Examine Your Credit Card Interest Rates Often
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
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| Photo by oberazzi |
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
February 7th, 2008 at 7:32 am
Mr. D, why settle for 8 -10%? You can transfer balances over to ZERO percent interest rate cards. That’s what I’m planning to do very soon, using one of the offers from this site:
http://www.direct-credit-card.com/categories/balance_transfer_credit_cards
Typically they expect you to pay 3% of your balance transfer, capping the fee at $75 or $100. One of the cards there extends the 0% interest for 12 months.
I figure it is going to cost me $200 to transfer over my two credit cards to one 0% interest card, but since I’m putting out about $130 in interest each month, that initial $200 investment will pay for itself within 2 months.
February 7th, 2008 at 8:07 am
You know, I did that a couple years ago and even though I saved money on interest, I just ended up with more credit cards and an overall credit card debt that was much higher than we started with.
I’ve considered doing it again, but if I do it won’t be with 5 different card issuers all giving me piddly little $1500 and $2000 limits. I’m wanting to scour through my current card list and give them the option of being my one single card for the next year or so while I start closing down some of the others. (Keeping my oldest card still open for FICO scores and overdraft protection.)
If none of them are willing to play, I may consider playing the credit card transfer game again.
February 7th, 2008 at 8:13 am
Ah yes, the sneaky “changes in terms and conditions” pamphlet. That happened with one of my Chase cards (yes, I had two). I noticed that my minimum balance had dramatically increased, and when I looked, my interest rate had ballooned about 10 percentage points. And for no reason on my part. I immediately transfered the balance to another card that had a low fixed rate and even was able to enjoy an even lower promotional introductory rate for several months.
I never could figure out how or why that other interest rate had changed without my knowledge, but then about five months ago, I received another little pamphlet from Chase regarding the other card. And yes, buried in the fine print was a notice about the upcoming change in the rate — another significant jump. If I didn’t agree to the new terms, I had to jump through their stated hoops within a fairly short time period to inform them that I absolutely did not agree to the new terms. In return, my rate would remain the same, BUT my account would be closed and I wouldn’t be able to use the card again. Yeah? So what! I wasn’t using that card anymore anyway.
What burns me is that they send these little pamphlets in what looks like junk mail, making it easy to overlook and even throw away.
February 7th, 2008 at 3:46 pm
Have you looked at using mint (http://www.mint.com) to keep tabs on your credit cards? It keeps the interest rate at the forefront so you *know* what the rate is on your card. Also provides you with offers for Credit Cards with better interest rates. Pretty useful. I don’t like using it for it’s intended purpose (spending tracking) becase I do that using a spreadsheet,but I do like how you can pull up charts at a moments notice with it.
I’m pulling for you man! Debt sucks, from one IT guy to the other, I know you can pull through!
February 12th, 2008 at 7:39 am
[…] Beater says that you should examine your credit card interest rates often. I suggest not getting credit card debt […]
February 12th, 2008 at 8:01 pm
@veronica - Well, I got another one of those little pamphlets today. It made me think of your comment.
I really hate credit card companies at this point.
@Zach - I saw mint when it was first launched and it looked interesting. I’m weary of some database somewhere having all of my financial information even though I’m familiar enough with web security to know that it’s probably OK anyway. I’d almost rather write my own tool to go look up my rates for me and report back any differences, but alas…I think I’ll just make a habit of checking them on every statement as I pay them since it’s the path of least resistance.
February 21st, 2008 at 10:51 am
I keep a spreadsheet with details about all of my current debts. I include the APR and credit limit on this sheet in addition to the balance, due date, etc. Every month I review what the APR is so I know how much things have changed. Unfortunately, I’m one of those folks who is currently being screwed by Bank of America and HSBC by getting my APR raised for no apparent reason.