Credit card protection: Is it worth it?

Image via WikipediaAre you paying a fee every month for credit card payment protection? It may not be worth it or you could be over paying. Americans are still carrying large credit card debt and they fear if they lose their job or become ill then they won't be able to make their minimum payment. The credit card company will make your minimum payment in these times, for a small monthly fee.

But a new government report shows that the price consumers pay for this debt protection may be too much for the benefits they receive. The Government Accountability Office reports that consumers shelled out about $2.4 billion in 2009 to the nine largest credit card issuers for debt protection products. For every $1 cardholders paid in fees, they received 21 cents of benefits. Meanwhile, the card issuers earned 55 cents, before taxes, on every dollar of fees.

Debt protection products generally promise to suspend monthly minimum payments or cancel balances in the event of an illness, unemployment or the death of the cardholder. Fees are tied to the account balance and can amount to hundreds of dollars a year. At that price, consumers likely are better off paying down their balance or putting the money in an interest-bearing account that can be tapped in an emergency.

Monthly fees, according to the GAO, range from 85 cents to $1.35 for every $100 of debt. On a $5,000 balance, consumers could end up paying $510 to $810 a year.
The irony is that those with high card balances are more likely to be struggling financially. Usually, the people who can afford the least will pay the most.

Credit insurance and debt protection products can safeguard credit ratings when consumers go through tough times, and consumers have lodged few complaints, the GAO notes. Moreover, 70 percent of benefit claims were paid in 2009, according to the GAO study. However, nearly one in four claims were denied, often because consumers didn't provide documentation of their hardship.

Instead of buying debt protection. If you lose a job or suffer some other financial hardship, contact the card company to work out a payment plan.

Some consumers might be tempted to buy debt protection because they worry about dying and leaving loved ones stuck with their credit card debt. But survivors won't be held accountable for the debt unless their names are on the account. If people are worried about leaving behind bills, they should buy life insurance that will cover more than just a credit card debt.

The Psychology of Tax Refunds

Image via WikipediaTax season is over it's time to relax. You filed your taxes and now waiting to get your refund. If your getting a refund you feel pretty good. The average refund for most Americans is around $3000. In the media and almost every financial blog you will be told this is wrong. They will say you are giving the government an interest free loan. It's true and it does make sense. But someone has an alternative view to this.

Ramit Sethi, author of "I WILL TEACH YOU TO BE RICH", has a different perspective on this idea. He says technically it makes sense to pay the government the least possible. He shoots down the idea that you are losing possible interest income on your money. What's the interest on $3,000 for the year? It comes to $2.50 per month for a total of $30 for the year. He says it's not that much of an impact on your money. Secondly, if you did receive the money in your paycheck you would probably end up spending it.

Ramit says it's a good thing to receive the money back as a lump sum. When you receive money as a lump sum, you tend to spend it more wisely. Americans use the money, on average, to payoff debt or save it. This is the psychology of tax refunds.

It's interesting that in my own experience, I have found this psychology very true. Every year for a quite a while I would receive, a tax refund, between $2000 and $3000. I would plan my budget and I was ready to use this money to payoff debt or I would put it toward my property tax. Like clockwork this went on and still goes on. Ask me if I would have it any other way and I would say, No.

Though not ever created to be a mini savings plan, it has turned out to be that way. I know people use their refunds to buy big screen TV's and other things. But for the most part I agree with Ramit that Americans use their refund to save or pay off large living expenses like I do.

I have followed Ramit for a few years now and notice his philosophy is to make money moves that are usually big. He doesn't believe in the frugal style or your "Latte Factor". He believes in making more money and having that latte when ever you want. I have his book and recommend it all. He puts out there an interesting plan for you finances. He goes against the grain of most money guru's. He preaches mostly on how to increase your income.

I am including one of Ramit's best YouTube videos where he describes how to automate the inflow and outflow of your money. He believes automation is key to a successful financial life. Watch.

Reader: Do you think a tax refund makes sense?

Happy Tax Day Freebies 2011

Image via WikipediaTax day freebies are freebies given out by businesses on the day taxes are due, to soften the blow and make the day a little more fun. These tax day freebies can make an otherwise dreary day a little bit brighter.

Tax day freebies 2011 include free Cinnabon bites, free ice cream sundaes at MaggiMoo's, a free workout at Bally Total Fitness, and a free massage from HydroMassage.

