• Showing Your ID at Checkout
• Giving Your Zip Code
• Disclosing Your Telephone Number
• Show Your Receipt

If you’ve ever been subjected to such suspicious demands, then read on to learn what the law really says.

Read the rest of this post at MasterYourCard.com.

img c/o agius

Last night, my wife and I watched “A Night to Remember” on TCM. For those who haven’t seen it, this is a starkly different take on the Titanic than you may remember from the recent James Cameron version. There’s no epic Celine Dion anthems, no naked Kate Winslett and it’s about 60 minutes shorter, too.

Of course, all the historical basics are much the same– the boat still sinks and the steerage still gets locked below the deck as the water rises (women and children and the wealthy first, apparently) – but the biggest contrast is the scope of the drama. In James Cameron’s bodice ripper version, the camera homes in on a story of singular love and the tragedy is in the fleeting romance ended by unthinkable disaster. It is a story of heroic, selfish love.

But in the 1958 film, the heroes are the officers of the White Star Line, who, in spite of certain death, keep cool heads and dutifully and selflessly work diligently to save as many lives as possible.

The officers do an admirable job of keeping the panic in check. The gentleman calmly move about the ship, relating the captains orders to place the women and children in the lifeboats “as a mere formality. Meanwhile, the outwardly unshaken men wryly comment to one another, “I take it you and I might be in the same boat later?”

Even after the captain declares “every man for himself!” and widespread panic sets in, the officers continue to implore the crowd, “Don’t panic! Have some pride in yourselves! If we can get organized, we’ll survive.”

The hero in the 1958 film is the courageous, honor-bound staff of the White Star Line, not an uppity, handsome churl who wins the heart of an icy, high-bred maiden. Likewise, the villain is not a spoiled, jilted lover he’s a man who shamelessly sneaks onto a lifeboat, abandoning hundreds of women, children and his dignity on the sinking ship. This message is clear, as the camera frames his guilt-racked visage as the ship slips into the ocean in the background.

The Sinking Ship, The Grand Applause

Okay, so what does this have to do with credit cards? Nothing, really. It has more to do with the attitudes we take towards our occupations. As Hollywood reframes our historical tragedies – Pearl Harbor, Titanic – we make them interesting to modern audiences by making them very personal stories, where love and loyalties between individuals are more important than the suffering of society as a whole. It’s no stretch to compare the current state of our economy and the financial industry to a sinking ship. And who is at the helm of the consumer finance industry? Who are the White Star Line officers to the dire situation that is the credit industry?

As far as we’ve seen in America, there are none. From the outset, it has been “every man for himself!” In fact, even after the CARD Act was made law, one hundred percent of credit cards offered online by leading bank card issuers continue to include practices that will be outlawed once the Act takes effect next year.  (Pewtrusts.org) That shows that the lenders, the bankers, the credit card issuers will do anything that they can get away with to turn a buck, simply because that’s the American way of doing business. When the government clamped down on rampant unfair lending practices, the industry responded by ratcheting up interest rates an average of 20 percent while they still could, again, according to Pew Health Group.

Where is the dignity? Where is the concern for the fellow man, woman and child? How come the lifeboats are filled with the ones who steered us into this iceberg, while the steerage is left locked beneath the deck and the engine room workers are vainly attempting to bail themselves out?

Read more at Master Your Card.

Photo by vsmoothe.

You may think that your vanity credit card with pictures of puppies or your alma mater’s mascot is what helps the cashier at the grocery store peg your personality, but in reality, the features and terms of your credit card are far more telling. Of course, no one but you and your issuer know whether you have a low interest rate, cash back rewards or monthly reporting to credit reporting agencies. So, consider this rundown of credit card personality types as an exercise in self reflection. You may learn something about yourself.

The Low Interest Rate Card

You, oh low interest rate seeker, are one who lives in the moment. A true American, you buy now and pay later. You carry a balance today so you can enjoy living beyond your means. To you, that finance charge is well worth having all the things you want, when you want them. You are first in line at Best Buy every Tuesday – ready to be the first to get that newly released DVD, the first to hear the new album from everyone’s favorite band. Sure, you’ll pay more for it in the long run. But you’d rather have something tangible in your hands now than waiting to save up the cash. Of course, you’ll need to be careful: if you charge too many things today, you may not be able to afford the next impulse buy down the road.

