Ask Your Bank for a Better Deal

Last fall, my wife and I went into our nearest bank branch to set up a new savings account for a trust that we’re managing. While we were there, the “Personal Banker” told us about a promo that they were running that would give us a higher than typical interest rate.

I can’t remember the details, but it was something like 2%, when the prevailing savings account interest rates (especially at brick and mortar banks) were much lower. Not only that, but he said he could apply it to our existing personal savings account, as well.

When we got up to leave, he said that the promo rate would end in a few months, but that they’re always introducing new ones. Thus, if we’d just call back and ask, he’d go ahead and apply the code for the new promo rate to our accounts.

I recently called him back and he gave us the new promo rate. I forget the details, but it was significantly higher than their “standard” savings account interest rate. All we had to do was ask.

Oh, and just in case you’re thinking that we must have been dealing with some local bank, and that there’s no hope of getting this treatment from the behemoth bank that you’re dealing with… We do all of our “local” banking with Bank of America.

Published on March 2nd, 2010 - 5 Comments
Filed under: Banking, Customer Service
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Encouraging Family and Friends to Improve Their Finances

Is money a taboo subject with your friends?

I’m not sure about anyone else, but I don’t think it’s taboo to talk about money. I do, however, recognize that it may be awkward and thus considered a bit wrong by someone to talk to others about how they should handle their finances. Thinking back on conversations we’ve had recently, money has often been a part of the subject matter.

I’ve heard friends and family members say they want to improve their finances and then they mention something that completely contradicts their stated goal. It’s kind of like when you hear people say they’re watching what they eat and then you notice that they’ve ordered and eaten their appetizer, entree, dessert, and even sampled on some of yours.

Do you let things like this slide? If not, when do you speak up and make a suggestion? And if you do feel compelled to talk to them, how can you encourage them to actually do something?

I wanted to go over a few topics that have come up in casual conversation when hanging out with our friends. Hopefully you can relate, and may have an insight that could help with these sticky situations.

Vacationing on credit cards

Our friend invited us to join him and his wife for a conference and show in Los Angeles this summer. Since we’ve never been to LA, we thought this might be a great excuse to go, see some other friends we’ve haven’t seen in a while, and have a good time.

Honestly, it sounds like a great idea. I was already thinking about finding a cheap flight and start budget for the trip when our friend interrupted my thoughts. He mentioned that he was putting it all on his credit card to get some rewards.

At first, I thought that seemed fine. After all, we typically reserve hotels and rental cars with a credit card and then pay it off once we get home. Later in the conversation, though, he told us that he’s still in debt from some of his elaborate vacations. He mixes business and pleasure, extending work trips for fun, and it had resulted in five figure debt.

I kind of backed off of even approaching the topic of funding a big purchase with your credit card. I couldn’t think of a way to begin the conversation without putting him on the defensive (which is a natural reaction). As you’ve probably figured, I hate to see people carry high interest credit card debt, and I worry when they use dent to pay for their wants.

Saving up in advance may force you to delay your purchases, but once the purchase has been made, the hard part is over. You can enjoy your TV or vacation and not worry about how you’re going to pay it all back. We mentioned to him is that we’d definitely like to go, but we’ll need to check our budget and set aside money. I think was probably the best approach in this situation because we’re not going to convince someone in one conversation to change their spending habits. We can, however, show him how budgeting can make it possible to have a debt free vacation.

Creating a budget (and sticking to it)

I’ve heard a few of my friends say that they find it impossible to budget. Like the latest diet or fitness routine, they start off gung-ho with a ‘perfect’ budget that accounts everything to the last penny. They soon wind up going off budget, however, and either wind up back where they started or worse.

This is something I completely understand. I empathize with them on how hard it can be to budget. The most common mistake is that their system is too strict and there is not cushion between what should happen and what actually happens.

I feel a bit better about how we usually handled this because we gave them a couple of tools that have helped us personally with our finances. I also told one friend some of my mistakes with my first few attempts at budgeting and how automating our bills has made it much easier to stay on track.

I think this has been the easiest financial topic for helping other to change their personal finance habits since many people can relate to how hard it can be to start.

Building an emergency fund (only for emergencies!)

Another topic I hear a lot is creating an emergency fund. It can be hard to stay on top of bills while setting aside money in a savings account, but you have to do it. I’ve had some friends lose their jobs or have their hours cut, so I know how important this can be.

