Credit card holders could lower their interest rates by as much as one-third if they make a five-minute phone call, according to a survey by the Public Interest Research Group.
The state offices of the nonprofit agency conducted the national survey by asking credit card holders to call companies and ask that their interest rates be lowered. The agency found that 56 percent of consumers who made the calls achieved lowered rates.
Those who were successful reduced their Annual Percentage Rate by an average of more than one-third, dropping from about 16 percent to 10.47 percent. Three consumers participating in the survey reduced their interest rates by 15 points.
Ray Prushnok, a Consumer Protection Associate for the New Mexico chapter of PIRG, said reductions in interest rates by the Federal Reserve that were not mirrored by credit card companies or banks prompted the survey.
"We found that a lot of these companies can afford to change the rates, they just haven't chosen to do it," he said. "Despite 11 rate changes by the Federal Reserve Board, these companies haven't changed. We realized that consumers needed to take the initiative or their rates would not change."
The results of the survey indicated that some of the factors that improved the caller's success rate included longer length of time owning a credit card, a low unpaid balance compared to the credit limit and a history of no late payments.
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"I participated in the survey and didn't have my rates lowered because I was still in the introductory period with my card, but I did have a lot of friends here who did have their rates lowered," Prushnok said. "It's amazingly convenient, with the calls taking five to 10 minutes, and the possible savings really makes it worth the effort."
The survey was part of PIRG's push to scrutinize the credit card industry because in the year 2000, American households carried revolving credit card balances of $574 billion, or about $10,000 in total credit card for each of the 55 percent of U.S. households that carry debt, according to Federal Reserve Board reports.
Residents in a household making minimum payments, which is commonly 2 percent of the unpaid balance or $20, would pay nearly $1,500 in interest in the first year of debt, according to the same reports. Nationally, interest paid on that debt, if held for one year, was $87 billion.
"What we've been asking folks to do, especially college students, is to recognize that you receive credit card offerings almost daily, so you should have the right to call your credit card company and say that you've been receiving all these great offers in the mail," Prushnok said. "Then tell them you want them to lower your interest rate."
PIRG also encourages credit card holders that the best way to manage debt and avoid getting caught up in soaring interest rates is to pay more than the minimum balances on their bills.
"If they own multiple credit cards, people should also pay the biggest payment on the card with the highest APR," he said. "If you're paying the minimum, then you're just running on a debt treadmill and the credit card company always win."
State and campus chapters of PIRG offer credit counseling for those interested in learning more about managing debt. The results of the survey and other information about the credit cards is available online at www.thetruthaboutcredit.org. The state PIRG office can be reached at 254-1244, while the campus office's number is 277-2757.