I Hate To Say This, But I Was Saved By A CREDIT CARD!!!

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I have written a few times on my weight loss blog about having to bring my car to the mechanic. I think I have made 5 trips since the end of November for the same problem.

During this time we have replaced practically the entire cooling system – including the radiator! After spending $1,600 to do this, my car started overheating a week or two later. At the same time, someone brought a car like mine (just one year older) in to my mechanic with the same exact problems. They found air in her cooling system just like mine! However, they did not detect any problems inside of her cooling system, as with mine.

This prompted him to check the Internet to see if this problem was common. He not only found tons of complaints in forums and other places, but he also discovered that this is something that GM knows about but are choosing to ignore. It seems that the problem is with the intake manifold gasket, and it usually happens after the car is already out of the warranty period.

It cost us about $650 to replace it (this was mainly labor, since the job took many hours), bringing our total to fix this problem up to $2,250! That doesn’t even included all of the countless hours on the road to and from the shop, who knows how much gas and wear & tear on both of our vehicles, as well as dozens of hours driving, worrying, and even sitting on the side of the road waiting for the engine to cool down.

[Find out how to save money on car repairs!]

I’ve talked in the past about how having an emergency fund can help when these types of necessary but unexpected expenses pop up. Fortunately, we were able to pay for some of these repairs (specifically replacing the intake manifold gasket) by tapping our emergency account. However, in order to cover the other $1,600, we would have had to drain the account completely!

Saved by Credit Card

I hate the idea of have a $0 emergency savings account, so we really needed to come up with another way to pay for these expensive repairs. Since we are deeply in debt bondage, we don’t have a lot of “wiggle room” when it comes to our expenses and our paycheck (most of our expenses consist of nothing more than debt payments), and although we try to keep a cushion in our checking account, we don’t have an extra $1,600 sitting around.

We could have tried to take out a personal loan, but I really don’t like the idea of owing people money. Another option would have been to take out a payday or other short-term loan, but we are really trying to avoid increasing the amount of interest we have to pay out this year.

So, as a personal finance blogger, I had to turn to the one place that was probably the least expected…a credit card! I’ve written about the benefits of credit cards in the past, so it shouldn’t come as a surprise that I don’t hate them. I just hate that many of us us them for the wrong reasons.

Last year my wife and I found a credit card that would allow us to charge any car repairs over $299 and have the interest deferred for 6 months. This means that if we can pay off the balance by the end of the 6-month period, we will have received an interest free loan. 🙂

Normally, I don’t like to be put in a position to have to place an expense (or multiple expenses as in this case) on a credit card, especially since we already have a ton of debt, but in this case it seemed to be our best option. The very worst case scenario (outside of us needing additional repairs) has us draining our savings at the beginning of the summer to pay for the repairs, but if we are able to use every extra dime to pay down the credit card, things won’t be as bad for us.

So this is definitely a case where having a credit card was a great benefit to us. I just pray that we can get back to moving in the right direction with our debt repayment plan…having our car need over $2,200 in repairs (and it needs more, plus my wife’s truck has a few things wrong with it as well) definitely set us back.

photo credit: Dan Esparza

Reader Questions

  1. Have you ever used a credit card to bail you out of a jam? Not, to buy a tablet or a toy, but for an actual emergency.
  2. Do you think we should have just emptied our savings account even though the credit card may not cost us an interest payments? If so, why?
  3. How do you feel about someone not having an emergency savings account at all, and just having a credit card or two (especially a rewards card) to pay for emergencies?

A Review of Cardhub.com

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The following is a review, written by my wife, of one of the few credit card comparison sites that seems to have been created with the consumer in mind. This represents her real opinion, and not just some positive words that we were paid to write…

Card Hub’s credit card comparison allows the consumer to make an informed decision about the credit card that suits his or her needs. Instead of responding to the first ‘pre-approved’ offer that comes in the mail, or relying on your bank to give you their best presentation, this website accommodates your specific requirements for the card for which you want to apply.

I was impressed by the parameters with which the website searches for cards. Some areas in which you are able to narrow your search for cards are: based on your level of credit, a specific type of offer (e.g. 0% balance transfer, gas rewards), specific bank networks (such as Visa or MasterCard), and various other credit card benefits.

