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Last year Americans charged up more than $400 billion on
their cards, according to RAM Research, a credit-card tracker.
That'd be just fine, if it weren't for the interest they
paid for the privilege. That $50 billion in finance charges
could have bought the inventory of 5,000 Jag dealerships.
Or a 2,000-season contract with Michael Jordan. Or Nike,
the company, with $34 billion to spare.
Instead, the only beneficiaries of this monumental sum were
the suspendered executives at the lending institutions who
probably used the money to buy more suspenders and some lovely
paperweights. (Take a moment to remove your cards from your
wallet, fan them across the kitchen table, and pay homage
to the marketing geniuses whose names are artfully hologrammed
on the front.) They've managed to peddle their services so
effectively that they have more than one billion cards in
circulation -- four for every man, woman, and child. On average,
these folks carry a $5,800 balance on their cards from month
to month, paying an average 18.3% in interest. That amounts
to $929.70 a year in interest payments. We're talking $929.70
that won't even get you a cheese pizza. Or pay for the phone
call to order it.
How do those guys do it? Simple, they bank on the fact that
the average everyday, red-blooded, consuming adult isn't
doing the math. After all, who in their right mind would
pay 18% interest on every purchase? And lenders keep you
by extending lines of credit, reducing minimum payment requirements,
and inching up the interest rate.
But you, Fool, are not average. You understand the golden
rules of plastic use -- pay off your cards every month, don't
spend what you don't have, budget for the big items and emergencies.
Still, debt happens. Especially around the holidays. So
herewith you'll find some tips on helping you get a handle
Some of the best advice on caring for and bearing plastic
comes from Fools on the message board. Tips From Fools contains
a sampling of their advice.
You can pay it down with determination and the good graces
of a few wealthy relatives.
We offer 9 Ways to Pay it Back.
Since this forum launched, Fools have put finger to keyboard
and sent Fribbles about the great plastic beast. We feature
a few here.
And finally, visit the credit card message board where you'll
find a no-holds-barred conversation on various issuers, the
rewards they offer, and the tactics they use to keep
you beholden to their money-making machines. — Dayana Yochim
Getting Out of Debt
Step 1: Pick the Best Offer
For the past several months we've been working feverishly
at Fool Labs™ to develop a scientifically sound method
for tracking the arrival of the single best credit card solicitation
with amenities unequaled by all others. We've modified the
experiment so that you, dear Fool, can do it at home:
Step 1: Save all the credit card offers that you receive
over the next two to three months. (This will probably require
a spare bedroom or at least a large portion of unused garage
and a fairly sturdy set of shelves.) After three weeks, if
you are an average red-blooded consumer, you should have
filled about four crates.
Step 2: Now, organize them by card issuer. Visa in this
pile, Mastercard in that pile, regional department stores
in another pile.
Step 3: Further divide them by platinum, gold, silver, bronze
and within those piles by interest rate (5.9%, 6.9%, 9.9%,
Step 4: Now take all the "absolutely LAST TIME you'll
receive THIS offer!!!" offers (random capitalization,
italics and over-punctuation is theirs) and put those in
a separate pile.
Step 5: You should now have one pile.
What you will have learned from this little exercise is
this: Offers trumpeting "0% Interest!" or "Free
Miles With Every Dollar You Charge!" are tempting. But
they are hardly rare. More than 1 billion solicitations are
mailed out each year. We're pretty sure a few of those have
been slipped into your mail slot.
And that "Absolutely LAST TIME you'll receive THIS
It is probably just the first of about 3,704 nearly identical solicitations
that are addressed to you.
The offers for credit weren't always so plentiful. Back
when bell bottoms and moon boots were big the first time
around, lenders extended credit only to the most stable of
customers -- those with pristine credit records who had never
fallen delinquent on payments. Then lenders got Wise. In
the '80s they jacked up their lending rates and
granted long lines of credit to the masses, figuring that the number
of people who would default on credit card payments would be nominal
compared to what they could make from interest and fees.
They figured right. There are more than one billion cards
in circulation -- four for every man, woman, and child --
with the average cardholder carrying a $5,800 balance from
month to month and paying 18.3% in interest to do so, as
we mentioned in our introduction.
We hope you take away one important lesson from this brief
preamble: Fools don't fall for just any credit card come-on.
They watch out for outrageous annual fees and low-interest
rate offers that last less than 6 months. Fools pore over
the fine print for restrictions on air miles and other rebate "deals." We
know it's only a matter of days before the right offer comes
along -- one with no annual fee and at least a 25-day grace
period. Surely one of those one billion mailers is right
Now, how to handle the Creditus Cardus Solicitationus flood.
— Dayana Yochim (TMF School)