Toni Riss had a credit card with a 79.9% interest rate.
The 58-year-old woman from Texas thought she struck gold when she found the First Premier card, which is aimed specifically at consumers with poor credit.
“I had an accident on a motorcycle, went through bankruptcy to pay for medical expenses and my credit went to hell in a hand basket, so I was looking for credit cards for people with bad credit” Riss said. (more…)
Credit cards may soon be as outdated as vinyl records. (Remember those?) And this is the year that the slow, steady march to oblivion begins.
You can already use your iPhone, Droid or BlackBerry to buy a hotdog at the ballgame, buy your Starbucks latté, or give a friend a few bucks by Bumping phones. But by the end of the year you may not even think twice about reaching for your phone to pay at the register instead of fumbling for your credit card. (more…)
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.
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
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:
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!