Dangers of Credit Cards
This article opened my eyes to the dangers of credit card use. It lists the “Top 10 Hidden Dangers of Credit Cards.” Here are the top three:
1. The universal default penalties. Card issuers regularly check their customers’ credit reports for late payments on any of their bills. Any late payment can be used as an excuse to trigger a hike in your credit card’s interest rate, even if you have never made a late payment to the card issuer.
A recent study by Consumer Action, a San Francisco-based consumer advocacy group, found that 44 percent of credit cards had universal default penalties in 2004.
2. Bait-and-switch card offers. Direct mail offers generally advertise the issuer’s premium card at an eye-popping low interest rate, while the fine print says the company can issue a more costly non-premium card with a higher annual percentage rate if you fail to qualify for the premium card. Just because you apply for a card with a low rate doesn’t mean the card that shows up in the mail actually carries that low rate.
3. Shrinking grace periods. Historically, grace periods — the time during which your transactions don’t accrue interest — were 30 days long. They now average 23 days, and some issuers have whittled the grace period to 20 days. Some cards have no grace period at all.
To see the other 7 hidden dangers of credit cards, click here.
Strange Tax Deductions
If your are currently stressing out as you try and finish your taxes for Friday, take a break and read these humorous and strange tax deductions that Americans have tried to get away with:
My son, my dog
Disc jockeys typically don’t make much money and save even less. A few years ago, one approached Wyoming CPA Mike Lovelett for some free advice.“I’ve got this problem, and I’m really starting to get nervous about it,” the DJ admitted. “Several years ago, I was going to owe some tax, so I put an extra deduction on my tax return.”
Well, reasoned Lovelett, managing director of Lovelett, Skogen & Assoc. in Casper, it couldn’t be that bad. Then the DJ explained: “I put my dog on as a dependent.” The radio personality had deducted his dog Red all these years, a move that meant he owed nothing to the IRS.
Sex and the city
Then there was the client who approached Manhattan CPA Marc Albaum about a very personal tax matter. “He had made some money being a sperm donor and wanted to know if he could take a depletion allowance,” Albaum recalls. “I told him he really needed to be an oil well or something like that.”Playing with fire
Herb Wakeford, a CPA in Raleigh, N.C., recalls a Pittsburgh furniture-store owner who, after years of trying unsuccessfully to sell his business, hired an arsonist to torch the place. The insurance company paid off to the tune of $500,000, which the owner dutifully reported on his income tax return. However, along with taking the proper deductions for the building, its contents and the usual business expenses, he also deducted a $10,000 “consulting fee” he had paid the arsonist. An IRS audit two years later landed them both in jail. The IRS disallowed the “consulting fee” and slapped on $6,500 in additional taxes, penalties and interest.See the rest of “The 9 Weirdest Tax Write-offs.”
Find the Credit Cards with the Lowest Rates!
Optimize Your Credit Card
If you are paying high interest rates on your credit card, you may want to apply for a new, lower interest credit card. The following companies offer attractive credit card rates that can lower your monthly credit card bill and help you pay off your credit card debt. If you have trouble getting a credit card, it may be because of a blemished credit report.
To find the credit card that is right for you, use the search form below to filter through the credit card offers that meet your needs. For example, if you’re looking for a poor or bad credit credit card select "poor credit". If you are looking for a student credit card, select "student". You can also choose from rewards cards, foreign cards and several other types. If you are looking for a low interest rate credit card, you can search by APR or you can go directly to the credit card directory where you can sort by APR, annual fee, rating or credit card name. Or, if you’d prefer a customized list of the best credit cards to apply for, you can answer a brief questionnaire.
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Credit Card Debt Buster Kit
Stay Out of Credit Card Debt
Although most people agree with me on this, many people find themselves falling into credit card debt and facing large monthly debt bills. In fact, credit card debt negatively affects a lot of people’s long-termwealth and it is very important that you get out of debt.
In my opinion, the real problems with credit card debt are the
following:
By purchasing goods before you have earned them, you are in effect borrowing from the future to pay for the present. In essence, it’s the exact opposite of saving or investing and instead of earning money you are paying interest.
Interest rates on credit cards are typically much higher than savings rates and even higher than many alternative investments (like stocks, bonds or CDs).
By carrying big balances on credit cards many people feel that it is hopeless to try to pay them off, so their balances continue to rise. Remember that every bit you pay down makes it easier to pay the rest down.
Once you get into credit card debt you fall further and further behind because in addition to funding current expenditures, you also need to pay for the previous expenditures that are already on your credit card.
If you are already in credit card debt, don’t worry. Follow these
rules to get out of debt, and be patient:
Never forget that even paying down a small portion helps. The more you pay down, the easier it is to pay the rest because there is less interest due each month.
ALWAYS pay more each month on your credit card than what you spend on your credit card. If possible, discontinue using your credit card and start paying for your purchases in cash, and only when you have the money.
