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Browse Topics > Finance CATEGORIES 
Financial slump? Financial up-rise? Financial questions? Maybe you just want to know how to create an effective budget. No matter what the financial situation is, feel free to discuss! You never know what you’ll discover.
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Here is an article I found about 5 ill-conceived pieces of retirement advice.
One size doesn’t always fit all, especially when it comes to retirement advice. In fact, some of the most time-honored rules of thumb for managing your finances after the end of your primary working years may not make sense in your specific situation.
On the other hand, they might make perfect sense. As is usually the case, whether retirement advice can be classified as good or bad for you really depends.
Bankrate presents arguments from the standpoint of the devil’s advocate to help you see the old standards in a new light. If nothing else, this exercise may help induce a healthy dose of skepticism when you hear or read advice that passes itself off as the truth.
Reconsider these potentially ill-conceived retirement solutions.

Solution #1 You Can Always Work.
Not so fast, says Gail Cunningham of the National Foundation for Credit Counseling. While Cunningham agrees that working has many pluses -- not only does it boost income, but it’s good for your mental and physical health -- too many unknowns make it chancy to count on a job as part of your retirement package.
She says a lot can go wrong with plans to work into perpetuity:
Your health can decline.
Your spouse’s health needs may cast you into the role of caregiver.
Your company may have other ideas.
Circumstances could make a move away from your job’s location attractive.
Plan to work if you want, but don’t make it a necessary part of your financial equation.
’Continuing to work is a plus, but only if it’s on your terms,’ Cunningham says.

Solution # 2 Pay off the Mortgage

While getting rid of debt doesn’t seem like it could have a downside, there are circumstances where paying off a mortgage might not be such a great move.
Michael PeQueen, managing director and partner with HighTower Las Vegas, a financial planning firm, says the decision to rid yourself of a mortgage is often an emotional decision rather than a financial one.
Sure, a paid-for home can bring peace of mind, but it’s not always the right strategy. Depending on the interest rates involved, it might make better financial sense to invest the cash that would go into freeing yourself from your low-interest home loan and instead put your money into higher-yielding investments.
PeQueen explains how it works: ’Let’s say a female becomes a widow in her early 60s. That could leave her 30 or 35 years worrying about inflation taking a significant portion of her portfolio. Locking it into a guaranteed low rate of return by paying off a fixed-rate mortgage really could cost her tens of thousands, if not more, over her lifetime,’ he says.

Solution #3 You Need X Amount Per Year
You do the math and decide you need $80,000 a year to retire, so you want to put everything in relatively safe vehicles to generate that amount. Fine, but that’s based on the value of today’s dollar. What will it take to maintain your lifestyle in 10, 20 or even 30 years? It’s not that easy to quantify what you’ll need in the face of unpredictable inflation rates.

David Twibell, president of Denver-based Custom Portfolio Group, says when investors grab numbers out of the air, they often forget that their money -- while theoretically growing over the years -- will be worth a lot less based on inflation.
Consider that in January 1975, the inflation rate was 11.8 percent. March 1980 brought inflation up to a whopping 14.8 percent. The past few years have seen a relatively low rate of inflation, but some say that won’t last.
Even if it stays at a benign 3 percent a year, over time your purchasing power erodes significantly. A thousand dollars today would be worth $412 in 30 years.
That unpredictability is why Twibell advises against overloading your portfolio with fixed-return vehicles like bonds and annuities with a low rate of return.
’The typical response I get when initially talking about retirement planning is, ’I just need $80,000 a year.’ Obviously, $80,000 today is far different from $80,000 two decades from now,’ Twibell says.

