We’ve all heard the ads—such and such company is offering to help you lower your debt costs, sometimes even affecting the principal, if you go through debt consolidation with their company. They claim to know the inside of the credit business, and can negotiate deals. Are these things for real?
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When my wife and I finally decided that we had had enough of debt and we wanted out we decided to do a little debt consolidation. At the time, we had two credit card bills—one with two different balances fixed at 3.99% and 4.99% and one with a variable percent. We were getting deals for 0% cards all the time in the mail, so we decided to transfer all of our debt to one of those, and vow to pay it off before that started to accrue interest a year later.
That meant that the transfer fee was the last fee we paid, and we didn’t have to pay any more interest—that was definitely a blessing.
The nice thing about debt consolidation programs is that they stabilize the amount of interest you are paying. Interest payments can vary wildly between accounts and depend on the way you’ve made payments.
Have you ever sat back and thought about where the money comes from to pay you points, to give you cash back, etc.?
I always knew that credit companies made money on interest—because they’re betting that you won’t pay your card off each month. What I didn’t always know is that merchants pay a percentage of each and every sale in order to give you the option of using plastic.
I’m sorry, but I’m having a lot of trouble wondering why it’s a big deal that banks will be able to give out less credit. To me, this whole sub-prime mortgage crisis is something that we’ve brought on ourselves.
I’m actually one of the ones that has benefited from these risky loans. I did not have a standard down-payment of 20% when it came time to buy my house, so I got an FHA loan based on my income potential and that I could raise $4000 in closing costs.
So, this morning I was presented with a chance to go through some questions about my fiscal health. Getting out of debt was an extremely freeing experience that I recommend for everyone. Contrary to the image at the right, I received a 92% A from billsIQ for my financial health—but they reminded me of a few problem areas I still have.
This world is backwards. Everyone loves to talk about using OPM (other people’s money) to purchase things or to gain wealth. I just don’t get it. Mathematically I understand the advantages of leveraging debt, but math cannot be used to understand every situation. As emotional creatures we were not designed to function as walking calculators making every decision based solely on the numbers.
While math plays a role in our financial lives, there are far more powerful truths, like discipline for example. The thing is that most of us know mathematically what we should do with our finances, yet because of a lack of discipline we don’t do it. So, what then needs fixing - the math or the discipline? Read the rest of this page »
When we finally decided to get out of debt, we knew we needed to cut back on impulsive shopping. We needed to get to a place where we budgeted what we would spend so that we could make the credit card payments.
This was not a problem. The problem is that it’s hard to go from impulsively buying to planning to buy—sometimes years in advance.
One of the hardest things about easy credit is not spending money. Somewhere, lurking in the back of your mind is a voice that only speaks when they see something that they want and that you cannot afford. It tells you that there’s extra money in an account. It helps you justify going against your better judgment. And judging by just how much debt the average American carries it is very persuasive!
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