September 2011 - Posts - Dollar Stretcher Guest Bloggers
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September 2011 - Posts

  • Credit Card Tips for International Travelers

    by Bill Hardekopf

    Credit cards can be a convenient way to pay when traveling overseas, but using the wrong card can add extra fees and complications to your purchase.

    Many credit cards charge as much as a 3 percent transaction fee for all international purchases. In addition, some issuers charge a fee if a purchase is processed by a bank outside the United States, even if you never leave your home. If you purchase something online from another country or purchase an airline ticket or hotel room with a foreign company, you could be charged a foreign transaction fee of up to 3 percent.

    Before you leave the country or order anything from a merchant that is not based in the United States, it is a good idea to call your issuer and ask about the foreign transaction fee. You can save yourself some money by using a credit card that doesn't charge a fee for foreign transactions.

    According to a study by Pew Trusts in 2010, 91 percent of bank cards charged an international transaction fee. However, in an attempt to attract affluent cardholders with high credit scores and low risk, some issuers have dropped the international transaction fee from selected credit cards. American Express dropped the 2.7 percent fee from its Platinum and Centurion cards. Chase eliminated the 3 percent fee from several upscale travel cards, including the Marriott Rewards Premier card, Chase Sapphire Preferred, British Airways Visa Signature, and United Mileage Plus Club Visa. Citi erased the fee from its ThankYou Premier and ThankYou Prestige cards.

    Capital One has never charged a foreign transaction fee on any of its cards.

    Current rates for international transaction fees:

    • Capital One - 0%
    • PenFed Travel Rewards American Express - 0%
    • Discover - 2%
    • American Express - 2.7%
    • Bank of America - 3%
    • Chase - 3%
    • Citi - 3%

    Using a credit or debit card at foreign ATMs can also add additional fees. Before departing, also ask your bank what the charges are to use your card at "foreign" ATMs. In addition to the international transaction fee, the ATM may also charge its own fee for withdrawals. If you plan to use your debit card, contact your bank to see if they have partner banks in the areas you are traveling. These partner banks may waive the withdrawal fees. Bank of America is a member of the Global ATM Alliance Bank that waives the fee if your bank is a member.

    ATM fees on international transactions vary widely. Chase assesses a $5 withdrawal fee for non-Chase withdrawals outside the United States plus a 3% conversion fee. Citi charges a 3% fee after conversion to American dollars.

    Here are some other credit card tips for international travel:

    • Avoid using your credit card at an ATM to get cash. The fee is typically 3%. You will also immediately be charged the much higher interest rate for cash advances. The cash advance rate can be as high as 25% for some issuers.

    • Take a second card in case your primary card is not accepted. American Express is not accepted everywhere, so have a MasterCard or Visa as a backup card. Discover does not have an extensive network in Europe and probably should not be your primary card.

    • Notify your bank and credit card issuer about your trip. While you are asking your bank about foreign transaction fees, tell them that you will be using your card while traveling out of the country. Otherwise, the foreign charges may raise a red flag with your issuer and a freeze could be placed on your account.

    • In case you run into any problems, take the phone numbers for contacting your issuer from outside the United States.

    • Before you order dinner or make any purchases, ask if the restaurant or merchant can process your credit card. Many countries use the chip and PIN system and no longer accept the American magnetic strip credit cards, and this can be a problem for American travelers. Credit card issuers have been slow to adopt chip and PIN, but this is changing with smartcards and smartphones.

    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.

  • Six Tips to Using Airline Credit Cards

    by Bill Hardekopf

    A free airline flight is one of the original and most popular credit card rewards, but those "free" flights have become expensive. If you are redeeming frequent flyer miles, or applying for an airline credit card in order to earn free trips, don't overlook the hidden catches and the fine print.

    Airline frequent flyer programs allow travelers to accumulate free points through most card purchases along with flight miles. Points can be redeemed for free tickets or even an upgrade to first class. Some cards now offer free baggage credit to their cardholders. But making the most of frequent flyer miles requires managing accounts, protecting miles from expiration, using the card for payment, and redeeming the miles efficiently.

    "It's easier to earn miles these days, but the number of reward seats are limited, the number of points needed to earn miles for those fewer flights has increased, and more time restrictions apply," says Michael Komarnitsky, CEO of GoMiles.com, a Seattle-based online service that helps consumers unlock the value of their frequent flyer mile assets. "In some cases, you have to book months in advance and settle for an inconvenient flight time."

    1. Book in Advance

    Just because you have the points does not mean that you will get the ticket you want when you want to fly. Some airlines have limitations on "free seats." Airlines have also reduced the overall number of flights and they use smaller planes to fill up each flight.

