Do you "envelope" budget? Credit: PinkMoose/Flickr
A friend emailed me with a bit of budgeting advice passed on from her mother, the professional organizer Janet Fishman:
Set up separate bank accounts for: living expenses, play, long-term savings, education, charity, and retirement and have either a percentage or fixed dollar amount from each paycheck go into these accounts. Most all companies that offer automatic deposits for payroll have the ability to automatically deposit into multiple accounts. Figure out how much you need to pay taxes, divide by the number of weeks you work, and that constitutes the dollar amount to set aside for each week. Repeat this for the categories above and you will be fully prepared and organized year round!
This ads up to six accounts – or more if you set up one for taxes and other categories. Phew! That strikes me as a lot to manage. Plus, you would have a harder time hitting minimum balance requirements to keep your account free or low cost.
On the other hand, how much money you have to spend on any given thing would be crystal clear. No pushing money earmarked for one expense to cover something else. Plus, retirement is singled out, which makes it more likely that you will save for retirement.
What do you think of this modern take on the “envelope” system? Would you use it?
pin add / Flickr
I share five must read blog posts about saving money every Friday.
Is your bank increasing their fees? Ditch them! Here are 3 steps to replacing your bank. (Money Talks News)
Have you received your internet bill? Find out seven ways your Internet Service Provider may be overcharging you. (Cheap Internet Deals Blog)
Daily deal junkie? You can now sell unused deals on sites that allow you to re-sell and buy past daily deals. (Fabulous & Frugal)
Travel on a shoestring budget to these five inexpensive off-season vacation spots. (CNN Money)
The checkout line is getting revamped. Look for these three changes at your local grocery store checkout line. (Time Moneyland)
Tom Purves / Flickr
This is a post by BargainBabe.com writer Yazmin Cruz.
Your smart phone is about to get smarter as mobile payment apps replace swiping plastic, by enabling you to tap your phone and exchange your credit card information via a radio frequency field. But just how safe is this?
I first learned about mobile payment apps in a college personal finance class. My professor warned us to be careful about using these apps until laws catch up with technology. Let me explain.
Once upon a time
kenteegardin / Flickr
This is a post by BargainBabe.com writer Yazmin Cruz.
With bank fees increasing due to debit card swipe fees getting capped, it’s time to take these four easy steps to avoid bank fees.
- Give your bank a call- I called my bank and requested my personal schedule of fees and deposit agreement. Didn’t get charged for this, thank goodness! It contains a list of all the bank fees I could end up paying if I’m not careful. Now I know that if I lose my card, I’ll have to pay $5 for a replacement. I could also get slapped with a $20 per hour fee for research (more…)
Ellen isn't the only one annoyed by bank fees. Credit: Betsssssy/Flickr
Reader Ellen emailed me an inspiring story this morning.
Hi Julia: In questioning a rogue fee attached to my savings account, I found out that I fell prey to not reading the fine print, a.ka. “terms and conditions apply.” Sure the fee was only $9.00 but in this economy every dollar and cent charged by a bank deserves an explanation. What I found out floored me, though, given the greed of banks it probably shouldn’t have surprised me.Here goes. (more…)
A bank vole captured by blackclough/Flickr
I recently switched banks for a higher interest rate on my checking account. My new bank is nontraditional so I had to consider what behaviors would let me take advantage of the account fully.
1. My bank does not have their own ATMs. However, all my ATM fees are refunded to me on a monthly schedule. As crazy as it seems, this is probably cheaper for the bank than maintaining thousands of ATMs across the country. I try to use the ATM only once a month so I don’t rack up a lot of fees, even though they are reimbursed, because I figure the bank factors the expense into other services.
2. My bank does not have traditional branches so I do not have access to bank tellers to make large cash withdrawals or deposits. This is rare for me, but uncomfortable if it comes up. The branches accept check deposits or I can mail in deposits.
3. The branches are few and far between so I do the vast majority of my banking online, through the mail, or over the phone. The bank website is great, I can request free deposit envelopes through the mail, and the US-based phone service is excellent.
4. I have free checking as long as I have a debit card for the account. This is my first debit card ever and I usually use it for small purchases. It does not feel as safe as using a credit card, however. I think that is just me.
5. My other bank services are free as long as I have a brokerage account, which I use to fund my ROTH-IRA. I like having my checking, savings, and IRA all through the same bank, though I’m worried it makes me more vulnerable if my identity is ever stolen.
All told, I’ve had to adapt my banking habits slightly to take advantage of my new nontraditional bank. But I think I made the right decision because I pay no monthly bank fees and my interest rate is higher that my previous bank. Knowing this, would you bank with a nontraditional bank?
This guest post is brought to you by Earl Fischer, who writes for The Digerati Life, a site that covers all things personal finance, from investing to budgeting and money management. Check out the site’s reviews of online brokers and the best credit card programs that are available today.
Know what the world’s oldest profession is? Well what about the world’s oldest business? That would be a bank, I believe. No condescension intended by the analogy. In fact, I like banks. I am a client of at least four of them. Banks have a way of sustaining an economy just as much as it can take one down.
What I dislike about some of these large financial institutions — aside from the fact that quite a number of them have siphoned my tax dollars, no thanks to government bailouts — is how they tend to resort to deception in trying to entice one to become a client. Take my recent experiences with two such banks whose names I’d rather not mention right now.
Extra Bank Offers That I Don’t Care For
1. The Upsell
From one bank, I received a replacement card in the mail recently. The instruction they gave me was for me to call a toll free number in order to activate my card. Pretty standard stuff. Well, I followed the instruction and after going through the entire rigmarole of entering my card’s last four digits to giving the names of my first dog’s offspring, I was informed that my card was now activated and ready for use.
