Tuesday, April 30, 2013

Another Prepaid Card Scam

Most people who use prepaid debit cards are: people who don’t want to use a bank, people with bad credit, people who want to learn how to control their spending, and people who desire to teach their children or grandchildren how to manage money.

Many celebrities have promoted prepaid debit or credit cards claiming that they will help consumers better manage their money.  Well, if all it took was for consumers to use a plastic card to better manage their money then none of us would have money problems or be in debt, therein lies the flaw in their marketing claims.

Justin Bieber is the latest celebrity who signed a deal with BillMyParents to endorse its SpendSmart prepaid card for an estimated $3.75 million plus monthly royalties and company stock.  According to BillMyParents Bieber will promote the new prepaid debit card to his over 30 million Twitter followers and 50 million Facebook fans.

Bieber produced videos about managing your money which air on the SpendSmart website. However, the card comes with lots of fees.  The monthly fee is $3.95 or $47.40 a year. There is a $1.50 charge to withdraw money from an ATM, and a $.50 charge for checking your balance at an ATM.  If your card is inactive for 90 days you are charged a $3 inactive fee.  If you lose your card you will be charged a $7.95 replacement fee. Using the card can cost you hundreds of dollars a year.

The card fees are high compared to other prepaid debit cards on the market such as the American Express Serve or American Express Prepaid Card which do not charge a monthly fee or activation fee, the Kaiku Visa Prepaid Card which charges a $1.95 monthly fee but does not charge an activation fee or the Account Now Prepaid MasterCard that charges a $4.95 activation fee but does not charge a monthly fee.

Funds loaded from a bank account are available in your SpendSmart account within 4-5 business days. The SpendSmart card allows you to add money once a month from a bank account for free but charges a fee for adding additional money from a bank account, debit or credit card.  You can load money 5 times during a 24 hour period for a fee and are charged a $.50 fee for insufficient funds. You can only spend $500 in a 24 hour period, get $200 at an ATM in a 24 hour period and add $500 in a 24 hour period. Exceeding the spending limits can cause a transaction to be declined.  

If your card or PIN has been lost or stolen you will lose no more than $50 if it is used without your permission within 2 business days after you learn of and report the loss or theft.

I am not sure how this card will appeal to parents or teenagers who spend money like there’s no tomorrow and may not be financially savvy enough to know about the fees or keep track of charges for using the card. Magic Johnson also has a prepaid card on the market. Unfortunately you never heard Bieber or Johnson mention that they used a prepaid debit card prior to becoming rich so why should young fans or parents get his?

Saturday, April 27, 2013

How to Submit a PMI Claim

PMI is private mortgage insurance that protects the mortgage lender against default. PMI allows people to purchase a home by putting less money down usually 3-5% of the purchase price versus the standard 20% down payment. In some instances, the value of the home exceeds 80% of the outstanding loan and a lender will cancel the PMI depending on the policy and homeowner payment history. The homeowner makes monthly payments and the lender files a claim and receives the payout when a default occurs.

A portion of PMI is charged upfront at closing and is typically 1.75% of the sales price. The remaining fee is charged monthly as part of the mortgage payment (PMI + principal + interest + taxes) until the value of the home exceeds 80% of the outstanding loan balance. For most homeowners this is usually the life of the loan.  Most PMI premiums remain the same for the first 10 years of the loan and then reduce to a lower amount.

You must notify your PMI company once 2 mortgage payments have been missed, or when you file a foreclosure or a short sale has begun.  The claim should be filed within 60 days of the transfer of title. Your PMI company will confirm and verify your coverage is active and request the necessary documents to process the claim within 20 days of receipt. Upon receipt of all required documents, the PMI company will review and finalize the claim. Claim payments are usually scheduled within 60 - 70 days from the date the claim and documentation were received and payments are paid to the lender. A PMI claim pays 10-35% of the loan payoff amount at the time of the loss is incurred to the lender. 

