For those of you who need a checking account, there are several answers you should have before you commit your funds to a bank or credit union. For those who have an existing checking account, its time you re-evaluate your relationship and make the necessary changes either within your existing account or with another financial institution.
1. Do not pay for printed checks. Most banks offer basic accounts with free check printing. Checks printed from a bank are usually far more expensive than those you can order outside of the bank. If you are computer and financially savvy enough you can print your own checks as you need them. With the use of cash cards, one does not need as many paper checks as in the past.
2. Look for a cash card that will offer you rewards but do not sacrifice paying other fees just to get one. Cash cards operate like checks but many times the withdrawal of your funds occurs on the spot from your account. If you don’t have a balance in your account, do not use your cash card. Most banks will not reject your use of your card should it overdraw you unless you call the bank and tell them to put a cap on your withdrawals in relation to your balance. They are just waiting to hit customers with additional fees and do not have your best interest at heart when it comes to putting money in their pockets due to your inability to manage your own funds.
3. Do not rely on float between your deposits and withdrawals. While I have talked about “float”, the time it takes between when you write a check or use your cash card to the actual withdrawal of funds from your cash balance in your checking account, I sincerely don’t recommend it. I’ve talked about how the new legislation called “Check 21” has encouraged banking institutions to submit electronic copies of your checks to speed up the “cashing” of the checks you write while being able to put a hold on the collection of your deposits. The “float” is virtually non-existent with “Check 21” and also with the use of cash cards, so hoping for and anticipating any type of float will more than likely expose your checking account funds to overdraft fees which are very expensive. Consumers who bank on “float” (or what’s left of it) are those who are constantly (every day) monitoring their checking accounts online.
4. Sign up to monitor your accounts online. It’s safe and secure. You get real time balance information and activity. You also can do a variety of other transactions without going into the physical bank such as funds transfers and online bill payments. Most banks will not charge a fee for these benefits because online access automates transactions they would normally pay a teller to do. If you are a “bare bones” consumer, operating paycheck to paycheck with little or no extra balance of funds, online banking is a better way to make sure you don’t overdraw your account. And for those who don’t want to bank online, keep a register of all deposits, checks written and cash card transactions for a reasonable calculation of available balance.
In this era of cash cards, often used just like writing out a check or taking cash out of our account, it can be a challenge to make sure you have recorded all your transactions and not forget to deduct them from your account cash balance. I suggest you always ask for receipts when using your cash card and at the end of the day, record your card receipts in your register.
5. If you are finding it hard to stay on top of your available balance and avoid
overdrafting your account, consider applying for an “overdraft line of credit”. This is usually a short term loan with a maximum approved balance you can use should one or more of your expenditures put your account in a negative situation. Be aware of the interest rate on these short term notes and don’t rely on these unless absolutely necessary. If you have to use your “overdraft protection” pay the amount you use as quickly as possible. In some instances, where you are facing a deadline and your paycheck falls after the due date you may benefit from using overdraft protection to avoid negative consequences of making a bill or credit card payment late. Again, if you believe you need overdraft protection, use it sparingly and pay it back as soon as possible. Also remember that should you leave a balance on your overdraft loan for more than 30 days you will find it calculating against your credit score. This is another bill owed and could be counted as a revolving line of credit which you could max out and will lower your credit score.
6. Avoid using your cash card for small withdrawals at ATM’s that charge you a fee and are non-affiliated with your bank. Your bank will let you know what ATM’s are free to use. Plan ahead for your cash needs so you don’t get into an emergency situation and are forced to pay ATM fees for the little cash you may withdraw. These fees can be anywhere from $1.50 to sometimes $4.00 ($2.00 for the participating ATM and an additional $2.00 to your bank for having to deal with another party for the mere $20-$40 you may withdraw). This could calculate to be as much as a 10% charge on the cash you receive. For that kind of charge I would love to be on the receiving end of those often overlooked fees. Why on earth would a financially responsible person forgo up to 10% of the funds he withdraws? You can barely earn interest at 1.5% in your savings accounts now days!
7. Avoid the interest checking account if you don’t have cash to stash. Most checking accounts that say they will pay you interest at barely 1.5% today also require you to keep a very high balance in the account. You would be better off getting a basic free checking account, no monthly fees and taking your extra cash, should you have any, to look for a good high yield money market which typically pays you better on untouched balances.
8. Set up automatic deposits. It is always better and a more efficient use of your deposits should you have them deposited electronically. Most banks will give you same day use of these types of funds compared to depositing paper checks. Paper checks are usually subject to a bank hold of up to 7 or more days depending on the distance of the participating bank. Keep in mind that when you deposit a paper check, the teller submits a 5-7 day hold on the funds but doesn’t mention that to you. It would be on your deposit receipt but most of the time you may not even know the bank is holding your funds until you get notice of “uncollected funds fees” which are equivalent to the amount the bank charges in overdraft fees.
Banks are not inherently evil but they are profit making businesses that create their profit from many types of fees and interest charges. Why not charge fees to those who don’t pay attention? As a consumer, your goal is to get as much service for as little or no cost as possible. Make your money work for you. As much as the banks and financial institutions charge fees for all their services to make a profit, so too should you avoid those fees whenever possible to conserve your everyday cash position. It’s all about value and conservation of your own worth and wealth.
Manage your credit before it manages you!
Order Free Credit Report(s) Online
To
receive your free credit reports online, visit the official website: www.annualcreditreport.com
Tuesday, April 7, 2009
Thursday, April 2, 2009
Once Again a Warning about Credit Cards – 4 Areas to Manage
The economy is in a mess right now. Some of this mess is of our own making, some of it unavoidable and some of it not as bad as we think. Regardless, each one of us must maintain our own heads with our own finances and credit cards is the single most influence on our psyche, our pocket books, our wealth and finally our credit scores. Kind of large don’t you think?