Solution # 4 It’s Smart to Downsize
Getting rid of the big house once the kids are gone may seem like a good idea. But like any other type of financial decision, it’s good to crunch the numbers first and not simply assume that downsizing is right for everyone.
HighTower Las Vegas’ PeQueen says the fees to buy and sell a home, plus the costs of moving and preparing both homes for these transactions, can negate any financial gain for at least the first few years. And, PeQueen says, a smaller home doesn’t necessarily translate to a lower cost of living.
’In downsizing to a better location, for example, you have to factor in the increased costs, such as homeowners association fees and a higher tax rate,’ he says, adding that surviving spouses often opt for downsizing because memories of happier times prove difficult and they want a new start emotionally.
’And that’s fine, but you also need to look at all options because holding onto their current home could actually be the cheaper option,’ PeQueen says.

Solution #5 Skimp on 401(k) Savings
Sometimes life pelts you with not-so-great surprises; you’re short on cash due to medical bills, home repairs or college expenses. Your budget is already tight, so how do you come up with the money you need? That 401(k) nest egg looks mighty tempting to tap, but you’ve heard enough times that it’s not a good idea. So how about lowering your retirement contributions to increase your income temporarily?
Experts say the solution to your cash flow problem may take some creative thinking (an additional part-time job, working overtime, selling something). But you should not sacrifice your 401(k) contribution.
’Stopping 401(k) contributions is convenient when times are tough,’ says Ted Lakkides, CFP professional and founder of Cygnet Financial Planning, ’but there are (plenty of other) items that can be trimmed off a budget if a person has the guts to look.’
Lakkides says it’s best to comb through current expenses to find that cash, but if lowering your retirement contribution can’t be helped, then avoid going below the employer’s match point. If you feel you must do so, maintain at least a 1 percent contribution, he says, and hike it to former levels or higher as soon as possible.
He provides this warning to those who do give in and lower their 401(k) contribution: Be prepared for major tax-time sticker shock.
’They will owe income taxes on the extra money they didn’t put in their 401(k)s,’ he says.

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I read an interesting article today on Comcast Homepage and wanted to share it. 4 Signs it’s Time to Sell Stock:
Take emotion out
The key is taking the emotion out of the investment process, adds Amy Rose Herrick, a chartered financial consultant in the U.S. Virgin Islands. ’No stock can love you because they’re merely investment tools,’ she says. So, it’s important to set key profit and loss limits on a stock. ’Too much greed or pride can cost you,’ she says.

Here are four guidelines to help you decide whether to sell or hold your stocks.

1. Some stocks begin overtaking your portfolio. Any time a stock comprises 5 percent to 10 percent of your portfolio’s value, look to see if it still fits, Bingham says. Stocks that have risen so fast that they’re now over 10 percent of a portfolio should be gradually pared back.
’Never sell one stock all at once, however,’ he says. ’Sell a little at a time and buy a little at a time.’
2. Company fundamentals change. Crumbling company financials, especially revenue and earnings growth, can spell trouble for a company. These financials can change for many reasons, including losing competitive advantages or changing managers.

One major technology firm is a good example here, Bingham says. Company revenues have slowed and gross profits, which measure the cost of generating those revenues, have declined. On the plus side, the company had a huge cash hoard and fair dividend at the end of its most recent quarter.

Given these fundamental shifts, that stock might now better suit investors gunning for income, not growth, Bingham says.

Xavier Epps, a Washington, D.C.-based financial adviser, advises investors to especially monitor company earnings slumps. Did the company sell a division? Are earnings cyclical, such as with mining companies? Looking at income statements can give investors some insight, he says.

’If management can’t explain earnings declines, reconsider the stock,’ Epps says. ’All CEOs know that Wall Street is looking at earnings.’

Epps recommends avoiding stocks that have sudden run-ups, looking instead for consistent earnings. ’Even in economic uncertainty these stocks perform well,’ he says.

3. Stock price exceeds future growth. To scrutinize a company’s growth outlook, check out forward-looking earnings estimates that are issued by analysts, says Kure, a former equity analyst. They’re usually called consensus earnings estimates and are issued by as many as 40 analysts. They can be found on various financial websites.

