To: GEORGE/anyone

Discussion in 'Credit Talk' started by Jim, Apr 25, 2001.

  1. Jim

    Jim Well-Known Member

    I hope you are still on the board. Someone said that you had left. Anyway, a question for you or anyone?

    Someone said that in his/her opinion, the credit card companies are raising the apr. on open accounts when the consumer has committed themselves to pay 15% of their available income on non-mortgage debt. Example Income $60,000 x .15 = $9000 / 12 =$750.

    Therefore, buy a luxury car and run up your cards to total $750 per month and your apr. is raised.

    Does anyone have an opinion?
  2. john

    john Well-Known Member

    I really need to get back to doing some work but I would like to offer an opinion on this.

    I would agree that your numbers look about right.

    If you make 60,000/year then

    Taxes: 12,000/yr
    SS Taxes: 4,000/yr
    Mortgage-PITI: 14,400/yr
    Other: 9000/yr(750x12)
    Utilities: 2400/yr
    Misc(food, vacation, medical, whatever) 12,000/yr
    Savings: 6,000/yr

    Grand Total is right around 60,000/yr

    These are just some really rough numbers but yes I could see where someone like this be perceived by the credit card companies or any other lender as being of greater risk than a diffrent borrower with similiar obligations but with a substatially higher income.

    I think the number that really should be of concern is the ratio -

    Total Monthy Obligations divided by Monthly Gross Income.

    That ratio for this example would be around 53%. That is really high and indicates a greater credit risk.

    Again these numbers I just pulled out of the air but I don't think they are too far off from real life. And of course there are many other things like tax mortgage interest deductions that would impact the bottom line that I haven't accounted for.

  3. Jim

    Jim Well-Known Member

    Thanks John

    GEORGE was hot to trot because the apr. on one of his accounts was being raised without explanation. I think this 15% threshold may have some relation to his problem. If my fictional example here got a credit card in 1990 when he only made 30K he could be in even bigger trouble. After all, how would the cc company even know he makes 60K now?
  4. creditwork

    creditwork Well-Known Member

    Re: Thanks John

    I have never made over $52,000/yr. I have only one card with an APR above 15% and I have that at zero balance. It helps that I have have 18 or so accounts and when they raise my APr I simply pay the card off. Chase tried it, when I paid them off, they promptly contacted me to offer 4.9% APR for 1 year.

Share This Page