Mobody’s Business - The Finance Edition

*AN: This post is an expansion of several comments I have made regarding the credit industry and my personal experiences with American Express at Consumerist.com

I have an American Express Blue card. It used to have a $25K limit. I was laid off for 9 months and was not late and missed no payments. I missed a $13 gas card payment that got reported to my credit report. Shortly after, Amex pulled my credit, lowered my credit line to around $200 above the balance I am carrying and raised my interest from around 9% to 17%. For several months I have tried to get this bill paid down. Every time I would pay it down by $500, they would lower my limit by another $500. It’s been frustrating but since I am aggressively trying to pay this off I feel like I am hitting my head against the wall and getting nowhere.

I have had recently had trouble with this card. I was setting up automatic payments through their website so that the payment would be deducted from my checking on the due date each month. I thought, this way, it would never be late. What a nightmare it turned out to be. A payment was due on the 2nd of May, I checked my bank to see if it had posted, or was pending on the 5th, and there was no record of it. I went on Amex website to see why it wasn’t paid. Somehow, when I went into the bill pay area it processed a second payment. It clearly said there were two payments in process. There was no way to reverse it online so I called them. For over an hour I was on the phone with them. No way could they reverse the second payment. The CSR advised me to cancel it with my bank, so I did. The next day the second payment was processed, and the first one disappeared into thin air with no record that it had ever existed, and the one remaining payment was reversed by the bank I went back to the website, scheduled payment, and it went through the next day with no problems. I called them, told them what happened, they reversed my late fees.

The following month I again scheduled a payment for the due date. I checked the bank, no money deducted, no payment made. I called customer service, and they told me I never scheduled the payment. I went back on the computer, scheduled the payment again, and it went through the next day with no problems.

In July, I scheduled a payment for the due date, and the payment did not get made. Amex suggested that I sign up for direct debit to avoid any further problems. I signed up and was told it might take two billing cycles for the direct debit to take effect and I should just pay the monthly bill. I paid the $375 due with a phone payment. I asked them if any direct debit would include that past due amount. I was told it would be deducted from my next payment due.

Two days later I get my statement asking for $988. This statement included the $375 I had already paid. I called customer service and yes direct debit would start with the August 2nd payment. I was also assured that only the current amount of $613 would be deducted from my account.

On July 28 American Express deducted $988 from my bank account, overdrawing it by more than $700. First, it was deducted four days before the due date. Second, it was $375 more than I owed. I called American Express customer service again. They are always nice and understanding but unwilling and unable to do anything to help. Yes, they were wrong to take the more money than the current payment I owed them. But again they were powerless to do anything on their end to reverse their mistake. Again the advice was to stop the ACH at the bank. I was able to stop the payment, but then Amex put it through a second time on the actual due date and left me with $42 in the bank for the weekend till I could go back to the bank and put another stop payment on the ACH.

The end result of all this, my payment was deemed “late”, I was charged a fee for that, then they re-assessed my account and lowered my limit to $300 below my current balance, advising me that no over limit charge would be assessed and increased my interest rate to 27%. When I told them what happened at the website, they all but called me a liar. However, they told me that they will not charge an over limit fee the first month since they were the ones who lowered the limit. Nice.

I have been fighting a losing battle with them for 4 months. It has resulted in my bank account having $988 deducted twice from my bank account, even though I only owed them $613. They are always nice at CSR, but the answer is the same. Can’t lower the interest rate they boosted because of their mistake, nor the ding to my credit by lowering my limit to less than the balance I am carrying.

I really do hope that there will be some serious credit reform and that the candidates and congress are not just blowing smoke. Even if it is a small percentage of credit users these laws would affect it would make the idea of actually paying one’s debt more realistic and manageable. But I am not getting my hopes up too high. My feeling is that the first thing that should go is the 30% + interest rates. There was a time when there were caps on how much interest could be charged. Any thing over that was called loan sharking. These days its standard business practice. Look to our lawmakers. Hillary calls for a cap of 30% interest. Obama so far won’t commit to a number. I don’t know what the future will bring, but one way or the other I will pay what I owe.

