The Credit Card Offer
By David Berky
One day I got a call from my credit card company asking me if I would like to
increase my credit limit by borrowing up to $9000 at their special rate of
The operator stated, "Your credit card rate will then be a low 15.9%. How much
would you like to transfer today to take advantage of this offer? Do you have
any high interest loans you would like to pay off and reduce your payments?"
The previous day I had called them to get two bogus late payment charges taken
off my statement. I also had to get my interest rate lowered back to my usual
rate rather than the "penalty rate" (22.9%) they charge to anyone who is late,
misses a payment or goes over their credit limit.
Wondering if my rate got changed back to my usual rate, I asked the operator
what my current rate was. She said that it was at 12.9%, which was my usual rate
for this card.
I do carry some debt on other cards (it helps with my credit rating to be making
regular payments) but all the other debt I have is at lower rates than this
card. I mentioned that I had no other debt that was at a higher rate than what
she was offering.
She then replied that I could just take the money as a cash advance and do
whatever I wanted with it.
So I asked her if I understood correctly what she was offering. "So you are
offering to raise my interest rate if I get further into debt by getting a cash
"Yes, you can have up to $9000 and do whatever you like with the extra cash,"
she replied. I was amused that she said that I could "have" not "borrow" the
money and it would be "extra cash" rather than "additional debt". But after all,
she is in sales and the words "have" and "extra cash" are much more enticing
than the more realistic alternatives - "borrow" and "additional debt".
I politely told her that I was not interested in raising my interest rate or
borrowing more money, "but thanks anyway."
I then wondered how many other people would jump at the opportunity to pocket a
quick $10,000 at the "low" rate of 15.9%.
I was also amused that she encouraged me to pay off my high interest debt with
this money. Well, to my standards 15.9% is high interest debt. Granted it's not
the 24-25% charged by department stores but still it was more than I was
currently being charged on any of my other cards.
Shouldn't an offer that would appeal to me be one that offered me money at a
lower rate? Her offer seemed backwards. She was trying to entice me with the
vision of "extra cash" in my hand to do whatever I would like.
I took a moment to do some financial math (the most important kind) on this
offer and found that if I had a current balance on that credit card of $4000 at
my current interest rate of 12.9%, I would be paying about $43 a month in
If I had accepted her offer for an additional $9000 at 15.9% (and I suspect that
my regular rate of 12.9% would have risen to the 15.9% rate also), I would be
paying about $172 a month, exactly 4 times what I am currently paying. If I made
a payment of $200 a month to pay off this debt, I would be paying for over 12
and a half years.
What I learned from this experience is that I should get into the credit card
business. Maybe I'll check on some bank and financial institution stocks today.
With offers like this they must be making money.
Once again, those who understand interest earn it, those who don't, pay it.
is president of Simple Joe, Inc. which sells
the Simple Joe's Debt Eraser PC software. Debt Eraser can help anyone get out of
debt quickly and inexpensively by creating a
Rapid Debt Reduction
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