Don’t lose sight of the big picture. It’s often discouraging because it seems like it will take forever to get out of credit card debt. Don’t get discouraged. Think about how nice it will be to start sending those credit card payments to your savings or brokerage account each month when you’re out of credit card debt.
If your credit card rates are high, try calling your lender and asking them to reduce the rate. You’d be surprised. I’ve heard of companies reducing their rates from as much as 18% to as low as 7-9%.
Sometimes it pays to transfer balances on your credit cards to lower interest rate credit cards. This is usually a good idea but be careful for two reasons:
1) these low balance transfers often expire in a few months at which point the interest rate may be even higher than your previous rate,
2) new purchases made on these cards will carry the standard interest rate (which is much higher than the balance transfer rate). As you make payments, they will be applied to the low balance transfer portion first.
If you find yourself with more payments than you can handle, you may want to refinance your debt with a lower interest rate loan. Sometimes these loans can cut your interest rate in half or more, especially if they
can be backed by your assets (car, home, boat, etc.).
If you have trouble getting a low interest rate loan, it may be advantageous to consolidate all of your loans into one payment or to work with a debt consolidation company to lower both your debt and your debt payments.
The Ultimate Dream: Can You Retire Early?
How Much Money Do You Need to Retire Early?
This is really an amazing table to look at! Depending on your age and your lifestyle, you need to save a lot of money to be able to retire early.
There are two important factors that make a difference in how much money you need to retire early: how many years you’ll be retired; and how much money you need each year. The third factor, which is also important, is the rate of return that you will earn on your retirement savings. The chart below assumes 6%, which is the historical average rate of return for very non-risky assets. If your time to retirement is very long, you should be able to invest in slightly riskier assets and get a higher rate of return than 6%.
How to Read the Table.
The table below shows how much money you’ll have to save to retire early. Notice that if you only need $20,000 per year to live on, you can retire with a relatively small amount of money. However, if your lifestyle requires more (which it likely does), you’ll have to save significantly more money to retire early. Also notice that the earlier you retire, the more money you’ll need.
Money Needed to
Retire, Given Number of Years to Live and Annual Income Desired
(assumes a 6% return on
retirement savings)
|
Years to Live |
$20,000 | $25,000 | $30,000 | $35,000 | $40,000 |
| 50 Years | $316,862 | $396,078 | $475,293 | $554,509 | $633,724 |
| 45 Years | $311,083 | $388,853 | $466,624 | $544,395 | $622,165 |
| 40 Years | $303,276 | $379,094 | $454,913 | $530,732 | $606,551 |
| 35 Years | $292,729 | $365,911 | $439,093 | $512,276 | $585,458 |
| 30 Years | $278,482 | $348,102 | $417,723 | $487,343 | $556,964 |
| 25 Years | $259,236 | $324,045 | $388,854 | $453,663 | $518,472 |
| 20 Years | $233,237 | $291,546 | $349,856 | $408,165 | $466,474 |
| 15 Years | $198,116 | $247,645 | $297,174 | $346,703 | $396,231 |
| 10 Years | $150,671 | $188,339 | $226,007 | $263,675 | $301,342 |
| 5 Years | $86,580 | $108,225 | $129,870 | $151,514 | $173,159 |
Money Needed to
Retire, Given Number of Years to Live and Annual Income Desired - Continued
(assumes a 6% return on
retirement savings)
|
Years to Live |
$45,000 | $50,000 | $75,000 | $100,000 |
| 50 Years | $712,940 | $792,155 | $1,188,233 | $1,584,310 |
| 45 Years | $699,936 | $777,707 | $1,166,560 | $1,555,414 |
| 40 Years | $682,370 | $758,189 | $1,137,283 | $1,516,378 |
| 35 Years | $658,640 | $731,822 | $1,097,734 | $1,463,645 |
| 30 Years | $626,584 | $696,205 | $1,044,307 | $1,392,410 |
| 25 Years | $583,281 | $648,090 | $972,135 | $1,296,180 |
| 20 Years | $524,783 | $583,093 | $874,639 | $1,166,185 |
| 15 Years | $445,760 | $495,289 | $742,934 | $990,579 |
| 10 Years | $339,010 | $376,678 | $565,017 | $753,356 |
| 5 Years | $194,804 | $216,449 | $324,674 | $432,898 |
DON’T Pay that Bill!
When I read this article, “When Paying Bills can Hurt Your Credit,” I knew I had to share it with everyone. I never knew that you could do yourself more harm than good by paying off your old debts.
When paying bills can hurt your credit
Now that you’ve decided to clean up your act, use caution: Settling some old debts can harm your credit score. Here’s how to do the right thing the right way.
By Liz Pulliam Weston
Borrowers who try to pay off old delinquencies, charge-offs and collection accounts often learn the hard way: Sometimes, doing the right thing does the wrong thing to your credit.
Thanks to the sometimes bizarre quirks of credit scoring, state statutes of limitations and the federal Fair Credit Reporting Act, consumers can’t necessarily assume that paying off old debts will improve their financial situation or make them a better risk in lenders’ eyes. Add in the tactics of some unethical collection agencies, and you have a real quagmire.
