Wednesday, April 20, 2011

Time to check your money!

By Bryan Cain-Jackson

I can’t even remember what it’s like to just pull out a $20 bill to pay for something. Every time you pay for something its swipe, swipe, swipe, and then swipe some more. Before you know it, the weekend is over and you realize on Monday morning that you've been too generous at the lounge with your friends.

At that point, you say to yourself: “Darn, if only I hadn't bought that last round of drinks for all of my buds!!!”

We've all been there. For some people, they can afford it, for most of us… Let’s face it; we have to make the rent.

What if every time you swiped that card you were costing your bartender money? What if every time you swiped that card you were earning that bank you may hate to bank with hundreds of thousands of dollars every year?

Well, folks… It’s not a “what if,” it’s a reality. Every time you use your debit card and select credit instead of debit, you are costing that business a minimum of 1% of your total purchases where ever you go. This either causes the businesses you like to shop at to drive up their prices or go out of business. That 1% percent goes to the bank you have your debit card with.

In case you have not been watching or reading the news on this subject, I feel inclined to let you know that this may all change soon.

The Feds are trying to stop the greed in the big banking business. Instead of being able to charge 1% per transaction to businesses every time you use your debit card, that may change to 12 cents per transaction. That is a huge difference for the big banks. This means that it will actually cost banks more to issue you debit cards than the amount of money they earn from your using it. Now you know why banks always pressure you to have a debit card whether you want one or not. Many large banks will even give you incentive to use it!

Times are changing, and this means that the way you bank will change as well. Some banks are going to continue to offer you incentive to use the debit card while others will discontinue their debit cards rewards programs.

There is an enormous expense in issuing and maintaining customer debit cards. If the new law goes into effect, banks will lose money on their debit cards which means you will lose the convenience factor. There are banks that are even considering limiting debit card purchases to $100 per day, others are considering charging you to use them. If this happens, then you will only have the following choices:

1. Go to the ATM and keep cash in your wallet which will be dangerous. Unlike debit cards, cash cannot be reported stolen.

2. Write checks. Go ahead… be that person in the front of the grocery line that everyone hates. In addition to that, if your checks are stolen or duplicated then you are at serious risk of being a victim of identity theft.

3. Use your credit card. This can actually benefit the banks and hurt you. If you max out your credit cards, the banks earn interest unless you pay off your balance in full every month. (Less than 1/3 of credit card borrowers pay off their balances in full at the end of the month.) Adding further harm will be the fact that maxing out your credit cards will have a negative impact on your credit scores.

Well, folks… After reading this it seems like you’re damned if you do and damned if you don’t, right? Well here are a few pointers that I will share with you to cheat the system and not lose your convenience factor or harm your credit scores.

1. Carrying cash in a bad economy is not a good thing. These days you seriously run the risk of being pick pocketed or mugged.

2. Don’t write checks. You don’t want to be that person that holds up the line in a store. I really hate that. Not to mention since the checks have your bank account, name and address on them this means there is more information on there for a person looking to take your identity.

3. You can use your credit card. However, do not use the credit card for more than the amount that you have in cash or in your bank account. This means that you can make payments on it continuously so that you’re not letting the balance get out of control. Remember, you should never have a balance on your credit card for more than 1/3 of the total credit limit on there to maintain a good credit score.

Example: Credit card limit is $300; your balance should never be more than $100 from one month to the next. This way, it doesn’t look bad on your credit report. Someone who is maxing out their credit cards every month looks risky because it looks like they’re living off of their credit cards. Banks and lenders do not like the looks of this. I know you all want to buy a house and some nice cars in your lifetime, so take this advice seriously as it does affect you and your families.

4. The last option (my least favorite) is that you have is to go out and find a prepaid debit card. It is expected that as banks become stricter and less convenient that many people will choose this option. Just be sure to shop very carefully for a prepaid debit card. Many prepaid debit card companies charge for everything such as checking your balance, reloading, making purchases, calling customer service, and many other things that you should not be paying for. Do not allow yourself to be taken advantage of. Make sure you are getting a prepaid debit card that has minimal charges. If you get direct deposit from your job, there should be no reason why you are paying a monthly fee. You don’t have to take that non-sense.

Again folks, times are changing in an ever stressed economy. Become financially aware, and again do not allow yourself to be taken advantage of. Many of us live for today when we need to think about tomorrow in every way, especially financially speaking because it makes sense.

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