April 2011 - Posts - Dollar Stretcher Guest Bloggers
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April 2011 - Posts

  • Confessions from the Auto Body Shop

    courtesy of Edmunds.com

    “Of every ten body shops, three of them are unethical and five of them do mediocre work at best,” said “Neal,” one of three anonymous auto body business veterans who agreed to give Edmunds.com an insider’s look at some of the shady practices carried out across the industry.

    According to the insiders, many auto body shops will engage in dishonest behavior like adding unnecessary steps in the repairs process and charging for old parts as if they were new. Some body shops, they say, will even work with insurance companies to cut corners in order to minimize costs before adding “back charges” to areas not covered by insurance.

    To make sure customers are not getting ripped off on their auto body repairs, Edmunds.com advises the following steps:

    1. Choose the right body shop. Look for a second-generation business or family-owned shop. Word-of-mouth referrals from friends and family carry the most weight. Research the shop to make sure it has a track record of dealing fairly and honestly with its customers.

    2. Get an estimate breakdown. Each line of an estimate represents one step in the repair process, which in turn constitutes another charge. Without understanding the steps, the estimate won’t make any sense. Do business with a shop that listens patiently and replies with reasonable answers to any questions you may have.

    3. Turn down the “save the deductible” come-on. Some shops may offer to effectively scam the insurance company by not collecting the deductible payment. This is a sign that the shop is either not performing necessary work or overcharging for something to compensate for the waived deductible.

    4. Ask about the parts. Get the body shop to define the parts it intends to use. Will it use OEM parts? Aftermarket? New or used? Or will the parts be repaired and reused? Your charges should reflect the answers to these questions.

    5. Don’t get pushed to “preferred” shops. Insurance companies paying for repairs will often steer clients to a “preferred” list of body shops that will gladly accept the stream of steady work in exchange for cutting corners and costs. For this reason, most state laws allow consumers to choose their own auto body shops when an insurance company is paying for the repair.

    6. Be your own advocate. Insurance companies try to cut cost to the bone while still retaining policy holders. And even the most ethical body shops still need to make a profit. Balance the input from both sides as you choose the best shop to protect the value of your car while remaining cautious of overcharging.

    After the job is complete, consumers are urged to check the quality of the finished work as closely as possible. Edmunds.com offers a guide to what to look for here.

    Edmunds.com frequently taps insider knowledge to protect automotive consumers against a wide range of automotive scams, from car thieves to shady rental car agencies. See Edmunds.com’s entire “Confessions Series”.

  • U.S. Credit Rating Affects Your Interest Payments

    by Bill Hardekopf

    Last week, Standard & Poor's lowered its outlook on the United States long-term credit rating from stable to negative. This was seen as a warning to lawmakers who have been unable to agree on a long-term plan for cutting the deficit.

    Credit ratings are as important to a country as credit scores are to individuals. It is a measure lenders use to judge the borrower's ability to pay off a loan. Just like credit scores, the countries with the highest ratings get the lowest interest rates. If the scores drops, the rates increase. The S&P warning indicates that the U.S. is in danger of losing its AAA rating (the highest possible credit rating). A downgrade would mean that lending to the United States is no longer considered as safe and the U.S. would pay higher interest payments. Since the government would now have to pay a higher interest rate, it would charge banks a higher interest rate for the money it loans them. The banks would pass that on to consumers in the form of a higher rate on loans like mortgages and credit cards. This will be a shock for consumers who have become accustomed to years of record low rates for loans.

    Any household that carries a credit card balance can tell you that interest payments suck away money that could pay down the balance of the loan. The higher the interest payment, the longer it takes to pay off the loan. Just like household budgets, there are much better and needed ways to use that money. For the government, higher interest payments mean less money to spend on education, national parks, healthcare, roads and services.

    A lower credit rating is not the only rate-raising factor on the horizon. The economy is recovering, prices are rising, and concerns are swirling about inflation. The Federal Reserve tries to keep a tight reign on inflation, but its strongest weapon is raising the prime rate. The prime rate is the foundation of the interest rate on every consumer loan. If it increases, interest rates for mortgages, credit cards and auto loans will follow.

