Sunday, June 26, 2011

Credit Cards, Car Loans, & Mortgages, Oh My! Part 1

Credit Cards, Car Loans, & Mortgages, Oh My! Part 1

By Keith Bunn Jr.
June 26, 2011

Credit cards, car loans, and mortgages have been pretty much the standard in this country for decades now. We all know this and we’ve all probably either had or still have one or more of them, myself included. So I thought it would be a good idea to go over these topics. Let’s start with credit cards.
We’ve all seen the TV shows or movies where there is some thug type guy who loans some money to another guy who’s down on his luck at an outrageous interest rate. It is an illegal activity called Loan sharking and if you don’t pay it back when you’re supposed to, the thug makes the other guy’s life... you get the point. Sound familiar?
Credit card companies lure people in with talk like, low interest rates, cash back, convenience, and airline miles. The truth is, credit card companies feed off this country’s lack of patients. Offering the idea of living a better life than they’re living now with a swipe of a card. That sounds good until you have to pay that money back. That’s when that low interest rate gets jacked up to 30% or more. I know some of you are saying, “I pay mine on time each month, I don’t pay the interest.”  Did you know that some credit card companies have been known to hold your payment a day or two past the due date or even shred payments and say they never received it? Then you have to deal with the idiots in a cubical 500 miles away and argue with them that you paid your bill on time.

Cash back…

I just looked up online what the Discover® card has for rewards, for the month of June, you will earn 5% cash back bonus on up to $200 in purchases at the grocery stores and drug stores. Now that sounds fair. You pay the $200 plus 30% and they pay you 5% in Bonuses. Now if my math is right, you give them $260 and they give you back $10 ($200 x 30% = $60) ($200 x 5% = $10). Sounds pretty fair to me (he says sarcastically).


I’m not saying that it’s not convenient to pay with plastic. What I am saying is, that there maybe another way of paying with plastic that doesn’t involve debt. Instead of using a credit card, try using a debit card. You have the exact same protection, security wise, as you do with a credit card if you use the debit card as credit. Look it up. There is nothing you can’t buy or rent with a credit card that you can’t buy or rent with a debit card.
But remember this, A Dunn and Bradstreet study proved that people who spend with plastic (even the responsible ones), spend 12% - 18% more on purchases. Those same people will spend 37% more for fast food and 78% more at the vending machines. In another study done by M.I.T. proved that when people spend with cash, it hurts and registers psychologically. That pain is reduced somewhat when paying with a debit card and is reduced even more when spending with a credit card.

Airline miles/rewards…

Now again, I’m not saying that people are not getting their airline miles or rewards. I know some people who are getting them. I also know that it has been extremely hard for others. This is what I want you to think about or even track. I want you to figure out how much you’re spending on your credit cards compared to what you maybe getting in free or discounted airline tickets or rewards. I can bet that whatever you’re spending on those cards of yours, fees or no fees, interest or no interest, would more than pay for whatever you maybe getting from those companies.

Here are some credit card statistics…

·        Overall, the households in the U.S. spend over $412 BILLION in credit card charges each year.
·        Credit card interest is often raised when cardholders take out new loans, like mortgages, car loans, and other kinds of credit accounts.
·        The average credit card debt per household has gone up about 167% in the past 17 years.

“CREDIT CARD REFORM LAW WON'T SAVE STUPID FROM DEBT.” - Headline of the Day from the NY Post, Sept. 2010 –

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