1. Free Cinnabon Bites

Stop in on Monday, April 18 from 6:00 p.m. until 8:00 p.m. for this scrumptious tax day freebie called "Tax Day Bites."

Participating Cinnabon bakeries will be handing out two Cinnabon Bites to each customer who stops in.

I recommend calling your local Cinnabon before you head out to make sure they're participating in this tax day freebie.

2. Free Ice Cream Sundaes at MaggieMoo's

Here's a tasty tax day freebie for you! On tax day, Monday, April 18, 2011, you can stop by MaggieMoo's to get a free mini ice cream sundae during their Sundae Stimulus.

The free ice cream sundaes are MaggieMoo's Crumb Cake Fundae which features cinnamon Hostess crumb cake, cinnamon ice cream, caramel, sauce, mixed nuts, and whipped cream.

This tax day freebie will only be given out from 3:00 to 6:00 p.m.

3. Free Workout at Bally Total Fitness

After you've eaten your tax day freebie goodies, some exercise might be a good idea. Stop in on Monday, April 18 and non-members can get a free workout at Bally Total Fitness.

If you're already a member of Bally Total Fitness then they have a tax day freebie for you too. Sign up at your local Bally's and get a free 30 minute personal training session April 15-21.

4. Free Preview of HBO and Cinemax

This tax day freebie will really help you relax and spend some time with the family.

DirecTV, Dish Network, Verizon FIOS, and some Cox Communications customers will be getting a free preview of HBO and Cinemax over tax day weekend - April 15 to April 18.

Check with your provider for more details about this tax day freebie.

5. Free Massage From HydroMassage

After mailing in those taxes you're going to need a relaxing tax day freebie like this free massage from HydroMassage.

Click the link above to find a HydroMassage near you and print out the coupon to get a free massage from April 14-18. They suggest calling ahead to schedule your free massage.

6. Tax Day Cheapies 2011

These aren't tax day freebies but they're some great deals that are being offered on tax day.

• California Tortilla - Stop in and get an order of free chips and queso with any purchase on April 18.
• McCormick & Schmick's - They're offering some $10.40 entree specials and tax relief drink specials.
• P.F. Chang's - Dine-in or carry-out some food at P.F. Chang's on April 18th and you'll get 15% off your food order.

Have Fun.

Tax Tips As Filing Deadline Arrives

Image by wwarby via FlickrWhether you've already filed and are happily awaiting a refund or if you're just getting started with the annual chore, here are some last-minute tax tips.

GOOD NEWS: EXTRA TIME: Thanks to a local holiday in Washington, D.C., the normal April 15 tax filing deadline got moved by three days. This year only, state and federal taxes are due on Monday, April 18. Which means you get an extra weekend to get all that paperwork completed.

NEED HELP? Free tax preparation help is still available for low- and moderate-income individuals and the elderly.

• Those with annual incomes below $49,000 can get free help at Volunteer Income Tax Assistance sites, some of which are open through April 18.
• Free IRS tax help is also available to seniors over 60 through the Tax Counseling for the Elderly program.
• To find the nearest site for either program, call the IRS help line at 800-906-9887 or go to www.irs.gov. The help line is answered by a live IRS staffer, weekdays from 7 a.m. to 10 p.m.
• FASTER REFUNDS: The fastest refund route is to electronically file your tax return and request that refunds be direct-deposited to your bank account. Taxpayers who do so can expect their refund in seven to 10 days; those mailing a paper return can expect a refund by mail in eight weeks.
• To check the status of your IRS refund, call the refund hotline at 800-829-1954 or check online "Where's My Refund?" at www.irs.gov.
• There's also a new smartphone application, IRS2Go, that lets you check your refund status and get IRS tax updates. The app is available for Android or Apple devices.
• NEED AN EXTENSION? If you can't gather your paperwork in time, get a tax-filing extension. But note: You still must pay what you owe by Monday, April 18, or face interest fees and possible penalties.
• For IRS taxes, an extension is not automatic but requires filing a Form 4868. The extension form is easily filed online using the irs.gov "FreeFile" program.
• Those working overseas or serving in the military outside the United States get an automatic two-month extension to file and pay their federal taxes.
• HOW TO PAY: Never, ever send cash.
• If you're paying by check, make it payable to: "U.S. Treasury." On the front, include the tax year, tax form number and the first Social Security number shown on your tax form.
• Do not staple your check to the return.
• If you're paying by credit or debit card, the IRS offers several options through private providers on its website. The IRS does not charge a fee, but the providers do. Generally, the minimum "convenience fee" is about $3.95.
• CAN'T PAY? Taxpayers who owe but don't have the funds to pay should contact the IRS to request an "alternative payment" plan. It can be a one-time short-term extension or a longer installment plan. Generally, installment plans are offered if the tax debt is $25,000 or less and can be repaid within five years. Penalties and interest are charged.
• DON'T MISS OUT: Low-income individuals and families are urged to file for the Earned Income Tax Credit. It's a federal refund, up to a maximum of $5,666, depending on family size.
• The refund phases out at various income levels; for married couples filing jointly, with three or more kids, the maximum is roughly $48,360.
• Even if you don't owe taxes, you need to file a return to claim an EITC refund

