Beating Broke

Propaganda Alert: Visa Direct Deposit Prepaid

March 29, 2013 By Shane Ede 15 Comments

There I was driving home from work, when an ad on the radio catches my attention. It was an ad for a Visa Direct Deposit Prepaid card. Apparently not satisfied with a plethora of prepaid cards that are terrible for users (some are O.K., just not most), Visa would now like you to believe that it’s the next best thing to sliced bread to have your paycheck direct deposited to a prepaid visa card. Yeah, you read that right.

Prepaid Direct Deposit

The radio ad is the voice of a woman, and she talks about how she has her paycheck direct deposited to a Visa prepaid card. She goes on to talk about how she doesn’t have to drive all the way downtown and stand in a line at her bank to cash the check. Not content to simply portray the card as a time saver, the ad goes on for the woman to say that because she’s not driving all the way downtown and standing in line, she now has so much more time with her daughter. Now, the prepaid direct deposit card is not only a time saver, but a family bringer-togetherer. No, that’s not an actual word/phrase. I don’t care.

I have a friend from college that used to make fun of infomercials by saying that all they really did was demonstrate how terribly impossible common everyday tasks can be and then show you a miraculous new gadget to “fix” that impossibility. The problem is that most of those every day tasks aren’t all that impossible. Most able-bodied humans can do them easily without any help from the gadget. It loses a little something without his “demonstration” of the whole situation. Obviously, the tactic works though, or we wouldn’t have those infomercials.

Welcome to the Infomercial-ization of Prepaid Cards

Not that we haven’t seen some of this done before. Heck, the level of celebrity endorsements of prepaid cards with outrageous fees is still amazing to me. But, this goes a level further. They aren’t just banking (see what I did there?) on your needing a card with Justin Bieber’s face on it anymore. No, they’re going right for your heartstrings. After all, what parent among us doesn’t desire to spend more time with our children? And this card can deliver it to you! (You should read that last sentence in your best Billy Mays voice. R.I.P. Billy.) In fact, maybe they need the Sham-Wow guy to do the next voice-over for a commercial!

Visa Direct Deposit Prepaid : Solution to a Problem that Doesn’t Exist

Much like those infomercials, the problem that they claim the card fixes just doesn’t exist. Direct deposit isn’t a new service. Most employers offer it. In fact, most actually require it now. It’s just easier for them. No lost checks to try and track down. No delay in mailing a check from a payroll service. And, most of the time, if they direct deposit the check, it gets deposited into a checking account. And, do you know what most of those checking accounts have attached to them as a service? A debit card! It’s exactly like a prepaid visa card, but without most of the fees! Mine has no fees. I’m not sure there are many places that do have fees, in fact.

Maybe I’m wrong. Maybe there’s a whole population of the country who’ve been waiting patiently for someone to come along and solve this very problem. Maybe they still bank at an institution that keeps their account records on old green ledger books. If that’s so, I’d like to introduce them to the amazing egg shell separator that I’ve created. Yes, it looks exactly like the lip of a mixing bowl. But, it doesn’t have the added bulk of the bowl! It’s just a convenient shard sized device that helps you separate your egg shells without having to have the whole mixing bowl there! Yes, I came up with the idea when the bowl I was cracking eggs into suddenly grew heavy in my arm and fell to the ground, breaking into lots of small pieces. And one of those pieces was the prototype for the amazing egg shell separator!

What do you think? Am I wrong? Was there a need for a product like this? Or is Visa just pulling on emotional strings to get more cards in peoples’ wallets?

original img credit: classic visa (the inception of the “we’ve got you covered” campaign) : london underground ad (1988) by torbakhopper, on Flickr

In a Car Accident? Should You Pay Out of Pocket for Repairs?

March 13, 2013 By MelissaB 11 Comments

Our Chicago winter this year has been a lot less like a Midwest winter–the snow storms have been few and far between. A few weeks ago we finally got hammered by a storm that dumped 10 inches over the city. At the height of the snow storm I had to pick up my son from school. As I waited at a stop sign, the driver behind me bumped into my bumper.

Luckily, the damage wasn’t bad. When I took it to a repair shop for an estimate, they thought it would cost between $580 and $1,200 to fix depending on if there was any damage inside the bumper when they take it off to repair it.

Surprisingly, the woman who hit me decided she wanted to pay out of pocket rather than go through insurance. When I told her that the repair would take 2 to 3 days and we’d need a rental car during that time, she agreed to cover that cost, too.

This is the second time I’ve been rear-ended in 5 years, and both times the repairs were less than $2,000. Both times the drivers opted to pay out of pocket.

If you’re in a minor fender bender, should you pay out of pocket rather than going through insurance?

Reasons You May Want to Pay Out Of Pocket

1. If you have a high deductible. If you have a deductible of $1,000, for example, paying out of pocket if the repair is just a few hundred dollars over that amount may make sense. You’ll save yourself from an increasing premium.

2. If your insurance premium will increase substantially. Each insurance company is different, but rest assured that if you cause an accident and file a claim, your insurance will increase. Some insurers increase your premium by 10% and others by 20%. You may be able to call your insurer and ask how much the premium will go up before you decide to pay a claim or not.

3. If this is your second accident. While you’ll pay an increased premium for one accident, if you file two claims within a few years of one another, the increase is substantial. For instance, State Farm generally charges a 10% increase in premium for the first claim, but that amount increases to 45% for the second claim. While it may hurt your budget to come up with a thousand or two to pay out of pocket for the repairs, that may be the better option if you’re facing a substantial increase that could last several years.

