Ana of DebtFREE-Revolution this with her post about Bank of America’s most recent rate-jack. You see, BofA is allowing people to avoid the rate jack as long as they opt-out via the letter they’ll receive AND stop using the card and just pay off the balance (they can make minimum payments and accrue the old interest…after all, the company would rather get some interest than none).
What’s important to know is that if you opt-out*, your account is still eligible for rate-raise if you accidentally use it. Maybe you’ve forgotten that you have your cell phone bill automatically paid on this account.
If the new transaction is made (by you or automatically) your rate will rise and your entire balance will be at that new rate. You could try calling the company and saying that you forgot and it was an error, but your odds of them letting it slide are pretty low. After all, it’s a legitimate charge you authorized and that’s your responsibility.
Some ideas:
1. If you don’t carry a balance (and hopefully you don’t), treat this as a greater incentive to pay it off on time. Or find a card with lower rates elsewhere if you’d like.
2. If you have good credit, get approved for a 0% balance (or low%) transfer card elsewhere. Transfer the balance onto it, cancel the old card* and DON’T put any more of a balance on the transfer card (reasons I’ll get to in another post, but it involves interest).
* Don’t cancel the card if it’ll affect your credit score. For instance, it might be your oldest card (valuable) or your only card (again, affects your score). But if you have several and it’s not your oldest, consider it…
3. Opt-out and pay it off (get a new CC elsewhere). Go through your old statements. Look for any automatic billing. Put those on a bank account/debit card/other credit card. Check places like Amazon/web-hosting/etc and reset your payment information.
Then, cut up the card or consider freezing it in a block of ice or putting a huge NO on it.
*This isn’t just BofA, it’s pretty standard with credit card companies. So whenever you choose to opt-out and pay it off instead of canceling and walking away, be sure to double check you’ve got all your bases covered so that you won’t get any new charges!
As always, MM is not a finance professional, these are just her musings and ideas on the situation and should not be construed as advice. Consult your credit card company if you have questions about their policies and the loopholes.
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I isn’t said directly, but Do Not cancel the card. Just chop it up. If you kill the card it can affect your FICO score. The two ways are from credit utilization and also from length of credit history.
Also don’t forget that you are a catch! They want you, especially if you are a good customer. Say NO!
Call and talk to the manager!
It cost over $100 to acquire a new CC customer right now. Use your leverage.
RacerX is quite right about the cost of acquiring a new customer. You also need to remember that to the CC company there are two types of good customers: ones who spend a lot and pay it off or ones who keep a balance. I don’t recommend the second way because that is expensive and a credit trap. But spending and paying off is useful if you are disciplined. If you have trouble making it work you are better off cutting the card up but as was said, don’t close it.
When dealing with credit card companies, it’s never good to let them have the stronger position or upper hand. If you accumulate a balance, then you’re more or less forced to do business with them or try and find another card. By not carrying a balance, you never have any further obligation to the company and you have a much stronger postion.
That is an interesting point. I am wondering if it is possible to ask a credit card company you have been with for a couple of years to to lower your rate to 0% for say the next 6 months and try and repay other high interest loans using that money. Of course, this is subject to the fact that you are confident of paying off the balance in six months or the duration for which you have received 0% interest.
For me, I always pay my bill fully and on time (with a couple of exceptions). This way, what cc companies do with interest rates and all that nonsense does not bother me.
But with the sub prime and credit crisis, banks are simply going to be more stringent going forward. Is America going to start saving?
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