Stop Making Other People’s Mortgage Payments.
The following is a reprint of a post that I made from my old blog Getting Out Of The Poorhouse: To find out why, see here.
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I’ve recently had the chance to watch the documentary Maxed Out, about the credit card and lending industry in America. Some interesting tidbits gleaned from the movie:
- Dave Ramsey is over-caffeinated
-They put elevators in houses now!
-Robin Leech is still alive?
-Credit card executives and debt collectors are the scum of the earth.
There’s a part in the movie where a credit card executive says that the people in the depths of credit card debt are their biggest money makers. It was one of the few times when I yelled obscenities at the TV (The other times is whenever Deal or No Deal is on).
Credit cards are extremely profitable because of the astronomical interest rates they charge people. Double digit interest rates in the high teens or low twenties plus surcharges and late payments? Business is good. Scratch that, business is great. These folks drive fancy cars and live in enormous houses (with elevators!). They can afford all of these because regular folk like you and me are paying for it. And what do you have going for you? An inflation rate that is close to 5% and savings rates that have trouble cracking the 4% mark.
Are you tired of paying other people’s mortgage payments? Take heart and know that you can stop this. How?
-Pay off your balances: Sounds simple no? Every day that you carry a balance on your credit cards is a day that you help pay for Mr. Bank of America’s yacht and Mrs. Citibanks mansion. If you can’t do this outright, try…
-Transferring your balances to lower interest cards. There are 0% APR balance transfer rates that range anywhere from 6 to 15 months. Although a stop gap measure at best, you can avoid paying further interest on your balances. If that is not an option for you, there are still lower interest rate options in the single digits that are a lot better than those 18% - 27% rates.
-Send more that the minimum payments: For example - The difference between paying $40 a month and $50 a month for a balance of $1,000 and an interest rate of 18% is 8 months (32 months for $40/month and 24 months for $50/month.
-Stop buying things that you don’t need: Learn to differentiate between needs and wants. Food, shelter and safety are examples of needs. An iphone is not a need (Alhough some people disagree:)
-Use cash instead: Cash is King. Doesn’t charge you interest and is can help curb your spending habits. Nothing curbs spending faster than the unavailability of funds 
Stop applying for credit: When you’ve dug yourself a hole, you don’t need more shovels. You need a rope, a ladder, or a jet pack.
And above all, stay the course. It’s easy to step off the path and fall into old habits. However with a litte perseverance and support from loved ones, debt can be eliminated, and new financial behaviors will be forged along the way. And who knows, those credit card fat cats may start paying their own mortgages someday.
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