Pay Off Credit Cards with Home Equity?

Should you pay off your credit card debt with equity from your home? My simple answer is no but honestly it isn’t a simple matter at all.

Let’s take the case of Mr. Joe Smith who is carrying $15,000 in credit card debt, charging him 15% interest each year. Let’s assume that Joe Smith has learned the error of his ways, despite watching his home theater each night, and is now on the righteous path of financial prosperity and has stopped hemorrhaging money – now he wants to make right. Despite his credit card irresponsibility, Joe actually has quite a bit of equity stored up in his home and has considered taking out a line of credit to pay off the credit card debt. By lowering his rate from 15% to something as low as 6%, which is tax deductible, you’re talking about a savings of a good $1,500 a year. That’s serious money and that’s the main benefit of doing it.

(Click to continue reading…)

 Personal Finance, Taxes 

1040EZ-T: Telephone Excise Tax Refund Form

If you don’t have to fill out a federal tax return but you still want to claim the telephone excise tax refund for all those unfair and unreasonable long distance excise taxes you’ve been paying the last three years, the 1040EZ-T is the form you will need. For everyone else, you just need to fill out the applicable line(s) on your return to get your refund. And that, is your kinda useful tax tip of the day.

Telephone Excise Tax Refund FAQ


Make A Wish Come True: Ghent Charitable Bar Tour

Like to make wishes come true?

Live near or in Norfolk, Virginia? Like to drink? If you said yes to any of those, I have a great event in mind that I’d like to tell you about. My friend Scott has been putting together a charitable semi-annual pub/bar crawl (history of the bar crawl) in a synergistic merging of two things dear to my heart – charitable giving and drinking. In the previous three times they’ve put this together, they’ve been able to raise thirteen thousand dollars for the Make-A-Wish-Foundation of Eastern Virginia… that’s a staggering amount when you consider registration is a mere $15 if you register before tomorrow (it’s only $20 if you register afterwards). This year Scott told me he’d like the event to raise $8,000, a very admirable and certainly achievable goal, and I’d like to do whatever I can to help him along.

If you’re in the area and like a good time, please do sign up! If you’re not but you’d like to help, there is a Ghent Bar Tour donations page if you want to send a few dollars to the MAW foundation and help them reach their goal of $8,000.

Here’s more about the event:

Drinking for Charity? What a concept. is holding its fourth semi-annual charitable pub crawl on February 24th in Norfolk, VA. In the short span of just five hours, the 2007 Ghent Winter Bar Tour will visit ten different food & beverage locations in the city’s historic midtown neighborhood of Ghent. The winter and summer tours of 2006 brought out 300 plus participants each and raised a total of $13,000 for the Make-A-Wish Foundation of Eastern Virginia (the local Hampton Roads chapter of the well-known national wish-granting organization). This latest pub crawl will also once again benefit the Make-A-Wish Foundation.

Registration is required for the event and can be done online, by-mail, or at-the-door the day of the event. The registration booth will be located inside Zio’s at 1517 Colley Avenue. Every registered participant gets an official long sleeve event T-shirt, souvenir cup, magnet, guide map, a few other promotional items, and most importantly a wristband good for food and/or drink discounts at each stop on the tour. Registration is $20 the day of the event, but you can get a discount on this fee (and reserve your shirt size) by registering ahead of time in groups of two or more (see website for details). Still looking for more fun? Friendly competitions will be held along the way at each and every location. Play our versions of Bar Tour Bingo, Texas Hold ‘Em Poker, and various Bar Sports to win various prizes. And don’t forget to enter the 50/50 raffle to win your bar tab back! Rumor has it a few Budweiser representatives will also be making their way through the tour and adding excitement to the festivities. So why wait? If you live near Norfolk or have friends, family, or acquaintances that do you and they should register to be a part of the biggest party in Virginia this winter!

For the latest event information visit

The Make-A-Wish of Eastern Virginia chapter serves all of Hampton Roads, the Peninsula, Williamsburg, Emporia, Franklin, York, James City, Sussex, Isle of Wight, Surry, Greensville & Southampton counties and the Eastern Shore. The mission of the Make-A-Wish Foundation is to grant wishes to children between the ages of 2½ and 18 who have life threatening medical conditions. The organization provides a bright moment of hope, strength, and joy for a child in what can sometimes be a dark routine of treatments, doctors and hospital visits.

If you’re a blogger and wouldn’t mind writing a little bit about this event, I’d be very appreciative. Thanks!

Thank you FMF for your generosity and thank you Mapgirl and Henry for blogging about it!


PFBlogger Meetup & Technical Difficulties

I had some hacker issues last night, just as I was sitting in traffic trying to get to the Greenbelt Metro stop so I could take a lovely hour and a half jaunt down to meet the finest personal finance and non-personal finance bloggers (and non-bloggers) in the land, so my sincere apologies for those of you who had the thirst for knowledge that couldn’t be quenched and had to go to bed left wanting. What happened was someone was trying some script injection attack of some kind, the host didn’t elaborate and I didn’t bother to check the logs to figure it out, but it had to do with my site’s .htaccess (which I hadn’t updated with the rest of 2.1, the permalink rewrite stuff has been trimmed down considerably), so all the permalink stuff was down even though the main site was up. Anyway, hopefully those have been resolved.

