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Common Credit Card Myths and Misconceptions

JE Cornett — Thu, 05 Jan 2012 21:30:50 +0000

The world of credit cards is murky to many of us — danger may seem to lurk around every corner, and even the best credit card has the potential to be deadly to your credit score. Your best defence against making credit card mistakes is knowledge, and understanding some of the most common myths and misconceptions about credit cards can help you know what you need to manage the plastic in your wallet.

Misconception: As Long As I’m Making the Minimum Payment, I’m Okay

If you think that making only the minimum payment toward your debt is okay, you’re under the spell of one of the biggest credit card misconceptions. While making the minimum payment only will keep your credit from suffering, it really doesn’t do much to reduce your debt.

Skeptical? Consider this example: if you have a credit card with a balance of $5000 and an interest rate of 18%, and your minimum monthly payment is $125, it will take you 273 months, more than 22 years, to pay off that $5000. But that’s not the worst part – in those 22 years, you will have paid a whopping $6,923.14 in credit card interest!

Now, say you pay $175 dollars each month toward that debt. The monthly difference to your pocketbook is only $50, but in the long run, but the big difference? It will take you only 38 months to pay off your credit card debt, and you will pay $1,578.01 in interest, saving yourself over $5000.

Myth: Carrying Balances on Credit Cards is Bad for My Credit Rating

This one’s a bit tricky. Carrying balances on your credit cards may be a bad idea, but not for the reason you might think. As long as you’re making regular payments (of at least the minimum payment, of course) toward your credit card balances, you’re not necessarily hurting your credit – that is, until your balance hits your credit limit.

The closer your balance creeps toward your credit limit, the worse it looks for your credit score. However, the damage done to your credit limit is nothing compared to the damage done to your pocketbook. Carrying balances on credit cards is expensive, costing you more than you may be able to afford in interest fees. So, carrying a balance is worse for your finances than for your credit.

Misconception: Having Credit Card Debt is Bad for My Credit

It’s not really credit card debt that’s bad for your credit – rather, it’s how you’re managing that debt that may leave a poor impression. If you have three credit cards, on which you are carrying balances that are well under the credit limit, and you are making at least the minimum monthly payment on each card every month, you’re actually helping your credit, because you’re establishing a credit history that shows that you are using credit responsibly.

On the other hand, if you have three credit cards that are maxed out, and are missing payments or making them late, then yes, having credit card debt may be bad for your credit, because you’re showing lenders that you can’t be trusted to repay a debt as agreed.

Myth: It’s Impossible to Pay Off High-Interest Credit Card Balances

This one is a complete myth. It is possible to pay off high credit card balances and those with high interest rates, but in order to do so, you must be willing to get serious about putting a good portion of your income toward your debt repayment strategy. If you really want to pay off your credit card debt, you will probably need to commit to paying more than the minimum payment every month, even if it means taking on a second job or cutting your luxury expenses to the bone.

Don’t be taken in by these mistaken ideas about credit cards – used responsibly, they may be of benefit, and with a little dedication any credit card debt may be managed and reduced.

Image by Robert Couse-Baker

Did You Know These Credit Card Tips?

Amanda — Mon, 07 Nov 2011 03:41:14 +0000

Credit ratings can quite literally run your financial life – especially these days, as banks try to recuperate from a financial crisis that affected the global economy. Other companies and creditors are also playing it safe when it comes to a person’s credit, because they take on great financial risks with their business dealings. In other words, you really need to be on top of your credit game these days if you want them to consider you worth the risk.

If your credit rating is poor, it can prove difficult to get a loan, get approved for a mortgage, and in some cases even get hired for a job. Meanwhile, building and maintaining an excellent credit rating can open the doors to a wide array of financial opportunities – you’ve proven that you’re financially responsible, so creditors and other companies want to do business with you.

