Monday, March 13, 2006

Reader Success Story

Have you ever seen the commercial that says "When banks compete, you win?" I'm not sure what company that commercial was for but it is so true! A Defying Debt reader recently shared her sneaky strategy of getting her interest rate lowered and I think it was such a wonderful idea that I wanted to pass it along to everyone.

Raven had over $65,000 worth of debt at the end of 2005 and now owes $49,000. That is an amazing feat in itself. If you do the math that is $16,000 paid off in just a few months, wow! The problem was was that she had one credit card with a balance of $14,700 with a whoppin 22% interest rate. She had tried numerous times to call the credit card company to have them lower her rate but with no success. I guess they knew they had her in a bind and they were not going to make things any easier for her (those bastards).

So she took matters into her own hands, contacted a bank that would let her take out a personal line of credit for $15,000 at 20% interest to pay off her credit card. Now that is all fine and dandy, 2% interest on $15,000 can add up. But she didn't stop there.

She then called the credit card company back and asked them what it was worth to them to keep her as a customer. They then offered her a balance transfer rate of 6.99% for the life of the loan!

Just by creating a bidding war between banks she was able to cut her interest rate down by 15%. That just proves the commercial right, when banks compete, you win!

I'm lovin it! Congrats to you Raven! Thanks for sharing.

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John OMM said...

Having alternatives is critical in ensuring that you don't pay too much to borrow money. Jane and I have over $80,000 in outstanding credit card debt, but our overall APR on that debt is less than 1% because we take advantage of 0% balance transfer offers and have $25,000 in money market reserves to carry us over between offers.

If you don't have an alternative to whatever rate the credit card company is asking, then they'll squeeze you dry. Jane and I keep the 0% offers coming by keeping our overall debt as a percentage of available credit at less than 50%, and by never closing credit lines. Instead we shift available credit from one card to another among lines with the same company whenever we're offered a good rate on one of our cards with that company.

Investorial said...

I think that commercial is from Lending Tree "When banks compete, you win!"

mbhunter said...

Investorial that's right. It's their trademark!

Jay S. Fleischman said...

It's a terrific, if gutsy, move to create that competition. The reader clearly had decent credit in the first place or the new loan would not have been approved. If you're going to do this it's important to check your credit score to make sure that it's absolutely pristine - if you don't, this could end up back-firing on you.

Sadly, many people who have high APRs on their credit cards are victims of "universal default" due to being overextended or having imperfect credit. For those people, this ploy would not work.

Anonymous said...

I really enjoyed the story thanks for sharing. I always find it amazing when banks all of a sudden increase your creditline or give you these great offers with out you asking bc they know your doing well but its funny that when you call them out of the blue and nothing is happening and you ask for a lower interest rate they decline. I guess your credit has to be in an excellent condition and your debt ratio at a certain percent for them to consider you...and also a little bank competition like in this case always helps. : )

Anonymous said...

I love that she did her own competition!

Hope said...

Off topic:

Congratulations on being featured in Money magazine! I've been reading your blog for a couple of months now and I think you are outlining a plan for all those looking to get out of debt. Anyhow, as I was flipping through the magazine that I received today, I came across a site mentioned in the article "The Best Of Blogs From the Financial Front". It looked so familiar and after reading the profile it gave, I knew it was yours!

For those looking for the article, it is on page 44B of the April 2006 issue. I also highly recommend Money. It is great reading with a variety of different financial stories.

Keep up the great work and I hope to read very soon of when you reach $0!!!

Debt Hater said...

Congrats on thr Money Magazine kudos! And yes, it does work when you get tough with the credit card companies. They want you to carry debt with them because that's how they make money!

lpkitten said...

thats awesome! i tried to check it out but they still only had the march issues for sale.