    "Free flights book quickly. As a result, you may end up doubling the miles to get the flight you want, especially on very popular routes" says Erik Larson, founder and president of San Francisco-based Nextadvisor.com, an online service that analyzes credit card benefits.

    The best chance to get the flight you want is to book far in advance. It increases your chances of getting the flight you want with the least number of points or miles.

    Some airlines charge a fee for awards booked too close to the departure date. US Airways charges a non-refundable quick-ticketing fee of $75 on each award reservation purchased within 14days of travel.

    "If you don't book early, you can pay more depending on the airline. United frequent flyer members pay a fee for award tickets booked less than 21 days prior to departure: $75 for General Mileage Plus members, $50 for Premier members and $25 for Premier Executive members," says Komarnitsky.

    2. Beware of Higher Interest Rates and Annual Fees

    Credit card issuers dangle bonus miles to attract new applicants. United Airlines' Mileage Plus Explorer Card and the Continental Airlines OnePass Plus offer 25,000 bonus miles after first use plus 10,000 miles each year you spend $25,000 on the card. Cardholders also receive 5,000 more points if you add an additional user during the first two months. Both cards come with an annual fee of $95, which is waived during the first year of card membership. The Southwest Airlines Rapid Rewards Plus Card offers 25,000 bonus points after your first purchase plus 3,000 points on your cardmember anniversary date. But it also comes with a $69 annual fee.

    These can be attractive cards if you pay off your balance each month and don't have to pay interest charges. Airline frequent flyer reward credit cards typically charge higher interest rates and annual fees than non-airline cards to offset the cost of rewards.

    "If you are a consumer that doesn't pay off your credit card at the end of the month, be careful about using an airline rewards credit card because the APR can be up to 3% points higher," says Larson.

    3. Accrued Miles Can Expire

    Expiration policies vary by frequent flyer program. Some miles expire after 18months of inactivity. Others never expire.

    United has one of the strictest mileage policies. Any member who does not have account activity for 18 consecutive months could lose his or her membership and forfeit all miles.

    Southwest Airlines reserves the right to cancel the membership of any member with no points in the member's account or a member who has earned no points for at least 24 consecutive months.

    US Airways Dividend Miles members have an opportunity to reinstate forfeited miles for an additional 18 months for a fee that varies from $10 to $400, depending on the mileage to be reinstated. At 15-17 months of inactivity, customers can pay a $9 preservation fee to remain active for another 18 months.

    Keeping an account active may be as simple as buying lunch on the card or a song on iTunes.

    4. Pay Attention to Fees and Surcharges

    Free flights secured with airline credit cards can save a lot of money but this does not protect you from fees and surcharges.

    British Airways offers a 50,000 point promotion programs after the first purchase with their airline credit cards, enough to go to Europe. But consumers can be surprised by the fees that you may have to pay that accompany the free trip to Europe. Fees and surcharges can add hundreds of dollars to a roundtrip ticket because international flights require more fuel and airlines can charge a higher fuel surcharge.

    Airlines charge fees for processing tickets, reissuing tickets or human contact. US Airways charges an award procession fee for all Dividend Miles tickets based on destination ($25 for domestic tickets, $35 for tickets to Mexico/the Caribbean and $50 for tickets to Hawaii, Europe, the Middle East and South America). It also charges a $50 surcharge for issuing paper tickets on e-ticket eligible reservations.

    After an award ticket is issued, a service charge may be imposed for each change requested by the member which necessitates the re-issuance of the ticket. United Airlines charges $100-$125 for canceling your trip and re-crediting your account. There is not a fee for changing your date or flight in advance.

    5. Pick an Airline Credit Card and Stick to It

    "If you fly a lot, it makes sense to stay with one airline," says Susanna Zaraysky, author of Travel Happy, Budget Low. "The more loyal a flyer is to to a certain airline, the more perks he or she can get. Most airlines have their elite or premium frequent flyer membership levels that give members priority check-in, security and seating privileges, extra mileage bonuses, and upgrades."

    6. Read the Fine Print

    Before you sign up for an airline reward card or even use your miles, it is a good idea to read the fine print and understand your account. Here are a few examples of potential gotchas.

    • Award tickets may be subject to applicable departure taxes, federal inspection fees, passenger facility charges, and other fees, charges or taxes, and the person utilizing the award is responsible for the payment of any such items that may apply.

    • Miles in separate accounts can't be combined.

