Cash or Credit?

“Currency still has its place, despite the pervasive use of plastic.”

Today, it seems that more people are using credit or debit cards to pay for everything.  And yet, this article provides reasons why cash may be a better payment option.  Those include

  1. A cashless society? Not so fast.  According to a recent Federal Reserve Bank of San Francisco study, 40 percent of consumer transactions involve cash–a higher percentage than for debit cards (25%), credit cards (17%), electronic payments (7%), and checks (7%).
  2. Currency comes in handy. Most vending machines don’t take plastic, and cash works best for all small purchases.
  3. Hamiltons can’t get hacked. With data breaches of major retailers becoming common, some consumers pay by cash to protect their credit card information.
  4. A cash fix can cost you. If you get a cash advance from an ATM outside your bank’s network, you’ll pay more than $4, on average.
  5. Cash is a great budgeting tool. If you have trouble controlling your spending when you pay with credit cards, then cash or a debit card is best for your finances.
  6. Paying by cash may be a good option, but it won’t help build your credit history. Using a credit card now and then for routine purchases can help build a good credit history.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Reinforce the concept of paying by cash.
  • Discuss what happens when people use their credit cards and overspend.

Discussion Questions

  1. Would you prefer to pay for merchandise and services with cash or credit? Explain your answer.
  2. How could paying with cash help you balance your budget and control spending?

The Credit Repair Organizations Act

The Credit Repair Organization Act (CROA) makes it illegal for credit repair companies to lie about what they can do for you, and to charge you before they’ve performed their services.  The CROA is enforced by the Federal Trade Commission and requires credit repair companies to explain:

  • your legal rights in a written contract that also details the services they’ll perform,
  • your three day right to cancel without with any charge,
  • how long will it take to get results,
  • the total cost you will pay, and
  • any guarantees.

What if a credit repair company you hired doesn’t live up to its promises?  You have some options.  You can:

  • sue them in federal court for your actual losses or for what you paid them, whichever is more,
  • seek punitive damages—money to punish the company for violating the law,
  • join other people in a class action lawsuit against the company, and if you win, the company has to pay your attorney’s fees.

For more information, click here.

Teaching Suggestions

  • Ask students to make a list of major provisions of the Credit Repair Organization Act.
  • Ask students if there is a time limit on reporting negative information about criminal convictions.

Discussion Questions

  1. Where and how can you report credit repair frauds?
  2. Can the FTC resolve individual credit disputes? If not, why should you file the complaint with the FTC?

Auto Dealer Financing

You want a car and need financing, but your credit isn’t so great.  Most dealerships have a Finance and Insurance (F&I) Department that will tell you about their financing options.  To get the process started, the F&I Department will ask you to complete a credit application, which includes your monthly income and information on current credit accounts, including debt you owe.

At least that is how it’s supposed to work.  But there have been reports that some dealers inflate your income information for the financing without your knowledge.  That can cause you serious financial harm.  You could be saddled with car financing that you can’t afford to repay.  That means your car could be repossessed and your credit score could take a hit.

The Federal Trade Commission has a few tips to help you avoid unscrupulous finance deals:

  • Consider your options for financing. You might be able to arrange financing directly with a credit union or finance company before you pick a car.
  • Research the dealer before visiting the sales lot. Check the dealer’s reputation online by searching for the company’s name with words like “scam,” “rip-off,”or “complaint.”
  • If a dealer encourages you to overstate your income, take it as a sign that the dealer is not reputable, and leave the dealership.
  • Ask to see the credit application, completely filled out, before you sign it. Make sure your income and other personal information is correctly listed.

For more information, click here.

Discussion Questions

  1. Why is it important to consider other sources of financing before visiting an auto dealer?
  2. What might be the consequences if an auto dealer inflates your income?

Teaching Suggestions

  1. Have students visit an auto dealership to gain additional insight into this high-cost financing service.
  2. Have students make a short presentation with a summary of their findings.

