That is true for many mortgages, but not all. Our mortgage is truly underwritten only by our local bank, and not backed by Fannie Mae or any government agency. My understanding is that it would be difficult for them to sell it to another bank, even if they wanted to. This was a selling point for us, as we prefer to know who we are going to be doing business with, rather than having our mortgage sold to some random bank we have never heard of.Also, as you pointed out, you can get a mortgage with a nicest local bank in the world, but two weeks later your mortgage will be repackaged and sold to some big bank. You really don’t have much of a choice regarding who owns your mortgage.
I will respectfully disagree with this one point – though I will say that maybe it depends on the bank. My credit union shut down my debit card when it noticed a TV purchased at a Wal-Mart in a town about 150 miles from where I live. They had tried to call me to see if it was my purchase (we figured out they had my secretary’s work number and she happened to be on vacation so when I didn’t call them back and confirm if it was me, they shut the card down). I had the money returned to my account within 24 hours. Just had to fill out a form and e-mail or fax it to them. The bigger inconvenience was not having use of my debit card, but they were able to set it to where I could get cash from the ATM until my new card arrived. So grand scheme of things the inconvenience was very limited.Both good points.
Coincidentally, I actually did get a call from the credit card fraud department last week saying that someone had tried to chart $400 on my credit card at a target over 1,000 miles away from where I live. They cancelled the charge and that was the end of that (with new credit cards issued). If it had been a debit card stolen, it would have been a lot harder to get my money back.
What if you were out traveling and couldn’t get another card right away? It’s easier to have a back up credit card rather than another bank account to use.For what it’s worth, we once had several fraudulent charges on our Visa debit card. We reported them to our bank as soon as we saw them on our online statement, and they were taken off almost immediately, with no hassle.
It would indeed be nice to have a back-up card in the unlikely event that something like this happened. However, my wife and I have separate cards (for the same bank account) with separate card numbers. So if one of the cards was compromised, the other one might be fine and not have to be re-issued. (This has actually happened to us, where they automatically sent me a new card one time, because of a security concern, but my wife’s card was not replaced.) And my wife and I usually travel together, so we usually have both cards with us. We also usually travel with a substantial amount of cash, so we always have that as a back-up as well. (Though, yes, I know that traveling with cash carries risks as well.)What if you were out traveling and couldn’t get another card right away? It’s easier to have a back up credit card rather than another bank account to use.
Well, I have more confidence in my local bank having my back than I do in American Express (though no doubt American Express would protect me too), so I’m not worried.And there are just some transactions that I don’t want tied back to my bank account. I know Amex will get my back if I have a double bill or even if I just have a large charge I need to make; I’m not so sure what would happen if I try to use Podunk regional bank.
That is amazing!I’ve read concerns in several posts here that financial planning isn’t for the poor or isn’t for those who aren’t financially flush. I have to disagree with that. This is all about telling your money where to go, no matter how little or much money you have, so your money (or lack of it) doesn’t control you.
There is a couple who have even been leading DR classes in prison in Seattle. The inmates earn $55 a month. They have to buy their own hygiene products, some groceries and extracurricular activities out of that money. Needless to say, they’re not flush. And as convicted criminals, you can imagine many had disadvantages in this life that kept them from learning proper money managing techniques in the past. The class costs them $10, nearly 20% of their monthly budget, yet at the end of the class, many are able to save up another $10 to donate the tuition for a fellow prisoner.
One man even learned to live on $10 a month and was able to send his wife the other $45. She was able, over time, to pay off two credit cards. Another man (whose father was in the same prison and whose mother was the sole support of the family) had been asking his mother for money every week, but stopped asking because he learned to live within his means.
The DR plan isn’t just for the rich. Everybody has some form of money or goods that they need to learn how to allocate.
I keep hearing about the credit cards having better protection against fraud. I am curious why. I have kept a small bank account just in case, but I still don’t get it. When I loose a card, I call the bank and report it, they always verify the last few charges to the account, and they always inform me that I will not be responsible for any fraudulent charges.I use credit and charge cards because there is better fraud protection and service than with a debit card linked to my bank account. It is much easier to report a card lost or stolen and use another account rather than having to wait for your account to be ready again. I also get insurance on a rental car if I pay using my card. I also went with the largest bank I could find because they have locations in a lot of the developing world and I find it is the easiest way to get local currency. Basically I use them because they provide a lot of financial serviced I need to do business.