    • Any valid unused award ticket or certificate may be returned to the Mileage Plus Service Center for a service charge. The mileage used to redeem the award will be credited to the member's account and be subject to expiration. (United Airlines)

    • The award structure is subject to modification, cancellation or limitation at United's discretion, with or without notice. The amount of mileage required to redeem any award may be substantially increased, any award may be withdrawn, and restrictions on any award or its redemption may be imposed at any time. (United Airlines)

    • All award tickets must be issued and ticketed for roundtrip travel. (US Airways)

    • Award travel must be completed one year from the original date of issue of the ticket. (US Airways)

    • Special fares, such as senior, infant, child, military, and government fares, are not eligible to be purchased with points. Other travel not eligible for purchase with points includes, but is not limited to, charter flights, group travel, vacation packages, service-charged, reduced-rate, tradeout, extra seat, and paper tickets, and travel purchased through a travel agent. (Southwest)

    • Airlines may, from time to time, share information about their members with other businesses that may make special offers available through their respective communication channels. If you do not want to receive these special offers, you must notify your issuer either by phone or in writing.

    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.

  • Protect Your Pension

    by Rick Rodgers

    The Pension Protection Act of 2006 (PPA) turns five years old this month. As companies rush to shore up pension or cancel underfunded plans, you need to protect yourself from common pension mistakes. PPA was designed to close loopholes in the pension system and addresses problems for the roughly 34 million Americans covered by traditional pensions known as defined-benefit plans. 

    PPA requires pensions be fully funded by 2015. It also prevents companies with big pension deficits to skip annual contributions and still pronounce their plans healthy. Another major goal of the bill was to shore up the health of the Pension Benefit Guarantee Corporation (PBGC). PBGC is an agency of the US government that insures private pension plans. 147 pension plans failed in 2010, which increased the PBGC deficit to $23 billion. The agency assumes terminated plans and pays benefits to retirees up to a maximum of $54,000 if they retire at age 65 or later. 

    One problem not addressed by PPA but continues to affect millions of people of all ages, not just retirees, are pension miscalculations. Anytime you change jobs or take a lump-sum pension cash-out you are at risk. Women are especially vulnerable to pension mistakes because they tend to move in and out of the workforce more often than men. For the most part, pension mix-ups aren’t intentional. 

    How would you know if there was an error which had been compounding for many years? How can you ensure that you’ll get what’s rightfully yours when retirement arrives? It’s up to you to keep track of your own pension. Know your rights and monitor your retirement plan before the “golden years” creep up on you. 

    Educate yourself about how your plan works. Contact your company benefits officer and ask for a copy of the plan, not the summary plan description. In May, the US Supreme Court ruled that you can’t depend on your employer’s summary plan description. The summary is an abbreviated form of the plan. The Court held that if there are discrepancies, the plan is the controlling document. You need a copy of the plan to determine how your pension is calculated. The plan document can run 50 pages or more.

    More and more companies are freezing or terminating their pension plans. Only 38% of Fortune 1000 companies offered a pension plan in 2010. That number is down from 59% in 2004. Of those companies with a plan, 35% of those were frozen and 2% were in the process of terminating the plan. You should immediately request a personal statement of benefits if this happens to your pension. The statement will tell you what your benefits are currently worth and how many years you’ve been in the plan. It may even include a projection of your monthly check.

    Most of the time companies won’t intentionally fudge; sometimes the blame can be on simple errors. Here are seven common pension mistakes to watch for:

    1. Company forgot to include commission, overtime pay, or bonuses in determining your benefit level.

    2. Your employer relied on incorrect Social Security information to calculate your benefits.

    3. Somebody used the wrong benefit formula (i.e., an incorrect interest rate was plugged into the equation).

    4. Calculations are wrong because you’ve worked past age 65.

    5. You didn’t update your workplace personnel officer about important changes that would affect your benefits, such as marriage, divorce, or death of a spouse.

    6. The company neglected to include your total years of service.

    7. Your pension provider made a mathematical error.

    How do you protect yourself? Create a “pension file” to store all your documents from your employer. Also keep records of dates when you worked and your salary, since this type of data is used by your employer to calculate the value of your pension. Ask for professional help, if you still think something might be wrong. The American Academy of Actuaries Pension Assistance List program offers up to four hours of free help from a volunteer. The federal administration on Aging’s Pension Counseling and Information Program may also be helpful.  

    Rick Rodgers, Certified Financial Planner, Chartered Retirement Planner Counselor, Certified Retirement Counselor, and member of the National Association of Personal Financial Advisers, is Founder and CEO of Rodgers & Associates. Rick’s expertise in the investment and financial advisory profession began with one of the big Wall Street firms in 1984. Twelve years later, he founded Rodgers & Associates as a way to concentrate on financial planning. His vision was to help families prepare for a worry-free retirement through the creation and conservation of their wealth. Today, as a leading retirement expert and personal wealth adviser to high net worth individuals, Rick provides integrated financial, tax, and investment strategies, retirement planning, executive compensation, estate and charitable planning. He is also author of the book The New Three-Legged Stool: A Tax Efficient Approach To Retirement Planning (www.TheNewThreeLeggedStool.com)

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