“Not so fast bucko” (what might be hidden in that rewards credit card)

So, you were able to make all of the purchases that you were looking for this holiday season? Great! It was tough.  You never thought you would find a hoodie with wizard powers, or a full-body poncho so you could bike in the rain – but there they were. (and so cheap!)  Who could blame you for buying an Ewok costume for your dog?  Although we’re not sure why you just HAD to buy yourself a kit to give yourself freckles. (Not that we’d judge anybody’s gifts, but everyone is happy you did not splurge and get the inflatable slide made just for yachts)
No matter what you bought, when January comes around you’re going to be staring at the business end of a credit card bill with your name on it.  If you’re like most of the rest of us you won’t be able to pay the entire balance off when that due-date arrives.  Most Americans have (not one, but) two credit cards with rolling balances in the $5,000 range and an interest rate a little north of 12%.

What if you can’t play credit card bingo?

Credit card bingo (our term) is when – once your balance gets too high – you transfer your credit card balance to a new card that has a zero percent interest rate for an extended period of time (12 months or longer) so that you can save the monthly interest charges while you pay off the balance.  If you have reasonably good credit you’ll get this kind of offer in the mail pretty often.  It’s worth it, even though those deals always come with a “transfer fee” (usually between 3 and 5 percent of the balance you’re trying to transfer).  Once the transfer is made all you care about is avoiding any interest charges while you pay off the balance.  All you have to do is pretend that your interest-free period is one month less than it really is and divide the amount you have to pay back (the transfer amount) by that number to get your monthly payment. (if you transferred $11,000 and the “interest free period” is 12 months – you have to make 11 payments of $1,000 each)

What if you’re credit is not the best it’s ever been?

Not everyone can even get the zero percent offer.  If that’s the case you have a two-part strategy to pay off your credit card bill.

  • Step #1 – love that due date.  No matter what the interest rate on your credit card is, it is lower than the rate will be if you miss a payment and the default interest rate kicks in.  On the day you get your credit card bill, do either of these: 1) pay the minimum amount right away (so you’re sure NOT to miss the due date); or 2) write on the outside of the bill a date that is 7 days BEFORE the due-date on the bill and pay it by that earlier date.
  • Step #2 – Pay extra every month. Find the minimum payment that is listed on the bill.  Then add whatever amount that you can afford to the minimum payment.  After the CCARD Act of 2009,  the way your bill looked was changed big-time.  It used to be that the banks could list a minimum payment that was LESS than the monthly interest charge.  Many folks thought if they paid the monthly payment they would eventually pay off their credit card bill.  Now the bank has to show you how long it would take to pay the balance if you only pay the minimum payment.  What becomes obvious is that you should pay extra if you ever want to pay that card off.  How much extra should you pay?  That’s between you and your checkbook.  In the meantime find the little box that shows how much interest you are paying every month and use that as an incentive to pay as much extra as you can.

Can I get some kind of reward for transferring my balance?

As a matter of fact…..there are many ways for the bank to make money from their credit card business.  They pay less to the merchant than what you were charged (but collect the whole amount from you); they charge those same merchants a separate fee just to process the original charges; they charge separate fees to you and me (annual fee; late fee); and they charge the consumer interest on any unpaid balance from month-to-month.

How much money in the economy do credit cards account for? In 2014 alone, the credit card industry processed nearly $5 Trillion in payments.  Because issuing credit card is such a booming business, companies are always looking for ways to poach more consumers.  One of the weapons that they use is rewards for consumers who use their card.  Reward cards are so popular that now the majority of folks who have a credit card have one that comes with rewards.  Buy stuff with your credit card (or transfer balances in order to open a new account) and rack up the points!

Which one do I pick?

There are plenty of articles that compare rewards credit cards in an effort to let you know which one is the best.  You can get a card that lets you accumulate points, airline miles, cashback rewards or a combination.  Nearly every card gives you points for merely transferring an outstanding balance from your previous card.  Most of them have a hefty annual fee (the good ones are near the hundred dollar mark) that can be waived for the first year (and any year after that if you call and annoy the customer service rep into waiving it).