A lender can agree to accept a settlement sale on a property instead of a foreclosure and still has the option to file a claim with the PMI company for the property held in escrow.  When a home goes into foreclosure a lender can submit a PMI claim to pay the cost of processing the foreclosure and for any other associated costs. However, the PMI company does not have to pay a claim until there is a foreclosure. 

If you decide to do a short sale you must submit paperwork to your lender who submits it to the PMI company and requests that the PMI claim be paid prior to foreclosure.  The PMI company does not have to pay the claim to the lender right away and can wait to see if the property goes to foreclosure.  The PMI company may agree to pay the claim early but usually requires the borrower to pay some money.  You are required to pay back the lender the amount you borrowed minus the principalPrincipal is the amount of money you borrow if you're getting a home loan. If you're buying a bond, the principal is the amount you're lending. Typically, you'll buy bonds with a face value of ,000. If you buy a ,000 bond, your principal is ,000. you paid off at that time plus any additional fees and costs that you might owe the lender as a result of defaulting on the loan.  If the PMI company determines that the borrower has assets or income to pay the loss the PMI company may file a lawsuit or threaten legal action if payment is not received.  If this occurs contact a real estate lawyer.


When a property is listed as a short sale all submitted offers must be presented to the lender. The lender has the option to allow the PMI company to review the offer and accept or decline it. This process usually takes 30 to 60 days. However, the bank will review the figures on the offer to ensure that it can claim the maximum amount of PMI from the escrow account with all submitted offers, and will reserve the right to counter an offer.  Unfortunately, the homeowner is not eligible for compensation if any profit is made off of the sale of the home.

If a short sale has remained on the market for over 6 months the lender has the option to proceed with a foreclosure. The lender can sell the property to a private investor, sell the property at auction or keep the property and list the foreclosure sale with a real estate firm and once finalized the homeowner will be evicted.

The homeowner does not have to pay any monies: when the lender and borrower no longer have to repay the full amount, when the borrower files bankruptcy and all or part of the loan debt is released or in some states where the lender can only go after the property and can’t go after the borrower for a deficiency judgment; if you had not been able to repay the loan and the lender had foreclosed, if you had sold the home as a short sale and the lender agreed to accept that short amount as full payment for the debt and agreed not to go after you for the shortage, the lender would not be able to ask you for additional money.

On a $100,000.00 loan with 20% PMI when the borrower defaults and the lender takes the property back through foreclosure, the lender will sell the property.  If the net proceeds do not cover the entire loan plus fees, say a net of $80,000.00, the lender would file a claim with the PMI company for the 20% that they lost. The homeowner may have to pay back some money.

Wednesday, April 24, 2013

Why a Partial Payment is the Same As a Late Payment

Since the recession of 2008 many Americans continue to struggle with paying their bills and basic necessities. Many who are in debt cannot afford to pay the minimum monthly payment for their bills. Some opt to send in a partial payment; unfortunately this is frowned upon by most companies. Companies can refuse partial payments and the decision is solely up to the company to accept a partial payment.

If a partial payment is accepted for a company that provides you service such as a utility company or phone company your service may be temporarily interrupted until any past due payments are received. The company may also charge a restoration or reconnection fee to resume service. You may be able to negotiate sending a partial payment with your credit card company but don’t send a payment without talking to them first.  A partial payment is treated as a late payment and can be reported on your credit report. Some companies will allow payments by phone but charge a service fee and may charge a late fee.

If you have a charge card such as American Express and Diner’s Club that requires you to pay the balance in full by the billing due date usually the end of the month, you will charged a late fee on outstanding balances.  American Express provides eligible members with flexible payment options which allow the member to pay certain transactions over a period of time.

If you have a credit card such as Visa or MasterCard that requires you to pay the minimum payment by the billing due date you will be penalized for sending less than the minimum payment amount. You may be charged a late fee or your interest rate may increase unless you contact the creditor in advance to make payment arrangements.

For most loans such as mortgages, auto and student loans partial payments are not accepted unless stated in the terms of the loan agreement.  For mortgage loans, loan servicers must review a consumer’s legal obligation with the creditor to determine if a partial payment can be accepted since payments cover principal, interest and escrow – a partial payment would not cover all these costs.  Late fees can only be assessed on the unpaid previously owed amount and cannot be assessed on the regular scheduled payment.