Each card that is recommended provides its purchase or transfer annual percentage rate (APR), monthly or annual fees, the current APR, and any rewards that come with the card.

While specific, the website at NO time asks for your personal information. Once you make a decision, you are then transferred to that bank’s website to apply for the card. According to the website, advertising, and a stipend from the consumer clicking on an ‘Apply Now’ button on the site, are the ways that cardhub.com generates income.

If you are not sure about your exact needs, the website offers a Credit Card Advisor which will give you card options based on your answers to a few simple questions. The site also offers a Free Credit Check estimate. Since you are not providing personal information, they gauge the estimated credit standing based on your answers to the questions, the same questions used for their Credit Card Advisor function.

There are also various calculators which allow you to forecast your interest, fees, monthly payments, amount needed to pay off a card, and other options.

Along with these offerings, the tools and advice tabs gives a lot of useful information, advice, and data regarding credit and credit card usage that is definitely worth perusing.

The site also gives you a list of prepaid cards to consider, which offers the same information as the credit card section.

Cardhub.com also has a section for gift cards. Like the credit card area, the main gift card section gives you many parameters to narrow your search, and you are directed to the seller’s website to complete your purchase. The search function is not only useful in regards to finding a specific card, but it also allows you to choose different countries for your needs.

There is also a social gift card exchange tab which allows you to purchase gift cards at significant savings, or you can sell gift cards in the neighboring tab as well.

The most notable thing about the website is its ease of use. The navigation was straightforward, and I was always able to find what I was looking for without wasting much time.

I will definitely visit this site again should any credit or gift card needs arise. I like seeing my options in one place, with clear information, and not a lot of hoops to go through.

4 Reasons Why I Will Not File For Bankruptcy

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Most of the people who I talk to have debt. Debt is one of the major reasons behind this country’s economic growth over the past 40 or 50 years. Many people use credit cards to buy gas, computers, clothing, and a host of other items. On top of that, many people will borrow money to buy furniture, education, cars, and houses at some point in their life. It has pretty much become a way of life in this country, and I am no different.

When counseling clients (or just speaking with friends & acquaintances) about their finances, I will sometimes mention that I am currently paying off over $100,000 in debt. Oftentimes, the topic of bankruptcy will come up. They want to know why someone who doesn’t own a home, or other expensive assets, wouldn’t simply file for bankruptcy and get a “fresh start”.

Why I Will Not File For Bankruptcy

There are four basic reasons that I have for choosing not to file for bankruptcy (for the record, my wife agrees with this decision, but I will just speak of myself in this article)…

Integrity (I Gave My Word)

The main reason why I won’t file for bankruptcy is because of my word. When I signed up for all of those loans, I not only received the money (or line of credit), but I also received an obligation to repay that money according to the terms of the various agreements!

All of those agreements have a few things in common. I asked (sometimes begged) for money, they said ‘yes’ as long as I agreed to pay the money back, I gave them my word by signing a contract, I gladly spent the money, and now I’ve been paying it back every since.

By signing those agreements I put my word and integrity on the line. If I try to get out of those obligations, I will fail to keep my word and end up dishonoring God in the process!

To me, that is the strongest argument against filing for bankruptcy. I knew exactly what I was getting into when I signed those agreements, and I have an obligation to pay them back. It really bothers me when I see people trying to weasel their way out of an arrangement which they not only agreed to, but from which they also greatly benefited! They enjoyed all of the benefits of the arrangement, but when it came time to “pay the piper”, they claim that they should not be held responsible to keep their word! I don’t want to be one of those people if I can help it.

Protection Against Making The Same Mistakes

I have known plenty of people who have either filed for bankruptcy or have taken out debt consolidation loans, and have gone right back to their old habits once their credit cards were cleared. It takes time for most people to change their horrible money habits, and taking the time to pay off debt in a more conventional manner can give one a chance to develop good financial practices.