Of the articles about “how to choose a credit card” that we found, most of them do not talk about the interest rate; one dares to mention how much it will cost to repay cash advances; one dares to mention collections and one actually spells out the default interest rate.  But that’s precious little reality for our tastes.  If you want to do the research yourself we suppose the first thing you need to do is determine how much time you have.  That way you can decide whether to read about the five things to know when you choose a credit card; the 7 things you need to know; the 9 things you need to know or the 11 things you need to know.  Some articles use graphs, most have a picture of the card (which in itself is interesting as a marketing tactic.  One can only guess how much some bank paid for a marketing study that told them it would result in more customers if they put a picture of a piece of plastic in their marketing materials)

This will cost me how much?

The one tidbit that is missing from most of the articles about rewards credit cards is the interest rate.  We can understand why credit card companies don’t include the interest rate on the cards they are peddling.  The whole vibe of their ad campaigns is that after you use their card, you are going to be driving a new (!) car to the airport so you can score some free (!) tickets to fly to Hawaii where you’ll spend two weeks in the new (!) condo you bought, all on free travel points from the shiny rewards card you signed up for.  But what are those points costing you?

No annual fee v. annual fee

This is not the important consideration that it used to be. Nowadays almost every card has an annual fee.

  • Years ago we would think “an annual fee.  Ha! I’ll just get another card”
  • Now, after years of training to desensitize ourselves to the thought that we are paying a fee for a service we would qualify for anyway, we think “Oh, $50 bucks for an annual fee isn’t that bad. What the heck.”

And so it goes, you can razzlefratz and go off in search of a card that doesn’t have an annual fee, but you’ll be looking for a while.  A great many cards dangle the “no annual fee” idea in their ads. But, they’re really just talking about the first year.  Many of those cards also waive the annual fee if you have the wherewithal to ask.

Our advice: look for a card with no annual fee. Then be prepared to call just before the second year begins and ask if they would waive that fee on a go-forward basis.

Rewards points

You can obtain rewards points in various ways.  Every card gives out points as a function of how much money you spend.  Most will award points for every dollar that you transfer from a competing card when you open your new account.  Comparing them will take some time.  You’ll probably be better off if you make a chart to figure out which one will actually be the most financially beneficial.  Card A might give you more points for each dollar you spend; but less for each dollar you transfer.  Card B might give you more points for transfer dollars, but only if you’ve spent a lot in the 6 months immediately prior to your transfer.  (of course the premise here is that you actually look at several offers and compare them to each other)

You should also factor in this equation what type of rewards you’re looking for.  You can choose to get cash back, airline/travel miles, gasoline, groceries or (as is becoming more popular) a card that lets you spend your rewards for any product you would like.  There is another factor that will not fit into your comparison chart so easily:

How easy will it be to redeem your rewards?

  • Are you signing up for airline miles?  If so, you need to figure out what kind of restrictions the card will put on you when you want to buy a ticket.  Does the card let you travel only on Thursdays at 5:00 a.m.?  Does it require you to stay 10 days wherever you’re going? Will it let you book flights on any website and not just the airline’s own website?
  • Are there restrictions on dates or types of purchases when rewarding miles?  You need to figure out if the card that boasts “earn 50 miles for every purchase” stops awarding you points for every purchase that you make between Thanksgiving and New Years’ Eve; or if you don’t get points for every purchase for an item that you can wear.
  • If the card gives you points to be used to buy gas, it’s important to see if you’re limited to buying gas from a company that only has stations in Wakaluk, Alaska; or if the procedure for redeeming is so convoluted that you can’t figure it out.
  • The rules for redeeming any points are going to be covered in the Terms & Conditions that the new card has on the web.  It’s not a bad idea to take a pass at the Terms to see what the rules are for redeeming the points.  But don’t let your investigation end there.  Common problems that arise for folks who have tried to redeem their points for that same credit card might not be so easy to predict if all you do is read those terms.
  • Cash-back rewards is the most straight-forward to redeem.  Cash might not sound so flashy, if you’re comparing them to flying around the world for free.  But, “wait for a check to arrive” is probably the simplest redemption procedure you’ll come across.

Our advice: Look at the Terms & Conditions to shed light on the redemption procedure.  Then, try Googling: [name of card] and trouble redeeming rewards points, or [airline miles; grocery points; gasoline points, etc] to get an idea how much you can actually count on receiving those sweet rewards.

However easy it is to redeem the points, your most important inquiry is about the

Interest rate

Most of us have a revolving balance on our credit card.  Which means that every month, we are paying interest on the balance due.  Our hope is to one day pay that balance off and get back to the pledge we made back when we got married (“We are gonna pay the entire balance on our credit card every month!”).  But, until that lottery ticket finally has winning numbers (or until we stop using our credit card for about a year or so) we’re stuck paying interest.

