Thursday, November 05, 2009

Cost of Borrowing

Here is a chapter from my book TKL Financial Planning. It advises young people to build up some savings and avoid spending on credit cards,which carry a high rate of interest.
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2 comments:

Vincent Sear said...

If you're really into a credit card revolving credit spending lifestyle, there's a way to half your credit card interest.

Since you've already qualified for a credit card with your bank, ask for an overdraft checking account (commonly referred to as "ready credit" as popularised by Citibank in the 80s). Your bank would be happy to grant you one with credit line equalling your credit card.

Credit card interest is usually about 24% p.a. Overdraft interest is usually about 12% p.a. Sign a GIRO form to pay your credit card bill every month in full from your overdraft account. Don't carry any debt on the credit card. If you have the money, pay off the overdraft account monthly too. If not, carry your debt there at a much lower interest rate.

November 05, 2009 2:00 PM
Vincent Sear said...

Another thing, whether credit card or overdraft checking, don't pay annual fee. Call up the bank and threaten to close account at every annual renewal regardless even if your expenses don't qualify for fee waiver as stipulated.

The bank would then look at your business volume generated. They'd most probably agree to waive as long as your account has some activities in the past few months.

The only type they might refuse to waive is the >12-month inactive type. However, if your account is >12-month inactive, you most probably don't need the account anyway and would be wasting away your annual fee payments.

November 05, 2009 2:10 PM

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