Sunday, January 31, 2010

Slash Costs at the Gas Pump

Many Americans can't imagine going to work, the grocery store and performing daily activities without their car. Many Americans have cars where they owe more than the car is worth. No matter what your particular situation is taking care of your car will help it last longer and save you money in the process.

Americans are still feeling the effects of the recession. Gas prices across the country range from $2.43 per gallon for regular gas in Missouri to $3.64 per gallon in Alaska. Surviving any type of financial crisis will require sacrifices. A quick way to save money is by getting proper maintenance on your car. Here are 6 ways to slash costs at the gas pump.

1. Carpool. If gas prices are eating up a bulk of your monthly income start carpooling. Offer to pick up co-workers or friends who work near your job. Charge enough money to cover the costs of gas and car maintenance. You can also use carpooling services if you don't want to drive.

2. Downgrade. Trade in your expensive car for a cheaper car or get a more fuel-efficient car. This will save you money which can be used to pay down debt, pay for necessary household expenses or save for an emergency fund.

3. Regular Maintenance. Perform regular maintenance on your car at the scheduled intervals, get regular tune-ups, oil changes, check tire pressure, air filters, and check your tires for wear. This will help improve your car's gas mileage and save you money in the future.

4. Drive the Limit. Maintaining a constant speed by driving the speed limit reduces the amount of gas needed to rev up the engine to go faster and will keep you from filling up more often. It is also better for the environment.

5. Generic Tires. Buy generic brand tires. This will improve your gas mileage and save you money when buying new tires. Standard tires also provide a better ride especially on the highway.

6. Combine Trips. If possible combine nearby trips on the same day to reduce gas usage.

Thursday, January 28, 2010

Rapid Refund - Good or Bad

A rapid refund or Refund Anticipation Loan (RAL) is money borrowed by a taxpayer from a lender or tax preparer agency based on the taxpayer’s anticipated tax refund. You are applying for a loan in exchange for getting your tax refund faster or borrowing against your own money for a fee. Rapid refunds are similar to payday loans. A RAL is advertised to taxpayers as the easiest and quickest way to get your tax refund.

You may get your tax refund faster if you file electronically which is much cheaper than getting a RAL. Many tax preparation companies market RAL's to taxpayers that qualify for the Earned Income Tax Credit (EITC) because the EITC ensures that an eligible taxpayer will receive a refund from the federal government.

H&R Block generated 2.9 million refund anticipation loans in 2009.

Rapid Refund agencies must:
1. Disclose that taxpayer is receiving a loan from the agency, and the taxpayer's IRS refund will be sent to the RAL or lending agency

2. Disclose that a RAL accumulates interest

3. Disclose all fees associated with filing a tax refund and for the RAL

4. Obtain a written consent, along with an application for the RAL

5. Disclose that if the tax refund is not received by the agency in a certain amount of time or by a specific date, the taxpayer may be charged additional fees

6. Refer to the RAL product as a loan and not a refund.

7. Not advertise that individual income tax returns may be filed electronically prior to the receipt of W-2 or 1099 Forms or that pay stubs can be used to file tax returns.

Here are 10 things to consider before applying for a rapid refund:
1. A rapid refund may require paying bank fees, loan fees, and a tax preparation fee

2. Ask for a disclosure of all fees you will be charged before signing the loan agreement

3. Beware of RAL scams

4. Find out if the company is licensed and qualified to prepare taxes

5. Ask how many customers have been audited

6. Ask what process is in place to help customers have been audited

7. If you feel you are being rushed or have a gut feeling that you should not get the RAL then walk away

8. Do you homework before going to get your taxes prepared

9. Be cautious about several deductions that you are eligible for that you never heard of. Ask them to write down all the deductions you are eligible for, find out if they are valid, then you can go back to the tax preparer office and proceed with filing the RAL

10. If you get audited, your rapid refund is denied and you will immediately have to pay back your tax refund or be charged interest and penalty fees by the IRS for the amount owed

Monday, January 25, 2010

Is Social Lending the Right Option for You

Due the recession many Americans now have bad credit due to bankruptcies, foreclosures, repossessions, collection accounts and more. Banks no longer look at those with bad credit as potential customers. For those with bad credit it can sometimes be impossible trying to get approved for a loan or line of credit.

If you have bad credit one option is using social lending or peer to peer lending. Social lenders offer products similar to banks such as: personal loans, real estate loans, business loans, student loans, debt consolidation, etc. Borrowers and lenders conduct business without using a traditional bank.

Lenders make money on loan origination fees instead of interest payments so they constantly need repeat or new users. Loans are based on collateral, credit score and personal liquidity. If you own property and have equity it can serve as your collateral for the loan amount you are requesting. You have to have a minimum credit score on average 620 and up but some companies allow lower credit scores. If you default on the loan you lose your equity or personal liquidity and the default may be reported on your credit report.

There are dozens of companies that offer social lending such as: from Prosper, Zopa, Virgin Money, On Deck Capital, Loan Back, Fynanz and Green Note. Prosper offers loans from $1,000 to $25,000. You will be charged a percentage of the amount borrowed (1% -2%) or $25, whichever is greater, depending on your credit score. A minimum credit score of 520 is required for approval. OnDeck Capital offers small business loans.

Fynanz is offers loans to college students. Students are charged a financing rate and a margin rate. Fynanz charges a 1% annual servicing fee for loans. GreenNote offers student loans that do not require a co-signer and charges a one-time fee which is 2% of the loan amount. LoanBack creates a customized promissory note and payment schedule for loans and fees range from $9.95 to $14.95.

Another type of social lending used in many Africans countries is called a "su su" also known as "sou sou", ROSCA (Rotating Savings and Credit Association) or sociedad. "Su su's" are also used in Caribbean, Hispanic and Asian countries. A su-su is a savings method where a group of people pool an equal amount of money for a specific period time. After that time expires, one person in the group gets all the money. The members continue making equal contributions until everyone gets their turn receiving the full lump sum at least once.

Participants in the "su-su" usually consist of close friends and family members who feel obliged to honor the commitment. There are no transaction fees and no credit check is required.

There is a huge risk that members of the "su su" may renege on their obligation, the banker may collect the money and disappear or a member may receive their hand and disappear.

In the past if you trusted a bank or mortgage company and lost, it can’t hurt to put your trust in social lending.

Friday, January 22, 2010

Should You Skip a Payment

I received my December credit card monthly statement from my credit union and the minimum monthly amount due displayed zero. When I first saw the amount I thought there was some kind of mistake. As I read further down the statement there was a note that offered me the option of skipping my December monthly payment.

It sounded good but upon further reading the skip a payment option came with a "gotcha". You could skip a payment but interest would still accrue on your balance. So, on my January statement I would pay two months worth of interest plus whatever charges I made during the next month. Well, I declined the offer and sent in a payment for my December statement.

Skipping payments only reinforces bad spending habits. It seems easy and convenient but costs you more in the long run. The longer it takes to pay off a credit card bill, the more interest and finance charges accrue. The only one benefiting is the credit card company. If you are experiencing a financial crisis and are offered a "skip a payment" option here are some things to consider.

1. Don't skip a payment if your credit card balance is 50% or above the credit limit
2. Don't skip a payment option as a solution to a financial problem
3. Don’t skip a payment if your credit card is maxed out or you are close to maxing out your credit card because the missed payment may put your over the limit and cause you to be charged an over-the-limit fee
4. Don't skip a payment more than once
5. Use the skip a payment option only if you can afford to make the minimum monthly payment
6. The skip a payment option cannot be used for balances over-the-limit

If something sounds too good to be true, it usually is.

Tuesday, January 19, 2010

Credit Card Changes in 2010 Part 2

I have been a member of my local credit union for over 10 years. I have always paid my credit card bill on time or before the due date. I have often received automatic credit limit increases because I am a good customer. I took pride in knowing that I was a good customer and that my credit union appreciated my business.

This past weekend I received a letter from my credit union stating the my fixed credit card interest rate would now become variable effective March 1, 2010 and if I did not wish to have a variable interest rate account I could close my account. In addition, my credit union is converting all of their fixed accounts to variable accounts.

Read any notices you have recently received or will soon receive from your credit card company and make sure you understand the changes being made. If you are not sure call the company and ask them to explain in more detail. If you don't like the new terms you have the option to close your account, however, closing your account may impact your credit score.

If you have good credit your score may drop by a few points, however, if you have bad credit you could see your score drop by several points. Weigh your options if you find yourself in this situation. Here are some things to consider if you find out your fixed rate credit card is being converted to a variable rate credit card:

1. You interest rate will change as the market rate changes.

2. You will pay more in interest and finance charges.

3. If you are sending the minimum monthly payment you could go over your limit if your credit card is maxed out or near the limit.

