More Reasons to Pay Off Credit Card Debt

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Credit Card Debt

Many people not only avoid credit card debt like the plague, they actually view it as debt slavery.  If you are suffering from massive credit card debt and are looking for a s0lution read the credit card debt reduction handbook.

As a credit card holder, it’s pretty much a given that you need to be on the lookout for increasingly deceitful practices from your credit card bank.  I slipped up & just the other day was hit with a $29 “fine print bingo.”

Consumers are cutting back, and credit card companies are striking back!  With more and more Americans saving more and spending less the credit card banks are really starting to take a hit – but… they are not taking the hit lying down!

Cutting back on spending and use of credit cards

Are you like me?  In case this is your first visit to DebtFreeAdventure.com, I am in a raging battle against debt.  Not just high interest debt, but all debt – yes… even mortgage and student loan debt.  My goal is to be completely debt free as soon as possible – so it only makes sense that we should curtail our spending and use of credit.  Sound like something you’re interested in?

Steps to reduce credit card and other debt

  1. Reduce Expenses – Ummm… yeah, my wife and I have gotten mighty creative and resourceful over the last 10 months.
  2. Curb Spending – Spending less than you earn is a cornerstone of gaining monetary wealth – we are proudly standing upon that cornerstone.
  3. Consolidate High Interest Debt – Tread lightly here because this only applies if you can secure a loan to consolidate your debts at an interest rate that is lower than the rates of all the loans you plan to consolidate, all while limiting the loan origination fee.  Sound impossible?  We found an awesome opportunity to “stick it to da man” by taking a Lending Club consolidation loan to do just that.  If you want to figure out exactly how we did it check out my Lending Club review, it’s packed with good stuff.

As you can see, we have cut back on spending and use of credit.  How do the credit card banks feel about this?  Why they hate it of course… and I’m not the only one.  Tons of Americans are suddenly waking up and becoming “debt wise.”  It’s almost as if someone through a bucket of cold water on the whole country – and that is a good thing.

How are the banks responding to the decrease in consumer credit use?  Here is what recently happened to me…

Ways credit card banks are striking back…

Watching this “frugality movement” must be making their blood boil, and to be completely honest… I love the thought of that!  Can’t you just see the execs of Capital One, Citibank, etc. sitting around in a board room coming up with new ways to screw us out of our money?  I love picturing them squirming in reaction to the wise daily decisions more and more Americans are making lately.  BUT… they are no dummies.  Every day they strive to find increasingly deceitful ways to separate us from our money.  Here are some popular schemes to watch out for:

  1. Raising Interest Rates – It already makes me sick when I consider the amount of interest I pay each month… so what do the credit card banks do?  Raise them higher of course.  A few months back all three of our credit card banks sent us letters to inform us that they were doing just that.  It was the straw that broke MY back – so I consolidated with Lending Club and haven’t looked back since.  I’m loving the fact that while I still have to pay interest, I’m paying it to individuals rather than corporate credit card banks.
  2. Instituting Annual Fees and burying the evidence – About a week ago I received a Capital One statement in the mail saying I now owed them $29.  I was like… “WHAT?  I just paid that off like two months ago!”  Well… the letter they sent me a few months back about raising my rates ALSO said – in fine print of course – they were instituting an annual fee on my card.  It never had an annual fee before, and I had to dig back through my letters to find this little nugget.  They just slipped it in on me.  Chances are if they had sent a letter specifically about the annual fee I may have closed the account… so they buried it in the fine print.  This raises another point – should we cancel a credit card account that we recently paid off if it is going to cost us an annual fee?  Is the positive affect it has on our credit score worth the annual fee?  You be the judge.  The only reason I left the account open was because it bodes well for my credit score… now I am just inclined to close all the cards I recently paid off.
  3. Planned “Mistakes” – Yeah you read that right… “planned mistakes.”  This occurs when the credit card banks mail your statements late, giving you less time to pay your bill before the due date.  Another example is when you pay the bill on Friday, but they – very conveniently for their pocketbooks – do not process the payment until the following Monday… making your payment “late” and thus whopping you with a $36 late fee.

I guess what I am saying is…

I am mad that Capital One charged me $29 for a brand new annual fee, and I don’t want the same thing to happen to you!

Make sure you read all the fine print, and if it is too much of a hassle… just close the darn account – that way you are no longer subject to all the random deceitfulness of these tirelessly greedy credit card banks.

MAN I CAN’T WAIT TO BE DEBT FREE!

This article was featured in the 84th Edition of the Money Hacks Carnival over at MilitaryFinanceNetwork.com
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DFA is passionately dedicated to helping people break the bondage of debt and work toward financial freedom using biblical principles.



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1 Lakita

Hey Matt,

I had a similiar annual fee with one of my cards, I just paid it off and a hefty annual fee was coming up. I decided not to close the card because I knew I was going to need my FICO in the best condition possible as I was strongly considering buying a home. I’d probably close otherwise, if time is on your side, your score will rebound quick enough.

