What Credit Crunch?

28 02 2008

I got my first credit card when I was 19. It was a Citi American AAdvantage card. As I got older I slowly accumulated more credit cards, and by the time I graduated college I had 5, all with Citi, all with rates between 15 and 20%.

Shortly after graduation, I financed our cross-country move, and had over $10,000 in credit card debt. I was paying more than the minimum monthly payment on all of my cards. It finally got to a point where I was sick of having this debt hanging over my head, so I took what I consider to be a drastic measure. I cashed out of AAPL and paid off all my and all of Mary’s credit card debt.

Now that our only debt is a car (that we overpay on, and put a huge down payment on), we no longer have high interest debt hanging over our heads. We have diligently been using only two credit cards that we pay off every month and it is amazing!

With the “credit crunch” going on, I have heard stories of people’s interest rate on their credit cards going up, and people not qualifying for loans. I’ve heard that it’s much harder to get financing and even harder to get credit cards. But I have to say that I have felt the opposite of this. It’s not because I’m searching for loans (we locked in a mortgage before the mortgage crisis), or because I’m borrowing tons of money; it’s because credit card companies are sharks!

I completely understand why it is so hard for some people to stay out of debt once they get out. Not a month has gone by since we got out of credit card debt that I have not received at least two credit card incentives in the mail. (I understand that this is partially my fault for not closing the accounts, but by leaving them open it can help my credit score for when we close on the house.) The wording of the incentives I receive is along the lines of “use these low interest rate checks to pay bills, pay off debt, or just to deposit in your account!”

I know that these incentives are usual for credit card companies to send out, I got them when I was in debt, and I expected to continue receiving them. However, now that I don’t have the debt, the volume of these incentives has increased. When I was in debt I would receive one per month for one account in particular. Now that I’m out of debt with them I am receiving them for all of my accounts.

I have to admit, I’ve been tempted by these checks. “0% for 6 months! I can pay it all back by then,” I say to myself, but then I think about it, tear it up and feel much better.

I encourage all of you to do the same. If you have or have had problems with credit card debt, there are many ways to approach it, but remember, never use any of these incentives that are solicited to you. If you absolutely need it, you should call and get it on your own. The most effective way, however, is to cut up your credit cards, and close the accounts once they are paid off.

Advertisements

Actions

Information

3 responses

28 02 2008
joetaxpayerblog

Careful. In September I wrote about my own zero interest experience and remarked on FICO scoring at http://www.blog.joetaxpayer.com/archives/46 . Canceling cards can actually lower your credit score, and for the poor SOB who is borderline, can turn into a nightmarish spiral. Lower score can cause higher interest on the remaining cards. Not the right way to go. See my link for more details on that issue.
JOE

29 02 2008
Ron

Adds up quick doesn’t it?
The credit card companies won’t stop sending solicitations. It’s how they make money! If you sign up for Lifelock or put a freeze on your credit accounts, you get less of them though.

9 03 2008
Sharon J

Before I got myself into the financial pickle that I’m in at the moment, like you I was forever receiving unsolicited offers of credit cards. The thing that got me most was that companies I already had cards with would send out there standard “You’ve been pre-approved…” letters for cards I was already using! A complete pointless waste of their time, my time and the planet’s natural resources!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




%d bloggers like this: