OK I am going to take a little risk on this post. It will not apply to everyone who reads this blog. Some of you (statistically, probably very few) have been smart enough to escape the trap I am going to mention, so if you are among those fortunate and intelligent few, congratulations and don’t take offence at what I am going to write next.
To the rest of you (and let me add this included me for years), the reason you are not already living in the Philippines (or whatever your dream may be) is because you’re a sucker.
And the good old US government (both Republicans and Democrats by the way) have been allowing a bunch of scam artists to systematically (but legally, sadly) defraud you and I for years. And not only is the beat going on, it is getting stronger. The problem is getting larger and larger every year. What am I talking about? What is holding you back from making a move? Those cute little pieces of plastic you are carrying around in your pocket.
US consumer credit card debt is like an epidemic of an insidious, financially dangerous disease and the law doesn’t do anything to stop it, it essentially aids and abets in the crime. The problem is getting larger and more serious every year so there is little doubt in my mind you are not affected … almost all of us are.
Credit card debt is the most cunning financial adversary you will ever encounter. Credit card companies use enticing promotions to lure consumers by increasing credit limits and offering pre-approval. All of these strategies and tactics attempt to install the habit of spending now and paying later.
The interest rate you think you are paying, overall, is very likely a lie. You know here in the Philippines the cost of borrowing money tends to be much higher than what Americans think they are paying. Unfortunately, many people don’t realize how destructive credit cards can be until their payments become the largest part of their monthly budget. Credit card debt,as a percentage of income, has been on the rise for the past two decades.
So what’s this got to do with moving to or taking a trip to the Philippines? Simple. If you don’t have the money in your bank account right now to do what you want to do in life, there are really three possible solutions.
One: Make more money. That’s certainly possible, and I write abut that often. Supplementing and empowering my retirement certainly works for me.
Two: give up your dreams. I defiantly do not recommend this one. I try to make it practice not to dwell on the past and dredge up regrets, but I’m human like you … regrets sometimes come to the surface. Of all the regrets I can ever come up with, regret of things I didn’t do outnumber regrets about things I did about 1,000 to one.
Three: make better us of what you already have. That’s what I want to outline here, briefly, and credit card debt and credit card payments are frequently the number one way to make feast, effective change in your personal financial life.
Fist: (the single most important action). Stop using your cards! As Homer would say, "D-oh"! The number of situations the average person encounters in a month where a credit card has to be used is virtually ‘\nil. yes they can be convenient, but the debt is killing you. Start using cash or personal checks. Hmm, need to buy something and you don’t have the cash in your pocket? Maybe you didn’t really need to buy it. Good example. For years I was paying my electric bill with my credit card .. very convenient just put the information on a from from the electric company, sign it and away it goes. Well, guess what. A real emergency came up and I had to charge something big on that card. Until the entire card was paid off I was paying 19.9% on the entire balance … including that electric bill. If your electric provider told you your bill was going up 19.9% you would likely be ready to chew nails and spit tacks, but millions of us gave ourselves a rate increase every year by being too lazy to write a check and mail it off.
Second: Take stock. Get the credit card statements out for everything you owe and read the fine print section at the bottom of the statement. Many people would be shocked if they did this and saw that cards they thought had ‘bargain rates’, like 4.99%. Look close and you are likely to find that your debt is divided into different categories such that what you think is at 4.99% is actually at 20-something percent or even 30% or more. Make an honest comprehensive list of what you owe, what each amount is costing in interest, and what the minimum payment is for each card.
Third: Make a pyramid list. Write down the debts from highest interest to lowest.
Fourth: Make an honest assessment of what you have available to pay off each month. Just recently I posted about how much you are likely wasting on your phone service as just one example. What about cable TV or NetFlix or some other nice to have but non-essential monthly bill. Include in the ‘must pay’ list the minimum payment for each card.
Fifth: This is the most satisfying step. Take that left over amount, whatever it may be and apply all of it to that highest rate ‘leach’ on the list. Think of it this way … if that highest interest card is 25%, you are now investing that money in a safe, secure manner at 25% … try buying a CD and see what rate they give you.
