I HATE Credit Cards

So here’s the story.

Because of how the paycheck fell this month, I didn’t get my money until the 3rd of the month. It turns out that my credit card bill was due on the 3rd. It was payed automatically on the 4th. However, the 4th is still late and late it was. Even though it would have been impossible for me to pay it on time because of how the weekend fell this month.

I called up Bank of Americrap and explained the situation and they not-so-politely informed me that they would NOT take back the late charge. Also, they informed me that my minimum balance would be almost $600/month now (previously $300) and that my interest rate would go up to 27% (rather than 10%) ALL because the 1st was a Saturday and I payed my money automatically the day after I got paid instead of paying my payment before I had money. Explaining this – to two different people – made no difference.

They presented me with two options:

1) Pay the 27% interest for 6 months, at which time the account will be reviewed and they’ll lower me to 25%.

2) Close the account and put it into “financial hardship” – and pay 5% interest with a fixed payment over 5 years.

The obvious choice is to close the account, but I’ve very worried about the effect that this will have on my credit score. Losing that much credit to my name could have a pretty negative blow that could effect me for years to come but I can’t even afford the minimum payments that their new percentage rate comes attached with. And because I was over my limit in October of last year (remember my bad, bad spending habits before? And why this blog was started in the first place?) – they’re not changing their minds.

So I’m stuck. I just thought I was doing so good and that all this financial bullshit was going in the right direction. The idea of not having a credit card to fall back on scares the crap out of me – not that this card had enough available credit to even make a fuck of difference.

The other option of course is to do some fancy balance transfer business to get myself into another card or get myself a personal loan, but the idea of opening up more credit to fix this disaster sounds like an even worse option in the long run for me.

As another side point, I currently have enough miles on this card for a round trip ticket to lots of places, and was hoping to save these miles up for a vacation with my sister. If I put the card in “financial hardship” then I forfeit those miles. Not that that should be a defining thing, but it does weigh on my decision.

So I have to ask you guys: What would you do?

I hate the fact that I’m even in this situation because of how stupid their rules are and the fact that I had the payment automatically set up. It wasn’t like I was intentionally paying late or ignoring my bill – I paid it the same way I have done every month for nearly 4 years – and just THIS time there is an issue because of how the paycheck fell. *sigh*

I would really like some insight and advice here. What should I do?!

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18 Responses to I HATE Credit Cards

  1. Wait a second. Because you were late on one payment they increased your interest from 10% to 27%? That just doesn’t seem right. I know you’ve discussed this with many people at BoA, but surely there has to be something someone can do…. perhaps go in person to the bank and explain it? Have you read all the fine print and confirmed that this is the standard procedure?

    If this is the situation though, I would probably go with option 2. :-/ What would the monthly payment be on for 5 years? I know credit score is really important, but there are other ways that you can account for that including renting and paying other bills on time.

    After all of this is worked out, you may want to pause your intensity on the debt payment until you’ve got more savings to give you some more stability since you are without a credit card. It may be difficult not to have a credit card as a back-up, but maybe it will be better in the long run not to have that temptation.

    Oh man, I am so sorry about all this. 😦 Let us know what happens.

    • SS4BC says:

      That is a great suggestion on the debt payback intensity. I’m sure that this is eventually the route I’ll have to take because there is NO WAY that I can pay down the debt with a 27% interest rate. So that being the case, I’ll definitely need more than just a $1,200 emergency fund. Perhaps $3-5,000 just to feel comfortable.

      I am curious as to whether the debt repayment plan gives any benefit to paying the debt off early or if there is a penalty for paying off early (this just wouldn’t surprise me with BofA).

  2. Jessie says:

    Wow, this sounds like an absolutely brutal situation!! I am so sorry to hear this happened.

    I agree with MPP, I wonder if there are any other bank reps that you could speak with.

    I would also be curious how much the difference is between the five year repayment plan and the ridiculous interest plan.

    In the interest of your credit score, I wonder if you could come up with a repayment plan with the bank that didn’t involve them reporting it to any bureaus?

