B of A decided to raise my interest rate. From 12% to 21.9%.
I wasn’t late on a payment. I wasn’t over the limit. In fact, I’ve always been on time. They didn’t specify why they were doing it. They just did it.
So of course I immediately called them on the phone. They said that according to the Terms of Service, they could adjust the interest rate however they wanted. But that wasn’t my point. I wasn’t disputing the fact that they are allowed to change the interest rate. I called them to tell them that 21.9% is outrageous and that I wasn’t prepared to pay that much in interest. They agreed to lower the rate. To 18%.
I have approximately a $7500 balance with B of A. That works out to somewhere about a hundred dollars a month in interest. That’s just outrageous. I told them that I’ve never had an issue with them and that I would prefer to continue to do business with them, but that I was just not prepared to pay usurious interest rates.
I get offers all the time for zero percent balance transfers, and I’m prepared to use them if I need to.
So how did they respond to my latent threats? They offered me a debt consolidation loan. At 16% interest.
Well thank you, but no thank you, B of A.
My intention is to pay off one or two of my smallest debts which are just a pain to have to pay every month, and then move directly to the B of A account. I have a transfer available with zero percent for 12 months, with about a $3000 limit. After that is transferred, I will put them on top of my list of debts to pay off.
Once I pay them off, if they want to lower the interest rate below some of the other people, I would still be open to transferring back to them, but as it stands now, I intend to transfer some and pay some and eliminate that debt within the next two months.
Because really. 21.9%? You gotta be kidding me.
I could really use some advice here.
Later this week I will be getting paid, and I will be completing what would be called Dave Ramsey’s “Baby Step One”. That is, I will have $1000 in my Emergency Fund. After that I will be attacking the Credit Card Monsters.
My problem is that I don’t know which one(s) to attack first. Dave Ramsey says to go after the smallest balance.
But my quandary is that the Fed just slashed the interest rates by another 75 basis points. To me, this means that the time to refinance the house is coming up sometime later this year, or maybe early next year, when the Fed is done slashing.
With all of the sub-prime mortgage problems that the banks are having, I would think that they would be virtually begging for people to have traditional mortgages.
My current mortgage is at 7% and some change. I would think that if the going rate went back down to four or five percent that it would be a good idea to be in a position to refinance.
So what I was thinking is that if I while I am paying off the credit cards, if I were to start by paying on any card that is above forty percent balance to limit ratio, it will improve my credit score and make me qualify for a better rate if/when I do refinance my house. I have heard that when your balance on the credit card is above forty percent of the card’s limit, that is when you start to take a hit on your credit score. And while it wouldn’t speed up my debt snowball as much to pay a card down to thirty nine percent and then switch cards, it should drastically improve my credit score.
My current score is about 670. I’ve never had a late payment. The only damage to my score that I know of is that my balances are high compared to the limits. It has previously been as high as 740, when my balances were a bit lower. So I would think that by paying things down correctly, I could probably gain that 70 points back again on my score and then I would qualify for the best rates on my mortgage.
I currently have more than 20% equity in my house, so I don’t think the banks would be upset at all to lend to me. My credit union even sends me letters from time to time, which I haven’t even considered, since interest rates are too high right now. But as the Fed knocks them back down to where they used to be, I want to be able to do something about it this time.
So I need someone with a bit more education than I have to either tell me that this is a good plan, or tell me why it is not. I don’t consider myself to be particularly stupid, but I don’t have a lot of education in regards to Finance (which I’m rectifying).
I guess my biggest fear is that I will pay off the credit cards Dave Ramsey’s way, and the interest rates on mortgages will have dipped down and then gone back up already and I will have missed it.
I expect to be out of credit card debt in a year to a year and a half, if that helps any.
Since I started this blog a week ago, I’m still working on my Emergency Fund. So the debts aren’t being paid extra right now. But at least the minimum payments are still going toward the debt. Since my student loans are installment loans, they are a lot more predictable than the rest. And today, my payment to Sallie Mae posted to my account.
So I have my first decrease in my debt balance today. Sallie stole got $434 last payday, so my new balance is $8072. That leaves eighteen and a half more payments left to go, or more like nineteen with interest accrued. And since she gets money every two weeks, that comes out to about nine and a half months, or somewhere around the end of October or November. I can pay off Sallie without ever having to make a payment from the snowball. Then I can use the debt snowball to work on the credit cards, and once Sallie Mae is gone, the money that I was paying her will make my debt snowball nice and fat. In fact, if all I ever made was minimum payments on everything until Sallie Mae was gone, and then used the money from Sallie Mae to pay off the credit cards I could be done in just over two years.
But of course, that’s not what I’m going to do. If my work holds out, I could pay off all of the credit cards in about thirteen months if I don’t count the Sallie Mae money that will be added to it towards the end. So there isn’t any reason why I couldn’t knock out the credit cards by the end of 2008. That is, if work holds out.
After the student loans and credit cards are gone, the car would only take about three or four more months with all the money that is added to the the snowball from the CC payments and the student loan payments.
Oh…I forgot about the Air Conditioner. Oh well. It will work in there somewhere.
The main point is that I have my first reduction in my debt totals and this is looking very doable right now.
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