Online Credit Card Protection

Credit card fraud is one of the most common forms of identity theft reported in the United States each year. Here are five strategies you can use to help protect and monitor your credit card number online.

1) Virtual Credit Card Numbers
Some of the best credit cards for shopping online offer virtual account numbers that help you keep your credit card information hidden. These account numbers are usually only good for one purchase, and stop working once you use them.  Typically you login to your credit card website, like Discover or Citibank, and request a virtual account number, which you then use to complete your purchase.

Another online payment alternative that can keep your credit card number hidden from the merchant is to use a third-party payment provider, such as Google Checkout or PayPal.  Not every merchant accepts these methods of payment, in which case a virtual number may be your only choice.

2) Online Billpay
Some people are still wary of online billpay because you’re accessing your bank account online but it’s much more difficult for someone to hack into your bank account than it is to steal your mail out of your mailbox. If you receive and pay your credit card bill electronically you don’t have to worry about people swiping your paper statement and stealing your credit card information.

Although it’s not an online threat, one thing worth mentioning are the credit card offers you get in the mail. Often times they will have information pre-populated to make it easier for you to fill them out. It’s helpful if you decide to apply but if you just toss it in the trash then someone has access to a credit card application with your name and address already filled in. Be sure to shred these.

3) Beware Phishing
Even though having your credit card bill delivered electronically can be useful, you have to be vigilant about the emails that arrive in your inbox. Identity thieves have discovered a technique known as phishing to be very effective at stealing your account numbers, passwords and other personal information.

Be wary of emails that ask you to click through to a page.  Although it may appear to be a page on your credit card company’s website that you end up on, it could be a fake site website that’s trying to trick you into giving up your login information.

A good rule of thumb is to never click on links inside of an email. Instead you can open a new browser window, type in the official home page, and login from there.

4) Online Alerts
Many credit card companies now offer alerts via email or text message to help you monitor your spending patterns.  They offer a variety of criteria, for example, you can get an email if there’s ever a charge over a certain amount on your credit card. These alerts can tip you off to credit card fraud early enough to help you put a stop to the spending before it gets worse.

5) Credit Card Statement Review
This one is simple but effective. Check out your activity on your credit card statements every month and look for purchases you haven’t made.  Companies like American Express have made your online credit card statement pretty interactive so you can easily search and sort your purchases and keep an eye out for ones that aren’t yours.

Most credit card companies offer purchase protection that shield you from liability in the event your credit card number is stolen and misused.  However, these companies do ask that you monitor your card activity and report anything suspicious right away so be sure to check your statements.

New Credit Accounts

The five strategies above can help you protect your current credit cards, but something else you want to watch out for are identity thieves opening lines of credit in your name.  If someone has enough information about you, it can be difficult to prevent them from posing as you and opening credit cards under your social security number. However, there are two ways you can keep an eye out for new cards that pop up in your name.

Credit Report Checks
The first way that you can catch credit card identity theft early on is to regularly check your credit report. Look for any credit accounts that you didn’t open. You are entitled to three free credit reports yearly (one from each of the major bureaus), you can access your free reports via Annual Credit Report website.

After you have used up your free reports, you can usually get reports from the major bureaus for between $15 and $50 (depending on whether you get a three-credit report, and include a credit score).

Credit Monitoring Services
The benefit of a credit monitoring service is that it will regularly check your credit reports on your behalf and notify you if something comes up. Credit monitoring services usually cost between $9.99 and $29.99 a month, and provide a range of services. Credit monitoring services alert you when suspicious activity occurs, and will let you know when accounts are opened in your name.

Bottom line: It is impossible to completely prevent identity theft. However, with some vigilance, it is possible to reduce the possibility of it happening to you and limit the amount of damage if it does.

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Identity Theft Action Plan

If you’re a victim of identity theft or think you might be here’s a checklist of actions to take to help contain any damage caused by the identity theft.

But before we get started let me suggest you devise a solid organizational plan for all of the paperwork and correspondence you are about to process. Print everything. Write everything down. Send letters to creditors and collection agencies rather than dealing with e-mails and phone calls.  Good records will help you sort through the financial mess you could be facing.

Here are some first steps to take if you’ve been hit with identity theft.  It’s not a comprehensive list, but it’s a good start to dealing with the issue.

