Credit Cards, Friends and PayDay Loans: Which would you use if you were short of cash?

There are indeed many ways that we simply throw good money away. In my previous post, I outlined seven ways that I have successfully thrown money away over the years. These are the ones I remember! I’m sure there are dozens more that I could think of. There are of course some ways that you can avoid events spiralling out of control, but each of them needs some self-control in that they all have inherent benefits, costs, and risks. But for short term personal loans needed urgently, there aren’t so many options. Credit Card #1

The Credit Card: This is perhaps the easiest way to borrow money, it’s available and easy to access. Just stick your card in the ATM, enter your password, retrieve. Then wait for the bill at the end of the month. The costs though are in the interest rates charged from the date of the loan, ATM fees and perhaps a worse credit score. Worse: this may not be an option if you are nearing your credit limit. The last thing you want do is incur late payment penalties on your Credit Card or overage penalties when you break your limit. In fact, having a safety limit for errors in billing is a good idea. Don’t run your credit card at 100% of your limit! friend next door

The Friend at Work or Next Door: Again an easy option, and one which will rarely attract interest payments as friends are ‘helping each other’. Typically, you’ll hear people saying things like “I had an unexpected emergency. Can you lend me a few hundred dollars until payday?” Most friends will oblige for a ‘friend in need’… and that’s where the problems begin. You can’t pay it back on payday, then you begin to feel embarrassed to see your friend. Every time you see him or her, you feel guilty thinking “I have to pay you back, but I can’t”. Others report that lending money to a friend or borrowing from a friend impacts the relationship. Things never seem quite the same, because money entered the equation. I stopped lending to friends after the problems it caused.

payday The PayDay Loan: A more recent entrant to the informal loan are the payday loans – a short term loan that is designed to bridge or cover the cashflow problems. With this facility now provided on the Internet, the application procedure could be quite quick and easy. Often these companies will provide next business day payment electronically. The payments are due (depending on the conditions of the loan) on the next pay day. The catch: it isn’t free. It’s not necessarily cheap either with fees that can run quite high. Most importantly, though, they are designed as short-term loans to cover short term problems. The fees and interest rates can be expensive, if these products are treated incorrectly. In some cases, though, clients become dependent on these kinds of loans; and can rack up large debts because they fail to read the fineprint or stick to their end of the bargain (the APR rates would make your eyes pop if you were borrowing for 12 months).

Personal Emergency Fund Each of these three methods allows you to get a small amount of cash to cover a cashflow crisis. Each of them has obvious benefits, costs and negative factors. Whichever you decide to use, there’s no doubt that setting aside a little money for your own personal ’emergency fund’ is probably the sanest, cheapest and most effective solution in the longer term. But that won’t help much if your bank account is flashing $0.01 right now. What do you do when you need to borrow some cash fast? Where do you go? What are your good or bad experiences? Do let me know!

3 Tips to Help you Deal with New Credit Cards

There are many reasons why your wallet may be feeling the pinch right now, and poor lending choices are one of the culprits. If your credit ratings have been affected by lost jobs, poor income levels or bad credit scores, you may need to spend quite a bit of time, money and personal energy restoring your credit record through credit repair efforts and renewed borrowing.

If you are considering high interest credit credit cards from sites such as BadCreditOffers (which provide links to different types of cards, different rates and conditions), I would caution you:

1. Know the Credit Card Interest Ratesbadcreditoffers-1[2]

Rates for most credit cards are typically between 10%~20%, but can go much higher depending on the card, the agreement, and the penalties.

Know this and understand this. Don’t be fooled by “Intro APRs”, “Low Rates”, Freebies, or Minimum Payments. Always know the full rate, work out how much you would have to pay at that rate, and calculate how much interest you would pay over 12 months on a typical amount for your own budget.

Oh, and beware those N/A statements. Know why they say “N/A”!

2. Read the Agreement before you sign!

Make sure you read the agreement, esp. if you are going to use the card a lot. Make sure that you understand what penalties may be applied, what rights you have under the agreement, and who you need to contact if you have problems.

If you don’t understand the agreement, don’t sign it until you are happy that you do. Find someone who can explain it to you.

3. Check those Statements carefully!

When you get your card, keep it safely along with a record of your usage of the card. Then make sure you check those statements carefully each month. Check off each item as it appears and query any that are incorrect. Then make the payment before the due date to avoid penalties.

I am thankful that I can read my statements (even though they are in a language I’m not competent at), I do have someone who can understand the agreement, and I religiously check each and every statement. It really helps to keep tabs on your credit cards and your usage patterns. But I’m assuming you already do that, don’t you?

Earth Hour 2009: Can I be excused?

It seems everyone is getting in on this thing called Earth Hour. It was a stunning participatory success when it was tried in 2008. But did it really hit home? Did it change people’s attitudes? I wonder… I got a lot of comments from people who asked me why I was not participating in it last year.

Well. Why? Because I already did my part last year. We cut our electricity usage from an average of NT$3650 per month to about NT$2650 in the space of 18 months. And we’re trying to figure out how we can reduce more without impacting our business.

We replaced several older computers with higher power requirements with lower power Asus Eee Boxes, and a newish PC and a notebook. We only have one remaining PC that is less energy friendly. All our monitors have been replaced with LCD types as well. It’s difficult to estimate how much wattage we cut: but it’s easily 50%.

We cut our wattage on spotlights alone from over 450 watts to just under 300 watts. I’m planning to switch totally to LEDs when the technology is ready. But spotlights like the LEDs tend to be very weak in light output. But this is a fast changing market… so it’s likely I’ll replace them all within 3 months. This is a huge saving on carbons since we use these lights almost 7 hours every day.

The one big kicker for our fuel bills was replacing two aging AC units, both of which were old, inefficient and difficult to repair. We opted for a more expensive variable motor type instead of the traditional on-off type unit and the energy savings have been substantial on these two units. The only downside with those units is that the external power units are larger than traditional ones making for space problems for us. We still run four traditional smaller units, but we’ve already decided when we purchase new ones what kind we’ll choose.

All of our school lighting has been replaced with fluorescent tubes or CFL quite a while ago (there were a few recalcitrant bulbs that managed to escape the first round of replacments).

For a minor inconvenience, a few complaints about lighting (which we rearranged), we’ve saved nearly 1/3rd of our energy bill over 2005. It’s difficult to predict the patterns for 2009 yet as some of the equipment is still new. But there could still be additional energy savings.

We will replace our spotlights in the next few months with LEDs to cut an additional 150 watts or more, we will replace one PC for sure, and we’re considering re-engineering the lighting for the classrooms. That alone will be the biggest challenge: each classroom has 16 to 24 strips of fluorescent tubes each burning 18w. We’re loathe to replace these with CFL because it will make the classrooms feel darker. Our main office area is lit with 8 CFLs at 22 watts and that is bright enough, so we could use that model for the classrooms. So there is room for improvement there.

One of the other big changes was turning off the water heater for the drinks unit: it had a lower power chiller for cold water, and a higher power (900 watts!) for hot water. We simply substituted a traditional kettle. And to think we used to leave that machine on all day and night.

So, why wait till Earth Hour to turn off your lights for one hour? You can save that energy every day by being smart. And your wallet will thank you, too.