How about a New Year's Resolution to end 2008 with hundreds - or maybe even thousands - of extra dollars in the bank?
If saving money sounds about as difficult as losing 25 pounds by swimsuit season, think again. It's actually as simple as promising that this year, you will find a bank that helps you save money.
Here's what you need to do:
First, stop using credit cards. Use debit cards instead.
Credit card companies want you to go into debt. Ever notice how they hand out so many gifts and rewards? It's so profitable to get you into debt that they're actually willing to bribe you to spend. It's pure gravy when you don't pay your balance in full or miss a minimum payment.
Unsurprisingly, credit card companies are good at getting people to spend beyond their means. In 1996, the average U.S. household had $5,875 in credit card debt. By 2006, that figure had climbed to nearly $10,000.
With debit cards, you're spending your own money. So you can't be lured into debt.
Next, you should avoid fees and earn interest on all your money. Most people use banks that pay virtually no interest on deposits and have a slew of hidden charges and complex fees.
Take overdraft fees. It is estimated that banks make a whopping $17.5 billion annually through these charges.
The reason this is so profitable is twofold. First, the average overdraft fee has climbed to $29. And second, banks apply it liberally.
Say you start your Saturday morning with $1,143 in your account - and then send $900 to your landlord, $50 to your electric company, $150 to your cable and internet provider, and $10 to your favorite charity.
Each recipient deposits the checks four days later. Unfortunately, that same day, your nephew cashes the $250 you gave him for his wedding six months ago. By the time he returned from his honeymoon, you'd forgotten about it.
Because most banks process daily transactions from the largest to the smallest dollar amount, you're looking at four separate overdraft fees. So if your bank charges the industry average, that's $136 in penalties.
A similar fleecing happens at the ATM. When your bank charges you to use another bank's cash machine, you get socked with two separate fees - one at the ATM and one on your statement. So instead of just paying what you see on the screen, you're actually paying double that amount -- to access to your own money!
When this double charge is factored in, the average ATM fee is $2.91. On a $50 withdrawal, that's a 5.8% charge.
Banking customers shouldn't have to navigate a minefield to avoid hidden fees.
So find a bank that offers a free overdraft line of credit with a competitive interest rate instead of charging overdraft fees. That way, whenever your checking account goes negative, you automatically borrow the cash you need at a reasonable cost rather than a lump sum fee. The "overdraft" simply shows up as a charge on your credit card, and there's no penalty fee.
Banks also shouldn't charge you to use another bank's ATM.
Finally, find a bank that pays high interest on all your money. These days, there's no reason to do business with a bank where you'll lose money over time. According to Bankrate.com, the average savings bank pays less than half a percent of interest - well under the rate of inflation. The annual percentage yield on the average checking account is even worse. A number of direct banks are now offering savings and checking accounts that pay three percent or more.
Millions of Americans use big banks because they assume that if a bank is well-known and popular, it must be offering its customers a good deal. But this clearly isn't the case.
Making this mistake could be costing you a fortune. In 2008, fixing this mistake could save you thousands.
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How To Get Free Samples For Almost Anything
From a Banker: Stop Using Credit Cards!
Rebate Incentives for Using Debit as Credit Cards Kicks Merchants in the Cash Drawer
When it comes to paying with plastic, what consumers hand over to merchants can make a big difference both to buyer and seller.
Debbie Marinaro of Noblesville estimates she uses her credit card about 95 percent of the time when she makes purchases.
“I would use credit more than debit for those expenses that I would let roll over to the end of the month,” she said. “But I use my debit card for when I want to pay ‘cash’ – like a check and want it to come directly from my account.”
Marinaro said she never uses her debit card as a charge card, but many people do, to the chagrin of merchants who pay higher fees to process debit cards as charge transactions.
Sue Roudebush of the Old Picket Fence shop in Noblesville said about 75 percent of “plastic” transactions are processed as credit, rather than debit.
“If they (purchasers) run it as a charge and it’s over $25 it costs less for me as a retailer,” she said. “If it’s a debit card and it’s over $25, then it’s a lot less for me – sometimes a percentage, percentage-and-a-half.”
