Credit Cards for Dummies?


Use With Caution

Credit Card Disclosure

Over half of Americans don’t understand what percents are or how they work. They might think they do, because they can tell you 50% means “half”, but they can’t answer the very easy question of how much 25% of 8 pennies is.

Half of Americans can’t read well enough to really understand what they’re reading.

People who can’t read well or can’t understand what a percent is cannot understand today’s “disclosure” documents when they take out a loan. A disclosure document is the piece of paper that says you understand the rules for borrowing money, and you understand what might happen to you if you don’t pay it back, or don’t pay it back quickly enough.

But if you can’t read well, or understand math well, you do NOT understand what might happen when you borrow money with interest due.

(That includes when you get a credit card. Every time you use a credit card, you are borrowing money.)

The only way to be fair to all Americans–the ones who read and do math well, and the ones who don’t–is to write the clearest disclosure papers ever (and to start educating our children in math and reading when they are preschool age instead of waiting until it’s harder for them to learn).

YOUR LOAN

We are loaning you our money so that you can buy something you want now, even though you don’t have enough money now.  You’ll have to pay us back not only the money we loaned you, but also extra money.  Interest is name for the extra money you will have to pay us back.

Interest uses a percent, or interest rate.  Different percents work different ways, but here is one example: If you borrow ten beans, and the interest rate, or percent, was 10%, you would have to pay back ten beans plus one more. If the interest rate was 20%, you’d have to pay back ten beans plus two more.

What if the interest rate was still 20% but you borrowed MORE beans?

BEANS   Extra Due (Interest Rate 20%)
10                       2
20                       4
30                       6
40                       (How many extra beans do YOU think?)

The more you charge on your credit card (the more money you borrow from us), the more interest you’ll have to pay us.

Let’s say your interest rate is 9.99%.  That looks like a big, scary 999% but the . after that first 9 means it is really very close to 10%, so let’s pretend it is.  At 10% interest, if you charged, or borrowed, $100, you’d have to pay us back $100 plus ten dollars extra in interest.  But if you charged $1,000, you’d have to pay us back $1,000 plus ONE-HUNDRED dollars in interest.  You can see that interest really adds up when you charge a lot. 

If you don’t pay your whole bill every month, you’ll have to pay even more interest: You’ll pay interest on any new charges, just like always, but you’ll also have to pay more interest on the leftover billed amounts you haven’t paid for yet–the ones from last month that ALREADY had interest amounts added in to them last month!

That’s right: The credit card company charges you interest on interest. Yes. We calculate interest all over again on the same money we calculated it on last month, and add that NEW interest in on top of the OLD interest that was charged for the same borrowed amount!

There are different kinds of interest and different ways of computing it, but this gives the main idea.

We can change your interest rate, or percent, each month if we want.  Sometimes, the more money you owe us, the more we will raise your interest rate, so that your Total Owed, or debt, grows bigger even faster. This can feel scary if it happens to you when you owe a lot on your credit card.

Besides interest, if you pay a credit card bill late, or even if you pay on time but pay less than the “Minimum Payment” amount shown on the bill, you’ll have to pay us late fees as a punishment for paying late. (This is because when you pay your bill late, it costs our company money, so we charge you extra money in late fees–that seems fair to us.)

Interest and late fees can make your credit card bill get high very quickly.  Try to pay your bill on time and pay everything you owe all at once.  If you can’t, try to stop buying things using your card until your your whole bill is paid off and your Total Owed is $0.   Sending extra payment amounts—even small ones—helps pay your debt faster.  Some people send their tax refunds.

To Think About:

If you do have any extra money sitting in a savings account (money not being used for everyday needs, or reserved for emergencies), that money is not being saved.  It is being lost.

Until all credit card debt is paid off, saving money is losing you money. That is because what a bank pays you in savings interest is never as much as what a credit card costs you in interest and fees for the money you’ve charged (borrowed) from the credit card company.

(Figures below totally bogus–just used for an example.)

.

The Reveal Card
Total Owed (Debt):
$10,724.23                                                                           (CALCULATIONS AT BOTTOM)
Payment Due Date:
April 23, 2011
Payment Choices:                                                               (ESTIMATES)
$10,724.23 will pay your entire debt now
With No New Charges:
$     1,281.90      a month will pay off your debt in 1 year. 
$        742.56      a month will pay off your debt in 2 years.   
$        299.99      a month will pay off your debt in 3 years     (“MINIMUM PAYMENT”)
$      199.99     a month will only keep your debt the same size.
Any less than that will make your debt grow bigger, and,
If you keep using your card, even BIGGER payments will be needed.
____________________________________________________________
CALCULATIONS
A.  $aa,aaa.aa   Still unpaid from your last bill
B.  +  b,bbb.bb  New charges for this month (the “posted” ones we know about) 

C.  $cc,ccc.cc    Unpaid plus new charges 
D.  +    _  ii.ii  The interest amount we’re charging you (cc,ccc.cc  X  pp.pp%)

E.  $10,724.23   Your new total debt, or Outstanding Balance

Your card’s interest rate, or percent, is now pp.pp%.  Your card uses the average daily balance method to calculate the amount on line “B.”. 
(All your charges for the month divided by the number of days in the month).

(Orig. posted 4/22 on Blogger)

edited 2013/11/22 to add an excerpt, try to improve readability

The Wordy Shipmates, Sarah Vowell


In 1630, John Cotton, the leading mega-rock star of his time, saw off the departing Puritans headed for the Massachusetts Bay colony with a sermon based on the idea that they were God’s new chosen people. 