So here you go. How do you maintain or manage your own credit cards? You always look for the hidden fees BEFORE you apply for new or even use existing credit cards because terms are changing without notices, bold print or a slap in the head to get your attention.
If you are the kind of consumer who opens your statements, pays the bill and either throws the statement away or tosses it into a pile, never to be looked at again, please think twice. Unless you log and examine your bills every month you may miss hidden fees that credit card companies are charging you to recoup the massive losses they are incurring at an alarming rate due to the financial crisis.
Take for example:
1. Rate Hikes
Unprovoked: In this troubled economy most credit card companies are doubling and sometimes even tripling the interest rates they charge you to buy on credit. They need to make up for their losses of income due to the economy and the amount of customers defaulting on their accounts. ( That’s another whole bucket of mess itself) . Keep in mind that you may not get a separate notice or a bolded and separate line item on your statement to draw your attention to a change. The only way you will notice a rate hike is by looking closely at your statement and knowing the interest rate as it had been versus what is calculating now. Here’s where not paying attention to your finances can really hurt you. Sooner or later you may notice your finance charges have gotten quite large but you may not notice that for a couple of months if even then.
Provoked: One of the things credit card companies are doing, again in reaction to the credit crisis, is to change their terms of interest. It would be a change in the default rate more than likely and that default rate is the rate you are charged should you pay late, go over your credit limit or default the terms of the credit card in any way. Once you have violated their terms the credit card company hikes your interest rate to the default rate which is sometimes double or more over what you were initially paying them. You then have to contact the credit card company to see if they have any redemption rules, rules that would allow you to return to your original interest rate once you have satisfied their requirements. This though, is an outside shot as many credit card companies are thrilled they could push you into the higher interest rate and are not likely to lower it for you anytime soon. It’s money out of your pocket and into their profits.
2. Cutting the credit limits to almost nothing.
Unprovoked: Credit card companies, because they can, may lower your credit limit to sometimes just $2-3 dollars over your current balance without warning. They may have decided that credit limits at a certain amount are just too high a risk for the company to take in these times and therefore lower everyone’s credit limits within that range whether a good customer or not. The only place you might notice the change is your statement if you pay attention. You could be the best customer in the world and still have your credit limit lowered.
The rub is in the lack of notice that this has happened to you. Again, if you are not paying attention you could ruin your credit, interest rate and definitely your credit score. How? By accidentally charging and going over your limit. If you are not aware you credit limit has been lowered to just above your current balance and you charge thinking you have room, when in reality you don’t, you can go over your credit limit. And once you go over your credit limit, the terms of the credit card allows them to charge you fees, overlimit fees which are expensive. They may then also be able to raise your interest rate to the default interest rate that is double, sometimes triple what it was initially. The financial effects of this can have a snowball effect on your debt and may be devastating to your credit.
Provoked: You can get your credit limit lowered all by yourself by your own credit card management behavior. Missing payments, lower credit scores, excessive borrowing and maxing out your credit limits are all red flags to credit card companies that they should lower their risk by lowering your available credit. Just like credit scores, your limits are reduced far faster than they are increased. Again you could contact your credit card company to see if they have a program by which you can satisfy certain requirements and they will reinstate your original limit. I would not hold my breath though.
3. International Fees
International fees are those fees international banks charge to flow transactions through them either to a foreign country or to the US. While international fees were normally 1-2% of the total balance they have now increased to over 3% in some instances. You don’t have to be abroad to be charged international fees. If you buy something from another country either through E-Bay or directly you will more than likely pay an international fee.
4. Credit Protection Plans
When you are approved for a credit card you are offered an opportunity to enroll for a credit protection plan which is charged monthly at $1.00 for about every $100.00 of credit limit. The implied protection you get is that in the event you are laid-off or become disabled your monthly payments, possibly your balance will be paid by the insurance company the Protection Plan uses.
DON’T EVEN THINK ABOUT IT. This is nothing but a money-making gimmick and very rarely does it do what you assume it should. Until you go to use it you don’t know about the strict loopholes they have enabling the insurance company not to pay on your behalf. By also invoking this program you may give the credit card company an excuse to lower your credit limit, enforce your default interest rate, freeze your account or maybe altogether close it as though they closed your account for your irresponsibility. And the clincher is that your credit score is harmed. For more information on credit card protection insurance read my December 12, 2008 blog, "Credit Card Insurance: Is it worth it?"
Be your best advocate and pay more attention to your bills than you have in the past.
Not everyone is an accountant but you can still protect yourself by just paying more attention to your finances and where they go every month under what terms. By not paying attention to your own finances you are turning financial power over to those who’s bills you pay rather than you, the consumer controlling your own financial destiny.
So here you go. How do you maintain or manage your own credit cards? You always look for the hidden fees BEFORE you apply for new or even use existing credit cards because terms are changing without notices, bold print or a slap in the head to get your attention.
If you are the kind of consumer who opens your statements, pays the bill and either throws the statement away or tosses it into a pile, never to be looked at again, please think twice. Unless you log and examine your bills every month you may miss hidden fees that credit card companies are charging you to recoup the massive losses they are incurring at an alarming rate due to the financial crisis.
Take for example:
1. Rate Hikes
Unprovoked: In this troubled economy most credit card companies are doubling and sometimes even tripling the interest rates they charge you to buy on credit. They need to make up for their losses of income due to the economy and the amount of customers defaulting on their accounts. ( That’s another whole bucket of mess itself) . Keep in mind that you may not get a separate notice or a bolded and separate line item on your statement to draw your attention to a change. The only way you will notice a rate hike is by looking closely at your statement and knowing the interest rate as it had been versus what is calculating now. Here’s where not paying attention to your finances can really hurt you. Sooner or later you may notice your finance charges have gotten quite large but you may not notice that for a couple of months if even then.
