topic Re: CC Payoff Tactics in General Credit Topics

CC Payoff Tactics

Noah_Bodie — Fri, 07 Sep 2007 04:40:33 GMT

Whenever one is paying down CCs and/or trying to get their CC util down, always consider your overall CC util.

If for example the util on one CC is 84%, but one's overall util is 45%, then a couple of BTs could bring everything under 50% util--within a couple of days, then probably one billing cycle of the CCs for the CCCs to report.

Obviously paying debt down is better than transferring debt from Peter to Paul, but everyone's situation is different.

Person A might have a relatively small amount of debt compared to their income and they might thru payments alone get their util down on all CCs within a couple of months.

However, Person B might be looking at a longer repayment schedule, perhaps a couple of years rather than a couple of months. In that case, it could pay, and a lot, to get one's overall util down right away thru BTs. This could give a score boost and allow one to qualify for prime CCs or better prime CCs with lower APRs.

A BT can make some CCCs nervous that you're about to close the CC thus ending a revenue stream for them. You can confirm their fears by calling and asking about an APR reduction and CLI. Tell them straight out, "I'm trying to get rid of debt, and I'll planning to close my high interest CCs." Be nice, polite, and ask whether they can help you. Don't threaten, kick or scream. Even if they say no, be nice and thank them for their time. Tomorrow, or the next day, or next month, you might get the same CSR on the right day at the right time with the right offer available and get both a lower APR and a CLI.

If you have multiple CCs, here are my steps to try and get your APRs down and your CLs up.

1) Get the util of your CC with the highest APR down under 50%, preferably to about 40%. Pay the debt down, do a BT, or both. Once they've cashed the check(s), give 'em a call and ask about getting an APR reduction and a CLI. Tell 'em you're trying to pay down some debt, this is your highest interest CC, and you're hoping they can help you out.

2) If they say yes to a lower APR, then another CC becomes your highest APR CC. Repeat Step 1 for your new highest APR CC.

3) If they say no, then get the CC down to 10% util. Pay down, BT, or both. Once they cash that check. Call 'em and ask again about an APR reduction and a CLI. If they say yes to a lower APR, then another CC becomes your highest APR CC. Repeat Step 1 for your new highest APR CC.

4) If they say no, then pay the CC down to $0 and stick it in your sock drawer. Repeat Step 1 for you next highest APR CC.

The CCC can choose to collect lower interest on some money or higher interest on $0. Many can do the math.

Message Edited by Noah_Bodie on 09-06-2007 09:40 PM

Re: CC Payoff Tactics

smallfry — Wed, 09 May 2007 01:55:36 GMT

Think it pays to pay off all debt at once or say over a six month period? FICO prefers the slower approach as far as I can tell.

Re: CC Payoff Tactics

Noah_Bodie — Wed, 09 May 2007 03:50:41 GMT

If a windfall comes your way, start banging down all the debt you can. Don't wanna leave money sitting earning 5 or 6 percent interest while you're paying 18 percent or more.

Re: CC Payoff Tactics

smallfry — Wed, 09 May 2007 04:06:01 GMT

I did so I'll let you know if I cross the 700 line.

Re: CC Payoff Tactics

bobkelly — Wed, 04 Jul 2007 03:38:39 GMT

Certainlly doesn't hurt to demand credit card companies to lower your rates. It can be part of a tactic to lower or perhaps eliminate your debts one day. Still, for most borrowers, time can be a bigger obstacle in overcoming debt. If it's paid in full, it won't matter what your interest rate was.

For that matter, your FICO score won't matter much if you're not planning on getting in the lifelong debt trap. Do you think Bill Gates cares about his FICO score?

(BTW, Noah hates me so I'm sure he will disagree, and loudly I might add. Probably a cheap shot with a dose of bad humor to boot. )

Re: CC Payoff Tactics

Tuscani — Wed, 04 Jul 2007 15:11:11 GMT

bobkelly wrote:

Certainlly doesn't hurt to demand credit card companies to lower your rates. It can be part of a tactic to lower or perhaps eliminate your debts one day. Still, for most borrowers, time can be a bigger obstacle in overcoming debt. If it's paid in full, it won't matter what your interest rate was.

For that matter, your FICO score won't matter much if you're not planning on getting in the lifelong debt trap. Do you think Bill Gates cares about his FICO score?

