topic Re: What is an acceptable amount for cc fees & interest? in Credit Cards

What is an acceptable amount for cc fees & interest?

Anonymous — Tue, 28 Jan 2020 17:39:39 GMT

I know ZERO. If you aren't one of those people who PIF each month and never carry a significant balance, what is the range of interest you should pay on your credit cards. I'll use myself as an example. In 2019, I spent over 6 months paying my balances down and getting below 8.99% total ut. Then summer and winter vacations came and my balances are high. I did a review of my fees ($1,549.64) and interest ($807.48) for the 7 cc's and $26,900 (8.76% of) my total CL . If I only include the AF (CSP $50; Cap1QS1 $59; AmEx Aspire $450) and interest I get a total of $1,366.48 which is about 5% of my CL. So for a person trying to run fixed expenses through a credit card to get points and pay for vacations on credit card, what is an acceptable amount of fees and interest to pay?

I'm just looking at my past and current situations and feel like my outlook is going to be either I'm paying off credit cards 9 months out the year to spend on 3 months for several vacation OR only going on vacations every other year so that I save in order to PIF once the vacation spend posts.

Did I mention I was really close to wining the powerball on Saturday? Only missing 4 numbers but they were all close.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Tue, 28 Jan 2020 17:58:12 GMT

If not zero, then your rewards should at least exceed your fees and interest to make it a net savings overall. Otherwise the rewards are just an illusion.

Sounds like vacation every other year so you can PIF is the way to go until you can PIF all the time.

Or even alternating $$ vacations with inexpensive vacations like camping every other year.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Wed, 29 Jan 2020 14:24:54 GMT

The answer really is zero interest.

If you don’t PIF, then *your* answer is subject to your opinions.

Think of it this way - anytime you don’t PIF, anything you charged and that is now revolving is going to cost you more. Depending on how long you take to pay it off and the interest rate applied, that $4000 vacation could cost you double or triple that when all is said and done.

Fees, however, are all about benefits received for the cost of the fee. That’s a different animal.

Re: What is an acceptable amount for cc fees & interest?

Openwater — Tue, 28 Jan 2020 18:42:55 GMT

I agree that the real answer is 0, but sometimes you have to spread things out to live and vacation. I would definitely agree with @SteelerNYC that you really should exceed your rewards with AF. That's first and foremost, if you're not, I would re-evaluate those cards.

If you are getting the most for your rewards, then I would look at not the percentage of CL, but the % of interest for the total cost of the vacations. I think it would be better come up with a set amount that you are willing to pay for the luxury of the vacations and add it to the cost of the vacation (in terms of budgeting). If you're planning a $5,000 trip for example, say you're willing to pay $5,600 for the added luxury of interest cost associated with that trip. Then plan accordingly.

IMO that makes it easier to tolerate and give you a static figure from which to budget. Using a percentage would make it more difficult as you're assuming more cost the more you spend. With a set number you can get a more solid idea of what numbers work to pay of the debt on terms that are more manageable. At least that's how I would look at it. Best of luck!

Re: What is an acceptable amount for cc fees & interest?

RSX — Tue, 28 Jan 2020 18:54:54 GMT

I think $807 is too much

1. Plan to BT the amount when you get home, so you can pay 0% for 12 months

2. This may not apply to you,but I always advise people to not feel like they will never go back to a place again. What I mean is some people overspend on every vacation and say "Well I may never come back here again!" Enjoy your experiences, but spend like you would at home. Then you have a much likelier chance of being able to afford going back

i go to Mexico all inclusive every year. I book 2-3 months before and have almost paid off the trip before I even leave for it. Then I spend $2-400 when there at the very most. And that is half tips and half a day trip somewhere.
When I come home, I have not much to pay off ,which makes it easier to go back the next year. No stress traveling.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Tue, 28 Jan 2020 20:32:30 GMT

Here is my two cents:

When using any type of credit you are reducing your purchasing power in the future by increasing it now. Technically you should never pay for anything with a credit card that you couldn't pay for in cash UNLESS you can gain a better return over and above the financing costs (e.g., new suit that helps you get a job, or tools for work that bring in additional money, etc, etc).

Financing a vacation with a credit card will always be a bad decision because you will be paying that off during your non-vacation time of the year. And then when life happens suddenly paying down your card becomes less of a concern and the credit piles up. From reading your post you are thinking about credit card fees and interest but when you carry balances for a long time (or indefinitely) it puts your score in a position that whenever you apply for real credit (house, car, business loan) you are paying more in interest that outweighs your credit card debt because usually the amounts are far greater than a couple of thousand.

All of that being said to try to answer your question you HAVE to do the math. Annual fees are very easy and not subjective AT ALL. If you spend more on fees than you do in benefits for the card you should downgrade your card. Period. The banks expect you to not utilize all of the benefits that come with the annual fee over the course of 5-10 years and then your net net cost of having the card is negative. Too many no annual fee cards to ever pay an annual fee unless you run enough money through it without question to always benefit (forget prestige).

