Credit Cards
Prepaid Debit Cards: Not So Prepaid, After All
What: So, you’re about to check out at the grocery store, and a $50 prepaid visa card catches your eye. That would make a great Christmas gift for someone! Or perhaps you’re into DIY banking, or have horrible credit, and need some kind of plastic to get by. If you end up buying that prepaid debit card, you’re like millions of other Americans. And if you’re not careful, you could get screwed over with hidden fees like millions of other Americans. You name it, they’ll charge you for it. Monthly maintenance fee. Ouch. ATM balance inquiry fee. Ouch again. Inactivity fee. Are you kidding?
What They Say: From the New York Times:
Like many workers, Tyrell Blocker, 20, of Brooklyn, could ill afford the surprise when he took such a card last week to a Pay-O-Matic Financial Services store in Manhattan after a bank turned him down for an account because he lacked one of two required pieces of identification. As soon as the cash from his paycheck landed on his card, he noticed fees accumulating. Mr. Blocker returned to Pay-O-Matic to complain and only then was provided a detailed list of more than two dozen fees, he said.
What We Say: This is just sooooo disappointing. We’ve been big fans of pre-paid debit cards as a way to manage your expenditures and to teach kids how to use credit responsibly and now this. While banks and credit card companies are notorious for nickeling-and-diming customers, it’s much easier to hide fees from shoppers via preloaded debit cards. If, however, you play your prepaid card right, you can save a little money over traditional banking. But only if you’re really on top of it. When in doubt, pay with cash or check. Stores still accept paper, we promise!
Obama Takes On Hidden Credit Card Fees
What: Visa and Mastercard may not be able to get away with charging retailers a “credit card swipe fee” for much longer. Interchange fees, the fee the credit card companies charge merchants every time you swipe your card- which amount to roughly two percent of every plastic purchase, really add up over time. And that cost gets passed down to consumers, in the form of higher price tags on merchandise. This fee is conveniently hidden, though - you won’t see it on a monthly statement or a receipt. Well, now a bill is in the works that will require credit card companies and retailers to negotiate these pesky fees, in an effort to reduce the cost to the average consumer.
What They Say:
“Interchange collections totaled $48 billion in 2008, up from $16.6 billion when NRF started tracking the fees in 2001. The higher prices that result from the fees cost the average household an estimated $427 last year, up from $159 in 2001.”
What We Say: These kinds of stories give us the heebie jeebies…How little we know about the real, underlying price of the things we buy every day. What also concerns us is that this fee is passed on to us, the consumer, whether we pay cash or use credit and the credit card companies are making money on both ends.
Photo by Andres Rueda
Alaskans Love Thrift Stores And Credit Cards
What: In Alaska, and we imagine the rest of the country, shoppers are going to the thrift store instead of the mall. Demand for second-hand items is up and in some cases, the supply is also up, as people are now more willing than ever to sell their old clothing for cheap. In Juneau, a mixture of thrift shops and consignment stores, including the Salvation Army, Alaskan Dames (And Gents), and Mommy & Me, are all enjoying the silver lining of this shabby economy.
What They Say:
“The Salvation Army Family Store manager Henry James said he is seeing ‘more office-style people,’ including state or federal workers in the new Juneau store.”
What We Say: What makes us a little nervous is that “customers are using credit cards more often than before,” and isn’t that what got us into this mess in the first place? Good thing we’re spending less money but if we were using cash before and credit now - there could be some serious consequences of this years to come. Also, as for bargain stores that rely on donations alone, like the Salvation Army and Goodwill, the news isn’t all that great. People aren’t giving away as much stuff as they used to; many would rather sell an ancient pair of shoes on Craigslist than donate it to the Salvation Army.
Do you think thrifts shops are worth the required hunting around and negotiating, or do you stick to the department stores, which offer convenience and first-hand clothing?
