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David Bach The Automatic Millionaire

David Bach, The Automatic Millionaire

Top Reader Tips: Giving Credit Where It's Due

by David Bach

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Posted on Monday, May 7, 2007, 12:00AM

Back in February, I wrote that one of the things I love most about the enhanced Yahoo! Finance format is its instant reader feedback. My subsequent four columns have received a combined total of over 11,000 ratings and almost 1,500 comments.

I read every one of them -- both positive and negative -- and take all of your advice, ideas, and criticisms to heart. The questions you ask and experiences you share help to create a community where readers can come together to learn -- not just from me, but from each other as well.

In that spirit, here are eight of the best reader postings from those articles.

Credit Card Horrors and Helpful Tips

Of all the columns, "What Credit Card Companies Don't Want You to Know" received the most attention. In it, I discussed the universal default clause, which allows credit card companies to raise the interest rate on your card for being late with a payment on another card, a car payment, your mortgage -- even your utility bill.

Some of the horror stories readers posted were stunning, and there were many great questions, too.

1. Don V asked: "Will checking your own credit report lower your credit rating?"

Fortunately, the answer is "no." According to MyFICO, the consumer division of Fair Isaac Corp., checking your own credit score doesn't count as an inquiry and will not hurt your FICO score. The only inquiries that count toward your credit score are the ones that are done whenever you apply for new credit.

2. An anonymous Yahoo! Finance reader advised: "Don't go to freecreditreport.com. That site will try to sell you a 'monitoring service' at a stiff fee. Use AnnualCreditReport.com instead."

This was an oversight that many readers picked up on. I always recommend AnnualCreditReport.com in my books.

The site I inadvertently listed, freecreditreport.com, provides you with a "free" credit report and your credit score, but at the same time you're enrolled in a "trial membership" for their credit monitoring service. If you don't cancel the trial within 30 days, you'll start incurring a $12.95 monthly fee.

The truly free site, AnnualCreditReport.com, was created in accordance with the Fair and Accurate Credit Transactions Act and is sponsored by the three major credit bureaus -- Equifax, Experian, and TransUnion. It provides you with one free credit report (but not your credit score) from each credit bureau over a period of 12 months.

Debit Debacles and Dispatches

My next column, "What Debit Card Companies Don't Tell You," touched a nerve with many readers. That's not surprising, since more consumers are now using debit cards in place of credit cards in order to avoid high interest rates and late fees. But there are other pitfalls to be aware of, namely overdraft fees:

3. Another anonymous Yahoo! Finance reader wrote: "Recently, I made a few rather large purchases (with my debit card) and did not check my balance afterwards, assuming some deposits were made. In the two-day period after my balance reached zero, my wife and I made several purchases. As I was not vigilant in checking my balance, we were subsequently hit with overdraft fees totaling over $500. The bank did not notify us that we were overspending, nor did they provide any leniency regarding fees."

This case is extreme, but proves an important point. A few years ago, if you made a debit card purchase but didn't have enough money in your checking account to cover it, the transaction was simply rejected. Times have changed.

Today, banks are more likely to approve the transaction but then charge you an overdraft fee. Although the above reader wasn't able to get these fees waived, it's smart to call your bank and request it. Read on:

4. Still another anonymous Yahoo! Finance reader commented: "I work for a bank, and you can spend money you don't have with a debit card; your bank will happily hit you with overdraft charges for saving you from the embarrassment of being declined. Many of our customers neglect to keep track of their balance, assuming that their card will simply stop working when they run out of money. Not so! Depending on various factors, some customers can go hundreds of dollars in the red before the card stops working. The lesson: keeping track of your balance is your responsibility, not your debit card's."

Some Closure on Foreclosure

As a financial coach, I can't stress enough that if you're having trouble paying your mortgage, call your lender today. Too many homeowners are unaware that there are real options available that will help them keep their home. But action must be taken sooner rather than later.

A reader really caught my attention with this comment about my column "Six Steps to Avoiding Foreclosure." He or she brings up an important warning -- something I didn't cover in the article:

5. j_mackin_42 wrote: "If you're going through a foreclosure, as soon as the proceedings start you'll likely hear from many different companies claiming they can 'rescue' you and your home. In actuality though, they trick you into signing over any equity you have in your home or they take your money and just disappear. If you're desperate enough, it seems like it would be rather easy to get sucked in by one of these scams. Make sure you get some legal advice before you sign anything from any third party claiming they can help."