American Express is not evil, but the credit card companies that use predatory practices, like double cycle billing - which charges interest on money you already paid off, changing due dates to trip you into late payments, boosting interest rates because you are maxed out on a different credit card, etc. are evil practices that must stop. They prey on the ignorant, and make money hand over fist, and when they get in trouble, they go to congress for a bailout. When I get in trouble, they are like sharks smelling blood in the water. They hijack my bank account, call me a liar, and jack my interest rates to usury levels. Thanks Amex. So as soon as I pay this pig off, I am done with credit cards for good.

Failure should be our teacher, not our undertaker. Failure is delay, not defeat. It is a temporary detour, not a dead end. Failure is something we can avoid only by saying nothing, doing nothing, and being nothing.

~ Denis Waitl ~

Since I started this journey of financial enlightenment, I have looked for ways to consolidate my high interest debt into a lower rate. As it stands I currently cannot qualify for any credit card that is worth having - low limits, high interest rates, fees on top of fees and the systematic throttling by every card I hold has kept me at a standstill. Progress is slow and frustrating and there have been many setbacks. Every time I get $500 in my emergency fund it is needed for “something”, mostly car repairs. Then add into the mix the price of gas and my 36 mile one way commute and its pure disaster. So at the 7-month mark I feel no better off than I was when I began all this in January. But that is not entirely true. I have caught up all but one of my lagging payments, paid off two very small credit cards, about $1000 combined, and that for me is a small victory. But the problems continue. Right now, each and every one of the cc’s I hold has raised my interest rates, and lowered my available credit to just above or just below my current balance on each card. This makes my credit report look like I am maxed out on every card. But when you owe 2100 on a card with a balance of $5000, then they lower my limit to $2200, times 5 cards is making my score drop like a lead balloon. Then the card companies pull the credit react to the changes, dropping my score even lower and begin the process again. It’s a vicious cycle. I wish I did not have to deal with them, but for now, there are few alternatives if you are not a homeowner, even that might not get you any relief.

Since I started reading personal finance blogs I keep hearing a lot about peer-to-peer lending. Prosper.com, Lending Club, Zopa.com are all P2P lenders in one form or another. I like the grass-roots notion of taking the loan process back to the people so I decided to check them out.

Lending Club is not currently accepting new applicants and there is no timeline for them to resume business.

My credit score is too low for Zopa, so that was a dead end for me.

I went to Prosper’s site and had a look around. Signing up was pretty easy. Getting verified was rather annoying. I was asked for the same items over and over again. Even though I sent .pdf scans of the requested items they for some reason could not be opened or read. I had to fax things and there was no alternative to faxing (my workplace records all faxes sent out and we have to put in a password to use the fax machine) So I ended up having to pay to have items faxed over and over again. They would not accept my passport as a valid ID. They would not accept my pay ordinance (which is a legal contract) as verification of my employment. But in the end I got verified. I am glad that they make a painstaking effort to verify your information. It may be anal, but perhaps that is why they are so successful.

Prosper is a bit like ebay in that you list your request for a loan, people bid on it, and it either funds or it doesn’t. In all, I listed 4 times before I got a loan funded. I had hoped that by getting a lower interest loan I could make some actual progress in paying off my debt.

In the first listing I asked for $2500.00, probably too much for a first time borrower. Even though I read the tutorials and looked to other people’s ads in similar predicaments, I was still in a learning curve. The listing ran for a week and got 4 bids. I didn’t go too much in detail, tried to be honest, short and sweet but it didn’t get the job done.

The second and and third listing I asked for $7500. I jumped up the amount of the loan because again, I was trying to make a serious dent in the interest rates I was paying. I expanded my information, pretty much laying everything on the line in the hopes of something coming of it. But for a first time loan, it was too much to ask for with the credit rating I had. I got one bid.