The Credit Card Dilemma

While loans and mortgages can greatly affect your credit rating, it would seem that the biggest credit rating damage culprit would be credit cards. The reason for this is obvious: it’s easier than ever to get your hands on a credit card. Credit card debt is also sometimes seen as a “bad debt”, while a student or business loan isn’t seen in such a poor light because they can help you further your career and thus your financial standing.

Credit card debt has become a common phenomenon as individuals around the world struggle with mounting debt. In 2010 it was reported that Australians lead the world in credit card debt, surpassing their American counterparts.

The easiest way to avoid this situation is by paying your card in full and on time every month. However, there are also a few other things you can try to ensure that your rating stays where it’s supposed to.

Pay Credit Card in Full Two Weeks Before It’s Due

Credit bureaus send monthly balances to banks, institutions and credit rating companies. If you pay your card two weeks before it is due you not only ensure that your payment was made on time, your monthly balance will also show up as zer0.

Do Not Open More Than Two Credit Cards a Year

Simply put, this makes creditors nervous. If you go on a credit card spree it looks like you are going to borrow a lot of money you don’t have. By the way, retail cards count as credit cards.

Only Check Your Credit Rating Once Every Six Months

If creditors notice that you are checking your credit rating often, they may get the impression that they have something to worry about. In other words, they might assume that you’re watching your credit score like a hawk because it’s either about to take a dip or you are trying to bring it up.

Do Not Use More Than 50% of Your Credit Limit

Your credit rating may take a dip if you use more than 50% of your limit. It’s one of the tell tale signs to creditors that you’ve taken on a large amount of debt you may not be able to pay off.

Credit ratings don’t have to be complicated – just make sure to practice these responsible finance tips and you’ll be confident that you can keep your credit score in great condition.

Image by Tinplaterodent

A Financial Attitude Adjustment

Sabrina — Thu, 03 Nov 2011 18:05:47 +0000

My husband recently told me about one of his work associates, who had retired early since he was raking in about $100,000 a year in policy renewals. When I heard this story, I thought of how wonderful it might be if my husband is equally successful in his business and is able to retire early as well. What an incredible blessing that would be!

My husband mentioned the story in passing to an acquaintance. Her response was to ask if his friend was still going to work part time. “No,” my husband replied, rather confused, “He retired. He doesn’t need to work.”

“Oh,” she said, “Well, I could never live on $100,000!”

And that, in my opinion, is a large part of what is wrong with the world.

Is it Just Me, or Are We Consumer Crazy?

Let’s keep in mind that I am living in an area with a very moderate cost of living, and an average income of around $30,000. Also, my husband and I have no dependants to support. And believe me when I say that I am quite certain I could find a multitude of ways to spend $100,000 a year. Indeed, I could even get used to spending 100 grand a year. But to say that I could not live with less than that would be absurd.

There is a pervasive culture of entitlement in the world that I find genuinely frightening. There is nothing wrong with being able to afford luxuries, but equating luxuries with needs is both dangerous and foolish. Buying organic produce, for example, is a very nice luxury. Shopping in only the nicest malls and stores can be lovely. Going out to eat is a ton of fun. And many people recognize that these things are indulgences, and are ready to cut them out if times get hard. But others need to come face to face with their own sense of entitlement.

You do not need the newest cell phone, the biggest television or this season’s coolest jacket, suit, toy, purse or shoes. You do not need to get your nails done or go out drinking every weekend with friends. You do not need to shop at the organic grocery. To enjoy material things is not evil in itself, but it takes my breath away when people are buried so deeply in their money that they can’t see the difference between needs and wants. This disordered thinking is just as likely in a 25-year-old as a 50-year-old, in a single man as a mother of two.

And our risk is that we will fall back into the pit of the recession by making the same mistakes again. If we continue to believe we are entitled to the best of everything the instant we want it, we will go right back to taking on debt and buying more than we can afford. There is nothing wrong with living within your means, shopping frugally and making things last, or with cautiously taking on debt when it is needed.

But there is something wrong with continuous instant gratification, and there is something wrong with confusing your passing desires with your daily needs. If we want to climb free of the recession entirely, a whole segment of the population needs a financial attitude adjustment.

