I’ve Paid For This Twice Already…

Archive for the ‘credit cards’ Category

After my post about Capital One raising our interest rate, I got a lot of interesting comments that made me wonder about the role of credit in our society and how it is changing.  I’ll be the first to admit that I don’t pay much attention to news about credit cards in general.  I am not strictly anti-debt but in the past I have not been as responsible as I wish I had been about using debt and accumulating debt, and I can finally see the light at the end of the tunnel, a world without monthly non-mortgage debt payments.  I don’t blame credit cards for taking advantage of me - I am not claiming they always do the nicest things or are in the business of helping the consumer - but it was my attitude towards available credit and taking on debt that needed an adjustment.

Now, the rules governing credit cards are changing.  Things like universal default (when you are late on one card, every card can penalize you) are being eliminated, and interest rates can’t be raised automatically when you pay late.  Fees and penalties are being capped.   Many things are being put into place to stop credit cards from taking advantage of those who are in over their head.

Which is good.  But on the other hand, someone has to pay for it.  And that someone seems to be those who use credit but do so without getting behind or paying late.

Annual fees - a yearly fee just for having a credit card - are expected to make a comeback.  As I’ve already firsthand experienced, interest rates for everyone are being raised as a pre-emptive strike before the laws go into effect.  Having a credit line “just in case” is going to cost me.  Is that worth it to me?  I don’t think of the credit card as my money any more, nor as an emergency fund.  But I’m not in a place yet where I can say with conviction we can handle anything life might throw at us without turning to credit.  I’m working on getting there, but we are definitely not there yet.

So on the one hand, I’m happy that preying on the most vulnerable will stop.  For example (and again it is my “friends” Capital One), my middle brother is not the most responsible when it comes to managing his finances.  He has a Capital One card with a very low limit, and he’d charged it beyond its limit.  Totally his fault, and he was assessed a penalty for it.  But the crazy thing was, his minimum payment due the next month wasn’t even enough to bring him below his limit!  And he doesn’t pay attention to things like that, so he paid his minimum, then was charged another over the limit fee for being over the limit.  This went on for three months until he asked me to take a look at things and I explained what was going on.    I’d like practices like that to stop.  It’s not illegal, but certainly unethical and just… tricky.

But at the same time I’m not really excited about paying a fee just to have a credit card.  Someone has to pay somewhere, and that someone might be me.  So, we’ll see what happens.  But for now, I can only say I am ambivalent.

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We’re raising your interest rate just because we can, and we’re annoyed you don’t owe us anything.  So there.

Well, that isn’t exactly what the letter I received said, but it might as well have.

This week I got a form letter/flyer from Capital One which informed me that they were raising my interest rate from the fixed 9.9% it was at to a variable rate that is currently 17.9%, effective immediately.  Hey, thanks Capital One!  I’ll get right on that…

We don’t have a balance on the Capital One card, and haven’t used it in several years.  It was the first thing I completed paying off in my debt-destroying extravaganza, and hasn’t carried a balance in over a year.   And to thank me, Capital One has finally gotten around to raising the interest rate.  Hey, thanks.  I appreciate it.

Many people who are anti-debt or anti-credit card debt destroy their credit cards and cancel them.  We didn’t.  It wasn’t a firm yes or no decision, it was more apathy on my part.  I didn’t really feel passionately about getting rid of them, so I just kept them.  My problem that got me into endless credit card debt wasn’t one of impulse control exactly, it was more poor money management.  I wasn’t one to pull out a credit card and buy things on impulse.  I used them as an emergency fund and then kept transferring balances back and forth while trying to pay them down until the next emergency.  Once I figured out how to track my money and know what I was really spending and started having a cash emergency fund, I didn’t increase the credit card debt and began to reverse the process.

So, I still have them.  Three, in fact.   This we’ve had for about 10 years, and I have had another one since 1996.  The last we got while we were paying down debt in 2007 to transfer our balance to a 0% rate.  So closing this one isn’t closing my longest-held credit card.  I think that means it won’t affect my credit score.  And the longest held credit card also has a $40000 limit, so if for some reason I found myself in a position where I needed to use a credit card, that one would suffice.

So Capital One, I think our days are through.  Thanks for everything… sort of.

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A few days ago, Capital One about gave me a heart attack.  I got an email from them telling me that my statement was ready.  This made my heart skip a beat because I have not done anything with my Capital One card in over a year, and ever since I moved my balance to a 0% interest offer on a different credit card (and subsequently paid it off), I have not gotten any emails about statements or anything else of the kind.  Until a few days ago.

I was scared that someone had gotten a hold of my card and used it, so I went to the website (by typing it into my browser, don’t click on email links you are unsure of) and found that I still have a zero balance and the same credit limit.  I’m not sure why I was sent an email about my statement being ready, when there hasn’t been any activity or change in anything, but at least it was all okay.

