Mar 18

A guest post from Joshua Rodriguez –
These days, the average American is no stranger to credit card debt. In fact, we love using our credit cards. But, after war and world-wide financial recession, many of us are starting to re-think our decision to use our cards so frequently. The truth is, more and more consumers these days are becoming interested in paying off their credit card debts. Although, at first glance, this task can seem a bit overwhelming, the truth is, it’s not that difficult. All it takes is a plan and you committing to it! Come on, I’ll walk you through it…

A Step By Step Guide To Getting Rid Of Your Credit Card Debts

Step #1: Preparing For The Battle – I’ve never heard of a fighter winning the belt without preparing first. The truth is, not using your credit cards is going to be a battle best fought with the right weapon. In this case, that weapon is your credit card profile. All this is is a list of your debts. In your list, you should include lender names, balances, interest rates, minimum payments, customer service phone numbers and pay-to addresses for each of your credit cards with a balance.

Step #2: Taking Advantage Of Your Qualifications – The lending industry is a very competitive one and, if you are a customer that is known for paying on time, they will compete for your business. One way that lenders do this is through balance transfer credit cards. If so, check out the market to see if there are any offers that provide lower interest rates than the rates you are currently paying. If so, apply and transfer your balances to lower long term rates!


Step #3: Commit To A Constant Payment – Your credit card minimum payments are based on your balances. When paying off your debts, this is a crucial factor. If your payments go down every time your balance does, you will NEVER pay off your credit cards! Your best option is to come use an aggressive plan of attack known as the constant payment plan. To do so, add up all of your minimum payments. Now ask yourself, “Is this all I can afford to send? Can I comfortably send extra?”. No matter what you decide, write down the total amount of money you can comfortably afford to pay towards your credit card debt. Now, you have to commit to sending no less than this month’s payments until your debts are completely paid off. If you do, you stand to save hundreds or even thousands of dollars in interest charges over the life of your debt. Which, will now be years less!

Step #4: Go After Your Highest Interest Rate First – Now that you have decided on a constant payment, it’s time to make sure that you get the most out of that payment. To do so, we need to attack the highest interest rate first with the debt stacking plan. Stacking your debts is a very easy thing to do. After all minimum payments are made each month, send an extra payment to the highest interest rate account with the remaining funds in your constant payment. By sending all extra funds to your highest interest rate debt, you will quickly pay it off. Once this happens, send all extra funds to your next highest interest rate. Continue to do this until all of your credit card debts are completely paid off!

The End Result

As a personal credit card debt consultant, I have seen this plan save quite a few people thousands of dollars and years in time paying off their debts! By following this plan, you will reduce your interest rates to the lowest rates you qualify for and attack your highest interest rates with aggressive payment plans! All it takes is a bit of commitment on your end and you will be debt free in no time!

About The Author – Joshua Rodriguez – This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance. Join the discussion about this article on Google+!

written by Joe \\ tags: , ,

Jan 28

For nearly all my adult life, I’ve been using one sort of Reward Credit Card or another. It’s one thing to get miles you may have a tough time using, and quite another to watch as a 529 college savings account funded with these rewards is on track to pay for a full semester of my daughter’s college. I’ve ignored the series of articles that reference “studies that prove consumers spend 12.3% more on credit cards than with cash.” It’s not that I think such things are possible. Nor do I think myself immune to the attraction of the impulse buy. It’s simply that there is no study I’ve found which offers real world data. Giving college students $20 and a $20 gift card to compare behavior isn’t the kind of study that will convince me of anything.

That said, I don’t kid myself into believing there’s no cost to this. The money in that 529 account came from somewhere. I’ve always known that the credit card companies are making money both on the interest  paid by those who carry a balance month to month, and from the fee they charge the merchants to process the transaction. One can rationalize that I’m getting back the money the bank charged the merchant or that the merchant’s profits are lowered by picking up the tab. Worse, others have suggested that the merchants are all forced to charge more and prices are all a bit inflated due to the bank’s fees.

