When did Customer Retention die?
Chances are you’ve heard the advice a couple of hundred times that if you call a credit company and threaten to close your account, they will try and keep you by reducing rates and increasing credit limits. When did that become a myth?
In the past week, my wife and I have closed three of our credit cards. Don’t celebrate for us, we paid them off with a second mortgage. The rate is a little over half of what the cards were charging and the payment will help reduce expenses while we adjust to the new expenses of our baby boy.
On two of the three cards, the customer service representative closed the cards with no attempts at customer retention. Is the Credit card industry so flush with money that they don’t care if they lose a customer? It’s not like the cards were little cards either. The grand total of the three was very nearly $7000. It amounted to over $100 in interest each month.
To their credit, the one card (Discover) did try and retain us. They did offer to lower the rate and increase the limit. Of course that wasn’t the purpose in closing the card so we closed it anyways, but at least they tried.
On a side note: If you have the equity to consolidate your card debt with a equity loan, you might consider it. The one caveat is that you MUST, MUST, MUST close those cards afterwards. If you consolidate them and do not close them, it leaves the door open to using them and if you use them, you’ll get further in the hole than you were before. The other minor caveat is that most equity loans are for longer terms. Ours for instance was for 15 years. The payment on it is nearly 1/3 of the payments on the cards consolidated though, so we can make extra payments to pay it off quicker.
Technorati Tags: equity, consolidate, credit cards, debt reduction, interest, home equity
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Rich said,
Wrote on June 29, 2006 @ 1:30 pm
I was recently charged $20 in interest from a big credit card bank. I called to inquire why since I pay my bill off in full every month and they stated that my outstanding balance was $1100 and I had only sent them a payment of $1062. So for a $48/balance I paid $20 in interest! I called to close they account and they offered to reduce my credit card interest rate from 14.99 to 11% and credit me my $20 back. I must say I was satisfied with their response and kept the account opened.
On another note, I don’t know why people continue to use their home equity to pay off credit card debt. This is the biggest blunder people make in my opinion. Why would you use a SECURED asset to pay UNSECURED debt? The only result here is you are endangering your SECURED asset (i.e. your home) if you continue to incurr credit card debt.
Which is worse? The ability to use/have credit cards or the loss of your home?
thatedeguy said,
Wrote on June 29, 2006 @ 1:35 pm
Rich:
You are completely right. Using a Secured asset to pay off unsecured debt can be a big blunder. Unfortunately, sometimes there is no other option. The reduction in payment and interest will allow my Wife and I to get ahead. It takes some willpower to pay everything off and in our position it was the best choice for us.
The key phrase you use is “if you continue to incurr credit card debt.”
As I mentioned in my post, you MUST close the cards and discontinue using them. If that is done, I don’t consider it a blunder at all, but a sound financial step to a better financial future.
Alberen said,
Wrote on July 1, 2006 @ 1:56 am
Wow, man, it is a tough situation.
Do you really have your money under control so that you won’t go further into debt? It is VERY easy to fall back into debt.
Do you have a budget you are working? If not, or if you are having trouble then let me know by posting a comment on the blog. I have a great system that I’ll show you (no cost or spam or anything…ask me anything you want about it.)
thatedeguy said,
Wrote on July 1, 2006 @ 10:02 pm
Alberen,
I’m sure that many of my readers would love to hear what your system is. I notice that you’ve recently started a blog at http://moneythinking.blogspot.com . How about sharing your system with the community through that. It could make great reading, especially if it’s a good system. While you’re at it, head on over to pfblogs.org and pfblogs.com and get yourself added to their rosters. It’s a great way to get your name out and share with the pfblogger community.