4. You will have to pay more in fees such as: late fees, over-the-limit, cash advance, balance transfer, annual fees, etc.

5. A variable interest rate makes it difficult to include the credit card payment or an estimated payment amount in your monthly budget or spending plan because you will never know the minimum monthly payment until you receive the statement.

6. Your credit score may or may not be impacted depending on your credit rating (bad, good, average).

7. Shop around at sites like, or to find a credit card that offers a fixed interest rate.

8. Consider using your debit card as a credit card to maintain credit history.

Saturday, January 16, 2010

Keys to Using COBRA Insurance

The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives employees who lose their health insurance coverage the right to receive temporary employer-provided health insurance coverage for a specific period of time for issues such as resignation, termination, a reduction in work hours, death, divorce or transition between jobs.

You have 60 days after your leave your employer to decide if you want to sign up for their COBRA plan. Verify with your employer if you will still have health insurance coverage under your existing plan once you leave the company and how long coverage will last.

Participants on a COBRA plan may be required to pay the entire premium up to 102% of the cost of the plan. A typical family plan may cost $300 a month and the employee may pay $150 a month and the employer pays the other $150. Under COBRA the participant could pay the full $300 up to $606 a month for coverage.

If you are healthy you can get a cheaper plan on your own instead of using a COBRA plan. Health insurance coverage varies state by state and finding your own health insurance may take some research to find a plan that's right for you but is worth it for the savings you that you will get.

If you plan on leaving your employer or know that a change in your employment status will happen, start at least 30 days prior and begin shopping for health insurance. If you are starting a new job find out when coverage from your new employer will begin. If you are taking a break from work or will no longer be working use health insurance comparison sites like or find out about state coverage information at

When shopping around for health insurance ask the health insurance provider for a copy of the Explanation of Benefits (EOB) document which provides more detailed information than the standard benefits summary or brochure provided to you. They may refuse or state they that are unable to give it to you until you sign up but be persistent and keep asking for it until they give it to you.

Don't sign up for health insurance plans advertised on television, many times these plans don't provide the coverage needed and use large named companies to lure unsuspecting consumers into their programs. You can also research government health insurance plans. For more information on COBRA plan visit

Wednesday, January 13, 2010

Upcoming Credit Card Changes in 2010

The Credit Card Accountability, Responsibility and Disclosures Act or CARD Act that was signed on May 22, 2010 provides changes to credit card rules and guidelines. The CARD Act will protect consumers from illegal and deceptive tactics used by credit card companies for years to earn extra money from unsuspecting consumers. Many of the changes go into effect on February 22, 2010, however some changes began in August 2009 and additional changes won't begin until August or December 2010.

Shortly after the bill was passed through summer 2009 many credit card companies began closing accounts of consumers with high balances; increased balance transfer fees, annual, late and over-the-limit fees such as Chase and Bank of America. Bank of America was also the first bank to begin charging the $3 ATM fee.

Credit card regulations and disclosures will be easier to understand and more transparent but at a high cost. They will be additional or higher upfront costs for the consumer because of the CARD act. This will greatly impact lower to middle income and consumers with bad credit who are only able to make the minimum payments. Here are some high points of the CARD act:

1. Existing Balances. Limit interest rate hikes on existing balances in certain instances.

2. Term Changes. Changes in terms on accounts cannot occur without 45 days advance notice.

3. Under 21. Credit offers can not be made to anyone under 21 unless they have an adult co-signer or can provide proof that they have enough income to repay the debt.

4. Universal Default. Universal default which increases interest rates based on payment history for other accounts would not be applied to existing credit card balances but is still allowed provided credit card companies give at least 45 days advance notice.

5. Paying Bills. Credit card payments are due at least 21 days after the monthly statement is mailed.

6. Opt Out. Consumers can opt-out or reject certain changes in the terms on the credit cards. Opting out allows the consumer to pay off the balance in five years in exchange for closing their account.

7. Due Dates. Credit card companies have to set payment cut-off times no sooner than 5pm on payment due dates and payments due on weekends or holidays are not subject to late fees.

8. Over-the-limit Fees. Consumers will now have the option to "opt in" for being charged over-the-limit fees. Those who opt-out would be unable to exceed their credit limits and will be charged a fee.

