JoeTaxpayer

My family and I drove back to Massachusetts this morning from a graduation party in NY for my cousin who finished college. I wish her nothing but success, in this case in graduate school. A year ago, I posted a political cartoon on Graduates Entering the Job Market, unfortunately, that market for new hires hasn’t picked up as much as I’d hoped. What advice are you giving your new grad?

Joe

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?
Joe

We are now in our house 14 years. We are on our fourth mortgage and I just submitted an application for what should be one last refinance. We started with a 30 yr fixed rate at 7.625%. Fixed, because I remembered the inflation of the late 70’s even though I was a teenager at the time, and 30 year as we were planning a child and knew there would be some expenses early on that would later go away. Fortunately, rates were falling and within two years we dropped the rate to 6.75%, keeping the balance pretty much the same. But, as rates fell further, and the expense of the nanny went away, we paid a nice chunk to principal, refinancing to a 20 year at 5.65%. In 2004, the 15 year rate was low enough, 5.24%, that for just a slightly higher payment, we went from the remaining 18 years down to 15. Now, with 9 years left, the same bank is offering  a 4.99% 10 year loan. The bank took the application over the phone and I expect to hear back within a day or two.

Crazy, right? Each refinance was with no costs. Zero. On a $200,000 mortgage (for example) normally the closing fees would be $2500 or more, so a 1/4% savings would make little sense, breaking even in 8 years when you plan to pay it off in 7. With no fee at all, a $25/mo savings is worth it to me. $2100 over 7 years for 15 minutes of my time on the phone, and maybe a half hour to sign the paperwork at the bank. This product, and my prior refinanced were all called Home Equity Loans, fixed rates, not to be confused with Home Equity Lines of Credit (HELOC) which are variable. There’s little difference in this and a standard mortgage, except no fees, and the rate is a bit higher than what you might find if you were willing to pay points and closing costs.

It can’t hurt to see what your local lenders are offering. $25 may not seem like much to you, but I’m sure you’ll find a way to spend it. If that’s a problem, just add it to your retirement savings.

On a final note – the targeted payoff date isn’t random, I’d like to have the mortgage paid in full by the time our daughter starts college in 2017. We’ve saved specifically for this, but should we be in for post graduate college bills, it will be nice to have no mortgage and know we can do this for our daughter.

Joe

Is that what they are calling whatever happened?
This week we start with a Guest post at Out of Your Rut, A better way to budget. I like the idea of first tracking your spending to have a baseline from which to progress. Read the rest if you can use an idea on how to get started. The Author Paul Williams blogs at Provident Planning.

Miranda Marquit asks Using Your Coupons: Is it Really a Good Deal? It might not always be, but when then are used right, there’s some savings to be had. A nice post to shed some light on this topic.

Kristin Harad, posting at fat wallet, asks, Are You Saving Too Much for Your Children’s Education? She helps you to understand why your own finances, emergency fund, and retirement savings should take priority.

Neal Frankle over at The Wealth Pilgrim (and a fellow Money Maven Network member) shares his thoughts on How To Select The Right Roth Beneficiary. This issue is too important to be overlooked, the wrong choices can cost your family quite a bit of money over time. Read Neal’s post, and choose wisely.

Shawn Watson at Watson Inc asks Do The Rich Pay Their Fair Share Of Taxes? This is really a question with no answer in sight. With the bottom 47% or so of taxpayers paying no Federal tax at all, it would seem that the middle and upper class are all paying more than their fair share. I’d bet that you can get twelve honest people in a room and they will never reach a consensus on what a fair tax structure is. I sure don’t know.

And last this week, Jason at Redeeming Riches, tell us The #1 Thing You Should Do With Your Money (And Probably Don’t). I don’t want to ruin the punchline, you’ll just have to visit to find out.