Holiday Hazards for Credit Card Users
Okay, even a budget fashionista is tempted to break out the plastic when the holidays roll around, and we’re not judging . . . but if you’re thinking of putting some things on credit, make sure you’re aware of the pitfalls, which these days are even more numerous than ever before. Fortunately, you can get the scoop from Americans for Fairness in Lending, through this timely tip sheet.
A few tips to get you started:
Credit Card Caveats:
Avoid Seasonal Solicitations - Beware of those attractive low introductory rates you receive before the holidays. The fine print in credit card contracts is filled with traps to catch the unwary. An introductory 0% interest rate can quickly leap to over 20% with just one slightly late payment. If you are going to use a credit card, shop around for one with a long-term low interest rate (APR), and read on to find out what you’re in for.
Avoid Late Fees - Pay your bill several days in advance of the due date to avoid sneaky late fees. If your due date falls on a Sunday and your payment arrives on Monday – surprise – you’re late and your interest rate may jump to a much higher level!
The Gift That Keeps on Taking —Even if you find the perfect gift for Aunt Betty, it’s not so perfect if it takes you over your credit limit. You’ll get hit with an overlimit fee and a penalty interest rate that will keep you paying for many holiday seasons to come.
Costly Cash Advances – Cash Advances are a Grinch’s (and a credit card company’s) best friend. The interest rates on this borrowed money are much higher than on purchases. In addition, the credit card companies apply your monthly payments to cash advances LAST so that the interest owed just grows and grows.
If you need help with credit card debt, contact the Consumer Action Help Desk online.
Money Mess: Personal Finance Advice
It’s not too tough to realize when your personal finances have spiraled out of control, especially if bill collectors are calling you all hours of the day and your electricity is shut off because you haven’t paid your bill in a couple of months. What about the period of time leading up to this financial disaster? What signs point toward an impending money crisis that may be able to tip you off that something needs to change before it’s too late?
You probably already know if you don’t handle money well. Some people are able to get by just fine with a little help from overdraft protection and small loans from family, but oftentimes money mismanagement will turn into something pretty dramatic if you don’t take the steps to wise up and change your ways.
How do you know if you’re heading toward financial trouble? If you answer “yes” to two or more of these statements then it’s time to make some big changes to your personal financial situation, whether it’s getting a budget in place, or cutting up your credit cards, or doing a complete overhaul of your personal financial situation.
Do any of these apply to you?
1. I don’t have a savings account in place at all.
2. Most of my credit cards are maxed out.
3. I’m behind on some of my bills.
4. Every day I get a phone call from a creditor.
5. Sometimes I have trouble sleeping because of my money problems.
6. I usually run out of money before my next payday.
7. Whenever I apply for new credit it gets denied.
8. I have to use credit cards to pay for basic necessities a lot.
9. I spend a lot more than I can truly afford to when I go shopping.
10. I’m pretty sure I’ll wind up in bankruptcy if somebody doesn’t bail me out soon.
Only answering “yes” to one statement shouldn’t be cause for celebration. You should strive to not only answer “no” to every single one of these statements, but to get to the point to where you scratch your head in confusion that anyone would ever answer positively to any of them at all.
So what do you do if you answer “yes” to some of these? First pat yourself on the back for recognizing that you need to make some changes, and then get to work with bringing your bills up to date while cutting back on your expenses. Yes, it will take some effort to get back on track, but it will certainly be worth it.
Store Credit: Personal Finance Advice
Spend a little bit of time in a clothing or department store and you’re bound to hear it…the manager’s voice booms over the walkie-talkies all the employees carry and in an excited voice makes an announcement that sounds a little like this: “Hey team, Sara just got another one! That makes two for today! Great going Sara!” This is usually followed by a couple of other supervisors who hop on the walkie-talkie and add their congratulations to the employee, and then the manager comes on one more time and urges all the other employees to keep up the good work just like Sara.
You might be inclined to believe that Sara has just made a huge sale, or maybe even that she stopped a shoplifter. What the manager is actually so jolly about is this: Sara compelled a customer to fill out a credit application.