(BTW, Noah hates me so I'm sure he will disagree, and loudly I might add. Probably a cheap shot with a dose of bad humor to boot. )

Noah is not racist. He hates everyone equally. :P

Seriously though, no one has anything against you. But this is not the site to post the same message over and over again with a ginormous font. People are here to build their scores, if they want debt advice they will ask for it.

Re: CC Payoff Tactics

Lori344 — Wed, 04 Jul 2007 18:36:08 GMT

bobkelly wrote:
(BTW, Noah hates me so I'm sure he will disagree, and loudly I might add. Probably a cheap shot with a dose of bad humor to boot. )

Talk about a "cheap shop"?

.... alright already bobkelly :smileysad:

Re: CC Payoff Tactics

Noah_Bodie — Thu, 05 Jul 2007 21:51:04 GMT

bobkelly wrote:
Certainlly doesn't hurt to demand credit card companies to lower your rates. It can be part of a tactic to lower or perhaps eliminate your debts one day. Still, for most borrowers, time can be a bigger obstacle in overcoming debt. If it's paid in full, it won't matter what your interest rate was.

For that matter, your FICO score won't matter much if you're not planning on getting in the lifelong debt trap. Do you think Bill Gates cares about his FICO score?

(BTW, Noah hates me so I'm sure he will disagree, and loudly I might add. Probably a cheap shot with a dose of bad humor to boot. )

It's true that a PIF CC doesn't adversely impact you--trouble is most folks aren't there yet. They are still trying to get there. No one is ignorant of the fact that being debt free is desirable. It's the getting there part and how to get there faster that most wanna know about.

I know personally that one can bully CCCs into compliance. State Farm Bank is a very conservative lender, and I've pressured them into a CLI and APR reduction. It's not 100%, but that's why Louis Cyphre created sock drawers. [Louis Cyphre is an extremely esoteric reference to Satan from the movie Angel Heart. Louis Cyphre = Lucifer. Movie scared me awake--one of the few. This is but a subtle inference that I worship the Devil. I'm told it's not needed as he worships me.]

It's true that a PIF CC which one keeps PIF each month doesn't incur interest charges, so the interest rate be danged. However, one never knows what the future holds. As such, it's still a good idea if one has PIF CCs, to seek lower APRs, higher CLs, and better terms. If it's AMEX and any of a myriad of other OCs, seek to get the CC upgraded to a better CC with better terms, no annual fee, more attractive rewards, etc.

Of course the wealthy don't care about their FICOs. Donald Trump could walk outta prison having lost every dime to his name after going bankrupt and pleading guilty to a myriad of criminal charges, and the banks would be lined up to give him money for his next deal. Poor people can't get credit and rich people don't need credit. It's those of us in the middle who need credit.

bob, buddy, where's the love? I love my wife and kids, but I disagree with them.

Fear leads to anger. Anger leads to hate. Hate leads to suffering, not disagreement. I sense much fear in you.

I thought rich guys could take a punch? What gives? Either you BKed overnight, or Mom caught you surfing the Internet and made you go outside to play because summer is gonna be over soon and you'll be back in school--only it's no longer middle school, it's the big leagues, high school.

Re: CC Payoff Tactics

Noah_Bodie — Mon, 23 Jul 2007 06:23:38 GMT

Some psychological musings to go with this order of fries.

http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&message.id=25315

Re: CC Payoff Tactics

MidnightVoice — Mon, 23 Jul 2007 12:18:32 GMT

bobkelly wrote:
Certainlly doesn't hurt to demand credit card companies to lower your rates. It can be part of a tactic to lower or perhaps eliminate your debts one day. Still, for most borrowers, time can be a bigger obstacle in overcoming debt. If it's paid in full, it won't matter what your interest rate was.

For that matter, your FICO score won't matter much if you're not planning on getting in the lifelong debt trap.

I am not in debt (apart from mortgage), but my scores are still important to me. A cheap auto loan is CHEAPER than paying in cash if I put the cash in my IRA instead. With a high score I actually spend less money that way

Re: CC Payoff Tactics

Noah_Bodie — Sun, 19 Aug 2007 09:51:55 GMT

Be nice when you speak with your CCC reps over the phone or in the branch, but always remember they are not your friends. Don't let your guard down with them.

I think this is a good place to end up.

http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&message.id=36284

Re: CC Payoff Tactics

MidnightVoice — Wed, 26 Sep 2007 19:44:14 GMT

Noah_Bodie wrote:

It's true that a PIF CC which one keeps PIF each month doesn't incur interest charges, so the interest rate be danged. However, one never knows what the future holds. As such, it's still a good idea if one has PIF CCs, to seek lower APRs, higher CLs, and better terms. If it's AMEX and any of a myriad of other OCs, seek to get the CC upgraded to a better CC with better terms, no annual fee, more attractive rewards, etc.