6. A final anonymous Yahoo! Finance reader advised: "You should warn people of the dangers of a short sell when you mention it as an option. You will have to claim the difference between the reduced selling price of the home and the actual amount owed on the loan (including late fees and penalties) as income on your tax return! I know someone who was in this predicament that ended up owing several thousand dollars in federal and state taxes because they had to claim the portion of the mortgage that was forgiven as income (mostly late fees -- money that never existed to begin with!)."

Phoning It In

Finally, writing "Ten Steps to Cell Phone Security" was a real eye-opener for me. Two weeks before I wrote that column, I left my BlackBerry in a cab in New York City. Unlike if I'd lost a credit card, I didn't rush to cancel the account. I won't make that mistake again.

Losing a phone is worse than losing a credit card because your liability is greater. In my case, I got lucky -- the phone was returned to me the next day without having been used. (I love New Yorkers!)

Here are some simple but great reader responses to that column:

7. According to Marknmark54: "Overseas calls make up a large part of the fraudulent calls. Have international calling blocked from your phone if you don't need it."

8. Maxxguyy commented: "Thanks for the warning. I will pass it on. As soon as my last cell contract expired, I switched to a pay-as-you go phone. No hassles ... no huge bills with unexpected charges ... life is good!"

Many of the major carriers offer prepaid plans like the one he mentions, and you can also check out TracFone and Virgin Mobile Prepaid.

My goal with this column is to be both your FinishRich coach and consumer advocate. If you've got an issue or idea, let me know. And keep posting your opinions, ideas, experiences, and questions -- they transform this column into a powerful, interactive tool for learning more about money.

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61 Comments

Showing comments 6-35 of 61<< PreviousNext >>
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  • Yahoo! Finance User - Friday, May 11, 2007, 11:47AM ET  Report Abuse

    • Overall: 5/5

    Great idea of blocking international calling, never thought of that, because "I never lose my phone", "That'll never happen to me" (never say never !!) I just blocked my phone now!

  • __A_YAHOO_USER__ - Thursday, May 10, 2007, 4:06PM ET  Report Abuse

    • Overall: 1/5

    The title of the aricle does not represent its contents.

  • DIANAP - Thursday, May 10, 2007, 3:11PM ET  Report Abuse

    • Overall: 4/5

    I swithched from one internet provider to the one I am presently using. The old internet provider AOL continues billing my SBC account at a DSL rate which is unavailable in the area I reside. AOL was a six month free service provided thru Dell Computer when I purchased a new computer. My warning to persons buying a new computer and offered free service use a local provider...skip the free service needless to say "simply put it is not worth the hassle" especially from a business stand point" My time is worth much more than the time spent.

  • __A_YAHOO_USER__ - Thursday, May 10, 2007, 2:09PM ET  Report Abuse

    • Overall: 5/5

    The number one piece of advice that I have for couples (being that I myself am engaged) is to have a joint account as well as separate accounts. My finance and I share an account that the bills come out of and will soon be starting the process of a joint retirement account. However, we both still have separate checking and savings, and individual retirement accounts (which are set to open the beginning of June - yay!). I find that not only do both of us take responsibility for what gets paid when in regards to the joint account, but there is no blame when it comes to "Him spending too much on take out" or "Her spending too much on shopping" to the point that bills don't get paid, overdraft fees, etc. When our personal account is empty, than it's empty. No taking money out of the joint account, no using a joint credit card to get that 'New song on iTunes' - it holds you both personally responsible for your own finances. What's even better is that you don't have to worry about someone telling you, "No, we can't get that." If you have the money and you want to go out and see a movie with your buddies or go get your nails done with the girls, you can - with no guilt. Just make sure that you are not putting only the bare minimum in your joint checking - always have some extra incase something pops up; otherwise fights of 'I took money out of my account last time,' will occur. Great article David!

  • Wildchild - Thursday, May 10, 2007, 1:45PM ET  Report Abuse

    • Overall: 5/5

    My first time to this site and I have learned so very much! Thank you for all of the valuable information...I will be checking back often for more advice. Also, I've traveled the world and it is my experience that New Yorkers, while blunt, are very good samaritans. Thanks again for your service!

  • MICHELLE - Thursday, May 10, 2007, 1:43PM ET  Report Abuse

    • Overall: 1/5

    The title of this article was 8 tips For Saving Money on the Yahoo home page. That is not what this article was about.

