Money Saving Tips and Tricks for the Whole Family
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The recession might be ending soon, depending upon which economists and other financial forecasters you believe. But, that doesn’t mean that people aren’t still looking to save money. In fact, if one good thing comes out of this recession it will be that people have been reminded that money isn’t free, credit isn’t always easy to get, and saving for emergencies and opportunities is more important than remodeling the kitchen.
That being said, it isn’t always easy to find ways to save money. Many family expenses seem pretty fixed and finding ways to make cuts can be hard. The savings tips and saving tricks found in most money magazines, newspaper financial sections, and finance websites have been around the block a few times. Many have lost their effectiveness, others were just never very helpful in the first place.
Saving Tips and Tricks Section
I’m happy to announce that today the Finance Gourmet website will begin building a new money saving tips section for our readers. We’ll repeat some of the oldies but goodies (there is, after all, a reason that they are oldies but goodies). However, we’ll also tell you about money saving tips that you might not already know about. Some of them are easy, and some of them are harder, but they will all be worthwhile tools to add to your financial knowledge arsenal.
And, I guarantee that it won’t be the same old, "Make a budget, and cut back," advice you’ve seen a thousand times before.
Keep an eye out for our first money saving tips later today! Or, do yourself a favor and grab the Finance Gourmet Feed instead. That way, you won’t have to remember to get your tips, they’ll come automatically to you.
— The Finance Gourmet
Credit Card Company Tricks and How To Beat Them
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Citibank raised the interest rates for customers with high credit scores who had never missed a payment. Virtually every credit card company opposed the very tame reforms recently passed into law by Congress. The sad truth is that is isn’t a matter of if your credit card issuer will try something sneaky, it’s a matter of when, and how bad will it be.
While there is always tension between a company that must turn a profit and consumers who want to get as much as possible for the lowest price, with most relationships between a business and consumer there is at least some degree of fairness. Unfortunately, this is seldom the case for the relationship between credit card company and credit card user. Instead, in this relationship, the credit card company works hard to hook a customer and then slowly tries to squeeze the maximum profit out of them. Between absurd fees, sudden contract term changes, and just plain old subterfuge, your credit card company is out to get you if you stop paying attention.
Top Credit Card Company Tricks – 0% APR Credit Card Offers
While there are many areas the banks that issue credit cards are less than forthright, one area that the tricks come fast and furious is with 0% credit card offers. Whether it is a zero percent interest balance transfer offer, or an offer for 0% interest for an introductory period, you have to stay on your toes to stay ahead of all the little tricks credit card issuers play.
Here, are the most common credit card company tricks on 0% interest credit cards.
- Transaction Fees – Buried in the middle of the text of a full-page letter or even on the back of the page in lighter gray text is the notification that this particular 0% offer is not a free offer. Instead, you’ll be charged a transaction fee of 3% typically. That means when you write a credit card check or fill out the balance transfer form, you’ll be charged 3% (or more sometimes) immediately. No grace period, no chance to pay it off before there are interest charges. If you take $5,000 with this 0% interest credit card offer, you’ll be charged $150 the second you get the money no matter how fast you pay it back. In other words, you don’t have to pay off $5,000 before the offer expires, you have to pay off $5,150 before the offer expires.
- Payments Credited to Lowest Interest Balance – Here is the one that even financially savvy consumers miss. Buried in the fine print of your zero percent interest balance transfer offer is the fact that every payment you make will be used to pay off the part of your balance that is being charged 0% interest. Any other charges you make are going to get hit with full interest charges. Oh, and by the way, those interest charges? You’ll be charged interest on it too until you pay off the whole zero percent balance! In other words, if you take $5,000 at 0% and then next month you charge $300 thinking that you will make a payment of $300 to cover it without being charged interest, you’ve fallen into the trap. Instead, when you send in your $300 payment, the credit card company will reduce the amount you are paying 0% on by $300 and nothing will be credited to the $300 which you are going to be charged interest on. So, after the first month you have $4,700 at 0% and $300 at the full rate. After next month it will be $4,700 plus the $305 or whatever your interest rate makes it. In other words, you cannot use your credit card in anyway until after you have paid off the free offer, whether that is 6 months, 12 months, or 24 months.
- Minimum Payment Still Required – Some zero percent offers require you to still make the minimum monthly payment. If you are late by just one day at any time, the whole 0% interest rate promotion can be revoked immediately and you start paying the full interest rate. Call and complain, and you might get this one reversed, but don’t count on it.
- Zero Percent As Long As Balance Is Paid By End of Offer – This one is most common with department store credit cards. The way it works is that the credit card company keeps track of how much interest you would owe if you didn’t get 0% interest rate. Then, if you don’t finish paying off the whole zero percent balance by a certain time, then you have to pay ALL the interest, not just the interest going forward. So, if you buy a $6,000 bedroom set with a 24 month same as cash offer and you haven’t paid off the full $6,000 then you will pay all of the interest for each and every one of those 24 months. And how will you pay it? It will be added to your balance so they can charge you interest on that too.
Using a zero percent interest rate credit card offer can make good financial sense, but you have to be careful to follow the rules exactly to avoid coming out worse than you thought.
