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

Double Your Returns on Investments - Viewer Q & A

I had a very nice response from my ABC NEWS NOW show last week and wanted to share my favorite questions from viewers, along with some answers you might find helpful!




Q. Should I buy gold? If so, how do I buy it?
Thomas, Sante Fe, NM
Submitted via Facebook


Ellie: Today’s discussion has been about investments that double your returns, and we’re talking about small returns to begin with. Consequently, gold doesn’t qualify as a risk free way to double your returns. But you could keep gold in your portfolio for safety and protection as a hedge against inflation. As always, keep your portfolio diversified and don’t overstock on gold. If the dollar stays weak, as it is suppose to do until interest rates are rising again, then the price of gold is expected to rise in the second half of the year. You can buy gold in one of two ways: you can buy a gold based ETF (exchange traded fund), which is traded like stock. Or, you can buy gold coins such as the American Eagles. Go to money.org, to find a gold coin dealer. Store these coins in a safety deposit box at a bank.



Q. If a high interest bearing checking account has so many hoops that I have to jump through, then is it worth the effort it to park my extra $20,000 in that account?
Rosha, New York
Submitted via blog

Ellie: Yes, high interest bearing checking accounts can earn as much as 4.3% and they are complicated and require a certain number of debit transactions because they make their money from merchant fees from those transactions. They also can require direct deposits or automatic payments. But if you took your $20,000 and parked it there, instead of making nothing (which is what you would do in an average checking account, when adjusted for inflation), you could, instead, make $860 in interest.


Q. Do high interest checking accounts have the same protections that regular checking accounts have? I’m concerned because most of these are found in small banks and we all know how many banks have failed in the last couple of years—plus, they aren’t local to me and I’m a bit squeamish about banking long distance.
Victoria, Spokane, WA
Submitted via email

Ellie: Yes, most of the high interest checking accounts you’ll find at www.checkingfinder.com are held with small to medium sized banks because it’s a new stream of revenue that is working for these smaller financial institutions. Not all of these accounts are created equal, so you need to do your research before you sign up. Some of these have an automatic reimbursement of up to $25 monthly for ATM fees, because they understand there will be a charge for their customers who don’t bank with a mainstream banker. In terms of your money being secure, have no fear! They have the same FDIC protection offered by any local or big named bank, which among other benefits is up to $250,000 per person per bank.


Q. I’m interested in investing for double my return at less risk and was thinking about investing in bonds because some of my more savvy investing friends have found success with their bond investments. What, would you say, are the least risky bond mutual funds?
Jill from Chicago, IL
Submitted via online contact form

Ellie: Even though bond mutual funds are less risky than stock mutual funds there is still some risk involved, unlike non traditional CDs and high interest bearing checking accounts. Short term bonds tend to be less risky than intermediate and long-term bond funds. But understand that you can lose money as the bond market goes up and down. Do your homework by going to Morningstar.com to research how the bond mutual fund performs. Granted, it’s rare that you would lose money over the course of a year. In fact, the greatest kind of disappointment you might have, if anything, is that they just don’t make as much money as you hoped they would make. But that is a price worth paying for a 4% to 5% return on this kind of short term investment.

Q. If I want to concentrate on de-leveraging, should I pay off consumer debt before I build up an emergency fund? If the most I can get on a high interest checking account is a 4% then wouldn’t paying off a credit card that is at 16% make better financial sense?
Lee Green from Colorado Springs, CO
Submitted via Facebook

Ellie: On paper, it makes more sense to use that saved money to pay down a 16% rate than it would be to get a 4% (max) rate on the high interest checking account. However, there’s a hidden factor here and that is the uncertainty of what your economic future holds. With unemployment in double digits in many parts of the country and employers offering paycuts to keep employees gainfully employed, there are no guarantees. That’s why you need an ample emergency fund—around 9 months of living expenses if you are a dual income family and 12 months if you are a single paycheck income. I’d recommend you put a portion of your savings toward consumer debt and a portion toward building your emergency fund in order to build one up while you’re paying the other down.

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

Earn 4.3% on Your Checking Account? You Can Double the Returns on Short Term Investments

The return on your savings account, money market account or certificate of deposit is probably hovering at 1.7% (see below), but what if you could boost that return to 3.4% or more? You would double the returns on your short term investment!