Regarding the “planned mistakes” — I thought you were doing online payments? Wouldn’t that get rid of the Friday/Monday mailing issues?

Keep up the good work!
Kita

2 Matt Jabs

Oh… I should probably clarify – the only thing that happened to me was the sudden and new institution of an annual fee on a card that previously never had one.

The other points are just some other sneaky ways they are using to get our money. I was not personally affected by “planned mistakes” point, albeit a lot of consumers are!

3 Craig

Credit card companies are always trying to be sneaky and get more money of you customers, so spending and using less can only ensure you will pay in full and help you out over time.

4 Paul @ FiscalGeek

That is really lame. One thing that drives me insane is when you are actually ready to pay off your credit card no one can give you a payoff amount. Apparently the math is waaaayy to difficult or variable for them to give you that payoff, so they can squeeze one more payment out of you. Debt Freedom is coming!!!!

5 Matt Jabs

That happened to me too… with the Capital One card. I paid it off and the very next month received a bill for $17.54 – which was the interest from the previous month.

6 Kevin@OutOfYourRut

I know everyone wants to keep their credit lines open to keep those credit scores up, but should we really reward credit card companies with our business when they treat us like something other than paying customers? Right now, we’re more like captives.

Forget the credit scores and ditch the cards once they’re paid off! Only when we start saying NO to them will they start courting us like real customers again.

7 Matt Jabs

I am in a straight betwixt these two concepts. On the one hand I want to reap the benefits of paying off the card – an increased credit score. While on the other hand, I want to cut ties w/these terribly toxic companies altogether and forgo the benefit.

For now I am keeping it open.

8 Eric

What type of Capital One card do you have? I have the No Hassle Rewards card and have not seen any notice of an annual fee, but I will be extra careful when reading the fine print now.

Thanks Matt!

9 Matt Jabs

Mine Capital One card is a Platinum Mastercard.

10 BG

Thanks for the heads-up Matt. I paid off my CapitalOne CC about 2 years ago and haven’t used it since. I still get those annoying “checks” in the mail for balance transfers, etc, from them. Now that you’ve shed the light on these new annual fees, I’m canceling the card. I have been holding on to it in case of emergencies, but now I see it is too much risk to have a CapitalOne card, even if it is paid off — I’ll handle the emergencies myself!

11 Matt Jabs

Yeah… I plan to leave it open for the next 11 months (to realize the credit score benefit) but then close it before next years annual love hits again!

12 Chris K

Matt, I have to say that stories like this are becoming more & more common. A good friend of ours informed us that her rates were bumped to 13.99% for no fault of hers. She contacted the company and they informed her that they were just doing it because they could through the general default provision. We paid off all our credit cards last year & called and canceled them to avoid this situation. It’s sad because the consumer doesn’t have much of an option other than get mad and switch until they pay it off. I’m a Dave Ramsey fan, so I’m in the camp of “cut them up, pay them off and cancel them.” I know you’ll be done soon. Keep up the good work. It’s worth it.

13 Mom

This comment is not specifically about sneaky credit card fees. I, too, have been a victim of the credit card pirates, as well. However, this is actually a note of hope in an otherwise bleak financial institution landscape. The other day, I became overdrawn at my bank. Yes, sad but true! I noticed that two checks cleared in the same day….the larger one cleared first, the smaller second. Usually, my bank, which is Independent Bank, will clear the checks in an order that causes the least NS fee damage. Because of the order in which they cleared, I had two NS fees instead of one. Well, I got right on the customer service tab and wrote to my bank about the situation. Miraculously, when I checked my balance on line this morning, they had refunded my account with the $30 fee (yes, folks, only $30, while others are charging $40-45!) AND there was also a nice response from the customer service team explaining why they cleared the checks in that particular order.
I found it very refreshing in this day and age of nameless, faceless people robbing us of our money, that my bank cared enough about ME to address my situation so quickly and with compassion about my situation.

14 Kevin@OutOfYourRut

We have a credit card that raised our rate to 13.99% and cut our credit limit. We’ve never been late on it! When we called to question it, we got the door closed in our faces, in effect.

That’s not a client relionship, I don’t know what it is. But I think it’s time to give the creditor the boot and say ‘goodbye until you’re ready to talk.’

That was the scary thing about it, it was as if they were making a policy declaration, and didn’t care what the fallout might be.

15 Peter

I have a hard time keeping an account open just because of the credit score benefits. As Dave Ramsey says, “dont’ worship at the altar of the great FICO!”. Personally I really don’t need my credit score for much of anything besides getting a home loan – and even that can be manually underwritten if you really want to (by less and less banks, granted).

I DO keep one credit card open that I use for large purchases – but only when I have the cash in my bank account to pay it off right away. That way I get the cash back rewards off of those large ticket items, but never carry a balance because I pay it off as soon as it hits the account. I just got $50 back from our vacation that we just booked by doing this. But of course, I paid it back right away – so no interest.