  • Intro rate v. regular rate – Every credit card offer shows you what the interest rate will be.  They also have an asterisk next to that number, because the interest rate will change at some point in the future.  Your questions are: WHEN will the interest rate change and HOW HIGH will it go.  If you get a card because the interest rate is 2.2% and don’t mark the date it will shoot up to 19.9% on your calendar with big letters and a skull & crossbones logo, you’ll be disappointed.
  • Variable or fixed – variable rates are still alive & well in credit card world.  If your new card has a variable interest rate, you don’t need to worry so much about how they will calculate your interest rate.  What you have to worry about is that the interest rate is NOT Fixed.  This worry should be enough to make you think about looking elsewhere for you rewards.
  • When you don’t care about the interest rate – If your company is paying the balance on your credit card you’re not so worried about the interest rate (unless the talk around the office is that accounting is famous for not reimbursing for credit card charges for 90 days) Otherwise, don’t sweat it.

This one’s the whole ballgame.  Whatever you do in terms of research, if you can figure out nothing else about that new credit card you have to know what the interest rate is.  There is no quicker way to find yourself in the soup than thinking that your new card has a 5.5% interest rate when the rate is really 15.5%.

Editor’s example of what in-the-soup looks like:

If your monthly balance is $10,000; with a 5.5% interest rate your monthly interest charge will be: $46.00.

If your monthly balance is $10,000; with a 15.5% interest rate, your monthly interest charge will be: $129.00.

If you want to see how nasty interest charges can get and how your monthly payment can be too much to deal with at different balance amounts, click here for a table of sample monthly interest amounts.

So, transfer those balances to a fancy-schmancy rewards card and charge up a storm.  Just make sure that you’re not making it worse for yourself in the process.

Posted by: Mark Wiseman (who also pledged early in his marriage to sell his house, move away for a year, and then move back…..don’t ask)


“Hey, are you really from customer service?” How to avoid phone scams (part 2)

When to pay

If anyone is asking for money, don’t even consider paying them until you something in writing from them.  It should either be a contract; a letter confirming the terms; a letter describing the transaction…something.  Not just an e-mail. As we already know, anyone with electricity in Minsk can send you an e-mail and make it look very legit.  Yes, letters can be mocked up. But, letters have return addresses and give you something to hold on to when you are doing follow-up research on them.  Many scam artists are just looking for the quickest buck. 

It would be easy for them to print off a letter.  But, the real crooks will just slide over to the sucker who will let them take the easy way out.  We at the “Casa del Consumer Courage” have a rule: the phrase “we can keep our costs down by NOT sending you a letter” is a magic phrase that we interpret as “Please hang up now.  I mean you harm.” 

And, don’t be in a hurry.  Many a scam have been avoided by the consumer who says “You know what, I’d like to sleep on this.  Let’s talk tomorrow.”  Call it “delayed reasoning.”  Whatever blocked you from realizing that you were going to spend $5,000.00 on an electric dog polisher disappears when you hang up the phone.  Trust us: if a deal is there today, it’ll be there tomorrow.  Take what the person is saying on the other end of the line as a clue.  Are they getting more aggressive right after you tell them you need to think about it?  Do they keep talking about how this deal is going to be gone tomorrow?  That should make you want to sleep on it even more.   

How to pay:

Credit card that’s how.

If you’re making a payment over the phone or on the net, use your credit card.  Not only does it make the folks you’re paying more legit, it protects you much better.  Credit card companies keep track where your money is going and if you get scammed, most of them will put a hold on your payment and make the company you paid prove that they’re on the up-and-up.  (not to mention the fact that your credit card company has to follow the Fair Credit Billing Act, which is very consumer friendly)

Take note: there is a difference between credit cards and debit cards. They may look the same. But, a debit card is more like a check card.  It acts more like a portable ATM and when the vendor charges you for the purchase, the cash is gone.  Debit cards very rarely (if at all) have the fraud-protection that a credit cards have. 

How NOT to pay:

Debit card, green dot card, iTunes card, check by phone.  Scam artists want you to pay with these cards because they act just like cash. Meaning to say: they want funds that can’t be traced to them; won’t give the company that issues the card their name & address and won’t give you the chance to dispute the charge.

These cards all do a very good job of transferring funds – but a lousy job of protecting you.  Anybody who suggests that you “buy a green dot card, iTunes card or any loadable debt card” is bad news. If they say this, you should hear “Run away! Run away!” and hang up the phone (or X-out the website you’re on).