Provoked: One of the things credit card companies are doing, again in reaction to the credit crisis, is to change their terms of interest. It would be a change in the default rate more than likely and that default rate is the rate you are charged should you pay late, go over your credit limit or default the terms of the credit card in any way. Once you have violated their terms the credit card company hikes your interest rate to the default rate which is sometimes double or more over what you were initially paying them. You then have to contact the credit card company to see if they have any redemption rules, rules that would allow you to return to your original interest rate once you have satisfied their requirements. This though, is an outside shot as many credit card companies are thrilled they could push you into the higher interest rate and are not likely to lower it for you anytime soon. It’s money out of your pocket and into their profits.
2. Cutting the credit limits to almost nothing.
Unprovoked: Credit card companies, because they can, may lower your credit limit to sometimes just $2-3 dollars over your current balance without warning. They may have decided that credit limits at a certain amount are just too high a risk for the company to take in these times and therefore lower everyone’s credit limits within that range whether a good customer or not. The only place you might notice the change is your statement if you pay attention. You could be the best customer in the world and still have your credit limit lowered.
The rub is in the lack of notice that this has happened to you. Again, if you are not paying attention you could ruin your credit, interest rate and definitely your credit score. How? By accidentally charging and going over your limit. If you are not aware you credit limit has been lowered to just above your current balance and you charge thinking you have room, when in reality you don’t, you can go over your credit limit. And once you go over your credit limit, the terms of the credit card allows them to charge you fees, overlimit fees which are expensive. They may then also be able to raise your interest rate to the default interest rate that is double, sometimes triple what it was initially. The financial effects of this can have a snowball effect on your debt and may be devastating to your credit.
Provoked: You can get your credit limit lowered all by yourself by your own credit card management behavior. Missing payments, lower credit scores, excessive borrowing and maxing out your credit limits are all red flags to credit card companies that they should lower their risk by lowering your available credit. Just like credit scores, your limits are reduced far faster than they are increased. Again you could contact your credit card company to see if they have a program by which you can satisfy certain requirements and they will reinstate your original limit. I would not hold my breath though.
3. International Fees
International fees are those fees international banks charge to flow transactions through them either to a foreign country or to the US. While international fees were normally 1-2% of the total balance they have now increased to over 3% in some instances. You don’t have to be abroad to be charged international fees. If you buy something from another country either through E-Bay or directly you will more than likely pay an international fee.
4. Credit Protection Plans
When you are approved for a credit card you are offered an opportunity to enroll for a credit protection plan which is charged monthly at $1.00 for about every $100.00 of credit limit. The implied protection you get is that in the event you are laid-off or become disabled your monthly payments, possibly your balance will be paid by the insurance company the Protection Plan uses.
DON’T EVEN THINK ABOUT IT. This is nothing but a money-making gimmick and very rarely does it do what you assume it should. Until you go to use it you don’t know about the strict loopholes they have enabling the insurance company not to pay on your behalf. By also invoking this program you may give the credit card company an excuse to lower your credit limit, enforce your default interest rate, freeze your account or maybe altogether close it as though they closed your account for your irresponsibility. And the clincher is that your credit score is harmed. For more information on credit card protection insurance read my December 12, 2008 blog, "Credit Card Insurance: Is it worth it?"
Be your best advocate and pay more attention to your bills than you have in the past.
Not everyone is an accountant but you can still protect yourself by just paying more attention to your finances and where they go every month under what terms. By not paying attention to your own finances you are turning financial power over to those who’s bills you pay rather than you, the consumer controlling your own financial destiny.
Wednesday, April 1, 2009
6 Efficient Ways to Manage the Cash in your Checking Account
Ever find yourself facing a deadline for a bill payment but it falls just before or on your paycheck date? You don’t want to miss your due date because that can mean you may lose your bargain interest rate, slapped with a larger interest rate next month, get your credit limit reduced automatically and/or lower your credit score. What to do?
Times used to be when you could write a check to pay a bill on or before its due date and the check would not clear (funds withdrawn) your bank for 2-3 days. You would have a few days to make sure you have deposited enough funds to cover the payments that are due. This was known as “check float”, the time it takes from writing your check to the actual presentation of the check and withdrawal of those funds from your account. Those days are long gone. So are the days of having a rather large stash of funds so that due dates aren’t quite such a crisis. Today its many times paycheck to paycheck.
In 2003. the Federal Government under pressure from banks passed the Check Clearing for the 21st Century Act also known as “Check 21”. This act allowed participating banks to use electronic imaging of checks they receive to present to the bank from which the check was written for faster collection of funds. That meant everything electronically transmitted would get same/next day attention collecting the money out of your account. While this Act shortened the time it takes before a bank takes your money, it did nothing to allow the same courtesy in collecting your paychecks and deposits timely. Banks can still hold paper check deposits according to the policies they set. That means that your bank may cash the check you wrote and still put a hold on your regular paper and paper paycheck deposits. This may sometimes create a serious negative balance in your checking account upon which you will be incurring many different fees charged against your checking account according to your bank’s policies. It can snowball on you if you are not careful. Doesn’t seem quite fair does it? Unless consumers rise up and put a consumer advocacy group together there’s not much one can do except legally manage your finances around this law.
Here are several things you can do to protect yourself from one-sided law.
1. Sign up for direct deposit whenever possible.
Generally your paychecks from your employer or funds requested that are electronically sent through the “Direct Deposit” system is available either by midnight or early the next morning of your paycheck date or deposit date. No receiving bank can hold an electronic direct deposit from your account unless there are serious security and or theft issues. While this won’t solve all your timing issues it will be helpful.
CAUTION: Make sure that the issuing party does not have a processing lag time between your request and the actual electronic transaction into your requested account.
One example: ING Direct, an online bank will allow you to set up online transfer
requests from your checking or saving accounts you have with them to any outside bank account you have verified with them. While you may have cash in one of their accounts they have a policy that your funds are going to be deposited no earlier than 3 business days. Here is an instance of electronic lag times from an issuing bank.