    I’m so sorry you have to go through this….

  3. Holy shit dude! Yet another reason to be hating on the SKank of America. =(

    I agree with MPP. 27% seems unreasonable as an increase for one late payment. Maybe you should talk with someone here?

    If the monthly payment on the “cancel the card” plan is not that much different than the 27% plan, maybe you should keep it open. If it’s drastically lower, I’d say kill the card. The miles are nice, but with the added interest you’d be paying you could buy the damn plane tickets outright.

    It is possible to live without credit cards on which to fall back. I’ve done it for years (until the last 9 months). Honestly, if this were me, and the 27% interest payment was not at all doable, I’d cancel the card, get on their plan, and put money in savings for the fall back position.

    It totally sucks though. And it’s just further proof that BofA sucks major ass.

    Hugs.

  4. TMcImmy says:

    Firstly, it SUCKS that you basically got screwed over by way of the calendar and accounting.

    Is Opting out an option?
    http://www.ehow.com/how_4551975_credit-card-interest-rate-increase.html

    27% APR is pretty much extortionate. Closing the account has probably been a long time coming. You’ve paid it off twice and run it up. It doesn’t really function as a cushion anymore considering how close you are to the limit. Of course, closing it could potentially damage your FICO score. But paying less interest and paying off your debt faster is probably more beneficial than the negative effect of closing an account.

  5. SS4BC says:

    @ All.

    Thanks for your advice. =)

    So I’ve talked to two different people so far at BofA and none of them are willing to budge on the interest issue. I’ve explained it now, thoroughly, to both of them and they seem pretty set on following the rules.

    While I have yet to test this theory, I’m assuming I’ll get the same answer from someone in a banking center (there aren’t any in the state I live in, FYI) or if I called back again.

    They DO allow one “grace” error before bumping you up to the 27% interest. And I “used” mine in October when my balance went above my limit for about 1 day (charged something I didn’t have credit for and paid it down the next day). So it is 2 strikes and I’m out – and there doesn’t seem to be any compromise – and from their point of view I don’t see why they SHOULD compromise.

    And I tried to explain to the guy on the phone that I WAS trying to get my financial house in order and that this month I had paid down all my other debt and this one was the one I was going to tackle next if only I could keep my lowered interest rate – and he scoffed and said that my debt was obviously not going anywhere. That was really, really disheartening to hear from him, because I know how hard I have worked to make sure that my house is getting put into order.

    I mean, I guess I should kinda consider this a blessing in disguise because it will get the interest rate lower – but I have never had late payments before so it seems like this is such a harsh penalty to kill my credit score or make it near impossible to pay down the debt because of one stupid “late payment” that was sent in to the bank (via their payment system) on the due date. =(

  6. Jessie says:

    keep fighting!! have you spoken with any of these folks ‘management’ team ?

  7. As others have said, I hate these credit card companies and I’m sorry to hear about the situation you are in. A couple comments an suggestions.

    The “debt relief plan” offered by credit card companies, are simply a way to keep you paying. They do not reduce your debt, nor do they lower interest rates. They shut your card off, and allow you to continue to make payments. Some companies will stop over the limit and late fees. It has an impact on your credit and if you miss a payment, you are kicked out and back at square one.

    Their plan is this. Get a card into your hands. Give you high credit limits. Wait until you have enough debt, and then they start changing your billing cycle so they can catch you going late just by a day. They immediately lower your credit limit and jack up your interest rates. Most often this puts many consumers beyond their means to pay. Late fees and over the limit fees start up. Now they have you on the payment path they love. This is a big money maker for creditors.

    Just before you call it quits

    They offer the”debt relief program” to milk you a bit longer and see how much debt you can pay off. They hit you with the fear of “your credit will be ruined” if you don’t pay tactic. If you don’t use them, they refer you to credit counseling, who get paid by your creditors to collect from you.. a similar money maker for the creditors.

