Your Questions about Paying Bills, Credit & More

Here are some Q&A that Ellie recently answered on ABC NEWS, Good Money Show.

Q. I’m single and my landlord recently raised my rent, plus the costs of others things are rising while my income stays the same. I’m having a harder and harder time paying bills and I don’t’ have a mortgage to refinance, would it be worth it to refinance my car? Joellen - WA

Ellie: Yes, most people don’t realize that you can refi an auto loan, but you need to be prudent! First, go check out some of the best rates that are being offered and that your credit score would allow you to qualify for by going to monitorBankRates.com or bankrate.com where rates vary from 3.99% to over 12%. Take the best rate and plug it into my auto loan calculator at elliekay.com to see how much you would save with a refinance. Sometimes, you’re offered a longer loan at a higher interest rate but the monthly payments are lower because you’re paying longer. I’ve also noticed that Wells Fargo will finance a car for 125% of its value—run from that deal as you’re guaranteed to owe lots more than the car is worth as soon as you sign the paperwork and your car will only continue to decrease in value. This is not a good deal for you as you’ll pay more over the long run.

Q. Should I pay my department store credit card first or my Visa credit card bill first—I don’t think I can pay the minimums on both of these this month because I just got my hours cut in half at work! Robin Hilldale, Tehachapi, CA

Ellie: Generally speaking bank cards such as American Express, Visa, Mastercard or Discover are the accounts that carry more weight on your credit report. A department store credit card does little to improve your credit rating, but that’s not to say that you can let this debt go bad because it will be turned over to collections and it will hurt your credit score. But if you can only pay one on time and have to pay the other late, then go with the Visa and even if you pay less than the minimum, try to pay something on the department store card.

Q. My husband was injured in an automobile accident and not only do we have a mountain of medical bills, he can’t work until he’s recovered from his accident. We can’t really afford to pay for financial counseling, is there some place we could go for help? Justine - Ohio

Ellie: Justine, I’m sorry to hear of your situation, it must be very difficult. But I do have some good news, you are a prime candidate for Consumer Credit Counseling Services. Go to nfcc.org to find a credit counselor in your area who will work with you for free. In some cases they are able to get some of your medical debt forgiven and in many other cases, they are able to get interest rates lowered. But beware, there are a lot of “for profit” counseling services out there that masquerade as “non profit” and you need to be sure to only go to nfcc.org .


Q. I was laid off from work last year, but I’m really happy to report they called me back to work this past month. However, our bills took a hit as we were trying to make ends meet. My credit score is now a paltry 590. What can I do to try and repair it? Heidi Rothenberg, New York

Ellie: Communication with creditors is the key when it comes to going through the rough patch that you just survived. If they know you are trying to be responsible and pay off your bills, they can, in some cases, lower the minimum payment or extend the loan (depending on the kind of debt you have). The three quickest ways to improve your credit are: 1) pay more than the minimum payment due on your credit cards—even if it’s just $5 over the minimum, it shows up on paper as you paying down debt 2) make payments on time – better a day early rather than a day late and 3) pay attention to the proportionality on your credit card accounts and make sure that you only have 50% or less of the available credit charged on any one card. Go to annualcreditreport.com to get a free copy of your credit report and you can see which accounts need the most attention.

Q. My problem isn’t that I’m not paying my bills, it’s that my estranged husband isn’t paying the credit card that is in both of our names. What can I do to protect myself in the case of his unpaid bills that also impact my credit? Stephanie, AZ

Ellie: Any joint accounts set up in both your names will continue to impact your credit score, even after a divorce. So it’s important, no it’s critical, to your financial health that you separate these accounts by setting up new account numbers. For example, you could ask your spouse to get a loan from your credit union to pay off the balance of the joint account. Or, you could propose that he could go to bankrate.com and find a card offering better rates, including transferred balances. In that case, it’s a win/win situation because he gets a lower interest rate through an introductory offer and once the balance is transferred, you can both shut down the joint account.

