In these changing times, we never know what little trick big business will pull on us next. Recently I received a disclosure in the mail from Chase credit cards. Normally I would have tossed this kind of paper out without even a glance. However, something in my gut told me to read it.
The disclosure was to notify me that my Chase credit card was increasing the minimum payment from 2% to 5%. The reason they gave for this was nothing to do with how my credit rating was or anything like that. The reason they gave was simply that they are changing the way they do business. That sounds like a loan shark to me.
Me and about 850,000 other people took this offer several years ago from Chase to consolidate debt. They offered us a “fixed” rate, mine was 4.99% for the life of the loan. This was my way of having a fixed payment and a way to getting out of debt with an end in sight. Since I’ve been a good cookie and have been paying my payments on time they have not had the opportunity to increase my rate for any kind of default. So this is Chase’s way of getting everyone off of the fixed rate to pay higher interest.
I began searching for practical solutions to stop this from happening or to deal with the changes. First, I emailed Obama, my congressmen, and all of the politicians I could name. I soon found out, so did everyone else. However, the politicians have not had any practical solutions.
I considered a balance transfer to another card. This may be an option for you however, in a year you may be right back in that same boat again. If you find a zero percent card that will transfer these days then it’s likely you’ll pay a 3% balance transfer fee. Essentially you are adding more debt to your loan. You have to do the math and figure out if this is a better deal for you.
The other problem with balance transfers is that you are at the discretion of the credit card company. So if you owe Chase $8000 and find you can do a zero percent transfer to Citi or Discover, they can transfer a portion of the $8000. This leaves you with a balance remaining on the Chase card and now you have two payments to make. I decided not to do this.
I called Chase and pleaded with them to work with me. They told me a flat out “no” and referred me to credit counselors. I didn’t feel for me that credit counseling was an option. The reason being is they do charge you a fee and after doing the math I’d be paying the same amount plus the fees. I decided this was not an option for me, it may be for you.
I threatened Chase with bankruptcy initially because I am fed up with the way our economy is being handled. My threats were just that, threats. I did let them know they were stupid for doing this. They have paying customers, they are collecting interest from these 850,000 plus individuals. When they raise the minimum it will force some people to file bankruptcy, they will have no other option. Chase will lose money. It fell upon deaf ears.
I began brainstorming some more and thought about refinancing my car. My car is paid for but it’s only worth about $3000 so I wouldn’t be able to pay off Chase in that way. You may be able to refinance your car, your home, or some other asset.
I considered trying to find another part time job on top of the two I currently have. I decided it wasn’t worth having a heart attack over. In this job market it could be difficult to find any jobs, not impossible, but difficult. I called my credit union and asked them if they could help. They said they had received numerous calls but had no solutions for me either.
Finally, I thought about my 401k. I have not touched it at the advice of Suze Orman and all of the television financial advisors. However, it seems these advisors live in their own little world and have no touch with reality. More and more often financial advisors on television are eating their words.
I called my 401k bank and asked them what the current loan rate is and how much I could borrow. I found out that I could borrow enough on my 401k to pay off all of my cards and only pay 4.25% interest. That’s less interest than I was paying Chase! This is what I decided to do because it fits into my life and budget.
The only disadvantage for me to borrow from my 401k is the money I borrow will not make money in the stocks. However, I pay myself interest instead of the banks and it comes directly out of my paycheck. I will be cutting up all of my cards and telling them to shove them.
I also have a thing or two to say to Chase. When I pay them off I will be sure to let them know they have lost a customer for life. I will be sure to tell them they have lost thousands of dollars in interest from me and I’m certain from other loyal customers. I will also let them know that I will be seeking legal advice to find out if we the customers can sue them for doing this to us.