Credit Card

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Step 1. Halt savings and eliminate credit card debt.

Okay, that’s the only step so far…

For years now, I’ve but making auto-tranfers to an online savings account four times per week. Overkill, right?

Well, two of the days are to cover for my property tax bill and homeowners insurance premimum (both of which I pay out-of-pocket instead of from an escrow account attached to my mortgage).

I’m not halting that as I’d hate to come up short when those rather large bills come due. It’d be financially crippling…

But I am halting the other two days worth of weekly tranfers which add up to $250. Each week. Or over $1000 per month.

Yeah — it was a pretty aggressive savings plan and it worked great until I started pulling cash out the other end…

So now I’ll have an “extra” $250 per week to throw at the credit card debt which should have a real noticable effect.

Current balance is: $4887.53

Game on.

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So it’s been 3 years since I last did this, which kinda disappoints me because I like constant and plentiful data…

Bank of America Business MasterCard
Limit: $26580 | Rate: 9.99% | Account Opened in 2005
This is the credit card that I use for all of my business related purchases. For a long time my personal spending and business spending all came from the same pool but obtaining this credit card put an end to that. My income is all still flowing into one pool but my expenses are clearly divided.

Bank of America MasterCard
Limit: $14000 | Rate: 12.99% | Account Opened in 1997
I have no clue where this credit card is. Physically, it’s probably in the still un-opened envelope it arrived in buried in one of my big “piles of stuff”. As such, as I became quite certain that it was slated to be my next plastic casualty due to lack of use (where the account would close automatically), so I recently used one of those convenient checks — which I still receive in the mail on a near weekly basis — to show some “activity” and keep the line open.

A little bit of credit card advice — don’t let your accounts evaporate.

Citi AT&T Universal Rewards World MasterCard
Limit: $12500 | Rate: 17.99% | Account Opened in 2007
This is the card that I use for day-to-day purchases when I don’t have cash in my back pocket. The ony reason it’s the card on top is because it offers the best rewards — rewards I haven’t taken advantage of for years now cause they tend to be, well, less than exciting

Slate from Chase VISA
Limit: $19200 | Rate: 18.24% | Account Opened in 1998
I have a sticker on the front and back of this card that says “GAS ONLY”. It’s not a gas card — just a regular old credit card — but I did that to shame myself from using it for any other purchases. I’m pretty disciplined anyway but this really keeps me from running up multiple (and un-payable) balances.

You’d also think that 15 years of loyal use (and on-time payments) would be rewarded with a more competitive rate. Clearly, that isn’t how they operate. My oldest card is also my worst.

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It’s funny to me that my current line-up is predominently MasterCard.

For reasons unknown, possibly because it’s what my parents usually carried, when I think of a credit card, VISA is what comes to mind first.

I know I had at least one, and possibly five or six, VISA cards in the past but they’ve all apparently now fallen victim to various bank mergers and automatic account closures due to inactivity.

Hmmmm… Might be time to seek out a VISA card with CapitalOne…

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Here’s the recap of past roll calls:

» Jun 2007 : Limit = $98500, Balance = $13026
» Jan 2008 : Limit = $108400, Balance = $8125
» Apr 2008 : Limit = $110820, Balance = $0
» Dec 2008 : Limit = $111820, Balance = $0
» May 2009 : Limit = $98420, Balance = $0
» Apr 2010 : Limit = $69320, Balance = $0
» May 2013 : Limit = $72280, Balance = $0

Looks like an upswing!

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I’ve seen a couple of articles over the past couple of weeks on this topic. Essentially they’re just fluff pieces filling space in the business pages but everyone likes fluff pieces…

Anyway, I live in Connecticut so I’m going to focus my attention there.

Huffington Post – January 22, 2012
Credit Card Debt: $7,730 (3rd highest)
Median Household Income:$64,032 (4th highest)
Average Credit Score: 672 (9th highest)
Cost of Living: 4th highest

Connecticut is often recognized as one of the country’s wealthiest states. This is a well-earned reputation. The state has the fourth-highest median household income. The cost of living is also higher than that in all but three states. Residents, therefore, spend more than those in most other states. Average credit card debt is the third highest in the country, but not surprising, their credit scores are also high.

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Hartford Courant — February 2, 2012

Classic example of how you can make numbers say whatever you want them to.

Niether article really listed how they came to these values but I think it’s funny that the largest newspaper in Connecticut came to the conclusion that we’re number one while the Huffington Post (with a more national audience) only put us in third.

All of that aside, where do I stack up?

My current credit card debt totals $6635. Lower than either stat above.

Less than a year ago, it was $28165 which far exceeds them both.

So since I’ve been on both sides, above and below, I think I’m equipped to have a knowledgeable opinion.

Well, not surprisingly, I do.

The Huffington Post puts Connecticut in third place in the nation with an average debt balance of “just” $7730.

No freakin’ way.

First off, I don’t think $7730 is nearly high enough to be third in the country. No way.

How many women between the ages of 18 and 45 do you see walking around with $400 Coach purses with matching $250 rubber boots? They’re all over the place around here.

I don’t have a problem with it (the boots are pretty fugly, though) but I don’t have the income to justify spending that kind of coin on some ugly accessories.

As our household income is considerably higher than the stat listed, I’d pretty comfortable saying that 80% of those Coach accessories were purchased with a Visa, Mastercard, or, heaven forbid, a Discover Card.