Either way, last night a bunch of us got together, had some half price/2-for-1 burgers and then meandered over to a bar about the size of my living room. Those in attendance were:

(Hopefully I remembered everyone, if not, let me know because I didn’t leave you out on purpose. I had a two hour trek home…)

It was a pleasure meeting you all face to face, my apologies to Nick’s wife who really had little interest in blogging but tried to smile whenever someone said something about it… next time I’ll try to bring my fiancee and you two can talk about normal stuff. 🙂

 Devil's Advocate 

Lease A Car, Don’t Buy It!

Devils Advocate Logo
This is a Devil's Advocate post.

Buying a car, whether it’s new or used/certified pre-owned/whatever Orwellian double-speak you prefer, is better than leasing a car. When you lease a car, you’re throwing your money away! You’re overpaying in terms of fees, you don’t get any ownership in the car, and basically you’re renting.

All that is true. However, I argue, in this Devil’s Advocate post, that while you do pay a premium for leasing and while you don’t get to keep the car, that premium gets you a lot of benefits you either don’t get at all or that you’ll lose after a period of time when you buy the car. Also, one thing a lot of people don’t consider is the impact of depreciation. With leasing, you’re essentially paying for that depreciation (plus fees, etc.) because it represents the value that you’ve used up. With buying, you are paying for that depreciation but you get the car afterwards.

Automobile Equity Is A Myth
First off, I think the fact that you get your car after you pay off your loan is hugely overrated. People say that you should buy a car instead of leasing it because when you pay off the loan the car is yours. When you lease, you’re basically paying rent (you pay for the depreciation of the car) and you never actually own a piece of it. See how the analogies are so closely tied to home ownership? The problem is that cars depreciate, and depreciate extremely quickly, whereas homes appreciate. You want to own a home… it doesn’t really matter if you own your car because in ten years you’ll probably sell it for a couple hundred bucks or donate it. When you buy a car instead of leasing it, you’re still paying rent – it just takes the form of depreciation (value that you never recover) and just looks invisible to you (out of sight, out of mind). It’s something businesses fully understand (why do you think businesses lease equipment?) but something individuals don’t fully consider.

Taxes taxes taxes!
In Maryland, the sales tax is 5% – that means when you buy a $15,000 car, you need to send another $750 to the state just to register your car and get license plates. That tax is up front, even before you get to drive the car. With leasing, you will only pay taxes up front on the amount of the down payment (often little to no down payment is necessary for leases). Then, with each month’s payment you will be charged tax but ultimately, with leasing, you are only charged taxes on the fraction of the car that you’re using during your leasing period. You don’t pay tax on all $15,000 of car.

Cars are Always New and In-Warranty
I put these two together because they’re related and they focus in on the same reason – when you lease a car, you’re getting a new car. You’re getting a car that has on accident history, it doesn’t have weird noises or other strange quirky behavior. Also, when you lease a new car, it will probably be covered by the original manufacturer’s warranty for the length of your lease. That means if something happens, the repairs are absolutely free. While this is true of new cars that you purchase, that warranty will eventually run out and then you’re stuck with the repairs. If you continue to lease, you’re always getting yourself a new car and you’re always in warranty.

Ultimately, the choice of whether to buy or lease depends on each individual’s personal factors but just like the Buy, Don’t Rent post, one cannot universally say that everyone should buy a car and not lease it. As you can see, with this inclusion as a Devil’s Advocate post, I am a proponent of buying a car because there are a lot of benefits to doing that – mainly, that little bit (dollar-wise) of ownership that you get after you pay off the car can last a very very long time, especially if you’re smart about maintenance.

 Credit, Personal Finance, Shopping 

AMEX Buyers Assurance Plan Explained

I recently purchased the 50″ Philips Plasma TV from and for the first time in my life I chose which credit card I’d use to make the purchase based on their customer protections – in this case, I used my American Express TrueEarnings Costco card because, like many other AMEX cards, it offers a Buyer’s Assurance Plan. (The TrueEarnings Costco card has an annual fee that’s waived with a Costco membership, if you want this protection but from an AMEX without an annual fee, consider the AMEX Blue card)

The Buyer’s Assurance Plan will double the manufacturer’s warranty on a product up to an additional year (so if it only has a six month warranty, you get another six; if it’s a two year warranty, you get only an additional year) if the original manufacturer’s warranty covers the product for fewer than five years. All you need to do is charge the purchase to your eligible American Express card. There are two limits to be aware of. The first is that the product must cost less than $10,000 and the second is that there is a $50,000 per card account limit per year. There are also some other rules like how you must be a card holder in good standing (paying on time, still have the card, etc.) at the time of the claim as well as a list of product types not covered by the plan.

