Thinking of Asking Credit Card Company to stop charging interest

[bumbershoot]

You know, the "I did it, now you have to" part of my brain wants to say "yeah well back in '99 or so Discover took my rate up to 29.99% just when I needed them the most (after having them, and using them wisely since '88, being a good customer for all that time)", and so you have to deal with it too."

The other part of me, the part that wishes I'd fought their crud more and cried on the phone with them less, wants you to ask ask ask! Things are different now, and they might work with you, but they won't unless you ask them to.

I think the interest rate on some of these was like 10 or 11% and now it's almost 30% on some of them! The credit card companies are greedy.

I know that the info sheets on offers we get all say x%, then x times 2 or 3 or 4 percent (usually up to about 30%) if so and so happens.

BUT on the other hand, I remember people getting smashed by random interest increases back a year or so ago, and they hadn't done anything officially wrong, nothing in the supposed fine print...

Don't they only raise your rates if you miss or are late with payments?

It used to be like that, but like I just said, about a year or a bit more ago, a bunch of people had their rates raised AND their minimum payments raised (by quite a bit), by places like Chase, seemingly in advance of the changes about to be put in place.

 

[kmedina]

Okay, so we are over our heads in credit card debt. We make the monthly minimum payment on each one, so we haven't defaulted, but we also will never in this lifetime get them paid off. I was thinking of sending all of our creditors a letter, but I'm not sure how to word it.
How does this sound:
Dear ____________:

We are in the process of paying back all of our outstanding credit balances but feel that we will never get our balance paid down if we have to keep paying the high interest rate that your company is charging. I realize we agreed to pay interest on our debt, but your company has raised the interest rate considerably since we signed up with you. I am asking that you stop charging us interest on our outstanding balance so that we can get it paid off sooner and can once again do business with you.

Sincerely,_____________

How does that sound? Any tips would be greatly appreciated.
Thanks!

I read the first two pages and skimmed through the others. It does not appear that anyone helped you with the letter (the whole reason for the thread). Here are the changes I would make:


Dear Credit Grantor:

We are in the process of paying back all of our outstanding credit balances. With the high interest rates we currently have, it will not be possible. I respectfully ask that (insert credit card company's name) lower my interest rate. The lowest possible rate available would be extremely helpful with this endeavor. If there is any information I can provide to assist you with this decision, please contact me via (preferred method of contact). Any assistance you can provide will be greatly appreciated. Thank you for your time and consideration.

Sincerely,_____________


Good luck. The worst the company can do is write back declining your request. If the written response is no, call them. I am assuming you are writing the letter (before calling if youu have not already called), because you feel more comfortable and confident with the written word. You should always try your most comfortable method first (whether it be a letter, a phone call or when applicable, in person).

If you exhaust all efforts to resolve the matter on your own, you can look into other methods suggested. Just be advised most of them (like closing accounts, contacting debt relief agencies, etc can hurt your credit). I am assuming (yes, assumptions can always be incorrect) that you want to pay the accounts off to help your credit (as well as your pocketbook from extra interest charges). You would just stop paying all together if you did not care about your credit and/or honoring your agreement. Based on my assumption, I would advise you do everything possible before a tactic that could hurt your credit.

 

[dzorn]

Can you add some money to your mortgage and pay off the credit cards? The interest would be significantly lower, your mortagage payment would still be reasonable and your credit cards would be eliminated.
It's kind of a one time fix, but it can help you, providing the cards aren't twenty or thirty thousand in debt.
A line of credit with your bank would also carry a lower interest rate.

Never do this. Do not risk losing your home.

Denise in MI

 

[ilovemk76]

Not necessarily. I have never been late on a payment, never even paid a late fee. They only raised mine after I stopped charging and started paying it off. My niece had a student loan that did the same. They were quite content to charge the interest rate agreed upon until we started doubling up on the payments. They went up twice in 5 months.

Are you the OP? You created this ID yesterda and seem to just be defending her.