Q. Ellie, I’ve read all your books and they have really changed our lives! We ran into some trouble when our credit card company suddenly changed the due date on us and we were late on our payment. I thought they weren’t suppose to do that anymore because of the Credit Card ACT reform. Should I watch out for this with my other credit card companies in the future? Chris from New Mexico

Ellie: Yes, you and millions of others had the same problem with changed due dates that suddenly made you late on a credit card bill. But those days are suppose to be a thing of the pass with the Credit Card Accountability, Responsibility and Disclosure Act or the CARD act that has been implemented throughout the latter part of 2009 and into 2010. Now, credit card companies are suppose to give you 45 days notice for any significant changes on your account, including your due dates as well as increased fees and higher APRS

Q. Our problem is that we seem to be perpetually late on paying our bills—because we’re so busy that the bills creep up on us before we can send the check in on time. Is there something you can suggest to help us avoid being late on our bills? Hannah Ortega, Texas

Ellie: Yes, this is a problem isn’t it? In our house, I’ve asked my husband to be in charge of the bills because even though I'm the "financial expert," I felt it was important for him to be keenly aware of how much we’re spending and where it goes. But that meant that I had to oftentimes deal with the frustration of seeing bills paid late until technology came to our rescue and the advent of online bill paying came into existence. We pay all our bills online including the mortgage, credit cards, electric bill, etc and we’ve set these up for an automatic draft on our checking account on the day they are due. The only bill we haven’t been able to pay online is our water bill because our city is a little behind the times and doesn’t allow that for now. However, since we’ve set up automatic pay online, we’ve never been late on a bill again!

Ellie Kay

America's Family Financial Expert (R)

www.elliekay.com

Prioritize Your Debt - What to do With Unpaid Bills

Recently, on ABC NEWS, I talked about the fact that some parts of the country still have unemployment in the double digits while other employees are facing cutbacks in hours and salaries. More and more people are having a hard time paying their bills in these economically challenging times. If you only have a certain amount of money available and you know you won’t be able to pay all the bills, you need to know that not all bills are created equal. There are certain bills that have greater penalties than others. Today, I want to help you look at how to tackle those unpaid bills as well as grace periods and the variable consequences for not paying bills on time.
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Q. Are people still having a harder time paying their bills? I mean, we hear about new jobs being created and the recession is officially over. Why are some families susceptible to continued financial difficulty?

ELLIE: Obviously, unemployment is a big issue as well as the fact that many workers have had to accept pay cuts or work fewer hours to keep their jobs. With these come a contagion effect in that if you are unemployed or you go part time, there’s additional costs involved such as purchasing health insurance. Even if these workers find new jobs, they still have the residual effect of having less income for many months. In other cases, some may have had homes foreclosed upon and it’s cost them a lot to get established in another place of residence, plus these individuals has tanked their credit ratings—which means that rental property will require a larger down payment. A poor credit score also means these renters have to pay more down to even get basic utilities hooked up to their rental property. All these expenses start to add up and eventually, families are finding that they don’t have enough to pay all the bills.

Q. So if someone is between jobs or had some unexpected expenses such as medical bills, then what bill should they pay first?

ELLIE: When it comes to paying the bills there are always consequences for not paying. However, it’s the severity of the consequences that people need to consider when they are rank ordering which bills they should pay first, second, and so forth. The rule of thumb is to look at how fast your creditors will be likely to move against you. Which brings us to the most important bill and first bill you should always pay—your mortgage. If you fail to pay, the bank can begin foreclosure in as little as three months. Plus, this is the most significant debt you have when it comes to influencing your credit score. And with a poor credit score, the bills will just stack up even more quickly as we know that those who have bad credit have to pay more for deposits, for auto insurance some times and a poor score can even influence whether you get a new job or a job promotion at your existing place of employment. So protect your score and your financial future by paying the mortgage first.

Q. OK, so we understand that the mortgage is the most important bill, what would come second?

ELLIE: The next most important bill to pay is your car loan. Not only because you need a car to go to and from work, but also because as the second most significant loan you have, it will also impact your credit score in a more significant way than a department store charge card or a utility bill will. As for the consequences of not paying, a lender can begin repossess your vehicle if you’re a day late, but in all actuality, most will wait about sixty days. If you are serving in the military in a combat zone, there’s a little more leeway for vehicle repossession, you should contact your base’s financial office if you’re in danger of repossession while on active duty. But for the rest of us, not paying this important bill will cripple your ability to remain gainfully employed as having a vehicle is essential in most cases.