Shopaholics who live in the now may enjoy the Capital One No Hassle Miles Rewards or Capital One Platinum Prestige. You’ll pay 0% APR on purchases until May 2010 – but you’ll need excellent credit to qualify.

The Rewards Card

You, my friend, are a bargain seeker. For you, the pride of ownership isn’t satisfying enough. You need something a little extra to make purchases worth your while. But to you, it’s worth it to know that your spending is accruing you extra perks down the road. You’re a modern day coupon clipper – always getting a deal. That’s why you research each of our purchases carefully, diligently ascertaining:

• Where am I going to get the best deal?
• How can I get a discount?
• Who should I buy from to get the most rewards?

With today’s tightening credit card terms, getting the most rewards for your spending habits isn’t always as easy as picking three top categories. Now, you have to shop online through your card issuers partners and keep track of “rotating categories” and “platforms.” It’s a lot of legwork, but that free vacation, free upgrade to first class, $250 cash back or $50 gift card to your favorite retailer is well worth it. You may even opt to pay an annual fee at the chance to earn rewards, because you’ve done your homework and know that it’ll pay for itself in the end.

Looking for free stuff down the road? Get $50 cash back right off the bat with the Chase Freedom Mastercard. Or why not spend towards a nice tropical vacation with your Sandals Resort Platinum Plus Visa Credit Card.

Read the rest of this post at FinancialMethods.org.

Ryan Bubb and Alex Kaufman, writing for the NYTimes, certainly think that credit unions have more to offer. Bubb and Kaufman argue that, while many claim that the Credit Card Accountability, Responsibility and Disclosure Act is the death knell of the credit card as we know it, credit unions prove that it’s not impossible to run a successful consumer lending operation without gouging the hell out of borrowers. That’s because they’ve been doing business the way that Credit CARD act dictates long before any legislation started twisting the arms of card issuers on behalf of the little guy. But before we get into the nitty gritty of what’s so hot about credit unions, it’s important to understand the fundamental differences between a credit union and other financial institutions.

What is a credit union?

The primary difference between a credit union and the other major credit card issuers lies in ownership. As the name implies, a credit union is owned by its members. So, in essence, you aren’t borrowing from investors, but other credit union members. Members pool their assets by opening savings and checking accounts and provide financing and other loans to each other from this pool. Credit unions are not-for-profit cooperatives, often operated by volunteer boards and are overseen and insured by the National Credit Union Administration. Profits are reinvested into the union or paid to shareholder-customers.

Investor-owned banks, on the other hand, are businesses. They are owned by stockholders and controlled by board members and investors. Dividends are paid to shareholders and the bottom line is the bottom line. These credit card issuers are regulated by the FTC and bank deposits are insured by the FDIC.

So it all boils down to interests. Credit unions are usually sponsored by employers for their employees or organized by churches, schools or regional or professional associations. Credit unions worry about the interests of their members and community. The other lending institutions answer to their shareholders.

Read the rest of this article at Master Your Card.

Photo by Dan4th

I really think that before giving me a credit card they really should have given me a math test. Like a series of story problems:

• Question Number One: If Maria works as a comedian for $100 a week but spends $20 a day on hair scrunchies, how many years will it take for her to pay off a Taco Bell Gordita she bought in 1992?
• Question Number Two: If Maria’s boyfriend is in a folk band but he only smokes pot every other day, what percentage of the rent will he be able to contribute?

I thought 50%, but the answer is zero. That’s good to know. That’s going to be on the test.

But in all seriousness, there are some truths that consumers should be able to wrap their heads around before being granted access to revolving credit. If you’re new to credit, I strongly recommend you be able to work out each of the following math equations:

Minimum Payment Costs

As penny pinching scrooges, we love to pay the minimum. We want to pay the minimum amount for our used cars, our utility bills, our phone and  Internet service. Heck, we’ll even forgo one of our slices of cheese on the McDonald’s double cheeseburger before we pay a single cent over the minimum. Bottom line: we don’t like to pay more than we have to.

But when it comes to your credit card balance, you shouldn’t pay the bare minimum just because you can get away with it. Here’s why:

Let’s say you have $2,000 in credit card debt.Your minimum payment (typically 2%) is $40 a month and your APR is 18%. Guess how long it’ll take you to pay that off? The answer: just over 24 years. Not only that, you’ll pay $4,396.57 in interest. That’s 2 grand and nearly a quarter of a century down the drain.

