My Grandad always used to say, “Take care of the pennies and the pounds will take care of themselves.”
He was obviously English and referring to the British monetary system but the concept is clear no matter which currency it’s applied to: Little amounts saved can add up to a lot. And that can make a big difference when it comes to meeting not just your financial goals but personal goals as well.
The inspiration for this post actually came in the form of a credit card statement ~ when I realized my interest rate had just TRIPLED for no apparent reason.
I never used to really understand or pay much attention to how the credit industry worked. I never really felt I needed to because I almost always paid the entire balance during the grace period so I didn’t have to pay interest or late fees or over-limit penalties. I also never used to ask questions. I just assumed there was a good reason for the changes, that it was my fault, and that I, a lowly borrower, was powerless to do anything about it. Remember The Golden Rule?
Well, not anymore. I’ve taken a keen interest in everything credit-related over the last few years, especially with the Great Recession and as the new federal regulations started coming out. I began tracking cards and rates, watching every statement like a hawk. I now review and verify new charges, avoid pre-authorized bank or card charges wherever possible or set email alerts to follow up free trial periods so that I cancel on time if needed. And I always, always, ALWAYS check the interest rates.
Twice in the last two months I have noticed rate hikes and successfully called the credit card companies in an effort to get them to lower the interest rate. Through this process I have learned that most credit accounts are set up on various automated systems. One involves a periodic, random check that is based on an inquiry into your credit report. Any kind of change to your credit (new card, job, even an error) can trigger a hike to a predetermined default interest rate, regardless of your past history with that card or company. The new rate is applied immediately and without notice.
Another automated system involves the payment due date. In the past, many companies would forgive a payment that posted a day or two after the due date. Not so anymore. Additional fees are typically set to apply immediately and are often accompanied by an automatic interest rate hike. I realized this after making a payment through my bank website instead of the company website. Because of the weekend, it delayed my payment beyond the due date and triggered an automatic rate hike.
As expected, the first response to both of my calls to request a rate reduction were negative. It pays to be calm and persistent, though. Fortunately, I have excellent payment history and was able to use that to my advantage. After asking for manager review and assistance, I was able to successfully get both rates adjusted back down to their original levels (along with my blood pressure!)
The interest rate reduction was extremely important because I was carrying a balance on both of the cards at the time. The tripling of the rate meant that my minimum monthly payment would more than DOUBLE from the original amount and would have resulted in TRIPLE the amount of total interest paid for the year.
Remember, this is happening immediately and without notice. More importantly, it is happening regardless of actual payment history. It might have gone unnoticed and unchallenged had I not been in the habit of reviewing and tracking the charges and rates.
Obviously, these hikes would have affected my own overall cash flow. But, in this global, interconnected world, that isn’t the end of the story. It could also impact the financial situation and daily lives of several women in developing countries who have benefited from the micro-loans that I’ve been able to contribute to since I was introduced to Kiva, an incredible micro-finance organization. The few extra dollars that I am able to save in interest can literally mean the difference between a child somewhere being able to attend school or not, or a family’s ability to put food on the table each week.
A few dollars saved here and there may not always seem like much or worth the trouble. To some, it might even be looked at as penny-pinching or cheap or just plain anal-retentive. To me, it’s about meeting financial and personal goals, without having to compromise one for the other. Who knows? Maybe Grandad was right about the pennies and pounds after all. In the grand scheme of things, that little bit just might make all the difference in someone’s world.
- The Golden Rule (investstratcre.wordpress.com)
- How many credit cards do you need? (confused.com)
- What Makes a Bad Credit Card Terrible? (applyforacreditcard.com)
- How to Really Manage Your Credit (online.wsj.com)
- A Little More Than the Minimum (thesimpledollar.com)