When it came to what bank I use for my mortgage I didn’t have much say in the matter as the local bank I chose sold the mortgage to the “big evil” bank right after closing.
Overdraft fees are too high, I agree. But they cannot be defined as usurious. Credit card interest rates of 25% when one is late on a payment are. Usury is a grave evil of our times. We need to recognize that and not participate in it.And the ATM/Debit cards you are using make money by charging some poor sap who overdrew his account or who just wants access to his money. It isn’t really my fault if somebody can’t use a credit card responsibly or makes use of optional services credit card companies offer. The banks do need regulation but you don’t throw the baby out with the bath water. I for one need the services credit cards offer.
Based on my experience, your experience, and the experience of someone else who posted here, I suspect that the idea of credit cards having better fraud protection is largely a myth. It is probably something that the credit card companies themselves claim, but like you I also am not really seeing any evidence of it being true.I keep hearing about the credit cards having better protection against fraud. I am curious why. I have kept a small bank account just in case, but I still don’t get it. When I loose a card, I call the bank and report it, they always verify the last few charges to the account, and they always inform me that I will not be responsible for any fraudulent charges.
They mail me out a card, but my bank account is never locked or I never have to wait.
They also have a fraud management system watching it, its not unusual for me to get a call out of the blue asking me to verify some charges that look wrong.
Can anyone tell me why credit cards are better?
It is my understanding that debit cards with the Visa/Mastercard logo have the same fraud protection as credit cards when you choose the credit option when paying. You should check your bank’s individual policy, however, since federal law offers slightly different protection. One problem that might arise is that someone who steals your debit card can clean money directly out of your account. It may take several days or weeks for the bank to replace the money. If a thief charges up your credit card, you just don’t pay the bill. It doesn’t affect the balance in your bank account.I keep hearing about the credit cards having better protection against fraud. I am curious why. I have kept a small bank account just in case, but I still don’t get it. When I loose a card, I call the bank and report it, they always verify the last few charges to the account, and they always inform me that I will not be responsible for any fraudulent charges.
They mail me out a card, but my bank account is never locked or I never have to wait.
They also have a fraud management system watching it, its not unusual for me to get a call out of the blue asking me to verify some charges that look wrong.
Can anyone tell me why credit cards are better?
No debt. The most significant part of his plan is called the debt snowball. It is aimed at getting you out of debt. To get out of debt, first establish a rainy day cash fund. Then sort your debts based on smallest to highest balance. Take every spare dollar you have and apply it to the lowest, while making minimum payments on the others to keep them current. Once the lowest is paid off, move up to the next. It called the debt snowball, and it will get the typical person out of debt faster than any other method, IMO.I may be familiar with this, but what exactly is his plan?
The fact that you may be temporarily drained of money is the obvious difference. That is why I think its a good idea to keep checking account balances low, with no automatic overdraft protection.It is my understanding that debit cards with the Visa/Mastercard logo have the same fraud protection as credit cards when you choose the credit option when paying. You should check your bank’s individual policy, however, since federal law offers slightly different protection. One problem that might arise is that someone who steals your debit card can clean money directly out of your account. It may take several days or weeks for the bank to replace the money. If a thief charges up your credit card, you just don’t pay the bill. It doesn’t affect the balance in your bank account.
I’ve twice had my debit card number stolen. The last time, my bank contacted me almost immediately after it happened and never authorized the transaction. The first time, somebody used my number to order a bunch of stuff off the Home Shopping Network. All the stuff got mailed to me because I guess HSN must only mail things to the address linked to your debit card. Neither time was I out any money.
These are his “baby steps” to paying off debt and building wealth:I may be familiar with this, but what exactly is his plan?
Baby Step 1
$1,000 to start an Emergency Fund
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen.
Baby Step 2
Pay off all debt using the Debt Snowball
List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first.
Baby Step 3
3 to 6 months of expenses in savings
Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund.
Baby Step 4
Invest 15% of household income into Roth IRAs and pre-tax retirement
When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth.
Baby Step 5
College funding for children
By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now.
Baby Step 6
Pay off home early
Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments.
Baby Step 7
Build wealth and give!
