The Credit Card Funeral:
On the 9th of October we held our credit card funeral. I would like to thank everyone who came down to see it. Plus we had A Current Affair do a story on it. Below is the speech that I made at the funeral. We have put the video at the bottom of the newsletter. Enjoy!

Australia's first credit card funeral

Welcome everyone to Australia's first credit card funeral.

My name is Adam Goulding or as some people know me Mr Home Budget.

This funeral is the start of Australia's debt revolt.

Credit cards hurt each one of our bank accounts, and decrease our standard of living.

It is a financial equivalent to cigarettes. One is bad for your health and the other for your bank balance.

My wife Renee and I have personally turned our lives around financially. Since Jan 1st 2007 we have collected every single receipt for every purchase we have made. If we purchased a $1.50 pack of gum we got the receipt. We would keep these receipts and work out what was spent where. In fact since Jan 1st 2007 we have personally collected 3209. By putting our costs in a spreadsheet, there is nothing we don't know about our home budget.

However now that we understand our home budget; we understand home budgets in general.

We have even written a book on the subject. And since July 2009, a monthly newsletter on saving money. We have received emails thanking us for helping people pull back from the brink of disaster.

What is the biggest destroyer of Home Budgets in our research and opinion? CREDIT CARDS. Time and time again people we have come across have been stung by credit cards. In our book we even spent a whole chapter just on this issue.

There are 7 major things we need to consider and think about. As you listen to this talk. All of these seven concepts should have you wanting to destroy your card.

1. Interest Rate
2. Annual Fees
3. Points System
4. Subconscious Buying
5. Terms and Conditions
6. Direct Advertising
7. The 2% Rule

OK let's start off with interest rates.

1. While doing our research on credit cards, we found credit cards from 5% interest on your debt per annum to 49% on your debt per annum.
   
   With the majority of credit cards sitting around the 20% mark.
   In fact most of you here today, I bet would have your card at about the 20% interest mark.
   
   Let me tell you a story about the world's second richest man Warren Buffet. Warren buys and sells shares. That is all he does.
   You could call him the world's best stock market picker.
   In fact if you had invested $10,000 in 1963. You would have earned 19.1% on your money on average each and every year.
   
   How can you move forward in your home budget if you are paying a higher percentage of interest on your debt than the world's 2nd richest man has earned on his money in the last 50 years.
   
   You can't! But people don't bat an eyelid when told their credit card is 20% per annum.
   
   In fact Warren was once asked this question:
   
   What financial suggestions do you have for college students?
   
   Warren Buffet's Answer: The biggest suggestion I have is to avoid credit cards. I get letters every day; lots of letters every day, from people that have financial troubles. And it comes about from three things; one is losing their job, the other is some kind of terrible illness that hits them by surprise, but the third thing is credit cards. Interest rates are very high on credit cards and sometimes they're 18%, sometimes they're 21%. If I borrowed money at 18% or 20%, I would be broke. I can't make a living by borrowing money. It is very easy to get in a hole and the interest charges compound and finally you're in too big a hole to dig your way out. If I had one piece of advice for young people, generally it is just to avoid credit cards.
   
   
2. Annual fee. Each year we use a credit card we get whacked with an annual fee. We must pay to earn the right to use the card.
   
   This fee as you know can be right up to $250 a year.
   Right away, by applying and getting a new card we are behind the 8 ball due to the annual fee.
   
   Right away, the credit card company is hitting us over the head with money from our pockets.

   Just for the privilege of having this card in our wallet or purse we must pay a yearly fee.

3. The points' system. Do the maths on the points
   
   The so-called free loyalty points. You know the deal, every dollar you spend you get one point.
   
   Our advice is to find out how much a point is worth. For example with one particular credit card point system, you get a $50 Woolworths voucher for every 8200 points.
   
   Therefore, for each dollar you spend you receive back 0.006 cents. Just over half a cent.
   
   This same credit card has a $200 a year annual fee. So just to cover your annual fee in point bonuses you would need to spend $32,800 a year.
   
   They really are not reward points.

4. Subconscious buying. This is a real hidden killer in credit cards. The one argument we get from credit card lovers, time and time again is that they pay off their balances before the due date.