Image by Muffet

When Not to Use Credit

Amanda — Thu, 13 Oct 2011 18:35:56 +0000

Credit card debt is a huge issue all over the world. While some people may find themselves in debt for good reason — like an unexpected emergency expense — others are just using their plastic when they really shouldn’t be.

We all know that putting everything on plastic isn’t a good idea, but there are certain circumstances when you really shouldn’t be relying on your credit. By avoiding using your credit card in these situations, you will be able to avoid some serious credit problems in the future.

So, here’s the lowdown on when not to use your credit card…

To Finance Your Start-Up Business

Many of us have dreams of starting our own business someday, and there is nothing wrong with that (in fact, it’s very much encouraged!). However, putting all of your expenses on credit in hopes that you will be successful is a gamble of epic proportions.

Sure, there are some entrepreneurs out there who put everything on credit and end up paying it all back in no time thanks to the quick success of their businesses, but the reality of the matter is that this doesn’t happen very often. In fact, you will undoubtedly have to weather financial storms if you are serious about running your own business.

So instead of tying your business expenses to your credit score, consider finding investors, or look into relatively low-cost businesses like freelance writing or web design.

When You Already Have Too Much Debt

If you already find yourself in the hole, there is absolutely no reason to dig yourself any deeper. If you don’t get a handle on your spending, your debt could spiral out of control, and believe me, no one is happy when that happens. Avoid putting things on your credit card; those morning coffees can really add up and make it more difficult for you to pay off your debt.

On a similar note, nothing will get you in debt faster than using your credit card to pay off another card or loan. You would have essentially put yourself in debt in an effort to pay some debt off. It’s downright illogical, when you think about it mathematically.

When Your Purchases May Be Morally Questionable

Believe it or not, credit card companies can actually restrict what you buy. A recent article from SmartMoney, a financial blog belonging to the Wall Street Journal, revealed that credit card companies like American Express do not approve transactions on purchases of medical marijuana, even if it’s legal. Other card companies may also restrict you from buying gambling chips and making donations to a controversial charity. You can also forget about anything remotely resembling online pornography!

Credit card companies like American Express, Visa, and MasterCard simply argue that they prohibit purchases with high levels of dispute. Whatever the case may be, if it’s morally questionable, avoid putting it on plastic.

For Small and Basic Purchases

It’s one thing to put recurring monthly purchases on a credit card and then paying off the card in full every month. By knowing your fixed costs on your card each month, you can make sure to accommodate your budget and build good credit.

However, it’s an entirely different thing to put small purchases like lunches and basic necessities (for example, socks!) on a credit card. Without keeping track of these purchases, they can really add up and make it difficult for you to pay off your debts.

Using your credit wisely can ensure your financial stability and even help you build wealth. By avoiding using credit in the aforementioned situations you will be one step closer to getting a handle on your credit and your financial future.

Image by Cheong Fong Liew

High Interest Online Savings Accounts – How Much Can You Make?

Sophie — Mon, 03 Oct 2011 12:04:31 +0000

If you want to get high interest on your savings, without the inflexibility of a fixed term deposit, then an online savings account is the way to go. But which one is the best for you? To help us, let’s compare some high interest online savings accounts and find out which one can best boost your hard saved dollars.

ANZ Smartypig Account

ANZ offers the Smartypig account with a variable rate of 5.5% p.a. It has no account keeping fees associated with it and you can make direct credits to a nominated account at any time. You can even receive value boosts from top retailers when you reach your savings goal, which could be perfect for that shopping spree.

Bank of Cyprus Australia – Midas Account

The Midas account is a high interest online savings account which offers a variable base rate of 5.5% p.a. Funds are available at a call and can be accessed online 24/7. There are no account keeping fees and you can transfer funds any time through internet banking. Interest is paid monthly.

