Month: March 2015

How Much Are You Paying in Credit Card Fees?

By: James Wilson

In the last few decades, remarkable expansion in the use of consumer credit has allowed individuals from every income bracket the opportunity to purchase goods and services that one would otherwise not have access to. Not only do individuals and families use credit cards for emergency purposes, but often these plastic cards are swiped to purchase groceries, movie tickets, ski lift passes, and many more items. One of the largest card issuers in the United States reported that for the latest fiscal year, they had $4.1 Billion in card net income, with $131 Billion in credit card loans as of December 31, 2014—and this is just ONE of many card issuers in the United States. There are substantial benefits to having access to credit, but it is important for you to understand what you are paying for that access.

The most common fee that individuals think of is the “interest” rate they pay on their card. What most people do not understand is how that interest is actually calculated. For example, do you know if your balance is compounded daily or monthly? Do you know whether interest is calculated on the average daily balance or adjusted balance? Fortunately, a detailed understanding of complicated formulas is not necessary for you to understand what you really need to know. Thanks to legislation like the Credit CARD Act of 2009 and others, a lot of important information is at your fingertips.

Credit card issuers are required to disclose a summary of important figures at the top of all promotional material. The box, where these figures are located, is often referred to as the Schumer Box. Inside this box you will find key numbers including the following:

  • Annual Percentage Rate: This is the yearly rate of interest on your credit card. Keep in mind that if you carry a balance from month to month, the effective rate of interest you actually pay is usually a couple of points higher.
  • Other APRs: A card issuer may have different percentage rates for different types of transactions, such as balance transfers, cash advances, and more. These other APRs will often be different than the standard APR for your card. Most importantly, if you are late on payments, a “Late Payment APR” may be significantly higher than the APR you normally pay.
  • Finance Charges: Some cards may have minimum fees you must pay every period for service fees and related charges. It is not hard to find cards that have very low, or no, finance charges.
  • Annual Fee: Depending on the issuer or benefits associated with your card, you may be responsible to pay an annual fee.
  • Late Payment Fee: If you are late on a payment, you may be required to pay an additional charge between $15-$50, or more, for being late. This also may trigger the Late Payment APR percentage described above.

Before you sign up for a new card, you should consider these numbers, what you plan to use the card for, and how these numbers might change in the future. You should always consider the difference between an introductory APR, and the ongoing APR. Just because you have an introductory APR of 0% for six months, does not actually mean the card will be cheaper in the long run.

For an extremely simplified example, let’s say you sign up for a card with an introductory APR of 0% for six months, and 23.99% after that (not unheard of). If you sign up for the card and carry a $1,000 balance month to month, you will pay approximately $268 in interest over the first 18 months. Alternatively, if you carry the same $1,000 balance on a card with a fixed APR of 10.99% (also not unheard of), you will save nearly $100 in interest expense over the same period. Factor in that most households have several thousand dollars in credit card debt, and the saving quickly grows.

The CARD Act went one step further to require card issuer to provide the number of months and total cost to you it would take to pay off the balance making only minimum payments. You should be able to locate this information on your statement or online account associated with your credit card. To save you added time, most issuers with online accounts also allow you to input the number of months you want to pay the balance off by and then provide you with how much you have to pay a month to achieve that goal.

Ultimately, it is up to you to understand how much more in interest and fees you may end up paying to effectively budget the total cost of that next vacation. Review your credit card agreement and go online and discover the features your card issuer provides. Signing up for the right credit card and budgeting effectively may make that vacation a little more affordable.

Phishing Attempts: How to Protect Yourself

By: Glenn Sellers 

One of the more common scams targeting consumers today is a phishing scam. Despite their notoriety however, many people are unfamiliar with what they are. Phishing is an attempt to gain your personal or sensitive information via deception on a virtual interface. This article will let you know how to spot them and how to stay safe from an attack.

