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Chester P. Dexter

How to negotiate better rates

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I have had some outstanding cash advances on a few credit cards and not a lot of income with which to pay down bills. In other words, I have had little more income than what's needed to pay minimum payments on my credit cards, yet I have some available credit on one or more cards.

Also, I have some cards with stinky APRs. No one likes paying down a debt very slowly at a high APR and no one likes even higher cash advance APRs that carry over from month to month.

One strategy is to pay a major bill (like rent or utilities) with a credit card and then use the money you would have used to pay rent to pay off a stinky credit card. Cash advance balance, be gone! Alternatively, you could just do a balance transfer to pay off a stinky card.

There may or may not be balance transfer fees depending on the card issuers.

Anyway, when your stinky card with the cash advance outstanding and/or a bad rate is paid, call that card issuer and tell them you are trying to decide which of your cards to keep and which to close out. Most likely (unless it is Merrick Bank or some other similar rinky-dink operation) they will offer you a sweet deal to keep you on as a customer. I paid off a huge HSBC card balance once and then said, "What can you do for me?" They offered to take my rate down from nosebleed-high to 3.9% on all purchases and balance transfers for the next 15 months. At that point it would adjust to something higher, but nowhere near as high as it had been.

You can systematically move money around this way and change the rates at which you are paying off balances. You may not win them all, but you will win some. And if you pay off a cash advance, that's a guaranteed win.

If you are wondering what you can do about the card you just charged rent to... it's true that you have not really paid anything down using this method, but you have moved debt around so that you were able to negotiate better rates on all cards. You did not really waste any cash (that would have been rent money); you just used it to pay a high-rate card off instead of using it to pay rent and leaving your high-rate balance charging you a high rate on and on forever. You could always then just charge rent the next month to one of your low-rate cards (maybe even the same one you just negotiated down!) and then use the rent money to pay off the card you charged rent to last month. This is a lot of shuffling but obviously it is not "kiting" and it's not illegal. In addition, card issuers tend to like seeing large charges that are very quickly paid off in full. They oftentimes raise credit limits in response to activity like this.

Just an FYI in case it helps anyone!

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Another option- Live within your means and not get so far into debt. When you're using credit to pay rent you have 'issues'. In todays credit climate, I would not be bluffing on a credit card co. They may do you one better and close it for you.

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Oh - why didn't I think of that? Not getting into debt in the first place. It's all so clear now. Thanks for the pointer.

Hey, I never said, "This is an ideal way to manage credit."

And as you may have noticed, if you read carefully, nothing in the above says, "If you need to pay your rent with a credit card." The idea of paying rent with a card is simply a method of freeing up money that would have been used for a monthly living expense and temporarily redirecting it to, say, paying off an entire card balance, to get out from under that particular card's unfavorable terms and replace the same credit card debt with better terms or even another card with better terms. As an alternate, simply moving debt by balance transfer is just as effective.

I was addressing the particular issue of being up to the gills in credit debt (never saying that is a good situation to be in) and sharing one method for reducing the rates of interest at which that debt is charged when there is very little income for paying down debt.

You're right that people should live within their means. I thought that was obvious and that everyone knows that. The reason for having gotten into debt in my personal situation was beyond the scope of this topic and wasn't the subject of this topic, and I thought it went without saying that it is not a good position to be in.

I hope this helps someone else.

*very true, though, that you have to be careful mentioning closure of an account. WaMu went ahead and closed mine in one second when the words left my lips - but I got them to reopen it within an hour. Yesterday I threatened Merrick Bank with the same, though, and it didn't faze them. In general, though, it's a tool to get through to the retention department or retention deal-of-the-day. You could do the same without using those words, though, just expressing general dissatisfaction with the terms.

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