I’ve heard from two readers in recent weeks who called Bank of America to ask for a lower rate on their credit cards–requests that seriously backfired.
The first knew his credit wasn’t great, but thought he’d see if BofA would lower his 25% rate anyway. Not only did the bank say no, it lowered his credit limit by $7,000.
The second asked BofA “what I could do in these difficult economic times to reduce my interest and/or payments” on a credit card and a line of credit, according to a post on the Your Money message board.Â Instead of a concession, the reader recently received letters from the bank saying the accounts had been frozen. “I was very surprised and called Bank of America again regarding the letters,” wrote the reader, who wasn’t in financial distresss. “Their response was that since I called to ask them for help it showed I was in financial hardship and froze my accounts.”Â
Bank of America spokeswoman Betty Reiss said it’s not the bank’s policy to freeze or shut down accounts simply because customers ask for an interest rate cut. But she sidestepped my question about whether such requests invite the bank to more closely scrutinize the accounts. Bank of America is more closely monitoring all its accounts these days, she said.
Here’s what you need to know about asking your issuer for a lower interest rate:
You have the best shot if your FICO scores are 720 or above. Credit card issuers are trying to shed high-risk customers but woo (and retain) low-risk ones.
Don’t cite “hard times” unless you’re facing them. If you have good scores, you want to argue from a position of strength–”I have great credit and can easily take my business elsewhere.” If you talk about economic distress, you’ll set off red flags and alarms.
If your scores aren’t great but you’re not in distress, consider other options. Rather than asking for concessions from your issuer, talk to your local credit union about a fixed-rate debt consolidation loan. Consider a 401(k) loan only if your job is rock-solid.
If you are facing distress, get help. Your issuer may offer you a modified repayment plan or temporary forbearance (read this excellent CreditCards.com story for details), but your accounts will almost certainly be frozen and perhaps shut down. Credit counseling is another option that will have the same result. Bankruptcy is a last-resort option that may be your only way out if your debt is truly unpayable; consult an experienced bankruptcy attorney fordetails.