What you may not realize is that clerks in stores are trained to get customers to fill out credit applications almost as much as they are trained to know about the merchandise they sell. Salespeople are given quotas to fill as to how many credit applications to bring in. In some instances, managers stress credit applications more than they do the actual sale of merchandise.
Credit is a big deal to retail stores. If a store can get you to obtain a credit card from them then chances are you’ll spend more and wind up paying some interest at some point. This makes you a more attractive customer.
Now you know why every time you go through the checkout line the person at the register asks you, “Can I save you 10% by opening a card for you today?” They’re not doing it because they really want to save you 10%. They’re doing it because they’ve been trained to and because they have a quota to fill.
Once you start to think of a store credit card as a product - instead of some sort of extra the store offers as a courtesy to their customers – then may be a little easier to decline the clerk’s offer for a credit card application. After all, if you went in to buy a bag of oranges at a grocery store and the clerk at the register asked you, “Can I interest you in this loaf of bread too?” you might think to yourself how you don’t even need the bread and how weird it is for the clerk to offer you bread at the checkout.
Think of store credit as a loaf of bread: Sometimes it’s a good idea, but you should get it when you need it instead of when it’s merely suggested to you.
Setting Priorities: Personal Finance Advice
Unless you live in a rent-free cave somewhere you probably have certain bills that you need to pay each and every month. If you have more than enough money to cover all your expenses then you may not put much thought toward which bills need to be paid before others because everything is covered, but if you find yourself pinching pennies then you may need to do some prioritizing with your bills.
Here is what you need to keep in mind: Ignoring some types of bills will result in annoying calls from a creditor and some horrendous late fees. Ignoring other types of bills will result in getting thrown out of your home or losing your car. The trick is to put certain bills first and then wait on the other ones, but only if you absolutely have to.
Prioritize your bills in this order:
1. Your mortgage or rent
2. Your health insurance payments
3. Your utilities
4. Your car payment
5. Your unsecured loan payments
6. Your credit card payments
The reason why the bills are listed in this order is simple: even if you are having trouble meeting your financial obligations you still need to have a place to live and the ability to seek medical care if necessary. You want to keep your lights on and the heater running and you don’t want your car repossessed. Loans that aren’t secured by some form of collateral and credit cards should be your last priority. Lenders for these type of accounts expect some customers to be late once in a while so they make accommodations – albeit expensive accommodations – for an occasional late payment.
In other words, you aren’t going to lose a credit card account because you’re late on your payment one month. You’ll probably get a higher interest rate and a hefty late fee, but you’ll keep the credit card nonetheless. Miss one car payment and technically your lender can come take your vehicle.
Don’t ever put your credit cards as a first priority, even if the creditors who call you are really aggressive. Don’t skip out on basic needs in order to make an unsecured loan payment. Your basic needs come first, long before a credit card payment . . .
Late Payments: Personal Finance Advice
If you’re like most people you probably have a few different payments you send out every month. Between utilities, loan payments, and credit cards it can be easy to miss a payment once in a while. So what do you do when you realize that you forgot to send a payment to someone and it’s late?
The worst thing you can do is ignore the problem. Don’t just decide that you should send in a double payment next month because it just doesn’t work like that. That’s like trying to cover up a snag on your pantyhose by ripping them twice as much.
Here is what you should do the very moment you realize you have forgotten to send in a payment:
Rent or mortgage: Call your landlord or mortgage lender immediately. Find out the fastest way to get a payment in. Be prepared to pay a fee not only for the late payment but also for the quick payment method.
Utility: Most utility companies are pretty liberal with payments, especially if you’re usually on time. Call the utility company and make the payment over the phone if possible, although some utility companies might just have you pay it all off with the next statement.
Loan payment: Contact the lender right away and apologize profusely for the late payment. Bring the account up to date by the quickest method possible, and if you’ve never been late before you might want to ask for a reversal of the late fee that’s probably already on your account.
Credit cards: It’s a little known fact that most credit card companies grant cardholders a grace period beyond the due date printed on the statement. Go online or call the company right away and make the payment and you may be able to avoid a late fee if you catch your mistake before the grace period ends.
