The other day my friends, my wife (who is also friend but unless I give her a shout out I get shouted at), went to the 16th Annual Safeway BBQ Battle (official site) down in Washington D.C. and had a marvelous time. The annual event is a ton of fun, only $10, and part of the proceeds goes to benefit the Boys & Girls Clubs of Greater Washington’s Metropolitan Police Club Houses - so it’s a win-win-win. Besides gorging ourselves on free samples and celebrity chef demonstration food, one of the interesting things I saw was a table giving away a $500 Target gift card. I wish we had taken a picture since the sign was distinctly unprofessional and the table was even less so.

If you’ve ever gone to a mall and seen the tiny stands announcing a sweepstakes giveaway of a car or incredible vacation, then you’d recognize the tell-tale cardboard boxes with the pictures of the vacation or car. Instead of a picture of a fancy new Prius or a beach in Aruba, picture a Target gift card with a big $500 on it. That’s what the table consisted of, about a dozen of these with plenty of people signing up.

Despite the convincing sign, I bet there there is a 0% chance (ok ok, maybe a 0.0001% chance) that you’d win a $500 gift card to Target if you entered. Many of those sweepstakes contests are affordable techniques to capture your name, phone number, and address for a mailing list. The surprisingly thing is that they often tell you right on the box (they are required to). By entering, you are subscribing to the XYZ Product/Timeshare Mailing list and allow XYZ Product/Timeshare to contact you even if you are the Do Not Call list.

The chances of you winning that cardboard box giveaway: 0%.
The chances of you receiving annoying phone calls during dinner offering a fantastic timeshare vacation offer or test trial of some crazy new product: 100%.

There Ain’t No Such Thing As A Free Lunch.

A reader recently sent an email asking about a program United First Financial runs called a Money Merge Account and whether it was legitimate. United First Financial promises that the program, which costs $3500, would have you pay off the mortgage in one-third to one-half the time it normally would take. Knowing nothing about money merge accounts and knowing a little bit more about simple math, I smelled a fat $3500 scam brewing. The only scenario in which I could see $3500 cutting your mortgage in half is if you had a $7000 mortgage. But, setting my mental scam alerts aside, I did some more research about the plan.

Apparently it’s a fancy name for an accelerated mortgage repayment scheme. The first step in the money merge account is to take out a second mortgage on your home, a home equity line of credit. Then, what you do pay your entire paycheck towards the first mortgage and withdraw money from the HELOC to cover your expenses. You save a little money because the interest on a HELOC is calculated based on average daily balance rather than the final monthly balance. This lets you pay off more of the mortgage at the beginning of the month and then be charged less interest on the HELOC. (this assumes the same interest rate, which is a big flaw)

However, the plan also has a lot of other assumptions and flaws.

1. It assumes that your HELOC interest rate will be the same as your first mortgage interest rate - very unlikely. The bigger the HELOC rate, the less you save on that difference.
2. It assumes a single monthly paycheck so it’s a plan that loses some of its power if you are paid irregularly or every two weeks.
3. One big flaw is that there is never discussion of HELOC fees. I’ve never opened a HELOC but I imagine it’s not free.
4. This plan requires that you don’t save at all for anything else. Since your entire paycheck goes towards the mortgage and you withdraw expenses, it penalizes you drawing on the HELOC for non-essentials. Why pay $100 towards a 6-7% mortgage and then borrow $100 from a 10% HELOC?
5. Finally, as if all those weren’t enough, you have to pay $3,500 for a program to help you do this!?

In researching this article I researched a lot of sites and they were nearly unanimous in their opinion that these types of programs are not worth the money (not surprisingly). They’re not scams in the sense that you pay your $3500 and they disappear into the night but it’s something you can do yourself.

This begs the question, should you use it to force discipline? I could justify paying $100 to enforce discipline because it can save you quite a bit in the long run, if you can overcome the failings, but $3500 is ridiculous. If you have $3500 and you want to pay off your mortgage sooner, send a $3500 check to your mortgage company. (if you want a legitimate and easy way to pay off a mortgage faster, consider making mortgage payments every two weeks)

The other day my fiancée received a letter from the Insurance Program Management office of Marsh Affinity Group Services, a service of Seabury & Smith, out of West Des Moines, IA. According to the letter, written by an Associate Benefit Specialist, Marsh had not received my fiancée’s premium payment for her AICHE-sponsored life insurance plan and her coverage was about to lapse. This letter would’ve been great… if my fiancée had AICHE-sponsored life insurance!

