- Screw April Fool's Day. I'm about ready to clear my entire feed queue. #
- I definitely need a reason to get up at 5 or I go back to sleep. #
- Bank tried to upsell me on my accounts today…through the drivethru. #
- Motorcycle battery died this morning. Surprise 4 mile hike. #
- RT @ramseyshow 'The rich get richer &the poor get poorer' is true! Rich keep doing what rich people do & poor keep doing what poor people do #
- RT @ramit: "How do you know if someone is a programmer?" I cannot stop laughing imagining half my programmer friends – http://bit.ly/9MOipi #
Why I chose a prepaid credit card
This is a guest post.
You can’t get credit without a credit card, and you can’t get a credit card without good credit. This is a dilemma that many people find themselves facing, whether they are trying to re-establish their credit or build credit for the first time. In fact, this is the dilemma that I found myself in. My solution was to get a prepaid card, and here’s why.
The Real Deal with Prepaid
Prepaid credit cards have earned a mixed reputation over the years. While it’s true that they usually have more fees than a regular credit card, they also offer a financial solution for people who don’t have good credit. And you should also keep in mind that they don’t charge interest because the cash that you are using is yours to begin with. The important thing to remember about prepaid cards is that they are a means to an end; once you rebuild your credit, you’ll find it much easier to apply for a card with better rates and fewer fees.
In addition, prepaid cards offer several advantages. The most important one for me was the convenience of having a card that I could use to make purchases. Prepaid cards look and work exactly like regular credit cards (you don’t have to enter a personal identification number to use them), so the only one who knows it is prepaid is me. And while I use cash for everyday purchases, there’s no avoiding the need for a card when you have to shop online or pay for gasoline at the pump, for example. Most digital merchants only accept payments from cards linked to large financial brands like Mastercard and Visa, and my card gives me a way to buy what I need from whoever has it in stock. In addition, my prepaid card offers me a way to keep track of all of my purchases electronically, which is helpful since I am trying to keep a closer eye on my budget.
Prepaid cards also offer security. Cash can easily be lost or stolen, but if you lose a prepaid card, you can easily get a replacement. More importantly, your balance is protected by a replacement guarantee from your bank, which comes in handy if you ever have to dispute fraudulent charges.
Perhaps the most convenient factor of a prepaid card, though, is how easy it is to get one. You don’t have to have a bank account in your name to receive a prepaid card. However, if you do have an account, you can easily link it to your prepaid card.
Changing my spending habits and getting out of debt hasn’t been easy for me, but one way for me to show creditors that I am getting better at managing finances is to build my credit with my prepaid card. It’s also a way for me to eventually be able to make big purchases that are necessary, such as a car, and hopefully one day, a home. Prepaid isn’t for everyone, but if you find yourself considering this option, it’s worth a second look.
Credit Peril
When my mother-in-law died, we went through all of her accounts and paid off anything she owed.
The Discover card she’d carried since the 80s–a card that had my wife listed as an authorized user–had a balance of about $700. We paid that off with the money in her savings account. They cashed out the accumulated points as gift cards and closed the account.
A few months ago, we decided it was time to buy an SUV, to fit our family’s needs. We financed it, to give us a chance to take advantage of a killer deal while waiting for the state to process the title transfer on an inherited car we have since sold.
Getting good terms was never a worry. Both of us had scores bordering on 800. Since our plan was to pay off the entire loan within a few months, we asked for whatever term came with the lowest interest rate.
Then the credit department came back and said that my wife’s credit was poor. I chalked it up to a temporary blip caused by closing the oldest account on her credit report and financed without her. No big deal.
Since we decided to rent our my mother-in-law’s house, we’ve discussed picking up more rental properties. That’s a post for another time, but last week, we went to get pre-approved for a mortgage. During the process, the mortgage officer asked me if my wife had any outstanding debt that could be ignored if we financed without her.
Weird.
A few days ago, we got the credit check letter from the bank. Her credit score? 668.
What the heck?
I immediately pulled her free annual credit report from annualcreditreport.com, which is something I usually do 2-3 times per year, but had neglected for 2012.
There are currently two negatives on her report.
One is a 30 day late payment on a store card in 2007. That’s not a 120 point hit.
The other is an $8 charge-off to Discover. As an authorized user. On an account that was paid.
Crap.
We called Discover to get them to correct the reporting and got told they don’t have it listed as a charge-off. They did agree to send a letter to us saying that, but said they couldn’t fix anything with the credit bureaus.
Once we get that letter, it’s dispute time.
SOPA Is Evil
So the record companies, the movie studios, the obsolete media, and some large software companies want the ability to nuke a website from orbit if they find any of their intellectual property there.
Or a hint of their intellectual property.
Or, “Oops, I guess that wasn’t ours. How much business did you lose during the 6 month appeal of a non-judicial takedown?”
Pure crap.
I’m not saying that from the perspective of some junior high pirate watching free porn in his parents’ basement. Intellectual property is the basis of my livelihood. I am a Microsoft Certified Professional; a software engineer. I am a blogger; a writer. I am a web developer; again, pure IP.
Giving private companies the right to arbitrarily take down sites for what may or may not be an actual violation is absurd.