After you’ve brought your account back up to date you should consider it all a lesson learned. Fashionista, you have to stay on top of your bills if you have any hopes of keeping your personal finances straight. Besides, late fees are expensive. Wouldn’t you rather spend the money on something fabulous?
Personal Finance Advice: Are You Scaling Back Yet?
If you haven’t been tightening your financial belt lately amidst all the recent drama with the economy then there is probably one of two reasons:
You’re independently wealthy.
You haven’t been paying attention.
Prices on gas, groceries, and other essentials have been creeping up steadily for a while now, which has most people paying more attention to how they spend their money. If you’re one of the few people who hasn’t really noticed any difference in what things cost then there is a pretty good chance that you don’t have a very firm grasp on your personal finances.
Think about it: If you plunk down a credit card for every single purchase and then make the minimum payment every month then probably wouldn’t notice that the balance of your credit card has reached ridiculous levels. If you’ve watched the alarmist news stories about the cost of everything and you’ve replied with a shrug and wondered what all the hubbub is about, then you might be in financial trouble and not even know it.
It’s time to take a look at your spending. Nobody really knows if the economy is going to get worse before it gets better. Will you be ready if everything starts to cost even more than it does now? What do you do if your credit card gets maxed out? What do you do if (gasp!) your credit card company lowers your available credit?
The point is this: If you haven’t started scaling back on your frivolous spending then the time has come. If you are a true Budget Fashionista then you already know how to get your hands on the stuff you want without spending a fortune. The trick is to apply this to your other spending. How can you save money on groceries? How can you save money on gas? How can you save money on everything?
Even if you pay attention to your finances really well and haven’t yet felt an economic squeeze, it doesn’t hurt to practice spending less and saving more. Don’t obligate yourself to big purchases right now unless you can actually afford it. Don’t quit your job if you don’t have something already lined up.
And for goodness’ sake, don’t use your credit card with reckless abandon.
Personal Finance Advice: If It’s On Credit It’s No Deal
How many times have you stumbled across a massive clearance or enticing sale at your favorite store right around the time when you ran out of money until the next payday? If you are like most people, chances are when this occurs your first instinct might be to grab your credit card and start charging. After all, you don’t want to miss the deals the store is offering. 80% off on clothing? Who in their right mind would pass up a deal like that?
If you don’t have the money in your wallet or in your bank account then you should be the type of person to pass on a deal like this. It doesn’t matter if you’re favorite brand of jeans winds up on the clearance rack and the store wants to eliminate the stock pronto. If you’re trying to get your finances in order and get out of debt then you need to avoid situations where you whip out your credit card.
Yes, that includes situations when a great deal is staring you in the face.
Think about what happens when you use your credit card to buy something, even if it’s on a fantastic clearance:
1. You buy your item on a credit card, fully intending on paying the balance off once you get paid. You congratulate yourself for finding such a great deal.
2. If your credit card had a zero balance before the purchase of the clearance item, you are now psychologically equipped to make more purchases on the credit card because of the small balance. You start charging more purchases, still sure that you’ll pay it off when the statement comes.
3. The statement comes, and you’re shocked and bewildered by the balance. You know that you bought a few things, but weren’t they all on clearance?
4. You’re unable to pay the balance in full, and now that you’re despondent over the whole situation you send in the minimum balance and go spend some more money on your credit card.
5. You eventually wind up paying more money in credit card interest charges on your clearance purchase than if you had bought it for full price with cash.
This isn’t an absolute outcome for everyone, but it’s quite a common scenario. You may have the noblest intentions of paying off the credit card purchases once the statement comes, but all too often it turns into something bad. If you don’t have the cash to buy it, don’t buy it. Even if the clearance rack is chock full of fabulous clothes in your size you should first think about the financial repercussions of charging up a credit card that you are desperately trying to pay off (or keep paid off).
Don’t let the lure of a good sale keep you from your financial goals.
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