Home
RP Funding
Categories
Personal Finance
Real Estate
Ask Robert
Financial Planning
Q&A
Money Minute
The Rules
Robert Palmer TV – Episode 1
Home
TV Episodes
Robert Palmer TV – Episode 1
Robert Palmer TV – Episode 1
Saving Thousands Episode 1
[MUSIC PLAYING] Saving Thousands with Robert Palmer. With a new year comes new beginnings, making it a great time to look at your finances. I’m Robert Palmer and I’m here to help you save thousands. Together every Saturday at 10:00, we’ll break down ways you can save money, be a smart consumer, and make better decisions when it comes to important topics. Like credit scores, credit cards, car loans, mortgages, insurance, and many other financial goods. One of the primary focuses of the show is encouraging and empowering us all to shop. Shopping around for financial products the same way we shop for consumer electronics, kitchen appliances, and furniture. For many types of loans and financial products, less than one-third of us actually shop around. Most of us take the first offer we receive, and this is a big part of why we’re in the economic mess we are today. As consumers, we all got lazy. In the mid-2000s, money was coming in from everywhere. Overtime, bonuses, pay increases. We turned equity in our homes into cash. And with all this money, we bought cars, boats, bigger houses. You name it, we had it. Well, the more money we pumped into the economy, the better things got. That is, until it all came crashing down. During this period, even fewer people shopped around when it came to credit cards, mortgages, and other debts. Many homeowners who took the higher-priced subprime loans would have actually qualified for low-cost conventional mortgages. But because they took the first loan they were offered, they ended up in a toxic loan with a much higher interest rate. In some cases, just shopping around would have opened all of our eyes, that maybe we couldn’t afford that bigger house. Or maybe the loan we were getting won’t have the payment we thought it would. All of this caused the problems of today. The mortgage industry was ground zero for the financial crisis, because this is where the fewest percentage of consumers shopped around. Most of us just took the recommendation of a friend or a real estate agent, and never took the time to find out what we were really getting into, and if we were getting a good deal. Only we as consumers can prevent the next financial crisis. Economics is all about supply and demand. And as consumers, we’re that demand. If we can unite and make better decisions, and shop for the best deals when it comes to car loans, mortgages, credit cards, the same way we shop for computers, appliances, and furniture, we’ll send a message to the big banks and to Wall Street. And we can change things for the better. I originally started this show on the radio because I wanted to give back. Every week, I cover these topics and answer callers’ questions live, but with the complexity of some of the topics, television seemed like a great next step. This way we can really, truly dig in and empower consumers who tune in. So if you have a question or a topic you’d like to see covered here on Saving Thousands, you can call in live to my radio show, every Saturday morning at 8:00 ON WDBO, FM 96.5. Or you can submit your question online at Facebook, by visiting facebook.com/SavingThousands. Just post your comments on our Wall or send me a message. I’ll be taking the topics that need more in-depth explanation and covering them here on the television show every Saturday. So let’s get back to the heart of the problem. Why don’t we shop for financial products the same way we shop for consumer goods? I think it’s a mixture of things. But one key point is the industry doesn’t want us to shop around. The industry has experts and consultants who do nothing but figure out ways to keep consumers from shopping around. This lets them keep prices high and profits even higher. While shopping for consumer products has actually become easier over the last decade, shopping for financial products has become more and more complex. If you search the internet for price comparisons and reviews on most consumer goods, you get an abundance of information. You can actually find the best product at the best price. Unfortunately, when you try the same search for financial products, you get results from companies who may claim to help you find the best deal. But these companies are actually getting kickbacks and payments from the companies they’re showing you, and raising the cost of the products they’re advertising. While I was researching credit card rates for today’s show, I came across a perfect example of this. I was shopping around for credit card rates to give them to you right here, and I checked the, quote unquote, “credit card shopping websites,” who claim to help you find a credit card with the best deal. I didn’t find very good rates. The lowest rates I actually found were by visiting the website of local credit unions and banks directly. By cutting out these middlemen I found rates as low as 8.75% versus rates in the 10 to 12s on most of these sites. This just shows, you can’t rely on any type of website or aggregator who claims to provide you with this data. In order to find the best deal, you have to take a little time and do the research yourself. So take the time, do your homework, and save money. Comparing vacuum cleaners, toasters, cell phones, and computers is easy. You can line up side-by-side, do some research, and make sure you’re getting the best deal. But again, when it comes to financial services, shopping is difficult because there are so many factors to consider. There’s rates, fees, terms, APRs, balance calculations. The list goes on. But I’m here to help. Each week, we’re going to break down these complex financial products so you can make better decisions and be a smarter