called in and haggled with them, and they said (first) that I wasn't eligible for a rate decrease, and after some further hassling, went down to 21%.
Fortunately, I had built up a bit in the bank by that point, and had some extra cash from freelance income. I paid off about $2000 of the debt, and went and got credit at 8.5% from a local credit union to move the rest onto. Immediately, MBNA mailed me an offer of 8.5% balance transfers. I expect Bank 1 to follow suit shortly.
Both the Bank 1 and MBNA cards I got through offers from the mail. I don't think I will ever trust an offer sent that way again.
posted by weston at 8:24 PM on August 31, 2004
I recently just had an experience with two credit card companies -- large big name ones (MBNA and Bank 1) -- that convinced me they are predatory lenders. 2-3 years ago I went through a rough period of unemployment. A bit over a year ago I finally started getting back on my feet, but not after incuring about $5000 of credit card debt.
Anyway, around the time that I apparently reached the point where the amount of unsecured debt I had was near 20% of my income (I touched 18% briefly), MBNA and Bank 1 raised my rates to 26%. And I have to figure the reason they did it was because when I got that unsecured debt to income ratio, I found it difficult to get another card account I could transfer to. In short, it looked like I was stuck with them and they knew it. I called in and haggled with them, and they said (first) that I wasn't eligible for a rate decrease, and after some further hassling, went down to 21%.
Fortunately, I had built up a bit in the bank by that point, and had some extra cash from freelance income. I paid off about $2000 of the debt, and went and got credit at 8.5% from a local credit union to move the rest onto. Immediately, MBNA mailed me an offer of 8.5% balance transfers. I expect Bank 1 to follow suit shortly.
Both the Bank 1 and MBNA cards I got through offers from the mail. I don't think I will ever trust an offer sent that way again.
posted by weston at 8:24 PM on August 31, 2004
I think you should call around to some other companies...if you only have to carry a balance for another 6 months, just find a 0% for 6-month intro deal and transfer that balance over. Or do as weston suggested and seek out a local credit union.
Even if you can talk your current lender down to 8%, you should be able to do even better by introducing some competition into the mix.
posted by jacobsee at 8:59 PM on August 31, 2004
Even if you can talk your current lender down to 8%, you should be able to do even better by introducing some competition into the mix.
posted by jacobsee at 8:59 PM on August 31, 2004
Whoa. It's all about the BankRate, which is an awesome resource for finding out who's got the best rates on credit cards. You can look by card type, and by promo and perm rates.
posted by zpousman at 9:01 PM on August 31, 2004
posted by zpousman at 9:01 PM on August 31, 2004
Response by poster: Run, do not walk, to your nearest credit union. Or bank, if you don't have one. They have permanent -- not introductory -- rates that will kick the trash out of any offer you will get in the mail.
I'm with such a small bank that they don't even offer credit cards, but your advice is really great for most people.
The links to these various credit-card-comparison websites are great, folks -- just what I'd hoped for.
posted by waldo at 10:30 PM on August 31, 2004
I'm with such a small bank that they don't even offer credit cards, but your advice is really great for most people.
The links to these various credit-card-comparison websites are great, folks -- just what I'd hoped for.
posted by waldo at 10:30 PM on August 31, 2004
Or bank, if you don't have one. They have permanent -- not introductory -- rates that will kick the trash out of any offer you will get in the mail.
Note, this isn't good advice for the UK, although it may be for the US. In the UK the best rates tend to come from independents (well, they're often 'sister companies' of other banks) like Egg or Marbles.
posted by wackybrit at 6:44 AM on September 1, 2004
Note, this isn't good advice for the UK, although it may be for the US. In the UK the best rates tend to come from independents (well, they're often 'sister companies' of other banks) like Egg or Marbles.
posted by wackybrit at 6:44 AM on September 1, 2004
I interviewed to work for one of the large credit card companies a few years back. As part of the interview they showed me the process they go through. One set of outbound telemarketers was devoted to calling customers of other credit card companies, and offering 0% rate transfers. I vaguely remember that it seemed the telemarketers knew what the outstanding balance was as well.
It was explained to me that some customers constantly work the system and switch to a different card company as the intro rate period comes to an end. The card companies realize this, and simply rely on the folks that don't bother to switch before the time is up for their profits. Of course of your credit score will be worse if you apply for a bunch of credit cards, so you have to weigh if it's worth it.
posted by SteveInMaine at 9:56 AM on September 1, 2004
It was explained to me that some customers constantly work the system and switch to a different card company as the intro rate period comes to an end. The card companies realize this, and simply rely on the folks that don't bother to switch before the time is up for their profits. Of course of your credit score will be worse if you apply for a bunch of credit cards, so you have to weigh if it's worth it.
posted by SteveInMaine at 9:56 AM on September 1, 2004
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posted by thomcatspike at 4:25 PM on August 31, 2004