FCCS Credit Union

This high interest online savings account also offers a variable base rate of 5.5% p.a. The account has no catches, a great going rate and access to you money whenever you need it. The bases rate of 5.5% is the account’s real rate not just a promotional rate and you can access to your money easily via the Internet and Phone Banking as well as BPAY services.

Arab Bank Australia – Online Savings Account

The online savings account offered by Arab Bank Australia has a variable base rate of 5.55% p.a. Your funds can be accesses 24 hours a day, 7 days a week through Internet Banking. You can also access funds over the counter at any of the branches via direct debit and make periodical payments. Interest on this account is paid monthly and there are no monthly account keeping fees.

This is the perfect savings account for those who prefer to transact online and earn a high rate of interest, but also wish to access their funds through other means, such as through a branch, via an ATM, or EFTPOS.

ME Bank – ME Bank Online Savings Account

This account was the winner of the AFR Smart Investor Blue Ribbon Awards 2009 in the Overall Savings Account Category. It was also Money magazine’s Best of the Best Awards 2009, top 3 Finalist in the Best Online Savings Account category. You will earn a competitive variable base rate of 5.60% p.a. on every dollar sitting in your account, with interest calculated daily. It has no bank fees and no set savings terms – deposit and withdraw without penalty at any time. You have 24/7 access to your account via Internet and Phone Banking.

Queensland Professional Credit Union – Netsaver

The Netsaver account is an online “at-call” cash management account earning a variable base rate of 5.75% p.a. It combines high daily interest rates with financial flexibility and control. The Netsaver Account works in tandem with the S1 transaction account. You can access your accounts at any time through QNet Internet Banking, QPhone Telephone Banking, EFTPOS and ATMs, or through the branch.

RaboDirect (RaboBank) – RaboDirect Savings Account

The RaboDirect savings account has a usual variable base rate of 6.01% p.a., but as a special, it is offering a variable rate of 6.51% for the first 4 months to new customers. Over one year, that works out to an average of 6.16%. Interest is calculated daily and paid monthly. Like most of these accounts, there are no fees attached. There is no need to switch banks and you will have access to your savings 24 hours a day, 7 days a week.

UBank backed by NAB – USAVER

For the second year running, USaver has been judged the Best Online Savings Account 2011 in Money magazine’s ‘Best of the Best’ awards. The USaver has a base variable interest rate of 6.01% p.a., but if you commit to the automated savings plan which requires you to deposits $200.00 per month into the account, then you will earn a base variable rate of 6.51% p.a.

Interest is paid monthly and there are no fees or charges whatsoever. The account comes with a useful Goal Tracker online savings tool which will help you learn how to save money to achieve your goals. You can transfer funds to any Australian account with the ‘Pay Anyone’ feature. This account also offers 24/7 anytime access to a real person.

RaboDirect (RaboBank) – Premium Saver

Another online savings account offered by RaboDirect, but instead, this one offers a variable base interest rate of 6.10% p.a. The difference between this account and the Savings Account is that in order to obtain the 6.1% p.a., you must be sure that, on the last business day of the month, your account balance is a minimum of $200 higher than it was at the beginning of the month, and that the $200 additional balance must be from a transfer or deposit you’ve made – not from any interest that was paid in to your account.

Don’t worry too much if you can’t meet this obligation, because you will still earn 4.75% p.a. Interest is paid monthly and there are no account fees.

Hunter United – Premium Online Investor Account

The Premium Online Investor Account offers a base variable rate or 6.41% p.a. This is a great return without locking yourself into a term deposit, and there are no monthly account keeping fees. You have access to your savings through Internet Banking which is available 24 hours a day, 7 days a week. There is, however, a small catch -interest is only payable in calendar months where no withdrawals or transfers have occurred and, unlike most of the other accounts that have a minimum opening deposit of between $0.00 and $10.00, this account asks for a minimum opening deposit of $5,000.

Even though we’ve looked at only a few of the high interest online savings accounts available, these are the highest earning ones. Obviously each account will have different features and the idea is to find one that is tailored to your needs.