WARNING: Any checks and payments that come through your bank at the end of the previous day are usually processed first before next day deposit transactions which can create a situation called “unavailable funds” regardless of midnight or early morning deposits . “Unavailable funds” occurs when a check or payment is presented and paid before your deposit is considered collected in your account. Not only can this occur but the order in which these checks/payments are paid can slam you with many more fees than normal. Many banks will process the largest payment first which may not overdraw you but as they process the next smaller amounts you may be hit for each transaction after that. Check with your bank on their interpretation and timing of this situation as it creates fees against your account identical to expensive overdraft fees.
2. Customize your due dates.
You should map out the timing of your financial transactions. It is easier if you do this on paper. Take a calendar and first plot out the dates of your income. It may be weekly on the same day of the week, bi-weekly (every two weeks), semi-monthly (twice a month usually the 1st and the 15th or the 15th and the end of the month) or monthly. Record the amount net of taxes, the amount you will receive in your account after payroll taxes. If you are not sure estimate 15-20% of the gross amount you make should be subtracted for taxes. You now know how much you will be generating every pay period and be better able to determine how long those funds should last.
Next you should plot out all your debts by their due dates. Add each pay period’s debt obligations and compare them to your income. Are too many clustered around a certain date, say perhaps the 15th of the month? Call your creditors and see if they will change your due date so that you can spread out your obligations over the timing of your income. You may also arrange your own payment date when you pay certain bills online but that usually means you are having to pay your payments earlier than your original due date. You will have to get permission directly from your creditor and have them change your due dates if you want to postpone your original due dates by a few days. Not all will agree but its always worth a try.
You are the best source for determining how often you want to pay bills and how you want to pay them.
3. Leverage your credit cards.
This is tricky and involves careful monitoring of your credit cards, balances and due dates. If you don’t have the time to manage your credit cards more carefully than simply using and then paying them, this is not something you should undertake.
Leveraging your credit cards means that you may make purchases right after your due date is met. Your report to the credit bureau by your creditor will be made at statement time with the balance after your payment is applied. Right after that date you could use your credit card to make a purchase you planned on paying in full anyway sometime during the month. That will give you up to three weeks or more before you have to part with that money. That means you could make a budgeted purchase sooner interest free only IF you make that payment before the card’s next due date and you have not already spent the extra funds. Do not make a habit of this if you don’t have the time to spend managing your budget because sooner or later this can catch up with you and you may end up paying large amounts of finance charges due to your negligence in staying aware of your cash situation.
4. Enroll in online banking.
Online banking provides the tools for you to monitor our funds on a daily or weekly basis. You can see what is clearing in your account sooner and get a better feel for your bank’s posting procedures. Remember: Not all banks and credit unions have to adopt Check 21 but it is encouraged. Online banking allows you quicker access to your other accounts transfers and deposits when you need to cover payments. Many banks will allow you to pay your bills for free directly from your accounts which offers you better control of your funds.
Security is becoming less of an issue nowadays and is actually safer than putting
checks in the mail.
5. Take advantage of alerts and alarms that are offered on your accounts whether they are checking accounts, credit cards, loan accounts or any debt you have.
Many times your financial institution or credit card companies will allow you to set up automatic e-mail notification of statement availability, payment reminders, deposit alerts, fee notifications, late payments etc. If you are not internet savvy take some time to become better aquainted, save yourself some time and set these alerts up. We all get busy with our lives and it’s easy to attend to an alert before some consequence when we are notified beforehand. Forgetting is easy and remembering is hard so why not make your life a little easier with automatic reminders?
6. Work on your own personal overdraft cushion.
While most of our banks allow us to apply for a small unsecured note or line of credit that will automatically activate once our checking account overdrafts, we will sometimes pay a heavy price for using that small loan to cover our mistake or timing issue.
There are also techniques by which you write yourself a check which shows less funds than you actually have but not all of us can operate with a false balance. If you can, the best option is to attach a savings account to your checking account and squirrel away $500 to $1000 at least in the event of an overdraft issue in your checking account.
Don’t assume your bank will automatically withdraw those funds in your savings to keep you from paying overdrafts. You will have to talk with your bank or credit union to make sure that they will set that up automatically for you. You will save yourself overdraft fees and grief if you do this correctly while still managing a little interest on these funds waiting for use.
If you find your bank or credit union is not cooperative in helping you avoid overdrafts then find another bank. Remember, banks make money on the interest you pay to borrow from them. Keep borrowing to a minimum and pay yourself interest on the use of your own funds.
There is virtually no way around the management of your cash any way you look at it. Banks have made it easier to take your money and harder for you to accumulate it. Be smarter and wiser by managing your own funds. Make it harder for banks to use and spend your hard earned cash by decreasing the opportunities for them to charge you fees. They are in business to make money from you and you should be using them to create wealth for yourself. You can’t create your own wealth from giving someone else your cash.
Times used to be when you could write a check to pay a bill on or before its due date and the check would not clear (funds withdrawn) your bank for 2-3 days. You would have a few days to make sure you have deposited enough funds to cover the payments that are due. This was known as “check float”, the time it takes from writing your check to the actual presentation of the check and withdrawal of those funds from your account. Those days are long gone. So are the days of having a rather large stash of funds so that due dates aren’t quite such a crisis. Today its many times paycheck to paycheck.
In 2003. the Federal Government under pressure from banks passed the Check Clearing for the 21st Century Act also known as “Check 21”. This act allowed participating banks to use electronic imaging of checks they receive to present to the bank from which the check was written for faster collection of funds. That meant everything electronically transmitted would get same/next day attention collecting the money out of your account. While this Act shortened the time it takes before a bank takes your money, it did nothing to allow the same courtesy in collecting your paychecks and deposits timely. Banks can still hold paper check deposits according to the policies they set. That means that your bank may cash the check you wrote and still put a hold on your regular paper and paper paycheck deposits. This may sometimes create a serious negative balance in your checking account upon which you will be incurring many different fees charged against your checking account according to your bank’s policies. It can snowball on you if you are not careful. Doesn’t seem quite fair does it? Unless consumers rise up and put a consumer advocacy group together there’s not much one can do except legally manage your finances around this law.