It was okay to move to a land that was already occupied by other people (notice that these forward-thinking folk did fully acknowledge the equal humanity of the Algonquin Indians) because:

God had said it was okay when Abraham horned in on the Philistines without paying them for their land.  The God-given excuse back then applied now:

“There is room enough.”

The colony’s official seal, brought with them from England, pictured an Indian in a loincloth holding a bow in one hand and an arrow in the other, with words saying

“Come over and help us.”

No, Seriously. I Offer My Wrists Freely. Shackle Them. It Will Help Me.

It’s from a vision of St. Paul where a Macedonian says to him “Come over into Macedonia, and help us.”  (Sarah adds some good snide commentary about how how unwanted help in the affairs of others became a U.S. speciality.)

https://i0.wp.com/upload.wikimedia.org/wikipedia/commons/thumb/d/de/Massachusetts_Bay_Colony_1930_Issue-2c.jpg/300px-Massachusetts_Bay_Colony_1930_Issue-2c.jpg

“Come Over and Help Us Be Conquered By the U.S. Post Office”

How William Tyndale Got Double-Screwed

William Tyndale is the English Protestant who committed the crime of translating the Bible into English (in 1524, in case you’re a date freak).

Henry VIII executed him for this twelve years later, in 1536 (which was two years after Henry had broken away from the Catholic church because he wanted to f*ck Anne Bolyn so badly and get a legitimate male heir by her). 

Tyndale’s reported last words were “Lord, open the King of England’s eyes!”.

Clearly, his prayer worked, because in 1538, only two years after Henry executed him, Henry commissioned the first official Bible in English, the Great Bible.   Based mostly upon–you guessed it–the executed William’s translation.

Let's At Least Give Henry's (William's) Lovely Version a Glimpse



The Puritans Believed God Purposely Created Us Un-Equal In Order That We’d Love One Another

The idea is emphasized in a famous sermon known in brief as “Christian Charity” in which John Winthrop, the colony’s first governor, says that the colony will be “as a city upon a hill”–a model for others to follow.

Many politicians have quoted this.  Winthrop was quoting it from the Bible. 

He said God’s purpose in making us unequal was: “…that every man might have need of others, and from hence they might be all knit more nearly together in the bonds of brotherly affection.” 

Or, as Anne Bradstreet, a poet-wanna-be put it:

“As it is with countries, so it is with (people):  there was never yet any one (person) that had all excellences…God will have us beholden one to another.”

(What you’re bad at, I’m good at and can help you with, and vice-versa.)

Sarah Vowell’s comment on this:

“Because of the “city upon a hill” sound bite, “A Model of Christian Charity” is one of the formative documents outlining the idea of America.  But dig deep into its communitarian ethos and it reads more like an America that might have been, an America fervently devoted to the quaint goals of working together and getting along. 

Of course, this America does exist.  It’s called Canada.”

Why Roger Williams (Founder of Rhode Island) Doesn’t Get Enough Credit

Man, this guy was forward-thinking!  I had known he allowed freedom of religious practice in his colony.  But he didn’t even believe in ORGANIZED religion at all, and he also thought that the state should be so hands-off religion that even “the most paganish, Jewish, Turkish [Islamic] or Antichristian consciences” should be allowed.  
 
Back in that time in history, a man believed in tolerance toward ANTI-Christians?! 
 
Williams did believe that non-Christian religions SHOULD be fought against–but he thought the only weapon used should be “the sword of God’s spirit, the Word of God.”

What a cool dude.

At the Roger Williams Zoo in Providence, This Goat is Free to Ruminate About The Great Unknown in Whatever Manner It Pleases

The other extremely cool thing about Roger, to this once-and-still Linguistics nerd, is that he made a dictionary of the Algonquin language that was so good, it was still able to be used in 1936–THREE HUNDRED YEARS LATER (!).

A guy made his way entirely across Canada using it, communicating successfully with various tribes who shared dialect branches.
 
Sarah Vowell makes fun of Roger’s bad poetry, citing as one example “righteousness” rhymed with “wilderness”. 
 
But Sarah may have made an errah. (Oooh, Babe… 🙂 )
 
Old and Middle English poem sound patterns were often based not on rhyming (“lazy” – “hazy”), but on alliteration (“lazy”-“lady”). Vowels alliterated more often than consonants, like the weak “e” in “ness”.  A matching line pair might end with “happiness” and “blessedness”.
 
Perhaps the average educated person in Roger’s time (1640-ish) was okay with newfangled rhyming line pairs mixed in with the older alliterating-vowel line pairs.
 
So there, Sarah Vowell!   And you have a funny last name!  (But I liked your book.)

Here’s one of Roger’s little poems about the Indians he met, where you can see that two lines rhyme (stranger/danger), and two lines do…something else (mat/sent):

     I have known them leave their house and mat
     To lodge a friend or stranger;
     When Jews and Christians oft have sent
     Christ Jesus to a manger.

That Sneaky-and-Sweet Governor Winthrop
 
The Massachusetts Bay colony expelled Roger Williams for his evil nasty nastiness regarding religion (“How DARE he be tolerant like Christ!”), which is when he moved to the Rhode Island area.
 
Well guess what? John Winthop, governor of the colony that kicked him out, gave him advance warning that the Massachusetts folk were coming for him. Withrop even told him where it would be safe to go!
 
Winthrop never dropped a hint of this treason in his own journals, but Williams revealed it in his. The two supposed enemies kept up a warm correspondence until Winthrop died.
 
(At which point, Winthrop would, one assumes, have learned the theological truth from the Big Horse’s mouth.)
 
(Or not…depending on which ruminating goat you are.)


FOOTNOTE:
1. Tyndale on Bible Reading