I had a friend that was living paycheck to paycheck and wanted to have some money tucked away for an emergency. She had just recently gotten her jobs (yes, she went from no jobs to 2 jobs) and didn’t want to wind up back in the predicament that she just got out of. Whenever people ask for ideas or advice, I take it as a green light to give them some tips that can help them right away.

I suggested that she cut down on things that she doesn’t really care about and use that money to start her emergency fund. It wasn’t a big step (she’s going to stop buying so many magazine at cover price), but it’s a sustainable way to fund her savings.

I also talked to her about using money management tools like Quicken or Mint to see where she could adjust her budget and save some more money. We compared options for different savings accounts. Even though ING Direct (where we bank) offered a high interest savings account, she felt more comfortable at her local credit union (another good option).

The good news is that I was chatting with her again a couple of weeks ago, and she now has two months of expenses tucked away. It felt good to help a great friend and she appreciated the suggestions. If only it was like this every time!

Your Thoughts

How do you handle money discussions with your friends and family? What are some ways you’ve helped others? What are some mistakes you’ve made when talking about finances?

Published on March 2nd, 2010 - 19 Comments
Filed under: Miscellany
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How Do You Know if a Credit Card Number is Valid?

As a followup to my recent post about what your credit card number means, I wanted to throw out a bit more credit card trivia and talk about how you can tell if a credit card number is valid.

As you may or may not aware, most credit card numbers are generated based on something known as the Luhn algorithm. It thus stands to reason that a credit card number is valid if (and only if) it satisfies the “Luhn check” (a.k.a., the Mod 10 check), which is a simple mathematical test that involves manipulating the credit card number, adding it up, and checking to see if it’s evenly divisible by ten.

Testing credit card numbers

Here’s how to apply the Luhn check to test whether or not a credit card number is valid:

• Step 1a. For a card number with an even number of digits (e.g., Visa or MasterCard), double alternating digits starting with the first digit in the sequence.
• Step 1b. For a card with an odd number of digits (e.g., American Express), double alternating digits starting with the second digit in the sequence.
• Step 2. If the doubling resulted in a number with two digits, add them together to get a single digit number
• Step 3. Now go back to the original credit number and replace the digits that you doubled with the new value — either the doubled value, or the doubled value with the digits added together — and add it all up.
• Step 4. Check to see if the sum is evenly divisible by 10 (you can simply look to see whether or not it ends with a zero).

If the card number does not pass this check, then it is not a valid number. If, on the other hand, it does pass, then it may be a valid number.

Checking validity: an example

Those steps are a bit convoluted, so here’s a real world example… The following credit card image comes from the CitiCards homepage for their Platinum Select MasterCard. The number on the card is 5424 1801 2345 6789. For starters, the fact that the number starts with a “5” indicates that it’s a MasterCard (as does the little MasterCard symbol on the card).

Since there are sixteen digits, we’ll start by doubling the 1st, 3rd, etc. digits and then summing as outlined above. I’ve highlighted the doubled (and in some cases summed) values in parentheses, below. I’ve also underlined the check digit.

(1+0) + 4 + (4) + 4 + (2) + 8 + (0) + 1 + (4) + 3 + (8) + 5 + (1+2) + 7 + (1+6) + 9

This totals up to 70, which is evenly divisible by 10. In other words, this is a potentially valid credit card number, though I’m sure it doesn’t correspond to a real account number. If it does, then L. Walker (the name on the card) probably isn’t too happy about his/her credit card number being spread around like this.

Published on March 1st, 2010 - 6 Comments
Filed under: Credit Cards
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What Do Credit Card Numbers Mean? Making Sense of Your Credit Card Number

Have you ever wondered what those numbers embossed on the front of your credit card mean? Commonly referred to as your “credit card number,” there is a lot more information packed into that number than meets the eye… If you have a credit or debit card, you might want to pull it out so you can follow along.

For starters, the first digit in the number indicates what type of card you’re dealing with. This number is always a 3, 4, 5, or 6, and can be interpreted as follows:

3 = Travel or entertainment card (e.g., Amex or Diner’s Club)
4 = Visa Card
5 = MasterCard
6 = Discover Card

Visa credit card numbers

For Visa cards, the numbers are 16 digits long. Visa has used to have 13 digit numbers, as well, but those have been mostly (completely?) migrated over to the 16 digit format.

