Credit Card Debt...

My statistical opinon is that credit card interest rates over 9.9% should be avoided at all costs.

You should primarily use your credit card to fund tangible items that you can use for employment or self employment. In other words, the use of a credit card should lead to income! But even then, AVOID using a credit card if it is over 9.9%

If your credit card purchase does not lead to future income, then use a debit card, which is based on money you already have in the bank.

Here's the philosophical Question. Why does Corporate America indenture it's citizens with credit card interest rates of 15%, 17%, 19% or higher?

Does it really help the economy if the average consumer is paying a large part of their debt simply to pay the interest on the debt?

Before you answer yes, consider this. If a consumer is merely paying the interest on a debt, they don't have any money to buy a new product. So the extra corporate "profit" generated by higher credit card debt can be invested in new product development, but who's going to buy it? Certainly the debtor already paying outlandish interest rates on previous debt won't be able to afford the new item.

Unlike purchasing a home with a 30 year mortage, in which the home goes up in value most every year, credit card debt usually revolves around items that are long gone and can no longer help the debtor, either from a comfort point of view, or from an income point of view.

It actually hurts the economy to make a person pay the equivalent in interest over the life of the debt to the amount they initially borrowed because the item they purchased has decreased in value, not increased. It therefore must cripple an economy to make a person pay MORE in interest payments than the principle they orginally borrowed.

If I could pass a credit card law, it would be that no matter what interest rate a person was paying, once they have paid an equal amount in interest to the amount they borrowed, the debt would be eliminated.

And the credit carsd cycle could start anew! [img]tongue.gif[/img]

If you get a really terrific balance transfer offer, beware. First off, go for the balance transfer offers that are until you pay off the card completely rather than the ones that are for only six months.

Make sure the credit card that offers a discounted balance transfer rate has zero balance on it BEFORE you balance transfer into the card. If you already have a balance on the credit card that is also offering you a balance transfer at a great rate your monthly payment will only go towards the balance transfer and your higher interest debt won't be touched! Only when you have paid off the lower interest balance transfer will the higher interest debt begin to be erased. The problem with this is that the higher interest debt keeps revolving and increasing without any payments going towards it to pay it down while the balance transfer money is being paid down, yech!

Once you do the balance transfer, DON'T EVER BE LATE WITH A PAYMENT, DON'T EVEN CUT IT CLOSE. Send your payment in 10 days before! If you're late just once, they can instantly raise your special balance transfer offer to 20% or MORE!

DON'T USE THE CARD ANYMORE! That's right, once you do a balance transfer to take advantage of a low interest rate until the card is paid off, DO NOT UNDER ANY CIRCUMSTANCE use that card UNTIL your balance is ZERO! Any new purchases you make will again be hidden behind the balance transfer money you owe and your monthly payments will not touch the higher rate purchases you make as long as you owe on the balance transfer.

Even a semi-low interest balance transfer rate of 6.99 - 7.99 STILL EQUALS an interest rate of between 20-25% if you only make the minimum payment!

So you can see as you creep up on the interest rate but only make minimum payments how futile it can become to pay off a credit card. I find that 5.99 is when the interest is somewhat reasonable even if you only make a minimimum payment.

4.99 is good.

3.99 and 2.99 are fantastic because when you make the minimum only about 10% of the payment is going towards interest. Isn't that interesting, even a 2.99 or 3.99 interest rate STILL equals a 10% rate if you only pay the minimum due!

To calculate what your actual interest rate is divide your monthly interest finance charge by your total monthly payment and that is the real interest rate you are paying.

In general, paying the minium amount due usually means your true interest rate will be a minimum of 20% and can go as high as 50% or more!

<font color="#a62a2a" size="1">[ February 25, 2006 01:43 PM: Message edited by: Alex ]</font>

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If you're late just once, they can instantly raise your special balance transfer offer to 20% or MORE!

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<font size="2" face="Verdana, Helvetica, sans-serif">Read the fine print. If you are late with any payment, including other credit cards, mortgage payment, water bill, phone bill, student loan, you name it, they can raise your rate.

A supreme court decision said that the laws of the state "where the decision to extend credit was made" determines the max interest rate that can be charged. All credit card companies then moved their headquarters to Virginia (which has a very high rate), Delaware (which has no limit) or South Dakota (which repealed its limit to attract the bank's business). What state's in your wallet?

That's very interesting.

The latest ultra sleazy tactic is being done by Sears Credit Cards. If you have a balance owed and don't pay it off in full, any payment you pay that is over 1% of the total due will not be counted for as long as it takes for the 1% per month to reach the amount you sent you.

For instance, if you owe $2,000 dollars on a Sears card and you send in a payment of $200.00, ONLY 20 dollars will go towards your bill, of which anywhere from 30% to 40%, 50%, perhaps 60% or even 70% of that amount may simply go to cover the finance charge.

Of the $200.00 that was sent in that could mean that only SIX DOLLARS will go towards paying down your debt!!!

the other $180 will get "floated" and $20.00 dollars of that will be applied to your next bill.
So you will get a payment holiday but the point is you won't ever be able to pay off the debt unless you pay it off in full.

It's basically some form of illegal banking practice that perhaps is being ignored by the comptroller of the currency because apparently Sears is struggling to survive right now.

It's still despicable.

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Ben Stein talked about how he has made a fortune in "rewards" by using credit cards for absolutely everything. Including bubble gum purchases.

The key is paying everything on time and then you get a ton of free stuff.

Credit cards can be your friend or enemy.