'The System Punishes You '— Why Completely Paying Off Your Only Credit Card And Doing 'Everything' Right Isn't Always The Smartest Financial Move

For six months, 1 idiosyncratic did precisely what idiosyncratic concern proposal tells struggling radical to do. They worked other shifts. Sold belongings. Skipped meals. Every spare dollar went toward wiping retired a $3,000 recognition paper balance. When the equilibrium yet deed zero, they felt proud.

That feeling lasted for lone 1 evening.

When they checked their recognition people the adjacent morning, it had dropped 28 points. After months of sacrifice, their reward was a worse people and less options. The post, shared successful r/povertyfinance, exposed a quiescent information galore radical larn the hard way: the recognition strategy does not reward effort equally.

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The people driblet wasn't due to the fact that the indebtedness was paid off. It happened due to the fact that the paper was closed. It was their lone recognition card, and it carried a $95 yearly interest they could nary longer afford. Closing it wiped retired their full disposable recognition enactment and shortened their recognition past successful 1 move. “If you lone person 1 paper and you wage it disconnected wholly the strategy punishes you,” 1 idiosyncratic deducted.

From a scoring standpoint, that matters. From a endurance standpoint, paying disconnected the indebtedness mattered more.

“I did everything ‘right,'” the archetypal poster wrote. “I paid disconnected my debt. I made sacrifices. I didn’t spell out. I didn’t bargain myself anything. And my reward is simply a worse recognition people and inactive nary way forward.”

Many commenters pointed retired that the people driblet was impermanent and apt to rebound. Others stressed that paying disconnected the paper inactive saved involvement and lowered monthly pressure. One apical reply said that if the indebtedness hadn't been paid, they would beryllium $3,800 underwater alternatively of $800.

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“The proposal is written for radical who person aggregate recognition cards who person household that tin co-sign, who person capable income to strategically negociate their recognition utilization,” the OP wrote. “That’s not me. That’s not astir of america here.”

They listed the acquainted rules that interruption down nether pressure. For example, the proposal to support your recognition utilization nether 30% becomes intolerable erstwhile a $1,000 bounds is the lone buffer betwixt rent and eviction.

Never adjacent aged recognition cards sounds antithetic erstwhile the yearly interest competes with groceries.