Aside from the $5,000 minimum deposit, the Premium Online Investor Account is the highest earner if you don’t intend to withdraw or transfer any money soon. If you’re looking for pure flexibility and a good return, check out the Arab Bank Australia Online Savings Account and the ME Bank Online Savings Account as well. Happy saving!

Image by Images_of_Money

How to Teach Your Kids About Credit

Amanda — Thu, 22 Sep 2011 10:17:17 +0000

Like most things in life, good financial skills start in the home. Judging by Gen Y’s current economic woes — insurmountable debt and underemployment, just to name a couple — it is safe to assume that maybe they did not have the best financial examples available to them. They don’t teach this kind of stuff in school, and this generation grew up in the ultimate “buy now pay later” atmosphere that was not only emulated by their parents but by their leaders as well.

The fact is that you may have to teach your kids the proper ways to manage money, because quite frankly no one else is going to do it for them. Many of us graduate with at least $20,000 in student loan debt plus a couple of thousand on the credit card, and with no idea how to even make a simple budget. The worst part is, young people don’t have to learn these things the hard way. They just need some good examples – especially when it comes to managing credit!

1. Create an interest

Personal finance probably won’t be on the forefront of your kid’s mind. As a result, neither will credit cards. Create an interest early on by considering co-signing a credit card for your teenager. Before you freak out at this thought, keep in mind that you can put a cap on it so they don’t ruin their credit – or yours. You can start with something very low, like their allowance amount, and use the opportunity to teach them how credit cards work.

2. Teach them how credit works

As soon as your kid turns 18, they can sign any credit card agreement that is thrown at them. A few decades ago you would need a good job, savings, collateral, and maybe a first-born son in order to get your hands on a credit card. These days all you need is to be of legal age. As soon as your child sets foot on a university campus, they may be bombarded with credit card marketing even despite new laws that have been placed by several countries to limit this.

Before your child signs on the dotted line, make sure to teach them how credit actually works. Let them know that credit cards are one of the most expensive ways to borrow money, that your credit rating can determine whether you can purchase big items like a house in the future, and that they do have to pay off those cards in full.

3. Lead by example

Experience is the best teacher, and children imitate what they see. These habits can follow them into adulthood, so it’s important to make sure that you are leading by example. By cultivating your own healthy financial habits, you can show your kids the “dos and don’ts” of personal finance. Just a few simple steps can help your kids realize the value of money and how credit works. So…

Pay your credit card in full every month.
Avoid unnecessary spending sprees.
Don’t take out 10 credit cards.
Have your kids watch you pay the credit card bill (great teaching opportunity!)
Create a simple budget and stick to it.

4. Encourage your kids to ask questions

Many times young adults just don’t even know who to ask when they have a personal finance question. They can try the internet, but that may lead to countless articles that contradict each other. Encourage them to ask you personal finance questions. They may hear some financial jargon on television commercials and marketing campaigns, so let them know they can always come to you if they are confused by their finances.

By starting early on, you can instill financial habits in your kids that will save them from lots of financial heartache later.

Image by Andres Rueda

Questions to Ask Yourself Before Taking Out Another Credit Card

Amanda — Mon, 22 Aug 2011 14:33:26 +0000

Credit card debt is a huge problem in Australia and all over the world. Families and individuals have found themselves relying on plastic and digging themselves into a hole of financial burden. However, if used correctly, credit cards can actually increase your credit rating, make it easier to take out loans, and even land you a job. (Yes, believe it or not, sometimes employers check your credit score.)

Much of your credit rating has to do with your ability to properly manage several different cards, because it shows companies and loan officers that you are good for your money. After all, anyone (hopefully) can manage just one card, but it takes a financially savvy and organized individual to stay on top of a few.

Do I really need another credit card?

The answer could be yes. For example, if you need to quickly boost your credit rating, taking out another card and thus reducing your debt to limit ratio could prove to be beneficial. That is, if you use the card wisely and don’t max it out.

