November 2011 - Posts - Dollar Stretcher Guest Bloggers
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November 2011 - Posts

  • Online Spending Much Higher with Credit Cards Than Debit Cards

    by Bill Hardekopf

    Holiday shopping on Cyber Monday was extremely strong, with analysts estimating sales to be 15% to 33% above last year's totals. Not only are a greater number of people now shopping online, but new research shows they are spending more when paying with a credit card.

    Consumers spend an average of $82.10 on a single online transaction with a credit card payment compared to $58.29 by those using a debit card, according to Javelin Strategy & Research's latest Online Retail Payments Forecast report. The study was based on over 2,300 respondents.

    Javelin predicts this trend will continue long beyond this holiday season. U.S. consumer payments volume from online use of credit cards will climb 63 percent from 2011 to 2016, but debit card online payment volume will only grow by 2 percent.

    This research follows a recent study by the Journal of Consumer Research (entitled "Do Payment Mechanisms Change the Way Consumers View Products?") that explains how the perception and evaluation of products differ with cash compared to a credit card payment. Consumers paying with a credit card focus on the benefits of the product, which increases the natural desire to spend. Consumers that pay with cash are more likely to choose an option based on cost, even if that option offers inferior benefits.

    Both studies provide more evidence that consumers must be wise when it comes to shopping with a credit card. This is especially true during Christmas when it is so easy to get caught up in the spirit of giving and buy that extra gift or two. That's why over 14 million people are still paying off credit card purchases from the 2010 holiday season. We all need to make a holiday budget and stick to it.

    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.

  • Clearing Out Clutter

    by Stacybart

    Apartment therapy’s 20/20 Home Cure episode today got me started in clearing out the bookshelf, but I took it a bit further. Instead of just clearing out the books, I went for the whole office.

    The best way to clear out a room is to do exactly that. Empty it completely. Remove anything you can, leaving only the bare furniture, shelves and walls. Arrange the furniture in a way that opens up the room and provides the functionality you really need.

    Once it's empty, think about the purpose of the room. Visualize what this room should look like and what you really want in it. Now, start putting things back. Only put back the items that are useful, aesthetically pleasing, and have a purpose there. The purpose may just be that you like it but think in terms of the perfect room.

    Once you have only what you really want in the room, take everything left outside and put it away. Not sure how to deal with what’s left outside? Make three boxes: another room, donate and out. No boxes? Don’t lose momentum here. Trash bags or even piles will work. Just don’t bring it back in the room. If it belongs in another room, put it there. If it’s broken or useless, throw it out/recycle it. If it can be used, donate it or put it in a box to go out and give it away.

    Every time you walk into this room you will feel good.

    Stacybart is a work-at-home mom with two teenagers, a loving husband and bills to pay. She believes that living within your means is not only financially responsible but cuts down on the waste in our world and stress in our lives. You can find more of her thoughts in her blog moremoola.wordpress.com.

  • New Credit Card Rule May Hurt Stay-At-Home Parents

    by Bill Hardekopf

    December and January are the biggest months of the year for credit card applications. This is the time that consumers look for cards with better rewards or cards with lower rates to get their finances in shape.

    However, new federal regulations that went into effect on October 1 may prevent some people, like stay-at-home parents, from getting their own credit card.

    The new rule is part of the CARD Act and says credit card issuers must only consider the applicant's own salary or other income. Any person that applies for a card must be able to make his or her own payments. Household income or combined income is no longer considered in the approval process. This means a stay-at-home parent who has no outside income will find it very difficult to get approved for a credit card.

    The intent of limiting credit cards to individuals who can afford them is a good idea, but just like many regulations, there are unintended consequences. This is a bigger problem than just the name on a piece of plastic. Credit card payment history is an important component in a credit score. If you aren't building a good history with a credit card in your own name, this could drag down your credit score and  may cause higher rates with future loans or become a reason for rejection during job interviews.

    Before the regulation, a person could get a credit card account based on the income of another family member. The stay-at-home spouse could get a credit card in his/her own name based on the salary of the working spouse.

    This new income requirement only applies to new accounts. It does not affect existing credit card accounts.

