What's the best way to handle a dispute with your credit card company?
There are steps you can take to get a lower interest rate or have a late-payment fee waived. Although there's no guarantee that they will work with every credit card issuer or for every cardholder, they're definitely worth trying.
As you approach your credit card company, remind its representative it's a competitive business and that other issuers are courting your business.
"Generally, they're very eager to resolve issues with their customers, to make accommodations to retain the customer," says Fritz Elmendorf, spokes-man for the Consumer Bankers Association. "It's much easier to retain a customer than to find a new customer."
The first key in dealing with a dispute is to stay calm when you call the customer-service line.
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If you're like the many debt-strapped consumers who already feel they're at the mercy of credit card companies, you may be tempted to lash out at the customer service rep after you've received a notice that your interest rate is going up.
But remember this: If you tick off the representative, he or she may be less willing to work with you to resolve your dispute.
"We understand there are extraordinary situations that come up," says Jessica Iben, spokeswoman for Chase Card Services. "We give our representatives tools to use to work with cardholders."
Those include waiving late-payment fees and lowering your annual percentage rate, or APR.
Second, come to the negotiating table with thorough knowledge about your personal standing with the card issuer.
The best consumers are those who are informed about their own credit and the terms, policies and conditions of the lender.
"The first step is to find out what your credit score is and be aware of how attractive you are to a lender," says Tracey Mills, spokeswoman for the American Bankers Association. "That gives you an idea of how a lender views you."
Be honest with yourself. Have you been a good customer of your credit card company? Have you paid your bills on time?
If you're trying to get a lower interest rate, you need first to know something about how card issuers arrive at higher interest rates.
Most credit cards carry variable interest rates, and those typically move in direct response to how the Federal Reserve adjusts interest rates.
The Fed's interest-rate moves influence the prime rate — what banks charge their best customers — and most variable-rate credit cards are tied to the prime rate.
"However, there can be a lag of up to three months between an interest rate hike and a credit card repricing, as most issuers reprice their cards on a monthly or quarterly basis," says Greg McBride, senior financial analyst at Bankrate.com, which tracks consumer interest rates.
The other way your APR can change is if you've been late on payments with your card issuer. That's called the "default rate," which can really hurt you because it can be nearly 30 percent.
"A common complaint that we get is, 'Why am I getting a finance charge and late fee?"' says Bill Hardekopf, chief executive of LowCards.com, a credit card information Web site. "The grace period seems to have shrunk." The grace period is the time you have to pay off your credit card bill to avoid any finance charges.
"It used to be 25 days," Hardekopf says. "A number of them have gone to 20 days."
Pay close attention to the grace period and pay your bill before the due date.
"If it's not back there by the due date, you can go into a default rate here very quickly," Hardekopf says.
"If you miss a couple of payments, you can be charged a default rate, which can be up to 28 percent."