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Archive for May, 2007

Protecting Your Credit Cards

May 21st, 2007 at 10:26 am

Recently, my husband and I had the displeasure of being ripped off for $400 after eating out at a restaurant. The debit card has now been closed and the bank is supposedly working on the problem of getting our money back to us.

How can one eat out without being concerned that this can happen again. Is there anyway to prevent it? We are very upset and frustrated that someone ripped us off for this money and also cannot afford this big of a loss. My husband is on Social Security and is working part-time. What can we do, if anything, to protect ourselves from this happening? We have discussed buying gift cards to these restaurants, which is a pain but would prevent what happened from happening again. Do you have any other suggestions?
-- Cheryl

Cheryl and her husband are not alone. In a recent poll (epaynews.com), three quarters of consumers said that credit card fraud was a major or moderate concern. And, they have good reason to be concerned. The Federal Trade Commission estimates there are $3 billion in fraudulent charges each year.

Guess that shouldn't be surprising. We use our plastic a lot. Visa and MasterCard estimate that we spend near $2 trillion dollars using their cards each year. And, that doesn't include the money we spend using Discover, American Express, store cards, gas cards, etc.

So what happened to Cheryl and her husband? The most likely scenario is that they gave their card to the server to pay for the meal. While out of sight from Cheryl, either the server or the cashier wrote down their card number and the verification code on the back. Later, they used the numbers to make online purchases where a physical credit card isn't required.

How can Cheryl and her husband prevent a reoccurrence? There are things they can do to protect themselves. But, we'll find that security comes with a price. The most effective tools are also the ones that are most inconvenient. So Cheryl will need to decide how much security she wants.

Cheryl is already using a debit card. The advantage is that the crook can only spend what's in the account unlike a credit card that can be used up to its credit limit.

Cheryl probably had the cost of the meal and another $400 in the account that day. One way to limit the loss is to keep less in the account. For instance, if there's only $100 in the account no one can charge more than that using the debit card. Of course, keeping a low balance means adding money to the account every time you intend to use it. If she wants to try this, Cheryl should talk to her bank about using online banking to transfer money. She'll also need to know whether the transferred money is available immediately or if she has to wait overnight.

There are a couple of other ways to make using credit or debit cards safer. One of the most effective is to not let the card out of your sight. That way if someone is going to try to steal your credit card number, they'll have to do it while you're watching them. Chances are, they'll choose someone else who is an easier target to rob.

Use a PIN number. She's probably already aware, but keep your PIN number separate from your card.

Using gift cards probably wouldn't have made Cheryl any safer than taking her debit card up to the cashier herself. You still have someone you don't know handling your card.

One way to make sure no one steals your card number is to use cash. You do run the risk of losing it or being mugged. However, the good news is that you can't lose more than you have in your pocket or purse.

There is, however, one additional risk for cash. Getting cash from an ATM is not completely safe. Some smart criminals put recording devices onto ATMs. They record your account and PIN number for later use. So the safest way to get cash is to visit the bank during normal business hours and deal with an old fashioned, real live teller.

While losing $400 is nasty, it could have been much worse. Cheryl should only be liable for the first $50 in fraudulent charges. So the monetary damage is limited. It becomes a much bigger problem if someone parlays her credit card number into identity theft.

Undoing an identity theft can take hundreds of hours. It's estimated that the time spent by the average ID theft victim to get things straightened out is worth $16,000.

Cheryl is right to worry about safeguarding her credit accounts. Not only are there more ways for crooks to use a stolen credit card number, but also in the age of ID theft, the damage inflicted can be substantial.

Peel and Stick Tiles - Can You Help?

May 19th, 2007 at 04:40 am

We have almost decided to lay "peel and stick" vinyl tiles in our kitchen and dining room. We would like to hear pros/cons on vinyl tiles.

Are they durable? Do they really stick? Do they come loose easily? Should we add more adhesive when applying them? Any help and direction will be greatly appreciated.

We hate to make an investment of money, time, and labor on something that is not going to hold up for the long term.

