This lady is ticked off by bank fees. Credit: Betsssssy/Flickr
Whatever happened to credit and debit card fees? You might remember I wrote about debit cards being cash cows for banks, which was followed by a post on major banks eliminating fees. Banks exist to profit, so many are raising existing fees to make up for ones that have been disallowed. Here is a list from Billshrink with examples. The good news is that these fees are much more transparent and upfront.
- Credit card interest rates are rising. Over the past six months, nearly 20% of card issuers have (more…)
alancleaver_2000/Flickr
This list intrigued me because I continually ask myself if I am spending and saving responsibly. If many of these behaviors ring true it is time to consider changing your ways. How many of these habits are you guilty of? See my answer below.
The following list comes from Billshrink, a site that compares plans for cell, cable, and other services to see if you are getting the lowest price.
1. You charge group dinners on your card and keep your friends’ cash to spend.
2. You spend more than 40% of your total income on rent.
3. You’re constantly transferring your balance to get 0% interest on your credit card debt. (more…)
My $37.89 credit card regret.
My credit card bill is due in a few days and while reviewing my charges from the past month I found one that I really wish I could take back. While stopping at California winery for a tasting in July, I bought a handmade vintage mini-quilt to hang in my office. The cloth, folded so a fourth of it shows above, can also be used as a table covering.
Purchase price? $37.89.
The cloth has picket fence edges and the material is very sturdy and soft. I like thinking that a woman used her creativity to sew a beautiful work of art that is entirely practical.
When I inspected the cloth more closely at home, however, I found a small stain and realized four circular embellishments were added to cover an inch-long rip. You can see one of the embellishments in the top right corner of the photo. I still adore the vintage cloth, but I think I could have found something similar at a thrift store or flea market for less than $10.
So if there is one credit card purchase I regret this past month, it is this mini-quilt. I was a bit tipsy when I made the purchase, and saw so many cute things in the shop (like cherry earrings for $10) I wanted to take home something. The earrings were only worth $5 to me, but maybe if I had bought those I would have passed on the cloth. At least I didn’t splurge for the vintage $25 waist apron. It was so adorable I never would have worn it!
What do you regret buying this month?
This change is weighing me down.
Grab your wallet and examine the contents. Are you carrying around things that make you vulnerable to identity theft? Are you needlessly carrying around receipts and cards that weigh you down? Are you missing important documents should you get into an accident? In my case, the answers are yes, yes, and yes.
Here is what’s in my wallet:
Vitals – license and current insurance card
Money – $41 in cash plus $4.91 in change
Plastic – main credit card, debit card, and AAA card
Plastic money – gift cards to Starbucks, TJ Maxx, Jo-Anns,
Plastic that is occasionally useful – loyalty cards for FedEx Kinkos, The Body Shop, Club Bev, Anthropologie, and the Ocean State Library system
Paper – 18 receipts, 8 coupons, two business cards, and a sticky note with two ID numbers I use for work
Lists – contents of boxes that I put in storage and carried in my cheap cross country move
Personal – two pictures of me and friends, two bobbi pins, half of a picture frame mount
My excavation was promoted by an email I received from a women’s personal finance site called LearnVest.com. According to the site, there are only 10 things you should carry.
1. Your main credit card—only.
2. $25 to $50 in cash.
3. A.T.M./debit card.
4. Driver’s license.
5. Insurance card for both health and auto insurance.
6. Transportation card, such as an unlimited rail pass.
7. Reward cards for stores you visit frequently (grocery, drug store, etc.).
8. Gift cards.
9. Membership cards (such as to your gym).
10. Airline cards.
Now for what not to carry in your wallet.
1. Personal information like your PIN (although a first name and phone number is OK in a note to someone who find’s your wallet)
2. Account numbers
3. Social Security card
4. Back up credit cards (they belong in a safe place at home)
Opps! I made three mistakes. Carrying around two ID numbers for work could make me vulnerable if someone know how to also log into that account. My receipt load is way too high; it’s time to sort out what I need to file and shred the rest. And I took my health insurance card out a few days ago and forgot to put it back in, which is a no no.