When the new Federal law about CCs was passed, right before many companies rasied their rates. Most people saw a raise in their rates but the ones who were a good risk did not go up to 30%. This law also increased the minium payment to 2% (IIRC) of the balance to enable it to be paid off in a certain period of time.

 

[ilovemk76]

I read the first two pages and skimmed through the others. It does not appear that anyone helped you with the letter (the whole reason for the thread). Here are the changes I would make:


Dear Credit Grantor:

We are in the process of paying back all of our outstanding credit balances. With the high interest rates we currently have, it will not be possible. I respectfully ask that (insert credit card company's name) lower my interest rate. The lowest possible rate available would be extremely helpful with this endeavor. If there is any information I can provide to assist you with this decision, please contact me via (preferred method of contact). Any assistance you can provide will be greatly appreciated. Thank you for your time and consideration.

Sincerely,_____________


Good luck. The worst the company can do is write back declining your request. If the written response is no, call them. I am assuming you are writing the letter (before calling if youu have not already called), because you feel more comfortable and confident with the written word. You should always try your most comfortable method first (whether it be a letter, a phone call or when applicable, in person).

If you exhaust all efforts to resolve the matter on your own, you can look into other methods suggested. Just be advised most of them (like closing accounts, contacting debt relief agencies, etc can hurt your credit). I am assuming (yes, assumptions can always be incorrect) that you want to pay the accounts off to help your credit (as well as your pocketbook from extra interest charges). You would just stop paying all together if you did not care about your credit and/or honoring your agreement. Based on my assumption, I would advise you do everything possible before a tactic that could hurt your credit.

Bold - That is because her letter will do no good. The demand of the letter is too extreme and they will ignore it.

 

[MrsPete]

And no matter how high the rates are, they are only a problem when you don't pay them off completely each month... I've probably charged over 30,000 a year on my credit card year after year and the total interest I've paid has been zero.... because I only charge what I can pay for... if you make sure that is how you use them then they are great. But the moment you decide to put off paying them for even a month, you lose big time.

Yeah, my husband and I made a conscious decision ONCE to carry a balance on our credit card for a 2-3 month period. We did this because our car died. We knew it was coming, and we'd saved for it; however, when the moment arrived, we realized that we'd saved so much that IF we used that money AND essentially bottomed-out our checking account, we could avoid financing altogether. We had a healthy emergency fund, which we never touched. It also happened to be three weeks before a long-planned vacation and a month before Christmas. We decided that it'd be worthwhile to carry a balance on our credit card for that short period.

That was some years ago, but given the same circumstances, I'd do the very same thing again -- but I hated seeing how much interest we paid in just that small amount of time. I felt very relieved when the 2-3 months were over and we reverted back to paying in full every month.

Turning unsecured debt into secured debt certainly doesn't seem like a wise choice to me. So I would advise the exact opposite. If you do end up taking out a consolidation loan, I would make sure you do not attach your house to the loan.

Good advice. Bears repeating.

Probably should have thought about the interest before you ran up your cards, they are not free money but high interests loans. You could not afford to pay the interest but you could afford to run them up??? Your debt and you need to pay it, unless there are extenuating circumstances that you have not mentioned, no sympathy from me!!

The wording's a bit harsh, but I'd suggest that when you're thinking, "I have to use my credit card -- I have no choice", ask yourself this: "What would I do if I didn't have this card?" I bet you'll come up with an answer that isn't the end of the world. It might involve altering your plans or doing without something that you want, or it might involve working out payments to the hospital, or it might involve buying something used instead of new -- but it probably isn't something that will be important years later. On the other hand, obviously, paying off the credit card bill IS important years later.

And as I say that, keep in mind that I'm sitting here wearing a pair of pants that I bought at a consignment store for $2 a good 5-6 years ago and a pair of shoes that're literally falling apart (I did order a replacement pair yesterday from Lands' End). This morning my kids packed bag lunches for school, carrying bookbags that're on their 3rd year of use. What's the point? I'm able to pay my credit cards off each month NOT because I have so much money; rather, I'm able to pay my cards off each month because I'm frugal.