Here are several things you can do to protect yourself from one-sided law.
1. Sign up for direct deposit whenever possible.
Generally your paychecks from your employer or funds requested that are electronically sent through the “Direct Deposit” system is available either by midnight or early the next morning of your paycheck date or deposit date. No receiving bank can hold an electronic direct deposit from your account unless there are serious security and or theft issues. While this won’t solve all your timing issues it will be helpful.
CAUTION: Make sure that the issuing party does not have a processing lag time between your request and the actual electronic transaction into your requested account.
One example: ING Direct, an online bank will allow you to set up online transfer
requests from your checking or saving accounts you have with them to any outside bank account you have verified with them. While you may have cash in one of their accounts they have a policy that your funds are going to be deposited no earlier than 3 business days. Here is an instance of electronic lag times from an issuing bank.
WARNING: Any checks and payments that come through your bank at the end of the previous day are usually processed first before next day deposit transactions which can create a situation called “unavailable funds” regardless of midnight or early morning deposits . “Unavailable funds” occurs when a check or payment is presented and paid before your deposit is considered collected in your account. Not only can this occur but the order in which these checks/payments are paid can slam you with many more fees than normal. Many banks will process the largest payment first which may not overdraw you but as they process the next smaller amounts you may be hit for each transaction after that. Check with your bank on their interpretation and timing of this situation as it creates fees against your account identical to expensive overdraft fees.
2. Customize your due dates.
You should map out the timing of your financial transactions. It is easier if you do this on paper. Take a calendar and first plot out the dates of your income. It may be weekly on the same day of the week, bi-weekly (every two weeks), semi-monthly (twice a month usually the 1st and the 15th or the 15th and the end of the month) or monthly. Record the amount net of taxes, the amount you will receive in your account after payroll taxes. If you are not sure estimate 15-20% of the gross amount you make should be subtracted for taxes. You now know how much you will be generating every pay period and be better able to determine how long those funds should last.
Next you should plot out all your debts by their due dates. Add each pay period’s debt obligations and compare them to your income. Are too many clustered around a certain date, say perhaps the 15th of the month? Call your creditors and see if they will change your due date so that you can spread out your obligations over the timing of your income. You may also arrange your own payment date when you pay certain bills online but that usually means you are having to pay your payments earlier than your original due date. You will have to get permission directly from your creditor and have them change your due dates if you want to postpone your original due dates by a few days. Not all will agree but its always worth a try.
You are the best source for determining how often you want to pay bills and how you want to pay them.
3. Leverage your credit cards.
This is tricky and involves careful monitoring of your credit cards, balances and due dates. If you don’t have the time to manage your credit cards more carefully than simply using and then paying them, this is not something you should undertake.
Leveraging your credit cards means that you may make purchases right after your due date is met. Your report to the credit bureau by your creditor will be made at statement time with the balance after your payment is applied. Right after that date you could use your credit card to make a purchase you planned on paying in full anyway sometime during the month. That will give you up to three weeks or more before you have to part with that money. That means you could make a budgeted purchase sooner interest free only IF you make that payment before the card’s next due date and you have not already spent the extra funds. Do not make a habit of this if you don’t have the time to spend managing your budget because sooner or later this can catch up with you and you may end up paying large amounts of finance charges due to your negligence in staying aware of your cash situation.
4. Enroll in online banking.
Online banking provides the tools for you to monitor our funds on a daily or weekly basis. You can see what is clearing in your account sooner and get a better feel for your bank’s posting procedures. Remember: Not all banks and credit unions have to adopt Check 21 but it is encouraged. Online banking allows you quicker access to your other accounts transfers and deposits when you need to cover payments. Many banks will allow you to pay your bills for free directly from your accounts which offers you better control of your funds.
Security is becoming less of an issue nowadays and is actually safer than putting
checks in the mail.
5. Take advantage of alerts and alarms that are offered on your accounts whether they are checking accounts, credit cards, loan accounts or any debt you have.
Many times your financial institution or credit card companies will allow you to set up automatic e-mail notification of statement availability, payment reminders, deposit alerts, fee notifications, late payments etc. If you are not internet savvy take some time to become better aquainted, save yourself some time and set these alerts up. We all get busy with our lives and it’s easy to attend to an alert before some consequence when we are notified beforehand. Forgetting is easy and remembering is hard so why not make your life a little easier with automatic reminders?
6. Work on your own personal overdraft cushion.
While most of our banks allow us to apply for a small unsecured note or line of credit that will automatically activate once our checking account overdrafts, we will sometimes pay a heavy price for using that small loan to cover our mistake or timing issue.
There are also techniques by which you write yourself a check which shows less funds than you actually have but not all of us can operate with a false balance. If you can, the best option is to attach a savings account to your checking account and squirrel away $500 to $1000 at least in the event of an overdraft issue in your checking account.
Don’t assume your bank will automatically withdraw those funds in your savings to keep you from paying overdrafts. You will have to talk with your bank or credit union to make sure that they will set that up automatically for you. You will save yourself overdraft fees and grief if you do this correctly while still managing a little interest on these funds waiting for use.
If you find your bank or credit union is not cooperative in helping you avoid overdrafts then find another bank. Remember, banks make money on the interest you pay to borrow from them. Keep borrowing to a minimum and pay yourself interest on the use of your own funds.
There is virtually no way around the management of your cash any way you look at it. Banks have made it easier to take your money and harder for you to accumulate it. Be smarter and wiser by managing your own funds. Make it harder for banks to use and spend your hard earned cash by decreasing the opportunities for them to charge you fees. They are in business to make money from you and you should be using them to create wealth for yourself. You can’t create your own wealth from giving someone else your cash.