Helping Family

May 19th, 2007 at 04:37 am

My sister is a single mom and can't fully provide for her kids. She is receiving housing benefits where the government pays for most of her rent. She purchased a car with no money down. The payment with insurance is about $500 per month. When housing found out, she was told to get rid of that car or she would lose her housing benefits. She asked me to put the car in my name, which means that I would have to put the financing in my name as well so it does not show on her credit. She would still drive the car. I'm afraid to make that kind of commitment. She refuses to give the car back to the dealer because it's going to ruin her credit. My other sister gave her $4,000 to buy a used car when she returns her new car, but she does not want an old car. What should I do? My heart tells me help her, but my head tells me not to help her! I love her dearly, but she's always broke and I am afraid she'd get into an accident and I would be totally liable. -- Confused Sister

Confused Sister must come from a very close and loving family. It's obvious that these three sisters care for each other. But, sometimes you need to do what's best for a person. Even if it's different than what they ask you to do. This is one of those situations.

If your three-year-old takes a sharp knife from the dinner table, you're going to take the knife away from him even if he cries and doesn't want to give it up. You know the danger even if he doesn't.

Broke Sister is going to hurt herself (and her children) with the car loan. That's one reason why the housing authority doesn't want her to keep the car while she's receiving rental assistance. They know that she won't be able to keep up with a car payment and continue to feed her children.

So the best thing that you can do for your sister is to help her get out of the new car and replace it with something she can afford.

Broke Sister has a couple of different possibilities for the new car. If she can find someone to take over payments, she could come out with no bad marks on her credit. The key here is that the lender gets their money on time.

It's also possible that the housing authority could help. Most have laws against "predatory lending" practices. There's a possibility that the lender was taking advantage of Broke Sister. The housing authority might be able to point her to a state agency that could help her get out of the car loan.

A third option would be to contact the dealer and explain the situation. They might be able to put her into an affordable car. The original dealer should be Broke's first stop since they'll get the best price for her now used new car. She will need to finance the loss on the new car, but the money from Third Sister should help keep the payment affordable.

The final method for returning the car is a "voluntary repossession." That's where Broke Sister drives the car to the lender and turns over the keys. They will sell the car. It will bring less than Broke Sister owes on the loan. The lender will expect her to pay the difference. She might have to use the $4,000 that the Third Sister is offering to cover the loss. If she doesn't repay the loss, it will affect her credit rating.

Ok, now that Broke Sister has a few options to put her into an acceptable ride, let's convince Confused Sister why she should avoid Broke's scheme.

First, it's probably illegal. If Broke hides the car from the government, she's lying to get financial aid. That's illegal. Helping Broke to lie is participating in the frau, which is not something that you want to be involved in.

Next, you would be responsible for the financing. If your sister were one day late with a payment, it could trigger penalty rates as high as 30% on any credit card balances you have. Plus, it would affect your ability to get your own car loan or a mortgage.

You would also be responsible for the car. Broke can't insure a car that she doesn't own. So you would need to add it to your insurance policy. You'd also need to let them know that your sister is a regular driver on the car. If Broke Sister had an accident, you would be involved. It's your car and your insurance company. You can guess what will happen to your rates.

This is a case where you need to listen to your head. It would appear that your sister is not grasping financial reality. She can't afford to care for herself and her kids, so the government is helping her. It's time for Broke to realize that paying for food and shelter is more important than driving a new car. You can help lead her to do what's right for her kids.

Confused wants to help her sister. The best way to do that is to tell her the truth. Broke needs to give up the new car and start being a financially responsible parent for her children.

What To Teach Your Teens About Money

May 7th, 2007 at 06:30 am

There's an old saying that 'the apple doesn't fall far from the tree'. For those of you too young to have heard that phrase before, it means that children will be a lot like their parents. I was reminded of that the other day when I found my twelve year old reading "The Millionaire Next Door".

Lest you think that I'm some kind of fanatic, I don't give my children homework assignments on money management. The book was just sitting next to my easy chair. But, in fairness, my kids have heard me talk about the value of money on a regular basis. And I do hope that some of the lessons stay with them.

