Personal Finance
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
Wal-Mart Lowers Price on Debit Cards
What: Wal-Mart’s prepaid debit card just got cheaper—once $9, it’s now just $3 (other fees associated with the card have also been lowered). The typical price of a money card like this is anywhere from 10 to 15 bucks.
What They Say:
“While we’ll make a little less money than we would with that other pricing, we feel like this is one of those game-changer type moves,” said Jane Thompson, president of Wal-Mart’s financial services division, in an interview.
What We Say: The debit card is just one of the many moves the retailer we love to hate has made to keep customers coming back day after day; it’s also opening 1,000 financial services centers (instead of its own bank, a recently abandoned idea) in 2009. By doing this, Wal-Mart can target shoppers who don’t have bank accounts but still need to pay bills, transfer money, and do other basic tasks. And for those who do have bank accounts/credit cards, etc, there will be just one more reason to one stop shop at Wal-Mart.
Should we applaud Wal-Mart for making it easier for folks on a budget to buy what they want and need, or feel a little nervous about this expansion? Let us know if you’ve used Wal-Mart financial services or its debit card - what has your experience been like?
Bank Fees: Personal Finance Advice
You already know that you’re supposed to save money when you make purchases and you’re supposed to vehemently oppose any fees that financial institutions try to put on your account. If they want to charge you for talking to a customer service representative, you speak with a manager and get the fee waived. If they want to charge you a late fee when you have proof that the payment was sent on time, you point out the error and you get the fee reversed.
What happens when you are the one who made the mistake? Should you still aggressively pursue a refund and stop at no costs to save money, or should you accept your mistake and chalk it up to a lesson learned? A $30 late fee can really hurt – that’s a whole outfit at some secondhand stores, after all – but even if you’re totally at fault you might still be able to talk someone into refunding the fee. You may have to be pushy and even a little whiny, but when it comes to saving some money you may be tempted to do whatever you need to do to keep money in your wallet.
Here is the bottom line: You should definitely fight against any fees that are placed on your account that aren’t legitimate. For example, if you order a copy of a credit card statement and it never gets sent to you then you certainly shouldn’t pay the $1 per printed page fee. You should also fight against any fees that are downright silly. Suppose your bank sends you a new debit card and the card has to be activated by using it in an ATM, but then you’re charged a $3 fee for using a foreign ATM to activate your card. That’s silly.
You may also be able to successfully get fees reversed when you’re the one at fault as long as it’s an unusual occurrence. If you’re late sending in your loan payment once in five years then calling up the lender apologetically will probably lead to the fee getting reversed. On the other hand, if you fall into a pattern of sending in your payment late and then calling up the lender to get the fee reversed you’ll soon find that no matter how apologetic you are the fee won’t get reversed anymore.
The moral of the story is that you shouldn’t accept ridiculous fees, but you also shouldn’t expect financial institutions to waive every fee just because you call and ask. You want to save money and probably hate paying fees, but you also need to take some responsibility.
Life Insurance and Wills: Personal Finance Advice
Do you have life insurance? If you’re single, or you don’t have any kids, or you don’t work, there is a good chance that you have talked yourself out of needing life insurance because you figure that nobody will find themselves in financial trouble if you die. Most people should have life insurance, regardless of their marital status or financial standing. It may seem like an unnecessary expense to you – after all, why should you care what happens to your finances after you’ve passed away as long as you’ve already specified who will inherit the vintage Chanel you found at a garage sale – but life insurance can be relatively inexpensive depending on what type you purchase.
Consider what happens to your finances when you die. Before your assets can be divvied out to people your debts have to be paid. This means that your estate is responsible for any debts you incurred while you were still living. Debt doesn’t magically disappear when you die, contrary to popular belief.
If you have a life insurance policy it should cover the cost of your debt and maybe even give a nice chunk of change to someone who is going to miss you. For example, if you aren’t married and don’t have any children you might put a sibling or parent as your life insurance beneficiary. They will then be responsible for using the life insurance money to settle your debts and then use the rest to do with as they please. Remember that funerals and burials cost money, and unless you make previous arrangements for these things you’re putting the financial burden on someone else.