Friday, March 27, 2009
Mortgage Help from Citigroup?
Citigroup just announced a plan to help homeowners who have been laid off. It is called “Homeowner Assist”. They said they would provide an opportunity for a homeowner to pay just $500 per month for three months. Note* this is a temporary solution. The catch…….the home owner must be unemployed under 6 months, provide proof of unemployment and has to be at least 60 days behind in their payments on their first mortgage, (2nd mortgages and home equity loans do not qualify). While it is a step in the right direction, the damage to a homeowner’s credit has already taken a huge hit. There is no work out for the newly unemployed who was previously current on their mortgage. So there is no way to save good credit when faced with an unavoidable situation…unemployment. One would have to let payments go unpaid for two months in order to qualify. At this point, the homeowner already will have 1 60 day late and a 30 day late hit on their credit report not to mention the past due payments for 2 months. In addition, Citigroup doesn’t specify what happens with the past due months nor do they guarantee that the previous and ensuing months will be reported as “current”. Furthermore, with long term unemployment this may be a matter of postponing the inevitable, foreclosure. There may be few unemployed in this economy that will find employment within 3 months thereby improving their own negotiation with their current situation. Is this program an actual help to the homeowners in this situation? While Citibank says that if you can’t find work in three months they will work with you on a case by case basis I would contend that this is merely an empty offer that really does little to help the homeowner avoid losing their home, creating an opportunity to save their home and avoid ruining their credit. There is little that will make a bank work with you in these situations. Until I see the results I would venture an educated guess that again, Citibank is positioning itself in the eyes of the bailout government by outwardly offering something that has virtually little substance.
Citigroup, I challenge you to make me take this opinion back by proving to me you are true to your word.
Citigroup, I challenge you to make me take this opinion back by proving to me you are true to your word.
Straight Scoop on Dating a Credit Score
You've seen reports from many media outlets on the most recent dating craze…using FICO (credit) scores as a criteria for a possible compatible match. From NBC News, ABC News and the Economist to Oprah Winfrey and Suze Orman you’ve heard the virtues of making sure you have a partner with a good FICO (credit) score. (Suze Orman among many other affiliates has a “deal” with Fair Isaac that promotes their version of a credit score called the FICO score.) It’s assumed people with high credit scores are much better financial matches. While a good credit score may be a plus to your potential love interest, the subjectivity of it makes a public credit score a possible vehicle for deception. So my advice is to beware. Credit scores are and should be as private as your social security number, driver’s license numbers, banking information and any personal information.
Upon hearing of a dating website based on everyone’s FICO score I started to wonder just how authentic the scores would be assuming that the site was set and sorted on a FICO score filter. Would a site like this ask to view your credit reports and scores to authenticate the scores or would they just rely on honesty when potential searchers sign up on their website? The site that has gotten all the hype is Creditscoredating.com and I thought I had better check it out from a consumer standpoint. Remember you can’t always believe everything you read or hear and being a proponent of that idea I thought it important to experience first hand whether or not this hyped site was true to its claims. More importantly is it authentic?
Signing onto the site you are first required to become a free member where you are prompted to enter a profile and all your preferences. Since this site’s name and claim to fame is the credit score of each candidate who signs up, I looked diligently for a place where they would either ask you for specific personal information to pull credit reports and scores for authenticity or a place you might enter your own credit scores. There was neither. I looked everywhere on the site including the profile, Preferences, FAQ (Frequently Asked Questions) and Contact Us pages. I found nothing! I couldn’t believe that missing this in the FAQ’s was good business. So I decided to e-mail the contact and ask where this information was and how I might search on this information. I got a prompt reply back.
“ We encourage completion of profile information which includes a member adding their average credit score. This information would be shown when another member views their profile. Unfortunately some do add this information immediately and others will do it later or not at all. Thank you for bringing the subject to our attention. We have noticed that a field was turned off (about me) where we ask a person signing up to input their credit score.”
Well ok mistakes happen. However, now we know they do not pull anyone’s credit report for a score which means we now know that anyone can input any credit score they want based on their own honesty without any authentication. I’m more than sure people who have a 480 credit score are going to put that out into the dating universe! Probably not. And now that we heard from the site, can we assume those who don’t put their score out there are hiding something or maybe just believe that it’s none of anyone’s business in the beginning stages of the dating game? What intelligent consumer is actually going to put his/her score in their profile, especially a score that is considered questionable? How do we know that if this is such an important criteria for finding a match/mate we are getting truthful information? Sounds like just another area that can be left to the whim of the person who maintains his/her own profile. Let alone the validity of the argument that a lower score makes for a bad match choice, how many low scores are you going to actually see on this sort of a website? It would be relationship suicide to do so.
My two cents? This is just another way to make money by making prospective customers believe that matching by credit score is important in this economy. While credit scores and how one handles money IS very important to the survival of a relationship, let’s not put the cart before the horse here. There are so many reasons a credit score may be less than perfect and some is through no fault of their own. Take it from me, I’ve seen good people with low scores who have done most things right, some who have made little use of credit and are cash rich who have low scores because credit history was not on their side as far as calculating a score. I’ve met people who prefer to pay cash and make little or no use of credit cards (revolving credit) which again can lower your score since it is assumed revolving credit and its use is a good measure of a credit score. Membership and the need to pull one’s own FICO score may be profit enough for this site above but the real question…are you getting what you pay for? If you need to find a date online stick to the basics and approach the credit score issue when you both think there may be some compatibility.
Upon hearing of a dating website based on everyone’s FICO score I started to wonder just how authentic the scores would be assuming that the site was set and sorted on a FICO score filter. Would a site like this ask to view your credit reports and scores to authenticate the scores or would they just rely on honesty when potential searchers sign up on their website? The site that has gotten all the hype is Creditscoredating.com and I thought I had better check it out from a consumer standpoint. Remember you can’t always believe everything you read or hear and being a proponent of that idea I thought it important to experience first hand whether or not this hyped site was true to its claims. More importantly is it authentic?