 

[SaraJayne]

Not necessarily. I have never been late on a payment, never even paid a late fee. They only raised mine after I stopped charging and started paying it off. My niece had a student loan that did the same. They were quite content to charge the interest rate agreed upon until we started doubling up on the payments. They went up twice in 5 months.

Ok.

We don't carry a balance, so I thought they only raised your rates if you were late or missed a statement.

Thanks for correcting me.

 

[mhsjax]

Credit card companies routinely target people with lower credit scores precisely to get them to pay the minimum payment each month in perpetuity. That way CC companies make TONS of money. Read it again - CC companies TARGET people who they KNOW can't make more than the minimum payments.

For example, if the minimum payment is 2% of your actual balance and you charge NO MORE purchases, you could assume it would take 50 months to pay it off (2%x50 months = 100%). But it's not true, by the time you add the interest, it could take about 300 months to pay off a balance. They've collected 10% or more for longer than most people take out a mortgage.

They also have language so that if you are late on a DIFFERENT credit card, they can raise your rate on this one, where you've made perfect payments.

They LURE college kids over to their sign-up desks by offering freebies - no they can no longer REQUIRE them to apply for the card to get the free item, but many students do and the CC company knows this.

They also ALLOW consumers to OPT-IN for allowing over-the-limit purchases so that the CC company can then charge the consumer additional fees. If someone is at their credit limit, WHY OH WHY would CC company allow the charge to go through? Because allowing the consumer to purchase more than they can afford (the credit card company already determined the consumer's spending limit based on their credit report) MAKES the credit card company even more money.

Someone posted that credit card companies are businesses and they want to make money. That is really, really true.

But I stand by my statement that sometimes their practices are less than ethical. It's because of these unethical practices that the federal government has legistated such sweeping credit card reform. And because of this reform, credit card companies are looking for other creative ways to make this money.

This is soooooo true. I worked for a very large CC company for quite some time, I was shocked at the practices, and have decided that CC companies are basically low life scum. They want you in over your head, but not too much. Those people here that love to lecture about how they pay off their bills to the CC companies every month, well those companies hate you, you aren't a good customer for them. People that pay the minimum but are on time, are usually given more credit line increases than those who do. Also when you have 2 interest rates, the lower will automatically get the payment applied first, you can't tell them which payment applies to which interest rate, it will go to the lower one, giving the CC company a chance to get even more of your money. Yeah, these people are the cream of the crop. They put all that info in little tiny writing that looks like Chinese swing set instructions and then they screw you over. They would also send you stuff, out of the blue, and you would think oh wow, they sent me something, in the fine print it said that if you didn't call and cancel, you would be charged the full amount. Lovely people.

I am not saying that we aren't responsible for our debt, (in general ours, mine is paid off) but I do want to say that these companies are out to screw you any way they can, and they make it very difficult to really know what is going on. We are their meal ticket, and they will get every cent out of us that they can, ethically and unethically.

 

[crisi]

And in typical Budget Board fashion, we have a lot of high horses giving their "two cents" and very little practical advise. Anyway...

And also, in typical budget board fashion - its in response to someone saying "what do you mean that would be irresponsible." People are simply answering her question on why they believe this is 'walking away.'

Personally, I think there should be a cap on how much interest CC companies can charge. But at the same time, I think people need to be aware that there isn't and that most CC banks are pretty darn predatory and protect themselves accordingly. That "no interest" or "3% interest" card is likely going to cost you a LOT more than that. (And yes, I know some of us have worked the interest game to our advantage. I currently have a mortgage to work the interest game to my advantage. But its a dangerous game with credit card companies and their "nearly random" rate changes.)

Anyway....OP, I don't think you'll get very far with your letters - at this point the promise of additional business with someone they took a bath on isn't really attractive to them. You aren't threatening them with non-payment at all, and you can make your minimum payments. Your letters are "whats in this for me" not "what's in this for them." It might be worth a try, but I think you'd be better off with a non-profit credit counseling service to work it for you. That will also help create some accountability to paying down the debt. Or, if you want to give it a go yourself, try reading Dave Ramsey's book - he won't tell you to negotiate lower rates, he'll just tell you to pay them off as fast as you can by making sacrifices today. If I were going to try and negotiate my debt, I'd start with phone calls, not letters.