How did you do?
paalia/Flickr
A recent survey by CESI Debt Solutions found a whopping 80% of us hide purchases from our partners. Ouch! Some 18.5% of married couples have credit cards their spouse don’t even know about! I’m not sure how that is possible. Wouldn’t they see the bill, notice transfers out of a bank account, or wonder where new items around the house came from?
According to the survey of more than 200 Americans, spouses are secretly buying:
- 34.5% clothing and accessories
- 24% food/dining
- 19.5% beauty/personal care items
- 16.5% gifts
- 13% alcohol
- 9% entertainment
- 9.5% music/cd/mp3
- 8.5% childcare/items for children
The last item makes me think the survey included in the “secret” category purchases not explicitly mentioned, which would inflate these numbers. The survey was conducted by a company that makes money from helping people pay down credit card debt so I suppose the more people overspend, the more their business is necessary. But forgetting to mention a purchase is different than keeping something secret. You took the kid to JC Penney for new underwear? Not exactly scintillating dinner conversation.
Most financial cheaters kept their spending on the down low to avoid problems at home, the survey found. Ya think?! Oh honey, I forgot to tell you I owe $6,000. Guess we won’t be going on vacation, after all.
- 46% are currently paying off the debt and feel s/he doesn’t need to know
- 43% want to avoid an argument
- 27% will never tell their spouse about their spending
- 19.9% are concerned it would end the relationship
- 11% plan to tell their spouse, but are not ready yet
So the question is not whether you have cheated financially on your partner, but what purchase were you hiding? Or perhaps you have a story to tell about discovering a secret purchase?
One of the biggest fights I ever had with a significant other was when I discovered he had purchased a TiVo in secret. The purchase price was not the issue, however. I was strongly against a TiVo as I was convinced I would watch too much television if we had one. He was strongly for the TiVo as it would allow him to easily record shows he liked. A great sale came up and he couldn’t resist. I found the thing in the closet about a week later and blew up – it felt like he had lied to me. Looking back, we both could have compromised and avoided the whole argument. Sigh. Live, and learn.
Logan Antill/Flickr
I’ve been fairly responsible lately with my credit card, perhaps owing to my monthly-long credit card ban in April. But last month I slipped up and forgot to pay my bill on time. I paid three days late, incurring a $12.15 interest charge. Blast!
Normally, I would call my credit card company and politely ask that they remove the charge, seeing how I am a loyal customer who pays in full. But I didn’t because I truly forgot to pay my bill.
Instead of automatically paying each month, I get two reminders to review my bill online, then pay via bank transfer. My first reminder comes about three weeks before the due date and I usually ignore it because the due date is sooo far away.
The second reminder is a note that pops up in my online Google calender about five days before the bill is paid. When I get this I log in, review the charges, and set a transfer from my bank to pay in full two days before it is due. If anything is amiss, I can contest without paying.
Last month, however, my second reminder popped up on a weekend, when I rarely check my online calender. My credit card due date sailed by before I remembered. I hate to pay the $12.15, but think it is fair. I’m more worried about how a late payment will affect my credit history so I’m considering putting my credit card on auto-pay. What do you think?
MyFico.com
There are five parts to your credit score. Payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and types of credit (10%). FICO, a financial analytics firm, uses these categories to rate consumers’ credit risk with a three-digit score. Within each category FICO outlines one to seven factors that come into play.
For example, in the payment history category, credit rating agencies consider how many accounts you are up to date on, whether you have any negatives like a bankruptcy or liens, and how long an overdue bill has been past due, among other factors.
In the length of credit history category, they consider how long it’s been since you opened an account, how long each specific account has been open, and how recently you’ve used each account. Read all the factors that are considered for each category of your credit score.
This is important stuff to know, but unfortunately the three credit rating agencies, TransUnion, Experian, and Equifax, don’t share specifics. How many points do I lose if I have a bill past due seven months instead of two? How many points do I gain if I am paid up on three accounts instead of one?
More information would help consumers improve their score. In the meantime, AARP shared tips for seniors and everyone else on how to improve your credit score or hurt your score. When in doubt, use common sense.
Related posts:
Best credit card rewards and perks
Get a free credit history report (sans FICO score) through the FTC
Anthrocopy/Flickr
Reader Diane sent me a darn good question via a comment on my post about approaching the end of my credit card ban. “When the experiment is over, will you go back to spending as before or will you make some changes,” Diane asked. “Either way, why?” My month-long cash-only spending experiment definitely changed the way I will spend money. Going forward I’m going to make three changes.