Signing onto the site you are first required to become a free member where you are prompted to enter a profile and all your preferences. Since this site’s name and claim to fame is the credit score of each candidate who signs up, I looked diligently for a place where they would either ask you for specific personal information to pull credit reports and scores for authenticity or a place you might enter your own credit scores. There was neither. I looked everywhere on the site including the profile, Preferences, FAQ (Frequently Asked Questions) and Contact Us pages. I found nothing! I couldn’t believe that missing this in the FAQ’s was good business. So I decided to e-mail the contact and ask where this information was and how I might search on this information. I got a prompt reply back.
“ We encourage completion of profile information which includes a member adding their average credit score. This information would be shown when another member views their profile. Unfortunately some do add this information immediately and others will do it later or not at all. Thank you for bringing the subject to our attention. We have noticed that a field was turned off (about me) where we ask a person signing up to input their credit score.”
Well ok mistakes happen. However, now we know they do not pull anyone’s credit report for a score which means we now know that anyone can input any credit score they want based on their own honesty without any authentication. I’m more than sure people who have a 480 credit score are going to put that out into the dating universe! Probably not. And now that we heard from the site, can we assume those who don’t put their score out there are hiding something or maybe just believe that it’s none of anyone’s business in the beginning stages of the dating game? What intelligent consumer is actually going to put his/her score in their profile, especially a score that is considered questionable? How do we know that if this is such an important criteria for finding a match/mate we are getting truthful information? Sounds like just another area that can be left to the whim of the person who maintains his/her own profile. Let alone the validity of the argument that a lower score makes for a bad match choice, how many low scores are you going to actually see on this sort of a website? It would be relationship suicide to do so.
My two cents? This is just another way to make money by making prospective customers believe that matching by credit score is important in this economy. While credit scores and how one handles money IS very important to the survival of a relationship, let’s not put the cart before the horse here. There are so many reasons a credit score may be less than perfect and some is through no fault of their own. Take it from me, I’ve seen good people with low scores who have done most things right, some who have made little use of credit and are cash rich who have low scores because credit history was not on their side as far as calculating a score. I’ve met people who prefer to pay cash and make little or no use of credit cards (revolving credit) which again can lower your score since it is assumed revolving credit and its use is a good measure of a credit score. Membership and the need to pull one’s own FICO score may be profit enough for this site above but the real question…are you getting what you pay for? If you need to find a date online stick to the basics and approach the credit score issue when you both think there may be some compatibility.
Tuesday, March 24, 2009
Are you kidding me...Dating a FICO Score?
Incredible... and what will they think of next to get our private information?Creditscoredating.com just got some national press as a way to convince us that a credit score makes or breaks a relationship. Yes, while financial diffficulties is one of the hardest challenges in any relationship I'm not sure I would be advertising my credit score in this market on a public site.
I'll be looking into the site a little more and report later but seriously be very careful when giving your private financial and credit information to any public site. Most sites are run by some sort of revenue and whether they admit it or not your information will be shared with someone leaving you ripe for offers both personal and financial.
A credit score can be a personal thing because they are not always correct. There are a meriad of mistakes that I have seen on the credit reports of perfectly responsible people. As one aticle puts it, even an unemployed lawyer with lots of debt is finding the credit scores dropping faster than the New year's Eve ball in NY.
I'll be looking into the site a little more and report later but seriously be very careful when giving your private financial and credit information to any public site. Most sites are run by some sort of revenue and whether they admit it or not your information will be shared with someone leaving you ripe for offers both personal and financial.
A credit score can be a personal thing because they are not always correct. There are a meriad of mistakes that I have seen on the credit reports of perfectly responsible people. As one aticle puts it, even an unemployed lawyer with lots of debt is finding the credit scores dropping faster than the New year's Eve ball in NY.
Friday, December 12, 2008
Credit Card Insurance - Is it worth it?
Be careful when you apply for credit with a credit card company. Consider this.
A customer applied for credit at Best Buy on Black Friday (day after Thanksgiving) because there were some very interesting interest free purchases that interested her. The provider of the credit card was HSBC (Household-Beneficial Corporation) on behalf of Best Buy. A camera was purchased for 6 months free interest. The Best Buy clerk took the filled-out application from the applicant, Sue and completed it online for her. Sue, being familiar with financial consumer issues and consumer applications was very careful not to fall into the "extra" trap on the application that she filled out. When the clerk used that application to complete it on their register, he didn't tell Sue about the "extra" that was automatic when he submitted her application. That "extra" is particularly a product most credit card issuers are now calling "unemployment credit card insurance". For a monthly fee based on the amount of debt on the card, the card holder is supposedly covered for a period of time indicating that the insurance company will make your monthly payments due to a lay-off or perhaps a disability. This policy will NOT forgive your debt should you experience a lay-off or a disability but merely make the monthly minimum payment over a specified period of time.
What did Sue do or not do when she purchased her camera? She made sure that no box was checked that indicated a subscription to anything additional other than her direct purchase of her camera on her credit application at Best Buy. She made sure the Best Buy associate understood this and made him uncheck that option box. Extras such as "credit protection enrollment" or "credit insurance" are sometimes by default (automatic) check marked and billed to you. By the time you get your first statement and in some cases a few months down the road depending on how closely you check your finances, you find that you might have been unaware of the new monthly premium charges on your statements. It's credit insurance and you didn't look closely enough when you applied if this has happened to you. Calling and cancelling does not refund for the time you didn't catch this and were covered. Like most insurance policies your fees only stop the day you cancel.