financial consumer. We’ll break down common myths and misconceptions while also decoding the complex terminology and the smoke and mirrors that many financial companies use to try and get you to overpay. I’ve spent over 15 years as an executive in financial services. And I’m going to share that knowledge with you each week. We’re going to pull back the curtain, and I’m going to show you how to shop and save when it comes to financial services. When we get back, I’ll show you just how financial services are a lot like magic tricks. And also, did you know that paying off your credit cards on time can actually hurt your credit score? [MUSIC PLAYING] Stay tuned. We’ll be right back with more Saving Thousands with Robert Palmer. [MUSIC PLAYING] We all know the basics behind a magic trick. You get distracted by some fireworks, the pretty assistant, the pig in the hat, the look over here, whatever else the magician uses to take your attention off what’s really happening. In a lot of ways, this is exactly how many financial services work. In particular, credit cards. Did you ever wonder why credit cards offer airline miles, concierge services, travel insurance, and all other kinds of perks? These are the distractions. We can throw in there 0% APR teaser rates, cash-back promotions, trips to sporting events, and anything else they can come up with to not talk about the annual percentage rate and the fees associated with the card. The sole purpose of these perks is to distract you and me, the consumer. To keep us from asking the right question, and to make it more difficult to determine which credit card is best for us. I think the king of all credit card distractions is the instant discount while you’re in line at a department store. There’s very few department stores you can visit now and not be offered a discount at check-out for signing up for some kind of credit card. If these companies really wanted to give us discounts, they would do it without strings attached. This, quote unquote, “discount,” is about making money by getting us as consumers to sign up for overpriced credit cards. What makes it worse is that very few of us ask about the APR, the annual percentage rate, or other costs associated with these cards, because we’re caught off guard. Think about it. You’re in line at a check-out. A transaction that takes 30 to 60 seconds of your life. You’ve got people in line behind you. And here you are being asked to make a financial decision that could affect you for the next six to twelve years of your life. That’s right. According to credit bureaus, the average credit card account is opened that long. Six to twelve years. Department stores have figured out that by offering these discounts and making the offer at a very inopportune time, when you’re in line and focused on other things, allows them to charge much higher interest rates. They take away your ability to shop around, to compare other cards, to ask the right questions, and to make a good decision. Taking on a new debt is serious. And it should be reduced to a snap decision while you’re checking out at a department store. When you visit your bank or credit union, and they offer you a credit card, the first question you ask is, what’s the interest rate? What’s the annual fees? When you’re in line at a department store, these questions rarely get asked. At the bank, you sit down with a representative and go over the benefits of each available card. Or you do this online from the comfort of your own home, where you can compare interest rates and fees and make a decision on your time frame. This allows you to find the best deal. Well, guess what? The banks don’t like this. Because they have to be more competitive. And they’ve figured out that by teaming up with department stores and making their credit offer while you’re checking out in a line, with a bunch of people behind you, there’s a chance you’ll sign up without shopping around. Without considering the costs. Without analyzing the rates and fees. And guess what? They’re right. So just how high does the distracting combination of discounts and environment designed to prevent you from shopping around allow them to charge on interest rates? Let’s look at some examples. I went online to some websites and found out that JC Penney’s charges a 26.99% interest rate. The Gap, 24.99%. Macy’s comes in at 24.5%. American Eagle, 23.99%. Dillard’s and Target, at 22.9% And Kohl’s at 21.9%. So how does that compare to what I found by visiting local banks and credit unions? Guess what? At Central Florida Educators, you can get an 8.75% rate. That’s almost a third of what some of these department stores are charging. Fairwinds Credit Union, 9.24%. Mid Florida Credit Union, 9.99%. Insight Credit Union, 9.9%. And even the big banks are more competitive than the department stores. Chase, 13.99%. Wells Fargo, 10.15%. And Bank of America, 10.99%. I know it’s a lot of information to digest, but you can really get a feel for how much higher these department stores are able to charge. What’s really interesting is Capital One, a pure credit card company, charges a 10.9% rate. However, if you sign up at Kohl’s, the card is 21.9%, and it’s actually offered through Capital One. You pay that much of a premium by signing up at Kohl’s instead of Capital One’s website. This is a prime example of how you can sign up for a card on your own terms online and save tons of money by getting it in line at the department store. So these rates may not make a lot of sense. Just how much are you actually going to overpay based on these interest rates? Well, the average consumer with credit card debt owes almost $16,000 across all their cards. And if you were to owe all of that debt to department stores, at an average rate of, say, 24%, instead of low-rate bank cards at 10%, you would waste $2,240 per year. And as we said, the average card is kept for six