By not taking the easy way out, I have been forced to develop and revise a budget, look for ways to reduce my expenses, try to develop other streams of income, and set guidelines for evaluating purchases. Had I been given a clean slate directly after feeling the full weight of my debt, I may not have acknowledged and changed my horrible financial habits, which got me into this mess in the first place (most of our debt is from student loans, but we made some bad decisions along the way as well).

This concept not only works with finances, but it also works with our health, and even our ability to learn. Going on a quick, fad diet may help us drop weight pretty quickly, but it is usually harder to maintain the weight loss once you return to a more normal way of life. Likewise, it is much more beneficial to study a subject over time in order to let the foundational topics sink into our thinking, and then build upon that. If we decide to cram a day or two before we need to use the information, it will be much harder to incorporate it into our normal thought process.

So, by forcing myself to take the hard way out, I not only can identify what I did wrong, but I get a chance to develop a system that will benefit my family for decades after we become debt free!

Satisfaction (I Love A Challenge)

As I think about it, I think that even if I wasn’t convinced of my obligation to repay the loans, I would still choose to pay them back. I love a challenge, and having to pay off over $100k in debt is definitely a challenge!

I want the satisfaction of being able to look back over time and seeing the amount of progress that I have made. This is the same reason why I would never have surgery to lose weight (besides the very serious health risks) – I want to get into shape through discipline and making wise choices!

I want to pay off debt by making sacrifices, exercising discipline, making wise choices, and honoring all of my commitments. Since it won’t be easy to pay off this much debt – especially with one income – I feel that it is more of a challenge than if I only owed $10k or so.

To Serve As An Example

I also feel that I can point to my own situation to be an example for others in my situation. I managed to pay off a huge chunk of debt when I was younger (and making a little more than minimum wage), and I can look to that experience to give me confidence that I can do it again.

I want others (especially some of my clients) to see that I was able to overcome a mountain of debt, and avoid filing for bankruptcy to do it, and have them be able to use a small part of my experience as motivation. If I am telling them not to take the easy way out, I want to be able to assure them that it is worth it!

For some reason we humans are better able to take advice from someone if they have been through what we are currently going through. So if I want to convince someone that bankruptcy isn’t the answer, I need to be able to show them that the alternatives work!

Is This The Only “Right” Decision?

Keep in mind that this article is more about expressing my views on the subject, rather than giving a generic, one-size-fits-all piece of financial advice. Every situation is different, but for the most part, bankruptcy is a quick fix with a huge downside.

Of course there are people who are so crippled by their debt, that bankruptcy seems to be the only option to stop them from being homeless. Each case is different, but please be sure to make this decision with a lot of prayer, reflection, and wise counsel.

I plan to take a more detailed look at the subject of bankruptcy, from a biblical point of view in the near future. You may be surprised by how much the bible has to say about this topic, even though the actual word is never used.

Reader Questions

  1. Have you even been in a situation where filing for bankruptcy seemed to be the best solution?
  2. If you refused to file, what was your reason?
  3. Have you ever declared bankruptcy? If so, was it a struggle to make that decision?
  4. Also, how long was it before you recovered financially?

photo courtesy of FreeDigitalPhotos.net

Be Careful Of A New DEA Scam

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I received a phone call recently from an unknown number. For anyone who doesn’t know me personally, I NEVER answer calls from unknown numbers. I will simply let the call go to voicemail and then look up the number in a search engine to see who was calling (and then look for a voicemail message afterwards).

DEA Scam?

As I searched the number, I came across a couple of forum threads stating that it was used in a DEA scam.

Given the number of people reporting this on these various forums, this must be pretty widespread and successful. Even the DEA has issued a press release to warn the public.

Here is a part of the press release:

The Drug Enforcement Administration is warning the public about criminals posing as DEA special agents or other law enforcement personnel as part of an international extortion scheme.

The criminals call the victims (who in most cases previously purchased drugs over the lnternet or by telephone) and identify themselves as DEA agents or law enforcement officials from other agencies.  The impersonators inform their victims that purchasing drugs over the lnternet or by telephone is illegal, and that enforcement action will be taken against them unless they pay a fine.

In most cases, the impersonators instruct their victims to pay the “fine” via wire transfer to a designated location, usually overseas.  If victims refuse to send money, the impersonators often threaten to arrest them or search their property.  Some victims who purchased their drugs using a credit card also reported fraudulent use of their credit cards.