Smart Rules for Using 0% Interest Offers
How do you keep from becoming another cash cow sucker for the credit card companies? Follow these simple rules and you’ll be ahead of most of their tricks.
- Watch Out For Transaction Fees – Use no transaction fee offers whenever possible. These are less common from credit card accounts you already have, so you might have to look at offers for getting a new credit card.
- Stop Using the Card – Take the card out of your wallet or purse and do the same for your spouse. If any kids have a card on that account, get theirs too. Put them in a safe or other place where they can’t be accidentally used until the whole zero percent balance has been paid off.
- Setup an Automatic Payment – Many cards will allow you to setup an automatic payment. This is a must if you have an offer that still requires an on-time monthly payment. If you have a card that must be paid off by a certain date to avoid being charged all accrued interest, make your automatic payment enough to pay off the balance over the free time period. At minimum write down the date your account must be paid by in big colorful letters on every calendar you have. Don’t cut it close, pay it off a month or more in advance to avoid any mishaps like lost checks or a family emergency that keeps you from remembering.
- Don’t Zero Percent Hop – Some people try and get too cute and keep swapping one zero percent interest rate offer for another 0% offer. While this sounds smart in theory, your odds increase of making a mistake that could cost you enough to wipe out any savings you’ve gotten up until then. If you have no other options, then by all means, another zero percent offer is better than nothing, but focus on paying that one off right away. Otherwise, if you want to take advantage of multiple 0% offers, close out the first one and then move on to the next one. That way, you’ll make sure you are starting fresh each time.
Want to get benefits and make money back from using your credit cards? Get the right rewards card and use it wisely. Then, the benefits you earn will out weigh the hoops you have to jump through.
Issuers of credit cards have started re-doing their terms and conditions in anticipation of recently passed legislation taking effect which prohibits some of the more egregious terms from credit card agreements.
Watch for non-descript black and white mailings that contain a small brochure with fine print. These are likely the new terms and conditions for your existing credit cards. Make sure you read them over and see what is changing.
There is nothing in the new credit card law that says your credit card company can’t change something else to make sure that you stay a cash piñata to the banks fee revenue streams, so don’t assume that everything else is staying the same. We’ll keep our eyes out as the new terms and conditions roll out and let you know if we spot anything big or any sort of trends.
Are TARP Repaying Banks Good Investments
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Whether or not now is a good time to invest in banks that are repaying their US government bailout dollars to the Treasury is an easy analysis to make, but a tricky question to answer. Which among banking stocks like JP Morgan ( JPM ), Goldman Sachs ( GS), Bank of New York / Mellon ( BK ), and Wells Fargo ( WFC ) are good stock market investments in this economic environment?
For those large US banks who never really wanted any government bailout money in the first place and that have stayed relatively stable and profitable since taking the TARP funds, now might be a good time to invest. However, for those US banks trying a little bit too hard to look like the good banks that are repaying their government loans with ease, the answer is much different. The tricky part is knowing the difference.
Recently released emails and documents from the US Federal Reserve suggest that certain big banks had to be brought in line for the good of the whole industry when it came to taking government aid. Other banks, like Citigroup, were already teetering too much on the edge of bankruptcy to have any real shot and avoiding a bank collapse without government help. In between were the other big banks which definitely benefited from the banking bailout. Knowing whether they are stronger or weaker bank stocks now is difficult to tell.
Analyzing US Bank Stocks
Any bank that was on the verge of collapse without government help should be avoided as an investment. The only difference between now and six or eight months ago is that the economy is a little bit better. A lot of that economic improvement is because of the massive economic stimulus package passed by Congress and the Obama administration. Stimulus like that doesn’t last forever and if it wears off at the wrong time, the economy could head straight back down taking those banks and their stocks back with it.
Banks that never really needed the TARP funds or the CAP program are better investment targets although they will continue to be tainted by the sector overall and may have trouble returning to full health. However, considering the banking industry no longer has a giant housing boom to bail it out if things are a little off, and that consumers might not be quite as anxious to do the kinds of banking business they used to even if things get better, the banking industry may be in for many years of lean growth regardless of how strong any single company is.
Banks that over-reached to repay their TARP money are also in danger of getting back into trouble. Some banking companies have undone YEARS of share buybacks by reissuing as much or more stock than they managed to buy back over those years. That means that those bank stocks will have a big supply to continuously weigh down on share prices. It also means that forgoing all of those dividend payments over the years were wasted since there is just as much stock now as their used to be.
Banking Sector Health
Lastly, never forget that usually the way a troubled sector is able to rebuild and move forward is that the weaker players and the poorly managed companies die off and are forced into bankruptcy or sold to stronger better managed competitors. With the US Government and the US Treasury Department stepping in a saving many of those weaker and badly managed banks, the sector did not have the necessary purge.
That means that when things return to “normal” there will be just as many competitors trying for the same number (or less) customers which means smaller profit margins and little or no room for error. Just because that bank didn’t go bankrupt this year doesn’t mean it won’t next year, or the year after.
For now, banks are an unusually risky stock investment with little or none of the traditional upside of risky investments. If you want to take on more risk in anticipation of a stock market run or a steadily improving US economy, then by all means do so. Just find your risk somewhere where there are better rewards to go along with that risk.
