Sunday, March 8, 2009

Tool to track credit card debt by applying sticker on card

I came up with Credit Card Tracker based upon something my dad was doing: he was taping piece of paper with the interest rate written on them on the back of his credit cards. Credit Card Tracker turns this into an easy to apply sticker.

I have also been experimenting with a paper sleeve in which you store your credit card, and write the APR, month, etc. on the outside of the sleeve. With the sleeve, you can separate the card and the information, thereby you can avoid letting waiters see your notes (if that makes you uncomfortable; it's not for me). You can also keep track of past balances and APRs by looking at past sleeves.

There apparently is a need to cut our debt with some sort of tool like these. The New York Times said in an article:

The typical American carries a $9,000 credit card balance from month to month. Say this card charges an annual 18 percent interest rate and allows paying as little as 2 percent of the balance each month. Even if no more charges are made on the card and the minimum payments is made on time every month, it would take 47 years to pay it off, according to the National Foundation of Credit Counselors. By then, total payments would be $32,994, including $23,994 in interest.

The full article can be found by clicking here


  1. As a follow up to the post above, this is a great article from the New Yorker about credit card debt, and credit card companies' strategies to bilk you out of your money. They want "captive customers." Sounds appealing, right?

    "...between 2000 and 2006, even as Americans’ real income was essentially stagnant and their savings rate negligible, credit-card borrowing rose by about thirty per cent."

    Click here to read the artilce at the New Yorker site

    by James Surowiecki

    In tough times, businesses will do nearly anything to get new customers—look at the big markdowns at retailers and the cheap financing at auto dealerships. But there is an exception to the rule: these days, credit-card companies are trying to get rid of customers. They’re shutting down accounts, shrinking credit lines, and, in some cases, actually paying customers to go away. American Express recently offered some of its customers three hundred dollars if they would pay off their balance and close their account.
    This is a pretty startling change of direction for the lords of plastic. For decades, they’ve been deluging Americans with come-ons (in 2007, 5.2 billion offers for new cards were sent out), so much so that, as of 2006, there were nearly 1.5 billion charge cards in circulation. And these cards did not go unused: between 2000 and 2006, even as Americans’ real income was essentially stagnant and their savings rate negligible, credit-card borrowing rose by about thirty per cent. Our willingness to spend beyond our means served the credit-card companies well: their profits jumped forty-five per cent between 2003 and 2008. But while making borrowing easier boosted the companies’ profits, it also increased the risks they faced, risks that started to hit home once the economic slowdown began. According to Fitch Ratings, credit-card chargeoffs—debts that companies determine they will not be able to collect—rose to almost 7.5 per cent in December, up forty per cent from a year earlier. And, as unemployment continues to rise, so, too, will the number of people who are unable to pay their bills.
    It’s little wonder, then, that credit-card companies are now scrambling to shed the customers they think are most likely to default, and to limit the amount that others can spend. In effect, they’re trying to follow the advice given by Larry Selden and Geoffrey Colvin in a book called “Angel Customers & Demon Customers.” Not all customers are equal, it turns out: some are tremendously profitable, while others, like the guy who calls customer service six times a day to check his account balance, cost more than they’re worth. To boost profits, you must cultivate the angels and protect yourself against the demons.
    That sounds easy enough. But credit-card companies have created a strange business, in which there’s a fine line between good and bad customers. Their best customers aren’t those who dutifully pay off their balance every month; instead, they’re the ones who charge a lot and pay only a little every month, carrying a sizable balance and racking up interest charges and late fees. These are the “revolvers,” and the credit-card business feeds on them. Credit-card companies don’t necessarily want revolvers to pay off their debts; if they did, there’d be no interest or fees to collect. They want their loans to be, in the words of a banking regulator, “a perpetual earning asset.” And they’ve thought a lot about how to keep those interest payments coming. For instance, they used to keep minimum payments relatively high. But, over time, companies started lowering minimum payments, sometimes to just two per cent of the balance. The lower the minimum payment the less people pay off each month and the longer they stay on the hook.
    The catch is that while revolvers are the companies’ best customers, they’re also more likely to default, which would make them the worst. That’s why credit-card companies have had to rein in their lending and shed accounts. Since that risks shrinking profits, they’re also trying to get as much as they can out of their existing customers, by doing things like sharply increasing their interest rates. This increase is partly a response to the greater risk of default, but it also takes advantage of the recession. Many cardholders don’t have enough money to pay off their balance in full, so when interest rates rise they aren’t able to just close their account and get a different card. Effectively, they’re captive customers. And since credit-card companies, unlike most lenders, are allowed to change the terms of their loans at any time, people who borrowed a big chunk of money at, say, nine per cent may now be paying seventeen per cent on the loan.
    These tactics are not going to improve the credit-card industry’s dismal reputation. They’re also not going to help an economy in recession, since reduced credit lines take away an important cushion for consumer spending, and higher interest rates and increased fees are likely to drive more people to default. But the odd thing is that while less access to revolving credit is a bad thing for us in the short run, having people rely less on credit cards is a good thing in the long run. The easy availability of credit cards encouraged people to live beyond their means—studies suggest that people really do spend more when they can pay with a credit card, and that big credit lines further encourage extravagance. And the high price of credit-card debt meant that billions of dollars in interest and late fees went to credit-card companies instead of to more productive uses. Smaller credit lines and less borrowing make sense. But in the short run they’re going to throw a lot of sand into the economy’s gears.
    This is the paradox of deleveraging: it’s good for borrowers to reduce their debt, and good for lenders to be more rigorous in their standards, but when everyone deleverages at once it does real damage. It’s like a drug addict whose dealer cuts him off: it’s good to stop using, but withdrawal is painful. The end of the credit-card boom isn’t going to wreak as much havoc as the end of the housing boom. But it is helping to put a brake on our spending. And, at this point, every little bit hurts

