The Social Marginal

People often approach me to help them develop plans to pay off their debts, which I am always happy to provide (free of charge) as long as they’re completely honest with me about their finances.  Often after three to six months of the changed lifestyle often needed to payoff these debts, people tend to get discouraged and start to just consider alternatives to paying them off, including bankruptcy or just stop paying all together when they could continue, don’t let yourself fall into this discouragement.

Remember that you somehow got yourself into this debt (I’ve rode that boat before as well), and that in most cases, you can get yourself out it the good old fashioned way, paying it off in full according to the contract you agreed to.  It may be hard, but just look forward to the day when you have no irresponsible debt and your FICO score says so.  Having credit is good, utilizing the majority of that credit, well, not so good.  During this process, always keep a spreadsheet showing your active debts and record them incrimentally by the month, allowing you to look at it and see that progress is being made in the process; this will help you ‘keep the faith’.

Most of all, trust in yourself and your ability to do it.  You made a decision to pay off your irresponsible debt for a good reason.  If you really get trapped into a situation where the struggling is so extreme to pay the debt off in a reasonable period of time that you’re sacrificing neccessities in life (these don’t include Cable or Going out to Eat, etc), then please seek a financial advisor.  Note that I said financial advisor and not a debt consolidation/relief company, they are two very different things.

Good luck and keep the faith in finishing your journey to be rid of irresponsible debt, if you need motivation or informal advice on a situation, you can feel free to email me at cinder@socialmarginal.com or comment here for others to provide their input.

It’s an age-old adage, but one that is often forgotten in these days of instant credit and zero percent financing.  People on low salaries constantly running up bills that they can not afford to pay off and end up needing to be bailed out in one way or another in the end.  Before you read this brief excerpt, realize that I am no Ramseyite.  I don’t believe that one must strive to live without debt (though it is, of course, nice), what I do believe is that people should strive to live only with responsible debt.

Responsible debt is a hard thing to define, and something that, of course, differs from person to person, if there is a set formula for figuring it out then please feel free to comment and share it.  However, I loosely classify it as being able to pay off all your debt sans mortgage within a one-year period under normal circumstances and without the need to drain your emergency cash reserves, retirement, or standard savings.  Of course this means that you should always take advantage of products such as zero percent financing deals and the like that ultimately benefit you, as they are very often purely responsible debt if handled correctly.  Say you purchase a $4,000 television and they offer 12 months interest free.  Well, you can buy the television on their credit and then bank the $4,000 in a C.D. or whatever and then cash out the C.D., pay for the television and pocket the interest earned on the “holding” account.  That extra 3.4% or so that you can earn on that money over the year (or hopefully multiple years) adds up, just as long as you have a plan to pay off that debt before the promotion expires and you’re suddenly hit with all the retroactive financing charges.  Play the system, but play it responsibly. Read the fine print, ask questions, be sure you understand the terms of the deferred interest “0%” interest plan that is being talked-up to you. You must keep in mind that it is the goal of the seller to move his product and make as much money doing it as is possible.

Responsible debt requires responsible financial planning, and if you don’t have it, you can’t afford any debt.

As I posted yesterday, I’m in the process of paying off all my credit cards, especially the ones that Rate Jacked me for no reason at all.  Well Bank of America seems to have Rate Jacked over a million people with perfect payment histories for no reason at all.  I’m proud to say that the balance is now zero and they are now forever sock drawered. I also have an emergency checking account that I keep with them that I will be closing thanks to their rate jacking decision.

In other news, I’m working on an article about not spending more than you can afford (duh, huh?) but trying not to make it cliche and giving some good example and alternatives.  Look for it in the next couple days.  I also removed the AdSense ads as they’re pointless right now and they take away credibility as to why I’m writing at the moment.  (Not saying that ad money or referals are bad, you can shop via the Amazon link in the Blog Roll and earn me money to support the blog with your regular Amazon purchases, heh heh)

 Update 03-01-08:  I feel like a sell-out, but I wanted to keep the card open to decrease my total credit utilization.  I called Customer Support today and asked for a rate reduction since they rate jacked me without any real reason, other than a high utilization, and that they were just trying to profit from customers who actually had good payment records.  Last time I did this, when I had a balance, they just apologized and told me it was policy and they couldn’t lower my APR from what would soon be 27.99%  (Millions of people got jacked to these sort of rates effective in May).  This time however, explaining the situation and telling her that I wasn’t all too happy with BoA, and with a Zero balance on my card, the courteous Customer Service agent transfered me to Retention.  So I got there, told them “I don’t authorize any hard pulls” (also note that my credit report does not reflect any of the zero balance paydowns yet, they still show the high utilization across the board for the most part), and explained the whole story and asked for a lower APR.  He said “Let me see what I can offer you”, came back a couple minutes later, and told me that they could permanently decrease my APR to 12.99% ‘Fixed’ (which at least is an acceptable rate, but not one I would carry a balance on).  I immediately asked that if I ran up 90% utilization on the card and held it at that for a year or two, providing I always made payments, even minimums (worst case situation), if it would stay at that 12.99%.  He responded “Certainly”.  I’m almost tempted to try it, just to see if they were lying, but I don’t want to spend the money on interest doing so.