Alert the Company

If you find an unauthorized account opened in your name, contact the company that’s providing the credit immediately.  For example, if someone uses your credit card number to make purchases call the issuer up and report the problem.  They’ll take the steps necessary to stop the perpetrator from charging anything further to your card.

Freeze Your Credit

You’ve got to stop the identity thief from opening up additional credit lines in your name. Once your credit is frozen you can go and start to fight the accounts that are open in your name, and you’ll have a definitive list of which accounts to close. Without freezing your credit you can end up thinking you are done fixing the theft and then another fraudulent line of credit opens up.

You’ll need to contact each credit bureaus separately to freeze your credit. Freezing your credit is supposed to mean that lenders will no longer extend you, or anyone posing as you, a line of credit.  Unfortunately not all lenders heed the credit freeze but they’re supposed to so it’s a step you definitely want to take.

Of course the one downside is if you do actually need access to credit during this time then it will be more difficult for you to borrow money.  You have to unfreeze your credit report to be able to open up a new line of credit, but the inconvenience is probably worth the protection.

You will also want to establish fraud alerts that are valid for 90 days initially. You can then extend this fraud alert to 7 years once you’ve received information in the mail from the bureaus.

File a Police Report

If someone has used your credit card or opened accounts in your name then fraud has been committed. If your identity has been stolen it’s definitely a crime and you need to get a police report detailing the facts. The police may not be able to catch the criminal but it’s still very important that you file a report.

You’ll have to send this report to creditors, banks, etc. to provide proof that you didn’t open the accounts and a thief did.  For example, let’s say someone goes on a shopping spree with your credit card and you report it. The credit card company will send the case to their fraud department and an investigator will gather the evidence to validate that you really are a victim of a crime and not trying to commit fraud yourself.

Filing a police report can be an especially difficult task if the identity thief is someone you know and trust. It’s not uncommon for identity theft crimes to be committed by family members since they have access to a lot of the information needed to pose as you. It’s hard to point the finger at a family member and accuse them of identity theft, but if that’s what has happened then you should file the police report.

Contact Financial Institutions

Reach out to your financial institutions (banks, credit card companies, mortgage company, retirement account companies; all of them!) and ask them what steps you need to take to protect your account with them.

Then begin tackling the fraudulently opened accounts at the same types of firms. Again, have your police report at the ready. You’re going to have to provide documentation that your identity was stolen to them, and it can be a pain. This is costing them money, and they may not be inclined to believe you. Work in writing, and prepare for this to take a while.

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Identity Theft Protection Week

Identity theft costs individuals and companies millions of dollars each year but if you haven’t been a victim then it’s probably not something you think about that often.

Unfortunately even if you haven’t been a direct victim, the costs of identity theft are often passed onto you by the companies that end up footing the bill.  For example, if someone steals your credit card and goes on a spending spree you’re not responsible for the charges but someone is taking a loss on those items.

Protect Your Identity Week

The National Foundation for Credit Counseling (NFCC) and the Council of Better Business Bureaus are hosting “Protect Your Identity” week to help raise awareness of the threat and share ways to help prevent it.

We’ve covered identity theft in the past with tips for preventing college student identity theft and looks at the credit monitoring services of True Credit and Equifax Id Patrol.  We also ran the series below about identity theft:

• Identity Theft Protection – What You Don’t Know Can Hurt You
• Identity Theft Tips – How They Steal Your Information & How You Can Help Prevent ID Theft
• Identity Theft Costs – How Much Time & Money Does ID Theft Cost the Victim
• Identity Theft – Stealing Your Identity so They Can Break the Law

Identity Theft Protection

According to the NFCC 11.1 million people were victims of identity theft last year, 12.5% more than the year before.  Later this week we’ll look at ways to protect yourself against id theft and what to do if you discover you’ve been the vicitim of identity theft.

One thing to check out are the free paper shredding events around the country this week sponsored by Cintas Corporation.  As part of “Protect Your Identity Week” they’re trying to set a Guinness Book World Record, so if you have a bunch of documents with sensitive information you need to shred, check it out.

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Options Trading 101

Options trading is a strategy that some investors use as a way to hedge against a decrease in the value of an asset they own shares in, such as a stock.  Having an option contract in place can help limit your losses in the event your stock loses value, however, there are also risks involved with trading options since you’re speculating as to the future direction and timing of the stock movement.

What are Options?

