October 16, 2009
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Woe to Us 0% CC Freeriders, Pt.3
You've Got to Move.This article is a continuation from the credit card article before (Part 2). To review that article, simply press the hyperlink called "Previous...". This is the third scenario mentioned in that previous article:
3) Low FICO score: If you already know your FICO score is low, your only option is to pay that credit card off. Otherwise, expect the new interest rate to eat you alive.
<O> If you already have the balance saved up (like I always do), then find out for certain when your last credit card payment must be posted in order to avoid that first storm surge. Your whole back balance could be multiplied by your new, much-higher, interest rate. Make very certain you don't forget to make that credit card payment in time.
<O> If you don't have the money saved up, pay everything you can now: If you're having trouble now paying on the account, how much more trouble will you have when the first $40 of all your payments won't even count toward paying down the credit card balance.
Say you owe $3,000 on your credit card and just make the $100 minimum payment. Do you realize that this is costing you well over $1,000 each year for many years? My advice to you would be to pay $500 every month starting now. The absolute minimum you should pay is $200.
The banks rake in all their profits from those who only make the minimum they suggest. That is, until they break a person and lose the whole amount (charge-off). Starting right now, pay everything you can on that credit card, before the introductory low APR goes away. Sacrifice a few luxuries and pay everything you can now.
Don't expect that good-deal Balance Transfer to come along, it's not going to happen. You might as well play the gaming tables in Las Vegas (but please, don't). You won't be happy going bankrupt and still having to pay off the credit card.