In the spring of 2008, consumers were saving less than 1% of their income. But then the economy headed south and savings headed north to where Americans were saving over 6% a year later. In fact, as a nation, we saved 5.6 trillion dollars last year. But wait! That’s not all the good news—there’s more! Inflation is projected to remain relatively low for the next five years, hovering around 2.5%. This means that all those people who have been saving money have a legitimate question to ask—what should we do with our savings? If you put it in your basic checking account, you will lose money due to inflation, but how do you make it grow without risk? I was recently on ABC NEWS NOW to discuss this problem and here are some of the highlights:

Q. Ellie, many of the people who are putting away 6% of their income are saving for a time in the near future when they feel comfortable enough to spend again. What are some of the things that these savers should not do with their money?


Ellie: I think it’s just as important to know what not to do with your money as it is to know what to do with that savings. If you are like most of those savers, you’re saving for the short term—at least temporarily. So that means you should not tie up your investments in stocks. If in the next three to five years, you plan on starting a business, buying a home, sending a child to college or buying a car—you should look at short term investing and not long term. There is a difference between funding long term investments, such as retirement and saving cash that you might need in the next three to five years. Second, you should not put these short term investments into money market accounts or traditional CDs because the money sitting in these low yield accounts, when weighed against inflation are basically making you nothing. When you do the math, you’ll see that a basic account making around 1.7 % interest, after you pay taxes on the growth and then adjust for a 2.5% inflation rate, is losing you money. In fact, that $100 you now have will be worth $98.60 next year.


Q. Then where do we start and if you are advising savers to avoid putting their short term savings into a savings account, then where do they put it to protect the principle and make the money grow?

Ellie: High Interest Bearing Checking accounts are a good place to start. In the past, these kinds of checking accounts haven’t been worth the effort. But recently, some financial companies have responded to the economic situation and they have found a way to still make money by allowing you to earn money as well. These kinds of high interest bearing checking accounts can usually be found in small to medium sized banks and some of them are paying 4% interest, which is 30 times what you could make in an average checking account or money market account. You can go to http://www.checkingfinder.com/ to find one of these kinds of accounts. An example of this is Royal Banks of Missouri, that pays 4.3% on balances up to $24,999 and 1.4% on balances over that maximum. There is a catch, however, you must use your debit card at least 10 times during the statement cycle, make at least one direct deposit or an automatic payment per month and then receive your statements online. If you don’t meet ALL this criteria, the hit is a big one because you’ll only earn .15% on the entire balance for the month.



Q. So a High Interest Bearing Checking account is one way to double your return. If we’re not having much luck in average money market funds and traditional CDs, then is there another kind of CD out there that might help those who want to double their return?

Ellie: As a matter of fact, you can look at some of the nontraditional certificates of deposits to get a better rate. First, look for the introductory teaser rate which are found at bankrate.com or ratebrain.com. I found some for 4.3%. You’ve seen the teaser rates for credit cards and these are basically the same kind of offer—they have limitations and stipulations and if you want them to work for you, then you’d better know what those boundaries are. Most of these introductory CD rates are from banks who want to boost their deposits by offering a drop dead gorgeous interest rates. As long as they are FDIC insured, you don’t have to worry.

Q. In the past, it’s been wise to ladder your CDs, is that still true, even with the nontraditional certificate of deposit?

Ellie: Yes, the laddering concept is still the same. Basically, you’ll divide your CD money into four or five pots of money, then invest the portions into CDs that will come due over the next five years. That way, when interest rates rise (and they will) then you won’t have to wait five years to take advantage of the higher rate; you’ll be able to roll over the CD that matures next. This strategy also gives you more access to cash, should need it.

Q. One of the new nontraditional CDs that can give you twice the return at no risk is called a STEP-UP product. How does this work?

Ellie: This is a new kind of product that offers longer maturing CDs at a higher rate for each year that you hold the certificate. The first year, it may offer a 1% return, but in years two and three, you could see it rise to 2% and in the fourth and fifth years it would be 4%. They are FDIC insured and you will need to buy them through your brokerage firm. But the good news is that you do not pay the commission, the issuing bank will cover that amount. However, if you want out of the CD early, you could go back to your broker and they could try to find someone to buy them from you, but in that case you would be the one paying the broker’s commission.

