Credit-card firm that offers to cut your debt is like cigarette company wanting you to quit

PERSONAL FINANCE

Their kindly letters drip hypocrisy yet offer 16.9%

Personal finance

Dollars & Sense

March 26, 2000|By Jeff Brown | Jeff Brown,KNIGHT RIDDER/TRIBUNE

A colleague recently received a charming missive from her credit-card company after she started knocking down the $6,000 balance on a card that had been charging 19.99 percent.

Dear Ms. ... Your recent payment activity suggests that you're trying to pay off your ... credit-card balance. It's simply good business for us to do whatever we can to help you.

So we're lowering your ongoing interest rate to 16.9 percent ... There are no strings attached or gimmicks. Simply call ... and give us the go-ahead. From that moment on, you'll be paying a new, lower ongoing interest rate.

Gosh, how thoughful! Should I take back all the nasty things I've said about card issuers?

Nah. The hypocrisy in this letter is just too stunning.

Obviously, the company offered to shave 3 percentage points off the rate in hopes this customer would lose her desire to pay down the balance. Better to earn 16.9 percent on something than 19.99 percent on nothing.

A card company that wants to help you clear your debt is like a cigarette company that wants to help you quit smoking.

There's a lesson in my colleague's experience. You might get a lower rate by exerting a little pressure. Call your card company and threaten to close out the account if they won't trim the rate.

Or look around for a card with a better deal. Many companies offer single-digit rates on balances transferred from other cards. Or do what my friend did: Pay off the debt no matter what the card company offers.

Eliminating a 16.9 percent card debt is like earning 16.9 percent on an investment -- a wonderful return.

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