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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 profitable customers.
  • 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.

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    Customer 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 supervisor, though."

    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," Kelly said.

    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 that."

    Annual fees usually easy to waive
    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 issuers."

    -- Posted: Jan. 20, 1998


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