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Credit Cards and Consumer Debt
Shamelessly Using the Bank's Money

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By Crosenfield
August 31, 2009

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For decades, I have habitually paid my cards off every month. The nice credit card companies have given me cash rewards and free nights in motels. I've never paid any interest at all. Poor them, when they have been so nice to me.

In recent months most of them have been raising my interest rates. I didn't care--I wasn't paying it anyway. 24% per year of zero is still zero.

Now, I have a relatively big house with a long driveway. Next to the house is a parking area. From the parking area, the driveway continues to the street. I bought the house 12 years ago, with the driveway all gravel. For 12 years I've done zero maintenance, and it was getting bad. Grass growing between two tire tracks, a rut in the driveway where rain ran down the hill toward the lake. Really, time to do something about it.

I checked out companies who could do the job of taking 6 inches of gravel off the top, grade it, apply crushed stone, compact it, put on an inch of special sand, and then put "pavers" over the driveway. Then they'd come back and "seal" it so the nice finish wouldn't be stained permanently by leaves. Cost quotes were all over the place. I picked one. The nice company accepts credit cards.

So looking around, I found a nice bank willing to give me balance transfers with a $75 cap, then 1.9% interest annually for a year, introductory rate. Fixed unless I screw up. I also checked with the bank that used to have my mortgage, before I paid it off. They wanted 6% as a "home equity loan". I don't think there were closing costs, but maybe. e-Trade wanted a fraction over 7% on a margin loan. I could sell some stocks and raise the cash easily enough, but the market has been on a tear recently. It would be nice to delay selling for awhile.

I applied for the brand new credit card offering balance transfers with $75 cap, then 1.9% for a year, and was granted a nice card with a $25000 limit.

Then I charged the deposit, which my driveway contractor wanted as seed money to order his materials, on an older Chase card that gives 1% cash back. Next I took one of those convenience check I always throw out, and paid off Chase just before the first charge was due. Their 1% cash back which they kindly credited to my account is more than the $75 cap charged by the new card. This leaves the Chase card with, as usual, zero balance.

The contractor did his work. My new driveway, with over 28000 concrete pavers laid by hand, is perfectly lovely. The grass cannot come up between the pavers and the ruts are gone. I look at it with happiness. Of course, the day it was finished, the nice contractor wanted the rest of his money, and the again empty Chase card was ready to pay him. Currently that balance is still on the Chase card. This week I got the statement, and again I will pay it with the second "convenience check". A second $75 balance transfer fee is coming up. Again Chase kindly credited me with 1% cash back. Meanwhile I've identified a couple stocks that aren't really doing all that well and can be weeded from my portfolio.

This exercise is going to leave me with somewhat more than $20000 at 1.9% for a year, although I'll pay it off long before the year is up.
I couldn't figure a good way to incur only one $75 transaction fee, and honestly am not that distressed at letting the nice folks at the new bank make a buck. The card, of course, has been carefully placed where there is no danger of it being used to make purchases until the balance transfers have all been paid off.

Now, how do you figure credit cards are evil? Yes, my record of never paying a penny in credit card interest is shattered, but every time I drive out of the house I look happily at the new driveway.

Best wishes, Chris