We have some credit card debt, and before you start to lecture me, YES we know better. Unplanned stuff happens when you own a home and cars and stuff breaks. Especially when you have kids living in different states and you have plane tickets to buy to spend time with them. Moving on.
I’ve had credit cards off and on over the last 20 or so years, and my preference is to NOT have them. Nothing irritates me more than looking at interest that I have to pay for spending money, whether it’s on a mortgage or a credit account. And I make a point of looking on every statement so I don’t ever forget the cost.
We try to be smart and take advantage of some of the better credit offers, and after doing a recent audit of all of our finances I had a few thoughts to share:
First of all, one of the “ace in the pocket” credit offers is from Best Buy. I don’t know if it’s always available, but we’ve made use of it a few times now - interest free for 18 months for items over $xxx (I don’t remember the minimum). Keep in mind that the ONLY way this is a good deal is if you pay it OFF before the 18 months expire. If you don’t, then you are charged retroactively all the interest you would have paid. You are given a wonderful motivator on the statement itself, as they have to disclose the offer expiration date along with the accrued interest you will be charged with if you go beyond the expiration.
I simply take the total charged and split it into 17 payments and pay that every month instead of the minimum required. If I can spare any extra I throw that on top also, just in case there is a financial crisis later that may make it difficult. You have to be very disciplined to do this, or you could be staring down the barrel of a huge balloon payment to make to avoid getting tagged with the accrued interest.
Another thing I learned ages ago was to always pay more than the minimum payment. I strive for at least a double payment, and more than that if possible.
Being disciplined with this is much easier now, thanks to the Credit Card Act of 2009. There are some very helpful requirements placed on credit companies to help you stay on track with your credit goals. If you click on the link, you can even download the legislation. It’s dry, but I think anyone with or contemplating a credit line should be familiar with it.
The provision most likely to help you achieve or maintain a healthy credit score is the Enhanced Consumer Disclosure found in Title II. In it, credit card companies are required to show how long it would take you to pay off your current balance AND what the interest would be over that time. Right below that, they show the calculation of how much you should submit in order to pay off the entire balance in 36 months and that amount of interest. It is shocking to see how long you’ll be paying that minimum, assuming that is all you pay and have no other charges on the account. I think one of ours was NINETEEN YEARS. This is definitely need to know information, and I’m happy that it’s on the statements now.
Another favorite is in Title III – Protection of Young Consumers. It prohibits practices such as giving away promotional items on or near college campuses for credit applications. This practice led countless kids to sign a form and get some crappy thing, not realizing they were harming their credit scores and opening a credit line that in many cases has led to devastating debt for young and informed students. It also prohibits from those under 21 unless there is a co-signer or the person actually meets requirements such as being able to pay independently. Y’know, like the rest of us?!? Also, the student now has to get authorization of joint account holder to credit limit increases. This was so long overdue, and I hope that it actually works as intended.
The Act also prohibits some of the “fees” on gift cards, those ridiculous dormancy and inactivity fees among others, that can chip away at the balance and zero it out before it can be redeemed on goods. These will only kick in after 12 months, as long as certain provisions are met.
It also provides a lot of other protections and requirements, and while I’m sure there are things in there that suck, if nothing else the aforementioned disclosure should scare you into being aggressive with your credit payoff efforts. I didn’t read the whole thing word for word, and if you find anything that I got wrong, please correct me!
Separate from the legislation, I must insist that you get your credit report from all three credit agencies annually. You can get it for free as explained on the Federal Trade Commission website, which points you to https://www.annualcreditreport.com. I’ve used this for a few years, and it is easy and painless to use. You can see everything that has hit your report, down to who has requested credit reports on you. Dooooo eeeeeeet! It only takes a few minutes to make sure everything is as it should be, and you don’t want to wait until you are applying for a mortgage to find out there is inaccurate information out there.
Now, back to that Credit legislation mentioned earlier. You know how you hear that politicians are always tacking unrelated things on? Well, buried at the bottom of the Credit Card Act (among other things) is an item covering gun possession at National Parks – Visitors to U.S. National Parks can legally carry licensed firearms in to parks, subject to state laws and other provisions, effective Feb. 22, 2010.
I hope Yogi got the news, or else he may get shot for lifting his next picnic basket.
Have you ordered your free credit reports yet? No? Then get to it, Twitter can wait.