Yes, I Am Cheap - Credit Cards

Pay More Than Your Minimums...Or Else

nospam@example.com (Cheapskate Sandy) — Fri, 06 Aug 2010 09:00:00 -0700

The CARD Act that went into effect earlier this year was designed to level the playing field for consumers and banks. Credit card statements were supposed to be easier to read, and it should have been easier to determine how your payments are being allocated. It all sounds good but you know how I am: I like to read the fine print.

Check your latest credit card statement. Somewhere on the page it should list the interest rates that you are paying for your balances. Typically, purchases, balance transfers and cash advances have different rates, with cash advances usually being about double the interest of purchases. Next to each different interest rate should be the balance that you have that falls into each category.

Finally, somewhere up top it should tell you what your minimum payment is, and how long it will take to pay off your card if you just pay the minimum. It should also tell you how much you need to pay if you'd like to pay off your card within 3 years. They're great changes to get you to see up from just how much your credit is costing you, just there's one thing that it doesn't say.

Before the reforms went into effect, banks would apply any payments first to balances with the lowest rate. This ensured that the balance with the highest interest rate kept racking up charges for as long as possible. Now, any payments above the minimum must first be applied to the balance with the higher interest rate. Here's the kicker, though. If you only pay the minimum, that money will only be applied to the balance with the lowest interest rate.

You might be wondering why that's a negative. Well, if you have a promotional interest rate for balance transfers - let's say 0% - and also have additional balances like a cash advance at 29.99% on the same card, then by paying only the minimum, you're only reducing the balance on the debt that costs you nothing while racking up interest on the cash advance. This might actually end up costing you a ton of money in the long run. How do you avoid this? Simple. You must pay more than your minimum payment amount. Anything that you pay above and beyond the minimum must then be allocated to the balance with the highest interest rate.

Paying more than the minimum has always been a good practice, but now you have even more incentive to do so.

This post was included in the
Carnival of Personal Finance #269: THE DIVA$ EDITION hosted by Miss Thrify.

Time To Revisit Your Bank Accounts

nospam@example.com (Cheapskate Sandy) — Mon, 15 Mar 2010 08:08:00 -0700

By now you should have received a multitude of letters from your various credit cards or bank accounts. These letters should detail major changes that are taking effect soon as a result of the CARD act. They could include things such as overdraft fees, what will be paid, interest rate changes and fee schedule changes. Don't just toss those things aside! Pay close attention to the changes and how they might affect you.

One of the changes that I noticed on my Chase account is a fee for charges that end up pulling money from my overdraft protection. I'm also going to be charged a fee for their points program. You know what is going to happen to that account? Say bye bye. There's no sense in keeping it at this point. I've already changed by direct deposit at work to one account and will head on over to Chase during my lunch break to close that account.

In the meanwhile I've shopped around for another account. I'm going to shock myself by saying this, but after reading all the fine print, Capital One seems to offer the next best deal. You could not pay me to open an account at Bank of America. I'd be setting myself up for a fall. From their horrible customer service alone I wouldn't open an account there. The Capital One account isn't going to be convenient for me since there's no Capital One bank near my home, but there is one right around the corner from my job. I'll just put my emergency money in there and continue to add a small amount from direct deposit to keep the account with no fees.

And be sure to pay attention to the fine print. I actually bought a magnifying class to be able to read some of the stuff they send. You almost need a law degree these days to understand things.

Sneaky, Sneaky, Chase

nospam@example.com (Cheapskate Sandy) — Wed, 02 Dec 2009 09:55:47 -0700

I have a platinum credit card at Chase. That would be the card with the $3K+ balance. I began the year with my card balance at Chase somewhere near $9K I think. I got the card because it offered 0% interest for a few months rising to 8.99% fixed. You know what's coming don't you? I logged into my Chase account this morning to see that my interest rate is now 14.24%. Nice, huh? I know some of you will say, "Well, that's not that bad. I've heard of raises to 25% interest." Well that's not the point. I signed up for online statements and correspondences because frankly, I don't know what the hell the mailman does with my mail. The crap shows up when he feels like it. So I've gotten every other notice and correspondence online. Somehow, this ONE letter they send in the mail back in September they said. I never got it.