Now, taking Ms. Bamford’s example, let’s say she abstained from hair scrunchies for one day a month and applied that extra $20 to her credit card balance. The debt is gone in just under 4 years and she pays only$793.44 in interest. That’s no typo.

The formula for this doozy is too complicated to keep in your head, but luckily you don’t have to. Just visit the credit card minimum payment cost calculator and hit CTRL – D.

Read the rest of this post at Master Your Card.

Photo by d3_dan

You load sixteen tons, and what do you get?
Another day older and deeper in debt.
Saint Peter, don’t you call me, ’cause I can’t go;
I owe my soul to the company store…

That’s the chorus to an old coal mining song first recorded by Merle Travis in 1946. When he talks about the company store, he’s talking about the truck system that coal mining companies used to keep their employees in debt. Instead of paying them in cash, workers were paid with vouchers that could only be redeemed in stores owned by the company with prices set by the company, too. If you didn’t have enough scrip to pay for your necessities, then the store would be happy to put it on your tab. Of course, that means you were never allowed to quit working for the company as long as you were in debt to the company store. And without any cash coming in, you couldn’t save up, shop elsewhere, open a savings account or otherwise invest in your own future. That’s why they called it debt bondage.

Keep on Trucking

Fast forward 60 years and the world’s largest private employer is paying its workers with prepaid debit cards instead of with paper checks. The press releases bill it as a convenience for their workers – they won’t have to come into work on their day off to cash their checks, they can get cashback for free at the register when buying groceries and other essentials from their employer. And with less paper, it’s “greener,” too. Greener, perhaps for the Earth. Greener, too, for Wal-Mart, MasterCard and First Data – the latter two of which reap a profit each time one of these cards is swiped. Greener for employees’ wallets? Maybe not.

Yesterday, the New York Times ran a story on the high cost of prepaid debit cards which gave real world confirmation for findings already confirmed by an earlier Consumer Union study on prepaid cards. The article, which noted that prepaid cards have long been the only viable alternative to low-income individuals and immigrants who cannot set up bank accounts (the “unbanked” in industry parlance). Prepaid debit cards deliver workers from the inconvenience and exorbitant fees associated with check cashing stores, low balance fees and overdraft penalties. But with the credit card industry grasping for more ways to increase the bottom line, it seems that prepaid debit cards are quickly becoming equally as unattractive as the seedy payday loan joints.

As well as having “little regulatory scrutiny,” NYTimes highlighted how the hidden fees of prepaid debit cards can add up:

The MiCash Prepaid MasterCard docks cardholders a $9.95 activation fee. Like many competitors, it then charges numerous recurring fees, including $1.75 for each A.T.M. withdrawal, $1 for each A.T.M. balance inquiry, 50 cents for each purchase, $4 for monthly maintenance, $2 for inactivity after 60 days and $1 for a call to customer service.

The Millennium Advantage Prepaid MasterCard goes further, listing an application fee of up to $99. The Silver Prepaid MasterCard advertises that it does not charge for overdrafts as many debit cards do, but it gives itself the option of charging a $25 shortage fee if customers exceed their balance.

Meanwhile, as pointed out by the article, the low balance fee for checking accounts averages out at $10 – a pittance compared to the extensive hidden menu of a la carte fees that are served up alongside most prepaids. In addition to these fees, Consumer Union pointed out the following:

• Dormancy fees levied for inactivity
• Fees for closing account and redeeming remaining funds
• “Loading” fees for adding money to balance
• “Bill pay” fee if card is used to pay recurring monthly expenses (utilities, rent, subscriptions)

With fees for spending money and fees for not spending money, it seems that you’re damned if you do and damned if you don’t. The inactivity fee discourages saving and the redemption fee ($10 to $15) makes it costly to get your money out to put it elsewhere.

Read the rest of this post at Master Your Card.

Do you know how to pick a good stock? In the unlikely case that you answered yes to that question, then I’ve got another one for you: are you among the less than 4 percent of stockpickers that will beat the market over a span of 50 years? If it’s a yes to that one, too, then I congratulate you and wish you well in your burgeoning career as a high flying money manager. If you’re among the vast majority of those that answered no to both, don’t worry – we can still make you a millionaire by 60.