16 Matt Jabs

@Chris K: Yeah, same thing happened to us – so we paid them off by consolidating w/a Lending Club loan at a fixed rate and are now paying that off. We will be done soon and it is exciting! I’m considering closing all my old CC accounts, I’m sure I’ll blog about it if I do! :-)

@Mom: Over the course of the last year I have found out that working with local institutions, banks & otherwise, is KEY! A lot of times they are much more personable & willing to help. Congrats and thanks for sharing encouragement in a world that severely lacks it!

@Kevin: That’s exactly their attitude, banks or otherwise. Large corporate companies couldn’t care less – 99% of the time… and it’s time we stood up & demanded something better. We can vote every time we make a financial decision so it’s on us… let’s get started! :-)

@Peter: Great DR quote! Once again my readers may be swaying my opinion and moving me to act… like I said to Chris, if I close them in lieu of the “credit score benefits” I will definitely blog about it. I love how you are successfully taking advantage of their “benefit programs.” That is the only way to go!

17 Chris

What a bummer. I paid off my (ridiculously high-interest) Capital One card 3 months ago, and canceled it. I still have two other CCs that I try to use occasionally and then pay off immediately to help keep the credit score in decent shape.

Is this sort of abusive fee-charging something that will be remedied by the credit card laws (the CARD Act)? If anything, they may just have to give you more warning when they’re going to start charging these types of fees.

Matt, do you know if the annual fee is dependent upon carrying a balance? Some cards charge a fee for consecutive months without activity.

18 Matt Jabs

The CARD Act may Chris, but I don’t think either of us want to wait around for the gov’t to fix anything! :-) That said, any help would be nice.

Per the inactivity fee – I’ll have to go read my terms, but I tell you what… these points you bring up are also pushing me in the direction of just close the darn account Matt! :-)

19 Mr. Not the Jet Set

Matt – love the post.

first –
“Can’t you just see the execs of Capital One, Citibank, etc. sitting around in a board room coming up with new ways to screw us out of our money?”

Yeah, I nearly fall off the couch laughing at these new credit card commercials… they wanna be your buddy again. “Yeah, yeah, we hate debt too, so we’re giving your 17 new BS features to help you, ya know, pay off your debt or something…. oh and we’ve got this sweet rewards program too…….” As if.

Now second –
I’ll join the chorus here and challenge both you and Peter (if he’s still following) to shred those cards. Burn’em. BBQ’em. Whatever. Ditch the credit cards and their never-ending schemes. Then come back in a month, 3 months, 6 months – tell me if you really miss it. It’s not like you can’t go out and get another if it’s really that awful.

It’s a much simpler life.

20 Molly

Thanks for the informative article. I’m just starting to work on my huge debt.

21 Jon

Like your blog – you’re on a great mission.
Thought you’d be appropriately incensed/stimulated by this story:
http://finance.yahoo.com/news/Credit-cards-newest-trick-799-apf-3359014390.html?x=0&.v=4

22 Matt Jabs

Excellent Jon, thank you.

I think I’ll be turning this into a DFA story!

23 Lara

I have 3 Citi cards that give ‘dividend’ returns on what I purchase. The interest rates on all three were raised in the beginning of 2009, then again in the fall of 2009. I don’t care because I pay it off every month. BUT… I’m just waiting for Citi to introduce a monthly or annual fee for the card. When that happens, they get cancelled.

For those of you buying in to the Dave Ramsey schtick, beware. Your FICO score is used in many ways, not just to calculate a mortgage interest rate. It also affects insurance rates and is often checked by potential employers. While I’m at a point in my life where I don’t need to be concerned about any of this, other than the insurance rates, if I were in my 20s or 30s, I’d be vigilant about my FICO score.

24 Frank @ Turn Key Consulting

Reasons to pay off credit card debt are we should stop paying interest while buying things from credit card. We should boost our credit score and increase spending money. We should also meet our financial goals and contribute more to our retirement accounts. We should save our self from debt collector harassment and get approved for a mortgage and sleep properly at night.

25 robert

Every cent i earn at the moment is going on to my credit card to get rid of the interest. I’m going to pay it off and rip it up.

26 Barbara Weatherly

I have closed all but one and that was because I forgot about it. I will be credit card free soon I hope. I could use some encouragement

27 Hareiana

By the time I realized how to play the credit card game to my advantage I was looking at over 6,000 dollars debt on my credit card which I was struggling to just pay the interest on, I made it my first objective to first pay off my credit card debt and never see it again. To do this I started using Out Of The Dark (OOTD) online budgeting which has a very helpful feature built into the budget called Credit Card Debt Terminator, with this I tightened my financial belt, no restaurants, no travel holidays, no extravagant clothing, and within one year I had my credit card debt paid off. Now I continue to use Out Of The Dark budgeting for good monthly budgeting on a regular basis and I am using my credit card for convenience only with every penny on it paid as soon as I get my monthly statement. All this happened 5 years ago and I now have almost enough saved for down payment on my first apartment.

For me budgeting was the game changer and I now live by my online budgeting.

28 Matt Jabs

Way to go Hareiana, I agree, budgeting is key.

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