Routine Order

For those with terrible credit having trouble paying off their debts, there are a variety of credit management programs to choose from. I decided to try out how these programs work, and wanted to put some real numbers to the test. So I was looking for a site that does not require too much personal information to play around with. This debt management program that allows users to evaluate their options seemed perfect, so I took the dive. The Consumer Alliance Processing Corporation Debt Management program seems to be good - it has a BBB affiliation, and seems to be honest.

They have a free debt management quote tool, which is we are most interested in. I filled out the form and the end results looks like the following:


I had plugged in some numbers that I thought to be typical for someone with 30% APR credit cards, choosing a sum below $10,000 for the total debt. I entered a total of 4 cards, with APRs from 20% to 30%, with the outstanding balance on the higher APR cards being about 75% of the total outstanding debt. The free quote tools gives estimates for how much money can be saved. It shows a monthly fee of $35 for the debt management program, but even after this, the total monthly payments are reduced by almost a hundred dollars. The tool also shows that the person can save a total of $18,476 (!!!) by enrolling in the debt management program. I expect this figure is calculated by comparing the total payments made over the lifetime of the debt if one were to pay only the minimum outstanding, to the amounts paid using the debt management program. What’s also interesting is that the monthly APRs are almost halved. If one were to continue making the same payments as before starting on the debt management program, then I suspect the debts will be paid off much sooner.

Debt management programs are not for everyone - of course, if you earn $1000 a month and your financial expenditure is $1200, you won’t find someone to manage your debt. These programs are not for those with less than $3000 in debt, neither are they for those with low APRs on their cards. One of the conditions of the program is that the credit accounts will be cancelled as they are paid off. Once you pay off all the debt, I bet your credit score will improve drastically - enough to get you another card, if you want to play the game all over again!

There’s a coffee shop in our office complex where they don’t accept credit cards for less than $3. I have been going there every single day and he declined to give me coffee on my card. I was really eager to try out my citi credit card, to find out if I’d get 3% or 1% cashback at that coffee shop - the one I visit most frequently. The usual lady wasn’t around, so I waited for her to come back and asked her what the deal was with the $3 minimum anyways.

Turns out, credit card services have the cake, eat it, and then sell it. They charge you and me and call it “APR” and then they charge the merchants. Dealers sign up for merchant accounts. These services charge fees so the dealers can accept cards and get the money after these fees are deducted. Some merchant services providers don’t charge some of these fees components, like application fees, but there are some charges associated with all of them.

So the lady was telling me that for a sale of $3, after deducting her credit card charges, and he cost, and the pay for the folks that work for her, she actually could be making a loss. Wow!

From the outside it always seems like everyone else is making easy money. Not so, not at all so. Some credit cards give you cash back on purchases, I should really try and find out how they manage to make a profit after this - but my guess is, they just wait till you miss a payment and then they make money off of you - after all, since it’s really not easy to make money, everyone will have bad patches. I suppose they want you have their card when you hit your rough patch. The citi credit card that I picked up the other day is one such - lets see if I can keep myself on the positive side with citi!

As I was driving home yesterday, I heard something on NPR about how America’s national debt is blossoming — it was just a sentence or a phrase in a newscast, but it got me thinking.

Today, I looked up the statistics for the External Debt of Nations. My hypothesis, made while driving the car, was that no nation would be free of debt. It was just a knee-jerk, instantaneous hypothesis. By this I mean that not much thought went into it.

I was wrong. There are nations free of debt. Brunei, Norway, Leichtenstein, Palau, Jersey in the Channel Islands and Cyprus are the nation-states that are free of debt. Thats it. Period. All other countries have huge amounts of external debt, and no one seems to be in a hurry to pay off their debts. I expect that the effective interest rates on these debts vary, with poorer nations paying higher interest rates, and the rich paying lower effective interest rates. So if one were to calculate and tabulate effective or net interest rates for countries’ external debt, that would reflect the “richness” of a nation.

Two questions buzz in my mind:

1. If all countries are in debt, how can there be any truly “rich” countries? The existence of debt implies a negative negative net worth, doesn’t it?
2. Why don’t groups of countries work together to minimize their debts? For example, if Germany owes the UK $10 billion, and UK owes France $12 billion, why don’t they work together to take UK out of the equation by saying Germany effectively owes France $22 billion?

Enough to get you thinking, I hope.

Go to FreeAnnualReport.com to get your credit report from the three major credit monitoring companies.

This new year, I have resolved to get a tighter grip on my finances. The credit report will (hopefully) help me in bargaining with my credit card companies for lower rates.

I also anticiapte having to pitch for a home loan/mortgage later this year - all the more reason why I should see myself as I am seen by lenders.

Everyone is entitled to one free credit report a year, so go get it, and get a grip.