9. Subprime Credit. Consumers with bad credit who get subprime credit cards are charged upfront fees but cannot exceed 25% of the available credit limit in the first year of using the card.

10. Minimum payments. Credit card companies must disclose the risks of making only minimum payments each month including how long it would take to pay off the entire balance if they only made the minimum monthly payment.

Unfortunately, the CARD act does not cover everything but does provide some help to consumers. The act does not address the issue that there is no maximum interest rate for credit cards and interest rates are not regulated by the government. Interest rates are regulated by each state.

Some credit card companies have raised annual fees to $99 a year including Bank of America and American Express. One bank is offering a credit card with a 79.9% interest rate.

For those who are addicted to their credit cards you may be forced to use cash soon.

Sunday, January 10, 2010

9 Ways to Protect Your Credit and Increase Your Credit Score

If you do a search on the internet you will find thousands of websites that provide tips or tricks on how to increase your credit score or repair your credit. This means that there is something about having good credit. Good credit opens the doors to various benefits and perks.

Good credit increases your chances of being hired for a job, provides you with cash back rewards, good interest rate and terms, skip a payment options, notices about sales or discounts, automatic credit limit increases without a credit check, and more. This year make a promise to yourself to repair your credit and increase your credit score. Here are 9 ways to protect your credit and increase your credit score.

1. Create a spending plan. Create a budget or spending plan to keep track of your spending so you can readily see where you money is going and make adjustments.

2. Reduce spending. Live below your means. Use coupons; buy items in bulk or on sale to reduce the amount of money you spend each month. Buy more needs vs. wants.

3. Pay down debt. Keep balances at 30% or below the limit. Having credit cards maxed out or close to the limit decreases your credit score.

4. Pay on time. Pay your bills at least 7-10 days before the due date to avoid late fees and penalties. You made an agreement with your creditors to pay your bills on time so try your best to keep that promise.

5. Don't open too many accounts. Don't open more than one account per year. You may be surprised to know that opening more than one new account per year will lower your credit score.

6. Don't close accounts. Don't close accounts that have been open for 2 years or more and don't close accounts that are in good standing. Closing accounts can decrease your credit score.

7. Be honest. Explain to your creditor the reason why you didn't pay your bills and that you are ready to pay back the debt. You may have to convince them several times because you have a bad track record. Notify them in writing of your willingness to pay.

8. Don't Hide. You can run but you can't hide. Call your creditors to setup a payment plan but don't avoid them. They will find you.

9. Don't Believe the Hype. Many times creditors use threats, insults and dishonesty to get you to pay your bills. Know your rights and don't agree to anything over the phone. Ask them to state their terms in writing. Review the Fair Credit Reporting Act on the Federal Trade Commission website for information about your credit rights.

Thursday, January 07, 2010

Are You Afraid of a Budget?

Many people cringe or experience fear when they hear the word "budget". Many Americans feel the word is too restrictive and means they won't be able to enjoy life. Some Americans feel more at ease when the word "budget" is replaced with the word "spending plan", "financial plan" or some other term.

Many Americans today don't have a savings account. Many of us have good intentions and start out creating a budget but after a few weeks or a few months pick up the old habits and start spending and charging again. A budget is your friend. It is there to help you when you need it; it is not your enemy.

Having a budget is your safety net if you get sick or lose your job you can use your savings to hold you for a few months until you can find a new job. Your savings account should be separate from your checking, investment or money market accounts and should only be used for emergencies such as an unexpected expense, unemployment, medical bills, etc.

You can have multiple savings accounts, for example, if you want to save money to go on a vacation you can create a vacation savings account but you should always have at least one savings account dedicated for emergencies and unexpected expenses.

A savings should have enough money in it to pay your bills for at least 9 to 12 months. Your savings account money should be readily accessible and stored in an account, preferably a high interest savings account such as Emigrant Direct, HSBC, ING or a money market account where you can make money while saving money. Here are 9tips to help you overcome the fear of creating a budget.

1. Admit that you have a problem. The first step to changing your spending habits is to admit that something is wrong. Then develop a plan to improve your spending habits. Start off small.

2. Take accountability for your actions. Don't blame others for your financial situation.

3. You have to know where you are before you can get to where you want to go. You have to determine your SEO – what you spend, what you earn and what you owe. You can't improve your financial horizon or plan for the future until you know where you are at the present time.

4. Use pen and paper, use a software tool like Quicken or Microsoft Money or use the envelope method. Once you visually see where you are spending your money it will make it easier to reduce spending.