The banks also required the merchants accepting their credit cards to not charge extra for credit transactions. In a victory of the Merchants vs The Banks, this was deemed illegal, and starting yesterday, merchants are allowed to add a ‘swipe fee’ for card usage. Interesting to note that ten states have laws restricting any type of surcharge fees: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.

My advice if you don’t live in one of these states is to pay close attention. Stores that plan to charge an adder for a credit card transaction need to post it clearly near the register. If the fee is more than your reward, you might wish to consider going back to cash. (Except for the fragile tech tech purchase on a card that offers a year’s damage protection. That’s worth every bit of a percent or two to me.)

written by Joe \\ tags: ,

Nov 09

A guest post by fellow Personal Finance Blogger, Mike –

Back when I was a kid, there was a friend of mine whose family owned a restaurant in town. One day while visiting, I remember hearing the father harp about credit card payments. Was he ranting about the 1-3% surcharge? Nope. He was whining about the fact that he was forced to pay taxes on those transactions (or in other words, he couldn’t break the law and make money under the table with them).

In the years since, the battle over card payments have only grown stronger. You rarely hear a company like McDonald’s, Target, or even a mid-size chain complaining, but rather the mom and pop businesses; independent liquor stores, gas stations, dry cleaners, eateries and the like. Which has naturally led me to wonder – How much of this hoopla is about the actual fees? And how much of the card hating has more to do with small biz owners paying Uncle Sam his fair share?

The argument for small businesses

On one hand, I sympathize with the mom and pops. Keeping a small business out of the red is hard enough as it is, so any fee or expense is a burden. This is especially true for small transactions, whereas the percentage paid for processing is higher. There’s the inquiry fee (say, 12 cents) and then the percentage fee (2% for example). On a $100 purchase that would only be $2.12 (2.12% of the price). However if the customer were just buying a $1.50 bottle of soda, then 2% plus 12 cents = $0.15 (which is a whopping 10% of the purchase price). Sure enough, the industries which are affected by this model the most seem to be those who are most vocal in complaining – the convenience stores, gas stations, and so forth.

Another obstacle for mom and pop businesses is that they have little to no negotiation power. That being said, the wiggle room is not as large as you may think. The card’s issuing bank (e.g. Citi) and the payment network (e.g. MasterCard) get the lion’s share. The portion that can typically be negotiated is the piece of pie that the processing service gets, which is a sliver. So while it’s true big business pay less, the difference might not be as drastic as you think. However the uber-big (think Walmart and Costco) do sometimes have the ability to negotiate the payment network’s cut, too.

Lastly, to say the fees are confusing for a mom and pop would be an understatement. There are multiple risk tiers, which all cost different rates. Take an online retailer, who would probably pay a higher rate than a restaurant where the card is physically swiped. To further complicate matters, different cards have different fees. For example, my business credit cards and Joe’s 2% cash back card are amongst the most expensive to process. All of this can lead to sticker shock each month, when the business owner sees just how much they’re forking over for those card transactions.

The argument for banks

For the pro-credit card camp (which admittedly, I am a part of) there are several aspects which even the naysayers must at least consider.

For starters, credit cards are a service that must be paid for. While it’s true that some people carry a balance and pay interest, the majority of cardholders pay their bill in full every month (Joe and I being two such examples). The fraud protection, insurance benefits, cash back, travel rewards, customer service, printed statements, and other expenses must be paid for somehow, right? Well that’s where those processing fees come in handy.

Secondly, thanks to Senator Durbin, businesses small and large have the ability to now place a minimum spend requirement on debit and credit card purchases (before the payment networks wouldn’t allow that). So that $1.50 soda conundrum can be circumvented by imposing a $10 minimum. Problem solved.

Third, there’s a good reason why you don’t see big business rallying against the card industry. Why? Probably because they’ve discovered that cards encourage spending. A few years ago when McDonald’s was trying to decide whether or not to accept plastic, they ran a pilot program and reportedly found that the average transaction size rose from $4.50 to $7.00 when paying with a card. After the discovery, they rolled out card acceptance nationwide in a hurry. Reportedly there is also a Dunn & Bradstreet study out there which claims a 12-18% increase with credit cards, though I have yet to read it myself. Either way, there is ample evidence to suggest that more will be spent. Is it worth paying 2-3% in fees for your business to rake in significantly higher purchase volume? You be the judge.