    The Federal Funds rate has been 0.00%, a record low, for almost 2 1/2 years. Consumers have gotten comfortable with these low rates, but they aren't permanent. Eventually, rates will increase and higher payments could push more households off the financial cliff or prevent some from buying a home.

    Start planning now for higher rates. If you are thinking about buying a new home or refinancing a mortgage, analyze your options now before rates go higher. If you carry a balance on a credit card that has a variable rate, your card's interest rate will increase every time the Federal Reserve raises rates. Pay off your credit card balances as quickly as you can and avoid new debt.

    Tips for Paying off Credit Card Debt

    • Pay more than your minimum payment. Your minimum payment is usually only 2%-5% of your balance. At this rate, it will take many years to pay off your debt. Thanks to one of the provisions of the CARD Act, your credit card bill now shows exactly how long it will take. You may be surprised about how much you will pay in interest by paying just the minimum payment each month.

    • If you have multiple credit cards with outstanding balances, focus on paying off the card with the highest interest rate first. Continue to pay the minimum on your other cards until the card with the highest rate is paid off, then focus your effort on the card with the next highest interest rate. Keep your oldest credit card accounts open and occasionally use them to buy a magazine or a movie ticket, but pay it off each month. This may help improve your credit score.

    • Use micropayments. If you have extra cash or skip dinner at a restaurant, immediately apply that to your credit card balance. Divide your monthly payment in half and pay that amount every two weeks. By the end of the year, you will have made 26 payments or the equivalent of 13 monthly payments. The extra monthly payment resulting from this payment plan will enable you to pay down your debt at a faster pace.

    • If you have a credit card balance, stop using it for anything other than necessities. If you use cash, you will not only save money on interest, but also reduce the amount you spend. Credit cards are convenient, but if you carry a balance, you are still paying interest for dinners, clothes, entertainment and things that are long gone.

    • Check into transferring your balance to a card with a lower interest rate. If your rate is above 15%, it could pay to transfer the balance for that card to one that offers 0% APR for at least 12 months for balance transfers. The Citi Platinum Select card currently offers a 0% rate for up to 21 months, and the Discover More card offers 0% for 24 months. To take full advantage of this 0% interest, pay as much as you can above the monthly minimum. Only use the card for the balance transfer, not additional purchases, so you pay it off as quickly as possible. Pay attention to the balance transfer fee.

    • Use tax refunds, birthday money, bonuses, inheritance, etc. to pay down your balance. Sell things you don't use. Every little bit can make a big difference.

    • Set up automatic payments or notifications. Do not slip up with a late payment. This will increase your rate and put you farther behind.

    Government spending and deficits can not continue down the current path. Changes are coming that will affect every one of us. If the government has to pay higher interest rates, there will be less money for government spending. It will also have to cut spending to get out of this mess. More than likely, this means less money for social security and healthcare. Paying down debt won't be enough for financial security; you will have to save as much as you can for retirement. Your savings will be the only money that is guaranteed.

    Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

  • Internet Moonlighting: Ways Your Internet Can Pay

    by Angela Yuriko Smith

    Lately it seems all my friends are looking for extra cash. There are so many ways to make it pay that I can't possibly cover them all in one blog post, so this is my brief overview of different options I explored last night.

    I personally signed up for some of these and gave them a try, some of them I read about or had friends tell me about, and one I wouldn't touch at all, even just to explore. I didn't even begin to cover selling real goods online, like with Etsy or eBay. That will have to be another post entirely.

    When I started looking around the internet for the best ways to make extra cash and goodies from it, I found a mass of useless advertisements being masqueraded as information. I have explored a lot of income options on the internet over the years, some have panned out and some were colossal wastes of time. Last night I took some time to explore what's out there now and try it out, and here's what I came up with.

    Product Review Sites

    These are websites that need chatty people and bloggers. Large companies depend on these sites to gather together people willing to try their products and review them. These companies fall into the category of word of mouth advertising.