Some lenders hold partial payments until the full amount is received and then apply the amount to the customer’s account. If you lender accepts your partial payment and puts it on hold ask the lender to apply the amount to the oldest missed payment to prevent a late fee charge.

Certain landlords may accept a partial payment but you should discuss the terms of the payment arrangements in advance and submit the payment along with a letter stating the agreement.  Some cable providers will charge a late fee for the remaining balance due when a partial payment is received and may interrupt service.

The IRS accepts partial payment for taxes owed but late payment penalties plus interest are charged.
If you send a partial payment for an insurance policy your policy may not remain active if the balance is not received by the payment due date.  However, some companies allow customers to send partial payments.  For example, if you pay $400 quarterly, your statement may require you to send a minimum payment of $137 to keep your policy active, however, you must pay the remaining balance by the due date specified on your statement. If a partial payment if sent any claims filed may not be processed.

A collection agency can refuse a partial payment.  If you are unable to pay the amount owed it is best to setup payment arrangements with a collection agency prior to sending a payment. However, if you are being threatened with legal action it may be best to submit a partial payment as a measure of good faith.  Ensure you remain in constant contact with the collection agency by sending a letter each month until you save the lump sum reminding them that you don’t have the full amount but once you get some extra money you will promptly send a payment. If the collection agency doesn’t accept your partial payment save up a lump sum and use that to negotiate a settlement amount of 50-70% of the original amount owed.   If the collection agency is unwilling to work with you contact the original creditor and ask them to take the account back and setup payment arrangements with them instead.

If you owe an outstanding balance to a utility company they may require you to send a deposit or partial payment before your service is restored.  If the company is a gas or electric company they must give you 10 days advance written notice by mail that your service will be disconnected.  If the company is a water, sewer or telephone company they must give you 5 days advance notice and the notice must state the shut-off date and the reason for the shut-off. The notice should also provide a contact number to call to inquire about the shut-off. The shut-off notice should be sent as a separate notice from your regular bill. Here are 4 steps to follow if you decide to send a partial payment:

  1. Payment. Determine how much you can pay when sending a partial payment. Be sure to get the agreement in writing and stick to the terms.
  2. Negotiate. If you want to send a partial payment for your credit card account, contact the company and ask for an interest rate reduction or reduction in your minimum monthly payment for a short period of time. 
  3. Ask. Ask the credit card company if it has a hardship program. This plan reduces the total amount due and may freeze the interest rate allowing you to pay less for a specified period of time without worrying about incurring late fees and penalties.
  4. Records. Keep records of all correspondence sent and verbal discussion for future reference. Mail all correspondence using certified mail.

Sunday, April 21, 2013

30 Ways to Save Money on Your Wedding

Weddings in America are a transition stage of living with your parents to moving in with your spouse to start a new life.  A wedding is an official form of recognizing a union between a man and a woman. The final transition symbol is when the bride is taken from the arm of her father or parents and given into the arms of her husband.

Weddings are a happy occasion to celebrate with family and friends.  Many weddings are stressful and can brides-to-be a range of emotions such as anger, sadness, anxiety, and joy. A wedding should be memorable but memories don’t have to be expensive. 

The average cost of a wedding in the United States over $20,000 and unfortunately many wedding end in divorce.  Going into debt as soon as you get married is a bad way to start off a marriage.  Many couples go into debt paying for a wedding and instead could have used the money as a down payment on a home.  There are plenty of creative methods to save money on your wedding. You can still have a fabulous wedding without breaking the bank. Here are 30 ways to save money on wedding costs.

