I May Cut Up My Credit Card

I LOVE my credit card.  It is so convenient (maybe too convenient!).  I love pulling up to the gas pump and swiping the card and never having to go inside.  I love going to the grocery store and swipin’ that bad boy credit-cardthrough the card reader as I cruise through the self-checkout lane.  It’s easy.  And, it’s FREE.  Courtney and I pay off our credit cards every month.  We are disciplined.  We don’t want to be enslaved to credit card debt.  And, for 8 blessed years of marriage, we’ve paid off our credit cards each month and the credit card company makes Jack Diddily Squat off of us.  Until now.

Let me explain.  So, we go to pay off my credit card this month and discover that our bill shows that we have taken a “cash advance.”  So I’m thinking, “O great. Somebody has nabbed my CC numbers and is taken out cash advances.”  So I call the card company to inform them.  To my surprise, the card company informs me that when my check cleared the bank last month, we had insufficient funds.  So, they did us a favor.  they charged us two fees (totaling $78) and then put the balance that was unpaid back on the account as a “cash advance.”  It would have seen kind of them to put it back where it came from – a credit card purchase, but apparently they thought it would be in my best INTEREST to put in the higher INTEREST of the cash advance.  So, instead of paying a lover interest rate as a credit card purchase, they simply move it over to cash advance, for no good reason, and charge an exorbitant interest rate.

It gets better.  If you don’t know this already, it may blow you away.  Here is how paying off your cash advance works.  Your bill comes.  Let’s say its $200.  $100 in credit card purchases, and $100 in cash advance.  And you’re thinking, well, I don’t want to pay these high interest rates, let me pay that off in full.  So you send in a check for $200.  Then you wait a month, get another bill, and low and behold, you still $100 in your cash advance, accept it has actually grown b/c they charged you interest on it.  And you’re thinking, “But wait!  I paid that off!.”  No.  You didn’t.  Because the credit card company wanted to do you another favor.   Here’s what they do.  Before they receive your check for $200, you go to the store, buy a shirt, buy a happy meal and buy some gas to fill up your SUV.  You spend a total of $100.  That registers on your account, before they receive your check.  So, in their good, kind-heartedness, they figure that you would want to pay off your lower interest debts first, apply the $200 you sent in only to your credit card purchases and leave your cash advance there earning you an interest payment.  Isn’t that great?  I hope I’m being clear and this is making sense.  This is REALLY what they do.  They have created a system that will keep you forever in debt unless you go to extreme measures to pay it off.  I’ve asked, can I send in a check and specify it to pay off my cash advance.  The answer, “no.”  They won’t take it.

The only way I can pay off that cash advance is to stop using my credit card until my previous payment has cleared, or they will not apply my payment to the cash advance.  Or you can go to the bank that issued your credit card, write a check and it will clear the bank that day.

And the credit card companies KNOW they are doing this.  They know it is wrong.  And THEY DON’T CARE.  They just want you and me in debt to them.  Period.

Anyway…I have never used a debit card.  Maybe it is time.  I wonder what Dave Ramsey’s Financial Peace University will have to say about this???

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About mikewindley

Mike Windley is Lead Pastor of The Bridge Community Church in Morrisville, NC.
This entry was posted in Helping Others, Money, Odd. Bookmark the permalink.

4 Responses to I May Cut Up My Credit Card

  1. Mike,
    There are some new regulations hitting the credit card industry-the first of which went into effect today. In February, part of those regulations will force them to apply your payments to the balance with the highest interest rates. It looks like the credit card companies are trying to “get all they can while they can” to me.

  2. Dan Griffin says:

    Your message is timely, because back in May, congress passed some new legislation limiting (regulating) things credit card companies can do. Those new laws started phasing in today.

    As part of that set of laws, starting next year, the credit card companies will be forced to apply payments to the higher interest items first.

  3. mikewindley says:

    Thanks for that info Dan. I wish the Credit Card companies would be “stand up guys” and do the right thing without the government having to make them.

  4. Dana says:

    I AM A BIT CONFUSED-if your credit card is through your bank, it sounds like they are using your card as a debit card, and you can ask them to not give you a cash advance on it, but to have them decline a charge. and banks are going to have to notify you if you have overdraft protection on your checking account (which is what this sounds like) and you can opt out of it so you cannot overdraft your account with your debit card-it will just decline your debit card at time of attempted purchase.

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