Friday night and the
phone rings... you know the call, it's late, the last bite of
dinner on your plate, and all you want to do is watch TV and relax.
Guess who's calling? Yes, it's a mortgage company that's trying to
sell a refinance deal!
The girl asks about my mortgage,
my rates, and my credit card debts--and I do reply. After all, I'm
always curious about getting a better loan (plus, I like to throw
them off their scripts).
I ask her what their best rates are.
She tells me that it depends on my credit history. I said,
"Okay, say I have a credit rating like Bill Gates. NOW what's your best rate?" She said that she can't quote a rate;
however, the loan officer would let me know. So, I agreed to have the
loan officer give me a call.
while I'm trying to set up the new DVD player, the phone rings.
Guess who? It's the loan officer. Let's just call him Kevin. Well,
okay, so Kevin is really his name. I'm not going to change names to
protect the innocent.
Kevin starts his spiel about how he
can save me money on my $110,000, 30-year, 6 7/8% mortgage and
$15,000 of credit card debt. I asked him what his best rates are and
he told me it varied depending on my credit score, which he could
check if I tell him my social security number--I don't think so!
There's no way I'm giving that out over the phone. If his deal
sounds real, then I'll ask for paperwork to be sent through the mail.
I told him to assume that "my
credit history is the best of anyone on earth and in this universe.
Now, what is your best rate?" He told me 6.5% with 1 point.
He went on to explain that, unlike
other mortgage companies that ask for the 1 point at closing, they
"conveniently" include that amount in the mortgage principal.
I told him that 6.5% isn't that much better than my 6 7/8% (6.875%),
and when you throw in the 1 point, then your "best" loan
is really around 6.6%.
That's when he asked me what my
credit card rates are. I told him that my credit card debts are at about
1.99% APR, which are a little high
since I had the entire $15,000 at 0% for the prior 20 months.
Kevin said that I'm really not
getting 1.99% and that there's no way I ever got 0%. He said,
"Tell me where I can get those credit card rates?"
him to look in his mailbox. That's where many great credit card
deals are found. And most really good ones are offered from your
He still didn't believe me and said
that if I look at my statement, I'd see that I was really
paying 16% or more. I explained that when I had those 0% deals, my
credit card statement would arrive and show a balance of $15,000, and
under "finance charges" the total is "$0.00."
His response was, "Think about
it, Scott...why would a bank give you 0%. They're not making any
I said, "To get new customers."
Kevin then told me that
it doesn't make sense that they would do that. I said, "Well
then, does it make sense that Publisher's Clearing House gives
away $10 million, or that McDonalds gives away millions in prizes?
Why do they do it? To get business."
Why do the banks offer 0%? Because
they think that I'm going to forget that the offer ended and let my
rate bounce to 15% (or more). I'm not!
I'm simply going to transfer my
balance to another low-rate offer when their offer ends. Overall,
the bank will make money because most people (not DebtSmart
readers--we're all too "debt smart") are not going to
notice that the rates have been increased or will be too lazy to
continue transferring balances.
After I told Kevin how I keep
transferring my balances, he said pretentiously, "So you're
manipulating the system."
I said, "I'm taking advantage of
my best loan options. You just called me and are trying to get me to
transfer my mortgage and credit card debt to YOUR bank. If I decide
to use your offer, am I then 'manipulating the system'?"
That comment really caused Kevin's
brain to freeze up. Almost as locked-up as Windows 98 with 20 open
applications. He was forced to shut down and restart.
He finally replied with, "Well no."
"So then, if I use the other bank's offers, I'm
'manipulating the system,' but if I use your offer, then I'm not.
Is that right?"
Kevin said, "Well I guess you're
just being smart."
You see my friends, there is a stigma
about transferring balances. People say that you're "credit
surfing," that you're "manipulating the system",
"using Peter to pay Paul" (I don't owe Paul anything) or
"paying one credit card with another."
Hear me on this...DON'T listen to
these myths. Don't be brainwashed by this dogma! It's always
DebtSmart to use your best loan options! It's doesn't matter how
many times you switch cards. You're always going to save money when
you pick a better loan deal.
Kevin changed the subject by trying
to give me numbers for his refinancing deal. He said that my
payments, with his 6.5%, 30-year mortgage for my $110,000 would be
about $750.00 per month. Of course, with my calculator always handy--I told him that the payments are more like $695.28. In fact,
they are exactly $695.28. He said that he's including his 1 point
fee in the payment.
Well then, according to my numbers, the
payment is $702.23. I asked him how he's coming up with $750. Kevin
said, "It's obvious that you have a calculator there."
My response was "Yeah, I have a
calculator here. What do you have there? Whatever you have doesn't seem to be able to come up with the correct payment."
Finally, since he can't talk about
facts anymore, he starts to get emotional and says, "Look, I've
been doing this for years. I do this all day. What do you do over
there at Press One?"
"I write and publish books, I run a
web site, write an email newsletter." However, I never did mention
to Kevin the subject matter.
Lastly, I should say that Kevin was
nice, and I do want to thank him for calling because it resulted in
this informative article.