Check by phone payments are also like cash and don’t protect your near as much as credit card payments.  You should really only be using a check by phone to pay a bill to a company that you’ve dealt with before and trust.  

Protect yourself

    • “If you didn’t start the call…..don’t pay them anything at all” – just before you say “YES, take my money” ask yourself if you started the call.  If you didn’t, maybe you should worry.
    • “Can I call you back?” – Scam artists will resist giving you any kind of identifying information.  If you get their number, you can look it up on the web and (maybe) see if they’re bad news.  Even if you can’t, calling them back will give you the chance to think twice, slow down and figure out if they are a legitimate business. 
    • “What’s your name, address & phone number?” – You’re giving them your money, why shouldn’t you get some basic info from them?  Anyone who refuses to give you this information is bad news.  If you asked the guy selling stereos from the trunk of his car for his name and address and he said “You see. I can keep my costs down by not associating my operation with any particular address,” would it make you feel better? 
    • Robo calls….Just Hang up – The Consumer Courage family has a saying in our house “if they don’t care enough to put a human on the line, they don’t get to talk to us.” 

Editor’s confession: Actually, this is my saying. Mrs. Consumer Courage will talk to anybody…and apologize to the robot who dialed us because she’s about to hang up.  It’s cute, actually. 

How do you tell if it’s a robo-call?  When you answer, you know how there’s sometime a two second pause followed by someone who mispronounces your name?  THAT’S how you know it’s a robo-call.  If this happens, say “I’m sorry he’s not here.”  Works every time. 

    • Never ever pay anybody with a green-dot card, debit card or other kind of card you have to “run out and put money on.” (did we say NEVER?)
    • Don’t be in a Hurry – hurrying is the bad guy’s friend.  The quicker you go, the more likely you are to forget everything we’ve told you and make a mistake.  Nothing has to be paid for RIGHT NOW!
    • It’s NOT the government on the line – one of the most popular scams right now happens when the scam artists call and pretend that they’re the IRS. Everybody’s afraid of getting dinged for a tax bill. Did the IRS call you?  If the answer is YES: 1. Thank them; 2. Hang up; and 3. TOMORROW, call the IRS on your own and ask what’s going on.  (Call your local “Taxpayer Advocate,” they’re very nice )
    • Either it’s free or it’s not – Free means you don’t have to pay for it. If someone tells you it’s free and then asks for money, tell them that they need to go find a dictionary so they can look up what the word FREE actually means and that their mother would be very disappointed with how their life turned out.

Don’t make your next phone or internet payment be your last. 

Posted by: Mark Wiseman (who would’ve hyperlinked a longer clip from the Holy Grail, but forgot exactly how aggressive that rabbit really was)  



You mean I have to PAY for this stuff?…How to handle all those Holiday Bills.

“The new year’s about to start, I recharged my mental batteries and I’m ready for 2014. Woo-hoo!”….. “I got everything I wanted for Christmas and then some.  Hoo-ray!”….. “I went over budget buying gifts for my family and I’m gonna get slammed when my bills arrive at the end of January.   Yes!”….Wait….what?

Sadly for many people in America, the ‘Retail eternity’   that is the Winter shopping season will wreak havoc on their household budgets.  By the time Jan 15 arrives and those bills start rolling in, what you need is a plan.  What should the plan look like?  How can you stretch your budget, while your bills are bloated?  Like Indiana Jones, running from the boulder,   looking back does you no good.  You can only look ahead.  So what’s the plan?

Study those bills

As unappealing as this sounds, you should get into the habit of going through your monthly bills and studying each and every charge to make sure that they should actually be there.  Many people don’t want to do this, because they don’t want to be reminded of exactly how much they owe.  “Sure I owe a ton,” they say. “But, I just feel better if I pay whatever I can and ignore the ‘total amount due.” 

Checking your bills is the only way to find charges that are on your card that were put there fraudulently or by accident.  Remember that any charges will show up on your statement one time and one time only.  Once the next month comes, last month’s charges are going to be buried in the total amount due.

What are you looking for?

Accidental double-charges and non-credits for returns are self-explanatory.  Bogus charges are a little more sinister.  While you are sleeping, there are people half-way around the world who have computer programs that randomly string numbers together, until they land on a working credit card number.  Once they find a good number, they will try to run an amount small enough that you (and your card’s fraud squad) will not notice. If that goes through, they will try a much larger charge the next month.  Before you know it, you’re paying on a balance that was never yours.  While it’s true that you are not responsible for charges that are placed on your credit card fraudulently, you have to actually find those charges and tell your credit card company about them, in order to get out of paying. 