    Other Credit Options

    Secured Cards. If you don't qualify for a credit card in your own name, you may want to consider a secured card. The credit limit will be the amount of your deposit. But cards like Capital One's Secured MasterCard may give credit line increases based on your payment and credit history.

    Secured cards can be a good place to start when you can't get a credit card. Make sure the card reports to all three credit bureaus so you get credit for a good payment history. If you carry a balance, you will still have to pay interest, so pay off the card each month. Many secured cards have higher interest rates than standard credit cards.

    Authorized User. You can also become an authorized user on your spouse's credit card. Your name will appear on the credit card and you will have full charging privileges, but you are not the owner of the account. The lender will report the credit information of both you and your spouse to the credit bureaus. FICO includes authorized accounts in its score calculation, and if your spouse has a good payment history, this can boost your credit score. Vantage Score does not use authorized user accounts in its formula.

    Keep in mind that there are some risks to authorized accounts. If your spouse already has a low credit score, it won't improve your score. If they have a late payment or a high balance, this can also drag down your score.

    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.

  • Being Frugal Is Also Eating The Best Quality Food You Can Get Your Hands On

    by Joyce McKnight

    In numerous cases, quality has little to do with cheap or inexpensive. Kale is an absolute powerhouse when it comes to taste, nutrition, and cheap, cheap, cheap. Also you will be, in my opinion, hard pressed to come up with a contender that could outshine the taste and nutrition of dry beans. When you pay for those high-priced, processed food items, in too many cases, you are paying for advertising and packaging. The quality may or may not be inside. I eat mainly a plant based diet and absolutely love it. What society puts a value on may or may not be congruent with its inherent value.

    A case in point is that dandelion greens are absolutely a miracle food and often viewed basically as a weed. Parsley is a fantastic, highly-nutritious green that is basically viewed as decoration. What about a sprig of parsley thrown into a smoothie for some extra nutrition. Or perhaps a sprig or two of cheap parsley thrown into a homemade soup. The choices are limitless. Don't have money for breakfast? What about a 13-cent banana? It surely beats having nothing and is loaded with good nutrition. You would be hard pressed to beat the benefits of a simple banana breakfast. Even a lot of sugar laden cereals couldn't match it.

    Another way to prepare inexpensive nutritious meals is to implement whole grains. You can purchase whole grain oats in the bin for extra savings if you choose or buy boxed on the shelf. I buy my whole grains in the bins now, and I absolutely love the quality so far. I eat whole grain oatmeal five days a week with a fruit. You don't need much; whole grains fill you up. I sweeten my oatmeal with local honey. The whole grains will take longer to cook so plan for extra cooking time.

    For a large breakfast crowd, I have had fantastic success slow cooking whole grain oatmeal in a crock pot. Break out of that box. You can eat oatmeal for dinner, too. It is certainly a bargain when compared with other options that are not nutritional heavy weights like oatmeal. So with some knowledge and a little planning, it is very possible, even in today's world, to eat well. When you are eating cheap, you must be careful and be mindful that buying cheap is the way to go. Eating cheap can deprive the body of needed nutrients for optimum health. Eating cheap and buying cheap are not synonymous.

    Joyce McKnight is a Home Economist and an advocate for consumer awareness. To learn more about frugality, see www.frugaltoolbox.blogspot.com.

  • Using Reward Credit Cards for Holiday Shopping

    by Bill Hardekopf

    Throughout 2011, credit card issuers have sweetened reward card offers to attract more consumers. Since most consumers spend so much additional money during the holidays, this is a great time to take advantage of these offers and quickly earn some extra cash or miles.

    Here are six tips for using reward credit cards to maximize your holiday shopping:

    1) Use your rewards points.

    These can be used to buy gift cards with many retailers. For example, you can use American Express Membership Reward points to shop at Amazon.com to pay in full or for part of your purchase.

    2) Pay attention to partner programs.

    Most credit card issuers have a partner program that offers discounts or bonuses for online purchases with certain companies. The program varies by issuer, but the partners could be stores where you already shop. Discover turns $20 rewards into $25 gift cards. Citi gives an additional 1%-5% cash back when you shop at their online partners. Capital One is adding bonus rewards for purchases made from November 25-28 with some retail partners in its online shopping portal, Perk Central. Some retailers include Landsend.com (100% rewards increase), Macys.com (40% rewards increase), Lego.com (100% rewards increase) and Gamestop.com (40% rewards increase).

