I recently called one of my credit card companies to cancel our primary credit card. We ran nearly every possible expense through this card but recently switched to a different one with a better rewards program.
Me: I’d like to cancel this credit card.
Bank Rep: What makes you want to cancel?
Me: I don’t like how the reward program works.
Bank Rep: OK, I have canceled the card. Thank you for calling.
Wow. I didn’t want to argue with him for five minutes as he tried to convince me to stay, but I was a bit surprised that he didn’t even try. We ran about $30,000 a year through this card. Since we paid it off each month and didn’t pay an annual fee, all the bank earned from us is their 3 percent transaction fee, paid by the merchant. Then the bank paid us 1 percent cash back. So our business was worth about $600/year to them, which apparently is not enough to make us worth their time.
I wonder if the rep would have fought harder to keep us if we regularly carried a balance or did things like paying late or getting cash advances to run up fees? On the other hand, I got the impression that the rep simply didn’t care and was only doing his job.
New Law
As you might have read, a new law went into effect in February that eliminates some of the more outrageous tricks that lenders had used to wring money from credit card users. As a result, expect to see a higher emphasis on fees from them. This CNN article discusses some of the traps to avoid. Lenders are also tightening requirements and being more stingy with credit, which affected us when we applied for our new card. For the first time, the lender required me to verify my income before issuing the card. Once they issued it, Chase gave us a pitiful credit limit, apparently because we had a very large amount of available credit with our other bank. Now that I’ve closed the other card, we should be able to get a higher limit on the new card.
Recommendations
As a bonus, here’s my totally unsolicited advice on credit cards:
- Pay off your cards each month. If you can’t pay for something when the bill comes due, save until you can. I don’t even know my interest rate because it doesn’t affect me.
- If you aren’t disciplined enough to limit your spending and pay off your cards each month, don’t use credit cards and pay cash instead.
- If you have to pay an annual fee or aren’t getting at least 1 percent back on all purchases, fire your lender and get a better card. Check BankRate to compare credit card deals.
Related posts:
- “Free” Credit Reports Jenny and I have been retooling our budget and financial priorities lately to spend less and save/give more. In late January I decided to pull up our credit reports, since...
- Live Long and Prosper Today’s Cool Website Spotlight shines on Prosper.com, a site that links up people who want to borrow money with people who want to lend money. The borrowers either don’t want...
- Accidental Hardball As I mentioned in October 2008, we buy our electricity from Green Mountain Energy, which focuses on renewable energy sources like wind and hydroelectric. When we moved to Euless, I...
- Before We Ask This month we weren’t expecting to end up with much extra cash for the savings account. I’m so excited about paying down our debt and saving for college (see below)...
- The Shackles of Debt This week our home group, which is going through Crown Ministries’ study on finances, talked about debt. I won’t retype the entire lesson (you’re welcome!), but the gist of it...
Loading ...
My unsolicited advice:
Don’t close credit card accounts that you’ve had for a very long time. Approximately 15% of your credit score is determined by the age of your credit history. Depending on the model used, this is determined by the age of your oldest account and/or average age of all of your accounts. If you close your older accounts in favor of new accounts, you’re adversely affecting your credit twice: once for closing an older account, and again for opening a new account, both of which decrease the average age of your credit history. So, the next time you find yourself in a situation like this, with a credit limit that is so high that it may be affecting your lines with other banks, simply ask the bank providing that card to lower your credit limit. This way, you solve your problem while still maintaining a higher average age of your accounts.
Also, if you’re interested in making the most possible off credit card rewards, I may can help with that, too. I currently make 5% on gas (in cash), 3-4% on food, movies, music, and books (in points that I trade for gift certificates), and 2% on everything else (in cash). I don’t want to spam your blog with links, so just contact me if you want more info.
Good points, Donny. I’d only had this particular card for a year, so I hope it won’t hurt my score too much. I have another one with them that I’m keeping open even though I don’t use it.
Your rewards card sounds too good to be true. Could you send me the details?
I just posted the details of my rewards cards in my new blog: http://donnycryer.com/?p=8
Sorry it took me a few days!
I am semi-retired and hav3 credit cards. My pension checks had been coming in by the 5th of the month, but when I changed my pension structure the checks were moved to the 15th and 20th of each month. This was a disaster because it created a cash flow problem. Most of my credit cards had due dates of the seventh of the month. When this change took place, I found myself not able to pay a monthly amount on time. As a result I accumulated a 40.00 fee and a 60.00 fee on two of my cards for lateness. I called them and they said that they were unable to remove the fees. That was odd since back in the 1990′s and early 2000′s, I was able to have them reverse the late fees but now they are getting more ridged. Could it be because of the new rules that went into effect in Feb? Anyway they did agree to move my due date to the 18th of each month. So my suggestion is to move your due date to later in the month if you are not getting income at the first of the month.