What Are The Benefits to Calculating Your Daily Interest Rate?

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After I created the “Calculate Your Daily, Monthly, and Annual Credit Card Interest” page, I was asked numerous times, why did you specifically decide to create that tool and what purpose does it serve? Well, I guess my brief intro on the homepage was a bit too brief. Let me elaborate.

Around the time I created that automated form, I was actually trying to make the decision of whether or not it’d be worth my effort to transfer my credit card debt into another credit card. I had multiple 0% balance transfer offers on existing cards, but knew better than to think it was a no-brainer decision, since there’s always a transfer fee associated with them.

The first step I took was to calculate how much interest I was losing per month. The idea was that the one time balance transfer fee may equate to be about three months worth of interest, in which case I could potentially pay off within two months. If that were the situation, then I would be wasting time calling up their customer service to perform the transfer. Not to mention, it’s just a dumb decision to pay more in the long run.

Once I got the formula to calculate the monthly interest rate and determined it was a good idea to perform the transfer, it dawned on me that it’d be extremely interesting to figure out how much I was “spending” by carrying this balance for so long. Of course my balance fluctuated throughout the months and years, but I just had to simplify my decision making process by fixing the balance to the amount at the time. What I discovered was pretty eye opening the moment I saw it.

I believe my daily interest came out to be about $1.25, that like one item from the McDonald’s Dollar Menu (plus tax). But, I haven’t been eating at McDonald’s and a side salad sounded pretty good at the time. Then, I thought, what if I escalated the calculation to a week? It came out to be $8.75. That equated to about 3 gallons of gas for my car. And what the heck? I’m always filling up my tank. That extra money would come in really handy!

Essentially, it put the money I was spending on credit card interest into perspective. Seemingly small amounts really add up and I couldn’t believe it. At that point, I made it a goal of mine to erase my credit card debt as soon as possible. So, my purpose of the form is mainly to provide people, in a similar situation that I was in, some perspective. It’s extremely important to manage your money (especially for kids) and figure do what you can to lower/extinguish your credit card debt.

I truly hope some people out there who have used my form realized the same lesson I did. For those who are severe bad credit situations, I recommend determining and monitoring your credit score first to determine how deep you’re in it and then just work your way up.

How To Build Credit With The Public Savings Bank Secured Visa

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I was provided the following article for the Public Savings Bank Secured Visa. In a nutshell, this card allows you to create good credit history while removing the risk of missing a payment, which in turn will improve your credit history. Here are the simple steps they provide on their site:

  1. You deposit a minimum of $300 into a Public Savings Bank FDIC insured deposit account.
  2. You can then make purchases with your card up to the amount you have in your security deposit account.
  3. You must pay at least the minimum payment before the due date each month. Your security deposit does not cover minimum payments.
  4. Your payments are reported to all 3 major credit bureaus (TransUnion, Experian, Equifax) so you can begin to establish your credit immediately.

For people with no credit or those who have experienced a negative credit event, such as divorce or foreclosure, establishing credit history can be difficult. Without proper credit, everything from a car loan to an apartment or even a job can be denied.

Prepaid cards are one way to manage daily expenses. However, prepaid cards simply provide access to your own money, not credit from a lender. Prepaid cards do not report to credit bureaus and do not help re-establish credit history. Individuals need to demonstrate on-time monthly payments on a credit card in order to rebuild credit history that’s so important.

How can someone who is denied a credit card rebuild their credit?

Well, one option is the Public Savings Bank Secured Visa. It offers people with low credit or no credit the ability to re-establish their credit history and work towards improving their credit score. Individuals deposit money into an FDIC-insured account that acts as a security deposit. They can then make purchases anywhere Visa is accepted or take cash advances up to the deposited credit line amount, currently between $300-$2000. Payments are reported to all three major credit bureaus (TransUnion, Experian and Equifax) so customers can begin to establish credit immediately.

The Public Savings Bank Secured Visa does not require a credit check or even a checking account to apply. Customers can fund their account via Western Union, ACH, wire transfer, check or money order. The card has no annual or monthly fees, and offers 0% APR for 6 months. Rush shipping is available so customers can begin using their card just days after funding their account.

Building good credit is critical at a time when credit is getting harder to obtain. This card allows the customer to build good credit while enjoying all the benefits of a Visa card at very favorable terms.

You can apply for the Public Savings Vank Secured Visa at www.publicbankcard.com and be approved within only a few hours.

Jobs, Ledgers, and Teenagers (Teaching Kids About Money)

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This article is part of a series on Teaching Kids About Money.

My next suggestion in how to teach kids about money may seem a bit far fetched, but I’m pretty sure it’ll work. Tell them to get a job! Of course, I’m talking teenagers. However, there are options for pre-teens to start making their own income as well, which I will cover later. The best way to teach your kids the value of a dollar is to make them earn it themselves. No longer will they take your busy day for granted. If you cut them off from any additional income and they know the only way to survive is on their own, I’m sure they’ll learn to adapt quickly. It won’t be easy and it could get quite dirty, but it’ll work.

