Archive for January 2011
I’m a Credit Card Deadbeat: You Can Be One Too!
I am delighted to say that I am a credit card deadbeat! In fact, some of you might already be credit card deadbeats too, if so, I commend you for your excellent work! Now, as for those who don’t know what a credit card deadbeat is, before you start thinking I have a screw loose, you may want to continue reading!
When I say that I am a credit card deadbeat, I don’t mean that I avoid my credit card bills. To the contrary, a credit card deadbeat is the insider term used by credit card company executives and refers to all of the credit card users who pay off their bill each month promptly; in doing so, such customers pay no interest and prevent the creditor from making any profit! That’s me! I love being a credit card deadbeat!
The alternative to being a credit card deadbeat is what credit card executives call a revolver. A revolver is a credit card user that constantly carries a balance and is charged regular, monthly interest on their charges. Credit card companies love revolvers because they, in essence, increase the bottom line for the credit card company and make them a nice profit. Further, from an insider perspective, the best customers not only carry a balance, but also make their payments late, triggering extra fees and a higher interest rate.
Okay, so I’ve been a credit card deadbeat for awhile now, but last year I went even further in improved my deadbeat ways. Not only did I hang onto my hard earned cash by refusing to line the wallets of the credit card companies, but I also happily lined my own wallet with their money, to the tune of $1,402. Yes, that’s right, they paid me $1,402 to use their cards; continue reading to find out how!
Cash Back Credit Card
First, I applied online for a Cash Back Credit Card and I was instantly approved. My new cash back credit card arrived to my house the following week ready for me to use. This card offered me 0% APR for 12 months and carried no annual fee; With it, I made all of my gas purchases, as well as grocery and drugstore purchases and earned 5% back cash back on the gas purchases and 1% back on all other purchases. I have a family of four and the gas purchases included gas for my spouse’s car as well. My average monthly purchases and cash back earnings were as follows:
Monthly Gas Purchases $325 x .05 = $16.25
Monthly Grocery Bill $1,200 x .01 =$12.00
Monthly Drugstore Purchases $160 x .01 = 1.60
Total Cash Back Earnings From Credit Card $ 29.85 x 12 = $358.20
Airline Rewards Credit Card
I also applied for an airline rewards credit card and again was instantly approved online. Like the cash back credit card, my new airline rewards credit card arrived the following week, came with a 0% introductory APR for 12 months and had no annual fee. This credit card earns 1 frequent flyer mile for every $1 charged.
I charged many of my miscellaneous expenses, including major purchases and business expenses, on my new Airline Rewards Credit Card. As a result, the qualified expenses came to an average of $2,250 monthly or $27,000 for the year, earning 27,000 frequent flyer miles, more than enough for an airline ticket to Hawaii: a $500 value!
0% Introductory APR for 12 Months
Now here’s the kicker. Since both credit cards came with a 0% introductory APR for 12 months, I paid only the minimum payments on each card and placed the money for my purchases into a savings account earning 2.5% (rates have gone up since). Using averages for simplicity, I made 12 monthly deposits of $3,935 into a savings account earning 2.5% interest compounded monthly. By the end of the year, I earned $544 in interest!
My Total Credit Card Earnings for the Year
So here is my total earnings from the cash back credit card, airline rewards card, and interest earned.
Cash Back 12 x 29.85 = $358
Free Airline Ticket $500
Savings Account Interest $544
Total Earned $1,402
Just to make sure I maintain my deadbeat ways, now that the 0% introductory rate has expired, I’ve paid off my balance from the money I deposited into my savings account during the year. To be a credit card deadbeat you need persistence, determination, and discipline. I did it, and so can you!
Related to : www.mercuryinsurance.com
Annual Percentage Rate Explained
Annual Percentage Rate or APR is a yearly rate of interest that includes all of the fees and expenses paid to acquire the loan or credit card. APR can vary anywhere from around 3% right up to 21% and beyond.
APR for Loans:
APR is a standardized expression of the interest rate that applies to a loan or credit card, taking into account at least some of the one-time fees that are applied by the lender. There are several ways to calculate APR, but the process generally includes 3 main steps. Firstly, all one-time costs are added onto the loan amount. Next, the monthly repayment for the loan is calculated based on the loan’s specified interest rate. Finally, the interest rate, that would have to be applied to the full loan amount in order for its repayments to equal the calculated monthly repayment, is calculated.