    To date, I've only tried Vibe Village of all these, but it was a rewarding experience. They sent me the large package of Tetley Tea in the photo for free. Inside were two large boxes of tea, a ton of smaller sample packages to pass out to my friends, and a carton of soy milk. All I had to do for it was respond a short review, and then tell them three different ways I shared the tea. Past campaigns have been Cadbury Chocolate and Bulla Ice Cream. Unfortunately, I joined up with them afterwards, so I missed out on the chocolate. Sigh. 

    Oddly enough, I could only find one company in the US. MyBlogSpark came came recommended to me from a friend who loves it, and when I contacted their customer service, they responded quickly and were very nice, so I'd think they would be a good choice. You do need to pick one from your own country due to the cost of shipping overseas. If I were in the US, I would definitely try out MyBlogSpark. Here's a few sites to get you started:

    Reward Sites

    These sites give you incentives like giftcards and PayPal credit in exchange for your activity on their site. I've used Gather casually for a little while and would highly recommend them. Squidoo is a new one I just found, and I'm actually going to check it out just because it looks like fun. SwagBucks has been used by a number of my friends, and last night I spent a frustrating hour and a half on MyPoints filling out my information for what seems to be nothing.

    While you probably won't get rich on any of these sites, they do help out with a little extra. As Dee B, one of my new Gather friends says,"They do help cut cost for us. I've used all my gift cards for work done on our house." And here are the ones I found:

    Virtual Business

    I know I talk about how wonderful virtual worlds like Second Life are, but seriously, I am bringing in around $50 a week from selling my clothes designs. To date, creating items to sell in our cyber shop has been the most financially rewarding thing I have done on the internet, aside from a past lucrative contract writing position. Those were the days...

    There are a large number of these "social games" to choose from besides Second Life, and there are a number of ways to earn money there besides creating items. A musician friend of mine brings in around $100 a week for doing live shows where he sings and plays his guitar. People can choose to be models for designers like me, run a club, be a dancer, a hostess for events... the possibilities are endless. Use your imagination and jump in.

    In Second Life, you get paid in game money called Lindens, which you trade for real currency. At this time 1,000 Lindens comes to just under $5. With 132,379 members on FaceBook alone, just a fraction of the total residents, there are a lot of people to discover, and pay you, for your special talents. My advice if you do try this route is to stay focused on your goal, and remember you are there to work or you can get swept away in all the distractions and find yourself spending more than you make. An excellent publication on the business side of virtual worlds is Hypergrid Business. You can visit Second Life here, or Google "virtual worlds."

    Temporary Hire

    This is my first experience with these type of site. The idea is that businesses that can't afford to keep a staff on hand can pay internet surfers like us to do their work. I actually tried out MicroWorkers. I signed on to do a small job, which was to write 100 words about Marilyn Monroe and link back to their site, which you can see I did with my last post. It was worth $4 for me to do that, and took me less then five minutes. 

    Today I got a message back from the "hirer" saying my job wasn't good enough and they wouldn't pay. I don't really see what is wrong about my post. It came in at 116 words excluding the quote at the end, so I don't see much of a future with MicroWorkers myself. A lot of the jobs listed were things like signing up for a certain dating site, or leave a comment or rate a book on Amazon and they paid anywhere from .05 to $5. I tried two other jobs with MicroWorkers, so I'll see how it all pans out.

    Opportunities on the internet are as widespread and varied as types of bird, and to cover them all would take me a book rather then a blog post. Second Life has proved to be the most all over rewarding venture, but of the rest of them, I enjoyed doing the product review for Tetley Tea best, followed by Gather and Squidoo. 

    I did come across one more called Project PayDay, but it sounded so shady I didn't even want to register. The idea behind that one, I am told, is that you get paid to sign up for offers and you have to remember to cancel the offers after you get your money. On the other end, you can pay others to sign up for deals with you so you can get discounted goods.

