The Wong Ohana

Here is another cool tip that I use for finding the best Promotional offers.

Whenever I’m ready to make the last payment on a Credit Card, I NEVER mail in that final payment. Of course you can do that, but you won’t get the benefit of what I’m going to tell you now. Instead of writing a check, Call the Credit Card Company (is anyone surprised by now at this recommendation?). When they answer the phone explain that you are ready to make your final payment, and you’d like to know how much the payoff amount is. Its really as simple as that!

The ball is now in THEIR COURT. And they do know what to do with that ball! They are very good at playing these games. Your goal is to get as good as they are so you can win once in awhile! Keep in mind that they want to keep your business. They definitely DON’T want you to pay off your balance and stop making interest payments, so now they are going to offer you a “deal” if you will transfer a balance.

The important thing to do is to have your spreadsheet in front of you (I do hope you have a spreadsheet with all your outstanding debt on it for easy reference!). If you don’t have a spreadsheet, either make one up quickly, or write down every credit card you have, what your outstanding balance is, the interest rate you are paying, and the date that interest rate expires if its a promotional offer. If you don’t have this information at your fingertips, then I highly recommend you start compiling it - this is very important if you are going to be responsible about managing your money and starting a serious debt reduction program! And believe me, they will have all this information in from of THEM before they start talking to you, so you’d better be prepared!

The next tip is also very important. NEVER accept the first offer - its like buying a car. The more you decline, or tell them that their rate just isn’t attractive enough, the more offers they will make and you’ll be surprised that it just keeps getting better and better. Believe me, they WANT your business.

They’ll probably start out offering a very nice rate, but for only 3-6 months. Your counter to this offer should be, “I’m sorry but 3-6 months isn’t really a long enough period of time to do a balance transfer, do you have anything with a longer term?”

Next they’ll offer you something a little longer, now you counter with, “But I already have existing offers for a lower percentage, is there anything you can do about the rate?”

Now you have them working for their money. The next question you want to be sure to ask is if there is a balance transfer fee. And no matter what they say, ALWAYS ASK if there is ANY WAY they can eliminate that balance transfer fee. They may not be able to eliminate it altogether, but they may come back with an offer of a fixed limit. In other words, they’ll want to charge you 3%, but they may be able to fix the limit at $50 or $75. What this means to you is that if you transfer in excess of $2,500 to their card you will have reached that $75 fee, but anything over and above that is basically free money with no transfer fee.

This is where your spreadsheet will come in handy. Look at the balances you have. Compare your interest rates, and how long they will last. If you have a 4.9 for the life of the balance, pass that one up, but if you have something at 10% or higher, that would be good to look at for a balance transfer.

Another thing you will want to ask them is what the rate will jump to AFTER the promotional offer ends. Compare the rate they are quoting you with your current rate. If this rate is lower than what you are already paying, then go ahead and transfer your entire balance if you can (depending on the limit you qualify for).

If the rate they are quoting you is higher than what you are paying, then figure out how much can you afford to pay monthly. Calculate this out to the term of the promotional offer and make your balance transfer amount approximately that amount or just ever so slightly higher. This give you the best possible scenario for being able to get the maximum benefit from the offer, yet you won’t ever be charged the full rate once the offer expires. That’s the important part. you don’t ever want your rate to expire and end up paying more than you started with. That would negate any benefit from using the promotional program.

My golden rule is never to accept a balance transfer for less than 9 months. If I can find one for the life of the balance, I’ll go for that one, but definitely not less than 9 months. Never pay more than 9% on any card ever! There are too many promotional programs out there that have excellent rates, you just have to start calling to find them! The majority of my cards are at 4.9% for the life of the balance. I have just 2 that are higher than that, so its these 2 that I keep moving back and forth to get the best rates until they are paid off. I keep my rates as low as possible at all times.

Right now our current debt is due mostly to a couple of larger purchases for our home that we made over the past few years in addition to a TON of dental work, and car repairs that we had to finance. Once these are all paid off, then I hope to remain as close to debt free as possible. We’re working towards that goal, and should be there in just 3-4 years if all goes well, and the river don’t rise!

Just today, I called to make a final payment on one of my cards. They offered me up front a 6.9% rate for 6 months for a balance transfer. I followed all the steps above, and after about 15 minutes I ended up with a 1.9% for 9 months with a 3% balance transfer fee capped at $75. This means that I basically got 4.9% for 9 months (which includes the 3% fee) - not a bad deal just for the time it took to make that phone call. I also asked if they could please put that amount in my checking account, and that way I can apply it where it will do my budget the most good, and I’m not charged the “cash” rate - it just gets applied to my promotional offer of 1.9% (another good trick to know - but you have TO ASK for it). It should show up in 5-7 business days.

One more important thing you want to do. Ask them if they would please allow you to make your final payment (remember the reason for your call in the first place??) PRIOR to the balance transfer being applied.

This is a very important final step because what it does is to bring your account down to a zero balance so that your entire resulting balance will be at the new rate. If you forget this important step, you’ll end up with that last payment amount remaining at the old rate and being charged every month because it is the credit card company policy to pay down the lowest interest rates first. You don’t want that last bit being charged at your old rate for the duration of the 9 months, so remember to make that request. And when they agree to make that payment on the phone for you (and they will happily do this), don’t forget to ask if they would be so kind as to remove any fee for making that payment over the phone.

My goal is to get everyone in the habit of making those phone calls, and to realize that you CAN lower the amount of interest and fees you are paying! It really is amazing what you can get just for the asking!

Filed under: Credit Card DOs and DON'Ts, Personal Finances on January 11th, 2008