To see this in action, consider the following simplified example where you borrow $1,000 and there is a loan setup fee of $50, making the total amount borrowed $1m050. If the interest rate is 10% (compounding monthly) and the term of the loan is 12 months, then you will need monthly repayments of $92.32 to pay off the $1,050. However, a for the monthly payment of a 12 month, $1,000 loan to be $92.32 would require an interest rate of 19.32%. So, the APR is 19,32%. If the term of the loan was longer, for example the loan was for 10 years instead of 12 months, then the loan fees would be spread across this period, and the APR would drop significantly.
The aim of using APR is to calculate a total cost of borrowing, and to make the interest understandable to an average consumer, so that they can compare loans to determine the best deal and also understand the loans that they already have.
Unfortunately, despite repeated attempts by regulators to establish a single standard for the calculation of APR, it does not always represent the total cost of borrowing nor does it really create a standard that allows consumers to precisely compare the costs of a loan.
The main issues in the calculation of APR arise because the definition for the calculation of APR does not specify which one-time fees must be included and which can be excluded. For example, should APR take into account fees and commissions that are paid to someone other than the lender ? Should APR include penalties, such as late fees ? As a result, it is partly up to the lender to determine which fees are included (or not) in the calculation of APR.
In addition, APR is also highly dependent on the term of the loan. For example, the APR for a loan with a 25 year duration cannot easily be compared to the APR for another loan with a 15 year duration.
APR for Credit Cards:
For credit cards the APR is a much simpler calculation. Due to the fact that the amount of money borrowed really isn’t known, you can not use the formula that is used for most loans. It’s simply a calculation of what the effective interest rate is for one year when you take into account that the interest is compounded monthly.
The formula for this is apr=(interest/12 + 1)^12. So for a card with a 10% interest rate it would be apr=(0.1%/12)^12, which is apr=1.0083^12, so apr=1.104 or approximated 11%. Really you should never have to calculate this yourself though.
Related to : www.wellsfargofinancial.com
Where To Get Low Interest Credit Cards
Low interest rate credit cards can immediately improve your quality of life by freeing up disposable income. In other words, instead of spending hundreds of dollars every month on credit card interest, you can have that money available to meet important family expenses. Hopefully, some of the interest savings can also be used to pay down debt so that you are debt free sooner. These special offer credit card deals have been created to generate new customers for credit card providers.
Once past the introductory period, these new customers will pay interest on the balance and add to the profits of the financial institution. Most people don’t realize that they do not have to follow this pattern. There is nothing to say that you cannot continue to transfer your credit card balance to a new zero rate card at the end of an introductory period. In this way, you would never have to pay interest on your credit card balance.
Low interest rate credit cards which charge low balance transfer fees and provide long zero interest introductory periods offer the best value. When you transfer credit card balances to these cards, you will receive significant financial respite. You will benefit immediately, in the short term and also in the longer term. So it is definitely worth taking the time to find the best cards for balance transfers.
The longer the zero rate introductory period, the more benefit you will receive. Even if you plan to transfer the balance to another interest-free card, an introductory period of twelve months or more means you will not be burdened by constantly having to go through the process of finding and applying for a new card. You will only have to do it once a year and maybe even less often.
The easiest way to locate low interest rate credit cards is to use an online credit card transfer service. These services have already done the hard work of evaluating different credit card offers and present the best deals for your consideration. They also provide online credit card application facilities which make applying quick and convenient. The better services also provide the opportunity to receive a reminder when the introductory period is about to expire so that you can transfer the balance to yet another low or zero rate card. This alert service can jolt us into remembering that we need to act quickly or we will once again have to pay interest on credit card debt.
If you want a quick and easy way to consolidate credit card debt or simply reduce monthly costs so you have more disposable income, it’s worth considering low interest rate credit cards (particularly if the interest is zero). Credit card debt has become a major burden to many families, especially with increasing costs of living and slow wages growth. Transferring credit card balances to low interest rate credit cards for periods of twelve months or more at a time, is a way to save on high monthly interest costs and ease stress on the family budget. If you are able to use some of your additional disposable income to reduce the credit card balance you will have the added benefit of getting out of debt sooner than you would otherwise be able to do.
Related to : www.mydrivecard.com