    Next after the debt relief program does not work a couple things happen. First they charge off your debt. This means they get to write down that defaulted debt amount against their earnings on their taxes. Then the debt gets sold to a collection company for about 40 cents on the dollar. In many cases they also have default insurance, so they can recoup some losses there as well. Credit card companies make a lot of money by ringing you through this process. And what is the whip they use to make this model successful? The credit score. Yes, that score created and used by the very bankers and insurance companies who are screwing you over. And what is that credit score used for? To allow you do do what? BORROW MORE MONEY!

    I know its hard, but you need to break out of the concept of using credit, loans and credit cards as a financial crutch. Yes, credit scores can impact you today, however in the long run we want to break the control credit scores have over many consumers. Use the Dave Ramsey approach. Address the debt, either with a pay down strategy, or if you cant pay the rent or keep the lights on, walk away from the debt. Then start saving anything you can each month to create an emergency fund so you do NOT have to rely on a credit card.

    Now, instead of your monthly credit card payment, pay yourself. Put that money into an investment account. Make it real. Project a date for when the money you have invested will pay for your BASIC expenses. This is the day you are financially independent. Not rich, but INDEPENDENT and secure.

    Once last note. NEVER user a pay day cash advance. They are the most certain path to bankruptcy you can take.

    Okay, lecture over.

    I do wish you the best.

    • SS4BC says:

      Jerry, I have to say that DOING the Dave Ramsey plan is exactly what I’ve been trying to do. I’ve been building up the E-fund, as of this month I had paid down ALL of my smaller credit, and now I was beginning to tackle the larger debt (this BofA credit card) when this happened.

      So, while I appreciate the focus of your comment, it isn’t helpful for the decision of what to do NOW, since the situation HAS been created while I was trying to DO exactly what you are telling me to do – yanno?

      I’m NOT creating new debt, nor have I done so since I started this new financial journey of mine. I’ve already started the journey to a credit-free existence – but that doesn’t mean that just because I’ve made the decision to do this that all my past credit problems magically disappear. They don’t. And THAT is what the problem is. With a 27% interest rate on this card I will NEVER be able to pay the debt down. Period. The minimum is more than I can afford. And because of that I HAVE to consider other payments options. I can’t put 40% of my salary every month just towards paying a MINIMUM fee that won’t get my card paid off for 30 years. Hence, not considering a lower payment plan like they’re offering is quite stupid of me. I mean really the Dave Ramsey plan only works when you can afford to pay over the minimum, which I COULD DO before they raised my interest rate 17% in one month, but now I cannot. Plan and simple. There is only so much my budget and stretch, and an addition of 17% interest is TOO FAR.

      Anyway, I’m not borrowing more money, I’m not creating new debt – I’m just trying to figure out how I can best repay what I owe in a way that fucks me up the least.

  8. SBCC – Sorry I had not read the history of your situation before I commented. My Bad. My comments related to your situation but were also meant to help a wider audience.

    You’re right, if you have little to no income then logically you can’t save or pay the debt off. If that is the case you may consider a more drastic and direct action, such as negotiating a settlement with the creditor on your own, or speaking with a bankruptcy attorney. This is not financial advice, just options, clearly details of your situation need to be communicated to a finance professional to make the best decision for you.

    Bottom line you may want to take the strong medicine now, eliminate the debt as fast as possible, deal with the consequences in terms of poor credit and no use of a credit card in for the next year, so you don’t have this lingering on keeping you from financial freedom for years to come.

    I wish you the best.

  9. If you are not late with your creditor and do not have a financial hardship negotiating a pay off will be fruitless.

    You should never go late intentionally, however if you happen to be more than 90 days late on your credit card bill you have the best opportunity to settle with B of A for about 40-50% of what you owe.

    Call for the negotiation around the 75th day of being past due.
    Be prepared to have your budget worked out.
    Be prepared to clearly articulate the logical reasons why you are unable to pay your bills. – Your hardship reason.
    Be prepared to be able to pay off a reduced amount in a reasonable time period.
    Negotiate to pay off the reduced balance over a 6 month period.

    When you settle a debt for less than what was owed your credit will be negatively impacted and your cards terminated.

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