Sunday, December 30, 2007

Tips and Tricks for the New Year

Hello all you credit-needy, credit-worthy, credit-hungry, credit-addicts!

I’d first like to take a moment to wish you all a very Happy and prosperous New Year!

With 2008 imminently approaching and all of those resolutions about getting out of credit card debt, losing weight, having more sex, and quitting smoking, I’d like to take a moment to share with you some expertise on how you can succeed with at least one of the above!

OK – since I’m skinny, married and I don’t smoke, I don’t know anything about the last three resolutions. I’m sorry, but I simply can’t offer any sound advice on any of those topics.

So, let’s concentrate on what I’m good at – getting out of credit card debt (or, at a minimum, reducing it drastically).

It all starts by looking in to your financial mirror so that you can evaluate your creditworthiness.

Are you a good credit risk, do you pay your bills on time, have you tapped less than 50% of your available credit?
If so, good for you. Here are some things you can (and should) do…

a. Call your credit card company and just ask for a lower interest rate.
Tell them you’re getting offers left and right for lower interest (even if you’re not) and that you’d prefer to stay with them since you’ve already got a long and healthy relationship. Don’t be surprised when they lower your rate 5% or more.

b. Take advantage of new credit card offers.
If you’re like me, you’re receiving a new credit card offer in the mail every 2.1 days. These offers ALWAYS come with a 0% APR on balance transfers for a minimum of 12 months. And, contrary to popular belief, if you’re credit score is good, applying for a new credit card won’t destroy your credit score – it’ll only knock it down a coupla’ points – no biggie if you’re already in good shape. Then, transfer your high rate balances to the new card and enjoy a minimum of 12 months free money! If you really want to screw with the credit card companies, don’t charge anything else on the card after you transfer your balance. Then, gloat in your new status as a “Credit Card Gamer”! Then, guess what – in 2009, you can do this all over again with another victim credit card company! It can be great fun beating those robber barrons at their own game. I’ve been doing it for years.

c. Take advantage of your balance transfer checks from your existing credit card companies. Card companies have to compete with each other (especially those offering you 0% APR on balance transfers), so they send out these balance transfer checks for 1.9%-4.9% to lure you to transfer your other debt to your account with their company. But, be warned – there is often a catch! Once you take advantage of one of these offers, you “agree” to pay off your low-interest balances before your high-interest balances. SO, guess what – you’re racking up all this extra interest on your pre-existing balances while paying off your balance transfer. One good way to get around this, if you have the means, is to pay off your existing balance BEFORE using your balance transfer check (see section “b” above). Then, activate your balance transfer check for anything like your heloc, car loans, or Vegas trip where you attempted to satisfy resolution #3. But, if you do this, you MUST follow the next rule which, simply put, is to cut up your credit card for this account. In other words, don’t charge ANYTHING else on this account while you’re paying off your transferred balance. I did this with my car loan and went from paying $250 a month in interest to paying $45 a month. There’s one more thing to remember here – again very important. DON’T EVER MISS OR BE LATE ON A PAYMENT. You’ll kiss your pretty little interest rate away and be slammed with a 25%+ rate hike plus late fees. It’ll get ugly quick. But, hey, if you get an offer like this, it means you’re responsible already and don’t need to worry about anything.

If you’re creditworthiness is non-existent, then I’m sorry to say the only thing you’re receiving in your mailbox are collection notices and other threats from loan-sharks or guys named Vinny. In this case, buy some Suze Orman books and get your financial house in order. There’s no excuse for your pathetic state (unless of course you’re a single mother of five working for tips at a diner or strip club – in which case, you need to resolve to have LESS sex so that you don’t have any more rugrats, ‘cuz they’re expensive).

Here are some steps you need to follow (and, yes, you’ve heard them before)…

a. Make your credit cards very difficult to use. Cut them up. If you can’t afford a pair of scissors, put them in a bag, fill the bag with water and stick it in a freezer. This works, believe it or not. Then, in case of emergency, defrost and the card will still work (just dry it off first).

b. Redirect your spending. Odds are, you have a lot of monthly drains to your income – Cable TV, broadband internet, cell phones, netflix/bockbuster – you CAN do without any of these, especially since you’ll be spending all of your newfound time reading Suze Orman books. Then, consider the money you’re spending on takeout pizza and other fast food. They make these things called Ramen noodles, and you can buy like 7 of them for a dollar. And, pasta’s cheap – so get creative and you can easily cut $100 or more a month off your food/dining bill.

c. Consolidate your debt and pay down your balances. If you have several credit cards that are causing you intestinal unrest, try to get all of your balances transferred to a single card (the one with the lowest rate, dummy). Then, take all of your newfound funds from “b” above and start chipping away at your balances.

d. Suck it up. Get used to your situation, and live the life of a broke person for a while. Be happy with your beater apartment and beater car. And if you can save some money by downgrading from your Saturn to a Kia, then do it. It’s only temporary. Resist any and all urges to open new credit cards – especially those at the big retailers like Target, Best Buy, Macy’s, Circuit City, etc. These are called “Private Label” cards, and they’re the equivalent to voluntary sodomy. Their interest rates are usually 50%+ more than what your typical Visa/MC/Amex/Discover will charge you. But you already know that you’re not allowed to open any more cards, right? After all, you’re digging yourself out of the hole you jumped into.

So, whether you’re already a credit champ or your FICO looks like it lost a fight with Mike Tyson, the advice above will surely put more money in your pocket in 2008. The last piece of advice is to bookmark this blog, check in daily and enjoy your newfound resource for credit advice, tips and user stories.



Anonymous said...

Good Grief!!

That's too much to look at let alone do. I'd need a personal assistant to go through the same thing on my "6" cards. isn't there a website that would do that for me? I'd sign up, like yesterday!

Seriously, that would be a great service, so I'd know what I've got, I can get the discounts & deals I forgot about. Someone's got to be doing it, anyone got a URL

S. Hardican said...

There's definitely a lot of great info in this blog and I will be putting some of the techniques to good use. I still think I might just avoid the issues as much as possible and just stay away from credit cards all together. If I don't have the money for it, I can wait. It's worked okay to this point. Thanks for all of the great pointers!