Stupid Credit Card Trick – Decreasing Interest Lock-in
By Randall | December 18th, 2007 | Category: Credit Cards | No Comments » 485 views | No comments yet » |
Recently I got an offer I really had to scratch my head about. The offer goes like this;
Pay on the card at the rate of 10.99% for a year, then the rate reduces to 9.99% for the life of the balance of the loan.
Now, 9.99% isn’t bad, but I don’t know why the company would make you pay 1% more to get it.
Let’s do the math.
If the balance is $10,000, that means you would pay about
$250/month (assuming a 2.5% payment which is typical).
So in the first year it looks like this.
| Balance | Payment | Interest |
| $ 10,000.00 | $ 250.00 | $ 91.58 |
| $ 9,841.58 | $ 246.04 | $ 90.13 |
| $ 9,685.68 | $ 242.14 | $ 88.70 |
| $ 9,532.24 | $ 238.31 | $ 87.30 |
| $ 9,381.23 | $ 234.53 | $ 85.92 |
| $ 9,232.62 | $ 230.82 | $ 84.56 |
| $ 9,086.36 | $ 227.16 | $ 83.22 |
| $ 8,942.41 | $ 223.56 | $ 81.90 |
| $ 8,800.75 | $ 220.02 | $ 80.60 |
| $ 8,661.33 | $ 216.53 | $ 79.32 |
| $ 8,524.12 | $ 213.10 | $ 78.07 |
| $ 8,389.09 | $ 209.73 | $ 76.83 |
Total Interest paid: $1008.13.
Now if you started out at 9.99%, the numbers look like
| Balance | Payment | Interest |
| $10,000.00 | $ 250.00 | $ 83.25 |
| $ 9,833.25 | $ 245.83 | $ 81.86 |
| $ 9,669.28 | $ 241.73 | $ 80.50 |
| $ 9,508.05 | $ 237.70 | $ 79.15 |
| $ 9,349.50 | $ 233.74 | $ 77.83 |
| $ 9,193.60 | $ 229.84 | $ 76.54 |
| $ 9,040.29 | $ 226.01 | $ 75.26 |
| $ 8,889.55 | $ 222.24 | $ 74.01 |
| $ 8,741.31 | $ 218.53 | $ 72.77 |
| $ 8,595.55 | $ 214.89 | $ 71.56 |
| $ 8,452.22 | $ 211.31 | $ 70.36 |
| $ 8,311.28 | $ 207.78 | $ 69.19 |
Total Interest Paid: 912.29.
Difference: $95.84,
Doesn’t seem like very much to me. I guess the credit card competition is hot enough that a hundred dollar difference on a $10,000 balance is worth the extra time and hassle.
This was a new one for me, but I don’t think it’s going to be too popular because;
- It doesn’t net the company a significant amount of money for the added complexity of the deal
- It didn’t convince me to switch from another credit card (aside from the fact that all my credit cards interest rates are already lower than this).
Nice try, but I don’t think this one’s going to fly.
Who wouldn’t want free money? The funny thing is people can get free money with government grants and other government programs. There is money for women entrepreneurs out there that many people don’t know about