When looking at the balance of the numbers, the 2nd through 6th digits are the bank number, and the 7th-15th numbers are your account number. The remaining digit is known as the “check digit,” which is used to help determine whether or not the overall number is legitimate.

MasterCard credit card numbers

For MasterCard cards, the number is also 16 digits long. The first digit is always a 5 and the second digit is always between 1-5. The 2nd-3rd, 2nd-4th, 2nd-5th, or 2nd-6th digits correspond to the bank number, and the remaining digits up through the 15th are the account number. As above, the 16th digit is the check digit.

American Express card numbers

For American Express cards, the number is always 15 digits long and it always starts with 34 or 37. The 3rd and 4th digits indicate the card type (business vs. personal) and the currency. The 5th-11th digits are the account number, the 12th-14th digits are the card number associated with the account, and the 15th digit is, once again, the check digit.

As an example, my wife and I have an Amex Blue Cash Rewards account. Our card numbers start with 37, and the 12th-14th digits on our cards are different. The rest of the digits are, however, the same. As far as I’m aware, both Visa and MasterCard issue identical numbers when there are multiple cards per account.

Source: How Stuff Works, Credit Addict

Published on February 26th, 2010 - 19 Comments
Filed under: Credit Cards
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Visa Credit Card Acceptance Guidelines

I was recently digging around for information on the Visa website when I ran across a document containing the Visa card acceptance guidelines for merchants. It includes some pretty interesting information that I thought was worth sharing.

Visa credit card rules

What follows is a summary of Visa’s rules regarding card acceptance. I’ve mentioned some of these things in the past, but ultimately decided that it’s worth having them all in one place.

• Merchants can choose to honor all Visa cards, Visa credit and business cards only, or Visa consumer debit and prepaid cards only.
• Merchants must always honor valid Visa cards in their acceptance category regardless of the dollar amount of the purchase. Minimum and maximum purchase amounts are a violation of Visa rules.
• Merchants must always treat Visa transactions like any other transaction (with a minor exception). They may not impost a surcharge for using a Visa card, but can offer a cash discount. This discount cannot be offered for use of a “comparable card” such as a different credit card.
• Merchants who offer an alternate payment channel, such as telephone or online, are allowed to add a convenience fee as long as it is disclosed, never applied to face-to-face transaction, applied to all forms of payment through the alternative channel, etc.
• Merchants must include all applicable taxes in total transaction amount, and may not collect taxes separately in cash.
• Restaurants, cab drivers, etc. can only authorize an account for the known amount, not for the transaction amount plus estimated tip.
• Merchants may not provide cash refunds for merchandise originally purchased with a Visa card.
• Merchants must deposit their Visa transaction receipts within five calendar days.
• All electronic POS terminal are required to provide account number truncation, such that only the last four digits of the credit card number are printed on the customer’s receipt. The expiration date should not appear.
• Merchants must keep cardholder account number and personal information confidential.
• Return/exchange policies must be properly disclosed before a transaction is completed, or made available online or via mail for “card-absent” transactions.
• An unsigned credit card is invalid and should not be accepted. If an unsigned card is presented, the merchant should check the cardholder’s ID, ask the customer to sign the card, and compare the signature to the one on the ID.
• Writing “See ID” or “Ask for ID” is not a valid substitute for a signature. The customer should be asked to sign the card, as outlined above.
• Visa rules do not preclude merchants from asking for cardholder ID prior to completing a transaction, but merchants cannot make the presentation of ID a condition of acceptance.

I don’t know about you, but I’m regularly asked for ID when I make purchases, and I don’t mind. In fact, I’m one of those people carrying around an invalid card because I chose to write “Ask for Photo ID” on the back instead of signing it.

My biggest complaint is when a merchant enforces a minimum purchase requirement. While I fully understand that even small purchases are accompanied by significant processing fees, nothing frustrates me more than getting to the register and being told I can’t use a credit card unless I spend more money.

At the same time, it’s important to recognize that the cashier doesn’t make the rules and is just trying to do his/her job. Thus, if you have a problem with a merchant’s policies, it’s best to take it up with a manager and/or your card issuer.

Source: Visa.com

Published on February 26th, 2010 - 21 Comments
Filed under: Credit Cards
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Beware New Credit Card Fees

The most recent issue of Money Magazine had an interesting article about protecting yourself from new “credit card traps.” In it, they highlighted a number of changes that banks have introduced to improve their bottom line in the face of recent credit card legislation.