Over the last few years, a law firm called Righthaven(spit!) has been teaming up with news agencies around the country to extort fees out of websites–generally small sites–for violating their copyright. Most of those cases involved individual users–not owners–posting fair-use snippets of articles. Since the cases were filed in Nevada, it would have cost more to fight the suits than to simply pay the blackmail, typically $5,000-$10,000.
Now, add the ability to threaten to administratively shut down the site if settlement isn’t made in 24 hours. That eliminates the ability to consult with an attorney, undermining the legal system completely.
All because once-successful companies can’t cope with the current world.
I’m not a fan of piracy. I enjoy buying movies because that encourages the people who made them to continue to make movies. The delivery system sucks.
Netflix has developed a successful business model out of making it easier to watch movies legally than to pirate them. For $8/month, you can watch as many movies as you’d like. If you have a $50 Roku, or any number of other devices, you can watch right on your TV. Add another $8/month to that, and you can get new DVDs delivered right to your door. For less than $20/month, they are delivering licensed, legitimate content and making a profit doing so.
How did the movie companies respond?
Did they increase the availability of their libraries, to get more wanting-to-be-honest customers paying a small fee to watch their content?
Of course not. They reduced the instant library and extended the amount of time before they would license new movies for rental. They made it harder to get their content legitimately, which increased the amount of piracy.
Now, since Plan A is biting them in the ass, they are pushing for yet more legislation to salvage their failed business models.
Here are three options for watching movies I don’t own:
Option 1: Instant
Through the magic of Amazon Instant, Netflix Instant, or any of the magical Roku channels, I can…
- Open an account. Once.
- Find a movie I want to watch.
- Watch it immediately. This could be included in a membership fee, or as an individual rental.
Option 2: Piracy
I am not recommending illegal activity. This is for the sake of example, only.
- Download torrent software, like uTorrent. Once.
- Go to a site like Torrentz.com and find a movie I want to watch.
- Click the torrent link, let the torrent software open it and download the movie.
- Watch the movie in a couple of hours. For free.
Option 3: Buy it.
- Drive to the store each time I want to watch a movie.
- Spend $15-$20 on the movie.
- Drive home.
- Fight the bank vault of plastic and tape they wrap the movies in.
- Put the DVD in the player.
- Watch 5 minutes of “Don’t Be a Pirate” garbage. Hey jerkface, if I’m watching the DVD, I didn’t pirate it. Bad market-targeting here.
- Watch 15 minutes of commercials that I can’t skip through.
- Watch 15 minutes of
commercialspreviews that I can’t skip through. - Watch the movie. This process takes longer than the piracy and costs more than option 1.
On top of that, I’m told I’m a pirate if I back up my movies for archival purposes. Or if I rip my movies to my network to allow me to watch them conveniently. I’m told that I’m merely licensing the content of the disc, but if the disc fails, I have to buy a new one. I can’t just download the content again.
This is a failure, and it isn’t a legislative failure.
The companies that are embracing modern options are succeeding, and will continue to do so. The companies that refuse, at the expense of their potential customers, will sink.
My Net Worth
While I find it fascinating to read about other people’s net worth, I’ve never bothered to figure out my own. With the start of the new year, I thought it would be fun to do. This is me, upping my personal transparency bar.
Assets
- House: $255,400. Estimated market value according to the county tax assessor.
- Cars: $23,445. Kelly Blue Book suggested retail value for both of our vehicles and my motorcycle.
- Checking accounts: $2,974. I have accounts spread across three banks.
- Savings accounts: $4,779. I have savings accounts spread across a few banks. This does not include my kids’ accounts, even though they are in my name. This includes every savings goal I have at the moment.
- CDs: $1,095. I consider this a part of my emergency fund.
- IRAs: $11,172 (Do you know your IRA contribution limits? Do you have a Roth IRA?)
- Total: $298,865
Liabilities
- Mortgage: $33,978
- Car loan: $1,226. This will be paid off this month.
- Credit card: $23,524. This is the next target of my debt snowball.
- Total: $58,728
Overall: $240,137
Update: I wrote and scheduled this before I paid off my car loan.
My Credit Cards
This announcement is a bit premature, but not everything that’s premature has to end in an evening of disappointment.
At the beginning of the year, I transferred the balance of my last credit card onto two different cards, each with a 0% interest rate. One card got a $4,000 transfer and the other got $13,850. The approximately $415 in fees I paid for the transfer saved me nearly $1500 in interest this year.
The card that got the big balance is the card we use for a lot of our daily spending. On my statement dated 2/18/2012, the balance on the this card was $14,865.23. At the same time, the smaller card had a balance of $3,925.09, for a total of $18,790.32. When I started my debt-murder journey in April 2009, it had peaked at just under $30,000.
When my payments clear later today, that balance will be gone.
That is nearly $19,000 paid down in 8 months.
Now, the inheritance we picked up did accelerate our repayment a bit, but only by a few months.
Starting from $90,394.70 in April 2009, we have paid down $63,746.70, leaving $26,648.00 on our mortgage.
I’m more than a little excited, which–as usual–is the cause for the prematurity.
New goal: pay off the mortgage in 2013.