Q. So we’ve paid the mortgage and the car loan, now we pay credit cards, right?

ELLIE: Yes, that’s right. As you know, credit cards payment are very important because if you don’t pay on time, you’ll get hit with late fees. But there are more consequences than just a late fee. You might be faced with a hike in your APR if you’re tardy and then it could spread to other cards as well. You might find your average APR going from 9% on your credit cards to 24% or more in just a month. After about six months of missed payments, credit card companies start to send your account to collections and then you have an entirely new set of headaches to contend with. Concentrate on paying bank cards first such as Visa, Mastercard and American Express. You can even go to www.bankrate.com and look for lower interest rate cards that offer a promotional for transferred balances which can help your overall liability on credit cards. A final option is to go to your local credit union to see about a consolidation loan.

Q. Let’s say you have a little bit of money left, what’s one of the lower priority bills that you can tackle?

ELLIE: The next bill to concentrate on just happened yesterday—taxes. While technically, there is no “grace period” you can ask about an installment plan. The IRS can eventually garnish your wages and seize property or bank accounts. The old saying, “death and taxes are inevitable” exists, it’s because you WILL have to pay that tax bill some day—whether you’re a celebrity dishing on talk shows and making 25 million dollars a picture or whether you dish up ice cream part time at Coldstone making $25 a day!

Q. Thus far, we haven’t mentioned student loan debt, isn’t that an essential bill as well?

ELLIE: Yes, it does seem kind of crazy that student loans haven’t made it into our priority list yet, but I think that it illustrates the fact of how quickly the money goes for more “essential” bills and how there’s often more month left at the end of the paycheck Lenders for student loans will wait about nine months before placing a federal loan in default. As of last July, graduates can opt for a loan program that bases payments on up to 15% of your annual gross income. If you have these kinds of bills, then you can go to www.IBRinfo.org for help in how to pay your student loans more efficiently.

Ellie Kay
America's Family Financial Expert (R)
www.elliekay.com

How to Save $160,000 on Groceries!

According to the Consumer Price Index (CPI) food prices rose 4% in 2007 and 5.5% in 2008. This year, according to the USDA Economic Research Service (ERS), prices are predicted to rise as high as 3.5%. This means that shoppers will continue to look for ways to cut corners while still feeding their families and purchasing household goods. Our family has saved an average of $8,000 per year for the last twenty years (according to the USDA cost of food at home chart) or a total of $160,000!

Here's how we did it as seen on ABC NEWS NOW - Good Money Show.

Q. So you’re saying that saving money on the food budget can make a significant impact on a family’s financial situation. Where does “food” generally rank in terms of expenses in a family’s budget?

Ellie: The greatest expense for most families is the mortgage and insurance, then there’s transportation and food ranks third. So if you can save money on the third largest bill you have in your family, then it can make a significant difference in your overall financial health. In fact, I fed our family of seven for only $200 per month during that first decade. According to the USDA’s “Cost of Food at Home” chart, I saved an average of $8000 per year. Since I’ve been doing this for 20 years, that’s a twenty year savings of $160,000. So it really adds up!

Q. That’s a lot of money you’ve saved, Ellie. We’re ready to hear about how your plan works. You say that “layering the savings” is the way to save 50% or more on grocery items. What are some of the savings layers?

Ellie: A lot of people think they are saving money by buying store brands or shopping the sales. While they may save a little here and there, I’ve found that the biggest savings are found when you combine or layer the savings factors. Here are some of the layers:

1. Shop the Sales
2. Use manufacturer’s coupons on brand name items
3. Shop at a double coupon store
4. Use a store coupon
5. Look for Value items - Items that donate to worthy causes such as Dawn's Everyday Wildlife Champions
6. Get rebates
7. Get Cash off Your Next Shopping Order


Q. OK, let’s get a little more information on these different layers. I understand shopping the sales and using manufacturer’s coupons. But you lost me at combining a manufacturer’s coupon with a store coupon. How can you use two coupons on one item?