You may ask, why is this something I should watch when I apply for any type of credit card? The answer is simple. This is an insurance product and in and of itself it does not do what you think it will do. The best way to illustrate this is to understand what this product is. When you apply for a credit card you are becoming a financial customer to a card issuing bank agreeing that you will pay certain fees (finance charges) for the extension of credit over a period of time. You are given a credit limit at the time they accept you as their customer and give you a credit limit they believe you can handle. You may charge up to this limit but if you don't pay it off in total within 25-30 days (read the contract and fine print) you will be charged an agreed upon interest rate (finance charge) as indicated by the issuing bank. That is the way credit card issuers make their money. Along with that interest they collect, the credit issuers also believe (especially in this economy) that they can sell you another product that will net them a commission for selling it to you. That product is an small insurance policy (agreement) that will cover your monthly payments with this credit card company if you should be unable to pay due to unemployment or diability. This policy is said to make your payments and maintain your account while you are unable. Some conservative consumers might find this a good move to protect themselves and their credit but it actually is a very bad decision in most cases. It doesn't work. Why?There are so many requirements and exceptions that you will virtually be throwing your money away on this so-called protection. The outcome, should you become unemployed or disabled and unable to pay your obligations will be the same with or without this protection. You will still have late payments on your credit record that can't be erased and the bill will still not be paid. So don't let yourself fall into this trap.
Take, for instance a client of mine who needed help with his credit. He was a recovering credit client trying to improve his credit after a period of employment. He brought two credit cards he was approved for and allowed them to talk him into "credit protection". He was being charged $4.95 each month on each account for this protection. While unemployed he called these two credit card companies to take advantage of his "credit protection" policy he knew he was paying for. He was sent paperwork to work directly with the company who held the policy. He had to provide documentation and after months of application and clarification he was denied due to a clause cleverly crafted that keep the insurance companies covered. Not only was he out the $4.95/month he had been paying for the last year and a half, 6 of those months spent working back and forth with the insurance company got him 30, 60 and 90 day late dings on his credit, a cancellation of his credit cards and the remaining obligation plus interest demanded to be paid in full under the terms of the credit card agreement.
Before you sign up you have to decide whether the fees would be better spent on a life and disability insurance policy that would encompass all aspects of your life.
Specific policies such as these are typically more expensive, restrictive and rarely pay out.
A customer applied for credit at Best Buy on Black Friday (day after Thanksgiving) because there were some very interesting interest free purchases that interested her. The provider of the credit card was HSBC (Household-Beneficial Corporation) on behalf of Best Buy. A camera was purchased for 6 months free interest. The Best Buy clerk took the filled-out application from the applicant, Sue and completed it online for her. Sue, being familiar with financial consumer issues and consumer applications was very careful not to fall into the "extra" trap on the application that she filled out. When the clerk used that application to complete it on their register, he didn't tell Sue about the "extra" that was automatic when he submitted her application. That "extra" is particularly a product most credit card issuers are now calling "unemployment credit card insurance". For a monthly fee based on the amount of debt on the card, the card holder is supposedly covered for a period of time indicating that the insurance company will make your monthly payments due to a lay-off or perhaps a disability. This policy will NOT forgive your debt should you experience a lay-off or a disability but merely make the monthly minimum payment over a specified period of time.
What did Sue do or not do when she purchased her camera? She made sure that no box was checked that indicated a subscription to anything additional other than her direct purchase of her camera on her credit application at Best Buy. She made sure the Best Buy associate understood this and made him uncheck that option box. Extras such as "credit protection enrollment" or "credit insurance" are sometimes by default (automatic) check marked and billed to you. By the time you get your first statement and in some cases a few months down the road depending on how closely you check your finances, you find that you might have been unaware of the new monthly premium charges on your statements. It's credit insurance and you didn't look closely enough when you applied if this has happened to you. Calling and cancelling does not refund for the time you didn't catch this and were covered. Like most insurance policies your fees only stop the day you cancel.
You may ask, why is this something I should watch when I apply for any type of credit card? The answer is simple. This is an insurance product and in and of itself it does not do what you think it will do. The best way to illustrate this is to understand what this product is. When you apply for a credit card you are becoming a financial customer to a card issuing bank agreeing that you will pay certain fees (finance charges) for the extension of credit over a period of time. You are given a credit limit at the time they accept you as their customer and give you a credit limit they believe you can handle. You may charge up to this limit but if you don't pay it off in total within 25-30 days (read the contract and fine print) you will be charged an agreed upon interest rate (finance charge) as indicated by the issuing bank. That is the way credit card issuers make their money. Along with that interest they collect, the credit issuers also believe (especially in this economy) that they can sell you another product that will net them a commission for selling it to you. That product is an small insurance policy (agreement) that will cover your monthly payments with this credit card company if you should be unable to pay due to unemployment or diability. This policy is said to make your payments and maintain your account while you are unable. Some conservative consumers might find this a good move to protect themselves and their credit but it actually is a very bad decision in most cases. It doesn't work. Why?There are so many requirements and exceptions that you will virtually be throwing your money away on this so-called protection. The outcome, should you become unemployed or disabled and unable to pay your obligations will be the same with or without this protection. You will still have late payments on your credit record that can't be erased and the bill will still not be paid. So don't let yourself fall into this trap.
Take, for instance a client of mine who needed help with his credit. He was a recovering credit client trying to improve his credit after a period of employment. He brought two credit cards he was approved for and allowed them to talk him into "credit protection". He was being charged $4.95 each month on each account for this protection. While unemployed he called these two credit card companies to take advantage of his "credit protection" policy he knew he was paying for. He was sent paperwork to work directly with the company who held the policy. He had to provide documentation and after months of application and clarification he was denied due to a clause cleverly crafted that keep the insurance companies covered. Not only was he out the $4.95/month he had been paying for the last year and a half, 6 of those months spent working back and forth with the insurance company got him 30, 60 and 90 day late dings on his credit, a cancellation of his credit cards and the remaining obligation plus interest demanded to be paid in full under the terms of the credit card agreement.
Before you sign up you have to decide whether the fees would be better spent on a life and disability insurance policy that would encompass all aspects of your life.
Specific policies such as these are typically more expensive, restrictive and rarely pay out.
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