And that’s just the tip of the iceberg, I mean, we’re just talkin’ purses and boots here… and, for the guys, I’m pretty sure it’s not cheap to pimp out a Subaru either…

So I’d say the average 24-30 year old in Connecticut is carrying a 5-figure credit card balance. Easily.

And a $20k auto loan too… with an income well shy of $64k per year.

So… I’d say the Hartford Courant’s $15k number is more accurate — but probably not high enough to rank number one.

I mean, Connecticut isn’t New York or California… We’re third.

But combine the two articles and I think you’ve got the accurate result!

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Having done this a few times now, I’ve learned that it’s not so much about how large a balance you’re carrying but how able you are to make constant and consistent payments while keeping the credit cards in your wallet.

Here are the three puzzle pieces that determine success or failure: Payments Made, Interest Charged, and Purchases Made.

The total balance doesn’t matter one bit. $20 in the hole or $200k in the red, it doesn’t matter.

In hockey terms, it’s a lot like a player’s plus/minus rating.

For those that don’t follow ice hockey, the +/- is a statistic that doesn’t take into account how many goals a player has scored. If you’re on the ice when your team scores a goal, whether or not you’ve influenced the play at all, you get a plus one. If you happen to be on the ice when the opponent scores a goal, you get a minus one. Pretty simple, huh?

Well, sometimes the most valuable player on a team is the guy with the fewest points. Some players are just “good luck charms” for those around them and the +/- rating is what showcases an otherwise un-noticed talent.

Brad McCrimmon, who sadly died in that hockey team plane crash a few months ago, has always been the “stud” of this statistic.

He was a defenseman who never once scored more than 13 goals in an entire season. Thirteen goals isn’t very many.

Casual fans thought of him as a, well, just a generic and totally replaceable player. I know I was never “excited” to see him on the ice — really, just a boring player among the likes of an offensive lineman in football or the guy who bats eighth in baseball.

Simply put, no one was chanting his name.

But when you took into account the +/- statistic, well, he was second to none. It became crystal clear that his team scored often and the opponent pretty much never scored while he was on the ice.

So, even though he wasn’t on the score sheet very often, he was, in a technical sort of way, the best player on the team. By far.

Back to finances…

So, first and foremost, my payments for the month (goals for) must exceed the sum of my expenses and the finance charges (goals against).

It’s really that easy.

I don’t even need to address the total balance — as long as the above holds true, I’ll always be headed in the right direction.

Duh?

I know, this isn’t rocket science but so many people somehow manage to lose track of how simple it all is…

So far, in January, I’ve charged $399.06 and I’ve submitted $1473.95 worth of payments. There have been no finance charges as of yet.

That means that my plus/minus rating is plus $1074.89.
And we’re less than halfway through the month…

Winning!

(I know, I know, I’m 6 months late with the Charlie Sheen references…)

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Mixed in among all of the inserts that always come with my Citi statement and bill was this nifty little flyer.

Talk about spin… I mean, they’re trying to imply that they’re meeting my “borrowing needs” better than ever before by raising the minimum monthly payment.

Say what?

This reminds me of how owners of Sony Trinitron televisions and monitors in the 1990’s would brag about how they’re screens were actually better than anything else on the market when, clearly, they weren’t. They had a MAJOR flaw. A visible one?!

I fell victim to it.

Anyway, none of this really matters since I don’t carry a balance with Citi.

I just thought it was hilarious that they tried to spin a rate increase as a feature for the consumer.

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How come people use the phrase “quarter of a million dollars” but you pretty much never hear anyone say, “quarter of a hundred thousand?”

Well, that’s how much credit card debt I had just a couple of months ago.

A quarter of $100k.

Yep, I said it.

A few weeks from now, I’ll have pared that down to a 4-figure number.

I’m not there just yet.

I’m just sayin’…

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Springfield Punx version of BatmanFor me, it’s to go with my first instinct and to do it quickly.

Right now, my top priority is my credit card debt.

I’ve got a lot of it again and it’s weighing me down.

Anyway, a long overdue invoice came in on Friday.

As it was for something I billed back in October of 2010, I wasn’t really counting on ever receiving payment anymore but since it was a $6k bill, well, I hadn’t forgotton about it either.

My first reaction to seeing the check was, “Wow — I can’t believe they actually paid… FINALLY.”

And then I started to think about how perhaps I’d just sold those I-Bonds for nothing.

But then I thought about how much of a dent I could put in my credit card balances on top of all of the money from the I-bond sell-off.

Holy 5-figures, Batman!

But I did nothing.

Instead, I sat around and waited for Hurricane Irene to arrive… and started to think about all to cool stuff I could afford to buy…

And just as I was about to buy something stupid online this afternoon, I kicked it into reverse and instead scheduled a $6000 credit card payment for tomorrow.

Woo-hoo!

It only took an entire year but, finally, this afternoon, I submitted the paperwork to stop contributing to my 401k.

No, no, it’s not due to the recent ups-and-downs on the market and any sort of economic uncertainly.

And I know that I’m not following my own advice by making this move.

But you know what?

I’ve got more credit card debt than I’m comfortable with and I’ve been dancing around that fact for too long.

Fourteen months ago it was a zero balance. Since then, I’d been tap dancing around $25k — and now the finance charges are starting to kick in.

My first manoeuvre was to sell the I-Bonds.

Hitting the pause button on the 401k is the second.

My debts will most certainly fall now.

They’d better.

Can You Dig It?

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