Tuesday, October 20, 2009

Let's talk about money, shall we?

You won't often see me write about money on this blog. Especially my money. We are a one income family, originally by choice/necessity due to daycare costs, and we have to be careful with what we spend our money on. We are also a large family, which means that our expenses are on the high side. We don't eat out much, we buy in bulk to save in the long run and we ask our families to help with the big expenses for the kids like hockey (thank you grandparents!!!). We are working hard to pay down debt; I am still paying on law school loans and will be for some time. Having to pay mortgages on two homes for 2 years did not help our financial situation and set us back. But we're trying to get out from under our debt.

I can't say that we were always financially savvy. We are quite guilty of using the equity in our home to consolidate debt, thinking that we were doing the right thing by paying off higher rate credit cards (hence why we had to sell our house for such a loss this year; owed more to the bank than the home was worth). We've consolidated several credit cards into a single credit card at a lower rate, which was supposed to stop the flow of money out of our bank account. We try to pay more to our higher rate card each month, but that isn't always possible. Our kids need clothes, food and shelter and those things cost money.

So imagine my horror yesterday when I got a letter from one of our credit card companies (Citibank) yesterday telling us that our nice, low interest rate was going up to 29.99% effective November 30th. TWENTY NINE POINT NINE NINE PERCENT! Of course this is our card with the highest balance, by far. Now of course under the new federal regulations Citibank is required to allow us to opt-out of this rate change. What their letter doesn't tell us, but what I know from doing my research, is that 1) if you opt-out, you have to pay your balance in full within 5 years, 2)when you opt-out and your card is canceled, it can effect your credit score (go here if you want to read the article).

I'm pissed. I'm pissed because we made stupid money mistakes. I'm pissed because as we're trying to get things right financially, the credit card companies are making it HARDER for us. I've done my calculations and I know what it will take to pay off our card in five years. It's more than we're currently paying for our minimum payment, which then puts us further in the hole instead of gaining any ground. Someone needs to explain to me how we can get out of the recession if people can't get out of debt because the credit card companies are putting the screws to us.

I am well aware that if we we were a two income family, I might not be writing this post. At the time I decide to retire from the practice of law five years ago, the cost of putting two kids into daycare was almost as much as my weekly salary. Add in my work costs (gas, clothes, travel, etc) and I wasn't going to have much of a paycheck left. We've talked about me trying to go back to work (NOT in the practice of law thank you very much), and quite frankly, it isn't a scenario that works for us right now with so many small children at home and this economy.

I know we've made our bed (financially speaking) and have to lie in it. But I also know that we are trying hard to rectify our past money mistakes and that having the credit card companies raise our rates isn't helping. We're trying to take steps forward and they are pulling us back. Is that the new American way? Quite frankly, it sucks.


3carnations said...

Citibank raised our rate - But not by that much. They also lowered it for 6 months when I asked. Did you have late payments? If not, if you call them, they may lower it, at least for a period of time.

Good luck!

Thia said...

Credit cards stink. I had problems with our cc company last week, went through three different supervisors with the end result not changing. They made an error, but I have to pay for it. I want this thing paid off and never used again unless it's a dire emergency. I'm done with these things!
I really don't know what "we" are supposed to do.

LoriD said...

It's like the banks didn't get the memo that people are already suffering. 30% interest is outrageous. Is there any way to transfer the balance to your other card or convert it to a bank loan?

My husband and I had some major financial problems a few years ago due to his failed business. We tried to bridge the financial gap with credit cards, which was a big mistake. As soon as those cards were paid off (we sacrificed a lot to pay them off), we cancelled all but one and we only use that one to book hotels and things. We are strictly cash people now and it's quite liberating.

Jenny said...

This same thing happened to us! And one more thing they don't tell you. If you opt out of the increase, and ANYONE charges ANYTHING to your card, even by error, you then jump from 7% to 29.99%. For us, after the whole opting out process, an online vitamin company charged me a $12 annual renewal and jumped the percentage. Even though they admitted fault (we'd changed payment methods and they don't even know why they had this old card number in the system still) and they removed the charge, Citibank didn't care and the rate never went back down!

Keep an excel schedule showing the progress you've made, even if it is over a few years, seeing the little bit off the house and the little bit off the car and the little bit off the credit card added together gives you proof that it is worth it. Then post that number for you and hubby to see, "We've paid of $7,452 in debt since Jan 2008" or whatever your numbers are. Remind yourself that you ARE getting somewhere, even if it is slow. Most of us are guilty of bad financial choices and are so mad at ourselves too! And DON'T beat yourself up for not working, with 4 kids it would never pay, and you WOULD be in this same boat because daycare would be eating all the salary.

Encouraging you to keep going. You can do this, forgive yourself and just move forward, like you already are! :) Best wishes from one mad over money mama to another!

Astarte said...

I so feel your frustration. I got married young, and DH, though eight years older than I, is WAY worse with money, so our credit card debt went up exponentially very quickly. With kids, and me staying home, and living in the DC area for so long, expenses just went up and up and up, and we're incredibly deep in debt. That's part of why I'm substituting while I'm in school, to make a little extra to try and stay afloat. Next year, when I'm in school full-time, we won't have this money and it'll be hard again. We've done the same thing with equity loans, and had events take us right back into debt. Once I finally start teaching full-time, we'll get back on better ground, but until then, I hold my breath when I pay the bills.

When I think about credit cards, immediately I imagine a grey, foggy mountain that is getting bigger as I climb. I used to think that it was possible to pay off my debt and straighten out our lives if we were reasonable, but now it's like someone has grabbed the edge of the image and yanked it straight up, like a bully chasing me up a slope.

I live in fear of getting a 29.99% interest letter. Call them and ask WTF, your payments are on-time, and you're a good customer. Threaten to move your money and cancel the account.

Flax Hill Gardener said...

Citicard sent me that letter, too, and I don't even use that card. I would consider transferring your balance to another card. LLBean Visa?

Anonymous said...

I got the same Citibank letter this week! I was so angry. We decided to close the account and just payoff, but I didn't realize we would only have 5 years. We may need to rethink that one. We have looked into a bank debt consolidation loan. Maybe I need to speed that up, my deadline is Dec 20th. Merry Christmas to us.
On the plus side we took the Dave Ramsey class and went cash about 2 years ago. It was wonderful, but very easy to fall off the wagon when money gets tight. Both hubby and wife must keep each other in check.
I understand your feelings about all of this exactly. I think the best thing we can do is be the best parents we can be and not let the worry of it rob the memories we can make without the money.