Wednesday, March 3, 2010

July or August, write it down.

I went to pay my HSBC card today. lps 7,1000 . About 5000 went to interest. I hate that and it's all money that I will never see again but I keep telling myself this is just more and more of a reminder to me about not going so deep in debt in the future with nothing to show for.
With HSBC there is no negotiating, they want me to pay their credit card rates or pay the full amount. I can't do the second right now so I'm just paying the minimum until I can hit it with more.
So as I was driving back I was thinking about which cards I will cancel when I can. I have two cards with BacBamer, one with HSBC, one with Promerica, one with Citibank and the latest one with Ficohsa.
The BacBamer ones are the oldest ones and the ones with the most benefit to me, although lately the've become a bit tougher but I can understand given my recent payment history. I would probably keep those in my desk drawer for travel or for medical emergencies.
Ficohsa card is one i'm using for business transactions and it has an extrafinancing on it that is basically paying itself from the selling of Honduran goods to relatives in the US. So I would probably keep that in the short term but would let it go or keep paying the full balance when I get down to 0.
HSBC is going to go. I don't want to have to deal with them ever again. They aren't bad, they just don't care about me as a customer. Even a replacement card took two months and I just took it to cash my points with them.
Promerica and Citibank are the cards on arranged payment schedule. Meaning that i've talked with them and told them that I want a payment plan and then I would want to turn in the cards.
Promerica was very quick with that and I don't even get a CC statement, it's totally turned into a loan now. However the last time I was trying to see if I could extend my payment term to them they pulled a different number than I had, about 4000lps higher. I think I will come into their office with my receipts and settle the number before it's too late. This card will go too. They've been nice with customer service and everything but for some gut reason I hate them. It must be the 8000lps I have to come up with every month to pay because they gave only 36 months to pay back instead of 48 like Citibank.
Citibank cut me the same deal, however they keep sending me CC statement and actually turn my payment plan into an extrafinancing. So they seem to want to keep me as a customer. However that was probably back when it was Banco Uno. Lately I've seen them become more like HSBC. They want their money and little room for negotiation, period. I can understand that but I don't like it so they are going to go too.
So the reason for the title is that I was checking my balance on my company coop loan and the expected balances on my "loans" from Promerica and Citibank. It seems that on either July or August I can request a new loan for about 120,000lps, which wouldn't affect the take home pay amount I have right now (previous loan was 118,000). WIth that money I could pay the balance on the previous coop loan, which is a requirement, and I would have almost the exact amount to pay either Citibank or Promerica, for some reason they will both have balances of about 75 to 80k lps at about that time.
Going the completely opposite way of how I was going about two posts ago. I'm thinking I want to pay Promerica. even if they say I owe them a couple thousand lempiras more in late fees or so, I could still pull that from my emergency fund and be done with them. That would free up 8,000lps a month to:
1- Get back on schedule with Citibank (currently one month behind every month), this would take about a month and a half
2- Pay more towards HSBC and get rid of them ASAP.
3- Save more in my emergency fund and freedom accounts
I could pay Citibank back instead of being tied to them for another two years but that would only lower my outgoing cash flow by 5,000.00 , and i'm always a bit concerned as to how long I will be able to keep the morning job. Not that I'm bad at it, but since i'm on contract it would be easy for them to let me go.
I sure appreciate your comments and they definitely don't fall on deaf ears.


La Gringa said...

You left out an important point. What is the interest rate on the company loan and what would the length of the term be?

I consider paying Citibank a month late every month an emergency! I would use the emergency funds to get that up-to-date as soon as possible. The late fees must be enormous. Sometimes I think that you are rationalizing by not mentioning these things.

If you do borrow the money and can pay off one of the accounts, is there any chance that the bank would negotiate the payoff (i.e., reduce the amount of interest that you owe)? A lot of banks in the US will do that just to finally get their money and be rid of a risky account.

That would be a real good thing to find out. If you find one who will negotiate, that is the account that you should pay off. BTW, you'll probably have to talk to someone other than the normal customer service people for that. Keep asking until you get to the person who has the power to make that decision.

In general borrowing to pay off other borrowing is never going to be the solution to your problem, especially if you are just extending the term of your bondage to the credit card companies.

