Jul 072008

I love the ‘greatest generation.’ They emerged from events like the Great Depression and World War II wondering what else they could do to be of help. They embraced responsibility in times that would bring most people today to their knees.

So when one of the group, my father, responded to my first blog with ‘I can’t believe those scoundrels at the credit card company raised my interest rate to an exorbitant level because I had the bill buried under a stack of papers on my desk and I was late with one payment. Heck, I even paid triple the minimum payment the month before!’ I was floored.

When words like ‘scoundrel,’ the curse words of a gentler generation, escape my father’s mouth I know that he’s really, really mad.

If you missed that particular blog, it outlines the fact that credit card companies can raise your rates to extremely high levels if you are late with one payment or run your balance up too high. Given the amount of money the banks have lost in the past couple of years through defaults in the mortgage industry, this isn’t too hard to believe. What most people don’t know is that the other credit card companies that you have accounts with check your credit from time to time and can raise your rate as well once they see that your credit score has dropped due to the late payment or maxed out card. The higher rate is kicked in, not by a human, but by a computer that automatically assigns the new rate. Make no mistake, the credit card companies could care less about you or your finances. They are businesses that want to maximize the amount of money they can make off of you.

So what can be done about a situation where your credit card companies sock you with a higher rate? Well, you can try a couple of things before you go and cancel the card. First, you can ask them to lower it. There are cases where they will forgive, but they are fewer and farther between nowadays – OR – You can threaten to pay off the balance and cancel the account. The second option gets their attention much more effectively. Credit card companies spend $200 to gain you as a customer. This is pretty much true with all of them. Their advertising cost is so high that they calculate exactly how much they have to spend to attract you as a customer. They lure you in with cute pirate commercials and then you find out, years later sometimes, that they have been systematically ruining your credit each time you run a balance too high or make a payment a day late. Threatening to cancel the account can sometimes lead them to either remove the late payment or, at least, reduce the interest rate to a lower level than the new one.

If that doesn’t work, what I would do is take advantage of my still good credit score and transfer the balance of that card to a new one with a low interest rate. I would leave the account open on the card that I transferred the money from and keep a zero balance except for very small purchases and pay the amount off, in full, before interest accrued each month. This would leave my credit unscathed. This is the advice I gave my father and now to you. Heaven knows the last thing we need is our credit card sticking it to us with gas and grocery prices going through the roof.

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