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1. Use
disclosure box to shop for the best deals
Inundated
with credit card offers? Well, the best way to sort through to
find the best deal for yourself is to go strait to the
"disclosure" box. It is required by law to tell you everything. If
the interest rate seems too low, go find out what the interest
rate really is in the disclosure box.
2. Get
your credit report
You can get
a copy of your credit report FREE. We tell you how in section 2 of
Credit Strategies
Seminars.
3. Use
a recorder to track expenditures
The key problem that you want to
avoid is to not overspend on your credit card. The best way to do
so is to track your purchases. Some students have used a checkbook
recorder. In recording how much you spend, your month-end credit
card bill won't be a surprise--EVER!
4.
Keep your card active!
Instead of
leaving your card inactive charge at least a very small amount.
What you want to do is manipulate your credit report to look like
you pay on time every month. Your credit bureau does not record
how much you pay. Therefore, if you charge only $15 and pay it all
off on time, you get credited for a "1". Do this if you have zero
for a balance. Do not do this if you already have a balance. Most
students use their card sporadically. This strategy of charging a
small amount will make your credit report look
better.
5. Be
careful of credit scams
Credit scams
are all around. Be extremely careful in giving out your credit
card number. A scam that has been reported recently goes like
this. A telemarketer calls to notify you that you have won a prize
if you have a visa card number that starts with a "four". The
scamee runs to get his card and realizes HE'S A WINNER. His visa
credit card number starts a "four". In his elation, he gives the
rest of the number to verify his winnings. What the scamee does
not realize is that all visa cards start with a "four", all
mastercards start with a "five" and all American Express cards
start with a "three". Be careful out there!
6.
Work with the retention department as opposed to the customer
service personnel
Have you
ever seen a $10 late fee appear on your statement? When you call
they will tell you that they received your payment a little late
(sometimes they charge the $10 fee just after three days). The
person in customer service says that it is policy to levy this
fee. At this point, you should politely ask as a "courtesy" that
they waive the fee. There may be real, legitimate reasons why they
received the payment late (post office delays, system
backlogs...). Regardless, ask this person in customer service to
waive the fee.
If they do not agree
to waive the fee and you feel as if you have a concrete gripe,
then you should state that you would like to cancel the account
and take your credit card business elsewhere (you do see one or
two banks on campus begging for your business, don't you?). At
this point, they will know who the boss is. They will then
either:
1) waive the late charge or
2) transfer you to
an "account closing specialist".
This "specialist" is
really going to be smooth and his/her job is to keep your account.
Please note: if you perpetually pay late don't expect preferential
treatment. Working with the "account closing specialist" in the
retention department is your best bet when it comes to getting
results. Aren't we sneaky?
7.
Rebate Cards
Do you
notice some credit card companies on campus trying to sell you a
credit card? Yeah, pretty sickening how they're on every corner
you turn. Well, we're here to talk about REBATE cards. Among the
different "bait and switch" schemes, credit card companies are the
most guilty.
8.
Reduce your balance
We've all
heard horror stories... There's always some friend of a friend of
a friend who is just completely out of control with their credit
card. Interest can really add up quickly. Here are some tips that
are really helpful in reducing your balance (if you have
one):
1) Watch what you charge! Small purchases (movie,
food, CDs) can really rack up your debt. Recording
transactions is a great way to keep track of what you'll be
owing at the end of the month.
2) Keep your balance
manageable. Don't charge huge amounts in the hopes of paying them
off with future income. Sale items that appear to be "too good to
pass up" can be costly. A good rule of thumb is to never have a
balance that is three times the amount that you can pay off in one
month.
3) It's O.K. to have a "0" balance! Some students
are so used to a balance that they feel the need to charge
something big when they don't owe anything.
4) If you do
have a balance you're trying to whittle down, use not only the
above strategies, but also LOWER YOUR INTEREST RATE. The benefits
are obvious--you'll owe less money. How do you lower your rate?
There are two ways: negotiate the interest rate with your bank or
shop for a lower rate offer.
