I’ve been gone for a minute, but with good reason. I finally finished my first book! Still planning the launch, but now that the hardest part is done, I can come back to the world.
For my first post back on Blackademics, I was going to write about Michael Crabtree, a recent NFL draft-pick who has threatened to sit out the 2009 season if he doesn’t get a contract for more than the $23.5 million. Why would I write about this? Well, NFL player salaries don’t concern me, nor do the 49ers, but use of the term “fair market value” by one of Mr. Crabtree’s associates caught my eye.
In terms of money, what is fair is often debatable, and what the market dictates isn’t always right. But right after I started typing this post, the phone rang and my attention was diverted. It was a credit card company.
The caller noticed the lack of activity on my account and she asked what the company could do to become the “card of choice in my wallet.” I told her I had another card that offered a rate 10 percent lower. She said, “Let me see what I can do about that.”
Within seconds, she lowered the rate on the card by 4.5 percent. It wasn’t good enough, but I could appreciate the quick effort. Three seconds could save me 4.5 percent. Now, 4.5 percent doesn’t sound like a big deal, but let me show you why it is.
Let’s look at two credit card options, one with a rate of 16.5 percent, the other with a rate of 12 percent. Assuming a $2,000 balance, the minimum payment required would be in the range of $80 per month.
With the first rate, it would take you 31 months to pay off the balance. With the second rate, it would take 29 months. That’s a savings of $160. It doesn’t seem like much, but relative to your $2,000 balance it represents a savings of 8 percent.
This example assumes that you made no additional purchases. We all know, the more you charge, the more interest you pay.
My point: don’t be afraid to talk down your creditors. If you have been holding up your end of the credit agreement, then don’t accept just any rate (or just any type of treatment). A few seconds of haggling today could save you a lot of money later.
Think about it. If a creditor is willing to let go of 4.5 percent in a matter of seconds, it’s because they still have plenty to gain—at your expense.