An option is a contract that gives you the right to buy or sell an asset at a specific price until a certain time. There are two types of options:

1. Call: This is a “buy” option, allowing you to buy the underlying asset in question, at a certain price.
2. Put: This is a “sell” option, providing you the right to sell the underlying asset at a certain price. If the option is exercised by the option holder, the seller is obligated to sell the underlying asset.

It is important that you understand that, as a buyer, you do not have to buy the asset the option contract is based on. You are simply purchasing the right to buy it at a specific price. Anytime until the option expires, you can buy it at the price specified. If asset prices rise, you can make money because you have the right to purchase the asset at a lower price than the current market value and then turn around and sell it for more.

If you do decide to exercise the option, you’ll need to have the money available to buy the stock.  Options contracts typically start off at 100 shares so even at the lower price, you’ll need a chunk of change to make the purchase.  Another alternative you have is to sell the option itself rather than exercising it and actually buying the shares.

While you can buy or sell options, many beginners prefer to start out with call options since they are a little simpler way to understand the options market.

Basic Options Definitions

Here are some basic definitions to understand before you begin options trading:

• Underlying Asset: This is the the security that the contract is based on. If you are trading stock options, it is the stock you are considering. If you want an option on Citi (C), then you purchase the right to exercise 100 shares of C.
• Premium: This is the price of the options contract.
• Expiration: The final date at which the option can be exercised.
• Strike Price: Using the market price of the underlying asset, a key price level is determined. This is the strike price. At expiry, if the underlying share price has moved below the strike price, it is worthless on a call option. For a call, you want the underlying security to expire above the strike price. The opposite is true of a put option. With a put option, it is worthless if the underlying asset ends up with a price above the strike.

Remember that the buyer has control of the transaction. An options buyer can choose to exercise the option, or allow it to expire. Sellers, in most situations, can only wait for a buyer decision.

Options Trading Advantages

The main advantage to buying options is that you do not have to actually own the underlying asset in order to participate. When buying options you have leverage working on your side.  You can control 100 shares of an asset without having to pay the price to purchase them at market value.

As mentioned earlier, one of the benefits of buying an option is to hedge your risk against a big drop in the value of an asset that you own.

Options Trading Disadvantages

The main drawback to options trading is, as you might imagine, the potential for loss. If the option expires without being executed, you lose money. Unlike buying a share of stock, whose value is based on the underlying assets and performance of the company, an options value is based only on your right to buy.

Indeed, since you purchased the right to buy an asset at a specific price, if you don’t buy it, you are still out what you paid for the option. Also, if you are selling an option, and someone buys it, and the price has increased, you have no choice but to accept the lower price.

Options Trading Training

More online brokerages these days are offering the ability to trade options.  Before you begin, it is important to make sure you fully understand how option contracts work, as well the potential downsides. Hopefully this gave you a decent overview of why people buy and sell options and some of the advatages and risks.

Some options brokers offer extensive training on the basics of options as well as the various options trading strategies.  If you’re interested in pursuing options trading I suggest you go through some of this training to see if it’s a good fit for you.

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Angies List Free Trial

The Wall Street Journal interviewed Angie Hicks, the co-founder of the Angies List this week and she shared how her toughest moments were in the early days of the user review company a decade ago.  After manning the phones during the day she’d go out and promote the contractor review service in the evenings and was only adding one new member a day. 

Angies List Free Trial

Since the biggest value of the service is the large number of user reviews I can see how it would have been hard to get the initial group of people to sign up.  What incentive is there to join a user review site when you’re the first one leaving a review, right?  

One thing I learned from the interview is that when they first start offering reviews in a new city, they offer a one year free Angies List membership to get people using the service.  They’re able to accumulate enough reviews using the Angies List free trial offer to make the service worthwhile in the new city.

Angies List Live

They’ve also added a new feature called “Angies List Live” where you can see in real time what kinds of services members are searching for reviews on.

If your area was just added to the Angies List cities you won’t see many people searching in your town but you can get an idea of how people are using it in other nearby cities.  Here are some of the services that scrolled by in the short time I was watching:

• Plumbing
• Roofing
• Chimney Sweep
• Windows
• Carpet cleaning
• HVAC
• Ophthalmology
• Computer Repair
• Exterior Painting
• Glass & Mirrors
• Air Duct Cleaning
• Pest Control & Exterminating
• Metal Fabrication and Restoration
• Exterior Painting
• Lawn Irrigation
• Masonry
• Landscaping
• Gutter Repair
• Home Inspection
• In-home Child Care
• Mattresses
• Family Medicine
• Florists
• Accountants
• General Surgery
• Siding
• House Cleaning Services
• Lawn and Yard Work
• Fencing
• General Remodeling
• House Cleaning Services
• Interior Painting
• Carpentry
• Moving
• Dentists
• Kennels
• Tree Service
• Windows
• Appliance repair
• Concrete Driveways
• Auto Repair
• Property Appraiser 

As the WSJ article revealed, in her early days Angie probably had no idea that one day there would be hundreds, sometimes thousands, of people using the service every hour. Pretty cool, nice work Angie!

