David M. Brown's Blog

July 19, 2009

Be a zealot about making those credit-card payments on time, cuz…

I had a scare last month with a credit card that shall remain nameless, since I suspect most or all credit-card vendors probably do the same thing. I’ll use the impenetrable fictional monicker of “Citibank MasterCard.”

I had just restored a substantial balance to this “Citibank MasterCard” and simply and embarassingly forgot to make the monthly payment on time (I was late by something like one or two days). Instantly, my interest rate was jacked up to such an extent that my minimum monthly payment was now doubled. A substantial fine was tacked on for good measure. When I talked to a “Citibank” representive about it on the phone, he agreed that “Citibank” would forgive the fine and flip the rate back to what it had been. I thought I extracted confirmation that although I would have to await processing of this reprieve, I would not have to await a decision about whether it would be granted to me; i.e., the determination was already in my favor.

Now, the fine was eventually subtracted, but it didn’t seem that the previous interest rate was being restored. And, indeed, I recently received a boilerplate letter from “Citibank” saying that “at this time” they were “unable” to restore the previous interest rate, as if they had no discretion in the matter. Rather, I might well have to wait twelve months for any mercy. (Possibly I’d get a break sooner, “Citibank” said; but since their representative had already told me, so far as I best recollect, that I was definitely getting this break now, my faith in this tentative provisional assurance was not so strong.) This, despite my record of having made my “Citibank” payments on time for something like a billion months in a row.

Fortunately, however, I was quickly able to flip the balance back to another credit card, the same card from which I had just pulled the balance in order to take advantage of a balance transfer offer from “Citibank.” And the instant the pay-off of the “Citibank” balance cleared, “Citibank” emailed me a new promotional offer for 2.9% or something on balance transfers for the next x months. If “Citibank” had simply agreed to switch the interest rate back to what it was before I goofed up, they wouldn’t now be obliged to offer me an even lower interest rate in order to try to recover my business.

No matter what understandable exigencies motivate a bank’s standard credit-card protocols, it seems silly to ignore the ability of a customer long in good standing to just flip his business to a different creditor to escape an unearned penalty. It might make sense if “Citibank” were eager to shed as much customer liability as possible given its shaky finances in a shaky economy, and thus would not have particularly wanted me to return as a customer. But this possibility seems to be belied by the immediate new balance transfer offer.

The generic moral of the story is, don’t get into credit-card debt. The more specific moral is, if you’re nonetheless in credit-card debt and obliged to make monthly credit-card payments, make each such payment well ahead of time come hell or high water. Let your cat drown if you have to, but make the flibbledyflib payment.

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