    The example I read about was a deal that gave you an Xbox 360 if you could get 5 people to sign up for a certain plan. You were paying 5 people each $20 to join up, so you got an Xbox at a discounted price of $100. I didn't try it, and it sounds like too much bother for me, but if you decide to try it, please let me know how it works for you. I'm always curious to learn more.

    That wraps up my exhausting search for money making on the web, I hope some of you can make good use of it. Please let me know what works for you and what doesn't, and anything you've tried that I haven't mentioned. I'm off to enjoy a lovely cup of Tetley Tea and explore my new Squidoo.

    Angela Yuriko Smith  is a professional writer with extensive experience in newspapers and online publications. Her work has been featured internationally, including a live interview on NPR. Currently she maintains her blog dandilyonfluff.com and is finishing book projects.

  • Students Can Appeal College Awards

    by Scott Anderson

    The college financial aid offer letters are showing up at the student's homes at this time, and many families are shocked by what they are seeing. Most often the colleges are expecting parents and students to pay more than they desire. Sometimes they are asking them to pay above what they can afford and well above the family's expected family contribution as calculated on their FAFSA form.

    Don't throw in the towel just yet. There is still more that can often be done. Now is the time to get your appeals ready. The appeals process is essentially negotiating with the college, but I recommend you do not call it negotiating. Colleges get a little touchy if you talk about negotiating a financial award. They seem to think that they are not big business selling a needed service. Instead, colleges and universities have an appeals process.

    The appeals process can take on many forms. Some schools have their own paperwork they want students to complete to start an appeal. Other schools will accept just a letter from the student. Students need to check the colleges' websites under financial aid to find out the process for each school. Regardless of the specific process, all appeals should go to a representative in the college's financial aid office if possible. The dean or administrator may be a good choice, but the better choice is the representative responsible for your student's financial award. A quick phone call to the financial aid office can get you that answer.

    When making an appeal to the college, keep in mind that financial aid officers are people too. If a compelling argument can be made to a stranger as to why the student's offer should be increased, then there is a good chance you will be successful with the college. It helps if the student applied to multiple colleges and has multiple offers on the table as well. Some schools will increase their offers simply because another school had a better offer. It is also important to have multiple choices to choose from. Maybe the student's second choice school is going to cost $10,000 less than the first choice school. $10,000 per year can often change a student's mind.

    State your case clearly and succinctly.  For instance, "my wife lost her job and our income this year will be $40,000 less than last year's information on the FAFSA." Or "My mother-in-law just moved in with us and we now have to support her."   Provide whatever supporting financial information you have available, but do not include information that does not pertain to your appeal.

    The number one rule of appealing a student's financial offer is it never hurts to ask. Families need to go ahead and ask. The worst thing that can happen is the college will say no.

    Scott Anderson, founder and CEO of eduLaunchpad.com, the most advanced college search engine on the Internet. It helps students not only identify which colleges they may be interested in, but which colleges will likely be the most generous towards them, as well. Scott Anderson co-founded eduLaunchpad in 2009 and has over a decade of college financial consulting experience. Contact Scott for more information on preparing students and family finances for college.

  • Study Shows the Hazards of Credit Card Indebtedness

    by Bill Hardekopf

    After the financial crash in 2008, credit cardholders cut back on their credit card usage and issuers cut back on their lending. As a result, credit card balances fell for 27 straight months and revolving credit declined $178 billion from its peak. But there is still a large group of Americans who are indebted to their credit card.

    A new study released by Demos, "Understanding the Debt Difference," examines credit card usage among low- and middle-income families and shows the effects of credit card indebtedness. It compares the difference between households who had credit card debt (defined as households with revolving balances on their credit card for three months or more) to a non-indebted group that did not carry a balance on their credit cards.

    According to the study, indebted families use credit cards to pay for basic expenses and make up for their lack of assets. However, this reliance on a credit card increases a family's economic vulnerability and increases the reliance on credit cards in the future. The families with credit card debt are more likely to have experienced unemployment, an unexpected medical expense, or a loss of health insurance.

