Earlier this month, we highlighted some of less than ideal money mistakes we make when we’re against the wall. Realizing that was just a short list and after hearing from our readers, we put together a “part 2”, so to speak. Keep reading as we highlight more money mistakes – and what to do if you find yourself smack-dab in the middle of one of those mistakes.
Payday Loans
These loans may seem like a better solution, especially when there’s not enough money in the bank to cover the bills. Most consumers think to themselves it’s a short term fix that keeps the electricity on and they believe by the time their payday rolls around again, they can cover it. Unfortunately that’s not always the case. In fact, a higher percentage of consumers will “let it ride” – sometimes for months at a time.
Here’s what happens – you write a postdated check for the amount you’re borrowing today, plus the fees and interest the payday lending company requires. You sign a contract stating the entire check’s value will be available for the company to withdraw, via your check, by the agreed upon date. Many companies will allow a couple of weeks and some even will extend it for a month (though you’re paying a very high interest every day the loan is outstanding).
When the due date comes along, the company will cash it. But, if the consumer can’t cover the check, they can pay the interest and extend the loan for another two weeks or longer. For many, they’re in a vicious cycle that’s difficult to break out of. Worse, some turn to other payday check companies in order to pay the first one off – and so the cycle continues.
You’re better off requesting a payment extension with whomever the money is owed to. If you feel you can have the money to repay the lending company in a couple of weeks, you’re better served to try to request an extension with the utility company or credit card company versus bringing a third party into the picture.
It’s true many insist this is a wonderful service, especially for the growing number of Americans who are unbanked or underbanked, but for many more, it feels like predatory lending on society’s most vulnerable. Worse, some big banks are now getting their own piece of the expensive pie by offering bank customers the same deals. What’s most interesting is the big banks were the loudest critics of payday lending companies in the past.
Credit Reports
Checking for credit report errors is the single most important thing any consumer can do for his finances. You’re allowed one complimentary credit report every year simply by requesting it from the credit bureaus. Before you assume everything is accurate on your report, you should know there are some estimates that a full one third of credit reports have inaccuracies. Before you shop for a new car or begin the refinancing process on your home, at least check out what’s being reported on you via your credit report. It can save time and money in the long run – and that’s always a good thing.
If you find mistakes, contact the credit bureau that’s reporting it. They will begin an investigation into the error and if they can’t verify it, they’ll drop it from your report. It’s always best to not let these errors ride as the long term effects are both costly and frustrating.
Instant Credit Fixes
These outfits have been around as long as credit cards have. These companies promise an overnight fix to credit reports – even if the accounts on that report are legitimate. Here’s the truth: there is nothing these costly companies can do for you that you can’t do yourself for free. In fact, even if your credit report suddenly shows the absence of past due accounts, there’s a good chance it’s temporary. The credit bureaus must pull any account off of a report while it’s being investigated. If it’s a legitimate debt, the bureaus will then put it back onto your report.
These companies will request old debt be eliminated. Again, this is something you can do for yourself minus the expensive price tag. Do yourself a favor and invest that few hundred dollars in your child’s college fund or your retirement plan – it’s money much better spent.
Late Fees
Finally, we take a look at late fees. Some call them convenience fees and say they’re worth it to get a few days extension on a credit card payment or car payment. Everyone has a difficult month from time to time but did you know you might be better served by calling the creditor and requesting an extension and then requesting the company forgo the late fee? It’s a courtesy a bank or creditor can extend from time to time, provided the consumer typically meets his financial obligations on time.
The most important thing to keep in mind when you’re handling financial business is to assume nothing. There’s always a solution, but it just sometimes takes a bit of effort on your part.
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