Why does someone who has good credit have a credit card that charges 20%+ interest?
If she does have good credit, I would expect it to be more like 10-12%.
I went a long time without (saved up money before going to school, to pay for it, etc.) But when I bought my car, I decided that wiping out my entire account didn’t make sense. So I paid it off in ~8 months (but did pay interest).
I’d stay out of it entirely if I was you.
That’s what I’m thinking.
After my bankruptcy went through years ago, the first credit card I got coming out of that was in the neighborhood of 20% (with a $250 limit).
If she really doesn’t want to pay any interest, with good credit I’m certain she would have no trouble getting a new card with a 0% balance transfer.
Don’t loan money. Period. You’re not a bank. Give her as much money as you’re prepared to never see again. If that’s $0, so be it. If she pays anything back, that’s a bonus.
Private individuals simply aren’t in a good position to evaluate risk, especially when family or friends are involved, and they don’t have the legal chops to negotiate contracts like “I get X% equity in your house if you fail to repay the loan in Y months”. If you can competently evaluate financial risk and write enforceable legal contracts, and have significant experience doing so, then for my purposes you are a bank and shouldn’t listen to what I say. But for the vast majority of us, don’t lend money!
In which case, it’s only a matter of $150-$200 bucks, which really isn’t worth worrying about since the sister can come up with $3000/month to pay this off anyhow.
Perhaps the sister is cutting back on unecessary expenses until everything is paid off? If I were in the OP’s shoes I would rather treat my sister and her family to a few dinners out, or otherwise pay for the creature comforts she is temporarily foregoing. Everybody wins, and there’s no need for the anxiety of loaning money to family!
SIL is loaded; she’s just not liquid. Rather than break into her investments, she’s going to get a loan of $6,000 from her CC. She’ll pay $3000 on time (before the due date) toward the 9K debt.
I just wanted to tell her how much this loan is going to cost her. I’m sure that when she finds out how little it is (at least to her), she won’t mind paying.
The suggestion above to get a new card with a 0% balance transfer option is a good one and may be worth it in this case. It is trivial to do these days if you have good credit like she does. I play different types of games with credit cards and never pay interest or other fees but I would if I found myself in her position. I have multiple credit cards begging me to take advantage of large balance transfers at 0% interest for the first year or so. I have never used them because I have never had the need to but all it takes is a simple online form if I needed to.
If you always pay off your balance in full, the interest rate is of little concern. My FICA score is about 800 and I always pay off in full. I chose the best card for me, with cash back, and had no clue as to the interest rate. Just looked it up: 17.5%
Agree with this, my wife used to move our credit card balance around for 0% interest for a while when we used our card to finance some remaining homebuying expenses. We could have paid it off more quickly if we absolutely had to, but 0% interest is 0% interest.
Absolutely! Why create unnecessary drama?
To me, the most relevant fact in the OP is the one that nobody has yet mentioned : the simple statement that “she can pay it off in 3 months”.
And then what follows is a classic SDope-appropriate thread with calculations of interest rates, and facts about refinancing,etc, etc etc----
All this effort expended—over a minor, minor problem that will completely solve itself anyway within 3 months, and maybe cost as much as a hotel room and a dinner.
This. Or less. Our long-term card are all well under 10%. (Business spending card and the miles household spending card are around 12% but never carry balances.)
20-25% is “college student who hasn’t completely screwed up yet” territory.
Yes, the interest rate is really high, but as has been said if you always always pay off the card every month the interest rate is irrelevant. So there’s been no need for her to find a card with a lower interest rate since this is the first time she’s ever carried a monthly balance.
If it’s worth the hassle she can find another card with a low rate, or with a low introductory rate, and save herself a few hundred bucks. Up to her to weigh the benefits with the hassle.
I have two major thoughts on this:
- Never loan money you’re not willing to simply give, especially to friends or family.
- Paying a little interest over time is a good thing for your credit score. Paying the balance off all at once will not give the same boost to a credit score as a string of regular, on-time payments higher than the minimum. Hard to say whether the SIL would benefit from that or not. Remember, a credit score is not really a measure of financial responsibility - it’s mostly a measure of how profitable you are to banks.
Back to the OP. So did your SIL ask for your input or advice? Or are you butting in or trying to control the situation?
Nobody knows exactly how credit scores work except for the people that design them but the above isn’t true. You don’t need to let balances revolve to get a boost to your credit score. What you do need to do is charge things regularly and make payments less than 30 days late but they do not factor in interest paid at all. Paying the full balance every month works at least as well and usually even better because carrying a balance also affects your credit utilization percentage.
Anyone can join www.creditkarma.com for free. It is legit and reputable. It gives you multiple versions of your credit score for free weekly if you want it along with the factors that are affecting it positively or negatively. Revolving balances are not listed anywhere among the factors. I have studied my own scores closely for years as a kind of real-life video game and have tried to see how high I can get it. I have it up to 827 out of a possible 850 now. That is absurdly high and pointless but it does mean that I never have to worry about not qualifying for any credit score based offers that I want.
She doesn’t live with her husband (long story) so she sometimes comes to me (her sister’s husband) for advise on things that some wives might ask their husband about. She lives nearby and is close to her sister (my wife).
BTW I am* not* saying that females generally do not know about finance. I am just saying that my SIL in this case, asked for some advise.