This is why I am working towards both higher CLs and lower APRs. The only time I have carried a balance over in the last few years was a typo (I sent them the wrong amount of money and I was not, at that time, obsessive/compulsive about checking everything on line :D). I hope to continue this way, but if an emergency happens, or if the internet goes down, or if I am stuck somewhere, and I HAVE to carry over a balance, I want the lowest interest rate possible.

Re: CC Payoff Tactics

Anderson — Wed, 24 Oct 2007 23:59:56 GMT

Very interesting, informative, reflective (and amusing) thread. Thanks Noah.

Re: CC Payoff Tactics

Noah_Bodie — Thu, 03 Jan 2008 15:55:02 GMT

Tough Love

Let's say you have a CC with a low CL and a high APR. Store CCs are bad for this, and one purchase can make that CC maxed. The remedy is something I call Tough Love.

Particularly since this is one of your highest APR CC, PIF the CC. A few days after you pay it, either check online or call the 800 number to confirm there's a $0 balance. It doesn't matter if the $0 balance has reported to the CRAs because you're trying to leverage something outta this company, and they know the balance is $0.

Once you know that they know the balance is $0, call customer service.

Hi, umm, I ah, hope you can, er, help me out with something. I'm not sure, uh, who I need to talk to.

Intentionally end a sentence with a preposition so the English majors will know you're frazzled.

I just paid off my credit card balance, mostly because the interest rate is so high and the credit limit is so low. Just having that one charge made the card look like it was almost maxed out. I'm trying to pay off my credit card debt, and yours had the highest interest rate.

Interest rates don't get reported on a credit report, so they have no way of knowing whether it truly is your highest interest rate.

I have some other high interest credit card debt, and if there's anyway you could increase my credit limit and reduce my interest rate, I'd really like to balance transfer some of my high interest debt to this card.

Ball is now in their court. You might get an automaton who will give you canned responses. If so, ask whether a supervisor is available, then pitch them. The veiled threat is that "I ain't gonna use yer card no more", but you don't wanna say that outright. In fact, by putting forth the idea of a BT, you're telling them that you WILL use their CC. They just have to decide whether they earn a high interest rate on zero dollars or a lower interest rate on N dollars.

Re: CC Payoff Tactics

Noah_Bodie — Thu, 03 Jan 2008 16:01:56 GMT

Tough Love with Store CC

Since you cannot BT to a store CC, try pitching them BEFORE you PIF the CC.

Hi, um, I need some help with something, with ah, er, my credit card. I just bought a new X on my XYZ store card. Now I love the X and I'm very happy with it, but that one purchase on my XYZ card is making it look like the card is maxed out. Is there anyway I can get the credit limit raised on my XYZ card?

They probabaly have a fixed high interest rate, but it never hurts to ask about getting that reduced as well. However, store CCs often have zero interest offers on purchases over $X for 6 months, maybe a year. If so, and if you have purchases like that on your store CC, then it pays to float that balance on the CC for a while. Take advantage of the zero interest offer while it's good, but get the limit raised so the CC doesn't look maxed. Also, pitch 'em on future business.

I'm looking to get a new X for my DH/DW for their birthday in a few months. If you could raise my credit limit, that would help me out a lot when I go shopping for that new X.

Be creative, but believable.

Re: CC Payoff Tactics

rifleman — Thu, 03 Jan 2008 16:21:23 GMT

I apologize is this is straying from the topic, but once a card is Paid off and you choose to close it, how will that effect your score? Lets assume that utilization is not an issue. I have heard that Average Age weighs both open and closed accounts equally. If this is true, can I expect my score to stay the same if I close my oldest card?

Re: CC Payoff Tactics

Noah_Bodie — Thu, 03 Jan 2008 16:57:38 GMT

rifleman wrote:
I apologize is this is straying from the topic, but once a card is Paid off and you choose to close it, how will that effect your score? Lets assume that utilization is not an issue. I have heard that Average Age weighs both open and closed accounts equally. If this is true, can I expect my score to stay the same if I close my oldest card?

Emotions can sometimes run high with CCs and debt, and the desire to close a CC "to show 'em" can be strong. As such, it's good to touch on this here.

On your question, assuming util isn't a factor, I believe closing an old CC will impact average age as I believe that only counts TLs which are open.