When it comes to APR you have to think about your personal cost of capital. For some people 8% apr is too much to justify holding while for others 24% might make sense. If you MUST finance something that doesn't produce a greater return (bad idea in general) no one on this forum can tell you what apr is good because it is different for every single human based on their options. You can get a general sense by looking up average APRs for certain credit scores so you at least know if you are getting ripped off and deserve better.

Also just fyi predatory banks like creditone offer sky high interst rates AND annual fees and very few cashback / rewards. They know genearlly their customers are going to finance and HOLD charges on their account and so they are making tons of money in the subprime market. Credit unions are known for offering lower APRs because they actually try to improve the lives of their clients. Prestige banks offer great rewards and also relatively high APRs to counter balance. A large number of their clients don't carry balances but when they do they get raked over the coals haha.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Tue, 28 Jan 2020 20:51:51 GMT

What other fees are you paying? If you subtract the annual fees that still leaves over $900 in "other fees".

As far as your original question I do not think your set up is ideal. You have a rewards optimization set-up but you are carrying balances. If you want to carry balances you need a set up for that. Meaning you need a low low interest card. Sub 8%. Preferably you need to also add either at least two cards that offer 0% or add a new zero 0% card annually. For example if you had a Discover and a CU card you could float the spend at 0% for 12 months. You budget to pay it off in 12 and the second card low APR card is in case of an emergency that does not allow you to pay off the cards. This is just an example.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Tue, 28 Jan 2020 22:57:26 GMT

@Anonymous wrote:
What other fees are you paying? If you subtract the annual fees that still leaves over $900 in "other fees".

As far as your original question I do not think your set up is ideal. You have a rewards optimization set-up but you are carrying balances. If you want to carry balances you need a set up for that. Meaning you need a low low interest card. Sub 8%. Preferably you need to also add either at least two cards that offer 0% or add a new zero 0% card annually. For example if you had a Discover and a CU card you could float the spend at 0% for 12 months. You budget to pay it off in 12 and the second card low APR card is in case of an emergency that does not allow you to pay off the cards. This is just an example.

Yep I try to always have a card running at 0% on purchases and I also have two CU cards that don't charge BT fees - NFCU and DCU - so if I need to carry something for awhile, I can do it on the NFCU Platinum at 7.49% at worst.

$5K at 7.49% paid off over 12 months in split equal payments of $433.76 only costs $205.17 in interest where paying an upfront 3% fee is $150 right off the top. 4% card is actually $200 and 4-5% is becoming more common. Most people don't do the math on how much BT fees are actually costing them.

I don't like to carry balances but sometimes it's a necessary evil so when I do, I get my interest as low as possible. I'm currently using a NFCU 1.99% BT offer. That same $5K would only cost about $54.06 in interest so if I time my 0% to run out around January, I can use my NFCU cards to get 0-2.99% (depends on which offer they run but they have one each year) for 12 months or I can use my DCU at 0% for 6 months (they seem to do this every year) if I'm confident I can get it paid off in that time.

I also don't believe in paying banks interest. I don't mind doing it for a CU but I refuse to do it for any bank.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Wed, 29 Jan 2020 09:57:43 GMT

Thank you all for the responses. I've been writting budgets for myself for years but last year was the first time I actually stuck to it. In the span of 3 months, I fell back into my old habits. Once I had my cc's down to 8.99%, the plan was to pay fixed expenses on autopay to one card and pay that statement balance the following month. I had a set amount for misc expenses and for savings. Then I wanted to go on a couple of trips and I guess my mind just went blank when it came to thinking about the next step. Now, I'm sitting in the garden, going to work and have an itch to go out of town this weekend. Part of me is thinking about what I want to do this summer. Then I look at my payback schedule (12-18 months). Then I get depressed.

I'm not in a situation right now to apply for low interest cards. I do have a CU cc but it doesn't have 0% offer, already has a BT balance on it and the CL isn't that high. I had another thread on here where I was asking about CHASE UR combined with Hilton AmEx ("View of Chase from the Garden"). Based on what I'm reading, I will have to lean on point redemption one year and PIF the following year. It really shouldn't have taken me so long to get my financial life in order. Having said that, the struggle is real.

Re: What is an acceptable amount for cc fees & interest?

Revelate — Wed, 29 Jan 2020 10:56:26 GMT

Generally speaking you shoudn't be carrying debt on a credit card anyway unless there's a promotional offer (0% or similar going on), you want to carry it on the lowest APR you have available.

Long term if you do need to use debt finance, setup instruments which aren't the typically 16%+ credit card APR's.