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Section 105 HRA Plans

This article on Medical Reimbursement and Health Rearrangement Plans comes from Timothy Wolfe, a Chicago based tax and business specialist who shares his expertise online at Chicago Business Advice.  A while back I looked at flexible spending accounts vs health savings accounts and Timothy left a comment about Section 105 HRA plans.  Since I wasn’t familiar with how those worked, I asked Timothy if he could write up some information on Section 105, hopefully you’ll find it useful.

Section 105 Overview

There are really only a few key definitions under code section 105, which covers two plans.  Both require written plans and are not discriminatory.    However, both plans may have some eligibility requirements that may be included in the written plan that allow certain employees to be excluded:

• Employees who have not completed 3 years of service
• Employees who have not attained aged 25
• Part-time (<25 hours /week) or seasonal (<7 months of service)

Medical reimbursement plan (code section 105) – a medical reimbursement is a tax free payment from the employer to the employee to reimburse the employee for medical expenses, not insurance.  Also, employees who leave the company do not get reimbursed.

Health reimbursement arrangement (105(b)) This plan has options the medical reimbursement plan doesn’t, including the option to include health insurance premiums.  Maximum reimbursements must be established and carryovers of unused reimbursements from year to year may be included in the plan.

Note that the major difference from the 125 plan (discussed in other blogs) and the 105 plan is the entity/person who funds (pays for) the plan.  The employee funds a 125 plan through having money withheld from his paycheck and then reimbursed while the employer funds the 105 plan as a true reimbursement.

Section 105 Benefits

The key to understanding who should utilize this benefit is key because the employer is not only providing a tax free benefit plan to the employee but is paying the cost.  Because the employer is paying for 100% of the funding, the employer probably only wants to utilize this plan when he is one of the few or only beneficiaries of the plan.

I will use myself as an example.  Because of pre-existing conditions our (family) insurance is very expensive.  And of course there are prescriptions, eye care, including glasses, dental, etc.  So our average medical expenses, including health insurance premiums, are over $20,000/year. 

Because I am a corporation and have no other employees I can offer this tremendous benefit of over $20,000 of tax free income.  I wouldn’t want to offer this to an employee who wasn’t a relative or key employee but I might have to if I had employees who were not eliminated from coverage.  If I had several employees I would want to opt for a different plan such as a 125 plan.

To finish my example let’s say I have an average federal tax rate of 20%, FICA of 7.65% and the (IL) state rate of 3% then my total individual tax rate is 30.65%.  So I am saving $6,130/year in taxes (30.65%*$20,000).  In addition my corporation will save $1,530 which is the employers matching FICA of 7.65% times $20,000.  So a total tax savings of $7,630.  Not bad.
 
Section 105 Eligibility

Any business entity, including the employees of someone who is self employed can utilize a 105 plan.  However, there are limitations.  If you are a partnership this benefit cannot be offered to a partner or spouse of a partner, unless they themselves are a partner.  A 2% or greater shareholder is limited to only having the FICA portion of their taxes being tax free.  And the self employed individual himself cannot participate in a 105 plan.  However, the if self employed’s spouse is a bona fide employee, that spouse can fully participate.    With an employed spouse you must consider the type of work the spouse is doing and the number of hours worked to determine if the benefit paid to the spouse is reasonable.

Section 105 Plan vs. Other Plans

The three plans offering the maximum medical deductions are the section 105 plan discussed above, the section 125 (flexible spending arrangement) and the Health Savings Account. (HSA)  The section 105 plan and 125 plans were discussed above while an HSA differs in that expenses are reimbursed though a medical savings type vehicle, which the employee or employer can fund. 

One main point is that the HSA requires a specific type of health insurance plan called a High Deductible Health Plan (HDHP), which means a higher deductible, federally mandated policy.  Additionally, the premium for the HDHP cannot be deducted from the HSA account but can be deducted as an employer expense under code sections 105, 106 or 125 or as a reimbursement to the employees under either code sections 105 or 106. 

