I know a lot of my readers are students and are probably new to the credit card game, so I thought I’d contribute a little bit of information. The impetus is a letter I just received from my Shell Mastercard informing me that as of April 1 of this year the APR for purchases would be the U.S. Prime Rate + 12.99%, with a minimum of 18.99%. The current rate on my card is 11.24%, so this is a hefty increase. I probably shouldn’t even care about this because I don’t finance anything on that card — I only use it for gas and at stores that won’t take Discover, and I pay the balance off every month. But it’s the principle of the matter. First, I got the letter on May 26 and they’re imposing a retroactive rate increase effective April 1. Second, the letter lists 10 different rates and fees that are being increased. The only thing that has not been increased is my cash back for gas purchases. I used to receive 5% cash back for buying gas at Shell, which is why I got the card in the first place. Last fall, they dropped that to a few cents per gallon, reducing my rebate credit each month to about a third of what it used to be.

(Aside: Congress just passed and Obama signed a Credit Card Reform Act to prevent this kind of retroactive interest rate increase. I have a feeling a lot of credit card companies sent out letters like this in advance of the new legislation, trying to wring out every last dollar before the rules change.)

The letter tells me I can “opt out” by contacting them by July 31. If I do that, I can use my account at the old terms until my card expires, and then they will close my account. I like to reward good companies with my continued service and recommendations to my friends and family, and punish bad ones by doing the opposite. In the past, the Shell MC (run by Citibank) has been good to me. They overnighted me my initial card so that I would have it for my long road trip from St. Cloud to Los Angeles a few years ago, and saved me about $35 as a result. But I just can’t deal with something like this, so I’m going to send them a nice letter and opt out.

I’m hoping that it won’t affect my credit score negatively, because normally when you close an account it hurts your FICO score. (I hope the opt out option is treated differently, but it very well might not be.) See, if you have any outstanding debt, closing down one line of credit makes your debt/credit ratio increase, which is a bad thing in FICO’s books. This link shows you what they consider when giving you your score. Take a second and look at it – I think everybody should know this information. Outstanding debt and the debt/credit ratio is 30% of your score. Of course, the website also says that these are just averages and everyone’s situation is different — an action that might make your credit score go down might not have any effect on mine, and vice versa. There’s really no way of knowing how anything will affect your specific situation, which is just another frustrating aspect of the credit card industry.

If you look at the information, you’ll see that it seems the best way to increase your credit score is to not do anything new. Open up a new line of credit and they count it against you. Close that new line of credit and they count that against you too. Close a line of credit you’ve had for a long time and it hurts even more. It’s all very messed up if you ask me. But what it means is that you should not get a bunch of credit cards in college just because they’ll give you a free t-shirt (I’m pretty sure I did that at least twice), as closing those accounts five years later when you finally get smart about your finances is just going to drag down your credit score.

I’ve decided that I’m going to send Citibank a letter telling them that I will opt out and close my account unless they will change my terms back to the old ones. One thing I have learned is that when it comes to credit card companies, if you ask for things convincingly enough, often you will get them. I have probably had a half dozen different late fees removed by just asking nicely. I have rewarded those companies by using those credit cards more. They help me out, I’ll help them out.

Back in 2003, I had one company that wouldn’t remove a late fee no matter how much I begged them. I asked to talk to an account manager and I informed him that if they would not remove it, I would transfer the entire balance to another card and then cancel my account. The account manager wouldn’t budge. I hung up and immediately arranged a balance transfer to another card — this was back in the days when you could transfer balances for free; now they’ll charge you 3-5%. When the transfer finally went through a week later and I had a zero balance on the original card, I called to cancel the account. They transferred me to an account manager and he asked why I was leaving. I told him that I promised I would cancel my account if they didn’t take off the late fee, and I was just fulfilling my promise. He said he was sorry to hear that and asked if there was anything they could do to get me to stay. I told him to make me an offer. He said if I transferred the balance back, he’d give me a 0% APR for the first year and then 4% after that until I paid off the balance, and no transfer fee. The card I had moved it to was charging me 7%. I gladly accepted his offer and transferred the debt back.

Just a few months ago, I had a balance on a card that I was paying the minimum on, enjoying a very low introductory APR that is set to increase in September. With the holiday season, I got distracted and forgot to make the minimum payment. I got hit with a $39 late fee, and the low 3% APR was immediately bumped up to the full rate of 18%. I called customer service and begged them to bring the rate back down, but the rep said there was nothing he could do. Grrrr.

I called back the next day and spoke with someone different. She asked me for my personal information to verify it was me calling, and when I told her my birthdate she said, “That’s my fiance’s birthday!” Somehow magically she was able to get my APR back down to 3% when the previous rep had said it was impossible. Something as completely irrelevant as having the same birthday made her want to pull a few strings and work for me.

The moral of the story is this: politely ask for lower interest rates and fee reversals. You can yell and get mad, but in my experience that doesn’t work. If asking nicely doesn’t work, you can say that you will pay off the balance and then cancel the card — and then do just that (or at least try to bluff them). Or you can call back the next day and get someone different who might be a little more receptive to your request, or have a different birthday. I’ve noticed that calling late at night is usually less successful, as the people who have the power to make important decisions work the day shift. All these actions might be a little less successful in today’s tighter credit environment, but there’s no harm in trying.

Or you can just not get into credit card debt in the first place. Yeah, that’s probably your best option.