If I didn’t know better, or if she didn’t know better, she likely would’ve called the toll free number in the letter and asked to speak with Samuel Batterson to renew her life insurance policy if she was too busy to recall she didn’t actually have a policy with them. Is this a new style of fishing for clients or just a new style to us? I had seen this type of letter before in which webmasters were sent letters that looked like bills from Domain Registry of America in a scam to get them more business, but I’ve never seen it outside of that instance.

With so many different policies in our real lives, it’s easy to get confused as to which company holds which policy so it’s not entirely impossible for someone to get tricked by this. So, the lesson of the day is to be wary of these types of letters and do your homework. While it’s very likely my fiancée had some sort of AICHE policy while she was at school (and a member of AICHE), that’s a few years back so the coverage probably lapsed long ago anyway. Either way, when you get one of these just double check everything before calling (or sending a check!).

Wasn’t it great whenever you pulled up that yellow Community Chest card in Monopoly that awarded you with $200? In real life, that almost never happens and usually, in the event of an error, it’s always not in your favor. So what do you do? In most cases, you want to call your bank and make sure you have all the pertinent information so that they can resolve it as quickly as possible. In some cases, you’ll want to contact other agencies because fraud could be involved.

ATM Withdrawal or Deposit Discrepancies

First tip: Never deposit cash via an ATM. I never deposit cash in an ATM because if the envelope is lost, which is rarely is but definitely possible, there is absolutely no proof that I put cash into an envelope. With checks, at the very least you can ask the issuer to put out a stop payment and re-issue the check. In the event of a large check deposit into an ATM, I always take the ATM receipt because it identifies the time and ATM I used (the amount deposited is useless from the bank’s perspective because you entered it).

On withdrawals, if you request $100 and get only $20, your account will still be debited $100 unless you contact the bank. They can usually resolve the register and figure out where the mistake was and properly debit your account.

Automatic Debits You Didn’t Authorize

With the advent of Check 21 and the fact that banks don’t even need to send the paper checks around anymore, more and more check transactions are merely automatic debits and credits after some paper processing. At many banks, they just scan the front and back of the check and then process the electronic information, shredding the checks afterwards. As we all know, the OCR (optical character recognition) is pretty good but not 100% accurate, so what happens if there is a mis-read? This is the same procedure you should follow if you’ve fallen victim to an automatic debit scam, call your bank and notify them of the mistake. Usually they can trace back into their records, locate the check, and fix the error without incident. If you’ve been scammed, in addition to calling your bank, call your state’s attorney general as they will investigate and go after the scammer.

Didn’t it seem like the day after you applied for and was approved for your first credit card that the credit card companies keep jamming more credit card offers down your throat? Well, the reason why it seemed that way is because once you got that first card, you joined a very exclusive fraternity of credit worthy borrowers and now every Tom, Dick and Harry credit card company wants to give you a special promotion rate or special balance transfer or special cashback reward program - and you’re probably sick of it. I know I was and when I got my first credit card in college, about 8 years ago, OptOutPrescreen didn’t exist. Back then, we had to resort to techniques like writing “return to sender” or packing ripped up catalogs into those postage-paid response envelopes, which, if they didn’t work, certainly were a lot of fun. Now, you can just go to OptOutPrescreen and stop all those credit card offers from coming in the first place.

Why should you stop the mailings? Well, first off you lower the number of opportunities you give identity thieves to pilfer your good name. You’re in this exclusive fraternity now, don’t let it go to waste! Whether or not someone actually will steal your mail, apply for a card, and then intercept it again is not very probable, why introduce the risk when you don’t need to?

Second, you reduce the amount of paper waste that’s generated for no good reason. Considering response rates for direct mail is in the single digit percentages, that’s a lot of envelopes, letters, fake plastic cards, and shipping for absolutely nothing. Do your part for both the environment and your sanity by stopping the mailings!

You would think that most people know that payday loans are ripoffs and the ones you use them are either in dire financial straits or think they’re in dire financial straits but as it turns out, a lot of folks don’t realize refund anticipation loans are ripoffs too because they usually are offered by reputable companies like Jackson Hewitt, H&R Block, and other big tax preparer names and not Fast Cash, Check Cashing R Us, or other seedily named joints. However, if you ever look at the fine print, you’ll see fees and interest rates that would make a check cashing shop blush. And an even scarier tactic nowadays is that a lot of these preparation houses don’t even need a W-2, they’re offering paystub loans and you only need to bring in your December paystub in order to apply for these loans.

