Tuesday, February 22, 2011

I Hate Credit Cards

   We've been making good progress on our primary resolution to pay down our debt. Both the wife and I have been stashing money whenever possible and paying as much as we can on the highest-interest debt first. I mentioned in This Time Of Year, we already paid the two credit cards with the highest interest (and lowest balances) and we are now attacking an account with a more significant balance.

   This past week we received a generous offer in the mail from said institution. The letter stated that they were introducing "a new way to get out of debt faster!" They offered us a $100 credit to "help you reduce your balance." All we have to do is get online, enter our personal invitation code, and sign up for the offer.

   Of course we checked it out. Effectively, the offer is this: if we agree to their terms we get a $100 credit in six months. What it appears they have done is divide our balance by six and round down, coming up with a monthly payment that will not quite pay off the balance at the end of six months. All we have to do is stop paying so much on the account and drag it out longer to get the $100 credit. In the meantime they make hundreds of dollars in interest and the card would still not be paid off, but this is a "faster way".

   In reading the FAQ for this program, there are all kinds of caveats to the offer. Any use of the account including automated transactions nullify the offer. All fees and charges associated with the account will still be charged. Basically, it's a deal formulated to look good to anyone who wants to pay off the card but is not good with financial math or details and get more money from them.

   I declined the offered and when asked why, I said this:

"Having recently made significant progress toward paying off this debt, this offer seems like a thinly veiled attempt to stretch the balance out and collect more interest. That interest will come to more than the $100 credit after six months.
I intend to be done doing business with [card name] much sooner than six months.
Thanks though."

   I hate credit cards.

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