9. Bad
credit can raise your insurance premiums!
In a Wall
Street Journal article (Nov. 6), insurance companies were cited
using credit reports to predict the likelihood of future claims.
The most glaring example is Allstate which has "on the basis of
statistical analysis" concluded that people with bad credit are
more risky to insure.
Is this fair? Hardly.
This can potentially have a big negative impact for you. Car
insurance premiums are high enough for us. Having to pay
additional for the same coverage isn't very appealing. The article
goes on to elaborate State Farm policies for evaluating. State
Farm concentrates on, "bankruptcies, foreclosures, repossessions,
judgments, and multiple large charge-offs". They imply that they
don't care if you are a few days late paying on a Sears card...or
do they?...
What I wonder is that
if bad credit can raise your premiums, will good credit lower
them?
10.
Rip up incoming credit card solicitations
Be really
careful when you're throwing away those credit card
solicitations--someone may be digging through your trash. Why?
Most credit card solicitations contain a lot of very personal
information. Some even come in the form of a certificate that is
very easy to forge. Here's potentially what can happen:
1) a
thief finds your credit card offer that you do not rip up,
2)
that person fills out the application and
3) gets the card sent
to some other address.
Credit card companies
do take precautions to ensure that this doesn't occur but why
trust them? Your best protection is to be safe with our personal
information.
Bonus - Your credit card interest rate can be
negotiated!
Last month,
we talked about "reducing your balance". One of the best ways to
owe less money and save money overall is to NEGOTIATE DOWN your
interest rate. Here are some specific strategies for doing so.
Negotiating
strategy number 1:
Call your bank. Ask for them to lower
the rate. Most banks have multiple rates that range from 5.9% (a
teaser rate) to 19.9%. Use the principal we outlined in an earlier
"Tip of the Month" (October 1995 - Work with the retention
department...). Remember, your bank values your business and will
do a lot of things to keep your business.
Negotiating
strategy number 2:
Shop for a better rate. Look around for
offers that are really aggressive. Going from a 17% rate to a 13%
rate saves you quite a lot.
Negotiating
strategy number 3:
Make your credit report look stronger.
This will reward you in the long run. Remember, loan officers use
a scorecard.
When you make a conscious decision to improve your score, that
will make you more qualified for better offers in the future.
People with good credit are inundated with low interest rate
offers.
Here's an example of
how you can work these "negotiating strategies" into a real life
situation. Let's say you owe about $750. Your current bank charges
you 16.95%. Here's exactly what you do. Call your bank's customer
service department and have them tell you what your current
interest rate is. Then, tell them that you are considering a much
lower rate offer. An offer you recently received in the mail that
is much cheaper, 5.9%. Listen to what they then say. It will
probably go something like this, "Oh, that's just a teaser rate to
get you to switch... " and then they'll say, "we provide
outstanding service and we're #1". Your reply should be, "Can you
as my current bank match this new bank's offer?" Say nothing and
wait for their response. Be ready to walk away from your bank. If
they say "yes" you are happy as a clam and we're glad that we
could help. On the other hand, if you meet up with some
resistance...
Ask to cancel the
account and go through the retention department (do this with
confidence if you have good credit and know it). The conversation
with the retention department should go along the lines of,
"Hello, my name's Mike and I can handle the details of closing
your account. I am sorry that you are closing your account... we
very much value your business. Before I start the process of
closing your account, can I ask you why...Is it something that we
did?... " This "Mike" will be super smooth but you'll be ready.
Tell him, "Look, it's not that I don't like the wonderful service
because it's terrific. I might even miss you guys...but what it
comes down to is money. It's important to me. I want a lower
interest rate." Be very nice but also very firm. Either he lowers
your rate or you're taking your business elsewhere. This "Mike"
has the authority to review your account and will most likely help
you out.
Some notes we want to
make clear. Make sure you have good credit before you start
exercising these negotiating gambits. There is no clearer example
of the benefits of good credit than when your bank values your
account to the point that they feel they can't afford to lose you.
That is the position that you want to be
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