JoeTaxpayer

As you know, this past Friday was Black Friday, and today is Cyber Monday, when the big online shopping deals start to sprout.

So, in keeping in the spirit, I offer this link to a great magazine deal. In one of my posts regarding how to find the extra money to save or pay down credit cards, I suggested that one of the first steps is to look at one’s magazine purchases. It’s easy to drop $10 each week without paying too much attention. One magazine offered is Entertainment Weekly. $3 per week in the supermarket, $10 for a year on this deal. If you only buy it once a month, that’s still $36, and you’ll still save $26 over the course of a year. This deal is scheduled to end on December 11.

Joe

written by JOE \\ tags: black friday, Credit, credit card, credit cards, cyber monday, frugal, money

Not a major Faux Pas, but one that can cost you if you are playing the float on zero interest credit card loans.

For those of you not familiar with this, let me start with a description of what I am discussing. Despite the state of the economy and credit crunch we are in, a number of credit card issuers are still offering zero interest cash withdrawals for as long as 12 months, and some with no transfer fees. The no-fee deals make it tempting to borrow the money, put it in a CD, and just pay it back when the zero rate comes to an end. Of course, this is not for everyone. You set yourself up for the risk of a missed payment, (in my case I set up monthly automatic payments on line), or the temptation to spend that money instead of putting it into a CD. For others, the credit line offered isn’t high enough to justify the effort.

Now, to my recent mistake. When you have an outstanding zero interest loan, any new charges are typically incurring the standard interest rate. So, with an outstanding zero interest loan, I forgot that I had this same card set up to charge my eBay account seller fees. I recently had a sale that had a fee of $2.47. So this amount will accrue interest until I pay this card off in January. Now, interest on this tiny charge would normally be about three cents per month, but BOA credit cards have a minimum $1.50 per month finance charge. So the account will be subject to $7.50 in finance charges over these five months or about 1450% when annualized. Not enough to cancel out the interest I earned on this deal, but enough to offer this as a warning. If it’s early in the free year, and you accidentally pull out the wrong card to make a large purchase, you may find you’ve just negated the saving for the whole year’s deal.

(To be clear, I have no issue with BOA, their rules are clear, the $1.50 min finance charge is stated on their agreement as well as on the checks I used to draw the loan. This is just one of the ‘got ya’s to watch out for.)

Joe

written by JOE \\ tags: Credit, credit card, credit card loans, credit cards, Finance, finance charges, interest, interest rate, loan, money, saving

Last September I wrote a post titled “Zero Interest Redux” in which I discussed the impact to one’s FICO score and how borrowing large sums off a credit card at zero interest can hurt your score in the short run. In May, I posted “Free FICO Score” about my discovery that WAMU (Washington Mutual) offered free access to your FICO score if you are a credit card holder.

The access to the report has been a bit sporadic. I was able to pull a number in April, but then no access till July when I received my warning email that my score “had changed more than 20 points.” Fair enough. The April score was 746. Since then I pulled one more $30,000 zero interest loan, and put it against my mortgage. The zero interest deal was for 24 months, and we’ll be able to pay it in full when it comes due. I also added a credit card which offered higher airline miles, a CitiBank Amex card, in addition the CitiBank Visa we had. So I went to the WAMU site, and much to my surprise, my score was up to 773. Even so, it offered suggestions as to how to raise it further;

1. The proportion of balances to credit limits on your revolving/charge accounts is too high
Analysis of consumer credit behavior repeatedly finds that owing a substantial balance on revolving/charge accounts (Visa, MasterCard, Discover, American Express, Diners Club, department store cards, etc.) relative to the amount of revolving/charge credit available to you represents increased risk.

2. The time since your most recent account opening is very recent
Research shows that consumers who have recently opened new credit accounts are slightly more likely to miss payments than those who have not. This is not an especially strong risk factor, and therefore usually means a difference of no more than a few points in a consumer’s FICO score.

That first one is interesting, they go on to suggest “Bear in mind that even if you pay off your credit cards in full each and every month, your credit bureau report may show the last billing statement balance on those accounts” Which means that giving up the float (the time from when the bill is cut to the time it’s due) or some portion of it, will help your score further. Let’s look at the math on that. If you are earning (or paying) 5% as the cost of capital, $1000 will cost you $2.75 for a 20 day float. If your credit card bill is $3000 each month, that’s about $8.25/mo to improve your FICO score. To be clear, this suggests that you make a payment before the bill is cut, so whatever you spent over the month does not show as a balance due.

The alternative to this would be to contact the issuing bank and request a credit line increase, or to use multiple cards, keeping the maximum balance on any one card below about 30% of its credit line.

Joe

written by JOE \\ tags: Credit, credit card, credit cards, department store cards, fico, free fico score, interest, irs, loan, Mortgage

Last September I wrote about a zero interest credit card offer I took advantage of. I took the money and bought a CD, pocketing $1000 interest in 6 months time. I received a few comments and questions, centering around how this would impact my credit score. I offered a chart showing how the score is impacted, in general, but couldn’t say for sure the precise impact of any one action on the score. That would take regular access to the score itself, which through MyFICO, would cost nearly $50/yr. Now, I discovered a free way to have regular access. It seems that WAMU (Washington Mutual) offers such access to their credit card holders. The card has no annual fee, and you just click through a link to see your score. They offer an option to get email notification if your score moves by more than 20 points. Combine this with a regular request for your full credit report, and you have a good plan to monitor your credit health

Joe

written by JOE \\ tags: annualcreditreport.com, Credit, credit cards, credit report, Equifax, equity line, Experian, Finance, lend, loan, Suze Orman, TransUnion

Some time back I made some remarks on my main site regarding some of Suze Orman’s advice. Long enough ago that it now has been moved to The Archives. A regular reader of mine wrote that those posts appeared to be mean spirited, and I edited to change their tone a bit and also stopped with new posts in that direction.

Now, I just had the opportunity to see a CNBC special she did for Martin Luther King Jr. day when my recorder is set to record Kudlow & Co. I must say, she was right on the mark with one great answer after the next.

• Do I pay off the small balance or high interest credit cards first? She replied,”Anyone who tells you to do anything but pay the high interest cards first is an idiot!” Well, right on, Suze. I’ve said this is the one flaw of the ‘debt snowball‘, and I’m glad you agree.
• She advised to deposit enough to one’s 401(k) to capture the company match. Again, I’ve been preaching the same message.
• She advocates Roth for those starting out and how it can serve double duty as an emergency fund, exactly as I remarked last month in my post ‘Roth Magic‘.
• Lastly, she stated most emphatically, that the only people Variable Annuities were good for was the salesmen who sold them.
• I’ll also admit that even though I disagree that one should ever invest 20% of their money in gold, Suze called it right in her advice of July 2006. Gold was about $640 then, $925 now.

I don’t know if she changed her approach a bit or I just happen to catch a good show, but today I liked what I saw.

JOE

written by JOE \\ tags: credit cards, debt, Finance, mild bagel, Suze Orman