4. If your insurance doesn’t have an accident forgiveness clause. Some insurers offer an accident forgiveness clause, meaning, if you’ve been with the company for a certain number of years (usually 5 to 9) with no accidents, the insurance company won’t increase your premium on the first accident you file. Again, though, you may want to save this benefit for a more substantial accident that you can’t afford to pay out of pocket rather than when the repair is relatively minor.

If you cause an accident, don’t automatically file a claim. There are benefits to paying out of pocket. You just need to understand your insurance policy as well as know exactly how much the repairs will cost before making a decision.

If you’ve caused an accident, did you pay out of pocket rather than filing a claim?

Original img credit: Oops, by fortes on Flickr

What is Financial Independence

March 8, 2013 By Shane Ede 37 Comments

In my post “Are we Doing Personal Finance Wrong“, I talked a little bit about “Financial Freedom”. Of all the comments that the post got, that was the one thing that was mentioned most of all. Which, to me, means it bears some further discussion.

Financial freedom, or financial independence, can be defined a little bit differently depending on the person doing the defining. Like most personal finance, it’s highly dependent on the values of the person. What I define financial independence as might be a whole lot different from what you define it as. I think, no matter who is defining it, the real keystone is the word freedom or independence. We all want freedom and independence. Some autonomy from the rat race. The idea of having the financial ability to declare our independence is alluring.

What is Financial Independence, for me.

My definition of financial independence is likely pretty similar to most. In it’s most broad sense, I define it as the ability to not be swayed by financial needs. Breaking it down a bit more, it means not “needing” a job just to make ends meet. It means not “needing” a job to keep a roof over my head. It also means having the ability to take advantage of opportunities to improve my situation. Whether that means having the cash on hand to be able to buy or start a business, buy a rental property, or just take a month off to travel or learn something new isn’t all that relevant. It’s that I have that ability.

Something that needs to be said here is that at one point, not that very long ago, I thought of it as being synonymous with “independently wealthy”. Which may or may not be true depending on your definition of independently wealthy. For sure, I don’t believe that it matches up with the definition I had back then. Back then, I would have told you that independently wealthy meant retirement and not doing a dang thing. Sitting on the beach all day, every day, being utterly non-productive. That definition has changed. A lot. Financial independence, if it’s synonymous with independently wealthy, doesn’t mean that you don’t work, but that you have the financial freedom to do the work you want to do. Because you are free from the “need” part of the financial equation, you have the ability to do the work that you feel called to do without regard for how much it pays, whether it’s part-time or full-time, or whether it’s a short term project or not.

What is Financial Independence, for you.

As I mentioned above, your definition might differ slightly (or a lot) from mine. Maybe, for you, it really does mean sitting on a beach somewhere, doing nothing. Maybe it means not having to work and spending all your time volunteering instead.

However our definitions might differ is somewhat irrelevant. Our personal definitions still mean that it’s something worth pursuing to each of us. And, if our end-game is to be financially independent, I still don’t think we’re doing personal finance right. I still don’t think we’re even close. I think we need to break away from the systems we have, find the ones that work for our personal finances, and then achieve our financial independence.

Achieving your Financial Independence.

Breaking away from the systems we have for personal finance won’t be easy. Heck, our definition of financial independence will probably change along the way and require a new system again. But, achieving that financial independence should be our primary goal. Not retirement. Not our childrens’ college education. And certainly not saving up cash to pay for that big SUV. Our primary goal in our personal finance should be achieving financial independence. Once we’ve achieved that, retirement, education, and big trucks will come. And they’ll come without sacrificing anything.

The Path to Financial Independence.

Much like our definitions differ, so too will our path to financial independence differ. Undeniably, I think that the first landmark on that path has to be the complete and utter destruction of all debt. Before we worry about anything else, we have to be free of the yoke of debt. Joan Otto, the community manager at Man Vs. Debt, wrote about this recently specifically referencing retirement accounts. Take a minute or two and read it. Then, pay special attention to the comments. Aside from a few people, almost all of the comments are people who think she’s off her rocker.

Is she off her rocker? Or is she just developing a new system for her personal finance that leads towards her financial independence? It takes a certain amount of courage to admit to the thoughts and ideas that she does in that post. (I should know, see: Why I’m Withdrawing from an IRA) But, then try and remove what you’ve been taught about retirement and saving from your mind for a minute and re-read section 4 of her post. She’s not being irrational. In fact, I’d argue that she’s being overly rational. I think I’ll have to write more about that in another post, but the Vulcan, logic loving, part of me thinks she is right.

Our paths to financial independence will vary. Some of those people in the comments of Joan’s article will achieve it using the current system. Many of them will have started saving early, and found ways to drastically save. But, will they have the liquidity available to make a move on an opportunity in the 30’s, 40’s, or even 50’s? Or will it have to wait until they’re past “retirement” age and have penalty free access to their nest eggs?

Find your path. Start the journey, and achieve your financial independence.

Have you already started on your journey? Have you found your path? Have you achieved your financial independence? There are many of us here, including myself, that are new to the journey or haven’t even begun yet that could benefit greatly from your story. Will you share it with us?

img background credit:Fireworks at Swindon by Stephen_Gunby, on Flickr