Just as I was about to wish the phone representative to have a pleasant day, she tells me that I am entitled to an additional service which would give me fraud and identity theft protection, credit monitoring services and other security features. The use of the word “entitled” can be very deceptive. Does this mean it’s like a gift that I just need to accept? Or will it cost me something? Remember, this is a bank and nothing ever comes free. So the fact was…. there was going to be a monthly charge of $6.95 (not the true amount). I told her I was going to think about it and will give them a call when I was ready for this. But she was insistent. She told me that it would be better for me to avail of the service right away because should I later change my mind, I can cancel it within a certain period and get a refund of the fees paid.
Wait. Hold it right there! It’s obvious what the bank was trying to do. They are capitalizing on the fact that people like me might not read the account information that they send and that I would become too busy to call them to cancel so in the long run, the bank makes a fortune. Of course, $6.95 a month is hardly a fortune. But think of 5,000 busy credit card holders and that’s a lot of money. So just like with drugs, I just said NO!
2. Does “no maintenance fee” really mean there are no fees?
My other experience involved this online ad which I came across while paying my credit card bill. In some cases, to encourage you to open a high interest savings account online, a bank may offer you a cash bonus for the effort. I caught on to one such offer lately, especially when I noticed the big bold letters on the ad that said the words “No maintenance fee.” I decided to fill out a savings account application online. Just as I was about to hit the final key to submit my application, I decided to confirm the terms and conditions of being an account holder one more time.
Lo and behold! Upon a second review, that’s when I noticed that the account would carry a monthly service fee. In fact, because of this fee, my initial deposit would have been exhausted after just three months. To make a long story short, I didn’t like how this bank would dangle a carrot by promoting their “no maintenance fee” account, but in the end, would turn around and still charge me a monthly service fee. Sneaky! I had two choices at that point –- hit SUBMIT APPLICATION or hit CANCEL. And so did I hit cancel? Well, does a zebra have stripes?
Just got some interesting economic factoids from the website BillShrink.com. Are you part of the savings trend?
- 46% of credit card holders paid their bill in full each month in Feb. 2009
- 59% of credit card holders paid their bill in full each month in Feb. 2010
- The average American family had $2,000 in unexpected expenses last year
- Americans have reduced their debt by $101.2 billion in the past 14 months ($1,874 per household)
- We are currently saving at record rates, setting a 15-year high (Check out BillShrink’s super cool graphic about American’s personal savings and debt, which goes back to 1960).
- We still over pay for lots of stuff, including ATM fees, credit card late fees, and dealership auto maintenance (though I’m seeing coupons from dealers these days)
To get this data BillShrink surveyed 154,000 users on its site from February 2009-January 2010. The pay off rate has been steadily increasing each month, according to the responses below.
Yes, I pay off balance each month No, I don’t pay off balance each month
02-09 46.03% 53.97%
03-09 45.92% 54.08%
04-09 41.75% 58.25%
05-09 43.19% 56.81%
06-09 46.28% 53.72%
07-09 46.92% 53.08%
08-09 48.72% 51.28%
09-09 51.21% 48.79%
10-09 51.99% 48.01%
11-09 54.73% 45.27%
12-09 57.25% 42.75%
01-10 58.63% 41.37%
I’m curious how BargainBabe.com readers compare to the national average.
[poll id="55"]
Politicians cracked down on credit card companies to help out consumers during the recession, but the new credit card law that goes into effect today has pitfalls.
“During the past nine months, credit card companies jacked up interest rates, created new fees and cut credit lines,” an AP story says. “They also closed down millions of accounts. So a law hailed as the most sweeping piece of consumer legislation in decades has helped make it more difficult for millions of Americans to get credit, and made that credit more expensive.”
Here an outline of the changes in store.
Pros:
1. Credit Card companies have to give you 45 days notice if your interest rate is increasing.
2. Statements will now show how long it will take to pay off the balance if you make only the minimum payment. Statements will also show how much you need to pay each month to pay off the loan in three years.
3. Statements must be sent 21 days before the due date, which cannot shift willy nilly anymore.
4. You have to expressly agree to be able to charge over your limit, which triggers over-the-limit fees. Even if you do agree, there are limits to how much your bank can charge you.
5. Folks under age 21 cannot get a credit card unless they have a co-signor or can show they can pay off the charges (independently of their parents’ income). Banks can’t hang out on college campuses offering perks for applying for a credit card.
6. Americans will save $10 billion or more a year from the changes, according to the Pew Charitable Trust.
Cons:
1. There’s still no ceiling on interest rates.
2. Fees now are capped at 25 percent of the total credit line during the first year – but in my book that is still way too high!!!
3. Annual fees are coming back. In late 2009, forty-five percent of new credit cards had annual fees compared to 25 percent in the same time period the year before.
4. Some retailer credit cards will charge $1 for paper statements, like Victoria’s Secret and Ann Taylor. Look out for inactivity fees, as well.
5. Balance transfer fees will go up on some cards.
6. Reduced credit lines on existing accounts. My credit limit decreased, which is not surprising consider 40 percent of banks reduced credit limits on existing accounts.
7. Higher initial interest rates. The average rate for new cards was 13.6 percent last week compared to 10.7 percent a year ago, according to Bankrate.com.
8. Fewer cards. There are 15 percent fewer Visa, Mastercard, and American Express cards in circulation in 2009 compared to 2008. Maybe this is a good thing, though it means credit cards with perks – like grocery and gasoline rebates – are declining.
I hope these changes have a net positive effect, but the bottom line is that if you use credit cards you have to be very careful about charging more than you can pay off, paying on time, and avoiding fees. When in debt, you are at the lender’s whim.
PS. Remember you can check your credit report for free.