- I’m no longer going to rely strictly on credit cards because I scrutinize purchases more with cash. My goal is to use cash for everything under $50, which are the purchases that have the most wiggle room. Think I’m giving up a ton of credit cards perks? During the past seven months I earned an average of $16 in cash-back rewards each month. With cash I spent $200 less. That’s a much bigger perk!
- I’m going to strictly use cash for groceries because I spend so much more carefully with greenbacks. My dollars are finite no matter how I pay, but using cash makes my limits feel more apparent.
- I’m going to leave my credit card at home unless I specifically plan to use it. The more I pre-think about purchases before I leave home, the more likely I am to spend less.
Before the experiment I used to use cash for about 10% of my purchases and credit for the other 90%. Now I think my ratio is going to be closer to 60/40. What’s your ratio?
Clemson/Flickr
I was tempted to use my credit card four times this month, despite my pledge to spend only cash. None of the purchases were hard to push off or say no to. (I also put off purchasing airfare and making a hotel reservation for a blogging conference in July.)
1. A letter from my Alma Mater asking for money prompted me to pull out my credit card. Then I remembered my self-imposed ban. The letter is in my queue for May.
2. A coupon to renew my BargainBabe.com domain made me seriously consider breaking my credit card ban to get the discount. But the URL does not expire until June, so I can re-up in May.
3. A deal for a haircut (which I’m in need of) and hair coloring (which I’ve been contemplating) for $95 (orig. $225) landed in my inbox via SocialBuy, a new Groupon-type site for Los Angeles deals. I’m glad I passed, however, because a few days later I got a recommendation for a woman in Glendale who gives cuts for $20. My appointment is next week. (Full disclosure: SocialBuy’s founder is a friend of mine and is helping me improve my site).
4. Last year I forked over a whopping $400 over carelessly losing my iPhone. Ouch. A friend told me insuring an iPhone is super cheap, and indeed AppleCare costs $69 for hardware and software support, battery fixes, and phone support. The policy lasts for two years from the purchase date, so if I buy it in May I’ll get 19 months of coverage, which is less than $4 a month. The policy does not include damage from negligence, loss, or theft, however, so I may pursue other policies.
Frankly, I’m surprised that not a single purchase that required a credit card came up in April. I fully expected to confront 2-3 transactions that required credit. Is credit necessary after all?
Dplanet/Flickr
The day of reckoning is here. I sorted through my receipts and tallied my discretionary expenditures during my month-long cash-only experiment. The tally below does not include fixed bills like rent. (New to my forward-thinking budgeting system? It takes 15 minutes to set up.)
Overall, more than a third of my discretionary spending – 35 percent – is unaccounted for because I forgot to ask for a receipt. That means a picture of my spending provided below is woefully incomplete. This is also why some of my category totals, like meals out, seem low.
A number of seemingly random items sucked up my dollars – like bike repairs and gear in preparation for a triathlon May 1. I say seemingly random because unusual expenses like these pop up every month without fail. This is the main reason I created a forward-thinking budgeting system.
My totals for each spending category include tax.
Groceries: $172.22
Meals out, including coffee: $21.12
Drugstore items: $43.10
Bicycling gear and repairs: $169.38, including $100 to ship bike across the country and back
Business supplies: $15.86
Ski trip: $95
House and garden: $45.52
Gas:$41.57
Camping: $40
TOTAL accounted for spending for April: $643.77
TOTAL ATM withdrawals: $1,000
Cash left in my pocket: $11 (to last me until Saturday)
Total unaccounted spending: $345.23
Total rebates and gift cards earned: $29.69
Percent of spending unaccounted for: 35 percent!
My month-long cash-only experiment has taught me a lot about money. I dipped into savings only once, and that was to cover a $533 emergency mattress purchase. I’m telling you it really was an emergency! Grocery shopping takes longer because, with a finite supply of cash in my pocket, I add up the cost of each item I put into my cart so that I have enough money at check out.
sillygwailo/Flickr
I’m in the home stretch of my cash-only budgeting month and have four days before I can go back to using my credit card. What sweet relief!