   While this might be the smartest way to use a stupid product, don't think you are not getting slugged.
   
   A study was done into the buying habits of people with credit cards vs people with cash. When people with credit cards did their weekly food shopping, they spent in some cases, up to 15% more than people who purchased with their own money.
   Why was this the case? Because subconsciously they were spending other people's money.

   They were using the plastic rather than handing over their hard earned dollars.

   Imagine spending 10 to 15 percent more on every purchase without even realising it.

5. Terms and conditions. Have you ever read them? Let me assure you of something. Stop working tomorrow. Take the next 8 years and go to university for a law degree. Devote 100% of your time to becoming a lawyer.

   Now grab a booklet of terms and conditions and you might understand what the hell it's talking about. It's written by people whose primary goal is to make it too hard for you and me to understand.

   You want to borrow $3000, no problem here's the terms and conditions from a major bank, its 88 pages and 25,000 words long.

   You can't make this up! This legal mumbo jumbo only helps one organisation. The credit card companies.

   All the rules are written so they can change the rules as they like. You can't win. You are in a legal minefield you can't get out of.

6. Direct advertising. We are constantly bombarded with letters from these banks wanting us to sign up to their latest card. Here is a direct mail letter my dad received for a new ANZ credit card.
   
   This particular 4 page letter starts off, "Dear Len, Dreaming of your next holiday?" Right away they are promoting using the card for a stupid purchase. And it is only the first sentence.
   
   Would you believe we counted the words of this letter... 2853? Do you realise 509 words are convincing the reader to dream about their upcoming holiday. That's over 17% of the letter just about the holiday.
   
   All about that dream holiday that you can't afford, now its right at your fingertips. All you have to do is sign here.
   
   And guess how many words are about the interest rate of the card? ZERO
   
   How many words about the annual fee? ZERO
   
   How many words about the interest free period? ZERO
   
   How many words about the fees if you pay late? ZERO
   
   Can you believe this craziness? How is this legal? When you have a card and by the way this particular card has a 19.49% interest rate; that is more than the 2nd richest man in the world earns on his money. They're allowed to send an unsolicited direct mail out, encouraging people to dream about their next holiday.
   
   And sentences like, and I'm not making this up. "All you have to worry about is where to go next?" How about worrying about how I can afford to take a holiday with 19.49% interest when I get back?
   
   
7. The 2% rule. Let's pretend you get sucked into this letter. You think, wow I will go on a $5000 cruise. You take the card at 19.49% interest.
   
   And the only thing you purchase is this wonderful cruise. Now you decide, "OK I'm not going to use the card anymore and I will pay my minimum statement each month".
   
   It is now the credit card company's goal to keep you owing that money. They want to keep your balance as high as possible.
   
   Well, they make it nice and simple for you to keep paying monthly as they only require you to pay back 2% of the outstanding balance.
   
   Just 2%.
   
   In your first month you would only be required to pay back 2% which by the way is only $100.
   
   Get this; it would take you 49 months of minimum payments not to pay back the $5000 dollars.
   
   But to just pay back $1000 of the outstanding $5000.
   
   Just over four years to pay back 1/5 of the total.
   
   It will take you 601 months to pay back the total $5000. Or just over 50 years.
   
   And throw in a further $15,600 in interest to boot. Fifty years... my dad is 57 now. He could still be paying for his hoiday by the time he is 107. You would want to hope it is some holiday.
   
   Now credit card companies could make this minimum 2% of the total debt higher. Let's say they said a minimum of 10% of the total debt. On $5000 your first payment would be $500.
   
   Now the total $5000 debt would be paid off in 56 months or 4.5 years.
   
   However their total interest bill would only be $902 compared to $15,600.
   
   Which way do you think the highly paid bank CEO wants to lean?
   
   With this in mind, this funeral marks what we call Australia's debt revolution. We are starting right here.
   
   I would like to call anyone up from the audience who would like to bury their credit card here today. Go over and see Renee and we will shred the card.
   
   Now normally you would say a few words about the dead. However, this scumbag of a financial product should be laid to rest silently.
   
   Here is the funeral video for you to have a look at.
   
   
   

   Dim lights
   
   

   Dim lights