MATH 1030 FINAL PROJECT
PAYING OFF HIGH INTEREST CREDIT CARD DEBT
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I decided to write about this topic because it has a very interesting background. It is no
surprise to anybody to say that I was in deep debt like every other American living in this
country of excesses, where the economy revolves around consumption and easy credit to
supply all the consumers’ demands. After the collapse of the housing industry, and the
bailouts to the financial and automakers industries, and after a great deal of people lost
their jobs, I realized that the problem was not the country, but the individual citizens who
bought things they didn’t need, only because they had the credit for it, even if later on
they could not pay for the things they acquired. We can ask ourselves, how did our mighty
country got to this point, if only a few years back we were at the top of the world
financially, even four years after 9/11?
HERE ARE A FEW FACTS OF WHAT I MEAN, WHILE RESEARCHING FOR
THIS ASSIGNMENT, I CAME UP TO THIS INFORMATION FROM THE WALL
STREET JOURNAL FROM 2005:
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from the Wall Street Journal from 2005:
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-650 million credit cards in circulation.
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-115 million households who have credit cards.
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-Average balance is $8,000 per family.
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-Average profit is 30 billion dollars per year per card company.
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-7.3 billion is charged in late fees.
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-1/3 of industry average profile comes from late fees, over limit fees, balance transfer fees,
annual fees.
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-Many credit card companies make more money off of fees than on interest.
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-Average late fee is $29.88
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-Average over limit fee is $27.40
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-Credit card companies made a profit of $650 billion in the second quarter of 2005.
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-MBNA is 1.5 the size of McDonalds in value.
UTAH SEES DRAMATIC RISE IN BANKRUPTCY FILINGS
JULY 29TH, 2010 @ 1:00PM
BY BECKY BRUCE
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SALT LAKE CITY -- Chalk it up as one more thing you can blame on the recession. Bankruptcy
filings are way up in Utah.
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Bankruptcy Filing Statistics 2010
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Chapter
Jan.
Feb.
March
April
May
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7
641
778
1,273
1,216
1,077
1,040
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13
390
410
544
518
502
516
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11
5
4
6
7
10
4
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12
0
0
1
0
0
0
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2010 1,036
1,192
1,824
1,741
1,589
1,560
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(2009) 761
910
1,395
1,311
1,182
1,258
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Source: U.S. Bankruptcy Court
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The U.S. Bankruptcy Court for Utah reports 8,942 people declared bankruptcy in the first six
months of 2010, a 31-percent increase over the same six months in 2009. By comparison,
national bankruptcy filings only rose about 14 percent in the same time frame.
June
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Here is a list of some of the debts I worked out when I started making my payments
plan to get out of debt (the actual list and amounts were larger), and the set time I
had to pay off my debts without increasing the amount of money I was sending out
every month for payments and interest. Another important fact is that I decided to
stop using those credit cards once I started with my plan, otherwise it would be
worthless to even start with a payment plan that would never end.
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Creditor
Amount
Interest
Payment
Planned length
Int. paid
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Visa
$8,636
12.9%
$128.44
10 years
$6,776.31
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Visa
$5,280
15.9%
$88.12
10 years
$5,294.18
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Master Card
$3,688
18.9%
$68.60
10 years
$4,544.47
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Master Card
$2,600
21.9%
$53.56
10 years
$3,827.71
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Discover Card
$1,300
21.9%
$26.78
10 years
$1,913.86
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RC Willey $2,480
18.9%
$46.13
10 years
$3,055.93
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Car
$12,000
7.9%
$242.74
5 years
$2,564.57
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House
$188,378
5.825%
$1,108.31
30 years
$210,615.20
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As you can see, the lower the interest rate in credit cards, more money out of the payment goes towards
the principal. The higher the interest rate, more money from the payment goes towards the interest.
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My plan consisted on paying the higher interest rate cards first, even if the balance was lower. On the house and car
payment there was no negotiation. The minimum payments were fixed. On the credit cards I negotiated to pay only the
interest for a short time, so I could pay off one by one the cards starting with the ones with higher interest rates and
worked my way to the ones with lower interest rates.
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I started with sending the interest to all credit cards which totaled roughly $200 a
month (the total minimum payment an all credit cards was about $412 a month, to
finish paying everything in ten years). After making my interest payment on all credit
cards but Discover card, I sent $212 towards the payment of Discover card, which
was paid in about 6 months.
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I continued doing the same and sent the $212 plus the $26.78 that I was not sending
to Discover card anymore, total $238.78 to my Master Card with 21.9%, which was
paid roughly in about 10 months.
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The next card was RC Willey, I sent every month the $238.78 I was not sending to
Discover and the Master card plus $46.13 of the normal RC Willey payment. This
account was paid in about 8 months.
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The next Master Card was paid in about 10 months. After that the visas were paid off
fairly fast as from 2003 to 2005 the economy picked up and I started making again
good money with Insurance deals and other sources of income.
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The plan I had to pay off my debts in 10 years I finished it in roughly 4 years. I
started to make more money and using cash for almost everything. I left a couple of
credit card accounts open just to keep my FICO score up, which is another benefit of
paying off debts: my credit rating went up very high, and I don’t use it, except for
traveling and school expenses, which I pay off as soon as I get the bills. Now I use
credit to my benefit, not the banks, such as getting points and rewards for paying
most of my bills on a credit card.
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By the time of the housing market collapse in the summer of 2008 I was debt free
and with some good investments overseas, which when the dollar falls, those
investments won’t be affected by the devaluation.
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It feels good to be out of debt and in control of ones finances. The money sent every
month for credit card payments only reflect the irresponsibility of people wanting
everything now, without thinking in the consequences of the near future regarding
their finances. Debt is only a different face of slavery. Once we are slaves of
anything or anyone, in this case the financial institutions, we are under the control of
those who own our paychecks.
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The United States economy is a slave of its creditors. We owe so much money to the
world that there is not a human possible way that we are ever going to repay it.
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So you get out of debt and your extra money invest it in solid assets, not stocks, not
bonds, nothing that is just a piece of paper that has no value when there is no money
to cover it. Invest in gold, silver, farmland, water, cemeteries, new sources of energy,
Sterling Pounds, Japanese Yen, Chinese Yuen, Francs, Marks, etc.
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There are a lot of legal ways to open overseas bank accounts with small amounts of
money that will protect your assets against an economic fall, that way your savings
won’t be wiped out when our economy collapses.