Why I Spend so Much?
It's kind of surprising how you expect to spend no money on the house other than the closing cost on the Good Faith Estimate, but then later, once the house closes, the moving costs, the blinders... ugh, where did all that money go? all I can recall is buying some blinders for the house, and yet my monthly expenditure, aside from the mortgage payments and utilities, has gone up by at least $1000/month.
The Blog Entry
Anyway, I decided to try to take advantage of President Barack Obama's Credit Card reform. According to this article on creditcards.com, when the credit cards will receive your monthly payment, it will take the "minimum payment" and do as it please with it, and the remaining money in the payment will be required to go towards paying off the portion of the debt that has the highest interest!!
Let's say that I have a credit card that I've used to make "auto-payment" of about $500/month to utilities, phones, tv, and the likes. These auto-payments occur every month, and I have arranged for the credit card company to withdraw that exact amount from my bank account monthly. If I do not pay this amount on time, my interest rate is something like 12% APR charged monthly at 1% a month.
Now, I have also received an offer of $5000 12-months 0% APR Promo-check from the same credit card company.
Prior to this legislation, my monthly auto-payment to this credit card will go towards paying off the $5000 0% APR debt, and the $500 I spend every month will accumulate and charge interest until the $5000 is paid off. So the payment/balance looks like this for the first few months
| Month | 0% APR balance | 12% APR balance | Payment | Total Balance | Interest Charged this Month |
|---|---|---|---|---|---|
| 1 | $4500 | $500 | $500 | $5000 | 0 |
| 2 | $4000 | $1000 | $500 | $5000 | $500 *.01=$5 |
| 3 | $3500 | $1500 | $500 | $5000 | $1000 *.01=$10 |
| 4 | $3000 | $2000 | $500 | $5000 | $1500 *.01=$15 |
Today, under the new rule, the same charge/payment that I make monthly would produce a table like this:
| Month | 0% APR balance | 12% APR balance | Payment | Total Balance | Interest Charged this Month |
|---|---|---|---|---|---|
| 1 | $5000 | $500 | $500 | $5000 | 0 |
| 2 | $5000 | $500 | $500 | $5000 | 0 |
| 3 | $5000 | $500 | $500 | $5000 | 0 |
| 4 | $5000 | $500 | $500 | $5000 | 0 |
So that 0% apr promotional charge is a real 0% APR.
Now, I don't believe my eyes when I read this "policy update" from the bank. So I found the legislation. Here's a snippet of the relevant portion:
And here are some links to the text of the bill passed:here, here, and here. 111th Congress, H.R.627;
I guess even after researching into the bill and reading the text of it, I am still sceptical. Why has the Obama administration not spend any marketing money on the passage of this bill? It would surely stimulate the economy by making more people take advantage of the true 0% APR? There must be a catch that I haven't seen yet. I'll probably get slammed by a loss of job, bodily injuries, numerous car accidents and traffic tickets, tree falling on my house, etc, for taking advantage of this 0% APR. I mean it's happened before that some thing random and rare happens every single time I used one of these 0% APR checks to interrupt my monthly payment. It's almost like the efficient market is efficient in taking my money in super-natural ways.
But despite my misgivings about the free market, the whole credit card industry and Obama brand of hopus-believous, I have taken one of those checks on the credit card I describe above and cashed it.
Call me stupid.
Call me gullible.
But having hope is right? I hope it's right...
12% interest is worth the price for even 1% chance of discovering a change that we've hoped for and can believe in.
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