Monthly Archives: December 2009

Pay Heavily For Convenience With Paypal

Written by in Money
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If you’ve ever bought or sold anything on Ebay, you know that Paypal is the most convenient and most widely used form of payment for transactions.

Paypal is really convenient. You get paid immediately and can transfer the funds immediately after getting paid (there are some restrictions) to your bank account. It’s one thing you don’t have to worry about and you definitely save a lot of time not having to be concerned about accepting certain credit cards and processing payments. It’s automatic and you don’t have to deal with it.

Of course, with any service, there are fees. Paypal takes part of every deposit that comes to your account, for business accounts. For a $250 transfer into your account (from your own bank account), you would pay over $6.50. That’s almost 3% just to fund your account. And of course there are fees for accepting payments too. Another 3%. So if you’re doing business regularly and there is money coming in and out of your account, you can end up paying a lot for this convenience.

There are no other tools out there that do what Paypal does and is used and accepted by so many people and online stores. When using Ebay, you actually pay two sets of fees: Ebay fees and Paypal fees. This can really cut into your profits and you should calculate this when deciding on the price you want to set for your items.

I just received $40 for selling an item, and of that, actually received $38.54 after the fees, which is over 3% in fees. Not horrendous, but if you’re doing a decent amount of business, it definitely adds up. Paypal is a great service and there’s no replacement. But know that you’re paying for that quality. With all the free services out there, I’m surprised they are able to be THE go to payment service with little competition from others who would accept smaller fees.

This summer, Paypal sneakily rolled out new fees of 2.9%, plus 30 cents for payments classified as “Goods” or “Services.” Previously these types of payments were free (typically they were used for transfering money between friends, or having money transferred from outside of Ebay), but without alerting anyone, Paypal added these fees to all types of accounts. They sent an e-mail regarding the positives changes that were happening, but that email didn’t say anything about changes to the fee structure.

Enjoy this service, but be aware that with Paypal, you are paying a high premium for the convenience of using their service. For awhile, Google Checkout provided comparable service for free, but started charging similar fees earlier in the year. At least they were up-front about it. I’m interested to see when the next service will roll out with lower fees and higher transparency.

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Bank of America Sucks!

Written by in Banking, Customer Service, Negotiating
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We’ve all had bad bank experiences, and I wanted to share mine.

I opened my account back in March, and in August saw a banner on the site for $25 free when I start using bill pay. The only qualifications listed were that I had to make two bill pay transactions within the first month. No problem, I was about to start anyway, so the timing was great.

I started using bill pay, made my mandatory transactions, and about 3 months later realized that I never got my $25. Frustrated, I called up. After being put on hold for 20 minutes, a customer service representative said that since I opened up the account in a branch, technically my bill pay account was activated then even though I didn’t use it until August.

That’s a load of crap, the all time dumbest rule ever. I never signed anything saying I wanted to use bill pay, so I went into a branch to talk to an accounts manager, Wendy, who has been extremely helpful. She did some research, called up a few people, and got it all taken care of. They said that they would put in a request and a check would be mailed rather than deposited into my account. No problem, as long as I got the money in the end.

A month went by and I still never received my check, or any other communication from Bank of America, so I went to go visit Wendy again. Again she helped me and called up some people, complained about their system (which I loved because she knew that it shouldn’t be this difficult to get what you deserve), and put in a request for me.

Wendy was wonderful and I couldn’t thank her enough. After sitting with her for half an hour, she figured I had to get back to work after my lunch break and offered to finish up talking to different people over the phone and assured me that everything would be taken care of. I have no doubt that she exhausted all effort.

I just don’t trust Bank of America to come through.

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Credit Series: Absolutely Free Credit Tools

Written by in Credit
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This is the eighth and final part of my Credit Series, where I explain the most important aspects of credit, credit reports, and credit scores. Each installment focuses on one factor influencing credit, tools to monitor and improve credit, or an explanation of a specific credit concept.

Of course you’ve seen those catchy commercials on TV for a site that says will give you what you want for free, but unlike that site, these 4 tools will help you get free reports (and scores) without using your credit card. Use these tools to find abnormal activity, such as accounts or credit cards you didn’t open. And remember, asking for your own credit information won’t negatively affect your credit score, so I encourage you to take advantage of these free tools.

Annual Credit Report

Believe it or not, by law, you are entitled to a free credit report from each of the three bureaus (Equifax, Experian, and Transunion) every year, and AnnualCreditReport provides just that. I suggest ordering a different report from this site every 4 months so you can keep track more frequently. These are the actual reports from the 3 credit bureaus, and since it’s absolutely free, why not take advantage of what is legally yours?