To spot a phishing attempt, it is first important to recognize the variety of forms they can take. The following is a list of the various forms of phishing:

  • A classic phishing attempt is just a plain and untailored attempt to get information. The “Nigerian Prince” scam is one of these. They are relatively crude and their success rate has been decreasing in recent years as consumers wise up. They often take the form of an e-mail.
  • Spear phishing is an individualized attempt to gain access to your information. An e-mail or web page is tailored to your specifics, such as your bank account, address, or other information in order to seem more believable.
  • Clone phishing is when a specific web page or e-mail is duplicated to appear like the real thing. Often, link manipulation will be used and a “mirror page” will be set up in order to deceive the consumer.
  • A mal-ware based phishing attempt refers to scams where malicious software is snuck into a user’s PC or Mac and information is relayed via the software. There needs to be some sort of introduction to get the mal-ware into your computer, which can take many forms.
  • Key-loggers track keyboard input. Whenever you go to a web page to enter account information, a password, or other sensitive information, the keystrokes will be tracked and relayed to hackers. These are often done on public computers or through mal-ware.
  • Man in the middle phishing attempts involve a compromised data access point, ranging from cell towers to Wifi routers. All data that passes through the compromised point is filtered and analyzed for useful sensitive information.

Now that you have an idea about the types of phishing attempts, here is some helpful information regarding how to spot and protect yourself against them:

  • Use “https sites” or other forms of encryption. There are abundant resources out there to help get you started with this.
  • Be wary of any suspicious links, especially in your email. This is the primary way that malware gets onto your computer. Anytime you open a link or download something, make sure you know and trust the site it’s coming from. If an unknown source tries to upload an .exe, .zip, or other atypical file to your computer, delete it before opening.
  • Think twice before providing any confidential information, including passwords, SSN, and anything else that may be useful for hackers to access your sensitive information. This can range from checking account information to all the way to seemingly innocuous information like your mother’s maiden name or your elementary school.
  • Use a spam filter in your e-mail. You may filter out useful e-mails periodically, but you can always view your spam folder and mark these as “not spam.” The majority of filtered e-mail will be junk mail or phishing attempts anyway.
  • Always check the URL of a site. A common way for hackers to initiate a clone phishing attempt is with a “mirror page” that looks identical to a legitimate web page, with the only difference being the URL is off.
  • If in doubt, contact the institution in question via phone before filling out a form
  • Avoid public computers and unsecured WiFi entirely when accessing important accounts like online banking or an e-mail account containing sensitive information.

Written Requests To Debt Collectors: What you need to know

By: Andrew Marchant 

Earlier Blogs on this site have discussed some of the basics regarding your rights against debt collectors.  The Fair Debt Collection Practices Act, a law that applies to all 50 states, allows you to make certain requests/demands to the debt collector.  The law also requires the debt collector comply with certain of those requests.  Some requests you can make include: that a debt collector reduce or stop contact with you; that the debt collector limit methods, times and locations of contact with you; and that the debt collector verify the debt.  You also have the right to dispute the debt.  All of these requests have one major thing in common – they must be in writing.

In this blog we take a look into basic mechanics of making written requests to the debt collector.

All letters can be fairly straight forward, and some information should be in almost every request letter you send to the debt collector:   

  • Identify your name and your address.  This can just be in the top left corner of the letter – similar to what you would find in most letters you’ve sent to businesses (or in letters you’ve received from businesses). Be sure you date the letter.  This helps you prove when you sent the letter out, and roughly when the debt collector should have received the letter.
  • Include information about your debt.  Things like the account number (if available) and any information the debt collector gave you about the debt should be included.  This will help the debt collector correctly identify the debt collection matter.  
  • If you can, sign your name at the bottom of the letter, which helps to prove you actually intended to make the request and that it was you who actually made the request.

The Consumer Financial Protection Bureau (CFPB) has a great website with examples of “action letters” that you can download and personalize.  These “action letters” contain form language for things like disputing the amount of the debt, requesting information on the original creditor, and restrictions on the ways the debt collector can contact you.

