How to Avoid Fraudulent Credit Counselors

Mr. Credit Card explains how to stay out of the clutches of the nefarious ne'er-do-wells who may, at worst, take your money and run, and at best may give you bad advice. The key point?

They should be non-profit and they should belong to either the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).

Check it out.

Photo by Gareth Simpson

Bravo Bank of America

Image via Wikipedia As I mentioned yesterday, I have an alumni affiliated Bank of America credit card. I used it for business, my business failed, I made some stupid mistakes, and my rate skyrocketed.

Today, for the first time in months I talked to a helpful, competent and compassionate account rep who put me on a 5-year payment plan and reduced my interest rate from almost 30 percent to 10 percent. Woot!

Of course there are pluses and minuses here. This was one of those bait and switch cards: 0% introductory balance transfer rate with stiff interest penalties for late payments or going over your limit. (Please don't ask how I know this). I've learned you have to be a lot more organized than I am to make it worthwhile.

And this payment plan is only available if they close my account, which puts (another) black mark on my credit report. (I'm thinking that at this point it couldn't get much blacker, but that's a thought for another day.) And, if I can come up with and additional $168 sometime over the next 6 months, they won't report it as being "closed by lender". (Doesn't that sound like extortion or something? Is that kosher to ask for payment to preserve your credit?) So I have 6 months to get over my fear of looking into my credit report, which I know can't be good.

Polly's Pointers

1. Persistence pays.

2. Beware of low interest rate teaser offers.

Negotiating with Credit Card Companies

We've got a lot of credit card debt--much of it a holdover from my business--more about that in a later post.

Until my husband's job loss, we were handling it pretty well (I thought)--taking advantage low-rate introductory offers to pay off higher rate debt, and making far more than minimum payments.

BUT, then I mistakenly used the wrong credit card for a purchase and went over my limit by $9. My interest rate skyrocketed. I didn't notice, because I pay my bills by online bill paying through my bank so I don't forget one. My minimum payment shot up, and the scheduled online payment fell short. So, my interest rate went up again!

Now, my interest rate on this credit card is close to 30 percent, and I was no longer able to meet the payments. I missed one or two. When I belatedly discovered the interest rate I was paying, I called customer service to explain the situation and ask for a rate reduction. I had been succesful in the past getting rate reductions if I was occasionally late on a payment. Not this time.

The collection department started calling. I called the company several times to try to negotiate a rate reduction, to no avail. I was told that the only way to get a rate reduction was to contact a Consumer Credit Counseling Service (there are many) and work out a debt management plan. I did, and it wasn't a good solution for me (more on that in a later post).

Finally, last week, I got another in a series of phone calls from the credit card company. This time, the representative said that she noticed in my file that I had spoken to a number of individuals and had asked for a rate reduction or a payment plan, and that she was prepared to negotiate one for me. Then her computer went down, and we arranged to talk at a later time (this week.) I'll let you know how it goes.

Polly's Pointers:

1. Open your statements, even if you have automatic payments set up!

2. Keep communicating with your card issuer, even if one person says "no." Credit card companies have collections departments (whose job it is to get all the money now) and loss mitigation departments (whose job it is to get what they can from you).

3. Beware of low-rate credit card offers. They're great if you pay off all your bills on time, but if you get into unexpected trouble, they can be devastating. Read the fine print, and read it again when they send you notice of change in terms.

4. When transferring balances to a lower rate card, close the account of the higher-rate issuer. You don't want to have more open credit than you can afford. Do note, however, that a pattern of opening and closing accounts can make you less attractive to future lenders.

5. When closing a credit card account, make sure that the lender notes that the account was closed by the customer.

Further Reading:
Credit Card Companies Boosting Your Rate by Suze Orman
O% Balance Transfer Card Guide from Blueprint for Financial Security
Canceling a Credit Card by Gary Foreman

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