Using my own financial life as an example:

HELOC: 4.5%

PLOC: 11% (approximately haven't checked in a while)

CC's: 15+%

You might be able to get a CC with an APR close or below my PLOC; actually if I do wind up getting my crap together with NFCU (been focused on other things) if I do pick up a CC it'll be their Platinum and hoping for a sub 10% APR TBH.

Anyway, if I wind up with a cash shortfall, like I have right now, I can write a check off the HELOC and be paying interest at 4.5% than my default spender which I think is still like 18% where that balance is sitting now still in the grace period. Made the budgetting mistake of spending before I had the money in hand for taxes and some other things, then the project got delayed by 3+ weeks and that cash didn't materialize. Not happy, and my own fault, and it's either unwind positions or just write a check off the HELOC and be done with it which is what's going to happen if this project gets delayed again.

But that's how I finance things: if I can't cover the expenses immediately, I let it ride on the HELOC and that's usually my signal to get my poop in a group financially TBH. Tighten down, focus, and in my case get a different second job.

Re: What is an acceptable amount for cc fees & interest?

recoveringfrombk7 — Wed, 29 Jan 2020 12:53:30 GMT

@Anonymous wrote:

Or even alternating $$ vacations with inexpensive vacations like camping every other year.

Bk really changed things for my family and though I zeroed out consumer debt I still have 35k in private student loans and 175k in federal. We have a mortgage, two cars, and DH owns a small subscription-based business so income for him is not completely fixed. Now that I've finished school my income is 6 figures, but we have obligations as you can see.

We've reduced our trips to one across country this year by plane/hotel. The rest we camp. The investment was minimal in camping gear. We stay at KOA campgrounds which have all of the amenities of a really nice hotel, you just sleep outside. We have a no electronics rule. We hike and relax. The kids love it and we save A LOT of money. We are also on track to be entirely debt free in 8 years. Gotta pick what's important and it is different for everyone. The BK changed our life approach and we are finding that for us our new way of saving a lot, paying down debt aggressively, is somehow way more relaxing than the vacations we were taking. We do plan to travel the world once our obligations are met.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Wed, 29 Jan 2020 13:55:21 GMT

@recoveringfrombk7 wrote:
@Anonymous wrote:

Or even alternating $$ vacations with inexpensive vacations like camping every other year.

Bk really changed things for my family and though I zeroed out consumer debt I still have 35k in private student loans and 175k in federal. We have a mortgage, two cars, and DH owns a small subscription-based business so income for him is not completely fixed. Now that I've finished school my income is 6 figures, but we have obligations as you can see.

We've reduced our trips to one across country this year by plane/hotel. The rest we camp. The investment was minimal in camping gear. We stay at KOA campgrounds which have all of the amenities of a really nice hotel, you just sleep outside. We have a no electronics rule. We hike and relax. The kids love it and we save A LOT of money. We are also on track to be entirely debt free in 8 years. Gotta pick what's important and it is different for everyone. The BK changed our life approach and we are finding that for us our new way of saving a lot, paying down debt aggressively, is somehow way more relaxing than the vacations we were taking. We do plan to travel the world once our obligations are met.

Camping got 10x as great for me after moving to NYC. Such a relief to be unplugged and out of the city!

I'd generally camp in the same manner - a campground with facilities and the car nearby. I used to follow concerts extensively around the country, and camping was a great way to save money when seeing a multiple night run in a different city.

I've only just now gotten comfortable with spending some money after my BK on concerts and travel again. There are a few splurges this Spring and then I'm going to see how lean I can run things from summer through the end of the year.

I constantly run through what if scenarios in my head . . if I were to lose my job tomorrow for instance, how long can I get by? I won't sign a lease or a new car note. Always making sure I have options available for cheap borrowing if I need it. I need to reel in my disposable spending, but my obligations are in a place where I could live on $1000/month in an instant if needed.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Wed, 29 Jan 2020 14:19:15 GMT

@Anonymous wrote:
Thank you all for the responses. I've been writting budgets for myself for years but last year was the first time I actually stuck to it. In the span of 3 months, I fell back into my old habits. ....... Part of me is thinking about what I want to do this summer. Then I look at my payback schedule (12-18 months). Then I get depressed........

......It really shouldn't have taken me so long to get my financial life in order. Having said that, the struggle is real.

Habits are very hard to break especially when they have been set in place for potentially years. As I've said in other parts of this forum, every single American would have a perfect credit file 7 years from today if they started following good habits today. Learning new information about credit strategies is suprisingly the easy part. When you are alone with your family at home, or in the mall, or on Amazon and you know doing something would be a bad financial move but you do it anyway...THAT is the hardest part of the credit rebuild. Some people have great habits and life just hits them hard and their safety net wasn't big enough. I believe many of us in credit repair land have BAD financial habits so then even when life doesn't hit us OR it hits really small it really screws up our balance.