Are there benefits associated with my card?

More often than not, rewards cards are a total bust. You sign up for a retail card to get a measly 15% savings and then what? You get slammed with high interest rates while barely shopping at that store.

Other reward cards – like airline miles and hotel points – can prove to be incredibly beneficial, because they can actually save you a lot of money on big expenses. They also have huge partnerships with banks, stores and restaurants, making it easy to rack up the miles.

The kind of reward card you apply for mostly depends on what needs you have. Just remember to keep in mind the following:

It is a credit card and thus needs to be paid each month.
They have high interest rates so you’d better pay the full amount every month.
There is usually an annual fee associated with the card, although it is waived for the first year and there are several ways to get it waived after that.

What is my history with credit cards?

Ok, this is a loaded question. That is to say, it comes with a whole slew of sub-questions that are important to consider when thinking about taking out a credit card.

Are you known to dig yourself into a hole of debt? Do you find that you easily mismanage money? Are you organized enough with your finances to budget yourself? Have you been known to put basic amenities like food on the credit card because you didn’t have enough cash?

Keep in mind that a credit card is a responsibility that needs to be accounted for in your budget. If you haven’t been responsible with them in the past, you may want to brush up on your personal finance skills before taking out another one.

Credit cards, while incredibly useful and a staple in your financial life, come with a lot of responsibility. Before taking out another card, make sure to take a good look at your finances and weigh your card options. That way, you can ensure you don’t take on more credit than you can manage.

Image by Beau Giles

Questions to Ask Yourself Before Taking Out Another Credit Card (15/15)

Avoid the Red: More Tips on Avoiding Credit Card Debt

David — Thu, 16 Jun 2011 07:26:39 +0000

There are plenty of positive factors related to having credit cards in your wallet, from added convenience in your day-to-day activities to helping you build or maintain a good credit rating.

But plastic also comes with big responsibilities and it can make your credit rating plummet if not used responsibly. Once you’ve accumulated debt, it can takes years to pay off and constant interest fees being added to your balance only makes it more difficult to get a handle on.

Here are a few tips to help you stay out of the red:

Photo by Horia Varlan

Think Twice Before Charging

If you are a credit card newbie or have a history of charging more than you can handle to your plastic, think twice before you pull out your credit card. A simple way to avoid racking up debt is to only charge what you know you can pay off—at least with your next paycheck. You’ll normally have about a month to pay off a purchase due to credit card billing cycles, but don’t push it too much!

Sometimes life happens and an unforeseen expense will pop up. When this happens to you, try to cut down on your “pleasure spending” for the rest of the month. For instance, don’t go out to dinner as much. Simply cut down on your splurges and leave your credit card in your wallet. Once you’ve paid off the emergency expense, then you can treat yourself.

Pay Your Bill On Time

There is no excuse not to! The Internet makes it easy to stay on top of our accounts, so make sure you know when your bill is due and pay it on time. In fact, it’s a good idea to pay it ahead of time. You don’t want to be consistently waiting until the very last minute to pay your bill, because there’s no guarantee that your credit card company will receive it before the deadline. And yes, even one day is considered late. Avoid those nasty late payment fees!

You also have the option of scheduling automatic payments when the bill is due. Do this if you always have plenty of money floating around in your checking account. Otherwise, do it manually when the money is available.

Forget About Minimum Payments

Your credit card statement will always cite an absolute minimum required payment. This is not an invitation to discard the rest of your account balance. You should basically ignore the minimum payment. Always try to pay the entire amount due from each billing cycle on time. It will make your life easier in the long run. Otherwise, your account balance will keep building and building until it gets out of control.

Your credit card can be a good thing in your life if you use it properly. Just follow these simple tips and you’ll save yourself a whole lot of stress. Remember to pay off your credit card in full and on time, and limit what you charge to only what you can pay off right away.