The argument for taxes

Last but certainly not least, we come to the taxes. If you’re up for some reading, check out this 30+ page article titled Cash Businesses and Tax Evasion. It was authored by three faculty members from various law schools in California. Nearly 275 interviews were conducted with cash business owners, as well as their tax preparers and bankers. They offer a fascinating insight into how cash payments from customers and to suppliers are used to grossly under-report income. The paper concludes:

ìCash business owners rely on parallel cash economies to under-report receipts and thereby evade income, employment and sales taxes. Many preparers in this sector adopt a “don’t ask, don’t tell” attitude toward their clients reported receipts. A small minority of preparers, however, actively aid in their clients’ evasion. Evasion seems best explained by opportunity, including the low-perceived likelihood of detection and penalty, and by peer norms. The perceived equity of the tax system has less importance, and the complexity of the tax law does not appear to play a significant role.î

While each page is riddled with example after example of how cash is drastically under-reported, the finding for credit card payments are a stark contrast: ìmost interviewees reported that credit card receipts were generally reported as taxable revenue.î

Going back to the industries mentioned above which appear to be most against cards, I find it interesting that they also seem to be the mom and pops who, historically, have largely been cash-based. While I sympathize with the high cost on processing small transactions, I find it ironic that large chain eateries (who are more likely to report all income, regardless of source) seem to feel the complete opposite ñ they love credit cards, even for the small transactions.

So which is it?

So that brings us back to the question, is it really the fees on the bottom line? Or the fact that card payments make tax evasion tough to pull off?

This post was written by Mike, the guy behind Credit Card Forum. Thanks, Mike, you looked at this topic from an angle that never really occurred to me before, very interesting.

written by Joe \\ tags: , , ,

May 15

Let’s start this week with the latest and greatest from my fellow Money Mavens – first Craig Ford explains Mutual Fund Investing Vs. Index Fund Investing. Craig will teach you the important distinctions that can help maximize your investments.

Monevator discussed Pay off the mortgage or invest? A well-reasoned, balanced discussion on this topic. The decision isn’t always so clear cut.

At The Military Wallet, Ryan offer the Best Military Credit Cards. I think as long as you pay the card off in full, credit cards are a great tool to help manage your finances. Not quite the devil’s tool The Dave makes them out to be.

Tom Drake, my Maven friend to the north wrote What To Do With Your Tax Refund. A great list of ideas for your refund or really, any found money, a bonus check, inheritance, etc.

Back on the subject of mortgages, Len Penzo wrote The 15-Year vs. 30-Year Mortgage Debate: Why 30 Is Better. Lot’s of comments on that controversial idea. For a multitude of reasons, I’m in agreement with Len.

Another article I enjoyed – 6 types of purchases you should always charge on your credit card. The anti-card gang ignores some of the protection that most good credit cards offer you.

written by Joe \\ tags: , , ,

May 20

I just wrote about debit card fees a couple weeks back, and my timing couldn’t have been better, although the Times always manages to produce a better chart.

This past week the New York Times reported Debit Fee Cut Is Rare Loss for Largest U.S. Banks. The article didn’t specify the exact changes that were voted on, as with any new regulations, they tend to run 1000 pages and be buried in fine print. As I discussed, and you can see above, debit card fees, while slightly lower than credit, are still based on the value of the purchase (thus my article’s catchy title “Ad Velorem Debit Card Fees”) while the true cost doesn’t change.
Beware, however, the unintended consequences of this set of regulations. Regardless of the savings the business and customer will enjoy, the card issuer will seek to make up that revenue. However they do it, it will come out of our pockets.
Currently, debit/credit card issuers have their own rule that merchants are not permitted to enforce a minimum purchase to use the card, e.g. “$10 minimum for charge purchases.” While I agree it can be convenient, it’s a burden to the store to process a charge for much under $5. The regulation will permit stores to set a minimum.
Let’s see how this story plays out. What do think of it so far? Will it help? Will it cost you?

written by Joe \\ tags: ,