A sign that your Technique is Working
By Mike Hillyer | Related entries in Credit Cards, Debt Management, Financial ManagementFor the last few months, I have been putting the methods I listed in my post titled The Ultimate Credit Card Payment Program to work.
I ordered my payments a little differently than the system I previously mentioned: rather than paying down the card with the lowest balance or the greatest interest, I instead focused on the card that A) was canceled (so that I cannot possible reverse my progress), B) was in my name (as the primary wage earner it is my credit profile that makes or breaks future loans, so my wife’s card can wait), and C) Has the highest interest cost. The card in question is an MBNA Mastercard.
I picked up the card at a Calgary Flames hockey game: the card would have the logo of my favorite hockey team, and I got a snazzy t-shirt. In hindsight both of these reasons were very lame, and I strongly recommend the physical appearance of a card and free gifts be the last things that factor into a credit card decision (for that matter I do not recommend getting an MBNA credit card).
Anyway, a few months ago I started accelerating the payment of my MBNA Mastercard by adding $100 to the $65 I currently pay on my card, dramatically decreasing the expected pay down of the card. I should now have the card paid off in 26 months, and save thousands in interest.
So, what was MBNA’s response to this? I have been offered a Payment Holiday every single month since I began my accelerated payment program. Every. Single. Month.
I think the credit card company is not happy with the fact that I have moved from paying the amount due on the statement, to paying a fixed monthly amount, to paying an accelerated amount. I personally have to think that the increase in payment holidays is not coincidental, I believe there is a direct correlation between my improved repayment actions and the increase in offered payment holidays.
Remember, payment holidays are a bad idea, don’t take them. The place credit card companies like you to be is at your credit limit, making the minimum monthly payments. Your goal should be to get as far away from where they want you as possible.
This entry was posted on Monday, May 16th, 2005 and is filed under Credit Cards, Debt Management, Financial Management. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
May 17th, 2005 at 9:28 am
I have an MBNA Mastercard as well. I didn’t cancel it outright, but I did cut it up about a year ago and have just been paying it down ever since. I started getting the regular payment holidays pretty soon thereafter, and promptly ignored them.
Last Month, I got a new “special offer” in the mail from MBNA. Apparently, if they can’t convince you to not pay your bill, their next move is to try and convince you to spend more on the card, by offering a new, very low interest rate. My MBNA rate dropped from 19.99% to 6.99%. With no annual fees. I was also offered the opportunity to transfer any balances at a promotional 3.99% rate until December, at which point the remaining promotional balance rate will increase to the regular 6.99% (which, of course, I took advantage of).
I’m not sure if this last-ditch effort of a lower interest rate is an across the board policy of MBNA, but it certainly ensured I’d keep paying them interest (albeit at a much lower rate) for a while longer.
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