CLEARFIELD – One of the most popular New Year’s resolutions many American’s make deals with their finances. Whether it is saving more, spending less, or reducing debt, the following evil eight dangers loom for the unsuspecting consumer that can quickly derail the most well-intentioned plans.
1. Check cashing services– families without bank accounts are charged a fee, often a percentage of the check’s face value to cash the check.
2. Buy Here/Pay Here Car Dealers – ill-informed buyers pay 50-100% more than the actual value of the car which is sold based on the payment amount, often extending the loan with APR (annual percentage rates) in excess of 25%.
3. “Courtesy” overdraft loans – charge to honor checks written when an account has insufficient funds and can be triggered when checks are processed in largest to smallest order and then deposits for the day are credited last.
4. Payday loans – storefront, internet and telephone operations offer loans secured by a post-dated check. Fees typically run in the 650-780% APR range. For example a $500 loan for two weeks costs $650 to repay.
5. Tax Refund Anticipation Loans –Taxpayers who electronically file their returns and have a bank account for direct deposit can expect their tax refunds within 7-14 days. Refund anticipation loans are short term loans offered by tax preparation firms that charge 235% APR to receive the money at the time the return is prepared.
6. Rent-to-own – Small weekly payments that generally make the consumer goods 2-3 times more expensive with interest rates running between 100 and 300% APR.
7. Sub-Prime Mortgage Loans – High interest, high fees, excessive insurance and points and unconventional terms that steer borrowers from conventional loans.
8. Credit Cards – late fees, over the limit fees, cash advance and universal default are all techniques to extract cash from customers.
Don’t fall prey to the evil eight. Carefully consider the long-range impact of using any of the evil eight financial traps. Explore your money management practices and areas that you could improve on. Review your spending for the past month. What areas can you cut back on this month? Could you set aside some money for future expenses? Could you use this “saved” money to pay down debt?
Prior to entering into any financial agreement, make sure you fully understand and agree with the terms. Ask yourself if you really can afford this purchase. Understand what will happen if you cannot fulfill the terms of the agreement. Remember your new year’s resolution? What steps are you taking to keep your resolution and achieve your goal?