Quizzle

While I’ve heard of it, it wasn’t until Evan from Evolution of Wealth suggested it that I went to Quizzle to see what all the commotion was about. It turns out that it’s a great tool that gives you a detailed, easy to read credit report courtesy of Experian as well as a credit score based on their new credit score model that tracks closely with leading industry sources. My score from here is comparable to what I found when I got my score when ordering a free trial at myFICO.com (I cancelled before the free trial ended, but it was a real hassle).

Credit.com

Credit.com gives you a credit report card as well as your estimated credit score ranges for several reporting companies. They grade you on all five factors used to determine your credit score: payment history, debt usage, credit age, account mix, and inquiries. It also provides a data snapshot providing Transunion data of the number of open and closed accounts as well as total balances, minimum payments, and total credit limits. The best part of Credit.com’s tool, however, is the credit score details section, where it breaks down each portion of your credit score and provides explanations and suggestions about how to improve your credit and earn the maximum number of points for each category.

CreditKarma

CreditKarma does not provide a credit report, but does calculate your score as well as grade you based on payment history, credit age, account mix, and inquiries. It is a helpful tool that also compares you to other Credit Karma users, but the credit score I found through them was considerably lower compared to the my FICO score and Quizzle. While all the features I have listed are free, some of these sites also offer additional features at a cost. If you are not interested in purchasing additional features, simply keep your credit card in your pocket. These tools can be very helpful and will enable you to keep track of your credit information and find inaccurate information. Right now, Quizzle is my favorite. Which do you like best?

Also, I’d like to wish my father (great photography work, whoever took that picture) a Happy Birthday, he’s taught me just about everything I know about money and we’ve had some pretty interesting discussions over the past few months, even if he hasn’t realized why I bring up finance. Unfortunately, he found my blog (again), he has a habit of doing that. Enjoy.

Think Money (UK)

This site may be helpful for anyone struggling with debt in the UK. On ThinkMoney.com there are debt tools, calculators and advice with personal debt and credit ratings. The debt calculators can help you find what might the best debt solution for your circumstances, or work out the details of a debt consolidation loan.

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Credit Series: Why Credit Matters

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We’ve talked a lot about how credit scores are calculated as well as ways to improve your score, so today I wanted to take a look at how your score actually affects you.
Your credit score has a large impact on the amount of interest you pay on a loan. Using FICO’s Loan Saving Calculator, I am going to illustrate the amount of money you can save by having a high credit score.
Assuming a $30,000 36-month new auto loan, we look at the interest rate, the monthly payment, and the total amount of interest paid based on credit scores. I think you will be surprised at just how much bad credit can cost you and the difference it could make in your life.

This is the seventh part of my Credit Series, where I explain the most important aspects of credit, credit reports, and credit scores. Each installment focuses on one factor influencing credit, tools to monitor and improve credit, or an explanation of a specific credit concept.

We’ve talked a lot about how credit scores are calculated as well as ways to improve your score, so today I wanted to take a look at how your score actually affects you.

Your credit score has a large impact on the amount of interest you pay on a loan. Using FICO’s Loan Saving Calculator, I am going to illustrate the amount of money you can save by having a high credit score.

Assuming a $30,000 36-month new auto loan, we look at the interest rate, the monthly payment, and the total amount of interest paid based on credit scores. I think you will be surprised at just how much bad credit can cost you and the difference it could make in your life.

Car Loan Chart

As you can see from the chart, those with the highest credit scores have an interest rate of just over 5.8%, giving them a monthly payment of $910. However, as the credit score decreases, the interest rate, along with the monthly payment increases. In the 660-689 tier, the monthly payments increase by $50 a month and the total amount of interest increases by almost $2,000 over the three year term of the loan. If you have an extremely low credit score, in the 500-589 range, this could mean almost $200 a month more in payments as well as over 3 times as much interest paid. Nobody would want to pay an extra $2,000 per year in extra interest charges due to poor credit. Imagine paying almost $40,000 for a $30,000 car. That’s what someone with a poor credit score would be dealing with.

The differences in cost are even more drastic when looking at mortgages. For a $300,000 30-Year fixed loan, the monthly payments for someone with a 630 credit score are $300 higher than for someone with a 760 credit score, which would add over $100,000 to the cost of the loan.

Clearly credit scores can have a huge effect on the amount houses and cars actually cost us, and by keeping our credit score high, we can save thousands of dollars a year.

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