The latest offerings from Credit Card Companies

[desdawg]

I recently recived an offer to transfer balances from WaMu at a ridiculous rate. 1.87% with a 3% tranfer fee until July 09. In Saturdays mail came another (different bank)at O%, 3% transfer fee Until October 09 with the option on the part of the card company to excalate the default rate to 19.9%APR in the future. In the past I have used these teasers knowing there would be another to replace it down the road. What is the new game. Zero % just to raise capital. Any thoughts Muldoon where this is going. Lowering a rate from 7 to 0 sounds pretty good but only if there is a light at the end of the tunnel and it isn't a train. I don't go to the Casino either.
I recently bought a CD at 4.05% from a bank on the endangered species list. B of A was offering only 3% so I took the better rate. Seems like if these banks fail someone jumps right in and takes them over. I heard yesterday that some of the biggies are sandbagging the govenment infusion to acquire smaller banks.  That wasn't what it was supposed to be for but apparently it fits in the guidelines that were set forth somehow. 

[MountainDon]

There are always unintended consequences. 



I've never taken one of those offers, but they keep coming here too. But then we pay off the CC every month. BofA and Citi both keep raising the purchase limits; BofA just this month. If you don't need the credit it seems it's there for the taking.

[desdawg]

I was reaching for the shredder when I saw the 0% and said whatsit. I have become very proficient at shredding those offerings of late. It may still be the best policy. I hate the hook and have successfully avoided it for many years. No doubt there is a new game afoot.

[StinkerBell]

We get actual checks in the mail. If I cash them then I agree to their terms. What irks me is if my mail is stolen and a check is cashed the burden is placed upon me for an item I did not even ask for. It is just wrong.

[MountainDon]

I hate those things. You can ask your CC company to remove you from their mailing list. Not all banks may have that, but I know some do.

[Squirl]

1-800-407-1088 Opt-Out or 1-888-567-8688.  If you call the number and opt out.  It opts you out of all solicitations from your credit report.  I have not recieved almost any junk mail since doing it.

[StinkerBell]

I have done that with no avail. I am seriously considering just putting a freeze on my credit. That is one thing my state allows for. Wont do that until we sell this house and find a new one.

[MountainDon]

I am talking about an opt out on mailings from just your bank. BofA for example allows special offer snail mail opt out, but you can keep email, etc.

[benevolance]

When my wife had her identity stolen 7 years ago someone got their hands on one of those cheques for 5,000 and they cashed it..At which point my wife and the bank finally saw what was happening...But still it was terrible...Thankfully they caught the bastard and he served a year and a half in Prison in Michigan where he was from...We recently looked him up on the state corrections web site and saw he was caught and served some time...We thought he should have spent more time in jail for opening up 21 credit accounts in my wife's name though

[StinkerBell]

I really think that laws need to be placed that when a credit card or one of those checks are sent to a person who did not request it, the burden of proof should be on the issuer of the items. Instead it is the other way around.

[apaknad]

i just had $165 stolen from my paypal acct last week. i got the money back and changed pass codes but they did not cover my rent check bouncing! the money went to europe and was changed to euros under the name of "iicode.com"

[muldoon]

desdawg,

going from teaser rate to teaser rate is exactly what many business and governemnts have been dogin for years and it is biting some of them very hard right now.  When you borrow money there is a rate associated with the length of the term.  Borrowing short term usually has a low rate and borrowing longer has a high rate because the money is tied up longer.  So people love to borrow short and roll over the debt when it comes due.  This concept has worked for decades, so I wont say it is necessarily bad.  However, you should be aware of the risk in doing so. 

What were to happen if you went to roll over to the next teaser card and found that the best you could get was 18%?  If that would have a serious impact on you then you should beware and make plans to better position yourself before it happens.  A significant portion of the credit market lockup on 10/1/08 was 3rd quarter commercial paper rolling over with 7% rates while historically they have been 1%.  It crushed many. 

On another note, I have heard good things about a movie/documentary called Maxxed Out; I haven't seen it but it apparently describes the tricks they routinely use on unwitting cardholders. 

[desdawg]

The big fear in doing that is that when the term ends a.) you won't have it paid off and b.) there won't be a new teaser offering to switch to. When things were moving and the income was good I would overpay to get rid of the debt in the alloted time frame. And there has awsays been another to switch to when the time is up. But that is no guarantee there always will be another. At some point I may just get stuck. With the credit policies changing the way they have recently I don't know how long business as usual will continue.
Stink, I get those checks in the mail all of the time. Thus the shredder. I turn them into confetti and burn them in the firepit.
I am waiting for the next offer below 0% where they pay me to use their money. I know they full expect their customers to not get them paid off and they will reap their reward when the teaser term expires. I have never used their funds to take vacations and buy silk shirts. I have always used them to pay for real estate, something I thought was a solid asset until recently.So far I have been able to disappoint them by dumping their balance elsewhere. I don't know that can continue forever.

As for banks on the endangered species list http://www.geocities.com/tubeguy@rogers.com/troubledbanks.htm #113 on the list AmTrust Bank has worked hard to earn my business since I started with them. They are working to raise their deposits and repair their situation apparently. I went to B of A to inquire about a CD the other day and B of A was paying a full percentage point less interest than AmTrust Bank. My money market account at B of A is paying 2.03% and AmTrust Bank has one that pays 3.5%. The flyer in the branch lobby says this is not an introductory rate this is the rate. Makes them hard to ignore. The service I have received from AmTrust Bank has been outstanding. I am going to try their mortgage division and see if I can do any good with that today. I have some seller carrybacks on real estate purchases that have balloon payment in a couple of years and I would like to start now and see if I can do a refinance on at least one of them. I have to call Columbus Ohio for that but the paperwork is processed locally. To date they have been very appreciative of my business and now for the real test. They act like the little local bank that I have wished for even though they are headquartered in Cleveland. I am hoping it all works out.
These are just a few thoughts from my recent experiences.