When I tried to figure out what those fees and rates were like by searching H&R Block and Jackson Hewitt’s websites, I found nothing (I only expected to be able to find the fees since the rate would be dependent on the amount and your credit worthiness). All I found were offers of instant money loans and instant refund anticipation loans and to make matters even worse, they were even offering to put the whole amount onto a debit card (taking advantage of a little breakage?). But what I did see was that H&R Block was partnered with HSBC Bank USA and Jackson Hewitt was partnered with Pacific Capital Bank, N.A. or HSBC Bank USA (your loan could come from either). HSBC Bank USA is headquartered in Delaware and Pacific Capital Bank is an independent bank in California - Delaware has no cap on usury interest rates and California sports a fat 36% cap. By partnering with banks located in capless or high cap states instead of offering these loans themselves, they can take advantage of charging higher rates. (Incidentally, partnering with banks in capless/high-cap states isn’t something that I think is deceitful or under-handed, all the credit card companies are headquartered in capless or high-cap states)

And if you think folks are diligent enough to read through the fine print to fully understand fees and interest rates to realize it’s a ripoff, they’re not. If you’ve ever installed software, how many times have you actually read the Terms & Conditions? I’ve never read it, heck, I’ve never even scanned it. Unfortunately one scenario that does happen a lot is that of a language barrier, where the tax payer isn’t a native English speaker and when they go to a tax preparer (if I couldn’t read English well, I’d definitely go to a preparer - you don’t want a mistake costing you thousands of dollars), they don’t understand that what they’re getting is in fact a loan and not their refund! It’s like those scumbags who are offering predatory mortgage loans and getting retirees to refinance a fully paid off home into a 3/1 ARM are preying on the simply fact that most people don’t read through or don’t understand the fine print, even if they’re laid out “obviously” on a HUD-1 form!

The bottom line is that you should avoid these paystub or refund anticipation loans like the plague because that’s what they are, one little loan can follow you for years if you’re not careful about paying it off. It’s that way with payday loans too except you can see it coming because you actually have to walk into shady looking places instead of a nicely lit office with a nicely dressed tax preparer.

Image courtesy of Jym Ferrier.

Carl D. Grossman reneged on a deal and stole $150 from me. Yes, I am a sucker for sending my money to a stranger and trusting he would refund it if I couldn’t use a voucher. I am not crying about the voucher, I just think it’s strange he would rip me off at the tail end of the deal in this way and I was hoping for some advice as to what I should do.

Remember when I posted about needing frequent flier vouchers for the trip I’m going away on this next week to Lake Tahoe? Well, a certain Carl Grossman of Joplin, MO emailed me saying he had a Delta voucher that I could try to use. I talked with him a couple times on the phone and he seemed and sounded like a honest guy. Carl, at one point, even told me he was an honest person and I believed him.

Carl Grossman wanted $250 for the voucher and we agreed that I would send him $150 now and $100 after I redeemed the voucher, while I trusted Mr. Grossman I did hedge myself a little so in the event he was scamming me (which was still kinda likely depending on what unsavory characters you deal with) I would only be out $150. He agreed. This is what vexes me… he sent me the voucher Fedex next day and I received it the next day. When I went to the airport I was told 1) I needed Carl D. Grossman actually there with photo ID and 2) there weren’t any discounted seats available (some Q or Z class, I forget). So, I called up Carl with the bad news and said I had to send it back. He agreed to send me my money back and I mailed off the voucher. Except the money never returned.

A week later I called Carl Grossman and he said he sent a money order and would look into it with the post office and call me back. I waited two days and called but he didn’t answer. I called his home number which he answered and he hung up on me. I’d been officially scammed and I’m not exactly sure what I can do, that’s where I need your help. What should I do? (besides suck it up)

It’s easy to promise to have an oil change done in 15 minutes if you don’t actually change the oil, isn’t it? NBC4 in LA put cameras in cars and then sent them over to Jiffy Lube to get some service done, turns out 6 of the 9 didn’t actually perform the work promised but charged customers anyway. In response to the expose, Jiffy Lube fired all the mechanics and installed their own cameras in 31 LA stores. Interesting is the fact that this is the third time in three years they’ve been told to “clean up their act.”

My advice to anyone who gets any sort of work done, always watch them if you can and always ask for the old parts. Getting something swapped out? Ask for the busted or worn out part. Then check the part that’s in its place, it better look new. If the mechanic isn’t pouring oil into your car, then he’s not changing your oil. If you have no idea what that even looks like, do research on the Internet. Don’t be a sucker.

Thanks to The Consumerist for picking this up.