You have the same opportunity to help shape your teen's money perspective. Lessons learned now could save them a lot of grief later. So let's spend a little time talking about what to teach your teens about money.

A cornerstone of building a sound financial future for your teenager is to teach them how to save money. Sounds easy, but even many adults don't know how to do it. And that might be because no one ever taught them.

You can use three strategies to teach a teen to save. First, you can encourage them to reach a goal. Suppose that they want a $100 pair of shoes. Let them save $5 or $10 a week until they have the purchase price. Have them put a reminder of their goal in strategic places. They'll learn patience and persistence. And by the time they save the money, they might also learn that they really don't want the shoes any more.

Another way to encourage savings is to match any money they put into a savings account. Set a minimum length that the money must stay in the account before being withdrawn. Don't want them to put it in with your match and withdraw it a few days later. This won't work for everyone, but some teens will love to watch their savings grow.

The teen years are also a good time to teach your young adult to 'pay themselves first'. That means that they set aside part of their income for savings before spending anything.

It's a perfect time to learn this lesson. Most teens don't have any real financial responsibilities. They don't have items that they're forced to buy each month (like rent, electricity, food). They generally just spend what they have available.

Of course, many adults do the same thing. They spend until they're out of money. Learning to set part of any income aside for savings is a great habit that will pay dividends for their entire lives.

Next a question for you. Do you remember who taught you to balance your checkbook? Most of us don't. And that's a shame. You'd be surprised how many people reach adulthood without knowing how to perform this simple task. And it's important that your teens learn it.

First, they need to know where they stand financially. Even a teenager should know how much money they have. The reason is simple. It's essential to understand that you can run out of money. Balancing a checkbook is a wonderful way of teaching them that there are penalties if you spend money that you don't have.

The alternative is to let them learn to keep spending until they've reached their credit limit. And that lesson will create heartaches later in their life.

PC software makes balancing a checkbook easy. But make sure that they don't just enter numbers and let the software do all the work. They need to understand the basics. You put money in. You write checks to take money out. What's left is the balance.

They also need to learn basic investment information. It's really essential for modern life. Teach them that stocks represent ownership in a company. And bonds are like an IOU. Introduce them to CD's, money market and mutual funds. Perhaps you'll want to subscribe to Money magazine and discuss the articles with them.

Don't forget to teach them how risks and rewards work. They need to know that a big return will include a big risk. It's surprising how many people think that they can get huge returns without taking any risk. That's a good way to lose money.

Also teach your teen about the beauty of compound interest. Let them know that money will double every 7 years if it earns 10%. That means that $1 that they don't spend on a soda today would be worth $128 when they're in their 60's. Compound interest is the secret ingredient of building wealth.

Conversely, they need to learn the risk of compounding debt. They'll learn this lesson before they die. Help them to learn it without pain. Teach them that borrowing money obligates them to pay the loan back with interest. And that credit cards are set up so that they keep making payments each month without ever paying off the debt. In fact, if they pay the minimum due on a charge card each month, it's just like doubling the price of everything they buy. That's a lesson that's less painful if you learn it before the bills come due.

Teach them what things cost. Some families share budget information with their teens. Others prefer to keep that private. If so, send your teen on a pretend 'first apartment' hunt. Have them walk through all the costs of setting up an apartment including rent, utilities and food. It will be a real eye opener for them.

Finally, help them to learn the difference between creative thinking and creative financing. Creative thinking is the ability to have a need and find a way to fill it without spending money. People who don't have money are forced to consider alternative answers. And some of those answers are quite creative.

The flip side is the person who only thinks of creative financing. He can't think of a way to solve his problem without making a purchase. His creative energies are spent trying to figure out who will loan him the money to make the purchase. Not only will he spend a bunch of energy trying to figure that out, but he'll make making payments for quite awhile, too.

Many of these lessons will pay dividends for the rest of their lives. Who knows, if your teen learns them well perhaps the apples will fall close to their tree, too.