Imagine a situation where you don’t have life insurance and you pass away, leaving massive piles of debt that your parents happened to co-sign for. Not only do your parents then have to deal with the untimely death of a loved one, but they also become solely responsible for the debt. That’s bad. Consider buying a term life insurance policy because this won’t cost you much in monthly premiums as opposed to any other type of policy. You don’t have to buy a lot of insurance…just buy enough to cover all the debt you’ll leave behind as well as to take care of anyone you’ll leave behind who is financially dependent upon you now.
Ask an insurance advisor about what specific policy is best for you. Don’t buy more than you need, but don’t scrimp on this particular expense. After all, you want people to remember you for your fierce fashion sense, and not for all the debt you stuck co-signers with.
Personal Finance Advice: You Have to Learn Sooner or Later
Let’s face it, Fashionistas: Personal finance can get a little bit boring.
It’s so much more fun to simply watch the money come in and then see it dissipate as you spend it on the things you need and want. As you await the next payday you may briefly wonder if a time will ever come when you get all this finance stuff figured out. When will you have enough money in the bank to where you aren’t living paycheck to paycheck? When will you have enough money in a retirement fund to where you feel great about your financial future? When will you be able to nod knowingly when people discuss things like NASDAQ, FOREX, or annuities?
Knowledge is power. You’re never too old to learn something new, so if you haven’t the foggiest idea how to balance your checkbook then now is the time to figure it out. It doesn’t matter if you’re 18 or 80; the answers to all your financial questions are out there. It’s amazing what you can learn when you put your mind to it, and before you know it you might be sparking up a conversation with your friends about the benefits of compound interest. Of course, you will do so while wearing fierce shoes that you found at an amazing discount.
Where should you look when you’re ready for a financial education? Websites for financial institutions are great because they are usually filled with glossaries and Q&A pages that take complicated financial concepts and simplify them for people without financial degrees. Why would a financial institution want to take the time to create such comprehensive educational materials available for viewing? There are a couple of reasons:
1. The more you know about money, the better the chances are that you will manage it well.
2. The more comfortable you get with your financial knowledge, the more likely you are to start dabbling in various financial products that you wouldn’t have dared touched before.
You can also make an appointment to speak with a representative at your bank or credit union who will sit you down and teach you everything you need to know about basic money management. This service is usually offered free of charge to customers.
Once you feel ready to move beyond the basics, start perusing the personal finance shelves at your local bookstore. Ignore any books that claim to make people rich quick, and instead go for the books that claim to teach people all about investing, money management, and all the stuff that would have made you snore before you started getting intrigued with personal finance. Before you know it, you’ll be making zillions of dollars in the Stock Market…or at least you’ll be able to pay off your debt and build up a nice nest egg.
Personal Finance Advice: Sell Your Stuff
Plenty of Fashionistas have the same problem, although many of them will claim that it’s no problem at all: Their closets are stuffed to the gills with clothes they found on a great discount but don’t really wear anymore. It might be a case of some clothes that are no longer in style, or clothes that you bought on impulse and didn’t wind up liking after you brought them home. Whatever the reason, a stuffed closet is a prime opportunity to make some money that you can either put toward your debt or instead use to invest in some new threads. Either way, it’s time to clean out your closet and get to work.
Pull everything out of your closet…yes, everything. You should even pull out your very favorite items that you know with a high degree of certainty that there is no way you will ever part with these beloved pieces. Start making some piles:
1. The I’m Going to Keep These for Sure pile
2. The I’ll Probably Keep These pile
3. The I Haven’t Worn These in a Decade pile, also known as the I Didn’t Know I Still Had These pile
4. The Get Out of My Closet, Vile Clothing! pile
Out everything back into your closet from Pile #1. Reevaluate everything in Pile #2 to see if there is anything you want to get rid of. Review Pile #3 to see if there is anything that might pass as vintage, and toss everything else in with Pile #4.