]Sixth: As soon as that highest rate card is paid off, apply this method again, starting on the next lowest .. remember you now have available all the money your were using for card one in addition to your best effort payoff … so number two will pay off much faster than the first one.
From now on, wash, rinse4, repeat. You can save thousands a year with the method (depending on how deep you were in the pit to begin with of course). And the best part? Each little success gets rid of one more obstacle between you and your move. hard to beat. This method also goes under the ‘snowball’ debt relief principle, because after that first, perhaps painful, initial start, the debt disappears faster than a snowball rolling downhill.
One last tip … when you do get yourself to where you feel it is time for that trip to the Philippines? DO NOT PUT It ON YOUR CARD! And if these tips aren’t enough, it might be wise to seek professional advice … because the problem won’t go away on its own. Stop living with bad credit! Let LexingtonLaw.com show you how!
You’ll be here before you know it if you stick to these principles. Best of luck and do let me know how this article resonated with you … as I said, it’s a bit of a risk.
Popularity: 13% [?]
Philly,
Yes, I like many others am slowly reducing the credit card debt.
A good idea is to take advantage of 0.00% balance transfer offers, but make sure that you pay off the debt within the time period, usually 6 months. Otherwise you will be charged interest back dated to when the card was activated.
I scored a good deal recently…0% interest for 9 months with no card fee. This is effectively a 9 month loan at zero cost. But as I said earlier, I must ensure that the balance is paid off by the end of the 9 month period.
Just pay off your credit card every month. Putting a trip on your cc is a good idea since you usually get some kind of reward from your cc company when you use your cc.
@Laurence: I’m not noticing any more of those zero percent with no fee offers anymore on my US cards, Laurence. Agree that careful use of benefits like that can work, but they really are of no use if you already have a balance on the card. Why? The card company pays _everything_ you submit against the lowest interest balance first, so even if you only have a modest amount in the regular category, you leave that there earning top dollar for the card company until you have paid back all the lowest balance amounts first. On US cards that isn’t even easy to see, becuase of course each month your balancegoes down as you pay … in the fine print thye usually have a section that breaks down the amounts at each rate. I got into a trap this way … had a card with about $1,000 on it and instead of paying that off first, I took a big chunk of money at zero percent. Great. Except by the time my zero percent balance was paid down, I had paid hundreds of dollars in interest on that lowly $1,000 balance which I could have just bitten the bullet and paid to start out with. Clever those rascals, too clever by half in my bookl.
@Bill: Hi Bill, thanks for dropping by and for commenting.
Your advice is great _if_ you _can_ pay off the card every month. The problem is that I know there are many wihtin the sound of my voice who can not. The US has never, ever had so many families carrying credit card balances. The news media tells everyone the economic slowdown … spelled crash … is becuase of sub-prime morgates. hello. less than 10% of US mortgages are in that category.
But people all over the US are losing their homes because they kept charging and charging and charging until they don’t have enough left to pay the credit card bills and the mortgage. This is not widely talked about on TV becuase credit card companies are amonf the very top advertisers in broadcasting. They don’t want to offend the client.
This is my advice, certainly subject to anyones interpretation, but I will say it clealry and emphatically. If you have balances unpaid on your credit cards and you charge a discretionary trip to the Philippines becuase, as the card companies like to have people think, ‘you deserve it’, then you are doing the _wrong_ thing and no nickel-dime promo from the card company is going to make up for the cost.
If you charge a $2500 trip (air fare and hotels) and you are paying the normal rate most US folks are paying you will pay close to double that amunt before the balance disappears. I fully agree that paying off your cards every month is the absolutel best solution, hands down, but millions of Americans can not, and that’s the ones I am writing to. Much as I love living here and visiting here, I would not go in debt for it. I paid cash for my ticket and cash for shipping my household goods and I pay cash for all my monthly bills … it’s like a perpetual high compared with the yoke I used to live under.
True enough, it’s just that those who rack up huge debt through their credit cards lack any sense of financial planning (to be blunt, they’re stupid). From the articles on your site and on Bob’s, it’s clear that setting up a life for yourself in a foreign country takes planning and foresight, which people who are easily lured by a “no money down!” promo clearly lack.
