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DEBTSMART EMAIL NEWSLETTER - Tools for financial success!
A Free E-Mail Newsletter from DebtSmart Online and Press One Publishing. ISSN 1538-6740
August 17, 2001 Issue 6
Scott Bilker, Editor and Publisher, mailto:publisher@debtsmart.com
Richard Crammer, Editor, mailto:editor@debtsmart.com
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For instructions to SUBSCRIBE, and DISCLAIMER, see bottom of this email.

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IN THIS ISSUE
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=> Advertisers

=> Cool Debt Statistic

=> Letter from the Publisher

=> CONTEST RESULTS from 8/3/01

=> Why Budgets Don't Work

=> Contest and Survey

=> Scott, You Have Too Many Credit Cards

=> Coping with Financial Stress

=> Auction Corner

=> College Credit

=> Reverse Mortgages

=> Subscribe/Disclaimer Information -----------------------------------------------------------------

****FORWARD THIS ISSUE (please)************************** 
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We have done our best to ensure that all advertisers included in the DebtSmart Email Newsletter offer quality products and services. However, if you have any problems, please let us know by sending
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COOL DEBT STATISTIC
Source: Bankrate.com

Did you know that--America's college students control more money than the national debt of some small countries? Together they spend more than $19 billion dollars a year!

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Letter from the Publisher
by Scott Bilker

My thanks to everyone who participated in the last contest and survey! The response was fantastic! I hope you all help me out with this week's survey about the email newsletter.

This week's contest again involves a math problem. The first person with the correct answer wins an autographed copy of my best-selling book, "Credit Card and Debt Management." Good luck!

Here are some highlights from our survey on your vacations this year.

1) Only 23% of respondents reported going on vacation. I guess everyone was staying home to save money and pay off some debt. :)

2) Of the people that reported going on vacation 71% paid less than $1,000.

3) Most, 80%, spent less than they planned. That's good budgeting.

4) Cash or credit--71%, used cash on their vacation over credit. I'd be in the remaining 29% since I always use credit, however, I stay within the budget.

This issue of the DebtSmart Email newsletter is really packed with some great information--enjoy!

You can reach me with your comments at:
mailto:publisher@debtsmart.com

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CONTEST RESULTS from 8/3/01 by Scott Bilker

Congratulations to Robin N. who won the second contest offered in the DebtSmart Email Newsletter! And congratulations to everyone as a group because 60% of you had the correct answer!

The problem last week was:

QUESTION: Your auto insurance bill arrives; it's $600.00 for 6 months of coverage, ugh. Luckily, to make paying easier, they give you the option of spreading this out over 3 monthly payments. The catch is they charge you an additional "convenience" fee of $3 per payment.

The same day you also receive a credit-line check offer from one of your credit cards, with no check fees, that is good for 3- months with a 5.99% APR.

What's better to do and why? (1) Take the insurance company's payment plan offer. (2) Use the credit line (5.99% offer) check to pay the car insurance in full for $600.00.

Technical Note: No matter which choice you make, you do pay off the $600.00 principal in exactly 3 monthly payments.

ANSWER: Credit Card There are many approaches that get to the correct answer. The simplest approach is to compare monthly payments. I used my personally designed program, "The DebtSmart Loan Calculator" to solve the problem. You can learn more about the software at:
http://www.debtsmart.com/cgi-pl/go/010817_email_news.cgi?1&7428

The insurance company payments are $200 plus the $3 fee. That is a total of $203 per month for 3 months.

To get the monthly payment for the credit card you ASK the question, "what's the monthly payment on a $600 principal at 5.99% for 3 months?" The answer is $202.00.

Therefore, you save $1 per month using the credit card to make the payment in full to the insurance company then paying the credit card off in 3 monthly payments.

I asked this question because I have always been calculating which deal is better throughout my life. Three dollars here, $100 there, it all adds up.

Some people would argue that it's not worth effort. They may say, "Scott, big deal, $3." Well, if it's not a big deal then send me the $3 instead of the insurance company! My position is that it is worth it because with the right tools it only takes a few seconds to determine the better (cheaper) option.

Okay, so $3 doesn't seem that much. How about looking at the problem another way.

Another method of finding the answer is to compare the interest rates. We already know that the rate for the credit offer is 5.99%, so how do we find out the interest rate for the insurance offer?

We have to ask the question, "At what interest rate must I borrow $600 if I am to pay it off in three equal monthly payments of $203?" Again I used my "DebtSmart Loan Calculator" to find the rate.

The answer is 8.98% APR.

Clearly, 5.99% is better than 8.98%. In fact, if I asked the questions, "If one loan is $3 cheaper than another is it better?" some people would say there's no difference. However, if I asked, "One loan is 5.99% and another is 8.98%, which is better?" everyone would agree to take the 5.99%.

There is yet another benefit of using the credit card. That benefit is that you're building your credit history by using your credit lines and repaying them on time. The bank that sent the offer will continue to send you offers. Other banks will start sending you more competitive offers, since they know you're using your credit lines.

All these banks will hope that you're going to let their low introductory rates rise after the offer ends, but you know better! Plus, you'll have many places to find better deals anyway!