I believe it’s a misconception that all teenagers are lazy and would rather spend their summer playing rather than finding a job. Though there are a lot of kids out there that do prefer to let mommy and daddy pay for everything, there are also a good amount of teenagers out there who simply want their freedom and not have to rely on parental figures to supply them with money to have some fun.

Of course, having fun is great and a necessity (especially while younger), but you must keep insight the purpose of this exercise – teaching your kids about money management. Make sure they open up a savings/checking account. The great thing about banks nowadays is that you can check your balance online. There is a slight defect though, the transactions tend to have a day or two lag before it’s realized within their systems. So I recommend convincing your kid to manage their money within their checkbook or hard copy ledger. Make sure they set aside time (about 10 minutes) a day updating their debits and credits. This way, they’ll learn a good habit that helps ensure they won’t overspend.

Once a child learns how hard it is to make money and manage it, this will teach them to cherish and save their hard earned money. At the very least, if they’re still spending their money frivolously, you can at least have a sigh of relief that they won’t be depleting your money.

Donations and Kids (Teaching Kids About Money)

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This article is part of a series on Teaching Kids About Money.

Let’s be honest, most people don’t donate as often as they should. I’m guilty of it myself. But donating to good causes does play in the realm of being financially responsible as a society. And this is something that needs to be introduced to our younger generation at an early age as well. Teaching kids to donate part of their money isn’t only helpful for society, but it’s also very beneficial for them.

  • Sharing is caring. I would hope that a majority of the people out there want to make sure their children grow up caring about others. It is suggested that ten percent (10%) of your revenue should be set aside for donations to charities. What does this teach your kid about money? Well, simply that a majority (if not all) of the time there will be people less fortunate than themselves and they should help whenever possible. From a value of money perspective, it helps strengthen their idea how important money is in society.
  • Power in numbers. It’s true that a single dollar won’t exactly feed an entire nation alone. It’s really the idea that we, as a society, can help others. This then teaches our younger generation that when multiple people come together to help others, then making a positive difference can be achieved.
  • Introduction to tax deductions. Taxes are inevitable, and too many Americans are still left in a dumbfounded state when this topic is brought up, which we need to hedge. One way to hedge that is to introduce how donations are tax deductible. It’s a bit of hard concept to understand, especially for a child. How does giving money give me money back? It’s a bit counter intuitive, but it can be a good introduction to a kind of investment as well. Please note that this may be something you’ll want to teach them only after you teach them how to save and instill the value of money to them.

I know this particular article is only loosely related to the idea of teaching kids about money, but I really felt it was something that needs addressing. Being financially responsible doesn’t simply mean saving for ourselves, but doing what we can to help others whenever possible.

What percentage of your revenue do you think you donate?

Savings/Checking Accounts for Children (Teaching Kids About Money)

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This article is part of a series on Teaching Kids About Money.

I believe many children either don’t have a savings/checking account or they aren’t aware they have one available to them. My own parents were very conscious of making sure they were saving money for my future. It’s taken nearly 30 years for me to finally realize how lucky I was that they were able to do that for me, but I digress. Though my parents were actively saving for me, taking the money given to me as gifts and depositing it into my college fund, I actually had no transparency to where that money was actually going. So, at that point, all I knew was that my parents took my money, placed it somewhere, and I wasn’t going to see my money for a long time. I didn’t understand what the benefits of opening a savings/checking account were. And this a key point to helping teach kids about money management.

What can a child learn from having their own savings account? Plenty. Here’s to name a few:

  • The process of opening an account in person. Nowadays, we have abstracted the need to go to a physical bank in person to open an account and do everything electronically. If your child is younger than 16, and your bank has a physical office, I would recommend taking them to open up an account. Why? Though the information of the various savings accounts are available online, it’s always best to have a person walk you through every nook and cranny. This also gives your child an opportunity to exercise their social development skills and learn to ask the experts the right questions.
  • The power of compound interest. Similar to what I mentioned in, Prepaid Credit Cards and Kids, teaching your child about compound interest will help them understand what their money can do for them if they focused on saving and not spending. But difference between what I mentioned in Prepaid Credit Card and Kids, it will be coming from the bank’s pocket – not yours. Though nowadays, the interest rates are fairly low for savings/checking accounts.
  • Learning the pains of withdrawal. Savings/checking accounts may not provide the best return in terms of interest rates, but it does provide the best flexibility when it comes to access to your money. And though we would all probably prefer to have children learn about depositing money, they’ll eventually want to withdrawal their money as well. With every withdrawal they’ll learn to live within their means, which is a huge lesson for any person to learn at any age.
  • Reviewing the bank statement. It’s not like reading the financial section of the Wall Street Journal, but it’s a start. You can teach your kids about the different vocabulary used within the statements, but more importantly, you can teach them how organized the data is. The sooner they learn to keep their finances in order, they closer they are at being financially responsible.

If you’ve already opened up a savings account for your child, which one did you open and why?