The Three-Tiered Savings Reserve – Make Your Savings Work For You

David — Fri, 20 May 2011 07:13:09 +0000

It is unfortunate that many personal finance sources imply that lucrative investments are the only way to make money Buying a second property and the often-volatile stock market are only one way of getting a return from your money.

Making money is not confined to long-term investments. And one great way of making money is by saving it. The three-tiered savings reserve is a plan that can help anyone make the most of their savings.

The First Tier – Your Primary Checking Account

In this strategy, the first tier is your foundation for your finances. You already use this in regards to your money. Your primary checking account(s) should serve all of these functions:

Where your income and expenses travel from/to
Provide a small buffer zone

While you probably don’t need much help with the first point, the second is where this not-too-uncommon strategy starts to become effective. The reasoning is simple: if you have too much of a buffer, you’re probably not earning (enough) interest on your cash. What you have is a nice piggy bank!

So, how much money should you keep in your primary account? At least 50% of your monthly expenses is advisable, at least for a starting point. You should consult your budget to see how much money comes in and goes out, though; if you write several cheques beyond your “normal” monthly expenses, a bit more of a buffer might be nice.

The Second Tier – Fluid Money Market/Savings Account

The next tier occupies a unique position: it’s the money that you don’t necessarily need, but which you’ll want to have if you need it. Sound confusing? Let’s call it “emergency money.” You’ll want to put it in an account that can:

Offer a reasonable interest rate on your money
Be very fluid (transfer money to checking account quickly, if needed)
No/limited fees and requirements

Take a look at what options might be available at your bank. Or, an easier option may be to take advantage of an online savings account. There are some banks that offer no minimums, fees, and a reasonable rate; that’s what we’re looking for.

The beauty of this level is that you have easy access to your emergency money. If you go over budget, or reach a point where you can invest some (or repair the house, for example), this money can easily go up or down on the tier – or to some other place that works for you.

The Third Tier – Deposits and Other Liquid Investments

At the top of your savings scheme is where investments come into play. Note that you can use this in conjunction with other investments, such as stocks – you can even create a fourth tier if you’d like! For the upper echelon of your savings, this tier serves two purposes:

Offers maximum interest
Limited but present element of liquidity

Term deposits are a perfect example of where you want your savings – the savings that you won’t need unless something drastic happens, financially. You will typically receive a considerably higher interest rate than more flexible savings accounts. Term deposits and other types of “safe” investments (bonds, etc.) give you a higher rate with the protection that is not found in volatile types of investments.

Also, if worse comes to worst, you will have access to your money. As there are a number of types of deposits and other options, you should be clear on these terms.

With this strategy in place, you can create a system that can easily transform your savings into extra money. Filter as much money as is reasonable and comfortable upwards, in order to realise easy gains in your finances. With or without other, more dangerous investments, this is one effective strategy to optimize your finances.

Pissed About Credit Card Business Practices? Take Action

Jack — Wed, 03 Feb 2010 16:13:21 +0000

Washington Post recently ran some required reading for all credit card users entitled “Five myths about America’s credit card debt.” Don’t be deceived by the somewhat banal title – this piece is actually very illuminating and broaches some topics not usually discussed in the day-to-day blogosphere.

The last myth is perhaps the most interesting and topical. Here it is:

“The CARD Act finally protects consumers against the credit card industry’s most abusive practices.”

The answer to this is a surprising “yes and no.” According to the Post, there is some overdue reining in of some of the most egregious credit card practices, but some restrictions and protections are left out and some measures were simply too little too late.

This next paragraph is old news to anyone who’s been taken for a ride by the credit card companies in the past few months, but its still satisfying to see the mainstream media confirm it again:

On the negative side, Congress stipulated a nine-month phase-in period for these regulations. For millions of Americans, especially those suffering from employment and income interruptions, this is too late. If you’re in debt today, this bill doesn’t help you. Companies already have jacked up interest rates, sharply reduced lines of credit, increased service fees and diluted the value of loyalty reward programs. These trends have brought consumer credit scores down, triggering higher borrowing costs and greater difficulty finding work.