    3) Look for 5% rotating cash back offers.

    Chase Freedom, Discover More and Citi Platinum Select offer an attractive 5% back on the spending on designated categories for a specific amount of time. The October-December bonus categories for these issuers focus on shopping and entertainment. If you have these cards, remember to sign up for these attractive rebate offers each quarter since enrollment is not automatic.

    4) Check for spending bonus opportunities.

    Chase Freedom offers $200 spending bonuses for new applicants who reach a set spending limit, $500 within three months. Holiday shopping is the best time to quickly reach these limits and then use the bonus to pay off your balance.

    5) Pay attention to reward limits.

    Some cards, like Discover More (5% cashback on up to $300 in purchases each quarter), place a limit on the bonus. After you reach the limit, switch to another bonus card.

    Best Reward Cards for Holiday Shopping

    Capital One Cash - Offers 1% cash back on every day purchases and a 50% anniversary bonus on cash earned on purchases in the previous year. It also gives a one-time $100 bonus once you spend $500 in the first three months. No annual fee.

    Chase Freedom $200 Cash Back Bonus - Get $200 cash back after you spend $500 in your first three months. Earn 5% cash back on dining, department stores, movie theaters, and charitable giving. No annual fee.

    Discover More - 0% APR for 15 months on purchases and balance transfers. Earn 5% Cashback Bonus on up to $300 in purchases at department stores, clothing stores and restaurants and 1% on all other purchases. No annual fee.

    Citi Thank You Preferred - Earn 10,000 bonus ThankYou points after $500 in purchases within the first three months, good for a $100 gift card. Earn five ThankYou Points for every $1 spent on all purchases at gas stations, supermarkets and drugstores during the first 12 months and one point for every $1 spent thereafter. No annual fee.

    Continental Airlines One PassPlus Card - Earn 25,000 bonus miles the first time you use this card. This is enough for a round trip ticket within the United States and Canada. The $95 annual fee is waived the first year.

    BankAmericard Cash Rewards - Gives a $50 cash rewards bonus after you make at least $100 in purchases within 60 days of account opening.

    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.


     

  • Ten Tips to Avoid Holiday Credit Card Debt

    by Bill Hardekopf

    The kids are still eating their trick-or-treat candy, and Christmas has probably not even entered their minds. But according to the National Retail Federation, nearly 40 percent of consumers had already started their Christmas shopping before Halloween.

    The most wonderful time of the year has crept into October and November, but Christmas must be celebrated with a budget and a spending plan. A survey by Consumer Reports showed that 14.1 million or 6% of Americans are still paying off credit card purchases from the 2010 holiday season, up from 13.6 million in 2009.

    Last year, approximately half of Americans charged at least some of their gift purchases, according to the Consumer Reports survey. Credit cards provide an easy way to buy, but they must be used with caution, especially around the holidays.

    Here are ten tips to avoid holiday credit card debt:

    1. Start saving now. Look at what you spent last year and try to save that amount in the next two months. If you spent $500, you can save $71.50 per week for the next seven weeks and pay cash for everything you purchase, or apply that payment to your January credit card balance so you don't have to pay interest on your holiday spending. Instead of eating out, take your lunch to work or eat more meals at home from now through December. Apply that money to your Christmas purchases.

    2. Make a budget and then keep a record of all gift purchases and holiday expenses from postage stamps to the food for the office party. It is hard for shoppers to make a budget and easy to underestimate their spending. Last year, respondents in the survey anticipated spending an average of $457 on gifts, but really spent $556, a 22 percent increase. Of those that made a budget last year, 45 percent exceeded it.

    3. Change your shopping habits now before you get into the spirit of the season. If you can't afford to pay off your credit card in November, then you can't afford to add a lot more to it in December. Generosity to friends or the perfect gift for the family are not good reasons to put yourself deeper into debt. If you are one of the 14 million people still paying off purchases from last Christmas, then you can't afford shopping on a credit card this year. If you must use a credit card to pay for Christmas, make sure you can pay it off by Easter.

