Tuesday, August 31, 2010

7 Fees The Credit Card Companies Are Getting Sneaky With

7 Fees The Credit Card Companies Are Getting Sneaky With

Link to Financial Highway

7 Fees The Credit Card Companies Are Getting Sneaky With

Posted: 31 Aug 2010 04:00 AM PDT


The credit card companies are working hard to recoup the losses they may experience as a result of the new Credit CARD Act. Although the act reduces and prevents many different types of fees, the credit card companies have found some tricky legal ways around the rules. For example, they can't charge a high annual fee so may instead charge a high processing fee to get a new card. Additionally, they are rapidly increasing fees in the areas where rate hikes are not prohibited.

Here are 7 fees that credit card companies are getting tricky with. Make sure that you look at these carefully on any new credit cards as well as on any communication updating your existing credit cards.

  1. Annual Fees. The Credit CARD Act limits the total allowed amount of an annual fee to 25% or less of the borrower's credit limit. Many credit card companies are increasing annual fees to push closer to this 25% limit. It's still best for you to find a good credit card that does not charge you any annual fee.
  2. Upfront processing fees. One way that credit card companies are trying to sneak around that 25% limit is to effectively charge your annual fee in advance. They do this by charging an upfront processing fee in order for you to qualify for the credit card. Fees for these cards can be as high as several hundred dollars and are generally targeted at no-credit and bad-credit borrowers. Beware of credit cards that are asking you to pay a large fee to get the card.
  3. Balance Transfer Fees. Reports indicate that the average cost of balance transfer fees has climbed 33% since the Credit CARD Act has been passed. This is an area where fees continue to be allowed and credit card companies feel that this is where they can gain back some of the financial losses that accompany the new credit card rules. You want to look for good deals on balance transfers that offer good interest rates but also offer low fees for making the transfer. In some cases, it may be better not to bother transferring balances to a lower interest rate if the cost to make the transfer is high and the likelihood of rapid repayment is also high.
  4. Cash Advance Fees. For the same reason as with balance transfer fees, the fees that are associated with getting a cash advance are getting higher and higher. Your number one choice here is to not take out cash advances at all. They cost you a lot of money in the long run. If you must get cash, you may want to see if you qualify for a low-cost personal loan. If you are someone who frequently takes out regular cash advances and you refuse to change this bad habit then you want to look for a card that offers ongoing low interest rates with a low fee, something that might be tough to find right now in the credit card market.
  5. Foreign Transaction Fees. This area of fees is climbing more than any other area of credit card fees right now. Reports indicate that the fees have increased 50% or more since the Credit CARD Act was passed. The solution here is a very simple one: don't use your credit cards when traveling to foreign countries. Use cash. Use travelers' checks. If you must access money from a credit card, do your research before the trip. It may actually be cheaper to take out a cash advance than to incur a large number of foreign transaction fees while you're on the road. Explore your options and make a smart choice.
  6. Penalty Fees. Hopefully you avoid penalty fees (such as late payment fees and over-limit fees) anyway. If you make these bad mistakes, though, you're probably going to start paying even more than before because these fees are rising slightly on many cards. Hopefully that's incentive to avoid those penalties!
  7. Inactivity Fees. Technically, inactivity fees are not allowed under the Credit CARD Act. Theoretically, you can keep your card as long as you want without using it and not be charged. However, sneaky credit card companies are finding a way around this by setting minimum spending requirements. You aren't charged an inactivity fee as long as you meet the minimum amount of spending. In other words, you're still not allowed to leave the card inactive. This is a questionable practice that may eventually be phased out but it's something to watch for at the current time.

Book Review: The Skinny on Real Estate Investing

Posted: 30 Aug 2010 10:00 AM PDT


The Skinny on Real Estate

When I consented to review The Skinny on Real Estate Investing, I assumed I'd be reviewing a book, and not a pamphlet illustrated by my 8-year old niece who drools a lot and still has some trouble negotiating bathroom time. This review might run longer than the book itself.

Jim Randel's series of illustrated The Skinny on titles boasts that it's "For Really Busy People!" It's also suitable For Really Fidgety People who can't get through a book longer than 10,000 words. The lengthiest passage is the introduction, which runs a full page and explains The Skinny on's M.O. of culling swaths of information into a workable whole. But it doesn't explain the distracting primary illustrations that adorn every page.

The jacket quotes all attest to Randel's success as an investor, but none of them speak about the book itself.