If you do not choose to use the samples form the CFPB website, always be sure you are direct in what you are requesting of the debt collector.  Also be clear with the request.  For example, if you are requesting that you only be contacted via mail, be sure you give an accurate address.  Or if you are telling the debt collector what times they can call you, be sure you note whether the hours are A.M. or P.M.  Specifically, with letters requesting information about the debt, at a minimum be sure to ask (1) Why the debt collector thinks you owe the debt, and to whom it is owed;  (2)  How much was the original debt, how much is owed now, and why there is any difference in the two amounts;  (3)  Details about the debt collector’s authority to collect the debt.

For all letters you send, make a copy of the letter for your records if possible.  That way, if the debt collector violates your request, you can easily reference the letter if you need to.  Also, that letter could be used as evidence against the debt collector in the event you end up in court with the debt collector over its violation of your request (and by extension its violation of the law).

If you are sure to be direct, clear, and accurate in your letter the debt collector is bound by law to honor certain requests.  If the debt collector does not, he can be liable to you and to the government.

The Pros and Cons of Prepaid Cards

By: Charles Clark 

Increasingly, consumers are leaving traditional banking avenues and moving towards alternative sources of money management such as prepaid cards. According to Nilson, “the top 50 largest US Banks and credit union issuers of general purpose prepaid card accounted for $118.09 billion in spending at merchants in 2013.” Additionally, the Mercator Advisory group found that from 2008 to 2012 the amount of money loaded on to general-purpose, reloadable debit cards tripled, rising to $76.7 billion. Mercator estimates that number will rise to $168.4 billion this year.

While prepaid cards seem to be here to stay, there are surprisingly few legal protections available to consumers who use prepaid cards. The Consumer Financial Protection Bureau (“CFPB”) has introduced a proposal that would extend greater protection to consumers who use prepaid cards; however, until new rules are passed (a long and uncertain process) consumers are left to fend for themselves. While there are many dangers associated with using prepaid cards, there can be a number of benefits as well. Below I summarize a few of those benefits and dangers.

Benefits

  • Alternatives to Banks: Prepaid cards present an alternative for consumers who do not have a traditional bank account. Consumers may not use a traditional bank account due to preference, poor credit, or a number of other reasons. Using prepaid cards, consumers without a bank account can do things that require a credit card. Examples include renting a car or booking a hotel room. Additionally, many prepaid cards include account numbers that allow for direct deposit of paychecks.
  • Helps to Manage Money: For consumers without a traditional bank account, paying bills can be a stressful and expensive process that includes paying for and sending out money orders. Prepaid cards can create cost savings by allowing consumers to pay for utility or other bills using their reloadable, prepaid cards.
  • Helps to Develop Budgeting Skills: Finally, prepaid cards allow consumers to develop smart budgeting skills. Loading a specific amount of money onto a prepaid card allows consumers to stick to their budgets and learn where they might be overspending. Additionally, consumers with children can use prepaid cards to start developing their kids’ budgeting habits early. Developing wise budgeting habits is key to financial stability.

Dangers

  • Excessive Fees: Some prepaid card issuers take advantage of consumers by charging fees for seemingly everything. There are examples of prepaid cards that will charge a fee for loading money, withdrawing money, or even to check your card balance. To make sure your prepaid card does not nickel-and-dime you, it is important to do your research before deciding on which prepaid card to use.
  • Limited Consumer Protections: As mentioned before, there are very limited legal protections for users of prepaid cards. The CFPB has proposed potential rules, but as of now consumers using prepaid cards do not have the traditional protections afforded to consumers using traditional banks.
  • Potential Overdraft Fees: Some prepaid cards have a credit feature that allows consumers to spend more than is loaded onto the card. This can result in high overdraft fees, such as those that once plagued the debit card world. Before settling on a prepaid card, consumers must determine whether the card has credit features and charges high overdraft fees.
  • No Loss or Theft Protection: Some prepaid cards will not pay back consumers who have funds stolen or loss due to an error. This can result in innocent consumers losing hard-earned cash by no fault of their own.  Again, one must read the terms applicable to the card — as all cards are not the same.
  • Potential Lack of Insurance: Almost all checking accounts at banks are federally insured up to $250,000. This means if a consumer’s bank ever fails or loses the consumer’s money, the consumer will be protected. Prepaid cards do not come with the same type of protections.

