Month: October 2010

FEATURE ARTICLE:   Be Careful When Using that Debit Card

Millions of people use their debit cards every day and if you have been in line at your favorite coffee shop or fast food restaurant, you can’t help but notice people make the smallest purchases with them. All the more reason you should keep your receipt and check your bank statement frequently. Although Federal Law limits your liability for fraudulent transactions to $50, if you are negligent and do not report fraudulent activity in a timely basis, you could be held liable for all of the transactions.

Loss of Funds; if somebody fraudulently used your debit card, the money comes out of your account (savings and or checking) in real time. By the time you report to the bank your money is gone and you wait for the bank to do their investigation and credit your funds, maybe a few days or a few weeks. We all know what happens next when we cannot pay our bills. Conversely, fraudulent use of your credit card means you do not have to pay the bill.

Merchant Disputes; if you make a purchase with a credit card, and it is broken or damaged; you can dispute the charge and stop payment. Not so with a debit card purchase. Once the merchant has the funds they may not be eager to assist you with your problem.

Extra Charges??; if you use your debit card to check in at a hotel and a “hold” will be put on your card for more than you are spending to allow for incidentals like meals, phone use, etc. Similarly a gas station purchase or rental car companies may put a hold for a larger amount than your purchase since they do not know how much the purchase will be when you swiped the card initially. If you are running a tight budget, you may not have allowed for these extra charges and this could lead to bounced checks on other payments. Conversely, a hotel will take your credit card and run only the charges incurred at check out.

Overdraft charges; if you have a debit card the bank you have probably signed you up for overdraft protection. This means if you inadvertently used the card or wrote a check for more than you have in your account, then the bank will honor the transaction and charge you anywhere from $30 to $40 for the privilege. That means that $2 value meal purchase now cost you quite a bit more. You would think that the bank should disallow the charge in the first place but just think of the money they would lose if you were not charged the overdraft fee. Expect the Government to review these practices and offer more consumer protection laws later in 2010.

Illegal Card Readers ; it is almost impossible to stop a crook when he is using technology to read your card info when paying at the pump at a gas station or ATM. Crooks can open these machines and place a card reader which will record your account number and pin code leaving your bank account vulnerable and empty within seconds.

In closing we can only stress how important it is that you review your statements, (daily if you have an on-line access) and rethink how and when you use your debit card. Ultimately, the bank or financial institution has made it very convenient for you to have access to your money and if you are not careful, so will everyone else.

MONEY SAVING TIP:  Actual Cash Value or Replacement cost

When you file a homeowners claim the insurance company calculates how much to pay you by evaluating the cost to replace your property with new property of the same kind and quality. But here is the critical distinction; if your policy covers your personal property (your home’s contents) for its actual cash value, the insurance company deducts depreciation from your personal property’s overall value before arriving at a figure.  Your check will be significantly less than the amount it will cost to restore, repair or replace the damage or loss.  However, if you have replacement-cost coverage, the insurance company will pay what it costs to repair or replace your damaged possessions at today’s prices without deducting for depreciation.

Review your insurance policy and make sure you understand what you are buying.  It could save you money if you have to make a claim.

DID YOU KNOW: that if you are a coupon clipper you can visit www.dealcatcher.com and get some great coupon and other deals.

www.dealcatcher.com is a website that is loaded with coupons, rebates and newspaper circulars with weekly specials.  You can also practice your smart shopper techniques and compare prices. If comparison shopping is your thing, check out these sites for a good overview, www.pricegrabber.com, www.shopping.com, www.mysimon.com www.shopping.yahoo.com, www.shopzilla.com and www.nextag.com.

FEATURE ARTICLE: Rent to Own Furniture and Appliances. Bad Idea!

Financing furniture from a rent to own store sounds like a great idea when you’re looking to fill up your home with appliances, furniture and electronics on a tight budget, but are those no-interest, no-payment offers as good a deal as they seem? Not usually.