But Roudebush said if it’s a debit card transaction under $25 the retailer has to pay more.
“This is so confusing,” she said. “It’s like 55 cents per transaction on a $10 debit card versus a $10 credit card … it only costs me like 1.5 percent.”
Tammy Daubenspeck of Eleanor Rozella’s said more than half the purchases at her store are credit transactions.
“I think some banks will tell the customers that if they use their debit card as a credit they can get a refund,” she said. “I know myself, when I use my debit card and I punch it in as credit, I get back so much rebate every month in my checking account using it that way instead of using it as a debit.”
Some credit card companies may even offer purchase protection on consumers goods to customers who use their debit cards as credit cards that they might not otherwise have with a debit card purchase should something go wrong after the sale. VISA media relations did not return a request for clarification on the benefits and disadvantages of requesting merchants transact debit cards at the higher-fee credit purchases. But merchants agree, even if customers hand over plastic cards to pay for purchases costing under a dollar, retailers have to offer the charge card service to stay in business.
“So many more people are using their debit cards rather than writing the old-fashioned checks, which is really good for us, because you’re pretty much guaranteed a payment,” Daubenspeck said. “Unless someone charges, let’s say, $5. That’s almost practically giving it away by the time you pay your fees and everything. It’s so much better to pay cash.”
Chuck Crow, president of Community Bank, agrees. He advises paying for purchases with cash and forgoing making credit purchases as much as possible.
Debit cards make it much easier to pay directly from a checking account without writing a check. But Crow said paying with a debit card can be risky if someone steals your card and your personal identification number (PIN).
“If you use your debit card, you have to enter that PIN,” he said. “If somebody stole your debit card and used just your card, they could clean out your checking account. Maybe there’s a consumer advantage for it, but most of the large retailers want to know what it is because of that difference in the processing rate, and that’s usually why they ask you, ‘Is this a debit card or credit card transaction?’”
Crow also advises keeping careful track of how many purchases you make with your debit card. Even though you can process a debit card as a credit transaction, it is not a credit purchase. Keep the amount you spend written down in the check register so you don’t come home from shopping to find a costly surprise.
“If you’re not disciplined, then all of a sudden all of the money in your checking account is gone and you wonder where it is,” he said. “And if you don’t keep all those charge slips, then you have to wait until you get your statement or you go online to look up your statement and see if there’s a charge to the local grocery store or drugstore, or whatever it is. So it requires some discipline.”
By Rebecca L. Sandlin
How To Get Free Samples For Almost Anything
Debit Card
If for any reason you don't want have a credit card, you want to make sure that you have a debit card. If you have a checking account, in most cases, you will be allowed to get one of these cards. They can be used almost anywhere credit cards are excepted, but they do work in a different way. These cards will only allow you to buy something if you have enough money in your account. If you have problems with credit cards, this might even be a great alternative to stop you from overspending.
A good debit card is one that offers you buyer protection. Though not all of these cards will do this for you, you will want to ask a your bank to see if yours will. The good debit card will offer you the same protection a good credit card will, and you should be able to use it anywhere you buy or spend money. They are especially useful if you want to buy things online, or if you are going out of town were you know no one will accept a check from you.
If your debit card comes with credit protection as an optional feature, make sure you sign up for it. Also remember that your debit card is vulnerable if someone else were to get their hands on it, so if you find that your debit card is missing make sure you contact your bank at once. They will be able to cancel your card and possibly issue you a new one immediately. In some cases, you will not be liable for fraudulent charges made against your account while your card was out of your hands. However you must act fast if you find it missing or there may be nothing the bank can do.
As with a credit card, make sure you have a secure server when you are using your debit card online. Also remember that there are scam e-mails that will ask you to enter your debit card information under false pretenses. If you receive an e-mail from your bank asking you to go to a web site to enter your information, you should delete the e-mail once and contact your bank. Your bank will never asked you for this information online. If you enter your information on one of these fraudulent sites, you have just given criminals the keys to your bank account. If you are ever in doubt call your bank over the phone. If there is a problem, they will address it with you then.
