Be careful with store credit cards
November 5, 2008
The holiday shopping season is fast approaching.
Stores are starting to roll out sale prices and other special offers. There’s a good chance that at least once during your holiday shopping you will be offered a store credit card when you make a purchase.
These offers seem very enticing because you are usually offered a certain percentage off of your purchase if you sign up for a store card. There are several things to be aware of before you say yes to that card.
The store card may carry a very high interest rate. If you charge your purchases to this card and can’t pay it off immediately, you could end up spending more in interest charges then you initially saved.
Also, opening store cards could hurt your credit score.
First of all, every time a lender requests your credit report and credit score, it puts a little ding in your credit score. Your credit score may only be lowered by a few points, but if you apply for more than one card in a day, those few points are going to add up. This could be damaging if you already have a low credit score.
Second, when you apply for several lines of credit within a short amount of time, this shows up on your credit report. It could be a red flag to lenders who may wonder why you are suddenly in need of so much credit.
If you need to use a credit card while holiday shopping, you are probably better off to use a card you already have that has a low interest rate.
If you do decide to open a store credit card, make sure you know the interest rate and any fees associated with the card before you sign up. Only charge what you can afford to pay off right away. And finally, only open one card. Do not open cards at every store that may offer you a card.
Women need to take control of their finances
October 20, 2008
It’s time for women to buckle down and save up for retirement.
Recent studies show that women are very unprepared for retirement.
According to the Ninth Annual Transamerican Retirement Survey, single women estimate they need a median amount of $500,000 by the time they retire. Despite their estimates, one third of women reported they have saved less than $25,000 and only one in 10 women reported having saved more than $100,000.
What’s even more disturbing, the majority of these women arrived at these numbers based on a guesstimate and not actual calculations.
It is a fact that women outlive men. The prospects of having Social Security to fall back on are rapidly diminishing, especially for younger workers.
If you haven’t started to save for retirement, you should meet with a financial planner in your area and talk about what you can do to start building a nest egg.
If you’re concerned that you don’t have enough leftover income every month to set aside money for retirement, contact the certified counselors at Advantage CCS. They can go over your budget and help you to look for ways to scale back on your expenses so that you can pay down any debt you may have and possibly free up some money to put towards retirement savings.
Don’t let the turbulence in the Stock Market discourage you from saving money. If you’re nervous about investing, you can ask your financial planner to guide you towards low risk options.
Avoid payday loans
October 15, 2008
It’s Wednesday. You have over a week until your next payday. You have a pile of bills due. Your kids need lunch money. You owe your friend $20.
A feeling of panic washes over you. You begin juggling numbers and adding and subtracting in your head.
You’re not going to make it.
Then you remember that place down the street that will cash your check today. You just have to repay them when you get your paycheck next week.
It seems like a financial life saver being thrown to you.
Reality: Payday loans are not a financial lifesaver. In fact, they’re more likely to be the equivalent of throwing a drowning man a brick.
There are a couple of reasons why payday loans are most likely not going to help you.
The first reason is that if the scenario above sounds familiar — and it’s a scenario you face often — the chances are good that you won’t actually be able to afford to repay the loan out of your next paycheck.
That leads to the second reason, which is incredibly high fees and interest rates. Payday loans can carry Annual Percentage Rates (APR’s) of higher than 300 percent. Yes, 300 percent!!
You could end up repaying almost twice the amount you borrow. And these days no one can afford to borrow $100 and pay back $180.
I conducted an informal poll of our counselors here at Advantage CCS. They’ve seen a fair number of people who are having financial difficulties and have also taken out payday loans. Not one counselor could remember one case where a payday loan actually helped the person. All the payday loans did was create an additional burden.
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If you are in need of a loan, it would be much less damaging to check with your local bank or credit union where you may be able to get a loan at a much lower interest rate with a longer payback term. The Pennsylvania Treasure and the Pennsylvania Credit Union Association have established something called the “Better Choice Program” to help steer consumers towards financial help that is more consumer friendly from reputable lenders. You can find information about the Better Choice Program at www.ibelong.org.
If you need help budgeting and managing your debt, you can contact the certified counselors at Advantage CCS and, for no cost, they will guide you through a comprehensive credit counseling session.