  1. Budget. Create a budget of $10,000 or less and stick to it.
  2. Spouse. Your spouse and groomsmen can buy nice suits instead of tuxedos for the wedding.
  3. Wedding Dress. Buy latest year’s style, a non-designer dress, at consignment shops, designer or sample sales, eBay,  off-the-rack dress or a non-white dress, have your dress made, rent a dress, or a consider a used gown.
  4. Bridesmaids Dresses. Let the bridesmaids pick their own dresses and colors or buy regular dresses.
  5. Rent.  Rent items instead of buying them such as tents, furniture, accessories, etc.
  6. All-Inclusive Package. Get an all-inclusive package at the wedding reception site.
  7. New Place.  Find a new place or recently opened venue.
  8. Be Creative. If you are creative with arts and crafts make your own decorations.
  9. Flowers. Use a long-stemmed bouquet, create your own, purchase local or seasonal flowers or comparison shop online to find deals on wholesale orders.
  10. Party Later. Have a small reception and a party later with 50 people or less.
  11. Don’t Waste Space. Ensure the space you rent is appropriate for the number of guests that you will have.
  12. Venue. Your wedding venue should be the location for your wedding and reception. Use a hall that is not normally use for weddings and try to find one that lets you use your own caterer. You can also have a wedding at an art gallery, hotel, in a park, backyard, church, beach, community clubhouse or recreation center. Get at least 3 quotes.
  13. Reception. Instead of having a 4 hour reception have a 2 hour reception.
  14. Food. Use a caterer that does not specialize in catering weddings. Eat standing up instead of a sit-down dinner or have a buffet where guests can get the food themselves. Have a potluck wedding if you are having a small number of guests. Select inexpensive items such as chicken, pasta or macaroni and cheese and provide no more than 2 meal options.
  15. Desert. Buy individual cupcakes instead of a wedding cake or buy a smaller cake to prevent leftovers.
  16. Alcohol. Offer a cash bar or bring your own alcohol and pay a corkage charge to have the alcohol served.
  17. Music. Use a band instead of a DJ. You can also be your own DJ and use your iPod, iPad or MP3 player for music.
  18. Invitations. Use office supply stores such as Kinkos to make invitations or hire a graphics designer student. Avoid engraving are choose free or local cost fonts and keep designs simple to reduce costs. Use one envelope instead of 2 when mailing invitations. Use online event websites such as Evite to send invitations. Use postcards for RSVPs instead of a folded card and matching envelope.  If your wedding is the same place as the reception don’t use a reception card. Send postcards for guests to RSVP.
  19. Guest List. Reduce the guest list to 100 or less.
  20. Planner. Plan your wedding instead of using a wedding planner. Get family and friends to help with the planning.
  21. Time. If you have a night wedding, have hors d'oeuvres instead of a full meal. Have your wedding at lunchtime or use a food truck to save on food costs. Get married during the week instead of on the weekend or on a Friday or Sunday night.  Saturdays are the most expensive. You can also have a morning wedding.
  22. Date.  Schedule the wedding during off-peak times such as October, November or January through March. April through October are peak seasons for weddings so choose a time outside of those months. Avoid getting married near a holiday when prices are higher.
  23. Toast. Skip buying champagne for the toast.  Guests can toast with whatever they are drinking.
  24. Makeup. Wash your face thoroughly that morning and get a facial at least 3 days prior to getting your makeup done for your wedding. Ask the makeup artist to leave a touchup case behind for you to save money.
  25. Drinks.  Offer a cash bar or limited bar to keep costs low.
  26. Flowers.  Spend money on your bouquet but choose seasonal or local flowers and keep arrangements simple or choose flowers that have larger buds to save money.
  27. Photographer.  Get referrals from friends or family or look for inexpensive packages. Spend money on the most important pictures and consider hiring an intern and student for additional pictures.
  28. Limousine. Save money by renting a town car or old fashioned car for your bridal parties.
  29. Vendors. Connect with vendors on social media or via email to get notifications about deals and specials. Also, call vendors to ask about discounts or specials that may not be advertised, to negotiate a lower price for goods or services or donate services. Ask friends to donate services such as photography or event planning instead of buying a gift. Be firm with prices with vendors and ask for a discount if you pay in full.
  30. Cost. When buying goods or services for your wedding, don’t mention that it’s for your wedding, some vendors tend to increase prices when they know customers are buying products and services for a wedding such as tailor, hairdresser, barber, spa, etc.