It's never a good idea to close a CC unless it's costing one money in annual or monthly fees. If a CC is costing one money, then that's something to attack in the negotiations with the CCC. Some CCC will waive an annual fee if you call up and complain every year. If that's the best I can do, then I'll probably settle for it. It's a toll free number, so it's their dime. Nothing fancy.

Hi, I see that my credit card is about to incur the annual fee. But you see, my other credit cards don't charge me an annual fee, and I'm hoping you can update my account so that it doesn't incur an annual fee. My payment history on this card has been excellent, as I'm sure you can see.

If that doesn't work, politely escalate to a supervisor. Always better to get the annual fee removed from the account altogether, but if complaining gets it removed each year, I can accept that.

Sometimes the CCCs can be obstinate about their fees and force you to open a new CC instead. HSBC has been reported to behave in this manner. If the CC with the fee isn't very old, then closing the fee CC and opening a fee-free CC is probably a good trade-off. Years from now, who will care whether your CC acount is 18 years old or 20 years old? This is why it's a good idea to beat on your CCs with fees every time the fees come due.

If you've slain the fees, then sock drawer the unused CCs. "Freeze" them if you don't trust yourself by sticking them in an empty, rinsen out frozen juice can, fill it with water, and stick it in the freezer.

When applying for a prime mortgage, some lenders will hold a lot of unused credit against you. 10-15 CCs with $150K in CL might be viewed as a liability the mortgage lender doesn't want you to have. They might tell you to close some CCs, and don't take offense if you're locking in the best possible 15, 22, or 30 year rate.

Better to have a great mortgage rate and a few CCs trying to add back a few more no fee, low interest CCs. That's an easy game to win.

Before closing CCs, call up the CCC and talk with them. Tell 'em your lender is requiring you to close some CCs, and you want to know whether they'd be willing to re-open the account in 60-90 days while retaining all your good credit history and age once the loan closes. If they will, great. If not, ask 'em whether they could give you a CLI and APR reduction to make this CC more attractive so you could keep it and close some other CC.

When you're deciding to close CCs, do so in a coldly, calculated manner. Don't use it as a threat against the CCCs because invariably you will do it wrong. Always negotiate with them under the premise that you're going to stick with 'em.

Close CCs that are costing you fees when you cannot get rid of the fees.

Close CCs when a prime lender demands it, and pick those with the highest fees first. Once the fee CCs are gone, close those you're least likely to use or which have the least chance of getting re-opened. There may also be CCs where you have some "baggage" because of a past dispute. Even if the dispute was resolved, that venom might remain and it might be time to say goodbye to CCCs with whom you've been at odds in the past.

Re: CC Payoff Tactics

MidnightVoice — Thu, 03 Jan 2008 17:03:16 GMT

Noah_Bodie wrote:

rifleman wrote:
I apologize is this is straying from the topic, but once a card is Paid off and you choose to close it, how will that effect your score? Lets assume that utilization is not an issue. I have heard that Average Age weighs both open and closed accounts equally. If this is true, can I expect my score to stay the same if I close my oldest card?

On your question, assuming util isn't a factor, I believe closing an old CC will impact average age as I believe that only counts TLs which are open.

As far as I know, closed CCs do impact average age - they certainly do on my CRAs.

And I know some old closed accounts are dropping off this year, which might actually hurt me.

Re: CC Payoff Tactics

rifleman — Thu, 03 Jan 2008 18:18:08 GMT

Thank you for the good responses! I'm hearing new things here--I thought average age weighted open and closed accounts equally--there seems to be some disagreement here, but 2 super contributers (Lady and Noah) both agree that closed accounts lower average age.

I closed my capital one account 2 months ago and noticed a drop in my scores. I closed it because of the annual fee, and because I was sick of them deleting late payments, and then putting them back on a month later. I had enough so I closed them. it was my second oldest CC. My average age has shrunk a bit since opening new cards.

Oh well, I guess I'll keep my good ol' Orchard bank card with $940 limit open forever. At least there's no annual fee with that one!

Re: CC Payoff Tactics

barbarino — Thu, 03 Jan 2008 18:46:00 GMT

1. Take all debt, list smallest to largest, smallest on top

2. Pay smallest ones first, pay min on the rest, and pay extra on smallest one REGARDLESS OF THE RATES!

3. Work your way down, applying your new found cash to the new smallest debt, each time you pay off a CC, close it.

4. Enjoy life