Of course, there are many routes that theoretically lead to big money – clamor your way up the corporate ladder, join a pyramid scheme, murder your brother and marry his wife – but if you’re like me, you prefer the method that doesn’t require any work or bloodshed. Luckily, a fella named John Bogle invented a thing called an “index fund” just for guys like you and me.

What’s an index fund?

An index fund is a mutual fund or exchange-traded fund (ETF) that tracks the movements of a stock market index. You’ve heard of stock market indices: Dow Jones Industrial Average (DJI), Nikkei 225 (N225), Standard & Poor’s 500 Index (S&P 500) and the FTSE 100 (”footsie”), for example. An index is meant to provide a snapshot of a market sector’s performance. In most cases, the media cites indices to report on the overall health of the economy. We all know that a headline reading “Dow Jones down over 500 points” translates to “We’re boned!” whereas “Dow Jones up a bajillion percent” means “Drinks on me!”

The stocks that make up an index are typically picked by committee (subjectively) or by a set of rules (objectively). The S&P 500 is composed by committee, with analysts picking the 500 stocks that they believe best represent certain industries based on the GICS. For example, Tyson Foods is included in the S&P 500 representing the “consumer staples” sector while Microsoft is included representing “information technology.” The Russel Indexes, on the other hand, are selected based on objective criteria, with the Russell 3000 Index being composed of the largest 3,000 companies in the U.S. by market capitalization (estimated value of a company by multiplying the share price by the number of outstanding shares).

A mutual fund is, essentially, a pile of money collected from various investors (you and me) and given to a money manager who chooses which stocks to buy. Most mutual funds have clearly delineated strategies and target certain sectors. Basically, instead of your investment being at the mercy of one stock’s gyrations, you are spreading your bets over several stocks. But really, you are simply betting on the man who is managing your money. And you’re paying him hefty management fees for it, too. Which is fair, really – that guy (or group of guys and gals and sometimes robots) have to pore over pages and pages of research and cut through all the corporate PR bullshit to find the healthiest stocks. The name of the game is “beat the market” and it’s hard work. It’s estimated that fewer than 20 percent of mutual funds outperform the market each year.

By now, you’ve probably figured it out. If the Wall Street kids are reinventing the wheel and still losing to the market, why not just invest in the market? That’s what an index fund does. Instead of busting duff to sleuth out stellar stocks, an index fund simply plunks money down in the stocks that the thinktanks at the likes of Dow Jones and S&P have already spotlighted. And because most of the hard work is already done, the management fees are bargain bin affordable while the investment is nest egg reliable.

Wait, reliable? Really?

Believe it or not, yes, index funds are a safe bet. I know that the news is constantly sounding the alarm on market dips and, yeah, we’ve had a recession, depression or crisis here and there, but historically, the market has steadily been on the up and up.

For example, Vanguard’s 500 Index (based off of S&P 500) has returned 9.84 percent since inception in 1976. (Compare that, also, to the highest savings account percentage I’ve ever seen: 3.00 percent.) As long as you are in this for the long run, you have virtually nothing to worry about. Of course, you’ll want to diversify to some degree (there is the old advice: “own your age in bonds”) but if you can spare $83 bucks per paycheck (paid bi-weekly, that’s about $2,000 a year) you can be well on your way to being a millionaire by 65 (60 if you start early).

Punch some numbers into Fidelity’s Growth Calculator and see for yourself:

• Start with an initial balance of $10,000. (Optimistic, maybe, but hopefully someone’s been saving on your behalf.)
• Contribute $2,000 a year. (Depending on how you do this, it’s tax free.)
• Invest in an index fund at about a 9.00 percent rate of return. (Like the aforementioned Vanguard 500 Index)
• Let it stew for 40 years. (Beginning at age 20 and investing until 60)
• Come out with $1,050,678

Now, of course, there’s other factors to think about, such as taxes, management fees and inflation, but you get the idea. Play with the numbers a bit and you’ll notice that:

• The sooner you start, the more you’ll make. (Einstein called compound interest the “most powerful force in the universe,” only half-jokingly.)
• The more you begin with, the more you’ll make.
• Even a small contribution – especially made early – will make a sizable difference to the final number.

Even when times are tough economically, it’s well worth it to squirrel away as much as you can. Those nickels and dimes that might buy you a pounder of PBR today can snowball into a comfy retirement tomorrow.

Read the frest of the article at Primer Magazine.