We are currently working on paying off our credit cards, and we had them sitting in 0% interest credit card accounts while we worked on paying them off. They are nearing the end of their 0% introductory rate for balance transfers, so we needed to apply for some more 0% interest rate offers to transfer the balances to the new cards. This is a very effective and legal way to never pay interest on a credit card balance if your only intention is to pay it off quickly. One thing that you need to watch out for is balance transfer fees. Credit card companies started getting smart about people who hopped from one 0% card to another, so they threw in the fee that charges you one time of usually 3% of the balance being transferred over. We found a Bank of America card that did not have any balance transfer fees and 0% until May of 2008.
My wife called and applied for the card, and within minutes, she had a $10,000 credit limit for the card! The first thing that came to my mind was that she must have a GREAT credit score (which, I really don’t obsess over the credit score like some people do), and the second thing that came to my mind was how EASY it is to receive a huge credit limit nowadays. I remember the days when credit card companies use to extend $500 to $1000 just to test the waters with you as a customer. They could care less how much credit they extend to you! Some people might think this is a very powerful thing. Being able to receive a ton of credit at the mercy of one phone call might excite some people. I know there are those of you out there that talk about how you make money off of credit cards by getting the 0% interest cards, maxing them out with a cash advance, and investing the money into a high interest savings account. I think this is silly. Even if you can get $100,000 in credit extended to you, you’re only making $5,000 per year and taking on a LOAD of risk along with it. This doesn’t excite me, it scares me. It is no wonder why so many people fall into the trap of revolving credit card debt. It is so tempting to take that $10,000 and go on a shopping spree. I need some new clothes, I need a plasma TV, I need new rims on my car, but then you get the bill and you realize you can’t pay that money off in a month, much less 6 months! There will never be a way to regulate credit card companies by limiting who they can extend credit to, and that is why we need to exercise personal responsibility.
Personal responsibility is the root of winning with money and becoming wealthy. Disciplined individuals become wealthy at a younger age than those that “live it up” in their early years. Sure, you may have done some great things in your 20’s and 30’s, but now that you’re 50, you can’t find enough money to go on vacation or you’ll be working until 82 before you retire.
Do you think the ability to acquire such massive amounts of credit in a matter of seconds is a good thing or a bad thing? Please explain your opinion. My stance is that it’s a bad thing, but we can’t blame it on the credit card companies. We need to blame it on our inability to resist the temptation of going wild with credit. That is why I decided to stay away from it all together. I can’t control it, so like any other addiction, I just have to cut it off altogether. Maybe you have an addiction to spending, but you don’t realize it. Talk to a friend, see counseling, or discuss it with your spouse. Get an accountability partner that keeps up with you about your spending habits. You may be surprised at the results.