Credit Card Interest Rate

[bayview]

   

   Just received in the mail today from my credit card company (Dis-shover) that the interest rate on balances will go up 4%.  The interest rate will be 8.5% over the prime rate for a total of 11.5%.

   I have been with this company for over 20 years with out being late and always making more than the minimum payment.  My credit is excellent.  (I have checked my credit rating)

   I called the representative and he told me all rates had gone up due to the credit crisis.  He said my interst "only" went up 4%.  Others will questionable credit have rates up to 20%.

   I will to continue to use the credit card but, I will guarantee you that the balance will be paid at the end of the month with no balance carry-over.

   I guess this credit card company prefers to make money on consumers with questionable abilities to repay.   

[MountainDon]

   
   I will to continue to use the credit card but, I will guarantee you that the balance will be paid at the end of the month with no balance carry-over.

Isn't paying off in full every month simply the soundest personal finance practice? And if we all did that wouldn't a lot of folks be in better shape right now? That's what my parents taught by example. Actually they paid cash or didn't buy it. We practice the same principle, but use plastic for convenience.

I got my first credit card back about 1970 when Visa was known as Chargex. I had $300 of credit available to me. Since then I have been an avid user of the plastic card. I had to go look and see what the rates are; 9.15% on one and 8.95% on the other. And I could care less. Except for two times when I messed up and didn't get the payment in on time I've never had an interest charge. And those time they refunded all charges with a smile when I called them.

[harry51]

Bottom line is that the credit business is like any other business, the good customers pay for the bad.

[peternap]

Credit card defaults are going to be the sub prime crisis this year. Everyone who lost their job and or house, have been racking them up at a record pace. The defaults are going to be awe inspiring.

The credit card companies know this and are just trying to pad their accounts as much as possible before the hammer drops.

[MountainDon]

Do you blame them?

We're not going to be giving unwritten periods of grace when/if any of our tenants are late with the rent money, like we have in the past. They'll get the legally required written notice, just to cover our behinds. They also may be billed for the late charges they signed for in their lease; that's discretionary.    Maybe not for a day or two, but if any later...

Ditto our preschool parents. We're going to be politely firm about on time payments. We're actually lucky there; hardly anyone is ever more than a week late, many pay early. We have a couple that have paid for half the year at a time in advance. 

[wildbil]

I have student loans...talk about a scam. I'll never return to college as long as I have to sell my soul for a few grades.

[StinkerBell]

Well the credit card companies can start saving money and some trees buy stopping the 12-15 pre approved application a month.

[muldoon]

with risk comes premium.

think of it like a pendulum, for some time credit was too easy.  easily extended to anyone for very cheap, now the pendulum is swinging the other direction.  It will likely go well past the equilibrium point and to the other extreme (credit locked up tight as a drum), before finding middle ground again.  We didn't get to where we are in 2 years and that pendulum wont be swinging back that soon either. 

I for one wouldn't loan my money to strangers for a paltry 8%.   Especially if I wasn't sure they would have a job in 6 months. 

From the debt market - things are looking very grim in the future.  James Montier, from Société Générale, has examined US bonds back to 1798.  Yields have never been this low before, except under war controls in the 1940s when the price was set by dictate.

The Fed drove the 10-year bond down to 2.25pc, much as it is doing today with mortgage bonds. It helped America win World War Two, but ended in tears for bond holders in 1946 when inflation jumped to 18 percent. 

Think about that a second.  Yeah - cheap credit is DONE.  Get yourself out of debt while it is still an option folks. 

[MountainDon]

I for one wouldn't loan my money to strangers for a paltry 8%.   

Hey muldoon that's it! Perfect insight I had lost sight of. 

A credit card purchase is nothing but an unsecured personal loan. Period.

Try getting one of those for whatever your credit card limit is!

[ScottA]

The intrest on one of my cards went down last month. Go figure? 

[Jens]

Bottom line is that the credit business is like any other business, the good customers pay for the bad.