You still have time to get your taxes done. It won't be easy. Good Luck!

Is It Finally Time To Get Organized?

With tax season almost over it's a great time of year to go through our files and get organized. I have just gotten all my paperwork back from the accountant and i would like to get organized. But what should I keep and what should I throw out?

What	How Long to Keep	Why
Tax returns (including receipts and supporting documents)	Up to six full years	The IRS can audit a return up to three years after you've filed. The agency can challenge your return for up to six years if it suspects you under-reported your income by 25% or more.
IRA contribution records	Permanently	Keeping these forms — like IRS Form 5498 and 8606 — may prevent you from paying too much tax when you tap your retirement stash.
Investment and real estate records	Seven years after you sell	They help track your cost basis — and the taxes you owe when you sell; shred your monthly statements and save the annual summaries.
Bank statements and checks	One month to seven years, depending on whether your bank has them available online	You could need them if you're audited by the IRS. If you haven't already, switch to receiving your bank documents online. Your bank may have past statements available online.
Credit card statements and bills for non-deductible items	Shred immediately after the next statement arrives	You don't need them once you confirm the charges and have proof it was paid.
Form W-2: Wage and Tax Statement	Until you start receiving Social Security benefits	Usually your best proof of earnings for Social Security
Pay stubs	Until the end of the year	Not needed once you get your W-2
Insurance policies	Until they expire — except for liability policies with "occurrence" coverage	Occurrence-based policies cover you for damages that occur while the policy was in effect — even if the claim happens after coverage expires.
Receipts	Day-to-day debit/credit: Toss after confirming the amount charged is correct. Big-ticket item: Keep with other purchase documentation for proof of value in case of loss or damage. Charitable donations: Store and keep for tax-filing purposes.	Depending on the type, amount and reason for the purchase, they may be necessary for insurance- and tax-filing.

Needless to say keeping documents safe means either a fireproof safe or a safety deposit box. There are many new services that will scan your documents for storage online or on disks. Try Shoeboxed.com

Discover is Offering a Rare 24 Month Promotional Balance Transfer

Over the last few years balance transfers have all but dried up. Only within the last six months I have noticed balance transfers starting to loosen up. I have seen many 6 month transfers and a few 1 year transfers. But never have I seen seen a 24 month transfer, not for many years.

Slowly, 0% APR balance transfer cards have made a comeback. But be sure to read the fine print and know beforehand what the balance transfer fee is going to be. It's usually 3-5%, if it's to much it can defeat the whole purpose.

Discover® More Card - 24 Month Promotional Balance Transfer 

Updated Bullets:

• 0% intro APR on balance transfers for 24 months, then the variable  APR of 11.99% - 20.99%
• 0% intro APR on purchases for 6 months, then the variable APR of 11.99% - 20.99%
• 5% Cashback Bonus® in categories that change like travel, gas, groceries, restaurants, home improvement stores and more
• Up to 1% unlimited Cashback Bonus on all other purchases
• No Annual Fee

Discover® More Card - 24 Month Promotional Balance Transfer

Who is this Discover Card Good For?
If you have a debt that you will need 2 years to pay off this is for you. If your digging out of credit card debt and need a break in the high interest piling up. But the deal is that you actually pay it off to make this work.


What's the Downside?
If you miss a payment you're going to lose your promotional balance. The balance transfer fee is 5%, steep to say the least. But if your transfering $10,000 the 5% comes to $500. Divide over two years it is 2.5% interest on the $10,000. Your paying all your interest up front. Still a good deal. Naturally your credit has to be pretty good to get this offer.

After being approved you have till June 10, 2011 to transfer the balance.

You can apply for the Discover® More Card - 24 Month Promotional Balance Transfer here.