Source: Associated Content
Using Your Debit Card May Not Be the Best Idea
Sometimes the Debit Card Just Isn't the Answer
One of the biggest misconceptions floating around in personal finance land is that a debit card is always better than a credit card. The problem with this thinking is that it just isn't true. In some cases, using a credit card is actually a better idea. Especially when you think of the ways in which a debit card is woefully lacking.
Debit card issuers cash in on overdraft fees
Remember when you could count on your debit card to be rejected in the case of insufficient funds? Not anymore. Debit card issuers are now cashing in on overdraft fees. If you forget to keep track of every little thing (and this is very possible when you are using the convenience of plastic to buy your morning coffee and donut), then you might find that you are over the limit. And banks are finding if they just let you go over, they can charge you $28 to $38 per transaction. You might have three or four transactions before you even realize that you are over the limit. That can be as much as $152 out of your pocket!
Less protection
Last time I went on vacation, I left the debit card home. Why? A debit card offers less protection against loss or identity fraud. Plus, it is much harder to dispute purchases with a debit card than it is with a credit card. With a debit card, you are liable for what happens before you get it canceled in cases of theft or loss. With a credit card, as long as you report the problem within 48 hours, your liability is limited to $50. Also, a credit card protects you to a certain degree against "blocking." Many hotels and car rental companies do this. They block out more than the amount you owe to cover incidentals. The final transaction is correct, but until you check out, or return the car (and sometimes two or three days after that), the amount shown as "reserved" in your account is higher. On a debit card, this lead to an overdraft...that may not really be an overdraft.
Fewer rewards
Despite the attempts by some debit card issuers to offer credit card style rewards programs, they really aren't that good. Most debit card rewards programs aren't even close to what is offered by credit cards. For the most part, debit card rewards come encumbered so much that they are literally not worth the trouble. Credit cards, the old hands at the rewards game, are much better.
The main caveat is that you need to use responsibility when using a credit card. Make sure you pay it off every month, and you can reap the rewards without paying the interest.
Source: Associated Content
Prepaid Traveler's Card Vs. Debit Card
You may not be aware of it, but the days of Traveler's checks are almost a thing of the past. Many merchants around the world have decided that it's better to be safe than sorry and they are refusing to accept the old style paper traveler's checks. There has been an increase in counterfeiting of the paper documents and this has led to an alternative method for vacation spending. The newest product? Visa TravelMoney.
Basically, it is a prepaid Debit Card. You purchase this card with any amount between $250 and $9999. The cost is around $9.95 which is a good buy if you want the large amount, not so good if you only need the small amount! The old style traveler's checks typically cost $1 for every $100 worth you bought. So $300 worth of traveler's checks would have cost $3 while $9000 would have cost $90!
Many consumers' first question "Is this any different than using my debit card?" Not a lot. Both should be accepted anywhere they take MasterCard or Visa. Both are pulling from funds that you already have established. Both are very convenient. The advantage that the traveler's card has is the quick replacement if it is lost or stolen. However, the travel cards are new enough that not all locations have converted to them so you might be given paper checks as your replacement funds. Hmm... do you think that you'll be able to use them?
If your debit card is lost or stolen, a quick call to your financial institution should stop any chance of fraudulent activity. But, the chances of getting a replacement card while you are still on vacation - very slim! Your bank may agree to wire money to you at whatever destination you are located - for a fee, of course. So, you shouldn't be stranded without any money.
Another advantage to the TravelMoney card is safety. Some consumers like the fact that this card is not tied to their checking account. They feel more comfortable using this card for Internet purchases than the regular debit card.
But be sure to watch out for extra fees. They seem to get you coming and going. ATM fees if you access your card via an automated teller machine. Balance inquiries at an ATM, even though you may obtain balance information for free on the internet. If you request a statement, there is a fee for that as well. If you run out of money and want to reload your card - you guessed it! Another fee.
Sounds like it might be easier just to stay home! Who's up for popcorn and a movie?
Source: Associated Content