Tax Impacts
The bottom line is that there a number of ways to deduct medical expenses, although all have to be established by the employer.  In my mind these are the greatest employee benefit plans an employer can offer.  The employer only has to be careful so that they do not unknowingly provide a larger benefit to his employee than they intended.  Additionally, I want to stress that if you are a S Corporation you really need to evaluate not only the type of plan you have but whether the other tax benefits of being an S Corp offset what you lose as an S Corporation.

For additional information Section 105 HRA Plans you can visit Timothy’s site, Chicago Business Advice.

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American Express Credit Card Airline Bonuses

American Express has two pretty good credit card offers for airline bonuses, one of which is ending soon.

American Express Premier Rewards Gold

The Premier Rewards Gold Card is offering 25,000 American Express membership rewards points for new card members.  After you charge $1000 on the card during your first three months you’ll receive the the rewards points in your AmEx membership rewards account.

You can get a free airline ticket with the points or they can be used for $250 in gift cards.  There is an annual fee for the Rewards Gold card but it is waived for the first year. This was a limited time offer that ends tomorrow, you can sign up for the bonus here.

American Express Gold Delta SkyMiles

The Gold Delta SkyMiles card is also offering a bonus for new card members.  This frequent flyer rewards card will give you 20,000 bonus miles after your first purchase.  If you have other family members you want to add to the account you can earn up to an additional 5000 rewards points for adding them.

The 25,000 rewards points can be used for $250 off an airline ticket on Delta. The annnual fee is waived for the first year and you earn one mile for every dollar spent on general purchases and two miles for every dollar spent at participating retailers and merchants.

American Express hasn’t said when this credit card offer will expire so you still have some time to sign up for this one.  You can read more about the card and the bonus here.

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Just for Kids Weekend

Our kids had an awesome weekend!  The weather was perfect here in the Midwest and we knew before long our little ones would be cooped up by the winter weather so we let them enjoy the outdoors.  I think a local festival and neighborhood carnival were the highlights of our son’s weekend.  Although they had a blast we didn’t really didn’t get anything done since we spent the whole time chasing them from one fun event to the next.  It could be a late one, playing catch-up on work tonight but they had fun so it was worth it.

Here are some articles you should check out, seems like the Frugality section is always one my biggest.  I guess it’s just because I love saving money!

Investing

• Correlation: The Reason For Asset Allocation @ Investor Junkie
• Asset Allocation for People in their 20s @ Sweating The Big Stuff
• Best Books on Investing: My Favorite Investing Authors @ Get Rich Slowly
• Asset Allocation Strategies: Rebalance Your Portfolio @ The Digerati Life

Credit

• Five Tips To Establish Credit! @ Millionaire Nurse
• Don’t Forget to Opt-In for Your 5% Cash Back Rewards @ Nerd Wallet
• Guaranteed Ways To Lower Your Credit Score @ Free From Broke
• How to Freeze Your Credit Report at All Three Credit Bureaus @ Generation X Finance

Frugality

• Layering Your Deals @ Frugal Confessions
• Spend Less on Baby Formula @ Money Ning
• Save Money on Dining Out Expenses @ PT Money
• 20 Ways to Save Some Cash @ Budgeting in the Fun Stuff
• Doing the Math on Refilling Ink Cartridges @ The Simple Dollar
• Mastering Negotiation to Save Money @ Suns Financial Diary
• 6 Ways to Change the Impact of Food on your Budget @ My Dollar Plan
• Frugal Entertaining Without Breaking Your Budget @ Eventual Millionaire
• How to Avoid Christmas Debt Without Becoming a Grinch @ Personal Finance By The Book

Personal Finance

• The Financial Toll of Special Diets @ Beating Broke
• Financial Lesson For My Son: Savings @ Money Reasons
• Ways to Track your Spending @ Million Dollar Journey
• Five Daily Activities to Improve Your Finances @ Frugal Dad
• Paperless Office: The Secret Savings @ Lazy Man & Money
• Is the Troubled Asset Relief Program (TARP) Working? @ Dough Roller
• 3 Reasons Why Spreadsheets Make Effective Tools @ Fiscal Fizzle
• Saving Money on Your Phone Bills with Microsoft Excel @ Couple Money
• Decision-Making Difficult for Ambivalent People @ Consumerism Commentary

Retirement

• Planning Your Retirement Spending @ The Oblivious Investor
• The Perils of Pursuing Financial Freedom @ My Money Blog
• An Example of Early Semi-Retirement @ Free Money Finance

Career

• Should I take a Pay Cut? @ Brip Blap
• 14 Resume, Cover Letter, and Application Mistakes to Avoid @ The Money Crashers

Announcements

Baker from Man vs Debt offers a few great guides to selling your stuff on eBay and Craigslist in his recently released course – Sell Your Crap.