Randel is an attorney, with condescension in his blood. He's in love with his own (lame) sense of humor, and uses an asterisk in one panel with the footnote, "*Did you catch the metaphor?" No, I didn't. Please explain it to me again, Attorney Boy, using something less complex than kindergarten sentences. Randel also has an amateur's pedantic insistence on avoiding contractions, the bane of the self-important, self-published, self-righteous author. This makes for a book that is simultaneously juvenile and stilted. Maybe Randel avoids apostrophes because he can't punctuate – he uses "+/-25%" where "~25%" should go, which makes a huge difference when calculating home values.

It's barely possible to repeat yourself in a book this short, but he does. Did you know Randel was born in Perkins, Ohio? If you didn't, don't worry. He'll tell you again. Several times.

He even puts a commercial for one of his other books right in the middle of the narrative.

The Skinny on Real Estate Investing is effectively a black-and-white comic book. It concerns a married stick-figure couple, ready to leave their workaday stick-figure lives and invest their way to stick-figure affluence. The husband gets suckered into attending a huckster's "wealth-building" seminar – you know, because men are impulsive and scatterbrained while women are sensible and rational – when Randel himself jumps into the couple's lives (literally, out of a plane) to right the ship.

Because he's a lawyer, or perhaps because he never learned to write for someone other than himself, Randel shifts directly from first gear to lecturing overdrive. He starts this at the book's quarter-mark (not coincidentally, when I first contemplated throwing The Skinny on Real Estate Investing in the swimming pool.) In the space of one panel, he goes from childish humor to the first edible meat of the book; this uninspired paragraph:

The key to all real estate investing is understanding what is called a cash-flow analysis. The logic of this analysis is the same whether you are buying a single-family house or a huge shopping center. The larger the property, the more numbers you need to review, but the methodology is the same.

The Drake Passage thinks The Skinny on Real Estate Investing is choppy. In another gem, Randel tells us that he'd only invest in a house if it "had an especially high likelihood for substantial appreciation."

You mean, if its price was almost certain to skyrocket? Speak English. This book is short, but it's anything but concise.

Randel explains legitimately important concepts like return on investment, leverage, cap rate and cash flow, but buries them in a style that no sane person will wallow through.

"Adding value simply means finding ways to increase the value of your property"

"A square foot is a square that measures one foot by one foot"

God, make it stop.

Randel moves effortlessly from simplistic to over the reader's head. For instance, he drops a reference to Class A vs. Class B office space halfway through the book, but never bothers explaining it.* He adds that if you want to buy a property and you're illiquid, you should ask the current owner to "take back a second mortgage", again without explanation.

Even the layout is garbage. In some illustrated panels, the publisher uses a font visible only to prairie falcons. Sure enough, the content therein is some of the most valuable in the book.

(Randel uses a metaphor to explain how simple the math involved in real estate investing is: "it's not ______!"

Guess what goes in the blank? No, not "rocket science". The other one. But don't fret: if you miss it on page 109, you can catch it again on page 156.)

I'm not sure which is more galling: Randel announcing that The Skinny on Real Estate Investing is just the first in a series; or him charging $14 for a book that clearly took him an afternoon to write, possibly a drunken one.

I got Randel's insufferable little vanity project down to 41 words while losing no detail. Here's every usable piece of knowledge in this book, in handy point form:

-unlike with stocks and bonds, with real estate you can influence the return on your investment;

-asking prices often mean nothing;

-find partners, but keep a management fee for yourself;

-don't invest in real estate that doesn't offer >10% cash-on-cash return.

What's cash-on-cash return? Sorry, that's a topic for another book.

_________________________________________

* There are three classes: A, B, and you can probably figure out the third. A Class "A" office building is at least 120,000 square feet. The term can even refer to multiple adjacent detached buildings that share an owner. A building this big should have a full-time property manager, maintenance person, and steward. There's more to the definition than size, though — and almost all of it is subjective. A Class "A" building should be in a "good" neighborhood and have other amenities like covered parking and some sort of concentration on aesthetics. Class "A" means cachet for its tenants. A Class "A" building has at least 3 floors and can cost more than $200/square foot to build.

Class "C" is the bottom end of the market — for example, converted houses in old parts of town. Which means Class "B" is everything else — functional, decent buildings that were built for the express purpose of accommodating businesses, but aren't places you would stick your chest out and brag about renting at.
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