December 15, 2002
CREDIT-CARD PINBALL ... WIZARD?
Yeah, I guess it can be worth it, but I sure hate the hassle.
If you can grab a minute, read this article by Susan Tompor of The Miami Herald. I've never been one to continuously bounce around credit-card balances just to keep them sitting at low promotional rates. If a better fixed-rate card comes to my attention, then I'll definitely sign up for it, but that's the catch: It has to be a better fixed rate. (Here's one place to look for better-rate cards, if you feel like doing that right now.) But the last thing in the world I want to spend time doing is monitoring my cards to keep up-to-date with which, if any, cards are about to drop out of their low-rate time periods.
The article above is precisely why you have to do just that.
Even Suze Orman, in her book The Courage to Be Rich, suggests that folks should play Credit Card Pinball if they're trying to dig their way out of debt. (Check my "12 Steps From Debt" page.) It's beneficial, she says, because the constant switching of credit balances to low- and zero-rate cards helps keep interest charges from piling up on your balances while you work like heck to pay them down. And she's probably correct. But in my case, to this point, I've never felt comfortable doing it this way.
Right now (December 15, 2002) my only credit card balance is $4,300 on a 5.99% card. (Yeah, $4,300 is a lot of money. But that's down from (gasp!) over $11,000 at the beginning of 2002, so I feel like I'm making excellent progress!) If I were to dump that balance onto a 0% interest, special-promo rate card, I'd save about $21 per month, or $260 per year. That's assuming I wasn't paying down the balance weekly, which I am.
Certainly I don't consider a monthly $21 to be chump change — it would almost pay for my two cats' monthly food bill, or my monthly long-distance phone charges. But it's important to me that I don't encourage any more inquiries on my credit report than are absolutely necessary. If you go credit-card hopping, then you're adding those inquiries every time you sign up for that new Great Introductory Rate offered by HopAlong Mastercard. Plus, I pay as many bills online as I can, and because of that, I'd end up going through the online-bill-payment-registration process over and over again as I switched my balance from this card to that one. It'd be one big pain in the butt. And that doesn't even factor in the effort for keeping track of when my five or eleven months (I'm giving one months' leeway to make sure I get my balance off the card before the 6- or 12-month grace period is up) of Great Low Rates expire. Miss that date, and you're gonna get dinged. Slip up and make a payment late? So long low rate; hello, massive Late Fee and upper-teens interest rate.
All of which are pitfalls that I'd just as soon not have to worry about.
When it comes to credit-card balances, I'm all for finding the best fixed-rate card out there, and moving your debt to it — but that's all the moving I'm willing to do. I'm just not a Credit-Card Pinball Wizard. So I guess Suze just wouldn't approve of my thoughts on this. Just lump me in with the "Keep It Simple, Stupid" school-of-thought folks.
Now, none of this is to say that I don't take advantage of ANY of these promotional-rate thingies. The last two computers in my household were purchased from Best Buy, both via 18-month, no-interest offers. We made darn sure that both computers were paid in full by the seventeenth month. Everything went off without a hitch, and we didn't pay a penny in interest or fees. That, undoubtedly, is NOT the way the Best Buy financial team drew it all up.
But I'm sure they'll get their beloved fees and interest charges from the next guy.
December 15, 2002
Play Great Defense