Ellie: In today’s example, I found a store coupon that made this $2.59 bottle of Dawn cost only .99. That is a store coupon. Then I used a manufacturer’s coupon for .25 off the same bottle. So this bottle of soap only cost me .74. And because it’s a higher end brand name, it lasts longer than a store brand (which has mostly water). Which makes it a “value” layer in our savings factors.
If you follow the funding source, then you’ll know which coupons can be combined. A “true” store coupon is one that is funded by the store’s advertising or marketing department. It is usually evident by the store name on the coupon and/or the store’s mailing address. If it has a manufacturer’s address on it, then it’s not a true store coupon. A manufacturer’s coupon is reimbursed by the manufacturer, not the store, so it can be combined with a store coupon.

Q. The other layer that can be a bit confusing is the “Cash Off Your Next Shopping Order” how do you earn that coupon, can you give me an example?

Ellie: In my example, I went to Albertson’s last week and found Post cereals, that were usually $2.89 on sale for only $1.69. I had a coupon for $1.00 off each box of cereal, which made them cost only .69 each. Post was running a promotional with Albertson’s and offered a $4.00 off your next shopping trip coupon for the purchase of 5 or more boxes of cereal. So, with sales and coupons, I paid $3.45 for five boxes of cereal and received the $4 off coupon for a net gain of five free boxes of cereal and .55.


Q. What about double coupons and even triple coupons, how does this work and what are some of the limitations that consumers should be aware of when double couponing?

Ellie: If you go to my website, and click onto the “resources” at the bottom of the home page, you’ll find a link to a list of double coupon stores across America. These are stores that will take the face value of a coupon and double (or even triple) it for the customer. So if you buy that Dawn soap, we talking about earlier, the .25 manufacturer’s coupon would now be worth .50. You need to check with the customer service desk because some of the limitations that might be included are: up to a limited amount, you might only be able to get one item doubled on any one particular product. So the first Dawn coupon would be doubled to .50 but the second one would be worth only the face value of .25. Another limitation might be on a “Buy one/Get one free” even though you are getting two products, they may only accept double coupons on the first product. If, however, the product will ring in at half price, then you could use two coupons.

Q. Are there any websites that can help me organize all these savings layers and let me know what deals are available in my area?

Ellie: Couponing can not only be time consuming and confusing, but you might not understand each store’s “rules” either. Thankfully, there are some outstanding websites that can help as they do a lot of the legwork for you. All you have to do is enter your zip code and they’ll let you know what is on sale in your area, what kind of manufacturer’s coupons should be out there on the product, what stores offer double coupons and even which stores might offer a store coupon in addition to the other sales. You can go to www.couponmom.com (free membership) or www.thegrocerygame.com (paid membership).

Q. What about saving money on food outside of the grocery store? Volunteer food programs have sprung up across the country, how do some of these work and are they cost effective for the consumer?

Ellie: There are a few different programs out there such as S.H.A.R.E that have been out there for quite a few years. SHARE is an acronym for Self-Help and Resource Exchange – is a program where people get a break on their grocery bills by exchanging volunteer time for the opportunity to buy affordable food. For each package of food purchased, we simply ask for two (2) hours of “good deed” time, whether at SHARE, other institutions in your community, or your own neighborhood. Food packages (worth up to $45) offer meats, fresh fruits and vegetables and grocery items. The price you pay is based on what you select from the menu but you can generally save about 50%. SHARE purchases the food from growers, brokers and packaging plants and is never donated, government surplus, or salvage.
For those who may not have access to a SHARE program in their area, there are other non-profits that have sprung up in response to the economic needs of families and they also offer boxes of food at bargain prices. Angel Food ministries offers $70 worth of food for $30 if you order it ahead of time and go pick it up at a central location. You can order online and it’s also a great organization to volunteer with as they have locations all across America. There are no income requirements and anyone can participate.


Happy Savings!
Ellie Kay
America's Family Financial Expert (R)
www.elliekay.com