  • Yahoo! Finance User - Thursday, May 10, 2007, 1:20PM ET  Report Abuse

    • Overall: 5/5

    I wish someome would have informed me about all of this valuable informations years ag. I just recently lost my family's home to a crooked realestate compaany. If I have prior knowledge I would have never sign the papers with that company. Thanks,

  • Cookie - Thursday, May 10, 2007, 12:49PM ET  Report Abuse

    • Overall: 5/5

    Thank you for the inforamation on short sells. Right now I'm looking for a home and have seen many that are short sells but I wasn't told about the extra cost come tax time.

  • Yahoo! Finance User - Thursday, May 10, 2007, 12:37PM ET  Report Abuse

    • Overall: 5/5

    Keep educating us.

  • Yahoo! Finance User - Thursday, May 10, 2007, 10:46AM ET  Report Abuse

    • Overall: 5/5

    i love new yorkers too, i lost my cell phone in manhattan but it was returned the following day, then again forgot my cell phone in a hotel in san antonio,tx and in a matter of 30 mins nobody saw it in the room!!!!! thieves!!!! your article is very realistic, write some more.

  • Yahoo! Finance User - Thursday, May 10, 2007, 10:38AM ET  Report Abuse

    • Overall: 5/5

    Thank you so much for the information on getting a truly free credit report. I have been trying for some time to get mine. I kept seeing that freereport.com, but like you said they want you to buy their service. I went on to the site you listed, and got my report free of charge. Thank you again. you were very helpful

  • Yahoo! Finance User - Thursday, May 10, 2007, 9:56AM ET  Report Abuse

    • Overall: 4/5

    www.NoExcuseBudget.com says... my favorite one of your articles yet! Keep up the good work!

  • Yahoo! Finance User - Thursday, May 10, 2007, 9:48AM ET  Report Abuse

    • Overall: 5/5

    I walk into my bank with 2 letters addressed to the Chairman of the Board. One describes how that particular bank helped and the other describes how the bank hindered my customer relations. Whether it is a bank, car dealership or mortgage company, I always bring/show the 2-Letters and explain to the representative that I will be mailing one of the two letters after I leave the place of business. It is amazing how much power the customer really has when one stops thinking of the bank as the almighty!!!!!

  • Yahoo! Finance User - Thursday, May 10, 2007, 9:43AM ET  Report Abuse

    • Overall: 5/5

    This information was awesome. I have gotten some really god tips on my banking and my cell phone fees. Thank you, Demetria

  • jl77 - Thursday, May 10, 2007, 8:30AM ET  Report Abuse

    • Overall: 4/5

    Concerning your #6 paragraph. Although, worst case scenario is you will have to claim this shortage as income, this is MUCH better than the alternative of letting your house get foreclosed on!

  • Dale - Thursday, May 10, 2007, 8:09AM ET  Report Abuse

    • Overall: 5/5

    I'm already in my 73rd year and am still working under rules from the innocent 1950's! I will get busy to cancel unused credit cards! Since I don't 'charge' much, my credit rating is good, but knowledge would be at best a D! DHS

  • Yahoo! Finance User - Thursday, May 10, 2007, 7:18AM ET  Report Abuse

    • Overall: 2/5

    I avoid overdraft fees "just in case" with a feature my bank offers where they will transfer from my savings or another account I have with them-- up to six times free a month. I've only needed it once, but this was marvelous when a lender drafted my automatic payment TWICE one month. I later learned in phone calls they didn't send out any notices to the 5000 people it happened to since "it was such a small percentage" of their customers. I didn't know it happened until I got the transfer notice from my bank. This leads to another recommendation: Don't let companies talk you into automatic payments. Pay your own bills! If a major expense comes up you have more flexibility to work out other arrangements. Conversely, when the payment is made that much sooner you incur that much less in interest; and avoid mistakes like the company that drafted my accout twice.

  • Yahoo! Finance User - Thursday, May 10, 2007, 6:13AM ET  Report Abuse

    • Overall: 5/5

    True about the credit report inquiry. I was enrolled but cancelled within 30 days.

  • S-Po - Thursday, May 10, 2007, 5:05AM ET  Report Abuse

    • Overall: 4/5

    Very informative, but with one "error'. TracFone is a terrible company to recomend. I travel a lot with my job, and I figured that a pay-as-you-go plan would save me some cash. It took me 6 hours to activate my service. Customer support was practically non-existant (1 woman who barely understood English or Spanish). And I had to punch about a thousand 12-35 digit codes into my phone to add minutes, "update the software", and troubleshoot an error that reduced my 600 minute time card to 0. All in all, it was a terrible experience, and I will never recomend TracFone to anyone.