So, we’ve taken two steps forward when we really need a giant leap in credit reform. The “silver lining” of this relatively disappointing bill, according to Washington Post, is that more consumers are completely disillusioned with credit cards and are “leaving home without it.” But there are still some of us who haven’t quite weaned ourselves off of revolving credit and for us, there is still a considerable gap between federal regulation and lender practices that personal responsibility can’t quite fill. And to believe that the credit card industry will ever stop dreaming up new tricks and traps to maneuver around the new credit card legislation is just plain naive.

American consumers should start demanding a sequel to the Credit CARD Act now. In fact, a trilogy is probably in order (third time’s a charm, right?). The CARD Act was a small victory, but the industry and the lawmakers need to know that we as consumers still aren’t satisfied. We are still plagued by predatory lending practices, violated by debt collectors who call everyday and harass our family members and neighbors, subject to the whimsy of credit card interest rates and fees and treated like second class citizens in favor of profits and corporations.

I read the comments and the blogs everyday and I see a lot of people who are still angry and with good reason. But in order to affect lasting change – and get it right this time – we need to focus our efforts and rage in a way that the powers that be (that’s government and the lenders themselves) hear us. So, if you have been wronged, make sure you formally lodge your complaint through one of the following channels:

1. Submit an FTC Complaint

The FTC is supposed to protect you, but before they can take action, they need to know what needs to be fixed. The best way for them to get this information is for consumers to bring them their complaints. After a certain issue or complaint about a specific company or industry reaches a certain critical mass, the gears start turning. Send them your complaints about credit card companies using the FTC Complaint Assistant.

2. Sign a Petition

The actual civic affect that signing petitions has is hard to measure. But doing so online is so quick and easy that it certainly wouldn’t hurt. Here are a few causes you can rally behind:

MoveOn.org Urging Credit Card Companies to Stop Taking Cuts from Haiti Contributions
Consumers Union Petition Urging Credit Card Companies to Obey the Spirit and Intent of the Credit CARD Act
A Similar Petition from Colorado Senator Mark Udall.
Petition Online Action to Cap Credit Card Interest Rates at 19%

3. Write Your Congressman

Many of us are quick to blame the president for unfavorable laws and national policy, but its your congressman who may actually listen to you. Find out who your congressman is and tell them what’s on your mind. Track them on OpenCongress.org and see how they are voting. If anything they do is against the best interests of their constituents, let them know. It’s incredibly easy – it takes about as much time as it would to fill out one of those Facebook surveys.

Click here to write your representative.

Click here to write your senator.

4. Tell Your Story

As I mentioned before, I’m witnessing a lot of unrest in the blogosphere, which is great. Blog about credit card deception, leave comments telling your story and share other people’s stories on Twitter and Facebook. Most Americans know that the credit industry is broken, but there are still many who don’t know just how bad it is. Spread the word as far and wide as you can. If you have a local news channel, send them an email. Send a letter to the editor of your local paper. Share your story at ResponsibleLending.org. The world needs to know.

5. Complain to Customer Support

Remember – you, as a cardholder, are a customer. And remember when the customer was always right? Letting companies know you’re dissatisfied isn’t completely a lost cause and if you don’t, they may just assume that everything is hunky dory. Most companies have some type of metric for measuring overall customer satisfaction, and anything you can do to get those numbers as realistic as possible is in the best interests of the company and your fellow cardholders. Send them an email, fill out their contact form or call the number on the back of your card whenever you’re unhappy and let someone know. Who knows, they might even fix your problem.

6. Hit the Streets

If you live in a metropolitan area or near the headquarters of a credit card company, then you might consider organizing a protest. It’s a lot of work – a lot more work than signing a petition – but it has a far greater impact. Read up on how to organize a protest, educate yourself on your rights and get out there and be heard.

Have you had any success lodging complaints with or about credit card companies? Leave us a comment and tell us what worked for you and what wasn’t worth your time.

Image by Paolo Tarantini