Money mistakes you can avoid
October 13, 2008
Yes, we are in difficult economic times. There may be things that set you back financially that are beyond your control. There are also things that can set us back that we bring upon ourselves.
It is very important that we are all careful when it comes to decisions about money. It is particularly important that we don’t make easily avoided mistakes that could wreak financial havoc on our lives.
Some of us find ourselves in a bad situation because we’re generous and try to help someone else. While it is wonderful to be a generous person and to help others, it’s foolish to put yourself in a bad situation to do so.
Here’s an anecdote that illustrates my point:
A good-hearted woman had a friend who needed a car. So, she gave the friend her car. The friend promised to make all of the payments, though the title and paperwork for the car were not transferred into the friend’s name. Unfortunately the friend did not honor his or her promise to make the payments, and the car was repossessed.
Do not get yourself into a situation where you’re on the hook financially and have no legal recourse to protect yourself. I am not a lawyer, therefore I can’t say what steps you need to take, but I know handing over a car for a promise is not a good idea.
I recently read about a woman who lent her daughter a sizeable amount of money. This woman put off her financial goals to help her daughter. The daughter did not repay her, which caused great financial hardship.
In general, making a personal loan to someone without the guarantee of repayment is a risky move, especially if you don’t have a large cushion of savings to fall back on.
Another misstep that could spell trouble is agreeing to co-sign a loan for someone. If you agree to be a co-signer you are agreeing to make payments if the primary borrower doesn’t. You could be putting yourself on the hook for payments you can’t afford.
If someone asks you to be a co-signer, ask a few questions. The first question should be: Why does this person need a co-signer? Sometimes people who are new to the credit world, like recent college graduates, need a co-signer because they don’t have an established credit history. Or, does the person have a poor credit history, and that’s why the lender requires a co-signer?
The second question you should ask yourself is: What is the chance the primary borrower will be able to meet his or her payment obligations? Do the loan payments fit into the borrower’s budget? Does the borrower have steady income?
Co-signing is not something to enter in to lightly.
Here’s a brief list of some other possible financial mistakes to avoid:
· Buying anything on credit. Try to pay cash for as much as possible.
· Using “no money down, no interest offers.” While these work for some people, if the interest-free period ends and you haven’t paid for the item in full, you will be responsible for paying all of the interest that accumulated over the term of the offer.
· Buying on emotion. Anytime you spend money based on feelings and not facts and numbers you can find yourself in trouble. That purchase could be as small as a new outfit or as big as a new house.
Can debt collectors do that?
September 17, 2008
I’ve been hearing a lot of talk about debt collectors lately. During a local news interview, the reporter asked if there are more debt collectors and if they are getting nastier.
I can’t say conclusively that debt collectors are more prolific or getting more aggressive, but according to the Better Business Bureau, complaints about aggressive debt collectors rose 20 percent last year.
We certainly hear stories at Advantage from consumers who have had unpleasant phone calls from debt collectors. Some of those consumers weren’t just subjected to mean behavior, they were subjected to illegal behavior.
The federal Fair Debt Collection Practices Act outlines what debt collectors may or may not do.
Debt collectors cannot:
· Misrepresent themselves or what company they work for.
· Threaten to send you to jail. You will not be put in jail for failing to pay your debt.
· Call you names or become verbally abusive.
· Call you at unreasonable hours of the day or night.
· Call you at work if they have knowledge that your work place does not allow for those types of phone calls.
· Persist in contacting you after you have notified them in writing to stop.
Debt collectors can:
· Verify you are the person who owes the debt and send written notice of the debt.
· Continue legal actions to collect unpaid debt that you legitimately owe.
· Contact you to inform you of any legal action being taken against you.
If you are contacted by a debt collector, do not ignore the phone call, even if you don’t believe the debt is yours. You need to address the issue, especially if you are possibly a victim or mistaken identity or identity theft.
Make sure to get the name of the collection agency, as well as the address and telephone number. Also, make note of the name of the agency representative who contacted you.
If you do not feel that you legitimately owe the debt, immediately send a letter stating that you do not owe the debt and you believe the collection agency has contacted the wrong person.
If you feel you have been the victim of an abusive debt collector or exposed to unfair debt collection practices, contact the Federal Trade Commission and you state attorney general’s office immediately.
For more information about debt collection from the FTC, click here.
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