YOU HAVE TO FIX YOUR HABITS AND MAKE THAT A PRIORITY if you ever want to have a solid financial future. I know you can do it. You are showing the desire in this forum. You just need to find a way to hold yourself accountable and make the best choice every time you swipe your card.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Wed, 29 Jan 2020 14:21:32 GMT

If you don’t carry a significant balance, than why not PIF?

Re: What is an acceptable amount for cc fees & interest?

MrDisco99 — Wed, 29 Jan 2020 14:55:56 GMT

One of my rules when I started back on credit cards after being cash only for about a decade was that I would never pay interest. Three years later, I have a 100% record on that. If I can't afford to pay for it by the next statement date then I don't buy it. Thankfully, I make enough money now that sticking to that rule is not too difficult.

I save up my rewards (cash and points) and use those for vacations. My signup bonuses paid for my big splurge trip in fall of 2018. I now have enough rewards banked to pay for another big trip. We just need to figure out where we want to go next.

As for fees, I do have a few cards that charge annual fees that I still consider keepers. We occasionally do trips to neighboring states to visit friends or to see a show so the free annual IHG night gets used, making the $49 fee on that card a no brainer. I've also renewed the fees on my Amex Gold and Citi Premier because the points earning and benefits on those cards are worth it to me. All my other AF cards I typically cancel or downgrade after the first year is done.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Wed, 29 Jan 2020 16:08:55 GMT

@MrDisco99 wrote:
One of my rules when I started back on credit cards after being cash only for about a decade was that I would never pay interest. Three years later, I have a 100% record on that....

I save up my rewards (cash and points) and use those for vacations. My signup bonuses paid for my big splurge trip in fall of 2018...

x10000 Textbook example of proper credit card use. PIF and milk rewards.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Wed, 29 Jan 2020 16:57:01 GMT

@Anonymous wrote:
If you don’t carry a significant balance, than why not PIF?

For me, the balance began to grow when I had impulse spending. Want to go out of town for a weekend? Found a flight for $227. That yearly trip with my college buddy to Vegas? Extend your stay a couple of days for hotel and change fees of $1575. Then a couple more trips for your birthday and NYE. Another 2K in swipes. Now I've been paying my fixed monthly expenses but I have accumulated 5K of debt. Dividing that up over 12 months so that I don't feel like I need to dump my entire disposable income into that for the next 6 months.

Now I'm feeling paralyzed. Should I go out of town this weekend and use points for a hotel and pay last minute price on airfare? Do I go out and have a good meal? or do I just stay at home, eat grilled cheese sandwhich and tomato soup? for the next 18 months, then again for another 6 months so I can save for the vacation I want to take.

Re: What is an acceptable amount for cc fees & interest?

Anonymous — Wed, 29 Jan 2020 17:13:48 GMT

Sometimes situations arise where you need to take on debt. But until that is all paid off, no vacations. Vacations are a necessity when you work hard all year, but if you have debt, you cannot afford to do so, and they are then a luxury. Find out ways to cut other expenses so that you have more discretionary income, so that you can get out of debt faster. Then start saving money. Then take vacations.

I go on 2 or 3 vacations a year, most involve flights. But I prepay these (most of the expenses), so the trips are mostly paid well before I take them (the remainder of the expenses aren't due until arrival, such as rental car expense, food, activities, etc.). That's the best way to do it.

Get yourself to that point, and vacation expenses are worry free. But you must pay off debt and at least have a running start (savings) in order to do so.

Re: What is an acceptable amount for cc fees & interest?

spiritcraft1 — Wed, 29 Jan 2020 18:13:05 GMT

Interest is a tax on the working stiff that lines the pockets of fatcats. Save up a bit prior to be able to pay that balance off so that the Fatcats end up paying you in points, rewards or CB!

Re: What is an acceptable amount for cc fees & interest?

MrDisco99 — Wed, 29 Jan 2020 18:39:54 GMT

@Anonymous wrote:
@Anonymous wrote:
If you don’t carry a significant balance, than why not PIF?
For me, the balance began to grow when I had impulse spending. Want to go out of town for a weekend? Found a flight for $227. That yearly trip with my college buddy to Vegas? Extend your stay a couple of days for hotel and change fees of $1575. Then a couple more trips for your birthday and NYE. Another 2K in swipes. Now I've been paying my fixed monthly expenses but I have accumulated 5K of debt. Dividing that up over 12 months so that I don't feel like I need to dump my entire disposable income into that for the next 6 months.

Now I'm feeling paralyzed. Should I go out of town this weekend and use points for a hotel and pay last minute price on airfare? Do I go out and have a good meal? or do I just stay at home, eat grilled cheese sandwhich and tomato soup? for the next 18 months, then again for another 6 months so I can save for the vacation I want to take.

Living beyond your means will always catch up with you. You need to pay for it sooner or later and it's usually cheaper to pay for it sooner.