Now here is how you make your money.
Anything that might fetch a decent price should go to a consignment shop or get sold using an online auction. You can try a garage sale, but most sellers make the claim that you’ll make more money using the other methods.
You make the decision whether to put your profits toward your debt or to fill your closet back up. The financially savvy woman will promptly put any profit toward debt, but the Fashionista inside you will probably insist on a couple of purchases nonetheless.
Anything that will probably not make you any money should get plopped into a bag and sent off to Goodwill or some other charity. Here is a financial tip when donating clothes: no matter how horribly out of style: Request a receipt. Hold on to the receipt until tax time. File the receipt with your taxes and get a nice deduction. Viola! You’ve made money from your discards without even having to sell them. You’ve also helped out a worthy cause.
In the end you’ll have a cleaned out closet and a little more money in your pocket. Fabulous!
Personal Finance Advice: Save for Retirement
You’re fabulous. You’re invincible. Never will there come a time when you are not raking in cash.
...or so you would like to think.
Retirement can seem like an abstract concept - kind of like traveling to Pluto or achieving complete inner peace - but when it comes right down to it there will probably come a time in your life when you just aren’t going to want to work anymore. Either you will figure the time has come to stop working so you can go out and enjoy the remainder of your life or instead your body will just tell you that it simply can’t work anymore. “You’re too old,” you body will say. “You can’t work.”
What do you do then? How do you still maintain a life without a steady stream of income coming in?
You should be saving for retirement right now. It doesn’t matter if you’re twenty-three or sixty-three. Something should be going toward an account earmarked for retirement. Even if it’s not a lot of money, it’s better than nothing.
How much you should save depends on a few different factors:
1. What is your current debt situation? If you are knee-deep in debt than retirement savings may not be your first priority right now. Some financial advisor recommend that people put savings on hold until they can get their debt under control. You can’t put off saving for retirement forever, though. At some point - preferably sooner than later - you’re going to have to start putting some money away.
2. How far away is retirement? If you are in your early twenties and you are still establishing yourself in a career then putting away a modest amount of money for retirement is still effective because you’ll have compound interest on your side. If you’re in your fifties and you don’t have much saved up for retirement then you’ll need to get aggressive.
3. What other financial factors are you dealing with? Maybe the current financial climate has you pinching pennies much more than you ever have, or perhaps you’re trying really hard to save for a down payment on a house or your child’s college education. Try to temper these goals with also saving for retirement.
Generally, you should aim to put at least 10-15% of your income into a retirement account. If you can’t put that much in a retirement account, put in what you can. If you can put in more, put in more.
Where should you stash your cash? Max out your 401k if the company you work for matches funds. You should also look into an IRA (Roth or Traditional). There are plenty of other options available, so be sure to have a chat with a financial advisor to figure out where your retirement money should go.
Save some money now so you can still enjoy your fabulousness after retiring.
Five Quick Tips to Start You on the Path to Personal Debt Relief
It’s the beginning of the year and many of us are starting to take stock of our finances. For those of us who are shocked to find that we’ve racked up massive debt over the past few months, here are some really simple tips to get you on the path to debt relief.
- Stop Spending. Sounds really simple, but I’m always amazed at the number of people who say they want to get out of debt, but still spend like a millionaire.
- Get Three Months of Bank and Credit Card Statements. Head online or to your bank branch and get three months worth of statements. Set up a budget sheet and record everything that you spent so you can have a complete picture of what’s coming in and what’s going out.
- Take stock of what you can cut out. Do you really need HBO? Or that morning latte? Or a closet full of designer purses?
- Take stock of what you can sell. Have a fur? Sell it. An expensive car or lease? Try and trade it in.
- Look for other ways to make money Turn your hobby like quilting, party planning, etc into a side gig. Get a second job, and if you have teenage kids, you might want them to get a job as well.
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