    This study is a reminder that credit card debt has harsh consequences for the households which have no other options. If you don't have assets, a credit card may be the only way to pay for essentials. But once you are caught in this trap, it is difficult to save and build up the resources that will help you get through the next crisis. It becomes an unending cycle of increasing debt and swelling interest payments.

    Among the low- and middle-income households that carry credit card debt, the average card debt was $9,799. Over half (52%) have had the same or more debt than three years ago. 54% of these households have been late or missed a credit card payment. 37% of families are still paying off a credit card they cancelled.

    Here are additional results of the study:

    • 41% of indebted families did not have have enough money in their checking or savings accounts. As a result, they have used a credit card to pay for basic living expenses, such as rent, mortgages, groceries, utilities or insurance. Only 18% of non-indebted households used credit cards to pay for these basic living expenses.

    • Indebted households are less likely to be homeowners than households without debt. If they do have a home with equity, indebted households have 54% less home equity (an average equity of $93,564) than households without credit card debt (an average of equity of $166,997).

    • 39% of indebted households had at least one member of the household lack health insurance in the last three years versus 25% for non-indebted households.

    • Working-age families with credit card debt were more likely to be unemployed for at least two months in the last three years. 37% of working-age families with credit card debt experienced this level of unemployment compared to 22% of households without credit card debt.

    • One startling note: indebted households were more likely to hold savings or checking accounts, but the value of these accounts was lower. 82% of households with credit card debts held these liquid assets; the average value was $4,348. 79% of households without credit card debt held liquid assets, but the average value was more than double at $9,845.

    Link to the study here.

    Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

  • Don't Pay Taxes with a Credit Card

    by Bill Hardekopf

    April 15 is less than a month away and hearts start pounding a little faster as thoughts turn to taxes. This is also the time that credit card issuers encourage customers to use their cards as a convenient way to pay their tax bill. It may be convenient, but it's certainly not free.

    Even the IRS promotes the benefits of paying taxes with a credit card. The IRS website says that payment with a credit card is "convenient, safe and secure," and reminds taxpayers that if they are enrolled in a rewards program, they can earn miles, points, and cash back.

    Credit card payments to the IRS are processed by third-party providers. These companies charge a processing fee, which averages 2.35% but can be as high as 3.93% (charged by FileYourTaxes.com).

    If your tax bill is $6,000, a processing fee of 2.35% will cost $141, which is rolled into your credit card's balance. If you don't pay off your card's balance in its entirety at the end of the month, you will begin to incur interest rate charges on the $6,141 balance, which, depending on the account's APR, can be an extremely costly way to pay your taxes.

    If you have no other available options, here are a few tips for paying your taxes with a credit card:

    • Find out your credit limit before you charge your taxes. Debt utilization is a major factor in credit scores. If you use too much of your available credit, you can hurt your credit score. If you are maxing out your credit cards, you are considered a high risk and could pay the highest interest rates. If charging your tax payment pushes you significantly closer to your credit limit, expect a drop in your credit score.

    • Do not write your credit card number on your tax return.

    • Make sure your payment is treated as a purchase, not a cash advance. The cash advance APR can be 25% and the cash advance fee varies from 3%-5%, depending on the issuer.

    Using Reward Points To Pay Taxes

    Using a reward card to pay taxes is not an easy way to earn reward points to pay for your summer vacation. The average reward is 1% of purchase, or 1 cent per dollar spent. This is much less than the 2.35% processing fee. You will save money writing a check for the taxes and paying cash for your vacation.

    American Express allows you to use rewards points toward your tax payment and convenience fee on officialpayment.com and pay1040.com. However, to pay off $5,000 in taxes, a cardmember would have to charge $1 million. It takes 200 points to pay off $1 in taxes.

    Other Payment Options

    If you can't afford to pay your taxes, look for other options.

    • An installment plan with the IRS is one possibility.

    • Your bank or credit union may also give you a personal loan with a lower interest rate than your credit card's APR.

    • You can also pay with a debit card, and the fee is much cheaper. For example, you will be charged a flat fee of $3.89 when you use your Visa Debit card (pay1040.com).

    Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

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