Sort of.
I’ve come to appreciate cash for what it’s taught me. Using cash is messier and makes individual purchases harder to track, but it is easier to remember how much money I’ve withdrawn than to remember how much I’ve charged. If I forget, I can add up my ATM withdrawals online in less than a minute.
I am more conscious of how purchases add up as I contemplate them in the store. I am paying greater attention to prices because I am hyper-aware that what I buy today takes away from what I can buy later. With credit that seems less true. I am also scared of putting more into my cart than I can pay for. How embarrassing to not be able to pay the cashier and have to put something back. This means shopping takes a few minutes longer as I’m tracking the price of everything in my cart, but it is a cinch to stick to my list. During my last grocery trip, I took two items off my list even though I had enough money to pay for them!
Almost everyone takes cash, but there are exceptions. Some airlines do not take cash for in-flight purchases of snacks and drinks. Rental companies often require a credit card to place a hold in case you damage or lose the equipment.
Big purchases are easier with credit. With plastic, you don’t have to stuff wads of bills in your wallet and ask the cashier to count out high sums. If I lost my wallet, I have no recourse other than hoping an honest soul returns my wallet untouched. With credit I am well protected.
Cash has changed my spending habits the most when it comes to purchases under $50. Most of my big purchases, like a plane ticket to NYC for my sister’s graduation, are unavoidable because I am committed to celebrating her accomplishment in person. But the small purchases – like whether to order another drink at the bar, or whether to stock up on groceries – come with wiggle room. Using cash makes me more likely to wiggle my spending downward.
So how do these lessons add up this month? I am on track to spend $1,000 in April, which is well below my target of $1,200. My total spending does not include a $533 mattress, for which I used savings. I have four days left to go so keep your fingers crossed I will make it to May without going to the ATM again!
spiderpop/Flickr
At least one reader was shocked by my disclosure that my monthly budget is $1,200. In a comment about whether a $533 mattress purchase should come out of my budget or my savings, Cindy said, “If you easily have $1200 free cash to spend in a month…wow! That’s not being very frugal.”
Let me explain my budgeting system and why I give myself so much leeway.
I have tried many, many budgeting systems, from tracking every penny to estimating monthly costs by category. None of them worked because they all relied on past purchases to predict future ones. What I spend my money on varies widely. One month a plane ticket may eat up a good chunk of my dollars. During another month a wedding or home project may account for much of my spending.
What does not change is my total spending, certain fixed bills, and my income.
I decided to use this information to create a forward-looking budget (the pdf is safe to download). I start with my income, subtract my fixed bills, and am left with a monthly spending amount (my budget).
My fixed bills include basic necessities and any bills that must be paid including my rent, savings contribution, 1-tank of gas, student loan payment, cell phone bill, and regular prescriptions. Everything else comes out of my monthly budget.
- groceries
- second and third tanks of gas
- gifts
- travel
- clothes
- coffee
- movie rentals
- toiletries
- meals out
- drinks with friends
- hair cuts
- yoga classes
- gardening supplies
- car washes
- vacations
- anything else
Still think $1,200 sounds like a lot?
I gave up credit and debit cards this month to try to reduce my monthly budget. Previously, I went on a spending moratorium to learn new habits. My 15-minute budget may or may not work for you. The first month I used it I reduced my credit card bill by $2,000. Give it a try and let me know what you think.
I totally overspent during the first week of my cash-only experiment (yes, I really did give up credit cards!) so I drastically scaled back during my second week. My cash outflow was drying up when – BAM! – I had to buy a new mattress. Believe me, it was that or sleep on the couch.
My mattress purchase leaves me with $157 for the month. Unless…I dip into savings to cover the mattress. Here’s how my spending looks so far.
Week 1 spending – $470 (including a pricey snowboarding trip)
Week 2 spending – $40 (just groceries)
Emergency mattress spending – $533
That adds up to $1,043. My target was to spend $1,200 this month.
Loading ...UPDATE: For some reason the poll is not working. We made some tech updates recently on BargainBabe.com so I’m checking to see if those affected the polling features. Hang tight!