5. Write down a list of at least 5 financial goals. If you cannot achieve any or can only achieve 1 or 2 of your financial goals you need to make some changes in your spending habits. Write down a list of all of your debts. Develop an action plan and beside each debt write down steps on how you can pay the debt off: reduce spending, use coupons, use money savings tips, earn extra income, etc.

6. Pay off small bills first. Pay down any small bills and debt first. Once all your small bills have been paid off start tackling the larger bills. Setup payment plans for bills you cannot pay off in full. Be sure the account balances are updated on your credit report.

7. Surround yourself with at least three people who are doing better financially and gain financial advice from them.

8. Don't make the same mistakes. Insanity is making the same mistake over and over again and expecting a different result – don't be financially insane.

9. Seek professional help. Consult a financial coach, financial planner or advisor to help you create a budget or spending plan and provide recommendations to help you stay on track.

Monday, January 04, 2010

10 Steps to Improve Your Finances in 2010

Many people make New Year's Resolutions and by January 10th they have forget all about their resolution. In 2010 and future years make resolutions and set goals for yourself that you know you will be able to achieve. Make a promise to yourself that every year you will do at least one thing to become a better person, help someone less fortunate than you, and work to improve your life.

Finances have been a big part of Americans lives. Finances can destroy relationships; result in divorce, arguments, sadness, depression, anxiety and fear. Finances have to be properly managed and can be used to generate wealth or can be used to generate debt. In 2010 here are 10 tips to help you get out of debt and stop the financial insanity.

1. Change Your Mindset. Change the way you think about money. If you believe you will always be in debt you will. If you are determined to get out of debt you will get out of debt.

2. Develop What If Scenarios. List different scenarios that could happen and how you would deal with each one, i.e. job loss, sickness, death, new baby, loss of health insurance or other benefits, car repair, etc.

3. Have a Plan A, B, C, D and E. Many people never plan for the unexpected. Always have multiple options to solve a problem or deal with a crisis.

4. Live below your means. You can no longer live within your means you have to live below your means. You should always have extra money left over each month after you pay your monthly expenses and debt; if you don't you need to change your spending habits.

5. Bundle products. If you have multiple insurance products with different companies contact each company and get a quote for bundling your products to help you save money, i.e. car, home, flood insurance, etc.

6. Ask for discounts or specials. Companies always provide discounts or specials but do not always advertise them. Every 3-6 months call each service provider and ask if they are offering any specials and what discounts they have available for the services you currently have.

7. Save once a week. Do at least one thing a week to save money, i.e. bring your lunch to work or bring coffee from home one day a week. See how much you save in one month.

8. Don't stop at retirement. Don't just plan for your retirement, plan for your children's retirement. Sometimes when planning for retirement retirees do not save enough money to cover all of their monthly expenses and end up going back to work after retirement. If you plan for your children's retirement or your grandchildren's college education this will ensure you have more than enough money to retire and enjoy your golden years.

9. Do better than your parents. If you parents retired at 65 or had to work until they were 70 and had nothing to show for it, do better than your parents. If you retire at 55 be sure you have at least enough money to live on for 20 years.

10. Consult a professional. Contact a financial advisor or financial planner to help you determine your financial goals, where you want to live, the age you want to retire and the lifestyle you would like to have when you retire.

Friday, January 01, 2010

Happy New Year

Another year has come and gone. Take this opportunity to forget about the past and don't make the same mistakes that you did in 2009. Here are some inspirational quotes I found related to starting a New Year.

I hope they provide you with hope, inspiration and courage to become the best you that you can be this year. Reach for the moon, you won't miss!

Be always at war with your vices, at peace with your neighbors, and let each new year find you a better man.
Benjamin Franklin

We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called Opportunity and its first chapter is New Year's Day.
Edith Lovejoy Pierce

He who breaks a resolution is a weakling;
He who makes one is a fool.
F.M. Knowles

Another fresh new year is here . . .
Another year to live!
To banish worry, doubt, and fear,
To love and laugh and give!

This bright new year is given me
To live each day with zest . . .
To daily grow and try to be
My highest and my best!

I have the opportunity
Once more to right some wrongs,
To pray for peace, to plant a tree,
And sing more joyful songs!
William Arthur Ward

Your Merry Christmas may depend upon what others do for you...but your Happy New Year depends upon what you do for others.
Author Unknown