Three of the big fees changes that they highlighted were:

• Fees because you’re not spending enough. Some Citibank cardholders are apparently being hit by annual fee of $30-$90 if they spend less than $2400 per year on their card.
• Fees because you’re not swiping enough. Some FigthThird cardholders are being hit with a $19 fee if they don’t use their card for a year.
• Fees… Just because. Bank of America has introduced annual fees of $29-$99 on a variety of new and existing cards.

There have been a number of other charges, as well, including new or increased fees on balance transfer credit cards, fees for participating in credit card reward programs, and so on. In other words… Fees, fees, fees!

The lesson here is to keep a close eye on your credit cards, and be sure to read any mailing from your card issuer. What you don’t know can hurt you (or at least your pocketbook).

Source: CNN/Money

Published on February 25th, 2010 - 7 Comments
Filed under: Credit Cards
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Money and Happiness

Does more money result in more happiness?

As my wife and I lazily follow American Idol, we’ve noticed a common statement of hope uttered by many of the contestants, “American Idol is the best thing that has ever happened to me, it’s gonna change everything!”

The contestants are not alone in their zeal to believe that happiness is a direct result of more money, fame, and/or success. Still… Every time I hear those words I cannot help but wonder if these changes will be for the better.

Setting aside fame and success, let’s hone in on the presumption that more money leads to more happiness.

Money and happiness – the wrong way

Whether we’re willing to admit it or not, many of us believe that if we just had more money, things would be better. But would they really? I mean, think about it… What have you done with the money you’ve earned up to this point? Were you responsible with it, or did you spend with disregard and without a plan?

If you’ve failed to responsibly manage little then it’s rational to assume you will do the same with more, only on a much larger scale.

We need only examine the life of the late Michael Jackson to see the possibility of earning untold millions yet departing awash in debt and scandal. Irresponsible money management is not cured by more money, and happiness is not achieved as a direct result of attaining more money.

I believe the “troubled rich” are troubled simply because they place an inordinate amount of attention on the money itself. When we improperly equate money with happiness, we set ourselves up for disappointment and possibly heartache.

Money and happiness – the right way

When kept in the proper perspective, it is possible to achieve an improved state of happiness through the wise use of money.

At this point in my life I can honestly say that more money would increase my happiness, but that statement hinges on my understanding the following two points:

1. Have a specific goal for using the money. It’s important to have an explicit goal in mind to buffer the risk of tying happiness to the money itself rather than to the achievement of the goal.
2. Define a specific amount and do not covet more. If we don’t cap the amount necessary to reach our goal, the fine line between need and want is too easily crossed. Defining amounts protects against temptation.

My goal is to be debt free. I need a specific amount of money to meet that goal. My happiness is tied to the goal, not the money. Ultimately, my happiness lies in the freedom and flexibility that accompany the absence of owing others.

In conclusion…

More money can afford us the ability to reduce or eliminate debt, thus increasing our financial freedom and free time. At the same time, more money can lead to corruption, stress, and burden of possession.

Just as personal finance is personal, the link between money and happiness can only be determined at the individual level. Based on my needs and intents for using the money I believe more money could very easily increase my level of happiness.

As Dave Ramsey is quick to point out, money is amoral. Our use of it can be moral or immoral, but money itself is neither. The link between money and happiness is much the same… It’s not the money itself that influences our happiness, but rather how we view the money and how we choose to use it.

Would more money make you happy?

What do you think of money as an amoral entity, attributing the relative good or evil to the person and their use of it rather than to the money itself? What about your particular situation – would more money bring you more happiness? If so, why?

Published on February 25th, 2010 - 17 Comments
Filed under: Miscellany
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Too Young for a Credit Card?

In case you missed it, the CARD Act of 2009 went into effect on Monday. Among other things, the new legislation aims to curtail the marketing of credit cards to college students and others under the age of 21.

More specifically, the CARD act requires colleges to disclose any marketing agreements they may have with credit card issuers, perhaps by just posting the info somewhere on their website. Moreover, “tangible items” (a.k.a. free stuff such as gift cards, t-shirts, etc.) cannot be used to induce students to apply for a credit card within 1,000 feet of campus.

The CARD Act also prohibits credit card issuers from extending credit to anyone under 21 unless there is an over 21 co-signer or the young applicant can demonstrate and independent means of repaying their debts (though this requirement might not be very effective).

