What is an acceptable amount for cc fees & interest?

[Anonymous]

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.

[Anonymous]

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.

[Anonymous]

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.

[Openwater]

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!

[RSX]

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.  

[Anonymous]

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. 

[Anonymous]

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.

[Anonymous]

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@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.

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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. 

[Anonymous]

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. 

[Revelate]

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.