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Tuesday, November 30, 2021   
 

Capital One's Brilliance
by Scott Bilker
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about and DebtSmart can be found in the online media kit.
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Scott Bilker

Scott,

I've been an avid reader and newsletter subscriber for some time now. I wanted to share with you a rather funny experience that I thought you'd appreciate.

Like all of Capital One's customers, I was hit with an interest rate hike from 9.9% (purchases and advances) to 15.4% and 22.9% respectively. I didn't see the 'notification' they sent in the mail (I assumed it was some sort of solicitation), so it caught me by surprise.

I contacted them and asked if they could adjust the rate back to what it was. My husband and I have perfect credit, never a day late and did carry a balance (we used the card for all purchases so we could get the frequent flyer miles, but we never let the balance get out of control). Between the interest and the fee they got from the merchant, we were certainly a profitable customer. Although our history with Capital One was exceptional, they refused to budge on the rates and informed me that this was an 'ongoing trend' in the industry. No amount of reasoning (i.e. "Is it better to get 9.9% from a customer, plus merchant fees, or nothing?") would deter them from their position.

So, I contacted my other credit card company, AFBA (Five Star Bankcard). Not only did I get a credit line increase, but they also reduced my 8.9% interest rate (no frequent flyer miles, though) to a fixed rate (for both purchases and transfers) of 7.9% and no transfer fees. I kept the Cap One card, but have not used it since.

A little more than a month passed, and I started to get Capital One offers for 0% for 18 months (transfer fees of either 3% or 2%). I have to laugh. They got greedy and lost a very profitable customer only to turn around and offer next to nothing to try to get them back. Our average monthly balance was about $3,500. During that same 18 months, we would have paid them about $520 in interest (plus they would have made some $$ on the merchant fees). Now, they'd settle for $105 ($3,500 X 3%) and no merchant fees.

Needless to say, I'm shorting Capital One stock.

Shannon


Shannon,

Thanks for sharing your story!

This is typical. That is, when the bank will not reduce rates when you try to negotiate. They deserve to be punished, and the only way to punish them is to transfer your balance. That's why I have a list of recommended banks at http://www.debtsmart.com/cards/. It's not that I support them, it's that we NEED them to compete with each other so we can win!

I have noticed, time and time again, as you have with this experience, you receive the best credit offers from your current banks within a short time after paying them off. You can increase their pain by taking advantage of their 0% offers. Use their cash, and let them get nothing for 18 months. That's worse than keeping the balance somewhere else. Then, the next time you call to talk with them, you can say, "Do you guys want to lower my rate, or should I just transfer my balance and use your money-for-nothin' again for 18 months?"

Nice job, Shannon!!!

Best,
Scott


Scott,

Thanks for your reply. BTW, thanks for the information on the 2.99% for life Advanta cards. My husband and I had some home improvements to do and each of us got a card. A lot cheaper than a home equity loan!

Thanks again for all of your great information.

Shannon

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