This all begs the question of whether or not these sorts of protections are a good thing. It’s a bit like the military/drinking age thing. If you’re old enough to serve the country, shouldn’t you be old enough to have a beer? The same logic could easily be applied to credit cards.

That being said, I don’t have any real problem with protecting college students from their own stupidity when it comes to finances. What about you? What do you think about these age-related restrictions?

Published on February 24th, 2010 - 21 Comments
Filed under: Credit Cards
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When Will I Get My Tax Refund? What if My Tax Refund Check is Wrong?

While a lot of your probably haven’t filed your taxes yet — neither have we — many others have. It’s therefore likely that people are starting to wonder when they’ll receive their refund.

How to check the status of your refund

The good news is that IRS has a refund hotline (800–829–1954) as well as an online “Refund Status” tool for finding our when you can expect your refund. Whether you call or go online, you’ll need your social security number, filing status, and exact refund amount to get an answer.

If they’re unable to locate your tax refund information, you’ll be asked to provide the approximate date that you filed as well as how you filed (paper or electronic). If they still can’t find your refund info, you’ll need to call the IRS for an answer.

Refund check for wrong amount

If your refund showed up but was for the wrong amount, then read on…

If your receive an unexpected check, or a check for more than you expected, don’t cash it until you receive a notice from the IRS explaining the discrepancy.

If you receive a smaller refund than you anticipated, you can go ahead and cash the check. If it is later determined that you should have received more, you should receive a check for the difference.

Either way, if you have questions about the amount of your refund, you can reach the IRA at 800-829-1040. Note that they ask you to wait two weeks from receipt of the erroneous check to provide time for any mailed notices to show up.

Published on February 24th, 2010 - 7 Comments
Filed under: Taxes
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Options for Reducing Your Student Loan Payments

I recently ran across an article about a woman with over $500,000 in student loan debt. While I’m amazed at the sheer amount of debt she is in, I know that’s she’s not the only person struggling with student loans. This is especially true for those who have been laid off or otherwise had their income diminished.

I’ve taken out student loans to support my education in the past and, like some, I wasn’t responsible with all that I borrowed. While I blew some of the cash, however, I soon realized that I needed to pay it all back. I got serious, created a spreadsheet, and got back on budget so I can pay back what I owe.

Work with your lender

Managing your student loan payments depends on several factors, with your lender being the biggest one. With federal student loans, you can usually find a workable solution to get you get back on your feet. Private loans can be a bit harder to negotiate, but it’s still possible.

Either way, you have to come prepared with numbers. Before calling your lender, organize a budget and have a ballpark figure of what you can afford to pay right now. If the customer service representative doesn’t give you a practical number, speak up and tell them what you can afford.

Consider your options

When trying to improve your situation, there are several options you may wish to pursue in hopes of getting back on top of your debt.

Choose a repayment plan that better fits your situation. You may be able to switch to a graduated payment plan with lower initial payments that gradually increase over the term of the loan. You’ll pay more in interest in the long run, but it may be worth it. Alternatively, if your current income has decreased, an income-based payment plan may be a beneficial option. If you have a Federal loan, you can change your payment plan by logging on at Federal Direct Loans.

Apply for a deferment to buy yourself some time. A loan deferment allows excuses you from making payments on your student loan for a set period of time. I’ve had friends use this option as they were job hunting and they resumed payments once they found employment. You can also defer loans when you return to school.

Apply for a forbearance. With a loan forbearance, you may be able to make reduced payments for a limited time, or stop making payment altogether (though interest will continue to accrue). With Federal loans, you can get more information about deferments and forbearances by calling Federal Direct Loans at 800-848-0979. For private loans, contact your lender to inquire about your options.

Consolidate your student loans. If you’re looking for a long-term plan to reduce your student loan payments, loan consolidation may be right for you. Depending on your interest rate, you may be able to consolidate your loans, reduce your interest payment, and have only one monthly payment to make. For private loans, check with your lender to see if there is a minimum amount to consolidate. If you have a mix of Federal and private student loans, you should keep your Federal loans separate as they tent to have very competitive rates.

Your take

Have you ever had to adjust your student loan payments or otherwise modify your loan agreement in order to make ends meet? If so, please share any tips, tricks, or experiences in the comments section.

Published on February 23rd, 2010 - 9 Comments
Filed under: Debt Reduction, Education
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