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Tuesday, May 21, 2024   

Manipulating the System
by Scott Bilker
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about and DebtSmart can be found in the online media kit.
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Scott Bilker

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.

On Monday, 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?"

I told 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 current banks.

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 money!"

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.



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