While prepaid cards can offer many benefits to consumers, there are significant dangers that consumers must be aware of. As always, before using a prepaid card do your research and determine which card gives you the best protections. You can find a great resource for finding consumer friendly prepaid cards here.

Payroll Cards: Paying Fees to Earn Money

By: Charles Clark 

Over the past several years, there has been a growing trend towards paying American workers with payroll cards. Payroll cards are pre-paid cards issued by employers to employees that can be used at an A.T.M. to withdraw wages. In 2012, approximately 4.5 million American workers received their wages on payroll cards, and the numbers continue to grow. Using payroll cards does have certain benefits because it gives workers without traditional bank accounts a way to withdraw their wages; however, the fee structure associated with many pre-paid cards hurt American workers in a big way.

Generally, the use of payroll cards involves a number of fees that quickly add up to take a significant chunk of workers’ wages. For many hourly workers, these fees eat up valuable wages that leave them making less than the minimum wage. When every dollar counts, these fees can leave workers light in the wallet when paying for necessities such as groceries, transportation, or rent. Payroll card fees typically include a fee for withdrawing cash, a fee for receiving a paper statement, and a fee for losing a card. In one example, a McDonalds employee in Wisconsin was spending $40 to $50 a month on fees associated with his payroll card. In another example, a Taco Bell employee in St. Louis would withdraw all of her wages at the start of the month and keep them in a shoebox in her closet in order to avoid high fees associated with withdrawing wages.

When it comes to the use of payroll cards, American workers do have certain protections. Employees who have their wages transferred onto payroll cards are entitle to protection under the Electronic Fund Transfer Act. The Electronic Fund Transfer Act offers the following protections:

  • Fee Disclosure: payroll card users are entitled to receive upfront disclosures of any fees that will be associated with use of the payroll card. This allows workers to know exactly how much they will have to pay in fees before using their payroll cards.
  • Access to Account History: Payroll card issuers must provide either a periodic statement, or make available to the consumer the following: (1) the consumer’s account balance by telephone; (2) an electronic account, such as through a website, of the consumer’s transaction history covering at least the past 60 days; and (3) upon the consumer’s oral or written request, a written account of the consumer’s transaction history covering at least the past 60 days.
  • Limited Liability for Unauthorized Transfers: If there is an unauthorized withdrawal of funds from a payroll account, the consumer must notify the financial institution within two days in order to receive limited liability protection. The consumer will not be liable for the lesser of $50 or the amount of the unauthorized transfer.
  • Error Resolution Rights: Financial institutions must respond to complaints of account errors within 120 days.
  • Prohibition Against Mandating Payroll Cards: The strongest protection provided to workers is that employers cannot force their employees to receive wages on a payroll card. Employers must give employees the choice of having wages deposited at a particular financial institution or receiving wages by other means, such as by cash or check
  • Federal Enforcement: If an employer violates portions of the Electronic Fund Transfer Act the Consumer Financial Protection Bureau has authority to take action against that employer.

While the use of payroll cards will likely continue to rise, it is important that American workers know their rights. If workers find that a significant amount of their paycheck is going to payroll card fees they should consider telling their employer to pay their wages using other means. No worker should be forced to pay high fees in order to retrieve their hard-earned money.

Strategies for Getting the Cheapest Rides from Uber and Lyft

By: Otto Hanson 

The rising popularity of ride-sharing programs such as Uber and Lyft has reduced the cost of travel for many people without access to personal vehicles. Not only has the price of getting a taxi-like service come down, availability has also gone up. Getting an Uber or Lyft in most metropolitan areas is now significantly quicker, easier and more reliable than traditional taxi services. However, with these improvements come some potential drawbacks. Namely, Uber and Lyft have struggled to clearly educate consumers about how to keep costs down when using their services. This blog post offers some simple ways to help ensure you’re getting the least expensive ride available.

Picking the Right Service

For most common travelers, the differences between Uber and Lyft are negligible. Both companies offer a smartphone app that connects people in need of rides to people willing to give rides. Both apps certify their drivers to some minimum standards, and both process payments between passengers and drivers.

