Wednesday, June 15, 2011

Simmons First

Simmons First has historically had the lowest Credit Card interest rates - currently 7.25% variable.  This small Arkansas Bank is the go-to place for low interest rate credit cards.

I recently received a credit card from Simmons First.    My Capital One card, with a 7.15% fixed interest rate, is slated to expire in November, and they have informed me they will not renew the card at the current rate - their new rates are all over 10% and variable.

This is odd, because my recent statement from Capital One offers car loans with a 2.99% APR.  But for a credit card, they can't crack that magic 10% barrier.

As I have noted time and time again, high interest-rate credit cards are like loaded handguns.   So long as you know what you are doing (and we all kid ourselves we do) and keep the safety on, they are safe.  But if you get careless - even once - then you can blow your brains out - or at least shoot yourself in the foot.

Simply stated, a $99 airplane flight isn't worth the risk of bankruptcy, and that is a very real possibility with free miles cards or cashback bonus miles, or whatever.  If you get into debt and can't make that monthly payment - bad things snowball and fast - faster than you can dig your way out.

22%+ interest rate debt is like a loan shark loan.  You get buried and can't even keep up with the interest payments.  A little debt quickly becomes a lot, and suddenly you are looking at $10,000 to $50,000 of intractable credit card debt that never, ever seems to go away.

(How much is considered intractable depends on your income, of course.  On the debt-guy site, there are sob stories from people struggling to pay off a $5000 balance, which seems small, until you realize that is nearly 1/4 of their income.  The actual amount is irrelevant other than in proportion to your income.  It is the interest rate that kills you.  The credit card companies are very good at extending you just enough credit to get you into trouble - and the interest rate insures that it will take you years and years to pay it off - if ever!  For this reason, it is always a good idea to get a low rate card and keep the credit limit low - lower than an amount you have readily available in savings).

Of course, never carrying a balance and paying off the balance every month is a good idea.  Never using a credit card is even a better one!  Use a debit card instead.  But for travel and car rental, a credit card can be handy.

And while the Simmons First Platinum has few "benefits" (7.5% variable rate is benefit enough!) it does provide Rental Car damage insurance, provided you use the card when renting a car.  For this reason alone, I would have a card like this (check your card issuer, many VISA cards and other cards provide this rental car coverage - but read the fine print carefully!).

Perhaps Capital One will come around and re-up my card at a lower rate - but I doubt it.  Their site is now full of "rewards" cards with high interest rates and it seems they are more interested in the big score these days and faux financial acumen than in offering a real bargain.  What's in your wallet?  Not Capital One, anymore.

Another thing Capital One did which was annoying was raise my credit limit without my approval.   I specifically asked them NOT to do this when I opened the account and had them re-lower the limit a couple of years ago.  But they are back to their old tricks, raising the limit to $15,000 - the siren song of "spend, spend, spend!"

Simmons First is a small bank - so don't expect Bank of America-like websites.  I applied online and the online application program appears to have some small bugs in it.  On one screen, it merely said "Credit Protector" and "Click here to continue".  I had to call to make sure I was not being signed up for some bogus service.

When I went to activate the card, I called the 1-800 number and it said "For voice recognition, press 2.  Para Espangnole, marque dos" - so if you press "2" for voice recognition, it goes into Spanish mode.  No other choices were offered (WTF?).    But I got it to work by pressing other keys until it said "input not understood, please enter card number."

Also, when filling out the online application, be sure to type in ALL CAPS.

So clearly, they have some HTML and DTMF coding issues to work out, and smaller banks cannot afford to have a full-time IT guy there to work these things out.

Their online banking site, however, works well and it took only minutes to sign up, create a password, and go to electronic statements.  So that part of it they have down pretty good (which makes sense, as it is the part of any banking site that is used often).

Again, a Credit Card is a DEBT INSTRUMENT regardless of whether you have the best intentions to "pay off the balance every month".   It is a loan, plain and simple and appears on your credit history as such.  Get the best terms you can for any loan - do not be distracted by trivial giveaways like free toasters, free airline miles, free coupons, or cash-back.  When you sign up for the trinkets and junk, they slam you with onerous loan terms - so onerous that if you every carry a balance, it could be a guaranteed one-way ticket to the poor house.

Yea, I know, you say you are "responsible" and pay off the balance every month.  But the same people say they can afford their toxic ARM home loan, too, and look where that got them.  I know too many people who have gotten into trouble with credit cards - usually lured onto the rocks of financial mishap by the siren song of airline miles.

(Going bankrupt over a bad home loan, losing your job, or medical bills is one thing.  Going bankrupt over credit card debt is sort of embarrassing.  And yet a lot of people do it!   And like the victim of the con artist, not many people will talk about it, either).

It is your choice - but I think the smart choice is the best loan terms possible, so that you have zero chance of every going belly-up.   And Simmons First is about the lowest rates.  There is a reason why, when CNN Money did a list of the "Best Credit Cards" that Simmons First was #1 with a bullet - low interest rate trumps everything....


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