  • John T - Thursday, May 10, 2007, 2:36AM ET  Report Abuse

    • Overall: 5/5

    I use a credit card issued by one of the major issuers (CITI). With that card, I get a 5% cash rebate on all Shell gas purchases (it applies to future Shell gas). With the prices of gas and since I pay off the balance in full every month, that saves me well over $1,000 a year.

  • Vicky - Thursday, May 10, 2007, 1:47AM ET  Report Abuse

    • Overall: 3/5

    I don't use charge or debit cards neither one are worth it. I pay the way we all should with our hard earned money. If you don't have it you can't give it. If you don't give it then you will have it. SAVE IT for the days you really need it. Retirerment OLD AGE !!

  • heather - Thursday, May 10, 2007, 1:24AM ET  Report Abuse

    • Overall: 5/5

    Love your books! I bought one for my husband and I, and it saved our lives. My daughter turned 17 and I made her buy one of your books too. She wanted to buy a new car when she had a perfectly nice car given to her. I told her to read your book, then we would discuss it. After a few chapters I asked her what did she learn. She said she learned she wouldn't be buying a new car till she was around 35 or so. Thanks!

  • JJ Hardy - Thursday, May 10, 2007, 12:40AM ET  Report Abuse

    • Overall: 3/5

    I can't believe so few people understand debit cards. Seriously it's basically an electronic check. You get hit with fees if your check bounces, and I don't understand why people expect something different with their debit cards, and then complain about it. The bank is not in business to foot your bills, if you want a card to do that, that's what a credit card is for.

  • andrew - Wednesday, May 9, 2007, 11:20PM ET  Report Abuse

    • Overall: 5/5

    Great column. I do have comment about prepaid mobile phones though. I do agree that it is nice to be in complete control of the money you spend on your cell phone. It should be pointed out though that the cost per minute is usually pretty high. Normally about as much as overage charges on a monthly plan. If you use a cell phone very much at all it's usually cheaper to just get a plan and exercise self-control.

  • Lamisi - Wednesday, May 9, 2007, 11:20PM ET  Report Abuse

    • Overall: 5/5

    I recently had a shock of my life when i over spent on my debit card.I am new to using debit cards for transactions and the dont remember reading anywhere in the banks documents that they charge so much as overdraft fee.The bank charges me $25 dollars for every item on the overdraft.They even charged me $25 for a $ 7 expense.This is absurd.I ended up paying almost $200 for less that a $100 overdraft.This is crazy and makes me really angry but what can i do about a fee already charged to my account?I am being careful now before my bank robs me again.

  • UrzZ TruLY - Wednesday, May 9, 2007, 11:02PM ET  Report Abuse

    • Overall: 4/5

    heres a tip. dont spend what you dont have!

  • IMM - Wednesday, May 9, 2007, 11:00PM ET  Report Abuse

    • Overall: 1/5

    he keeps saying the same thing

  • AmandaM - Wednesday, May 9, 2007, 10:59PM ET  Report Abuse

    • Overall: 5/5

    This was all great and useful info, I also had a suggestion for cell phone users, if you live in a state that offers Metro PCS service (i believe they are in Texas, Florida, Michigan, California, and Georgia as of now) they offer unlimited calling for really low monthly plans and you cannot roam, making international calls, download ringtones, etc unless u have a specified amount of money applied to your account. So you can control how much your spending on extras and the unlimited plans also help for no suprises. Hope I could help :)

  • Yahoo! Finance User - Wednesday, May 9, 2007, 10:21PM ET  Report Abuse

    • Overall: 3/5

    I think this is a well written column. I would like to suggest that your readers use their internet calenders to assist them with electronic bill payments. Those little buggers can catch you unaware and cause overdrafts. Just schedule a reminder that an electronic payment is about to post to your account, set it a couple of days ahead of time to save possible fees. Maybe a person forgets about a list that charges a small fee every month for looking at an Internet site but with the reminder set, you'll have a reminder.

  • Yahoo! Finance User - Wednesday, May 9, 2007, 10:05PM ET  Report Abuse

    • Overall: 3/5

    My bank will "forgive" overdraft fees as long as I make a deposit to cover the charges before the end of the business day on the day of the overdraft. That's why I keep my bank on speed-dial!

Showing comments 6-35 of 61<< PreviousNext >>

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