For the fourth listing I decided that I would just experiment. This time I listed for the $1000 loan minimum. It funded easily but the amount is so small it really only bailed me out of a short-term crisis and did nothing to help toward my real debt. So for now, I am paying the loan, paying extra each month. I plan to pay it off in 6-9 months. I think I have to wait 9 months before I can list for another loan that might actually help me. I am also hoping to demonstrate my ability to pay my bills, keep my promises and establish a history with Prosper.

I feel that my overall experience with Prosper is positive. I believe in what they are trying to do. I have no regrets going down this path as nothing worth attaining comes easily.

I have recently signed up for Revolution MoneyExchange, which is an alternative site to paypal. They are trying to build up users, so they are basically giving away $25 just for signing up. You can cash out the money even if you never use the service. (I think there is a small fee of a couple of bucks to get the money by check, no fee for bank transfer) Anything that sticks it to paypal, and gives you free money, is worth a look in my opinion. And if you sign up using this link, you get $25 bucks, and I get $10, woohoo.

I think its important to set some goals in my attempts to get out of debt. They are not much different from what I have read elsewhere. I just need to put them down to keep some focus.

• Live within my means, do not spend more than I make.
• Make a budget
• Pay off credit cards
• Pay off car
• Save money for retirement
• Stop spending on frivoulous items and things I do not need
• Stop eating out at restaurants as much

I’m sure I will have to revise this list. My best friend of 30+ years and I have been talking about what we will do when we retire. For the past 10 years or so that dream has included opening a restaurant or a hotel with a restaurant. As part of that I started setting aside a small amount of money each month toward that goal. I think a good plan to avoid failure is to have something to work for. This is what I am working for.

I’m so broke I can’ t pay attention.

Why am I broke? Because I didn’t pay attention.

Last December I had an epiphany. For the longest time, I have been in serious denial about my financial situation. I can handle it, I pay my bills, I make good money. So how did I end up nearly $150,000.00 in debt? I ignored it, I made all kinds of excuses. But the bottom line is I did it to myself. I should know better, I am an accountant for pity’s sake! I should know better.  It took hitting absolute rock bottom for me to realize that I was never going to be able to survive much less pay off this debt the way I was going.  I realized that I actually had to see the where I was going with this, so I decided to start this blog to chronicle my journey out of debt.

The crisis that put me here started just before Thanksgiving, when I was out of town and I didn’t open a bill that would have told me that my minimum payment was $32 more than the automatic payment I had sent. That took all my fine balance transfers from around 4.5% to a whopping 35%, my minimum payment, just for that card, from about $300 to well over a thousand. That was just one card. Just to keep from going into a complete meltdown I had to re-mortgage the house (consolidating 3 of my cc’s) for $80,000. Bringing the payments down to a manageable fixed monthly payment. I still have a long way to go, and many other debts to deal with.

For months I was playing this game, cash advancing one card to pay another, but my time ran out. The moment I knew I really hit rock bottom when I received a credit offer in the mail at 97% interest (yep, really). I kept asking myself why someone who has always paid their bills (granted late a few times) never missed payments, isn’t worth anything in credit. For a while I felt like I was worth more dead than alive and if my life insurance didn’t have a suicide clause I would have seriously considered it. Then I came back to reality, stopped feeling sorry for myself and now I have committed myself to earnestly paying off my debts. So to keep myself honest, I am throwing my personal journey out to whoever cares to read it, while I spend the next few years digging out of this mess I made.

Well after a few missed starts, I have decided to go on with chronicling my personal finance journey.  It seems kind of daunting when there are literally hundreds of PF blogs out there.  I hit a crisis of major proportions in December of 2007, and decided at that time that a serious change was in order.  So, for the next few years, I am going to keep track of how I am getting out of the mess I made.  In the next few posts, I will start with how I got here, what I am doing to get out of it, successes, failures, attempts and anything else that really strikes my fancy.  Hope you find something in here useful.

Mo