Repeat after me: Interest is evil. Interest is like flushing my paycheck down the toilet. Late charges are the most evil of all.

Have you done a budget yet? Or at least of schedule of where your money goes for a couple of month? It really isn't that hard.

Start by listing the largest items. Allow yourself for coffee/snacks/misc small items so you don't have to keep track of every centavo. Give your wife L.xxxx for groceries and whatever - a reasonable amount so that she doesn't have to report back every centavo, but not so much that she blows it on luxuries. Give your kids a set allowance and account for it that way. That way, you don't have to ask what they spent it on, AND they learn to budget their own money -- something which is very good for kids. Do keep track of eating out though.

I would think a total of the amount of interest paid each month would be a huge motivator for both you and your family. Let them think about how you could be living if that amount of money wasn't flushed down the toilet each month.

And....while I'm being such a you have an update on those Oct 2008 credit card balances?

AJ said...

The company coop loan is 12% interest rate. Term is 36 months. plus I get 5% back at the end of each year for interests paid during that period. It's the best interest i've found anywhere, and well I am the treasurer of it so I know those rates are true because I calculate them myself.

I think I read your mind because yesterday I went to take out money from my emergency fund to pay up Citibank 5000lps and about 2000lps on the Ficohsa card that was just a goof up on my part because I paid too much on the dollar balance with them. So I have a positive dollar balance but they won't transfer that to my lempira balance before they consider me being more late with my lempira payment. So I have to dish out money now and wait for next month to even things out.

On all the loans and credit cards, if I pay off the the account I pay only the balance. Even in the arranged payment plans. The requirement is to pay it in full and I don't have any more interests to pay if I pay the balance. That's the it's worked here since I can remember. So either it works different in the US or I misunderstood the question. So the balances that I wrote were capital only.

That reminds me that I'm going to finish this post and put down newer numbers and see if i've made any progress.

I know borrowing on one place to pay on another is not the solution. however paying off a loan that is at 33% interest rate and having to pay only capital with no "early payment" fees, using money from a loan at 12% with 5% back each year sounds like a reasonable thing to lower my interst load. Plus it's a monthly payment that i'm already used to and it's already in my budget.

Interest is not only evil, it's the sin of the poor. And it's what will remind me forever and ever how terrible all this has been and how I NEVER EVER want to be in this situation again. If I had this second job with nothing to pay with this money I would have improved my life in so may ways that I just don't think about it now because I don't want to get more depressed.

I have a budget. I have written down my four incomes (two from day job , two from morning job). I written down the debts I have to pay and the lump sums I give to my wife for house stuff,money for the kids. The I also write down the utilities, gas, rent, etc. When I get paid I move the payments from the "budget" column to a new column to start ticking them off as I actually pay each one off.

I appreciate you being a nag and not letting me fall back. I will put up the new balances right away.

La Gringa said...

That's huge difference in the interest rate so yes, I agree that making that co-op loan to pay off the much higher rates is a good thing to do. Just make sure that every centavo of the new loan funds goes to pay down your debt and not anything else.

Can you pay your credit card payments online? Also, be sure to keep the due dates on a calendar so you don't overlook them. If you don't already use something fancier, try google calendar. You can set up recurring events and have it send reminders to email and pop up messages. Now that you've used the emergency funds for a couple of them, I hope that gets you back on schedule so you don't run short when the payments are due.

I'm glad to hear that you're working on a budget. Do you also total it up and talk with your family about it? It's good to group the various types of expenses, such as household (rent, utilites), phone, groceries, eating out, etc. Has it revealed any excesses that need to be cut back on?

Regarding the extra financing: I thought that they took the balance that you owed on the credit card as of a certain date and turned it into a fixed term loan -- equal monthly payments over 3 years, which means that each of those payments includes interest.

So lets say you have 12 months to go and pay L.10,000 per month. Are you saying that if you pay it off early, you'll only have to pay, say L.100,000 and not the total of the payments (L.120,000)? If that's so, then, you're right, there's nothing to negotiate. Unless, of course, the bank would negotiate on your principle amount. Some banks do that in the US, too, but probably not here.

For some reason, I didn't receive your comment on this or I would have responded sooner. I was worried that you might be mad at me. I wouldn't blame you, but I'm glad that you aren't!