Q. A second kind of non-traditional CD is called a “Structured” CD, how does it work and are they a better option than a traditional CD?

Ellie: The returns on a structured CD are tied to an index (such as the S&P 500) or they could be tied to currency movements or inflation. You are guaranteed not to lose money should the index decline, which is nice but if it goes up, you’ll only get to take advantage of a part of that gain. So if the S&P goes up 10%, you may only get 6%. While some of these are FDIC insured, others are insured by the bank. I recommend the FDIC insured variety.


Q. Most of those who saved a part of that 5.6 trillion dollars last year, are short term investors who are saving to buy a car, house, or pay for college. While some aspects of the bond market have been attractive in recent months, is there a short term bond investment that will still allow savers to double their returns with no risk?

Ellie: There is a group of short term bonds that invest in municipal and corporate bonds and these can earn up to 4% and 5% in returns! Like our nontraditional CDs, these are also purchased through a brokerage firm, but as with any kind of a mutual fund it is a good idea to check the fund’s rating at Morningstar.com. Not all of these funds are created equal and some are better than others. Of all of the returns we’ve talked about so far, this investment option is the riskiest. Sometimes the bond market performs well and sometimes it doesn't, that's the risk you are taking for the higher return in this case.

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

When Free Credit Reports Aren't Free

When A “Free” Credit Report is not Free

Ellie was on ABC News Now this past week talking about this critical topic. Since 2004, consumers have had the right to request a free credit report every 12 months from each of the three credit-reporting agencies. But almost from the beginning there’s been confusion about how to get a free credit report. There are thousands of people who respond to TV ads offering “free” credit reports or they order a credit report online only to later discover that they have signed up for a monthly credit-monitoring service that was definitely not free.
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Q. Let’s start with the obvious question, Ellie, when is a free credit report really free?


Ellie: There’s basically one primary way to get a no-strings-attached free credit report and that is to go to AnnualCreditReport.com or call 1-877-322-8228. You can also write into Annual Credit Report Request Service at PO Box 105281, Atlanta, GA 30348-5281. While there are many look-a-likes sites, there is basically one government site and that is AnnualCreditReport.com .

Q. What is the difference between a credit report and a credit score and are they both free?

Ellie: A credit report is your credit history and that is free as outlined above. However, you are not entitled to a free credit score. The credit score is your FICO (Fair Isaac Credit Score) and it indicates your credit worthiness and will impact a variety of financial areas including what kind of Annual Percentage Rate you will pay for your mortgage loan.

Q. How often can you get a free credit report and from what credit reporting agencies?

Ellie: You are allowed one free report, per year, from each of the three major reporting agencies: TransUnion, Experian and Equifax. You don’t have to get all of them at the same time. In fact, I recommend that you spread out each of the reports every four months. That way you can track, for free, whether there have been any major changes in your credit history on a regular basis.


Q. Should I order a copy of my kids’ credit report to see if someone stole their ID?

Ellie: Child identity theft is on the rise and it is important for you to order a copy of your child’s credit report at least once a year to make sure it has not been compromised. You should also go to Social Security Administration website and order a copy of your child’s social security earnings to make sure someone isn’t using their number in order to obtain work.

Ellie Kay

America's Family Financial Expert (R)

http://www.elliekay.com/

Just Say "No" to All Credit Cards??

Just Say No? Fact or Fiction? ABC NEWS NOW Special with Ellie Kay



Revolving credit—largely made up of credit card debt—fell by nearly 20% in November, the largest drop on record, according to the Federal Reserve. Credit card usage is definitely slowing due to less borrowing by consumers as well as banks’ tighter lending standards. Through October, the number of new credit card accounts was down 46% from the same period in 2008, according to Equifax.
The average consumer in America owns five credit cards but there has been a slow emergence of a “no-credit-card” lifestyle among former credit card holders. These “cash only” buyers are convinced their numbers will grow as consumers become increasingly disenchanted with credit card industry practices. Cash-only can be inconvenient, but these consumers say it is worth it. **********

Q. Some of the consumers who have sworn off credit cards say that they are doing it in order to “get back to basics” and their “desire for a simpler lifestyle.” How do you think getting rid of credit cards can help them achieve their goals?