 

[QVCshopper]

Yes, you need to make phone calls. It won't be fun, but by asking them to lower your interest rate, you might get some help. They do it all the time on Til Debt Do Us Part and not everyone gets what they want, but some people are successful.

Then, I'd start snowballing to get rid of some of the cards. Whether you do highest interest or lowest balance is up to you, but maybe if you get rid of a couple faster, you can then attack the other ones.

 

[thomas998]

Never do this. Do not risk losing your home.

Denise in MI

The only reason you should not consolidate high interest loans and add pay them off using equity in your house is IF you already own your home free and clear of debt.

If you go bankrupt because of credit card debt and your house is not paid off free and clear then your probably going to lose your house because you probably can't make the mortgage payments and that debt isn't going to just vanish... I think too often people hear that under bankruptcy laws you are allowed to keep your house, but that is only when some very specific criteria is met.

If she can consolidate her CC debt into a much lower interest rate loan secured by her house, and IF she can afford to make those payments and this is the big IF, she can refrain from EVER using those credit cards again... then she should refinance.

The problem is that when most people do something like this, they will usually fall back into using the credit card again... fact is a CC for some people is no different than a bottle of alcohol in the hands of an alcoholic... some people need to simply cut them up and avoid them.

 

[ilovemk76]

This is soooooo true. I worked for a very large CC company for quite some time, I was shocked at the practices, and have decided that CC companies are basically low life scum. They want you in over your head, but not too much. Those people here that love to lecture about how they pay off their bills to the CC companies every month, well those companies hate you, you aren't a good customer for them. People that pay the minimum but are on time, are usually given more credit line increases than those who do. Also when you have 2 interest rates, the lower will automatically get the payment applied first, you can't tell them which payment applies to which interest rate, it will go to the lower one, giving the CC company a chance to get even more of your money. Yeah, these people are the cream of the crop. They put all that info in little tiny writing that looks like Chinese swing set instructions and then they screw you over. They would also send you stuff, out of the blue, and you would think oh wow, they sent me something, in the fine print it said that if you didn't call and cancel, you would be charged the full amount. Lovely people.

I am not saying that we aren't responsible for you r debt, (in general ours, mine is paid odd) but I do want to say that these companies are out to screw you any way they can, and they make it very difficult to really know what is going on. We are their meal ticket, and they will get every cent out of us that they can, ethically and unethically.

Capitolism is based on the premise that the workers are in debt. This keeps them coming to work. Once a person has a certain level of financial independence they have more choices of when and where to work. Once a person it financially secure they cannot be manipulated by Capitolism.

 

[punkin]

Capitolism is based on the premise that the workers are in debt. This keeps them coming to work. Once a person has a certain level of financial independence they have more choices of when and where to work. Once a person it financially secure they cannot be manipulated by Capitolism.

Capitalism...and Marx is largely discredited, you know. However, the way things are going in the world recently, we may yet create that permanent underclass he was always talking about.

 

[bettymae1121]

I think if the CC companies can raise rates at anytime they want it's okay for the consumer to ask that they lower it. All you're doing is ASKING, the CC companies can still say "no".

I have some CC debt on three cards (and have a fourth I use for monthly expenses and pay off each month). The debt on the three cards were at low interest rates so we could do our best to pay them off in a few years. Just before the CARD act went into effect, ALL THREE sent letters saying the 6% interest rate was now going to jump to 29.9%. We didn't pay late, we didn't go over our limit (imposible since we didn't use those cards for purchases anyway) and we paid more than the minimum as we were trying to pay them off.

Now, we were in a position to be able to tell them to stick their interest rates in an un-DIS like place (opt out) so we kept our 6% rates and they closed the accounts. Not everyone can do that though, for various reasons. Again, I see nothing wrong with asking the companies to reduce the rates when they can raise them at will.