What to do with a charge that isn’t quite right?

Each charge on your credit card should have a phone number at the end of the line of code that is meant to explain the charge.  If it looks suspicious (or if you don’t remember the charge) call the number and see who it is/where they are.  It’s not uncommon for the merchant’s name to look unfamiliar, because of some weird arrangement between merchants in a certain area, or because the merchant’s corporate office handles billing.   Ask pointed questions like “who are you?…What’s your street address?…What do you sell?…Why don’t I remember buying anything from ‘Murray’s Electric Dog Polishers?”  If you’re not able to figure out what you bought and how much you paid, the next call should be to your credit card company to tell them that you want to challenge the charge on your bill. 

Once you have to call your credit card company to fix it, the game becomes a little more serious.  You can count on them to investigate the charge and the seller.  This is the point where you should write a detailed letter to your credit card company that gives your version of what’s going on – even if you’ve told them the whole story three times over the phone !  (Here’s a webpage that has answers to quite a few ‘what do I do next?’ questions )

What about the charges that you do owe?

When you get your bills (this is a good rule for any bill that has an interest rate and/or a late fee) mark the outside of the envelope with a date that is 7 days BEFORE the actual due date on the bill.  That 7 days-ahead of time date is the day that you should put your payment in the mail.  Remember to pay more than just the minimum payment, if you can.  If you don’t, your total balance due will increase as time goes by. (Which is the exact opposite of what you want)

Most credit cards have default interest rates.  The ‘Default’ rate is the rate that they put on your card, if you are late on any payment.  Nobody will be shocked to learn that the default rate is usually more than 20%.  (Consumer Courage calls the ‘default interest rate’ the ‘Pre-bankruptcy rate.’)  If you’re going to be late, try calling the company to see if they’ll let you slide.  Most companies will a forgive a late payment once.  Better you should call before the due-date passes than, say, 30 days later, when the bill comes due and you realize that you got stuck with the default rate.

Pay off low balances and slim down to One card 

If you are lucky enough to have any cards with small balances and can pay them off quickly, you should do it.  And, try to get into the habit of only using one credit card.  It’s much easier to stay on top of things, if you don’t have 4 or 5 different credit card bills every month.  Zero in on the card with the smallest interest rate and try to use only that one.  It’ll be less expensive and much easier to keep track of. 

After a few months of using only that card, call their customer service number and see if they’ll lower your interest rate.  Many cards give their customer service reps permission to lower rates for their good customers.   If you only use their card and pay on time for a few months in a row, they just might surprise you, when you call and say “Uh, yeah, could you lower the interest rate on my card?  It’s a little high”

NEVER (EVER!) take out cash with a credit card

While it might be tempting to use your credit card like it’s an ATM card to get some quick cash, this is a move that you’ll regret fairly quickly.  Credit card companies do a great job marketing the ‘cash out’ option that their cards have.  The way they describe it, it’s like finding a bag of cash on the street, with no strings attached.   But remember, they don’t want you to withdraw cash with your credit card because they “just LOVE you.”  They are offering this service, because if they twisted your arm behind your back, until you agreed to give them money, it would be unseemly. This way, you do the arm-twisting yourself.

Whatever the interest rate is on your credit card for purchases, there is a separate interest rate on your card for so-called ‘cash withdrawals.’  That means that even though you might only have to pay 8% on every purchase you make, when you withdraw cash with your credit card, you will be charged somewhere between 20 and 25%.  “That’s crazy!” you say.  Correct you are.  Know what’s crazier?  Let’s say you take cash out with your credit card and plan to pay it back ‘before the payment comes due’ so you don’t have to pay any of that nasty high interest rate.  First of all, the interest starts accruing on the amount of cash you took out as soon as you take it out of the machine.  Second, most credit card agreements say that the money you pay is applied to ‘existing purchase balances’ first and will only be applied to the ‘balance for cash withdrawals’ when your ‘existing purchase balance’ gets to zero.  (Quick quiz – When’s the last time your credit card balance was at $00.00 ?) 

When those bills start to roll in this January, don’t panic!  You have a plan.

Posted by: Mark Wiseman (who read a book in College that has the phrase ‘DON’T PANIC!’ on the cover)