    4. The best way to stick to your budget and avoid impulse spending is to pay in cash. Pulling cash out of your wallet or purse and handing it to someone else is painful and a reminder that the less you spend, the more you can keep.

    5. Before making your first holiday purchase, verify the credit limit on every credit card you use. If you are unaware that your limit has been lowered, you can unknowingly exceed your credit limit. This can cause problems, including a lower credit score and a significantly higher APR.

    6. If you are looking for a new credit card, this may be a good time to apply. If the card has a 0% introductory rate for purchases for six or 12 months, you can use your card as a free loan for holiday spending. This is recommended only if you pay it off before the interest charges begin.

    7. If you carry a balance, calculate the cost of adding new charges to your credit card. This will probably serve as a wonderful deterrent to using your card. If you charge $1,000 on your credit card with an APR of 15%, and you choose to pay just $30 each month, it will take 44 months to pay off Christmas 2011 and you will pay an additional $302 in interest.

    8. If you are going to carry a balance, contact your issuer and ask for a lower rate. They may not be as willing to negotiate as they were several years ago, but it doesn't hurt to ask.

    9. Use your rewards points for holiday shopping. These can be used to buy gift cards with many retailers. You can also apply your American Express Membership Reward points to shop at Amazon.com to pay in full or for part of your purchase.

    10. Pay attention to partner programs. Most credit card issuers have a partner program that offers discounts or bonuses for online purchases with certain companies. The program varies by issuer, but the partners could be stores where you already shop. Discover turns $20 rewards into $25 gift cards. Citi gives an additional 1%-5% cash back when you shop at their online partners.

    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.

  • Banks Back Down on Debit Card Fees

    by Bill Hardekopf

    Some banks are backing down on planned monthly debit card fees after angry protests from customers and condemnations from both Congress and President Obama. Some consumers had even declared Saturday, November 5, as "Bank Transfer Day."

    SunTrust Banks announced the end of its $5 per month debit card fee, which it had instituted in June on its Everyday Checking customers. The bank said it will refund the money to customers.

    Wells Fargo scraped plans to charge $3 per month to customers who used their debit card. The bank had planned testing this fee beginning November 15 on customers in Georgia, Nevada, New Mexico, Oregon, and Washington.

    JP Morgan Chase ended its test of a $3 monthly debit card fee in Wisconsin, and is not going to impose it on consumers.

    Bank of America is working on plans to give customers some ways to avoid the $5 debit card fee it will impose beginning in 2012. The fee may be waived for customers that use Bank of America credit cards, maintain higher checking account balances, or make designated direct deposits. Customers who don't qualify could still get stuck with the fee.

    Regions Financial Corp. continues to charge $4 per month to some of their debit card customers.

    This is great news for consumers, but this is not the end of new fees. Banks are still losing billions of dollars in revenue from the interchange fee regulations. They will find more subtle ways to make up for this lost revenue, increases that may fly under the radar. Banks may increase existing fees or raise the introductory interest rates on credit cards. They will find some way to increase their revenue, and it's always the consumer that will end up paying for these increases.

    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.

  • New Study Reveals Credit Scores by City

    by Bill Hardekopf

    Credit scores give a measurement of an individual's financial health. Higher credit scores enable a consumer to receive the best interest rates on mortgages, loans, and credit cards, in addition to better financing on larger purchases, such as automobiles.

    Last week, credit agency Experian released its State of Credit Study that ranks the average credit scores of 143 cities in America. Wausau, Wisconsin had the highest average credit score of 789. Harlingen, Texas had the lowest credit score of 686. The national average was 749. These scores are based on the VantageScore with a 501-990 scoring range.

    The study found that eight of the top ten cities with the highest average credit score were located in the Midwest. Four of the ten cities with the lowest average credit score were located in Texas.

    There is a significant relationship between a city's average credit score and its unemployment rate. Nine of the top 10 cities with the highest average scores have unemployment rates below the national average of 9.2%.

    In 2011, the average debt for the U.S. was $25,542, down about one percent. Six of the ten cities with the lowest average debt were Midwestern cities. Seven of the ten cities with the highest average debt were cities in the South.