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Why Budgets Don't Work
by Terry Rigg

This article is for those families that have sat down at a desk or the kitchen table time after time trying to develop a family budget that they can live with.

Why don't they work?

There are several answers to that question. Most budgets are doomed from day one because they are too complicated, don't have the commitment of all involved, or the numbers simply don't add up. The biggest culprit is that most people don't allow for unexpected expenses.

Let's tackle these one at a time:

Read the rest of this article by clicking below:
http://www.debtsmart.com/cgi-pl/go/010817_email_news.cgi?2&7428 

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Contest and Survey
by Scott Bilker

Contest Question: In the last contest we took a look at how monthly payments affect the true cost of loans. This week we're going to look at how much you save when the rate drops. As usual, the first person with the correct answer wins an autographed copy of my best-selling book, "Credit Card and Debt Management"

Question: You have an outstanding credit card balance of $5,500 at 15.99% APR (fixed) and you're making payments of $99.87 per month. With those payments this loan will be paid off in exactly 100 months. You decide to save money by transferring this balance to an 9.99% APR (fixed) and keep making the same monthly payment of $99.87. The good news is that you can now pay off your loan in only 74 months! How much money do you save? Is it $2,596, $2,182, or $1,768?

Survey: There's difference of opinion at DebtSmart that we need your help resolving. Some say that the email newsletter has too many articles, just the right amount, or not enough in each issue.

Please help us make this email newsletter better for you by answer the following questions at the survey page:

1) How many articles should be in the email newsletter?

2) Do you like Auction Corner? Should it be a regular feature?

3) Do you read the "Letter from the Publisher"?

Enter contest by clicking on the below link:
http://www.debtsmart.com/cgi-pl/go/010817_email_news.cgi?3&7428 

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Scott, You Have Too Many Credit Cards!
by Scott Bilker

QUESTION: I read your article in which you state that you have 80 or so credit cards. I'm not sure why this is advantageous. I have cancelled all but one card which I pay in full each month and by no means see my "options" (to get into debt, I guess) as being restricted.

For instance, I did need to carry a balance for 3 months to pay for an engagement ring at the beginning of this year. All I did was charge it to my everyday card, which has a lousy rate but gives me perks, get a new card with a low rate so I paid almost no interest for those three months, then closed that card when it was paid. This is actually better than calling the banks for the best rate because the cards with the perks almost always have the lousy rates, so you're better off putting it onto one of those cards, and then transferring it to a lower rate card, then you get the perks.

The problem with having multiple cards that go unused is that potential creditors will count available credit against you when you apply for a mortgage or a car.

Also, the more open accounts you have, the greater the chance of being defrauded. Having only one card is by no means restrictive there are hundreds of companies who would give me a card after a 5-minute phone call. I just don't see the point in keeping cards that aren't being used open. --Keith

ANSWER: It's true. Between my wife and myself (joint accounts) we have over 80 credit cards!

WARNING, I am NOT advising anyone to go and get 80 credit cards! The more credit lines you have available, the greater the probability you'll increase your debt, obviously.

So why do I have so many cards?

There are many reasons:

1) When I borrow money I want to have many loan options. About half of my accounts are offering me low-rate transfer deals all the time! I have purchased used cars with my credit cards at 0%! And because I have so many cards I can continue to transfer the balances and keep the rates less than 4% all the time. I've been doing that for more than 10 years!

2) I'm into this topic, saving money on credit cards. How can I write about credit cards if I don't have credit cards? How can I verify good credit card offers if I don't ever receive or use any?

3) I actually enjoy trying to uncover the true costs of credit. I need lots-o-data!

4) Who would you want writing about credit...someone who hasn't had or used a credit card for 25 years or somebody who deals with credit cards all the time?

I don't carry a balance on all of those credit cards. If I did, then this article would be about bankruptcy not being "debt smart."

If you think 80 credit cards are a lot then how many do you think the worlds record is?

According to the Guinness Book of World Records Walter Cavanagh of Santa Clara, CA is "Mr. Plastic Fantastic" and blows me away with a total of...

Read the rest of this article by clicking below:
http://www.debtsmart.com/cgi-pl/go/010817_email_news.cgi?4&7428 

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Coping with Financial Stress
by Debra Vaughn

Maybe your credit card debt is growing faster than the weeds in your yard. Perhaps you have the money to pay your bills and live comfortably now. However, retirement is coming, or a crisis may land square on your lap that could, one day, leave you without a penny to your name.

When it comes to reasons behind stress, concerns about money top the list. We worry about not having enough, spending too much, not saving enough - even having more money than we can handle. Money related stress, can be bad for both your mental and physical health.

So how do you get a handle on financial stress? First, take charge of your finances. Controlling your money, not letting your money control you, will make you realize that you will not lose power over your finances. Begin with a plan:

Read the rest of this article by clicking below:
http://www.debtsmart.com/cgi-pl/go/010817_email_news.cgi?5&7428

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ONLINE AUCTION CORNER: Posting your items
by Scott Bilker

If you've been reading this column from the beginning then you should have already:

1) Identified items you're ready to sell online.

