Consumers can renegotiate
credit card rates and fees -- but it's not easy
Want a lower rate
on your credit cards? Just ask.
What to remember
when calling a creditor
Read the fine print in your credit
contract before calling -- understand the percentage you're
paying now and check to see if there is a cap.
Remind the issuer if you have made
payments on time.
Do you carry a balance? If so, share
this info with the creditor. Revolvers are considered more
If you know of other cards with no
annual fees, tell your issuer you will transfer balances
if they don't waive their fee, too.
When calling, ask to move beyond customer
service to a supervisor or manager if the first representative
is not responsive.
A study conducted by Auriemma Consulting Group
in Westbury, N.Y., reported that the percentage of consumer credit
cardholders who negotiate with issuers for higher credit lines and
lower late fees has been steadily rising.
"Approximately 17 percent to 22 percent of cardholders
say they negotiate at least some terms with the issuers," says Mark
Sacher, managing associate with Auriemma Consulting. "It did not
used to be this common, but with defaults increasing, more people
are paying late fees and penalty fees and other nuisance fees."
The most commonly negotiated terms are permanent
interest rates and annual fees, Sacher adds. The percentage of those
haggling over credit lines rose from 14 percent to 22 percent between
the first portion of 1996 and summer of 1997. Those negotiating
over late fees increased from none in a previous survey begun in
1996 to 10 percent by summer of 1997.
service has discretion
For the most part, the customer service representative who answers
the first call has "a certain amount of discretion," Sacher said,
but usually there is an escalation process in which other card issuer
employees would be involved. "Supervisors are called in, then managers.
I doubt a rate renegotiation request would ever go much beyond a
The response varies from issuer to issuer. Some
customer service representatives are given enough autonomy to make
credit decisions, using information provided by the customer and
following a "roadmap" provided by the issuer.
"Some issuers make the renegotiation process
as simple as yes and no," Sacher said. "Others are adamant about
not waiving fees."
Few issuers want to
talk about renegotiation
Few issuers were willing to talk about the process involved,
but First Chicago NBD, Chicago, said they examine a number of different
criteria when customers call. For example, whether the customer
is profitable or has been part of a good account is key. They want
positive answers to the following questions:
- Is there a high volume of transactions?
- Is it a revolving account?
- Do they carry a balance?
- What's the interchange fee (the amount the
merchant pays the issuer per card transaction) on the card?
"What we're really deciding is: Can we lower
a customer's rate?" said Thomas Kelly, spokesman for First Chicago.
"It's done on a case-by-case basis. Sometimes we can do it and sometimes
we can't, but we will always look at the profitability of the account
as a determining factor."
If consumers are in financial trouble and are
thinking about declaring bankruptcy, though, Kelly said, they should
seek the advice of Consumer Credit Counseling Service and not attempt
to renegotiate rates themselves.
Teaser rates often negotiable
For the average consumer whose teaser rate has expired, a quick
phone call to credit card customer service usually determines the
answer. "We look at the customer's account and decide what to do,"
Quick response from the issuer is essential, because
if the customer service representative promises "to get back to
you in four weeks," he said, "chances are the consumer won't wait
around that long, and you'll lose that balance."
The credit card industry does not take late payments
or habitual lateness lightly, said another bank representative in
Pittsburgh who declined to be identified.
Cards expensive if you don't
follow the rules
"It is more expensive if you don't follow the rules," he said. "We
know of people who have successfully renegotiated their card rates
themselves, but it's not as easy as it sounds. If you've missed
a couple of payments without a credible reason, trying to negotiate
new rates or waiving the fees could be impossible. "
At Consumer Credit Counseling Service (CCCS)
in West Palm Beach, Fla., counselor Carl Zimbro says that for a
rate to be changed or fees waived, banks might be more willing to
work with consumers than in the past.
"Typically, with monthly payments, it's not
going to be advisable to try to lower them, because that's what's
lowering your principle," Zimbro said. "You must really be in financial
distress to want to lower that payment, and we try to help you do
Annual fees usually easy to
Zimbro said that since many credit cards have no annual fee, it
would be unusual for an issuer not to waive that amount if the borrower
pressed for it.
"You have that in your corner," he said. "But
you can't usually talk them out of that penalty rate. If you get
caught up and have been paying well for some time, you might be
able to get a bank or card issuer to respond favorably to that request."
Many creditors offer consumers "hardship" programs
in which an issuer will reduce the interest and payment for six
months, to allow them to get caught up on debt. But once that time
period is up, the rate and fees rise again, Zimbro said.
"Some consumers are not aware that these programs
exist, but more creditors are advising customers to go that way
if they need some time to get caught up with debt," Zimbro added.
"Citibank has been doing it for some time, as well as other card
-- Posted: Jan. 20, 1998