    This study illustrates the financial cycle. Credit scores determine the interest rates that consumers pay on loans. If jobs are scarce or you are struggling to make ends meet, chances are you can't pay your bills and you may incur more debt. If you have a high debt-payment ratio, this will lower your credit score and increase your rate for interest payments, costing you more money and adding to your credit card balance. It is no coincidence that the cities with the lowest credit scores have some of the highest unemployment and foreclosure rates. When you are struggling to get through the day, it is tough to break out of this cycle.

    You can find the scores of all 143 cities in the study here.

    Here are some consumer tips for increasing your credit score:

    • Get a copy of your credit report from all three credit agencies. U.S. residents are entitled to one free copy of their credit report from each credit reporting agency once every 12 months. This information is found by calling 1-877-322-8228 or at AnnualCreditReport.com. If any of the information on a report is incorrect, contact the agency to correct it; doing so may give your score a quick boost.

    • Pay all your bills on time. This is the single most important factor in your credit score. Even if you only pay the minimum, pay your bills on time. Set payment reminders by email or text. Late and missed payments can quickly lower your credit score.

    • Pay off your debt. High balances and high debt ratios drag down credit scores. Your debt balance should be less than 35% of your available credit. If you have a good payment history, contact your creditors and ask for lower interest rates. Then use what you saved in interest to pay down your credit card balances.

    • Build a long-term relationship with the accounts you have. A long history of good payments on a car loan, a mortgage, or a credit card increases your credit score. Keep older credit card accounts open, even if you are not using them, because you are rewarded for a long, positive credit history. If you review your credit report and discover accounts that you no longer use, close the newest ones first.

    • Limit your credit applications. Too many new accounts can lower your credit score. Each time you apply for a loan, the application shows up on your credit report. A significant increase in inquiries signals that you are desperate for money and are a credit risk. The exception is shopping for a mortgage or a car loan, as multiple inquiries for the same purpose in a reasonable period are considered a single inquiry.

    • Get a checking and a savings account.

    • Do not co-sign for a loan for someone else. This shows up on your credit report, and a missed payment or a maxed out credit card by the other person will negatively affect your credit score.

    • If you can't pay your bills, contact your creditor or see a legitimate credit counselor. The National Foundation for Credit Counselors, a not-for-profit organization, can give counseling and help you put together a debt management plan.

    • Beware of credit repair scams and anyone who tells you they can improve your credit score for a fee. Investigate any company with your local consumer protection agency or Better Business Bureau.

    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.

  • Financial Tips for Recent College Graduates

    by Bill Hardekopf

    The average student loan debt is $24,000. Graduates may also have another $3,000 in credit card debt. These young adults are financially stressed before they enter the work force, and many have to turn to their parents for help. But these parents have just spent a lot of their money to pay for the college education and need to be saving for their own retirement. The parents may need their own financial help.

    Tips for a Good Financial Start for Graduates

    1. Budget everything and put every dollar in place. Start with your net income, which is your income once taxes, healthcare, and retirement are taken out. Don't underestimate expenses. Track your spending for a month to get an accurate understanding of how much your bills and expenses really are and where your money goes.

    2. Start saving immediately from every paycheck, even if it is only a small amount. Open a retirement account at work or your own IRA. Time and compounding interest will help your small amount grow into significant savings by retirement.

    3. Open a separate savings account to save for an emergency fund. The goal should be three months of income. If you lose your job or have sudden, unexpected expenses, your emergency fund (not your credit card) should be your safety net. Using loans to pay for an emergency simply adds to the cost of the emergency.

    4. Pay off your credit card debt as soon as possible. If you are carrying a balance on your card, do not put any new purchases on your credit card. If you can't pay for it with cash, you can't afford it, so don't buy it.

    5. Set a payment schedule. If you are not trained in paying bills, it is easy to misplace a bill or pay it late. This can be punished by late fees and even lower credit scores. The easiest way for young people to pay bills is to do so online with scheduled reminders for payments.

    6. Improve your credit score because it is the number that lenders, employers, and even renters will use to judge you. A good score (a FICO of 720) will get you the lowest rates and save money on auto, credit card and mortgage loans.

    7. Monitor your credit history with free annual credits reports through annualcreditreport.com. You can get a free credit report from each of the three credit agencies (Equifax, TransUnion, and Experian) every year.

    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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