Uber has more pricing options than Lyft, but both offer substantially similar low-end pricing options. For example, the author of this blog has taken the same trip in Denver, CO more than a dozen times comparing Uber’s low-end option (uberX) to that of Lyft. While each trip varies by a few dollars depending on traffic, the average price of the trip is almost identical between the two services, with uberX being slightly cheaper overall.

If you’re looking for the least expensive way to get to your destination, you should typically choose uberX (for 4 or fewer passengers) or uberXL (for 5 or 6 passengers) in Uber.  Lyft generally gives you the cheapest option by default (the “Lyft” option). If you’ve got 5 or 6 passengers though, you may want to select Lyft Plus, which is more expensive than a normal Lyft, but less expensive than getting two Lyfts.

A note on tipping: Uber discourages tipping drivers, and claims that a 20% tip is baked into every fare.  Lyft, on the other hand, encourages passengers to tip by enabling them to tip through the Lyft app.  Actual Lyft fares, are actually cheaper than Uber fares for this reason.  However, the author finds that after tipping 20% on Lyft, the two service’s base fares are substantially similar.

While both services may be similarly priced under normal circumstances, the pricing between the two can vary dramatically during busy times, when companies might apply surge pricing.

Surge Pricing

Both Uber and Lyft increase prices when there are more passengers looking for rides than there are drivers willing to give rides. While this practice may seem predatory at first glance, it does increase the incentives for more drivers to get out on the road, making rides more readily available.

Times when you’re likely to see surge pricing take effect are after the ball drops on New Years or after the Super Bowl ends. For reasons outside the scope of this blog, many people are looking for rides at those times, while few people are interested in driving. While it should come as no surprise that surge pricing takes effect at these times, there are other, less predictable times when it comes into effect as well. Luckily, both companies try to give consumers fair notice before charging surge rates.

When Lyft is implementing surge pricing you’ll get a notification like the one below indicating that “+ X% will be added to your total for the driver.” In the example below, 200% will be added to what the fare would be absent surge pricing. If your fare would be $10 under normal circumstances, it will now be $30.

In Uber, surge pricing is a little bit clearer. First, you’ll get a warning indicating a multiple of the original fare. Once you accept that multiple, Uber makes you confirm again by typing the multiple into the blanks on the next screen.  In this example, if your normal fare would have been $10, it will now be $22.

The screen shots of the surge pricing indicators of Lyft and Uber were both taken at the same time on a Friday night in Denver, Colorado.  The difference between Lyft’s surge pricing indicator and that of Uber made Uber the clear winner on that night.

Summary

If you’re looking for the most affordable ride, start by selecting the least expensive options within Uber and Lyft. In Uber, that option is uberX, and in Lyft it is the default “Lyft” option. If surge pricing is in effect on one service, don’t accept a ride before checking the other service. Sometimes one service will charge double or triple rates while the other service is not increasing prices at all.

Staying Safe Using Insecure Marketplaces

By: Glenn Sellers 

The rise of online shopping has been a huge boon to consumers. Prices, availability, and selection have never been more favorable. Most shopping interfaces are relatively safe for consumers and require little thought in terms of whether to trust a retailer. Places like Amazon, eBay, and other major online marketplaces offer assurances that goods will conform to quality standards and act as financial mediators for when there are disputes. For example, if one buys a product on Amazon and it doesn’t meet standards or never gets shipped, the consumer has avenues available within Amazon to seek a remedy.

Some marketplaces don’t afford these luxuries though, namely ones where individuals buy, sell, and trade goods and services without a robust intermediary. Places like Craigslist and other “classifieds”-style interfaces can be a true haven for bargain hunting, but without the safeguards offered by more mainstream marketplaces, consumers are at serious risk. For those who need markets like this or simply prefer them, here’s some advice that can allow one to avoid scams:

  1. Shop locally. It may be tempting to cash in on a great deal and have it shipped across the country, but often these deals are too good to be true. Try to always see what you’re buying in person. Scams right now commonly involve long-distance transactions.