Ellie: I’ve done research on and talked to those families who have downsized, sold their rental property, small businesses or material “stuff” and used that money to pay off most of their debts. They’ve made these radical lifestyle choices in order to go back to the “less is more” worldview in a quest for the simple life. One of these families has a blog, ManVsDebt.com and reading about their experiences is both inspiring and challenging. In fact, our own family has “been there and done that” to a certain extent, when we had a lot of consumer debt and opted to become a one car family for a season. I think that there is an advantage in that you have fewer bills, fewer arguments over money with your spouse and fewer headaches. There is a lot to be said for the simple life—and I’m not talking about Paris Hilton’s “Simple Life” but a more streamlined lifestyle that if free of the trappings of consumer debt.


Q. According to a July 2009 survey by Auriema Consulting Group, 28% of consumers have shifted the way they pay for purchases in the past year with an increase in debit card usage coming at the expense of credit cards. In fact, 46% of consumers surveyed said they believed debit cards helped control their spending. Do you think the increased acceptance of debit cards makes the “cash life” easier to achieve?

Ellie: A decade ago, consumers who didn’t want to use credit cards had two choices: they could carry around a lot of cash or write a check and hold up the grocery store line. I do think that with the increased use of debit cards, we have a situation where you can blend the discipline of paying cash with the convenience of using plastic. Most merchants, including online retailers, accept debit cards if they accept credit cards. Plus, there are other options such as paypal that help those consumers who want to use a debit card instead of a credit card. Since debit cards are broadly accepted I think that the decline in credit card usage is due primarily to a desire by people to get a better handle on credit card spending rather than a rejection of credit cards.


Q. Abandoning credit cards seems to be a much more radical step than using them less. Furthermore, consumers who don’t own a credit card often have a hard time renting a car, among other inconveniences. What are some of the drawbacks of cutting up those cards?

Ellie: Getting rid of all of your credit cards is a radical step that can have a significant impact on your ability to function in a card based society. Not only is it almost impossible to rent a car, but some hotels won’t book a room to travelers who want to pay with a debit card or cash. Those that accept debit cards may place a hold of several hundred dollars in the customer’s bank account, which could cause checks to bounce. Debit cards also provide fewer consumer protections than credit cards. If fraudulent charges show up on a credit card bill, the card holder can refuse to pay them. Federal law limits credit card holder’s liability to $50 of the fraudulent charges and most card issuers have zero liability policies for victims of identity theft. Whereas money stolen from a debt card is immediately removed from the card holders bank account, which means they must fight to get funds reimbursed. All of these drawbacks don’t even begin to discuss the consumer’s ability to develop good credit.


Q. Many consumer experts say that responsible use of credit cards is one of the most effective ways to build a good credit record, how would a “cash or debit card only” approach impact the ability to develop a good FICO score?


Ellie: Personally, I don’t agree with a cash only approach, especially for people in their early twenties who are trying to develop a good credit history in order to get a car loan, rent an apartment or secure lower cost auto insurance—all of these are dependent upon a good FICO score. Not to mention the fact that more and more employers are checking an applicant’s credit score before they consider employing them. The philosophy is: if you can’t manage your own money, why should I let you manage my company’s resources?
I think it's important to stress the responsible use of credit cards. We have several of our children who are now young adults and we coach them in securing a credit card in order to build a good score.


Q. What are some of the guidelines you advocate among first time credit card users so that they can build a score without building consumer debt?

Ellie: If possible, their first card should be secured at the same lending institution where they have a checking account and a savings account. It should have a low limit, such as $500, and be a major credit card rather than a department store card. Then they should follow three rules: First, they should make sure they try to pay off the balance each month and pay it on time. Second, they should never charge more than 30% of the available credit in order to keep the proportionality or utilization aspect of their credit scoring healthy. And finally, if they cannot pay off the full balance, then they should always pay more than the minimum balance due in order to have their score reflect that they are paying down a balance.

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