How do these stores work? Pretty simple, come in pick out the items you want and the store will offer you a payment plan to make the purchase. Make your payments as per the agreement (no late payment allowed) and over a period of time you will own the items. Be late once and the items will be repossessed and any chance of ownership has now vanished. The price you pay for a particular item is full retail with no discounts that you may find at another store. Also beware that the item you purchase may not be new but a repossessed unit that has come back to the store. All items financed over the long term carry a high interest.

Here is a typical example. A $1,000 television purchase as stated on CNN.

“Let’s say that a company rents a $1,000 TV to a customer for $100 per month for a term of 24 months. At the end of the 24 months, the customer owns the TV, but has paid a total of $2,400 for a $1,000 TV that is now 2 years old! That is like financing it at 103% over those two years! They are doing well in this economy because they are preying on the weak and many consider it predatory lending.”

Same as cash 90 day plan. All of these stores offer you a no interest 90 day plan when you make a purchase. They will let you pay for the item in full if you pay it completely off in 90 days. Remember that you paid a full undiscounted retail price. If after 90 days you cannot pay in full, they will put you into a one or two year payment plan with the interest starting from the original date of the purchase. If at any point you are late on your payment, even by a day, they will come to your home and repossess your purchases and all of the money you paid is gone.

Payment plans carry stiff penalties and finance charges if not paid on time. No-interest and no payments as advertised in promo offers for given number of months sounds like a dream come true; but what are the consequences when you fail to pay off your balance before the end of the offer’s term?

Unfortunately, that good deal immediately turns into a very bad deal. Typically you will be expected to pay interest on the item going all the way back to the date of purchase; and since store financing generally carries a much higher interest rate than most credit cards, the interest total can be quite shocking which combined with the original purchase price means you have more than doubled the original cost of the item.

Paying over time means you pay full sticker price. Cash is still king! Ask the store manager to give you a discount for paying cash and you will probably get it especially in these hard economic times. While you are in a negotiating mode, why not ask for free delivery, setup, and a free lamp? The worst that can happen, is they may say no but you may be pleasantly surprised.  Not so when it comes to financing your purchase. This means you will often pay full price and high finance charges for the convenience and privilege of delaying your payment.

How secure is your employment? Many consumers making a purchase at these stores find it so very convenient to make a list and get all of the items they always wanted in one purchase. They also assume that their income is fixed for the future also.  Assuming you do not lose your job, or become ill, things may work out. The finance plans associated with these purchases will not erase your debt just because your circumstances have changed. This simple fact  is financing any purchase is a risk. Yes the store will offer you an insurance plan to guarantee that your payments are uninterrupted but if you are on a budget that is an added expense you do not need. You must remember that if you are late or miss a payment, all of the payments made to acquire the item are forfeited as well as the item.

What’s the Alternative?
Cash is definitely the best alternative to a store finance plan. If you do not feel comfortable handing over cash to a store, a debit card will yield the same result with the added protection of the bank and the issuing credit company.

Realistically cash may not always be an option. For the times when you are forced to finance a purchase, use a credit card instead of the offered in-store financing. You will probably have to start making payments right away, but at least you won’t have to worry about inflated interest charges or unnecessary damage to your credit. We recommend that you delay the gratification of purchasing a new TV and save the cash for it. Better yet, why not purchase a TV from a site such as Craigslist or eBay? Or, if things are really tight you may consider some thrift store purchases like the Salvation Army.

MONEY SAVING TIP:  Consolidate your plugs.

Between 5 % and 15% of the power used by electronics is consumed when they’re turned off.  Plug your TV, DVD player, cable box, and home entertainment system into a power strip or surge protector, then unplug it at night and when you’re not home.  If your electric bill runs $120 per month, this is a savings of $216 per year.

DID YOU KNOW…your credit reports are all different?

Each of the credit bureau agencies, Equifax, Experian and TransUnion, are separate companies and therefore they not only receive different information from your creditors but choose to report it differently. The speed at which they update their records is not the same either.  One agency my update your address change or employment status as soon as it happens, while the other agencies may be delayed doing so.  It is rare that all three of your credit reports show the same information, this is why checking them for accuracy is crucial once every 6 to 12 months.