[MountainDon]

Even if you are one who pays off the CC balance due every month and never pay any interest or late penalties, the banks love you if you use the card heavily. The banks get a percentage of every sale that goes through the card. The merchant pays it. The bank makes good money off people like us.

[desdawg]

I rarely use CC's for purchases. My usage has mostly been for balance transfers. So I don't know how that plays out. I used to use one card at the pump quite a bit and for on-line purchases but I have mostly eliminated that by paying cash at the pump and the cash register when shopping at stores.

[benevolance]

Using the card for large amounts even if you pay off the card quickly will hurt your credit score...  ...It is not just what your total debt is or how much credit you have left on your cards... but people who spend more are more risk so you may want to avoid paying for something on the card if you can wait a week or two and pay with cash...Purhasing a Television or washer and dryer on the card is not a good idea... even if you pay it off within 30 days

[MountainDon]

I beg to differ, Peter.

One of the important factors is the ratio of how much credit you use to how much credit you have. Paying off on time every month is not detrimental to ones credit score.

Example: let's say you have three cards, card A with a credit limit of $35K, card B with a limit of $25K and card C with a limit of $15 K ($65K total)

You mainly use card A, $4K per month on average in billings. You pay it off every month. Card B, maybe $500 a month and card C you hardly ever use at all.     $4500 used out of $75,000 available...

You close card C because you see it as un-necessary.

That could hurt your credit rating as you now are using a higher ratio of available credit; $4500 out of $60,000 available.


We have "owned" three major cards for many years; card A since 1991, the others 1994 and 1999. We put everything on them; from a $1 item at the drug or hardware store up to $2775 at the lumber dealer (largest single purchase in my memory) and all points in between; TV, DVD-R, computer, car parts, wood stove, washer, dryer, range, Sunmar toilet,... everything. We even used to pay our property taxes on the CC until the county began charging a premium to do so. We pay the balance off every month the day before the due date. We do use spend cash unless it's necessary or advantageous (the roofing guys and the property taxes). Ditto on checks; we have enough checks to last a decade MTL.

My best personal FICO is 790 and my wife's 810. I don't know how she beats me?    It's hard to get much better than either of those scores.

Using less than 25% of your available credit is a big positive. Sticking with one or two or three credit lenders over time is better than skipping from one to another. Personal lines of credit, especially if not used, add to your credit score. Again, that affects the ratio of credit used to credit available. Having a variety of paid on time credit/loan sources; revolving credit accounts (credit cards), installment loans, lines of credit, also enhances your FICO score.

Any late payments are a negative. Using 80% or more of your available credit at any time is a negative. (That's where buying a big screen TV could be bad, IF you have a low total available credit amount.) Any credit card that is "maxxed out" is a negative, regardless of how good the other cards may be. The more credit applications you make is a negative. The exception there is that a few applications in a short period of time. These are treated as one occurrence; what would be expected if you were shopping for a best rate for a new car or a mortgage in a short period of time.

The best situation is to have oodles of credit available to you but making only moderate use, and paying on time (or in full).

Do a Google on "credit score factors" if you are in doubt.

[benevolance]

paying off the bill on time does not hurt the score... using the card for anything more than small purchases is what hurts the score...Even if you pay the bill on time and pay off the balance...Using the card to make large purchases will bring your credit score down

[MountainDon]

Using the card to make large purchases will bring your credit score down

Only if that large ticket purchase shifts the ratio of the total debt amount to the total credit available into an unfavorable utilization ratio. That can work two ways depending on the model the rating agency uses. (The big three use sighty different methods).

There's the ratio of total credit used to total credit available. Then there's also the utilization of credit on individual cards. That is, using 75% or more of the available credit on a card with a small limit, as compared to your other cards, could have a deleterious effect on your FICO score, even if you are only using 20% of the total credit available to you on all your credit sources.

Over time a history of low utilization ratios will result in automatic increases in your credit limits on cards from most issuers. High use ratios will affect FICO scores unfavorably.

Timing can also shift credit scores. That is, even if you pay off a card with a one time high utilization ratio on time, if the report to the scoring agency is made before that payment is received by the credit card issuer, that high utilization ratio may affect your score.

The fact remains, all other factors being equal, if you have low use ratios on your credit cards, a large purchase will not mess up your score. If it did how do you resolve our scores with our large purchases?

I'm just trying to be helpful. If you recall I used to work in big bank credit, although I was part of a team that dealt with deadbeats, cheaters, liars and thieves, not the granting of credit. I learned some things along the way, though.

Have a great day!

[benevolance]

Don

Congrats on where you used to work..I am only repeating what was drilled onto us by our banking lady...Who told us not to use the credit cards for large purchases even if we could pay off the balance within 30 days....She also sent us pamphlets and a web site with information backing up what she was saying..

Not saying I like what she had to say or that I think it is fair....Seems that no matter what you do it is possible to screw up your credit score.

[desdawg]

I always get dunned for carrying high balances. But it always worked best for me to do it that way. Fewer balls to juggle. I seldom apply for anything that requires checking unfair Isaac. That credit score methodology doesn't take into account self employed people. Which I imagine contributed to some of those bad mortgages. Declared Income became fairly common. Lenders annalize tax returns but don't allow for Section 179 equipment purchase deductions or property taxes that were paid. Those items reduce your AGI on the tax return. That is why we use them.  To determine income accurately they have to be added back into the formula. This years maximum 179 deduction is $250K and can be even greater if your purchases exceed that number. .http://www.section179.org/section_179_calculator.html

[MountainDon]

FWIW, from a downloaded document on the Fair Isaac Corporation website...