Buyer Beware: Grey Charges

You just opened your credit card statement. “What’s this charge?” may be your first thought when you see a small charge on your credit card statement that you can’t figure out. This is known as a “grey charge” and there are several types of grey charges you should be familiar with:

  • Unintended subscriptions. You thought you made a onetime purchase, but it was really a subscription.
  • Zombie fees. Membership fees that you had cancelled, but charges still appear on your statement.
  • Free trial to a paid subscription. When a free trial is over, the seller converts it to a paid subscription.
  • Negative option. You bought one product, but did not realize that you were buying others at the same time.

What can you do to protect yourself from grey charges?

  • Before you buy, read the terms of service. Disclosures about fees may be hidden, so read the entire document.
  • Mark your calendar as a reminder to cancel free trials by a set date.
  • Read your credit card statements carefully. Pay attention to the names of companies and charges for small amounts.
  • Contact the seller to have the grey charges removed.
  • Dispute the charges with your credit card company.

For additional information on grey charges go to: http://www.consumer.ftc.gov

Teaching Suggestions

  • Have students check their credit card statements to discover any grey charges.
  • Have students make a short presentation with a summary of actions that might be taken to avoid grey charges.

Discussion Questions

1. What are several reasons to check your credit card statements?

2. What can you do if grey charges appear on your credit card statement?

 

Protect Your Personal Information and Money

Recent reports about thieves gaining access to sensitive personal information that can be used to commit fraud or steal money, sometimes involving major security breaches at large retailers such as Target stores.  While federal laws and industry practices generally limit losses for unauthorized transactions involving bank accounts, debit and credit cards, it pays to be proactive.

Be careful when you use social networking sites.  Scammers use social networking sites to gather details about individuals, such as their place or date of birth, a pet’s name, their mother’s maiden name, and other information that can help them figure out passwords–or how to reset them.  Even small amount of information can help them steal your identity, such as by answering security questions that control access to accounts.  According to Michael Benardo, Chief of the FDIC’s Cyber Fraud and Financial Crimes Section, “Don’t share your ‘page’ or access with anyone you don’t know and trust.  Criminals may pretend to be your ‘friend’  or relative to convince you to send money or divulge personal information.”

For additional information and tips on avoiding fraud at social media sites, go to the Internet Crime Complaint Center at

http://www.ic3.gov/media/2009/091001.aspx and http://www.fdic.gov/consumers/consumer/news/cnfall13/socialmedia.html

Discussion Questions

1.  What can you do to guard against scams involving fraudulent requests to wire money or send a prepaid card?

2.  Why should you be suspicious about unsolicited emails or text messages asking you to click on a link or open an attachment?

Teaching Suggestions

You may want to use the information in this blog and the websites to

*  Discuss the importance of regularly reviewing your transactions in your credit card and bank statements.

*  Carefully choose user IDs and passwords for your computers, mobile devices, and online accounts.

*  Periodically review your credit reports to make sure someone else has not obtained a credit card or a loan in your name.

Billing Errors on Your Credit Card Statement

The Federal Deposit Insurance Corporation’s Response Center reports that billing disputes and error resolution problems and processes are the most common types of complaints it received in 2012 and 2013 related to credit cards.  And, according to the Consumer Financial Protection Bureau, many consumers are confused and frustrated by the process of challenging inaccuracies on their monthly statements.

Checking your statements periodically also can help you monitor your spending.  You may want to sign up for alerts on your mobile phone or through your email that inform you when your credit card has hit a specific balance amount or you are close to your credit limit.  Other alerts can remind you about an upcoming bill.

If you notice a billing error, such as an unauthorized charge on your statement, contact the card issuer as soon as possible.

 For additional information and guidance, see consumer information from the Federal Trade Commission at http://www.consumer.ftc.gov/articles/0219-fair-credit-billing.

 

Discussion Questions

1.  What might be some reasons for consumers to be confused and frustrated by the process of challenging inaccuracies on their monthly statements?

2.  What are advantages of checking your monthly credit card statements?

Teaching Suggestions

You may want to use the information in this blog post and the FTC website to

  • Have students make a short presentation with a summary of actions that might be taken to report billing errors to the credit card issuer and other federal consumer protection agencies.
  • Draft a sample letter to dispute a billing error.
  • Review the Fair Credit Billing Act to learn about protecting  their rights if  a billing error occurs.