So I called them this morning asking what the hell is up with my account! You kow you get the standard, oh you can opt out, we sent it a few months ago. So I asked her to confirm that I signed up to get all my crap online. She said yes. So I was royally pissed off and steamed that the most important correspondence didn't come online where I can fricken see it! The privacy policy changes, the dumb offers, the new number to reach them, that Slate crap they sent to my regular inbox and my Chase inbox, but this shit they send in the mail.

I'm glad that I'm diligent and caught it 24 hours after it went into effect because you know what will happen now, don't you? I was going to concentrate on the HELOC once my car was paid off but now that bad boy will wait until I finish with this shit instead. Don't say fixed interest rate a year ago if you don't mean it.

To be honest, I wasn't terribly shocked but just let me know that you're going to kick me in the shins like your rules say you will. I guess this is payback for the $125 interest that I got from them for opening a checking account and accelerating my payments. Have I got something coming for Chase because I'm almost 100% sure the way in which they calculate their finance charges is wrong and not in line with their rules. It'll take me a few weeks but wait for it.

Image courtesy of SickofChase.com

The Government Saves Me From Myself

nospam@example.com (Cheapskate Sandy) — Tue, 26 May 2009 08:17:37 -0700

By now, since I've been a lazy beast, you've probably heard about the restrictions that the Senate passed last week on credit cards. It's designed to stop the evil credit card empires from taking advantage of the poor, misguided public. Let's have a look-see shall we?

According to my buddies at the MSN Moneycentral (love them!) the Truth in Lending Act will affect the following:

Limited interest rate increases

Kill universal default

Highest interest balances paid first

No more double-cycle billing

Minimum payments payoff time spelled out

More time to pay monthly bills

Clearer due dates and times

Limits on over-limit fees

Subprime credit cards for people with bad credit

Promotional rates

Card for young adults

That means that we're instantly saved from the credit card companies' nasty ways of doing business aren't we? I like the sound of all of that! But really, you have to know by now that there is ALWAYS a catch. Great credit card offers are becoming harder to find. Only 3 months ago I got notices in the mail every week from Discover offering a promotional balance transfer rate of 0% for one year. As of least week I see that they now say 6 months. Rewards cards are now raising the threshold for getting rewards or dropping programs altogether.

I love that the government likes to think of my financial well-being, but let's all be honest here, we caused most of the problems that people have with credit cards ourselves. Yes, I'm admitting it. It's my fault and it's your fault too. We stopped looking at credit cards as what they are - open ended loans! We never read the fine print and were surprised when the credit card companies acted just like they said they would and charged us fees - some I will admit were just crazy (like raising your credit card interest rate because you missed or were late on a payment to another credit card from a totally different company).

Grab the bull by the horns and take responsibility for where you are with your credit cards and begin paying them off! That way, when the credit card company raises your rate from 10% to 18% like Bank of America just did to me, you can laugh and rip up the access checks since your balance is zero and you don't use that card anyway since it's for emergencies where you can't access your emergency fund. Suckers!

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I'm A Credit Card Whore

nospam@example.com (Cheapskate Sandy) — Wed, 04 Feb 2009 18:15:18 -0700

I know you're going to think that I'm out of my damn mind, but I think the credit card companies love me. So my credit card with the high balance is currently at 0% which is set to expire on April 14, 2009. That would have been 18 lovely months of no interest. Since I opened the card just to transfer my balance to take advantage of that interest rate, they're only made the $50 balance transfer fee off me. That is about a third of the interest that I would have paid on my original balance in one month had I left the balance on my old card.

So I've got 2 months before they start earning interest on my balance. In 16 months I managed to knock $2,500 off that debt so I can't complain...or can I? I hate Citibank but they just sent me a sweet offer in the mail for a new card with yes, you guessed it, 0% on balance transfers for 12 months. Balance transfer fee would max at 3% of the balance. I am seriously considering it but I wouldn't apply for 2 months and I would also try to negotiate the transfer fee. I'm not loyal. I'll admit it. You can even call me a credit card whore, but I don't care. My FICO is over 720 so I can take the temporary hit in my score.

So maybe I'll take Citibank up on their offer...unless a sexier card comes along.