  2. Another article from Advertising Age on credit card debt:

    Please click here to view the article on Ad Age's website

    Credit-Card Marketing Message: We'll Help You Pay Off Your Debt
    Visa, AmEx, MasterCard Promote Rewards, Debit to Frugal Cardmembers

    By Beth Snyder Bulik

    Published: March 09, 2009
    YORK, Pa. ( -- Credit's out, debit's in -- just ask Visa, MasterCard and American Express.

    As housing prices fall and job losses mount, consumers are increasingly keeping their plastic tucked tight in their wallets. U.S. consumers trimmed credit-card debt $6 billion from November to December last year, the only monthly decrease for the past two years. Although credit-card debt is still high, at $5,710, up 6% year over year according to TransUnion, studies show consumers are struggling to pay down what they already owe.

    In many cases they are failing. Credit-card delinquency, defined as more than 30 days past due, grew to 5.9% in January, the highest since a previous peak of 6.3% in January 1992, according to Moody's. Credit-card charge-offs, or uncollectable debts, are also up to more than 7.5%, and many analysts believe the tally could crest above 10%.

    "A lot of people are feeling powerless with all the challenges they're facing, and one way to take control is by using a debit card," said MasterCard VP-U.S. Advertising Chris Jogis.

    So what's a battered financial-services sector built on the concept of buy-now-pay later to do? Promote fiscal responsibility and paying as you go.

    Per-transaction income
    In fact, although it might not at first seem so, Visa and MasterCard are relatively well-positioned to ride out the recession. That's because those companies make money on the transaction every time a consumer uses a card, but they don't hold the debt, which is the responsibility of banks such as Citi, Chase and Capital One, who issue the cards.

    That's why Visa launched a new global tagline "More people go with Visa" and ad campaign from TBWA Worldwide, last week, with the goal of persuading consumers to use electronic-card payments instead of cash or checks. "It's not about getting people to spend more, but just that as you're out there living your life and when a transactional moment happens, we propose that it's a better transaction with Visa," said Kevin Burke, head of global consumer marketing.

    MasterCard has also been focusing on debit cards for the past few years and recently added MasterCard Savings for debit-card holders, with incentives of 5% to 20% average discounts and/or free shipping from a variety of merchant partners. Mr. Jogis said the company's "Priceless" campaign from creative agency McCann Erickson, New York, has toned down its messaging to focus on value, and in creative executions talk about "helping consumers outsmart the times."

    So far both Visa and MasterCard have continued to post healthy quarterly results, with Visa most recently marking a 28% in quarterly net income and MasterCard noting a revenue increase of 29%. However, both companies made identical cautionary statements that growth will likely slow this year, possibly only in the high single digits, and promised cost cuts to keep the bottom line healthy.

    Paying for necessities
    American Express, which is both a payments network and a credit card, is shoring up its health by focusing more on its charge cards -- the green, gold and platinum cards -- that consumers pay off each month. It is also beefing up rewards to customers by promoting its card for paying for necessities. "It's a way to let people cash in rewards for more everyday things now that there is a pullback on discretionary spending," said a spokeswoman for AmEx, whose account is held by Ogilvy & Mather, New York.

    The marketer will have to work quickly -- AmEx has seen revenue drop 11% and profits plunge 49% in the fourth quarter as it deals with growing loan delinquencies and write-offs.

    Discover Financial Services, which also has a payment network and credit card, recently launched an online "spend analyzer" promoted by a TV and online and print ad campaign, that includes a pay-down planner and purchase-planner tools. And although the analyzer product was in the works before the fall financial debacle, Larisa Drake, VP-brand communications, said those messages are now more relevant and important than ever. It also launched a debit card for teens called the Current Card.

    Discover reported fourth-quarter income growth of 10% year over year, but was aided by proceeds from an antitrust settlement win. The company noted card sales declined 2% for the quarter vs. last year, and forecasted a worsening charge-off rate that could climb more than 6% in 2009.

    Both the debit card and rewards strategy play to consumer trends. According to a recent study from Hitachi Consulting and BAI Research, debit cards now account for 37% of in-store payments (up from 21% in 1999), while cash has dropped to 29% (from 39%) and checks are down to 8% (from 18%). Credit card use has remained steady at 22%.

    Rewards working
    On the rewards side, more than 51% of respondents to the study said rewards have a "strong impact" on card usage, with three-quarters of those surveyed reported carrying at least one card with rewards attached.

    The pay-as-you-go shift isn't short term, either -- many believe it is a change in consumer behavior that credit-card companies and banks will have to acknowledge for the long run. Debit cards and prepaid cards will become even more popular as ideas such as paying down debt and living without excess take hold.

    "Consumption is always, at some level, aspirational, and during the bull market, credit-card companies were very good at appealing to that sense of wanting to belong to something exclusive, luxurious or seemingly unique," said Kevin DePew, executive editor of financial website Minyanville. "But for the next decade we will be a experiencing a structural shift in what, exactly, people are aspiring toward."