The phrases “credit cards” and “bargain hunters” typically do not belong in the same sentence except as an oxymoron or with some sort of caution—“don’t, won’t, shouldn’t, or never-ever” seem appropriate. For example, sound, sage financial advice almost always includes the caution, “Bargain hunters never-ever use credit cards,” because buying items with credit cards and then making nothing but minimum payments increases the costs of those items at least ten-fold, often far more. The Great Recession’s great message has registered loud and clear: Do not spend money you do not have, an expression which has inspired visionary families to shift their domestic economies to cash only. In that spirit, start your credit card bargain hunt by paying-off retail stores’ revolving credit balances and cutting-up those cards. No good can come from their continued use. Then, begin your quest for the admittedly contradictory “bargain credit card.”
All that sage advice about “cash only” comes with a caveat. In order to maintain an exemplary credit score, you must keep and sometimes use at least one credit card, the proof to would-be lenders that you are, in fact, creditworthy. Hence, the oxymoron. Although you must acknowledge you take a calculated risk when you inquire too often, nevertheless you should search for and secure a bargain hunter’s credit card. Note that bargains come in two classes—lower interest rates, or premium rewards.
Beware your triple digits. Check your credit scores before you begin your search and negotiations. If you already enjoy “tier 1” credit, then you have leverage and should apply it wherever it will exert the most force. If, however, your scores hover around 660—the average among hard-working upper-middle class two-income American families–work on elevating all three credit scores into the top tier before you aggressively court the credit card companies.
Calling attention to your current financial situation always creates risk. Your current lenders will check your credit reports when you inquire about preferred interest rates and perquisites; and they can raise your interest rates and lower your spending limits when they examine your scores and recalculate your income-to-debt ratios. Credit reporting agencies place no premium on precision, so that you almost inevitably will discover lots of mistakes on all three reports. Correcting those mistakes and clearing away derogatory reports will boost your scores considerably. Avoid wiping out those gains with too many requests for new credit cards; instead, start bargain-hunting with the devils you know.
Negotiate lower interest rates. First, check your credit card statements for details about the interest rates on your current balances. Look for the one with the lowest rate and challenge all of your current lenders to match it, arguing on the basis of common sense. “These guys have extended me credit at this rate; you should, too,” you urge. If you feel inclined to play for higher stakes because you have the credit scores to back your play, then use your internet resources to find the average credit card interest rates for people with your triple digits, and use those numbers as the high end of your negotiating scale. Then, find the rock-bottom lowest rates, and use them as the starting point for discussions with your lender. If you have an outstanding balance, you must exercise caution about over-playing your hand; but at least you can threaten to cancel your account with companies that will not negotiate in good faith.
Or get the right “rewards card.” Because you need at least one card to keep your scores healthy, choose a credit card that complements your work and lifestyle. NerdWallet.com compiles an annual list of “Best Rewards Cards” according to people’s professions and passions—best for business travelers generally, for example, and more specifically, then, best for hotels and best for airlines. Respecting niche markets, NerdWallet.com includes “Best for Socialites” and “Best for Suburbanites” on its annual lists. The NerdWalleteers concede you have no leverage on these cards’ interest rates, but they stress the correspondence between high-end products on the cards’ rewards malls and card customers’ most frequent requests. Given that rewards points translate to purchasing power, cardholders often find precisely the gear and gadgets they want at the card malls, “buying” them with points instead of cash. NerdWalleteers call that a “win-win.”
Management consultant Andrew Christison appreciates the canny strategy behind bargain-hunting among credit card lenders, but he emphasizes, “This does not number among a family’s highest financial priorities. When the family runs strictly according to a budget, follows the formulas for income-to-debt ratios, meets its regular monthly obligations with cash, and turns a profit, then the family’s CFO can start searching for the least expensive or most rewarding among credit cards.”