In the business world, companies renegotiate contracts all the time, and it's "just doing business". But when a consumer does it, it's suddenly immoral and going back on your agreement. Why is one okay and the other unethical?

 

[crisi]

Capitalism...and Marx is largely discredited, you know. However, the way things are going in the world recently, we may yet create that permanent underclass he was always talking about.

Communism has been as pure communism (though China is doing quite well with a modified capitalistic blend) - but capitalism? That's still going strong as an economic philosophy. We are even fond right now of laissez faire capitalism - fonder than we've been since the 1920s.

 

[punkin]

Communism has been as pure communism (though China is doing quite well with a modified capitalistic blend) - but capitalism? That's still going strong as an economic philosophy. We are even fond right now of laissez faire capitalism - fonder than we've been since the 1920s.

Yes. I agree. Read my post again. I said Marx was largely discredited.

...and China is not communist at all and hasn't been in decades.

 

[ceecee]

The wording's a bit harsh, but I'd suggest that when you're thinking, "I haveAnd as I say that, keep in mind that I'm sitting here wearing a pair of pants that I bought at a consignment store for $2 a good 5-6 years ago and a pair of shoes that're literally falling apart (I did order a replacement pair yesterday from Lands' End). This morning my kids packed bag lunches for school, carrying bookbags that're on their 3rd year of use. What's the point? I'm able to pay my credit cards off each month NOT because I have so much money; rather, I'm able to pay my cards off each month because I'm frugal.

RIGHT! It's all about living within your means and already having the $ before you make a purchase! Too many people today want instant gradification. It's like the kid who has everything appreciates nothing.

 

[kmedina]

Bold - That is because her letter will do no good. The demand of the letter is too extreme and they will ignore it.

Rather than passing judgement on someone who is looking (on the DISboarrds budget board of all places) for help, I decided to honor the request to look over the letter. Did you read my revision? The way I re-worded it is not extreme. Credit card companies can grant reductions, and there is nothing wrong with asking. If rates can be raised, they can also be lowered. It goes both ways. Maybe, it will be more effective to call, but the OP may be more comfortable writing the letter first.

If the letter is ineffective, it only cost her the price of a stamp. She can then call. People are advising her not to try anything (since she agreed to the terms) or to do something that could hurt her credit. Everyone has a different method for dealing with credit troubles. Those methods may work for them, but it seems like she wants to pay the balance down without hurting her credit. While I would never ask a company to waive my interest completely, I do not see any harm in asking for a reduction.





To the OP:

I repeat what I said in my first post. Exhaust all efforts to lower your rate yourself before you look into other methods. Good luck. Take all of the negative comments on here with a grain of salt. No one here knows your full situation, and you are trying to pay off the cards rather than walk away from them (without paying some interest, people consider that walking away too).

The company cannot waive all interest without affecting your credit (most likely). Anything you pay back today (due to inflation) is worth less than it was when you borrowed it (the whole reason for some interest, although huge interest rates are more for huge profits). The opportunity cost (what could have been done with the money had the company not loaned it to you) of giving you that loan makes interest necessary to run a successful business. It is capitalism at its finest (as others have metioned).

 

[drgnfly30]

For what it's worth.. OP you need to call. What you are asking for is not a simple reduction/elimination of interest but a "hardship program".

The CC company will need to assess your financial situation to see if it's a long/short term issue etc... They will ask you about your income, expenses, will most likely review your credit report. All in order to to determine what type of 'program' you are eligible for. A letter accomplishes nothing. The phone call will be difficult but they get them every day.

While a 0% rate until 'whenever' is highly unlikely, most CC companies offer a multitude of programs from a reduced interest/payment program to a settlement. All of which will require that your account will be closed, and all will 'ding' your credit report. A settlement will also affect your Federal taxes as you will be liable for the 'difference'.

Either way good luck.

 

[crisi]

Yes. I agree. Read my post again. I said Marx was largely discredited.

...and China is not communist at all and hasn't been in decades.

You mistyped. You said capitalism when you meant communism.