Sunday, April 27, 2008

Credit Line Increase

These days especially, credit cards get a bad rap. Some personal finance "experts" like Dave Ramsey have gone so far as to encourage no one to use a credit card. I can understand some of the hatred. Many people used credit cards, for whatever reason, to spend money they did not have at the time. They then went into debt, at often ridiculous interest rates of 12%, 16%, 22%, 30%, etc., not to mention incurring a number of fees. Many personal finance blogs were started to track the progress of the blogger's paying down of their credit card debt, sometimes in the tens of thousands of dollars. Such efforts should be commended.

But a credit card themselves are not really that bad, nor is the concept of credit. While I can appreciate some people's ambivalence toward the plastic cards (and there is something to be said for the fact that people generally have an easier time spending money on plastic than cash), I think all the negative press really distorts the benefits of credit cards. Credit cards are generally safer to carry than cash, allow for better organization and tracking of one's spending, help users build a credit history and many offer rewards. I am still amazed at the ease with which I can travel internationally and quickly, easily and safely use my credit card or ATM card operating on the Visa network to pay for goods and services.

I recently requested and automatically received a credit line increase on one of my cards. As a young adult trying to establish a credit history with the hopes of buying a home in the next 5-10 years, I was pleased to see the increase. After my request, I noticed I was still given the option to decline the increase. Some "experts" might suggest that an increase would just encourage me to put more money on the card, fulfilling the card company's dubious plan. I see it more as recognition by the company that I have been decently trustworthy with their money, so they are now giving me the option to borrow more of it. It also represents a small step on the path to a positive credit history and financial freedom. Today, I, for one, am thankful to the credit card company.

Saturday, April 26, 2008

Fake (or misleading) checks

If you have one or several credit cards, you likely have received a check in the mail and had the same reaction I did- FREE MONEY (well, not quite). Most of the “checks” I receive from my credit card companies I can spot pretty quickly as just being cash-advance devices. In other words, cash the check and you have immediately consented to a cash-advance on your card, which is likely racking up interest at around 12-20%. This means the cash you just received is immediately losing value and losing it quickly. So, cash-advance checks= bad.

However, I was almost fooled by another “check” I received from a different source. When I was booking a flight one time, I had heard of Priceline (with the William Shatner commercials on tv), and decided to try their “Name Your Own Price” service to save some money (this experience- and I don’t recommend it- will be discussed in a later posting). As I was finishing the transaction for my flight, I was told I could save an additional 15% by signing up for the classic free 30-day trial of some service. Trying to get the most bang out of my ticket price, I signed up for the discount club service, called Great Fun, noting that I could opt out within 30 days of signing up, never pay a thing, and keep my 15% off my airfare. Though I’m sure the company was hoping I would just forget about opting out, I did so within the next 2 weeks, never paid for the service, and received my rebate check a few weeks later (which was about a month ago now). Recently, I received another check from Great Fun and on first glance, I had almost forgotten about my first rebate check or perhaps just thought this was rebate check #2. In fact, after I read the fine print, I learned that if I cashed the $9.25 check, I would automatically be enrolled in a new discount program (with the usual 30-day free trial of course). If I didn’t opt out by the end of the 30 days, I read, I would be charged around $190 for one year’s annual membership.

Again here, I find myself in a similar position as I found myself purchasing my plane ticket. This company hopes I cash their check, then either forget to opt out or love their service so much that I stay with it. Personally, I have little doubt that I would remember to opt out of the service if I did cash the check- I tend to obsess over these things. Looking at this from a strictly financial point of view, I could continue a cycle of cashing these types of checks (not the cash advance type described previously), always opting out within the 30-day free trial and have a little more money in the bank (and every little bit helps a college student without a regular job). However, there is always the slim chance I could forget to cancel the service or have one of these companies write such crafty fine print that my best efforts at escaping with their money would be thwarted. I took the check to the bank along with some others I had to deposit, but ended up not depositing it.

So it begins...

Hello- I am a 21-year-old college student in North Carolina with an interest in finance and personal finance. After learning a lot not only about personal finance, but also people’s real experiences with it on other personal finance blogs, I thought I would add to the dialogue, trying to learn something in the process. As I enter my adult life, I realize the value of quality PF planning and knowledge, and so I use this medium as a way to share, but more importantly to learn. I know from experience that a lot of what I say and do I later realize were ill-advised, so if you know any more about a particular subject than I (and chances are that you do), please share it with me. Thanks for reading and I hope you can gain just a little from what you see here.