Anyways, great site. I love the info you provide and one day I hope to enjoy the country for a (very) extended period of time!
Philly,
I should have made it clearer. When I use a balance transfer option I do not spend on that card. If there is still a balance and the term is ending then I transfer to another card with 0.00% balance transfer option.
This is a way of gradually reducing debt and paying no interest. The credit card companies get nothing from me.
@Bill: Thanks Bill, for the additional explanation. I’ll suggest, thoiugh, that you are in the wrond place. I have _no_ stupid readers here, only ones (like me) whith things to learn.
It’s all very good to make it black and white and say, “You never should have gotten in debt.” But anyone who has ever been in a traffic accident knows the same feeling … why did we hit( no matter whose fault)? One minute we were both driving along without a care and next minute BANG. Having been there myself I have to say there is hardly a worse feeling.
Our government and our credit card funded news media have been ‘conditioning’ folks for years to dig their own hole.
Woulda, coulda, shoulda? Yep, you bet, I agree with you that no debt is the way to go, but after foklks are already in the mess they need practcal, non-credit card company driven techniques to help dig themslevs out. After all, you can’t help a drunk out of the gutter by breating him for taking that first drink back in 1960.
Thanks ever so much for the kind words too, Bill, comments, both the agree and the disagree are really what keeps this place alive.
@Laurence: Hmm, as I mentioned these zero percent offers seem to be few and far between in the US now … Australia still offers them regularly? Sounds like a good opportunity to be an online ‘Boombay” (money lender) to me .. you loan the folks who are struggling to pay off the 30% bills zero percent money at 15%, and everyone is happy … now, how high can you make your credit limit? LoL
I echo Bill’s advice. Use your card as much as you want, as long as you pay the balance in full each month. I’ve had one VISA card for the past 20 years and i’ve paid the balance off every month. The trick is to just stop using the damn thing if your balance gets close to the point that you can’t pay it in full next month.
I’ve never paid a dime in interest. And i love the free month-long “float”. If i buy something today with my debit card, the money is taken out today. But if i buy something today with my credit card, the money is taken from my account next month when i pay off the card balance.
I also agree with the post that credit card debt is a big problem for millions of consumers and for the whole United States. Credit card companies in the U.S. are like drug dealers.
@pogidaga: Thanks for sharing your thoughts. Apparently, though, I failed big time with the point of this article. Your advice to keep the card paid off is spot on … however I was trying to illustrate how bad the situation ha sbecome ibn the US … credit cards have become an addiction and hundreds of thousands of Americans _Can_not_ pay their cards off. I was pointing out a ‘pyramid’ scheme that actually works … paying off the highest i8nterest cards first. It’s all very well to tell an alcoholic not to drink, but he’ll be a drunk until he takes action. It’s all very well to tell a credit card debt adict to pay them off, but many can’t until they take positive steps … they just have month left over at the end of their money now days.
As far as the ‘free float’ issue, be careful. card company after card company is making this feature more and more restrictive. Likewise the ‘zero interest’ schemes. Make one payment one day late on the payback of a ‘zero interst’ transfer and you may be stuck with 39% interest for the life of the payback. It’s no coincidence that almost all credit card issuers have their headquarters in Joe Biden’s state, Delaware. That’s because Delaware has _no_ effective cap on the interest that can be charged to a consumer … the sky is the limit.
Suince I wrote the original article, huge changes have happened in the market, showing just how shaky the credit addicted US economy really is. I want every reader here to enjoy the expereince of coming to the Philippines, but if the choice is between putting it on your card, or paying something off … do yourself a favor … pay now fly later
My wife wrote an interesting essay on the subject of America’s credit addiction here… some might like it.
Philly, I don’t think you failed big time with the point of your article. It’s just that some of us that you’re preaching to are already in the choir and coming across a little too holier-than-thou, at least i did.
Your article turned out to be prescient as recent events in the U.S. have shown. Home values are down and credit is harder to get than it used to be. Lots of people are now going to have to start living within their means. The sooner they realize it and the sooner they pay off their debts, the happier they will be in the long run. Or perhaps i should say the less unhappy they will be.
