Young People See Debt As Empowering (Jezebel)
“We thought educational debt might be seen as a positive because it is an investment in their future, while credit card debt could be viewed more negatively … Surprisingly, though, we found that both kinds of debt had positive effects for young people. It didn’t matter the type of debt, it increased their self-esteem and sense of mastery.
…By age 28, they may be realizing that they overestimated how much money they were going to earn in their jobs. When they took out the loans, they may have thought they would pay off their debts easily, and it is turning out that it is not as easy as they had hoped.”
Eh, carrying a balance month after month that can’t be paid off tells me that the person is living beyond their means. Unforeseen expenses do come up and it’s good to have a credit card if there is a real emergency, but I know too many people who can’t seem to get out of credit card debt yet buy Starbucks every day and always have brand new clothes (not to mention the guy who is still trying to pay off the Sea-Doo that he bought right after college just because he had a large enough credit line for it).
Shit like this is right up there with those ‘Bridge Ices Before Road’ signs. If you don’t know this, you shouldn’t be anywhere near the driver’s seat or a credit card.
Since only 54% of people pay their credit card balances in full every month, I think that it’s fantastic to have the costs of carrying a balance spelled out like this on credit card bills. Everyone knows this in theory, but this forces people to think about their specific future consequences, and feels like a surprisingly nice gesture on the part of the credit card company (perhaps they are legally required to do this now?).
Debit-Card Scam Targets Michaels Shoppers (WSJ)
In SEO news, the headline in the paper edition is “Thieves Swipe Debit Card Data”.
This is why I dont ever use my debit card for anything except ATM (though I know that even that isn’t foolproof). With a debit card, your actual money from your actual bank account is being stolen, and often won’t be replace by the bank for more than a month. With a credit card, it’s the bank’s money that is stolen, and after a chargeback, life goes on.
Credit Cards Soon to Get a Makeover (NYT)
Next month, Citibank will begin testing a card that has two buttons and tiny lights that allow users to choose at the register whether they want to pay with rewards points or credit, at most any merchant they please.
Other card issuers are testing more newfangled cards, including some that can double as credit and debit cards, and cards with fraud protections baked right into the plastic. One, for instance, shows a portion of the account number only after the cardholder enters a PIN.
Fascinating, though as the article also points out, we will soon move towards no cards at all, using apps on mobile devices instead.
As much as I love credit cards, I don’t love how subtly manipulative they are in hopes of getting us all to carry a balance.
This month, I received some reimbursement checks from my insurance, so I ended up paying down part of my monthly balance last week. When I went in today to pay the remaining balance, I had to get out a calculator to figure out what I still owed on this month’s bill, since Amex only lists “$0.00 Payment Due”. This is the only data that appears in bold, and only reflects that I paid the minimum payment of $15. It would take me more than 4 years to pay for one month of expenses if I followed their lead.
IRAs/Savings Accounts/Credit Cards
A friend asked for advice on IRAs and Savings Accounts this morning, and I thought I’d recap my recommendations here, and throw in a bit about credit cards, too, since I love taking advantage of them for free money.
IRA: One of the first great things that I learned about from CR is Vanguard. I have a Roth IRA with them, and they are the best bargain out there. Any place will take fees out every year, but Vanguard charges the lowest fees, which really adds up over the life of a retirement fund. Their minimum initial contribution is $3,000, so if you don’t have that yet, accumulate it in a savings account until you get there.
SAVINGS: The best savings account is still the American Express High Yield Savings Account, at 1.3% APY (which is low compared to the olden days, but ridiculous compared to Chase’s 0.25%). I also like having my savings outside of my normal bank because it keeps it pretty off limits—I can transfer money within a few days if I need it, but can’t do anything impulsive. There are no fees.
CREDIT CARDS: My double whammy for credit cards is the American Express Blue Cash card, and an old Capital One card for occasional international travel. AMEX has no annual fee, and offers 0.5% cash back for the first $6,500 spent each year, then 1.25% after that (groceries and gas give 1% then 5% cash back after the $6,500, so it’s an even better deal for people in Ohio with Kroger and cars). Putting all expenses on a credit card then paying it off every month allows me to have a clear digital record of everything I’m spending, and I got $170 cash back last year. Capital One has lame rewards, but is the only card that doesn’t tack on additional fees for international purchases, so it keeps fees to a minimum while traveling.
International Credit Card Fees
While gearing up for honeymoon planning (Australia!), I was reminded to check out the current international transaction fees on credit cards (fees which are added on top of the standard Visa/Mastercard international fees). Conveniently, Consumerist listed them not too long ago…
Capital One 0%
PenFed 0%
Discover 2%
American Express 2.7%
Bank of America 3%
Chase 3%
Citi 3%
Looks like everything will be going on my Capital One card for this trip. It usually sits in a drawer, but it is the oldest account on my credit history, they just increased my limit, and this 0% while travelling is the one place that Capital One beats Amex.
In response to a frustrated post from JamesNord this morning, I again looked up the rules about minimums for using credit cards. Many vendors say that they have a $5 or $10 minimum, but it is actually against their Merchant Agreements with the credit card companies to do so.
This is a handy wallet sized excerpt of the agreement for Visa/MasterCard…I’ll have to see what the agreement from American Express looks like.
(via consumerist)
The house is making a bet that you will not live up to your intentions. If you will pay it off at the end of the month, and you can pay it off at the end of the month, and you actually have that discipline, it’s a really good deal. The strategy doesn’t work if it turns out you do it every other month.
The Hidden Cost of Spending While In Debt
“Once upon a time, I was approached by a close friend with a question about his credit card statement. He knew one of his rates was out of control, but didn’t know how to go about asking for a reduction (or even where to find the details on his statement).
Always the good friend, I offered to look over the statement for him. As my eyes drifted down the page I saw a frightening sight: 24.99% APR!
Yikes! The amazing thing was that he’d been paying consistently and timely for well over 18 months at this rate! He’d been paying the minimum payment, and occasionally making a small charge here and there. Because the interest was 90% of his minimum payment, his balance was simply treading water and at this rate he was never going to get out of debt.
Trying to help him brainstorm options (and trying to light a little fire under his butt), I turned to him and asked, “Do you realize that, until we get this fixed, every purchase you make is actually costing you 25% more?”
—Get Rich Slowly
I feel like people get sucked in by sales and deals, using them to justify credit card purchases that are then not paid off right away. Thinking of things this way (though it’s only a rough estimate of the interest you end up paying) makes the marked down price not so cheap after all.
Along the same lines, I just received an invite to a site LivingSocial that looks like Groupon, and I had to refuse signing up. Today’s deal, $9 for one dozen fancy cannolis looks great: 50% off! They tell me that I’m saving $9 by buying them, but the truth is I’d be losing $9, because LES cannolis aren’t even in my budget. I spend much less money when I don’t know what I’m missing and don’t have to fight any temptation.