A common place where consumers deviate from this rule is renting. When people move far away, they often want to ensure they have a place to stay before getting there. There are plenty of consumers who have made a deposit on a room or apartment across the country, moved there, and had no problems. There are also scores of consumers who have had worse luck, finding the “lease” they signed was for a place that either the seller didn’t own, or didn’t exist at all. To avoid this, either travel to see the place before making a payment or have a friend in the area do it for you. If this isn’t possible, consider staying in an inexpensive motel or hotel while looking for a place to rent. This may be less than ideal, but it’s certainly far less expensive than losing hundreds or even thousands on a fake deposit.

  1. Pay with card or check. While the former may not have been an option years ago, the rise of mobile applications like Venmo have made it possible to pay anyone with a smart phone and a bank account via credit or debit. Regardless of whether you use card or check, if something goes wrong at least there will be an institution to help you out and possibly issue a refund. Absent theft or fraud, many institutions won’t be able to issue a refund, but it’s best to at least have some sort of record of the transaction. Paying with check is especially helpful in this manner, as you can call your bank and stop payment on the check if you notice the problem quickly enough.

For smaller transactions, it’s usually safe to pay with cash, and many legitimate sellers may even find it unusual or refuse anyone who wishes otherwise. A general rule of thumb is to think twice about any transaction in cash if you’re not okay with that sum of cash going up in thin air if something goes wrong.

  1. Don’t give out any more personal information than required. If a far away renter or car seller asks for your social security number, bank account number, or other sensitive information, refuse. This may seem intuitive, but many people mindlessly fill out forms every year, giving out this information without second thought. Stop and think whether you know you’re engaging in a secure transaction whenever filling out a long form.
  1. Make sure to get proper documentation before completing large transactions. For example, stolen cars have turned up for sale on the internet mere days after being stolen. If you’re buying a car or motorcycle, make sure the seller has the bill of sale and it’s in their name; you can ask for their driver’s license to ensure this. Be wary of any seller that refuses to authenticate their goods or services.

The Telemarketing Terminator

By: Michael Havlik 

Telemarketers seem to target anyone with an active phone number, and their annoying and untimely solicitation calls are usually as appreciated as a fellow movie-goer chewing popcorn with his mouth open. “I’m not interested” might buy you a month or two of respite, but telemarketers seem to use Arnold Schwarzenegger’s famous catchphrase, “I’ll be bawck…” as their unstated selling motto. Their business model, after all, is simply a numbers game: if they call (bug?) enough people, a few might take the bait.

This problem disproportionately affects senior citizens because publicly available phone numbers are usually home phone numbers. According to a recent government study, more than 4 in 10 households have cut the cord—the landline telephone cord, that is. Still, and not surprisingly, seniors over the age of 65 are far more likely to own and use a landline telephone as compared to younger folk, with over 85% of seniors’ homes still attached to their corded phones (pun very much intended).

The Colorado Telemarketing No-Call Law, in concert with federal laws, gives some relief to Colorado seniors—and indeed, everyone who owns a phone and dislikes telemarketing calls. Under Colorado law, home phone and wireless phone customers can place their numbers on a “No Call List” free of charge. Telemarketers are prohibited from calling your number if it is on this list, unless they have an “established business relationship” with you. (Charities and other non-commercial organizations, however, are not subject to the Colorado No-Call Law.) Additionally, federal Telemarketing Sales Rules give you the right to tell companies that have an established business relationship with you to still put you on their internal “Do Not Call” lists.

You can sign up for the Colorado no-call list by calling (800) 309-7041, or registering online at www.coloradonocall.com. For further protection, add your home or cell phone numbers to the national Do Not Call list at www.donotcall.gov, or by calling (888) 382-1222. If telemarketers continue to call you, report them to the Attorney General or your district attorney’s office. You can even sue offending telemarketers in Small Claims Court under the Colorado Consumer Protection Act if you are on the No Call List.

These laws protect consumers from intrusive telemarketing solicitations, and by availing yourself of the Do Not Call Lists, say good-bye…er, “hasta la vista, baby” (a la Schwarzenegger) to the telemarketers contacting you!