July 30th, 2010
Would You Pay Off Your Credit Card If Your Issuer Offered You Money?
If you had an outstanding credit card balance of $5,000 and your issuer offered you a $200 bonus to pay off your debt in the next 6 months, would you take it?
Some credit card issuers are hoping that’s exactly what customers will do. Issuers are considering rewarding cardholders, rather than penalizing them, with these cash incentives to encourage customers to unload debt, which also decreases risk of defaults and record-high delinquencies for issuers. Sounds like good news for cardholders and issuers alike.
MSN Money broke the story, pointing out that issuers are becoming a little more cooperative with cardholders hampered with debt because potential defaults and delinquencies are costing issuers millions. While issuers used to be thrilled over cardholders with a high card balance because it generates high interest charges, if consumers aren’t paying debts at all, issuers are at a huge loss.
High rates of delinquency, closed accounts, and defaults have become more and more prevalent since the recession. MSN Money reports that the default rate peaked at 9.14% in April, and dropped to 8.8% in June; this are steep numbers compared to last year’s 5.8% default rate and below-4% rate pre-recession.
It’s a recipe for revenue loss, which is why banks are changing tactics and egging on debt repayment with cash rather than punishing consumers with cut limits, card closures, and rate hikes. This way, the issuer can be sure to receive a part of the consumers’ debt, even if it’s a lesser amount, rather than risk the consumer defaulting and the issuer never seeing their money again.
The payback program isn’t widely done by issuers yet, so don’t expect to call customer service and ask for cash in exchange for paying off your card. But, Chase stated that they are currently testing the program with invitation-only, select cardholders, and may be expanded if the program is successful.
Do It Yourself
Of course, you can always do it the old-fashioned way and pay off your debt yourself without a cash offer from your issuer.
- There are plenty of reasons to deal with debt now, like saving you potentially thousands in interest. Plus your credit score will perk up when you unload debt, especially mountains of it, from your credit report because it lowers your total debt and decreases your credit utilization rate.
- Tweak your current spending habits and adjust your budget with these steps on how to say goodbye to debt.
- Use a balance transfer credit card to save money on interest. Check out, Is A Balance Transfer Card The Key To Conquering Your Debt?
- Look into our comparison of debt consolidation and debt settlement to see if one of these debt relief plans works for you.
Here’s some food for thought: if you would you take a cash “bribe” from your credit card issuer to pay down your debt, consider the fact that paying off your debt faster already saves you hundreds of dollar in interest. It’s like paying yourself cash in the future by saving it in the first place. Wouldn’t that be incentive enough?
Related posts:
- Is A Balance Transfer Card The Key To Conquering Your Debt? The benefits of a balance transfer credit card is a mystery to many people, which is a shame because it...
- The Fine Print of Shopping For A Credit Card Choosing the right credit card can be daunting when credit card applications bombard you with unfamiliar terms like variable default...
- Changes To Your Credit Card Terms – What to Look For & How to Avoid It If you own a credit card or read this blog regularly, you should be familiar with the restrictions and fees...
- Need To Know List: 5 Credit Card Changes & 5 Credit Card Warnings Been a disgruntled credit cardholder before? Before you go ballistic on your credit card issuer in a way even...
- Thinking about Canceling Your Credit Card? The exorbitant interest rate hikes, cut credit limits, and unexpected new fees have made owning a credit card more of...
If I could pay it off that easily I wouldn’t wait for a bonus
. Even working a part time job is hard to come by and when you can find one to work around your full time job everyone’s busy cutting as much hours as possible.