It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It’s really the only way to live!
This sounds like a good summary. And it may be partly an issue of different people looking at this in different ways. I look at the summary above, and I see no fundamental difference between the fraud protections between credit and debit cards, because even in the unlikely event that my checking account was cleaned out, I can easily transfer money from savings to tide us over until the money is replaced. But someone else might look at that and say that to them, that is a big difference, and just the possibility that their checking balance could go down temporarily is not something that they want to risk.It is my understanding that debit cards with the Visa/Mastercard logo have the same fraud protection as credit cards when you choose the credit option when paying. You should check your bank’s individual policy, however, since federal law offers slightly different protection. One problem that might arise is that someone who steals your debit card can clean money directly out of your account. It may take several days or weeks for the bank to replace the money. If a thief charges up your credit card, you just don’t pay the bill. It doesn’t affect the balance in your bank account.
That’s pretty funny about them shipping the items to your address! Did you get to keep the stuff?I’ve twice had my debit card number stolen. The last time, my bank contacted me almost immediately after it happened and never authorized the transaction. The first time, somebody used my number to order a bunch of stuff off the Home Shopping Network. All the stuff got mailed to me because I guess HSN must only mail things to the address linked to your debit card. Neither time was I out any money.
The plan is the baby steps, although the first thing to do before step 1 is to commit to no new debt, make a written budget, get your spouse on board, and get current on all living basics (food, utilities, shelter, basic transportation) and all bill payments. This pre-step may include selling “toys”, cutting back lifestyle, and even getting a 2nd job.I may be familiar with this, but what exactly is his plan?
I had to call and make a police report. I wanted to keep one of the items and I had a difficult time making both the police and the bank understand that I wanted to keep and pay for the one item, but to get the money refunded for everything else. Now that I’m thinking about this, I also got a call from J.C. Penney asking if I wanted the bedspread I ordered (and hadn’t ordered) sent to a different address than my own. Looking back, I’m quite surprised these companies were that aware of what was going on. This was at least 15 years ago and I didn’t think they had that much protection back then.T
That’s pretty funny about them shipping the items to your address! Did you get to keep the stuff?
^This is an excellent summary. Legally there are significant differences between the rights you have if someone steals your debit card number and uses it to drain your account (basically none) and what happens if someone steals your credit card to use it.My husband has been reading through this thread with me.
He says that even though a bank might replace debit card money that was “lost” due to theft or fraud, they are under no legal obligation to replace that money. They would do so out of the goodness of their heart, to create customer loyalty, etc. But legally–they could treat this “loss” the same way they would treat a loss of cash. “So you were at the fair and you reached into your pocket and all your money was gone? And now you want us to replace it? Sorry, sir. We can’t do that.”
However, credit card companies are under legal constraints to replace money lost through fraudulent charges. And credit card companies have good methods in place to track fraud. My husband was in New York a few weeks ago, and made a few small charges on one of his cards. The company CALLED him and asked him if those charges were made by him. (He hasn’t been in New York on a regular basis, and so it was something out-of-the-ordinary that the credit card company picked up on.). I think that’s great protection.
Generally speaking, putting hotel reservations or travel reservations on a debit card is a really bad idea. Nothing stops the company from adding an extra amount to your debit transaction to cover expenses that you may occur while you are there. And then that money in your account isn’t available to you. When you leave the hotel and head for the McDonald’s and try to use your debit card to buy a Big Mac, your transaction will be denied due to insufficient funds. And there’s not one thing you can do about it!
But this can’t happen with a credit card, because they aren’t using your money, they’re using money that you promise you will pay them back.
Hope this makes sense to you. My husband travels a lot for skating and for his company (the big computer company).
This is a pretty decent high level summary.^This is an excellent summary. Legally there are significant differences between the rights you have if someone steals your debit card number and uses it to drain your account (basically none) and what happens if someone steals your credit card to use it.
As Cat mentioned, some banks may voluntarily choose to refund the money that has been stolen from you (out of the goodness of their hearts or customer loyalty or whatever), but are not required to; and many don’t.
In simplest terms, if someone uses your debit card they are stealing cash from you. If they steal your credit card, they are just running up a charge on your credit card. Even though both methods of payment are plastic (and often they both say visa on them) the legal implications are very different.