As I was going through some bills this week, I noticed how little progress I was making with a certain credit card’s balance after making pretty big payments. It turned out I was paying 28.99% interest on a near $6000 balance. Ouch. That’s a huge waste of almost $150 a month!
What kind of progress can one expect to make on debt with rates as horrible as these? Here’s the scary part…it’s been like this for months and I haven’t noticed. I’ve just been paying a couple hundred bucks a month without putting much thought into it.
The Problem
I have absolutely no idea what the interest rates are on my debts. Sure, I got a ballpark of the crappy rate I’ve got on my sub-prime mortgages. I know my student loans are single-digit rates. But I have absolutely no clue (other than the one I’ve already discovered) what my credit card rates are.
This situation is very dangerous. For all I know, I could be paying 30% interest across the board on over $15,000 in balances. That’s like FIVE THOUSAND DOLLARS a year! Come on! Just knowing the balances on your cards is not good enough, you need to regularly examine your credit card interest rates to make sure you’re not wasting money.
Allow me to be the example here of what not to do and what not to let happen.
The Catalyst
So, just not knowing your exact rates may not be the total cause of wasting thousands of dollars. Perhaps they were all fine six months ago when you last used them. The biggest problem you might have beyond not knowing your rates could be that the credit card company just decided to up your rates without really broadcasting it in your face. I mean, they have to give you those little folded pamphlets about terms and conditions and all…but who reads all that mail with the fine print anyway?
Here’s three things to watch out for:
- Your rates can change anytime.
- Universal default clause can trigger all companies to change rates.
- Electronic statements sometimes hide the rates on another page or view so it’s not immediately obvious to those not looking for it every month.
That little pamphlet is basically telling you that the credit card company can change your rate to whatever they want ANYTIME they want. Borrower slave to the lender? Yeah, you can say that again.
Not only that, with what’s known as the universal default clause one little pin-drop on your credit report and all your credit card companies can just go nuts with your interest rates.
One thing I’ve noticed is how much the current card interest rate is hidden. Just in the last 10 minutes I’ve had to dig through multiple screens on the website and the only place I found it was on the PRINTABLE PAGE for the statement. There’s no HTML page displaying my current interest rates! I had to dig up the printable page! LAME!
The Solution
The next step is to stop being uninformed. I’m examining all of my credit card interest rates right now before I finish this article. In fact, here, I’ll list them (rounded) right now.
| Credit Card |
Balance |
Interest Rate |
Wasted Annually |
| Discover |
$6000 |
29% |
$1200 |
| Visa |
$4500 |
18% |
$450 |
| Mastercard |
$5000 |
15% |
$600 |
| Store Card |
$2500 |
24% |
$400 |
| Total |
|
|
$2650 |
So, I’m basically wasting over $200 per month for not having all my credit card balances right around 8-10%. Why do this? All it takes is sticking a reminder on your calendar every month to check your credit card interest rates. Or just look at it every time you get a statement.
I have a feeling I’m going to be contacting some credit card companies pretty soon. I’m about to get a nice tax return, and it’s going to be the perfect leverage during the phone calls I have with them. I’ll save that for another story though. 
So, check your interest rates and share your findings! How often do you check your rates? Any surprises? Am I the only one getting totally taken for everything I’ve got because I’m too relaxed on watching rates? Let me know.
Debtbeater