You should use caution whenever someone calls you claiming to be on a mission to collect a debt or a fine. You should never give out your bank account or credit card information to anyone if you are not 100% sure of their identity.

These DEA scam artists (or any for that matter) know that the fear of jail, further fines, or the seizure of one’s property can cause people to do whatever they think is necessary in order to make the threat go away. This is exactly why you should never make a payment with someone who calls you, claiming to represent a creditor or a law enforcement agency!

They then had this to say regarding this DEA scam:

The public should be aware that no DEA agent will ever contact members of the public by telephone to demand money or any other form of payment.

The IRS, banks, student loan issuers, and other creditors have all released similar statements. Even the Treasury Department has to go through numerous steps before being able to garnish Social Security benefits! Even still, there are always people who get taken advantage of by scams such as this.

Be sure to protect your money and financial accounts at all times. Being overly cautious and skeptical will help you to avoid losing your money in a scam such as this!

Be sure to cancel gym memberships, magazine subscriptions, and anything else that could end up in collections, leaving you an easy target for these types of scams.

Here is the number to call if you receive one of these supposed DEA calls: 1-877-792-2873

photo by chanpipat

Reader Questions

  1. Have you ever been the victim of a scam?
  2. Why do you think they con-artists are so effective?
  3. What would you do if you received a phone call such as this?

Build Up Your Financial Security In Uncertain Times

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[This post is written by Derek from Creating A Passive Income. His goal is to explore every single passive income source there is and evaluate their effectiveness and revenue. If you’re interested in extra income, be sure to check out his site.]

There is a common piece of advice going around between parents and students. “Go to school, find a safe, secure job with good benefits, and you’ll retire well.” Let me be the first to tell you, this advice is terrible.

In our world today, there are fewer jobs than there are people, and employee turnover is higher than ever before. If you make a mistake or if your salary exceeds what is typical for your position, you might very well be on the chopping block. You might have your college degree, but guess what, so does everyone else.

The Typical Response for Financial Security

Occasionally, things just don’t work out with employment. It might not even have been your fault. The decline of the economy, the struggling sales of your company, or a transfer of ownership could be the cause of your job displacement. Whatever the case may be, you should have a financial plan in place so that you’re protected against total bankruptcy.

Once again, there’s some common advice out there – “To protect yourself from financial devastation after a job loss, you must have an emergency fund with funds equivalent to 6 months worth of expenses.” While I do condone an emergency fund, this alone will not protect you against complete financial failure.

After all, what if you just can’t find a job until month number 8? What happens then? You load up the credit cards? I hope not. The problem with setting aside a static stash of cash is that it is not regenerative. If you keep pulling money out and no more money gets put in, it WILL run out!

Financial Security 2

photo credit: Stuart Miles

The Best From of Financial Security

In these economic times, one really has no sense of security in a typical job. I’ve seen it too many times – people proclaim that no one can do what they do and that they’re too valuable to get rid of. And then….they get the boot….

Rather than depend only on an emergency fund for that potential job loss, I suggest that you focus on two more aspects of financial security.

1)      Live well below your means

2)      Build a residual cash flow

Live Well Below Your Means

My wife and I both work and we make a point to live off only one of our incomes. That way, if one of us loses a job (it’s happened before), we’re still completely fine financially. Maybe you can’t bring your expenses down to half of what you’re used to, but make an effort to reduce them and you’ll feel much more secure in the event that a job is lost.

Build a Residual Cash Flow

Instead of having just one or two incomes, why not go for three or four? That way, if one of your jobs says “see-ya”, it won’t be that big of a deal. My wife and I both have full-time jobs, plus she does photography on the side and I earn quite a bit of money through various passive income ventures. Now this is a true set-up for financial security, wouldn’t you say?

Perhaps you’re strapped for time and cannot possibly start another venture. If this is the case, then at least have some potential income options written down. You don’t want to lose your job and have no possible income sources. This is how you deplete your emergency savings in record time and make friends with the repo men…

Have you set up an emergency fund in the event of a job loss? Have you done anything more?

article photo by cooldesign