Analysts’ estimates that have headed downward for the past several quarters are a bad sign for a stock, Kure says. The reason: Crumbling estimates can drag down stock growth for a while. According to the American Association of Individual Investors, stocks with negative earnings surprises have below-average stock performance for as long as one year. This is called the cockroach effect, where one-quarter of earnings surprises is often followed by several others, says the Association.

For example, after one company announced that its 2014 earnings would be below analysts’ estimates, the stock sank. And it’s risen only 1.9 percent so far this year. ’When revisions are sharp, do some more homework so you can find out what has changed at the company,’ Kure says. ’Be especially vigilant with fast-moving companies.’

Some stocks like Amazon.com Inc. and Twitter still haven’t logged any earnings so far. ’These kinds of stocks are especially risky,’ Kure says.

4. A stock builds a high price-to-earnings ratio. P/E ratios are good metrics for investors to follow, Bingham says. One benchmark is checking to see if a company P/E is overvalued compared with its peers. Another way is comparing the P/E with its 10-year average.

’If it’s much higher, there should be a good reason,’ he says. ’When you buy a stock, you should know it backwards and forwards.’

High-flying stocks also may signal that price expectations have been met, says Herrick, a financial consultant. ’If so, sell and take the profit,’ she says. This method also helps you take the emotion out of the stock transaction, she adds.

Bingham says a good rule of thumb is don’t get greedy ... or irrational.

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How to take control of your debt

There are some aspects of your finances that you can’t control—like the stock market, and others you can—like debt
Making a few smart lifestyle decisions and maintaining some discipline can keep it under control.

While debt can be easily abused, it isn’t necessarily bad. Borrowing to pay for a home, for example, can be good. You gain equity as you pay down your loan or mortgage. Also, your mortgage interest can be deductible on your income taxes.

On the other hand, relying on credit card debt to sustain your lifestyle is like playing the lottery to fund retirement. The math is overwhelmingly against you.

Do the math
Credit cards offer instant gratification for people who want something they can’t afford. Often bearing interest rates of 15% or more, this kind of debt erodes your ability to save and costs you dearly over time if you continue to carry a balance.

For example, if you borrowed $1,000 at an annual interest rate of 15% to buy a new television and made monthly minimum payments, it would take more than 4½ years to pay off the debt. The $1,000 loan would end up costing you $1,375 with interest. You also would lose any chance to earn a positive return on the $1,375 by saving or investing it.

Live with a budget
You can avoid such bad debt by living below your means. A detailed budget can get you on track and help you stay there. Just as dieters who keep a record of what they eat tend to lose more weight than those who don’t, people who monitor their spending habits often have an easier time sticking to a budget.

Make saving a priority. One way to do this is by setting up an automatic direct-deposit plan through your bank or investment company. Ensuring the money never hits your wallet will reduce your temptation to spend it. You should also establish a financial safety net—at least 6 to 12 months’ worth of expenses in an account that’s easily accessible in an emergency.

A budget can help you watch expenses and divert more money to saving or paying off bills. Pack your lunch instead of eating out. Forgo the $4 mocha latte supreme and order regular coffee. Keep your car after it’s paid off rather than trading it in for the latest model—and a new set of payments. It all adds up.

Gain control of your finances
If you have credit card debt, you can dig yourself out. Find the card with the highest interest rate and pay as much as you can above the minimum payment each month while continuing to make minimum payments on other cards. Once the first card is paid off, divert those payments to the next most expensive card, and so on.

If possible, consolidate your cards under the most favorable interest rate available and pay as much as possible toward your monthly balance. Even a credit card is OK if you can pay off the balance every month. You get the convenience of using a card but avoid paying interest on products such as groceries, food, entertainment, and travel.

If you’re in serious trouble, consider debt counseling. Reputable sources such as the National Foundation for Credit Counseling can help consolidate your debt into one monthly payment and negotiate with your creditors for lower interest rates or minimum payments.