2) Researched the value of each item.

3) Developed the "sales copy," i.e. the words you use in the item description.

4) Taken photos of each item and digitized them.

Now all you need to do is post the items.

Quick mention, all the stuff I had for sale last week sold! So far 100% of my items have sold and taken over $150 off my debt! my latest posting is a Star Trek book that I found at the flea market for $5. You can check it out at:
http://www.debtsmart.com/cgi-pl/go/010817_email_news.cgi?6&7428

Two final notes before we get to posting your items.

First, you need to determine how much shipping costs for your items. You must decide how much to charge, if you're going to include it in the final price at no additional cost, or if you'll let the auction winner know the shipping costs at the end of the auction.

Second, you need to be able to accept payment. Many people will want to pay with a credit card. The good news is that you don't have to set up a merchant account. You can simply sign up with PayPal.com.

Back to posting...

There are many online auctions where you can sell your items. The most popular place is eBay.com so we'll talk about posting there.

To post your items go to eBay.com and click on "sell" on the top menu bar then select a category.

TIP: You can enter a category number at the bottom, which is a great short cut however, you need...

Read the rest of this article by clicking below:
http://www.debtsmart.com/cgi-pl/go/010817_email_news.cgi?7&7428

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College Credit
by Gary Foreman

Dear Dollar Stretcher, I just finished reading another article about credit card offers to college students that likened credit card company representatives to drug pushers and I agree.

The article suggested that if your child gets in over his head with a credit card the parent may want to bail him out once because of the harm it may cause when he needs a job, car loan or apartment. I can see the practicality of this suggestion but it would really bother me because I would be doing exactly what the credit company is counting on when they offer my child a credit card.

Is there no way to make the credit card companies responsible for the unreasonable risks they accept when they offer credit to college students? My son is 15, but I'm already concerned about this issue. I'm also concerned about our society as a whole. Other parents should not feel forced to take on responsibilities they did not assume for the sake of their children and our children deserve some time to grow up and learn to deal responsibly with credit. --Nancy

Surveys show that 80% of undergraduate students have at least one credit card in their own name without anyone else being responsible for payment. And almost every study shows that more students are carrying higher unpaid balances on their accounts each year. One report from Nelliemae.com indicates that the average balance in 2000 was over $2,700. That's a 46% increase from their 1998 survey.

High debt levels can force students to work extra hours to keep up with their bills. That cuts into study time. And some graduates are finding out that prospective employers can check credit histories before making a job offer. They'll avoid people who are having trouble keeping up with their debts.

While I appreciate Nancy's concern about the banks, they are being held accountable for taking 'unreasonable risks'. When they loan money unreasonably, a portion of that money isn't paid back. Those losses come directly out of profits.

Are the banks devious in assuming that some parents will bail out their children? Probably. But it's really just recognizing the truth. They'd be foolish to ignore reality.

Should they wait for our kids to grow up first? Perhaps. But if we trust our children to live on their own shouldn't we expect them to use a credit card wisely? And if we don't educate them they'll be just as vulnerable at age 25 as they are at 18. We all know...

Read the rest of this article by clicking below:
http://www.debtsmart.com/cgi-pl/go/010817_email_news.cgi?8&7428 

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Reverse Mortgages Federal Trade Commission
(FTC.gov)

If you are age 62 or older and are "house-rich, cash-poor," a reverse mortgage (RM) may be an option to help increase your income. However, because your home is such a valuable asset, you may want to consult with your family, attorney, or financial advisor before applying for an RM. Knowing your rights and responsibilities as a borrower may help to minimize your financial risks and avoid any threat of foreclosure or loss of your home.

This article explains how RMs work. It describes similarities and differences among the three RM plans available today: FHA- insured; lender-insured; and uninsured. It also discusses the benefits and drawbacks of each plan. Each plan differs slightly, so be careful...

Read the rest of this article by clicking below:
http://www.debtsmart.com/cgi-pl/go/010817_email_news.cgi?9&7428

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HOW TO SUBSCRIBE TO THIS NEWSLETTER

TO SUBSCRIBE to this newsletter click on the below link and complete the subscription form:
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Please contact mailto:comments@debtsmart.com with any comments, problems, or concerns.

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The author(s), Press One Publishing, and DebtSmart.com shall have neither liability nor responsibility to any person or entity with respect to any loss or damage caused, or alleged to be caused, directly or indirectly by the information contained in this email newsletter and/or at the DebtSmart.com web site. The information, methods and techniques described may not work for you and no recommendation is made to follow the same course of action. Every effort has been made verify the accuracy of all content contained herein. However, there may be mistakes; typographical, mathematical or in content. This email newsletter and the DebtSmart.com web site have been created for your entertainment only. You must always seek the proper professional advice before taking any financial or legal action. You have been warned.

Copyright (c) 2001 Press One Publishing. All rights reserved. Please do not reprint, or host on your Web site, without explicit permission. However, if you found this newsletter helpful, we grant you permission, and strongly encourage you, to e-mail it to a business associate or a friend. Thank you.