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Did my roommate just do what I think he just did?

January 8th, 2007 at 05:49 pm

So for anyone who does not recall part one of the diabolical roommate saga, here is a refresher.

Last September, roommie got a shiny new AmEx Blue Cash credit card with a 15 month 0% introductory APR and $3700 credit limit. He got it specifically so that he could charge a $2000 LCD projector on it during October. His plan was to pay $200 per month while the 0% APR lasted.

Now, I had doubts that he was disciplined enough to stick to that plan, but you never know. He was very proud of the fact that he has no signficant credit card debt.

Fast forward to last week, and two clues emerged that indicate how his plan went badly awry.

Clue one. Last Thursday, we went to Costco, and I had a $14 bill. Since Costco only accepts AmEx, I usually let my roommate charge my bill on his card so that he can get the rewards, and then I pay him back via bank transfer, usually on the same day.

That day, however, he didn't want to charge my bill anymore, saying that his balance was already $3000, and he didn't want to increase it further. I was a little confused. $15 was not enough to drive him over his credit limit, so either his actual balance was much higher, or he had plans to charge more on his card later this month.

Either way, it revealed that he has not been paying off his balance.

Clue two. The next day, he tells me that he got hit with a $30 late fee for not paying his AmEx balance on time ("Late Payment Fee: Subject to applicable law, $15 on balances less than $100, $29 on balances of $100 to $1,000, and $35 on balances greater than $1,000"). I told him to call and get it taken off, but he didn't want to go through the trouble.

In a fit of curiosity, I checked out AmEx's terms and conditions for his particular card, and ran into the following (my emphasis):

"Your account is reviewed monthly and will be considered in default if minimum payments are not timely paid one time, or seriously in default if minimum payments are not timely paid two or more times, your account is overlimit three or more times, or your payment is returned by your bank or financial institution. ... The introductory APRs and any other promotional rates will terminate upon your account being considered in default or seriously in default and the applicable Default APR will apply."

And then: "The APR for defaulted and seriously defaulted accounts is determined monthly by adding 12.99% and 21.99%, respectively, to the Prime Rate."

Source.

I'm still trying to wrap my head around this. Now I'm not sure if what I THINK happened actually DID happen, but if it did, he has seriously cooked his own goose.

It would mean that he defaulted on a $3000 balance and forfeited his introductory 0% APR for whatever "Prime Rate + 12.99%" must be. And while I have no clue what the Prime Rate is, it's probably not pretty.

Can this train wreck get any worse?

7 Responses to “Did my roommate just do what I think he just did?”

  1. Amber Says:

    yes it can, be careful...just make sure he keeps up his end of the agree with you as far as rent and utilities. It is easy to get into debt and hard to get out that is why I am paying cash for everything, thank Go I am CC debt free

  2. amberfocus Says:

    We have separate leases, so his ability to pay rent isn't a concern for me, thank goodness. All the utilities accounts are in his name, so as long as I pay him my share, any defaults on the bills will be in his name as well (unless he gets us cut off or something, which it hopefully won't come to).

    When it comes right down to it, it's not that difficult for him to dig himself out of this particular hole if he has the discipline to tighten his belt for a few months. He has enough disposable income to pull it off.

    I'm actually more worried that he's going to get fired for never doing any work. Then, he'll truly be in a pickle.

    ~mimi

  3. Personal Finance Guide 101 Says:

    HI mimi,

    Hope your friend will not get into trouble! because CC Debt is not good if it wasn't spent for something good. Well you better let him know about whats going wrong....will you? Oh yeah you have nice blog with interesting posts.....

  4. amberfocus Says:

    I'm not sure if I feel comfortable telling him... I feel pretty stalker-esque already, looking up his credit card terms and conditions, drawing conclusions, and then--here's the kicker--posting them on a blog (albeit anonymously). I'm kind of embarassed that I even know. After all, part of me feels like it's none of my business. Telling him would just be... awkward, like, "Hi, I just nosed into your personal business, and now I'm waving it in your face."

    Should he know? Definitely. Should I be the one to tell him? I don't know. I kind of like the "polite fiction" he and I have going on here, where we tacitly stay out of each other's hair regarding our differing opinions on how to manage finances. I mean, AmEx should let him know one way or the other, right?

    ~mimi

  5. Finance Guide 101 Says:

    Well you know exactly what you have to do and how to tell him... here you are trying to help him not pointing at him and telling like he is doing wrong.... Politeness always works. It's better to tell him before, because it's waste think about something, which already happened

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