And then I read an article about how credit card companies are cutting credit and closing inactive accounts.  I have three credit cards, and all of them could be classified as inactive.  One I haven’t had any activity on for about 4 years, the Captial One has been inactive for about a year now, and the last one which I opened to transfer the Capital One balance, hasn’t been used since February.  In total, these three cards together have about a $70K limit.  All of which is available and unused.

For a second I thought to myself,   What then?  Even though we have a small emergency fund it is nowhere near a true all-encompassing one, and what if a big emergency happened?

But then I realized, I didn’t actually care.  If all our credit cards get closed because we don’t use them - I’m okay with that.  I’d rather that than using the cards and feeling dependent on them.

Do you use your credit cards just to keep them from being inactive?

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I was recycling and shredding the junk mail a few days ago, and my three year old son was sitting with me while I sorted it. I had him open the envelopes for me and then I would sort the things inside into “shred” (things with our name on them) and “recycle” piles. Among the junk mail was a credit card offer from American Express for a card called Blue Sky, and when my son opened that, he got very excited, for there was a fake plastic credit card inside. He was thrilled with the “card” and he showed me excitedly that he had a card and he wanted to keep it.

I thought back to my own childhood, and how I used to create my own checks with scrap pieces of paper, and then tell my mom I was going to pay for things with them. Times haven’t changed all that much, after all. Now instead of checks, I use a debit card, and my son sees me pay for things that way. Obviously, a credit card and a debit card are two different things, but my three year old doesn’t know the difference, and I wouldn’t expect him to. To him, a “card” is what mommy and daddy use, and it makes him feel like a little grown-up to imitate us, as it did for me when I imitated my parents and created my own checks.

Cash itself is just a symbol too, after all. Those green pieces of paper and metal coins are symbols and placeholders for things we have and things we can get. Back a long time ago, if you wanted a cow you’d figure out what you had you could trade for it. If you did work for others you’d be paid with what they had that you needed. Now we just use currency as the go-between.

I explained to my son that when mommy and daddy used their cards to pay for things, they have to have money in the bank to pay for it, money that they get from working. He understands working, in part, he’s seen where my spouse works and he sees me work at the computer in our office. I don’t expect him to understand everything today, or even a whole lot, but he did ask me to give him a bank for his money. Heh. And the financial education of my preschooler continues.

When you were a child, did you make your own money? If you have kids, have they made their own money in some form or rescued fake credit cards from junk mail?

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I kind of just snuck in mentioning in my carnival roundup post that I paid off the Citicard last night, but JvW very astutely noticed my reference and called me out on it so I think I ought to come out and say it definitively. I was going to wait until Tuesday’s Tell All post but hopefully by then I’ll have even more payoff news.

Last night in the midst of entering receipts in my budget sheet, I started to get really antsy and irritated. I used to have a system. I’d get money that was designated for extra, or snowflake, debt repayments, I would send it off to the credit card immediately, and the debt total would go down. I’m a fan of instant gratification and it worked well for me. Because I track my earning and spending very closely, I knew what money coming in was for this debt snowflaking and I could use it right away.

But since the car repair saga, I’ve felt like all of our debt reduction was kind of in limbo. First, every available penny went towards the car repair, wiping out a lot of potential future snowflakes short term. This was a decidedly good thing, for it prevented the vast majority of the repair bill from ever becoming debt. But as far as my love of instant gratification, it kind of put a damper on it. Then, the line of credit we got through the dealership to finance the last $800 of the bill is the most archaic thing ever, and if you pay through any electronic means, you get hit with a $10 fee. Seriously, that is just lame. So I need to wait until they send me a paper bill (I have gotten the card etc in the mail already just not the first statement) to pay it off. Waiting. And waiting. And… waiting.

So, I have been collecting my few snowflakes and moving them to my emergency savings fund, and that has been okay. The debt total stays still though. And yesterday, I got my tutoring payment, plus some other money I had been expecting, and I now have enough money to pay off the car repair plus the remaining $155.17 on the credit card. So I wait for the car repair bill. And then I realize…

I can just pay off the credit card now. Yes, something could happen inbetween now and me actually receiving the car repair bill statement and I could not have the $800 any longer to pay it off. The car repair was higher on my priority list and so I wanted to pay it first. But, in reality, I am taking a small calculated risk and since the credit card payoff amount was not much all things considered, I decided to just go for it. And it did indeed make my instant gratification self feel a lot better.

So Citicard - balance $0.00.

After the car repair is balance $0.00 the next target is restoring the emergency fund, but I also need to seriously think about how to approach the student loans that gives me more of a safety net but at the same time gives my debt-destroying inclinations some satisfaction. On to more planning and goal setting and putting my relationship with Citicard behind me, just as I have with Capital One.

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