I’m not very happy. A year ago my wife and could have sold our house in California after owning it for three years and had enough money to build a comfy house in the Philippines with cash. If we sold today it would barely pay off the mortgage. Our Philippine retirement dream will likely be deferred by several years. Our only sin was to buy our house at the wrong time.
Mita has it right. The U.S. has been addicted to the excess that can be had with cheap credit and cheap oil. Many people never worried about their personal debt or the national debt. As long as the stock market continued to go up and house prices continued to go up, the debt could be repaid someday somehow they thought. Now many are in deep debt with no way to pay it off.
The collective delusion of ever increasing unearned prosperity is wearing thin. We’re in a tight spot. If Bush’s 700 billion dollar bailout plan works, it will be due it part to patching up the collection delusion for a little while longer. But for how long will that work? A few years is my guess. Will we use that time to mend our ways and work for want we want now and save for want we want later?
If Bush’s 700 billion dollar bailout plan doesn’t work, then the end of the American empire will come a little sooner than expected. If there is a revolution, it will be televised and we can watch it on our plasma TV’s until they are repossessed.
I don’t have high hopes for Bush’s bailout plan. Everything else he has done for the U.S. has been pretty much a disaster for working people, the economy, and the environment. Only the super rich are better off than they were eight years ago.
Philly,
I read and talk a lot about the Philippines, and have finally assigned a travel date. One of the best pieces of advice I was given was “research, research, research………then visit the countries you’re seriously considering retiring to” I’ve spent the last 3 years traveling to asia countries plus a few others listed in my planner. This will be my first trip to the Phils and I feel very excited about it. I’m currently 41 yo and have already desided that on Jan 22nd 2017, just 2 days short of my 48th b-day that I will defer my civil service retirement (FERS) of 29 yrs which includes military buy-back time and relocate to the somewhere in asia. Hopefully after a not so few visits to the Phils my choices will have narrowed to either Thailand or the Phils. I will be living off my savings(apox. $310,000 at the time of my BIG MOVE plus a 30% VA monthly check that I currently draw now. These 2 sources of income will have to last me for 11 years until I start drawing from my TSP at age 59, and then my civil service pension 1 yr later at age 60. I’ve learned a bit of tagalog, love the foods(sinigang na baboy), my favorite!!! and have a few pinoy friends (M & F) here……currently working abroad(U.S. Navy-Bahrain). I plan to stay abroad throughout my remaining time either here or in Singapore. Also I’ve just recently started learning a little about making money online, hopefully it will turn into a nice little hobby……..not really interested in creating a stress-filled day job out of it, just something fun, rewarding(in the way of helping others), while earning enough to prehaps cover my air-con, and mobile service. I plan to bring my Vonage phone and AFN cable plus Dream box systems.
Anyways, just when I think I’ve learned everything about the Phils I learn something new. Thanks for all the insights and advice you provide, whether you know it or not you’ve helped so many potential expats to the Phils learn so much. And your absolutely dead on when it comes to credit card debt. My New Years resolution was to be completely debt free by July 15th of this year. My credit card debt had rose to just over $24,000 after Christmas 2008 and this is with all my housing, utitilites, etc being provided for here…..I sold my house in the States before moving here and have no monthly car payment. I will not be using my credit cards for my trip in May this year or in any of the years to come!!! I use cash or debit cards only now. All credit cards have been shipped back home to my sisters house(locked away in her case)…….along with her own, she is indeed a master when it comes to money and saving it. Paying these off has giving me a hold new level of bordom I never thought I could reach, however it’s good training because I’m exercising more, seeking out fun FREE things to do while learning how to do without stuff I simply DO NOT need!!! and probably can not get at a reasonable price in the islands.
I have a spread sheet that I update each and every pay day. It has a calendar attached which shows my pay dates for the entire year. I know exactly how much I need to pay and save each pay day in order to reach my goals for the year. I have the money already deducted from my salary before it reaches my checking account. “Out of sight…….Out of mind” The reminder of my salary I divide by 2 which lets me know what I can spend weekly. I do miss the extra salary, but a lot less now that I’m in the 3rd month of this 7 1/2 month plan, plus being debt free just feels a whole lot damn better.
Thank again Philly