Isn't that what the bail out was for?  I thought most of the credit cards were owned by, or were banks included in that.

I am so glad we don't have those stupid little things anymore.  I won't say that I am glad to have $8k of debt in collections, with no clear way to pay it off, and our credit in the sewer, but it is so much easier than worrying about more stuff.  We went into debt with them when I lost a job years ago.  Buying food, gas, paying utilities and stuff with them.  Now we know we would have gotten along just fine without them.  I wish I had never gotten credit accounts of any kind, but then we couldn't have bought our first house, and that turned out really well.

Mom always taught me to not buy anything I couldn't pay for right there, but society didn't like that when I tried to get a loan.  0 credit is worse than bad credit.  This whole system doesn't make any sense to me.  It does, I understand their reasoning, but still doesn't make sense.  Does that make any sense?

[Sonoran]

I have student loans...talk about a scam. I'll never return to college as long as I have to sell my soul for a few grades.

Could you please tell me about your student loans?  I'm a student. I haven't taken out any loans because I am going to a community college with cheap tuition.  I'm afraid I may have to in the future when I transfer to the 4 year school.

Any advice?

[MountainDon]

Sonoran, do you know about FAFSA, the Free Application for Federal Student Aid?

http://www.fafsa.ed.gov/

You never know what you might qualify for. The application is free. You can do the whole process online, save info, go back and complete another day.  Our son received thousands of dollars of non repayable money, plus qualified for some small student loans. His loans were at a reasonable rate.



wildbil, it might be instructive to others to hear what problems you've had with your student loans, if you feel comfortable sharing.

[MountainDon]

And speaking of applying for student financial aid, here's something many might find useful.

Money that is an account(s) under the students name carries more of a penalty than money in accounts under the parents name(s). By that I mean when they look at the application having $4000 in an account of the student, will reduce the amount of grants and scholarships more than if the same amount was listed under a parents name. We had been advised of this years before our son went off to college. I ran the FAFSA application both ways and it was true. This is one reason I personally believe the education savings accounts for students are not as good a deal as they are advertised to be.

Money in a parents retirement account is usually not factored into the amounts that universities and colleges will grant to a student. A parent can put money in a Roth IRA account and it most likely will not be counted when considering grants. The money can be taken out of the Roth without penalty if needed for college.

[glenn kangiser]

As I recall - student loans will never be written off - even in dire calamity-- as opposed to a credit card debt which may be written off as uncollectable-- not that you would want to. 

[MountainDon]

Yep, the nice thing about student loans though is that no interest is charged or accumulated until six months after graduation, IIRC.  Our sons graduation gift from us was us paying off his loans.

[rwanders]

Also, student loans cannot be discharged in a bankruptcy----make sense since virtually all college students are technically bankrupt when they graduate with a large student loan debt and no or minimal assets. Credit card companies love college students since mom and dad will usually rescue little Johnny or Judy if they get in over their heads---that's why students get lots of "pre-approved" credit card offers even if they are unemployed.

Credit cards and e-mails-----both tools of the devil in careless hands.

[MountainDon]

All true.   Thank goodness we somehow managed to rear a responsible child. 

[rwanders]

In the credit card industry, those who pay off their balance every month are known as "deadbeats" since they are not profit centers but actually cost the companies money unless they run substantial balances each month-----I am proud to be a "deadbeat"!

[MountainDon]

Don't forget that the card issuer makes money on every transaction they vendor puts through. That is an average of about 2.6% per transaction. The larger the vendors monthly volume the smaller the percentage charged.

Sometimes you can use that as a bargaining tool. Writing a check or paying cash might bring a slight discount.

[Sassy]

I obtained student loans when I went back to college to get my nursing degree.  I also applied for grants.  20 yr ago the grants were aprox $1500 a semester.  I attended the junior college to get the pre-requisites & then CSUF to get my degree.  The loans & grants really helped as I was a single mom raising 2 young sons.   Once I graduated & working it was fairly easy to pay back the loans (5 & 6% interest).