I love credit cards – I get to borrow money from the credit
card companies at 0% for a month, I’m set up with a convenient way to track my
spending online, and for two years I have been establishing a credit score that
will enable me to pay a lower mortgage rate if I buy a home, or have an easier
time being approved as a tenant. I
pay my balance in full every month, so pay no interest, have no yearly fees,
and stick to cash-back rewards, which so far have totaled several hundred
dollars. My experience with credit
cards has been entirely positive (picture a montage of me running through the
grass and twirling around with my credit cards in the air).
Still, I never forget that credit card companies are
businesses – they not only have a terrifying amount of information about my
spending habits, but are also trying to suck as much money out of me while maintaining
the relationship so they can continue to drain me for as long as possible, much
like a parasitic partner. I
instead keep the relationship casual, hit it and quit it, and don’t let things
get complicated, or allow the companies to have leverage on me. (Just to be clear, despite my terrible
relationship analogies, I don’t actually hate all relationships or my
boyfriend.)
I’m sure you’ve all read an article or story describing just
how crazy expensive paying interest can be. Take a 30-year fixed mortgage on a 200K house – paying 6.5%
vs 9.5% in interest translates to 255K vs 405K paid in interest over the next
30 years. Yes, this is crazy, and
you should absolutely put 20+% down, and pay down the principal faster or
consider a 15-year mortgage if buying a house (and have a good credit score so
you can get the lower mortgage rate).
So of course the reason credit card companies (aka shifty mother-f*ckers)
are happy to lend you money, is because they’re raking in the dough due to your
interest payment on the balance you carry month-to-month.
Even assuming a really conservative 10% interest rate on a
credit card, paying off your balance in full vs not doing so is effectively a
guaranteed 10% return. Do you hear
me? If this is not shocking,
please tell me where you are getting such guaranteed returns elsewhere (and I
will show you a Ponzi scheme). This
is so clear, yet there are so many people letting credit card companies get the
best of them. We humans are so
infuriating but also so fascinating. Logic dictates that if you have balances
on say, 3 credit cards, you reduce debt more effectively by paying off the one
with highest interest first. Yet
Dave Ramsey’s famous for his Snowball method – pay off the one with the lowest
balance first instead, and you’ll more quickly get the boost of satisfaction
from kicking your debt in the gonads, and it will be easier to move on to your
next-highest balance card, with the goal of eliminating all debt.
I spent a typical Saturday morning eating salami, reading
about celebrities, and trying to understand how Chase’s BluePrint program
works. NBD – the tennis courts are
wet, else I might have been doing something more active (maybe). Anyway, instead of rewards like points
or perks, certain cards of theirs have lower interest and allow you to target
specific types of transactions to pay off in full, while continuing to pay the
minimum balance/some amount on the rest, and continuing to pay out interest to
Chase. According to the
commercials I’ve seen, this is AWESOME, because people can now make a PLAN,
which is IMPORTANT when you’re having TRIPLETS. I feel like this is actually a complete hoax, designed to
make people feel good about selectively paying down purchases, which continuing
to pay lots and lots of interest. Well
played, Chase, well played. You’ve
convinced people that you’re helping them out, and in return they’ll continue
to pay interest. Who knows – maybe
they’ll actually carry larger balances and pay more interest than before,
bolstered by their satisfaction at paying off that one big item.
Bottom line – if you’re paying interest, the credit card
companies are winning. And don’t
you want to be a winner? Anyone
else feel that Chase’s BluePrint program is hella sketchy? Do you make credit cards work for you,
or do you resist the lure of plastic?
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