“It seems so easy, but it’s not,” sighs Steve Rhode, a private money counselor and co-founder of the Rockville, Md., credit-crisis counseling firm MyVesta.org.
Here are just some of the problems that can arise:
If a creditor has already charged off an account and sent it to collections, paying may not help your credit score and might hurt it.
Arranging a payment plan or even inquiring about an old debt can restart the statute of limitations in some states, allowing creditors to sue you.
Simply contacting a creditor about a past-due account can revive its interest in trying to collect, leading to harassment and hardball tactics.
Unethical collection agencies may promise to upgrade how your debt appears on your credit report in exchange for payment — then not follow through or make matters worse by making the debt seem more recent than it is.
Taxpayer Mistakes
This article, Unlucky 7: The Top Taxpayer Mistakes, is a must-read before you turn in your taxes this week. Some of the mistakes are: bad math, forgetting about interest and dividends, losing receipts, and forgetting to donate unwanted items to charity before Dec.31.
If this article is too late to help you this year, there’s always next year. 
Tax Deductions for Homeowners
Taxes are due this week! (AHHH!) This is an article I found through MSN.com about common tax deductions that homeowners forget about:
10 Commonly Missed Tax Deductions for Homeowners
By Robert J. Bruss
Content provided byHave you ever forgotten to claim a tax deduction until after you sent your tax returns to the IRS? I have. Several times, in fact. The result was that I later filed an amended tax return on IRS Form 1040X.
One time, while cleaning out a desk drawer, I luckily discovered a substantial forgotten tax deduction I should have claimed on my tax returns filed two years earlier. Fortunately, tax returns can be amended up to three years from the date they were due.
But it’s better to claim all the deductions when the tax return is filed because amended tax returns often trigger a tax audit before the IRS will issue a refund check.
Especially if you bought, sold or refinanced your home, you might have forgotten to claim some big tax deductions. Here are the most often forgotten real estate tax deductions:
1. Deduct principal residence acquisition mortgage fee if you bought a home last year. If you bought your principal residence last year and if you paid the mortgage lender a loan fee, usually called “points” (each point equals 1 percent of the amount borrowed), that “home acquisition mortgage loan fee” is tax deductible as itemized interest on Schedule A of your tax returns…
2. Remember to deduct home mortgage refinance loan fees over the life of the home loan. If you refinanced your home loan or obtained another type of real estate loan, any loan fee or points you paid can only be deducted over the life of the mortgage, such as 15 or 30 years…
To avoid the hassle of remembering to deduct the small loan fee amount each year for 15 or 30 years, many refinancing home loan borrowers prefer to pay a slightly higher loan interest rate. Another reason to avoid paying a loan fee when refinancing is most home loans are paid off in less than 10 years, either due to property sale or a subsequent mortgage refinance.
3. Deduct undeducted loan fees from a prior home loan refinance. If you refinanced a previously refinanced home loan, don’t forget to deduct any remaining undeducted loan fee in the tax year of the second refinance…
Debt Statistics
I thought I’d share these “Scary Debt Stats” that I found on Fool.com. At least we know we’re not alone.
Scary Debt Stats
$1.7 trillion
Total consumer credit.$8,562
Credit card debt carried by the average American.$50 billion
Total finance charges Americans paid in 2001.$1.6 billion
Market capitalization of AT&T — the entire corporation.78%
Percent of U.S. households deemed “credit worthy” by the lending industry.1.3 million
Number of credit card holders declaring bankruptcy last year.
Understanding Diversification
At 23, I am completely lost when it comes to the world of investing. I have very, very basic knowledge on the difference between stocks and bonds, and that’s about the extent of my investment knowledge. So, in an attempt to educate myself and any of you who are similarly uninformed, here is a great explanation of diversification that I found through Yahoo!Finance:
Diversification means building a portfolio that includes securities from different asset classes. Since bonds tend to do well when stocks don’t, you could construct a portfolio that includes a certain percentage of stocks and bonds. This helps ensure that at least a portion of your holdings is always doing well.
Another way to diversify is to buy securities in the same asset class that are not affected by the same variables. For instance, entertainment companies, utilities, grocery stores, and airlines are completely different businesses. Depending on the country’s economy, one or more of these industries might tend to perform better than the others. If you build a portfolio that includes securities from a number of sectors, chances are that one or more would always be doing better than average.
When you diversify, you try to ensure that at any given time, the value of some of your holdings might be down, and some might be up, but overall you’re doing fine. The trick is to find securities that don’t have tendencies to increase or decrease in price at the same time.
The trade-off for the balancing of risk and return in a diversified portfolio is that your overall return might be somewhat lower than you could get in an undiversified portfolio. However, along the way, a diversified portfolio will have less volatility, and steadier returns.
Diversification does not eliminate risk, however. It is merely a tool that can reduce the risk you face with your investments.