to twelve years. Which would be a total cost of $13,000 to $27,000 just for signing up for too many credit cards while standing in line at the department store. Let’s look closer at these numbers. Having $16,000 in credit cards at 24% costs you $3,840 per year in interest. If we had that same $16,000 in debt on the lower-rate bank cards, at only 10%, that’s only $1,600 per year. That’s our savings of $2,240. And of course, paying off your card every single month, and avoiding interest altogether, would save you the full $3,840 each and every year. Now don’t get me wrong. As a smart consumer, you can use these perks and discounts to your advantage. But this takes a lot of prior planning and discipline. And to be honest, if the majority of consumers actually did take advantage of the discounts while not overpaying for the interest, these cards wouldn’t exist. The fact that companies continue to offer these cards proves most consumers fall victim to the misdirection and overpay on the interest. That’s the worst-case scenario. Wasting almost $27,000. So what’s the best? Well, you can actually win, when it comes to credit cards, by taking advantage of the perks but not allowing them to become a distraction. If you pay the card off every month or in the grace period, you can avoid paying any interest at all. And this allows you to take advantage of the discounts, the perks, the miles, and everything else, without paying the exorbitant interest charges. But you have to be very disciplined. And the majority of people will fail somewhere along the way, and fall victim to the trap of these high interest rate cards. Very few people successfully pull this off. Because let’s face it, life happens. Your car breaks down. Your kids need braces. Things happen that cause us to get off track and leave balances on these high-interest rate cards. The best way to avoid this pitfall, I’ve found, is to be able to react properly when life happens. And the way to do this is to actually have two sets of credit cards. One set of low-interest rate cards, with no frills and no perks, but the absolute rock-bottom interest rate. You can use these for unforeseen events, when you need to carry a balance. Then you have a second set of cards that gives you the perks and the discounts, but you should never leave a balance on these higher-interest rate cards. If something happens in your life when you’re unable to pay off the high-rate perk cards one month, you can just transfer the balance over to your lower-rate cards. This gives you a safety net. But you have to plan in advance. Because once your store cards have high balances, it’s much harder to qualify for the low-rate cards. This is the trap of credit. The next important step is to have a plan to pay off the balance on your low-rate cards in the event you do you have to carry a balance. Making the minimum payment on these cards will stretch the debt, on average, for 9.5 years. On a $5,000 balance, if you pay just an extra $50, you can cut that number to less than four years. And an extra $75 cuts it to under three. So have a plan and make payments to pay the debt off on your terms. Not the credit card company’s. We’ve talked about how planning is so important. And when we get back, we’re going to talk about how to make sure your credit score is as high as possible. Because getting these low-rate cards we all want and need requires the best possible credit score. And we’ll look at how paying off your credit cards on time doesn’t help your credit score, and can actually hurt it. So stay tuned. [MUSIC PLAYBACK] We’ll be right back with more Saving Thousands with Robert Palmer. [MUSIC PLAYBACK] Saving Thousands with Robert Palmer. So as we’re planning ahead, and we’re getting two sets of credit cards, the low-interest rate bank cards that we can use to carry balances, and then the higher-interest rate perk cards, that we’re only going to use for purchases and make sure we pay off every single month, we have to have the best credit score possible. So here’s some simple tips and some myths debunked about how you can increase your credit score. The number one misconception people have is that by paying your credit cards in full, once you receive your statement, helps your credit score. This just isn’t true. And it’s a system set up to prevent us from succeeding. Here’s what happens. When you receive your credit card statement, the balance before you make the payment is what’s reported to the credit bureaus. Once you make that payment and reduce the balance to zero, and then use the card again, the next statement is dropped. And that new balance is reported to the credit bureaus. Most of us think that when we pay the card down to zero, this is what goes into our credit score. It just doesn’t work that way. The balance only gets reported to the credit companies once a month, and that’s the statement date. So what you actually have to do is pay the card off a few days before the statement drops, if you want to improve your credit score. So what we need to do is take out your statements and take a look at the date. The date of this statement is what’s important. Not the date you receive it. Not the date the payment is due. The actual date the statement is generated. If you pay your balance in full before this date, this will show the low balance to the credit bureaus, which will raise your credit score. Percentage of debt to balance is a huge factor in credit scores. And having less than 35% of your credit card balance as used is ideal. Less than 50% is good. And once you get much over that, you actually start to hurt your credit score. So by allowing that balance to get reported, and paying it off after the statement drops– which is what they want you to do– you actually lower your credit score. Because these higher balances make it look like you’re using too much of your debt. Other important things to