Matt Jabs at Debt Free Adventure has launched a cool initiative aimed at helping yourself and others. You can hear more about it in his DFA Missionaries video.

Jeff Rose at Good Financial Cents announced the title of his upcoming book, Soldier of Finance.

Congrats to those guys for making things happen. Also, thanks to the following carnivals for including our post.

• Carnival of Financial Planning 
• Festival of Stocks 
• Carnival of Personal Finance 

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Should You Even Bother With Non-Reward Cards?

Today’s post is a guest article from Go Banking Rates that takes a look at how rewards cards can be hazardous to your financial health if the incentives they offer actually cause you to spend more money, wiping out the benefits of the rewards.

Credit card companies employ plenty of tactics to hook customers and keep them racking up balances. Some offer 0% APR introductory periods while others waive the annual fee. Then there are the rewards credit cards –from airline miles to points to cash back–there’s a suitable rewards system for just about every cardholder that makes the act of charging just a little bit sweeter.

However, if that’s the case, why would anyone bother with a credit card that doesn’t offer some type of reward for using it? It doesn’t seem worth it, right?

How Rewards Cards Cost You More In the Long Run
The answer may lie in how credit card companies can afford to give  millions of customers all that free stuff in the first place. You may swear by your rewards card, but it might really be costing you in ways you hadn’t considered.

Those Savings Are Just an Illusion

Let’s say you have a gas card with one particular station, Gas Station A. You just  love it because you earn 1 percent back on everything you spend at Gas Station A,  which great considering how expensive fuel is. That’s why it’s worth  filling up here, at $3.00 a gallon, when another station down the street  is only slightly less at $2.97. They’re not going to mail you a check at the end of the month,  are they?

Well, you go to your usual gas station and fill up a 15 gallon tank for $45. You charge it to your card, knowing you’ll get back  45 cents. It’s not a whole lot, but a month’s worth of charges really  add up to sizable savings.

However, what if you had gone to Gas Station B and paid with a card that doesn’t offer any sort of reward, or  better yet, just paid cash? Filling your tank for $2.97 would result in a total cost of $44.55. You would have only saved…45 cents. Also, you don’t have to pay an annual fee to shop at this station. Guess you didn’t really need to charge that purchase after all.

You Spend More Than Necessary

All right, maybe you use a card that offers some really significant savings. Maybe you earn 5 percent cash back on all of your purchases, not that measly one percent on gas alone.

Unfortunately, you’re only earning 5 percent back on money you probably 100 percent did not need to spend in the first place.

Studies show people may be psychologically inclined to spend more money when buying on credit than if they were to pay cash. Swiping a plastic card is much less “painful” than handing over a wad of cash–add the promise of points or cash back and it’s all the more easy to justify adding another line to your monthly statement.

Card Costs Wipe Out Savings

Rewards credit cards tend to also charge higher interest rates. A Consumer Reports study found that some of the most generous rewards programs charge interest anywhere between 9.74% and 19.99% APR.

So what does this mean if you have to carry a balance? Those rewards are negated by interest, and then you have to pay extra for purchases you probably wouldn’t have even charged if you weren’t going to earn points.

Then you have to consider whether you’re paying an annual fee. In that case, even if you never carry a balance, you’re still not realizing any real savings until they surpass the annual cost of just owning the card.

When Rewards Cards Make Sense
This doesn’t necessarily mean you should never use rewards credit cards. A rewards card is sometimes a helpful financial tool that can save you a little money, but only when used strategically. If you have trouble paying your bill in full every month and tend to carry a balance, or you just don’t use your rewards very often, a rewards card is not worth it.

If, however, you are diligent about paying your bill, you actually use the rewards to the degree that they truly save you money and your “savings” is greater than if you had just paid cash, then a rewards card might be worth it.