So, the moral of the story is that if you got Rate Jacked by BoA, whether or not you can pay to Zero balance (tell them that they’ll lose you, and your ongoing profit if you can’t, or that you’ll balance transfer, or something else), ask to get sent to Retentions and ask for a lower APR.  I’m guessing you might have a good chance at getting the Rate Jack that should have never happened reversed.  If you’re in this situation and able to try this, please do so and post a comment here with your results, I’d be very interested to hear them.

As I posted before, I have an addiction to credit (worst of all one that I can afford and that I can pay off and quit utilizing if I just buckled down and did it) and I’m finally putting an end to it.

Below is my account statement as of this morning with my Chase Credit Card.  After they purchased First USA, they rate jacked me to 24.99% for no reason other than high utilization (I had a high income, a perfect payment record, and always paid just a little over the minimum), I was basically their perfect customer, the one that made them the most money.  Too bad for them that I won’t be anymore.

Fortunately this is just one of many such posts in the near future.  That same day I sent off a check (decided to do it the old fashioned way instead of online like I always do) to Bank of America for a little over $6,000 for a card which they recently rate jacked me and over one and a half million other customers on.  Again, I had high utilization with a perfect credit and payment history on it, but they raised my rate to an outstanding 27.99% out of nowhere.  Hell, I even have an ‘emergency’ checking account with BoA (which I will be cashing out and closing soon) that has earned no interest for quite some time.  Of course, I also have a thirty year fixed mortage with Chase with a perfect payment history and that didn’t seem to effect their decision when it came to lowering my rate with them either.

After each of these rate jackings, I called the companies and asked about them, staying extremely calm and professional in my inquiries all the way through, and they both said that it was just part of a ’standard review’ and ‘due to my credit record (I check it almost daily using AMEX’s Credit Secure, it’s perfect, so it has to be the utilization) and that there was nothing they could do, have a nice day.  Well, fortunately, there is something I can do, and I’ve finally gotten around to doing to it, I’m paying them all to Zero.

While I am not overextended beyond my means, nor am I struggling to make payments beyond minimums, I can safely say that I am addicted to credit.  I have a little over $60,000 in credit card debt (I’ve decided, again, the pay it off and without sacrificing anything it should be gone in a year or two, but that’s not the point).  I have something like 80% utilization on my personal cards while having plenty of money in high yielding savings accounts and the stock market.  I know what I should do in this situation, I’m just too apathetic to do so and would rather just plug away at it until it’s gone, while continuing to also contribute to my savings, retirement, etc.

 This has happened before, and I paid it all off before.  Before and shortly after my divorce, I amassed approximately $65,000 in credit card debt.  After I got out of my self loathing state, I went ahead and decided to clean it up and within a year or so, by working extra contracting jobs and scrimping where need be (I made less at that time than I do now), I paid it all off in a little under a year.  It was a very liberating feeling.  I lived for awhile sans credit, not because I was an anti-credit zealot (Ramsey) or anything, but just because I didn’t need it.  And when I started charging again, I still didn’t need it, I just wanted stuff (which I didn’t need) before I could responsibly pay for it in full.  So the charging began, and five years or so later, here I am again deciding to pay it all over and clear it up.

I’ve never been late on a single payment to any creditor in my life, and I intend to continue that trend, and I’ve never had an issue getting a home loan or credit approval when I actually need it.  But I need to stop cycling these credit cards.  I’m not going to cut them up (because I *am* responsible in paying them and not spending or getting into debt for more than I can realistically afford to pay back, and I have some fixed 6.99% cards and such that I’d like to keep around for future emergencies), but I have sock drawered them all and stopped using everything except for a Chase Freedom card (for the rewards) and paying it in full every month.

 While I’m not in dire need and I’m not some credit sob story, hopefully I can make sure my plan sticks this time.  My main concern and reason for wanting to change this behavior is that if I have kids (it’s a possibility these days), I don’t want their parents to be teaching them bad credit usage habits.

 Oh well.  Upwards and onwards.  If you’re out there, feel free to comment and share about your credit addiction anonymously.