do, obviously, is always pay on time. Missed payments are the absolute worst things that can happen to your credit. And the other thing to consider is, it’s always best to get credit cards when you don’t need them. Now that may sound counterintuitive, but it’s the truth. Once you need a card, once something’s happened in your life that your other cards’ balances are up, or you really need the money, your credit will reflect this need. And it actually lowers your credit score. The best time to get all these credit cards is when you don’t need the debt. When all of your cards are paid off and you’re sitting pretty, your score will be high. You can apply for these great low-rate bank cards that you can keep and use only if you need to carry that balance when life happens. Another common credit score myth comes from one of our listeners. This week, Jill, from Winter Park, who listens to my radio show, wrote in and asked me about having her credit pulled multiple times while shopping for a mortgage. This is a great point. Because this reinforces everything we’re talking about. This is a company trying to prevent you from shopping around, under the threat of your credit score dropping. Now once upon a time, this was the case. When credit scores first came out, the credit companies didn’t think through that having your credit pulled multiple times would hurt your score, and that this would prevent people from shopping around. So what they’ve done is they’ve changed the way this works. If you have your credit pulled within a three to seven day period, depending on the type of inquiry, they lump them together and count them as one. Because they know you’re being a smart consumer and shopping around. So while once upon a time, it did hurt your credit score to have it pulled by multiple credit companies, that’s just not the case anymore. Nowadays, the bureaus know, this is what smart consumers do. So don’t be afraid to have your credit pulled by multiple companies. Don’t be afraid to shop around. Again, as consumers, we have to demand the best deal. And if that means having our credit pulled a couple times, so be it. It’s all about saving money and making companies compete for our business. When we come back, we’ll take a look at some more questions that came in through the website, as well as look at next week’s show. [MUSIC PLAYING] We’ll be right back with more Saving Thousands with Robert Palmer. [MUSIC PLAYING] Saving Thousands with Robert Palmer. We had another great question come in through the website this week. It lines up perfectly with today’s show topics. Heather, from Altamont Springs, spent a little too much money on her department store cards this holiday season, and is wondering what she should do. Well, Heather, we’ve already given you some great tips throughout the show. But again, to recap. If you have that second set of cards. If you have that low-interest rate bank card, that you can transfer the balances to, that’s going to be your best bet. If not, it may be too late to apply for that second set of cards, because with the higher balances, your credit score is going to suffer. So what we should do is set a plan to pay the debt off as quickly as possible. It’s very important that if you do have to leave balances on these higher-rate department store cards, that you have a plan to pay them off as quickly as possible. Maybe that a few times less each month. Maybe spend a little less money. Look at where else in your budget you can cut out a few dollars. Maybe a few less pay-per-view movies, a few less downloads on iTunes. But it’s important that until you get that debt paid down to a reasonable level, that you do tighten your belt a little bit. Because the longer you leave that debt out there at those high rates, the more interest you’re going to pay. Also, I’d recommend signing up for one of the services that allows you to monitor your credit score. This way you can see when your score raises back high enough that you can apply for the low-interest rate bank cards we talked about. In most cases, these low-rate card will require a credit score of around 740 or greater. So good luck, Heather. Let’s try to get that paid off as soon as possible. And if you do happen to have the second set of cards, like we talked about earlier in the show, go ahead and transfer those balances immediately so you can avoid those higher interest rate charges on the department store card. Thanks for tuning into today’s show. Before we go, I have a special request. And I need your help. My company, RP Funding, is helping raise money for Special Olympics of Florida by participating in the Polar Plunge. If we reach our goal, I’ll be plunging into freezing cold water at Aquatica on January 21. Plunging with me is Kristin Costanzo, a Special Olympic athlete. And to help Kristin raise money, I’ll be matching every dollar she raises, dollar for dollar. All donations benefit Special Olympics of Florida and help the amazing athletes to participate in their events. To donate to Kristin and help us take the plunge, visit rpfunding.com and click on the Special Olympics link. So remember, saving thousands starts with you and the decisions you make. Tune in every Saturday at 10:00, right here on TV-27, and I’ll help get you going in the right direction. It’s going to take all of us as consumers, making smarter decisions, to get our economy back on track. Next week we’ll take a look at knowing when it’s right to refinance and how to get the best deal on your mortgage. [MUSIC PLAYING] Be sure to join us again next week, as Robert Palmer shares more ideas on how you can save thousands while making everyday decisions. That’s next Saturday at 10:00 AM. Right here on Central Florida’s TV-27.
Robert Palmer
2015-04-30T12:15:55-04:00
April 20th, 2015
|
TV Episodes
|
Comments Off
on Robert Palmer TV – Episode 1
Share This Story, Choose Your Platform!
Shares