Andres Rueda/Flickr
One reader responded to my credit card moratorium with a detailed blog post about the cash back rewards I am giving up. The info was so useful I wanted to share it. Here is Marie’s post:
“Different strokes for different folks,” goes the saying. And that applies most definitely to credit cards! Now, I can see the benefits of trying to rein in one’s spending by using cash only for discretionary purchases. If you leave your credit and debit cards at home and have only your available cash to use, you are obliged to be cautious about your spending.
But, when used for larger payments, credit cards that offer 1% to 5% cash back can be very rewarding. Here are some approximate bills you probably pay and how much you can earn with a 1% cash back credit card:
- DMV ($2.50 rewards for $250 DMV payments)
- Car Insurance ($10 rewards for $1000 payments)
- Home Insurance ($15 rewards for $1500 payments)
- Home Earthquake or Flood Insurance ($15 rewards for $1500 payments)
- Renters insurance ($2.50 for $250 payments)
- Car dealer down payment ($50 rewards for $5000 down payment)
NOTE: All these benefits can be nullified if you pay high interest rates. So use your Rewards card wisely. Make sure you budget to pay in full (or installments), just as you would do if sending the payment by check.
You can also earn cash back rewards on many regular monthly payments:
- Time Warner Cable fees (at $60/month payment, cash back of $7.20/year)
- Direct TV fees (at $60/month payment, cash back of $7.20/year)
- Cell phone bills (at $50/month, cash back of $6/year)
Some credit cards offer special quarterly 5% cash back offers for purchases made at specific types of stores, like grocery stores, drug stores, department stores, home improvement stores, and clothing stores. Three sites I like for these types of credit cards are CapitalOne, ChaseFreedom or Discover.com. Spend $200-$400 per quarter on these special offers and the 5% cash back rewards will earn you $40-$80. You can also search for Visa and Mastercard reward cards at CardRatings.com.
I am spending cash like a maniac and have little idea where it is going. Five days into my month-long cash-only experiment, more than $200 has slipped out of my hands.
That’s partly because I feel more generous with a fat wad of bills in my pocket. I’ve fronted a bar cover for friends, paid for breakfast at a coffee shop, and treated myself to a package of beef jerky at a roadside stand. Tasty – but pricey! There was a tank of gas and…I can’t remember the rest.
I’m used to having a neat record of all my purchases at the end of the month on my credit card bill. With cash I forget to ask for a receipt and often the cashier forgets to give me one. How much money at the end of the month will be unaccounted for? I’m guessing almost half.
As I said in an earlier post on preparing to go without plastic, I hid my credit and debit cards in my jewelry box. Later that day I opened a letter from my Alma mater asking for money. I thought, “I can charge this donation and get cash back!” (My credit card has a 1-3% cash back deal). When I pulled out my wallet to retrieve the 16 digits to write on the form, I remembered my credit card moratorium. Oops! I will have to wait until May to send my school a contribution.
The next day I pulled my debit card out of its hiding place. I was going on a solo road trip and decided to carry it as a backup, just in case. If for some reason my car broke down, I would most likely need more than $300 – my cash allotment for the weekend – for the fix. Not that I plan to spend $300 in one weekend. I’m carrying around extra cash because I’m worried about not having enough money, which leads me to spend more because I have so much money. How ironic!
I’m not quitting, however. Support from readers has helped, including this email from Ellen, who saw my column in the N.J. Star-Ledger:
I read your column on going plastic-free (a.k.a. sans credit cards) and wanted to throw you some words of encouragement from someone who’s been there, cashed that. About ten years ago I successfully completed a credit card counseling program, one which required me to surrender all my plastic for the duration it took me to pay down my debt.
It was a small price to pay for getting my payments consolidated, interest rates lowered and getting those pesky collection calls to stop clogging my voicemail. So for three years, I went plastic-free all while I got my debt in order. Every transaction that required a credit card–like buying an airline ticket online–I simply used my debit card which contained a Visa logo. This win-win allowed me to make online purchases and have the money directly withdrawn from my checking account.
When I finally received the letter declaring me debt-free I eased back into just one credit card which I pay in full or darned-well near try. Since I’m still on a strict budget, I still try and use my debit card only. Good luck on your cash-only venture.
I’m rootin’ for ya.