Just think about this, though: Credit cards offer rewards as an incentive for you to spend more money. Rewards systems would not exist if credit card companies weren’t realizing a profit from their use. After all, you have to spend money to save money.

So the next time you’re ready to pull out your rewards card and earn a few more points on a purchase, think about whether you actually need to make the purchase in the first place. You will probably find you really save the most money by turning around and walking away.

Go Banking Rates features informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide.

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Nine Questions to ask Home Warranty Companies

A home warranty can provide valuable coverage against the cost of a wide variety of expensive home repairs, but not all home warranty companies are created equal and not all warranties cover the same repairs.

It pays to ask questions before entering into a contract, bearing in mind that selecting a home warranty is very different from the kind of manufacturer’s warranty that accompanies the purchase of a new car. Instead, a home warranty is equivalent to an “after-market” car warranty. You should understand what the warranty really costs and what it really covers by asking these questions:

1) What’s the Standard Pricing?
The cost of the warranty is an obvious consideration, but there is more to the story than the price of the first year of coverage. Warranty companies know that repairs become more likely as systems age, and often the premium cost increases in the second year and following years. It’s not uncommon for the first year premium to be a steeply discounted loss leader that convinces you to sign up. Make sure you know what happens to your premium after that first year. 

2) What is the Cost of Service Trips?
In addition to the premium itself, most warranty companies have a fixed charge for each service call. What is the price for each visit? Is it a flat fee or is there an extra cost for emergency service? Does the company offer an option to increase the flat rate for service calls in exchange for a lower annual premium?

3) How High are Coverage Limits?
Warranties always put limits on the company’s liability, whether those limits apply to the warranty as a whole or to specific items. Ask if there’s an annual limit on any and all work the company performs. Find out if there specific limits on individual items or systems.

Some contracts allow the company to pay you a fixed amount, typically no more than a few hundred dollars, in order to buy its way out of the contract. It pays to ask if this is a possibility and to find out what circumstances would allow the company to opt out of the agreement.

4) What Items are Covered by the Home Warranty?
This is perhaps the most basic question of all, but it pays to consider it carefully. Systems and components that you might assume are covered may be specifically excluded. Is the roof covered? How about the air conditioning equipment? Does coverage extend beyond the foundation, or are you responsible for gas, water and sewer lines that are on the property but outside the foundation?

5) Repair or Replace?
Home warranties almost always give the warranty company the option to repair instead of replace an item, since this is the more cost effective approach. However, it may not always the best approach from your perspective. 

For example, if your air conditioner has several different issues and they come out multiple times and patch it, instead of replacing the unit, this could cost you a service fee for each visit.  Not only that, if it’s in the middle of August and your AC goes out every week or two during the process you could spent some hot days waiting for the repairman to show up.

If they do replace an item, is it replaced with an item of the same kind and quality as the original? Does the contract say a replacement is satisfactory so long as it is functional?  In this case replacement may not be the best option if a premium item or system is going to be replaced by a lower grade.

6) What are Homeowner Responsibilities?
Home warranties almost always exclude coverage for items that are not properly maintained, but the issue for you is whether the warranty company will require proof of maintenance before it agrees to cover a repair. 

Even if a company does not have a specific requirement for maintenance records, coverage may be denied if a repair contractor believes that an item was not sufficiently maintained. This is a frequent source of conflict between home owners and home warranty companies so also ask about how maintenance disputes are resolved.

7) What’s the Repair Timeframe?
Some companies are available 24 hours a day so that a claim can be initiated, and all provide a time frame for getting a contractor to the home. In an emergency, though, does the company offer faster service? If so, how is an emergency defined? Are there special steps you must take? Although it is no guaranty of faster service, the company should be able to provide information about the contractors it uses so that a homeowner knows that help is available within a reasonable distance.

8 ) Guaranty of Work?
Work done by the warranty company should itself be warranted. What exactly does the company guaranty? Is it different for parts and for labor? If nothing else, the company should stand behind its own work and the homeowner should not be facing additional service charges for future visits. 

If the you’re not satisfied with a repair, how does the company resolve questions about the quality of the work?

9) How are Disputes Handled?
In addition to disagreements over the quality of a repair, homeowners and warranty companies can differ over whether an item is covered, whether maintenance was sufficient and whether to opt for repair or replacement, among many other things. 

A warranty company should be able to explain how these kinds of disputes are handled, whether the company will allow for second opinions, and what rights the homeowner has to cancel the contract.

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