YOU TOO CAN BE A TERRIBLE CREDIT CARD CUSTOMER!How to Take Advantage of Credit, Not the Other Way Around

d2dfinance.comOctober 3, 2011

The $5 Question

Bank of America announced last week that it will start charging most debit card-using customers $5/month. How much more will this make BoA per year?

A. $0B. $2 BillionC. $3 BillionD. $60 less a year, because I’m switching

banks

The $5 Question

Bank of America announced last week that it will start charging most debit card-using customers $5/month. How much more will this make BoA per year?

A. $0B. $2 BillionC. $3 BillionD. $60 less a year, because I’m switching

banks

It’s both!

The Only Sure Things in Life:Death, Taxes, and Bank Profits

Public Outrage

Regulation

Banks AdjustRevenue Streams

Customer

Pays More

You

Are

Here

Blame the Durbin Amendment – Dodd-Frank Bill, In Effect October 1st 10/01 Fed Debit Card Fee Limits

Only applies to banks with assets $10B+ Chase, Wells Fargo, and Citi are all testing fees

2010 2011$0

$1

$2

$3

$4

$5

0%

10%

20%

30%

40%

50%

60%

70%

$0.44 $0.24

$2.50

$4.37

65%

45%

Interchange/Trans Basic Checking Fee

Avg

Fee

Fre

e C

heck

ing

A

ccou

nts

Source: The Atlantic, 09/28/11, http://bit.ly/mZTDai

So What’s Left?

At least for now, credit cards appear more attractive

The CARD Act eliminated the biggest problems, but added new ones – particularly for college students

Pros Cons

Free if Paid Off Interest & Fees

Track Online No Privacy

Build Credit Destroy credit

Rewards Overspending

Alternatives

Credit Union or Small Bank

Online Bank

NFC/Mobile

Cash!

Credit Cards: Playing Hard to Get

Under 21? You need to have a co-signer or your own income Over 21? Live at home? Your parents’ income no

longer counts as of October 1st No more freebie tables on campus Is this the end of hard sells at the mall?

It’s not all bad – the CARD Act also limits: Unfair interest rate hikes Late/overlimit fees

Interactive guide to the CARD Act: http://bit.ly/IIe20

How to Be a High-value Customer

1. Choose the wrong Rewards or Cashback card, charge

everything to it, then carry a balance

How to Be a Terrible Customer

1. Choose the wrong Rewards or Cashback card, charge

everything to it, then carry a balance Instead: Choose the best card for you (travel,

cashback, low-interest), charge only what you have in cash, then pay in full

How to Be a High-value Customer

2. Sign up for Retail cards for the 10% Off or coupons

How to Be a Terrible Customer

2. Sign up for Retail cards for the 10% Off or coupons

Instead: Exploit your existing card’s Bonus Cash site for online discounts and cashback at major retailers

How to Be a High-value Customer

3. Pay a higher-tier APR because you didn’t check AnnualCreditReport.com for errors

How to Be a Terrible Customer

3. Pay a higher-tier APR because you didn’t check AnnualCreditReport.com for errors

Instead: Fix mistakes in your credit report to qualify for the best-tier pricing

How to Be a High-value Customer

4. Take a Balance Transfer, then spend on the same card

How to Be a Terrible Customer

4. Take a Balance Transfer, then spend on the same card

Instead: Use one card for Balance Transfers, another for purchases

How to Be a High-value Customer

5. Take a Balance Transfer, then stay after the offer ends

How to Be a Terrible Customer

5. Take a Balance Transfer, then stay after the offer ends

Instead: Pay off or transfer your BT at least a few days beforehand

How to Be a High-value Customer

6. Use your card for Cash Advances or at a casino

How to Be a Terrible Customer

6. Use your card for Cash Advances or at a casino

Instead: Buy Visa/MC/Amex gift cards and even earn bonus cashback – see how at http://bit.ly/oWGNqQ

How to Be a High-value Customer

7. Manually pay your bill so that it’s occasionally late

How to Be a Terrible Customer

7. Manually pay your bill so that it’s occasionally late

Instead: Set up auto-pay, even if it’s just for the minimum

How to Be a High-value Customer

8. Pay the minimum due

How to Be a Terrible Customer

8. Pay the minimum due Instead: Pay above the minimum, especially if

you have a balance transfer

More on Balance Transfers

That 3-5% up-front fee is added to your balance Your minimum payment applies to your lowest

rate It’s all about the “flip” Longer offers can help you get out of debt, but

know the risks

5% Min Due/

Month

Month 0 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$0

$100

$200

$300

$400

$500

$600

$700

$800

$2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500

$10,500$9,881 $9,293 $8,735 $8,205 $7,701 $7,222

$500 $531

$563 $594

$625 $656

$688

Purchases BT

Low-interest or Rewards?Your Choices Impact Your Rate

(But not as much as they used to) It’s a sliding scale – there is no free lunch

Prime Low Interest Rewards Final Rate0%

2%

4%

6%

8%

10%

12%

14%

16%

3.25%

7.48%

3.88%

14.61%

Source: Bankrate.com average interest rates, 10/01/11

Final Words

Are credit cards worth it? Or are they a necessary evil?

Know your own limits Treat credit like cash If you do get into credit-card debt –

make a plan and stick with it

Q&A

www.d2dfinance.com @suziedonuts