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Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: Which to pay? Date:  7/19/2007  1:24 AM
Author:  bingocards Number:  255948 of 312696

Mathematically, *if your financial position stays fixed*, you will always get the most bang for your buck by paying the minimums on everything with all additional money directed at the highest interest rate.

Note that part which is between the asterixes? That assumption is almost certainly false. The reason is that Bank C values your business, so if you pay down your balance with them very quickly you can expect to get a letter in the mail saying "What, paying off so soon? Would you happen to have any other money out there you would like to transfer to us?"

Here is what the bank is thinking: We spent $120 to get stray to bank with us. $120! Burned to ashes. And stray banked with us, and liked it, and we were just getting started on a beautiful relationship which would earn us thousands of dollars in interest over the years. And then some bastards lured him away, probably with a teaser offer. Well, he still has our card in his wallet, and TWO can play at this teaser offer game! It costs us less than $.50 to make it, the $120 is already sunk, and if he bites we're in the money again! We'll just outbid those suckers and let them console themselves by lending the money to a subprime deadbeat instead.

If Bank C doesn't come to that conclusion on their own, lead them to it. "Hey, Bank C, this is stray. I've been banking with you for the last 4 months and loving it, but I'm in the process of restructuring my finances and trying to figure where my relationship with you fits into that. Bottom line? I need more of a credit line with you. If you can give me $X, I will fill most of it with your balance transfer offer, and we'll grow old together. If you can't, I'm afraid your card might have to join my sock drawer. What do you say?"

(There are only two things to remember when negotiating with a bank or anyone else: #1, phrase any request such that fulfilling it achieves a win for the other party. #2, have an alternative to the negotiation in your back pocket. If you can do these two simple things you will have a life of polite, calm, and stressfree discussions with a wide variety of people who will fall over themselves to give you what you want.)

Oh, and forgive me for belaboring the obvious, but stop using Card B for charging anything.
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