The television itself comes with a supplier 1-Year Parts & Labor, 2-Years Plasma Panel warranty, less than the limit of 5 years, and it cost less than $10,000 (it was “only” $1,500, thanks to Miller for making my wallet lighter by pointing out this deal) so it’s eligible for the Buyer’s Assurance Plan. This marks the first time ever that I’ve purchased a television that wasn’t: 1) used, or 2) less than $100.

Full program details


A Look at Historical Federal Tax Brackets

Can you imagine that in 1913, the highest tax bracket in the United States was 7% and it applied to those folks who earned more than $500,000 a year? By 1916, the highest was 15% and applied to those who were banking more than $2 million a year and in 1917, that rate spiked to a whopping 67%! Now, getting a read on the max rate and income levels is a little misleading because you’re only looking at the tops of trees and not the forest itself… so I’m going to try to paint that forest for you and put some of those crazy numbers into context. (historical tax rates)

In reality, I’m only going to take a look at the highest tax bracket, which itself won’t give a complete picture of the income tax situation at that time but will enlighten us at least a little bit about the history of income taxation.

One big miss in that historical listing was the introduction of a tax on income in 1862 to help pay for the Civil War. As will become apparent in a few more paragraphs, instead of running a deficit and having a national debt, the government did the fiscally prudent thing of raising taxes. But, just like how the American public has racked up credit card and other debt, the government has led the way by borrowing instead of increasing collections (increased collections usually means those in power are no longer in power come the next election cycle). Anyway, back in 1913 there were only three brackets:

  • Income under $300 paid no tax,
  • Income between $300 and $10,000 was taxed at 3%,
  • Income over $10,000 was taxed at 5%.

That income tax was repealed in 1872 and after some Supreme Court cases and an amendment to the Constitution (16th), income taxes reappeared in 1913, which corresponds with the start of the historical tax rate chart above.

1918: The top rate was in fact 77%, as the chart said, because tax rates were raised in order to help pay for World War I. Tax rates started to fall in the years afterwards.

1932: Rates had been falling the past few years until 1932 when the top rate was 63% (if you think this is bad, wait until the US was deep into World War II). This rate increased in the years leading up to and including World War II.

1945: 94% tax on income over $200,000 – absolutely astounding. It stayed over 90% until 1964 when it was lowered to 77% and had been consistently falling until …

1988: “Read my lips: no new taxes” said George H.W. Bush in 1988 – three years later the top rate was increased from 28% (in part due to a recession and legislative deadlock), where it had bottomed out, to 31%. As you may remember, President Bush Sr. wasn’t asked to return for a second term.

Implications: When a lot of people analyze their personal finance decisions, such as whether to contribute to a Roth or Traditional IRA, they claim that their taxes are likely to be less in the future because they’ll earn less – so they opt to take the tax deduction now. While there has been greater stability in the tax code in recent memory, I firmly believe that our taxes will go up in the near future simply because the government won’t have a choice (debt, social security, universal health care, etc.). If you look historically at the maximum tax rate, we’re only 60 years removed from a time when it was 94%. For every extra dollar you earned (over $200,000), you kept six cents (one thing to consider though is that $200,000 in 1944 is the equivalent of $2,290,909.09 in 2006 according to the Department of Labor’s Bureau of Labor Statistics inflation calculator).

Take a look at the charts, do a little deeper research than I have done on income taxes (especially all the exceptions and breaks), and come up with your own conclusions (and please share your opinion!).

The historical information was compiled from a bunch of random websites and trusty Wikipedia.

 Banking, Credit 

Pay An Annual Fee, Help Poor Banks!

That’s what a credit card advocate said to the Senate Banking Committee… the reason? You’re basically getting an interest free loan from the credit card companies if you are diligent and pay off your loan at the end of the month, then you aren’t making them that much money. If you’re like me, charge a lot of stuff but pay off your entire balance at the end of the month, you’re a “deadbeat” because you’re not making the credit card enough money! No this isn’t a Devil’s Advocate post because I think annual fee credit cards are crap (and I don’t really think I can make much of a case for you to get a card with an annual fee) but I think the reason given by the credit card company advocate is laughable.

When you swipe, the store you’re at pays interchange processing fees, something like 3% or so; but apparently that’s not good enough. It’s not good enough because the credit card companies get approximately 70% of their revenue from interest and penalties, according to the Government Accountability Office, so they obviously want more. The estimated $17.1 billion in penalty fees (not counting interest) the banks are going to get for 2006… that’s not enough. That’s like your latest bonehead highly paid athlete complaining that he needs more money to feed his family. No one has compassion for piggish greed. No one.

If they call someone who just pays their bill a deadbeat, I wonder what they call 0% balance transfer arbitragers (or just folks looking for extra breathing room with 0% balance transfers) and folks who just sign up for credit cards for the bonuses?

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