In the end, it’s all up to you. Stick to your budget and live within your means. Then you can manage your debt and not let it manage you.
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According to FINANCE @ http://on.fb.me/11fk7Z8
It is a fact that 25% of women think money makes a man sexier. What do you think?
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4 Easy Steps to Raising Money Smart Kids:
Jonathan Clements is one of the few parents that has made a big effort at raising financially literate children. A former personal finance columnist at the Wall Street Journal, Clements is now the director of financial education at Citi Personal Wealth Management. He started family money lessons at age 5 with his children, who are now twentysomethings with, he tells me, enviable money management skills.

Clements believes there are four simple guidelines to raising money-smart kids:

Make them feel like the money they spend is theirs One way to do this is pay an allowance, explain what the money is for and never give in when they ask for more. “The first rule of parenting,” Clements jokes, “is to never negotiate with terrorists.” With young children, play the soda game. When you eat out offer $1 if they drink water instead of a soft drink. It’s shocking how often they take the $1. Pay allowance to a bank account so that they must make a withdrawal before they can spend.
Tell family stories that illustrate money values Clements’ own grandfather inherited and squandered a small fortune. He says he grew up hearing the story over and over from his parents; it ingrained in him and his siblings the lesson that money spent is not easily replaced. Share stories about your humble roots or how you struggled when starting your career. That way your kids will understand they must work to earn their lifestyle. “We all had cockroaches in our apartment at one point,” Clements says. “Don’t be afraid to dress up your story a little bit for emphasis.”
Lead by example Even if you are not a financial whiz (and who is?), you can set a good example by paying your bills on time and staying out of debt troubles. “If your kids know you’re up to your eyeballs in credit-card debt, they aren’t going to pay much attention to any wise words you might have about managing money,” Clements says. “Your kids are more likely to do as you do, not as you say.”
Manage expectations In their teens, Clements’ kids clearly heard what Dad would and would not pay for as the kids reached adulthood—how much he would pay toward college, what kind of support they could expect after college and how much he would pay towards a wedding. This gave them a realistic sense of what was coming and “no bruised feelings” later.
And there you have it. The hardest part may be consistency with your message and, for some, staying out of money trouble themselves. That’s all the more reason to commit to a plan like this, which will benefit you too.

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10 Money Mistakes Everybody Makes
By Brandon Ballenger | MoneyTalksNews – Mon, May 7, 2012 1:20 PM EDT

Two weeks ago, during Financial Literacy Month, USA Today ran an article suggesting my generation needs to get a clue about money. Citing studies showing most young people have “poor financial literacy” and leading with the story of a 29-year-old who can’t budget, the article says, “Today’s twentysomethings hold an average debt of about $45,000, which includes everything from cars to credit cards to student loans to mortgages.”

At 26, I’ve accumulated $14,878 in student loans – not that bad compared to other students I’ve met, but not good considering I borrowed to get a graduate degree that I probably didn’t need. That’s my biggest blunder so far, but when it comes to money, older isn’t necessarily wiser.

[Related: 5 bargain summer destinations]

CNN tallied up the national average consumer debt at the start of the year: $210,236. Even if you take mortgages out of the equation, it’s still more than $36,000. And according to an April poll hosted by the National Foundation for Credit Counseling (NFCC), “When asked to describe the state of their personal financial situation, 80 percent of more than 1,400 respondents admitted their finances were in need of a major overhaul.”

How many of these mistakes have you made?

1. Paying much, earning little

Bad move: Paying 20 percent interest on a credit card while earning 1.25 percent on your savings.

Better move: After ensuring you’ve got an adequate cash cushion for emergencies, use low-earning savings to pay off high-interest debt. Exception: if there’s any chance you’ll lose your job, gather as much cash as possible.
2. Buying new when used would do

Bad move: Shelling out $20,000 to $30,000 for a new car.

Better move: Avoid a monster depreciation hit by buying used. Cars are made better today than in years past, which makes buying them used less risky.
3. Passing up retirement plans

Bad move: Not participating in your employer’s 401(k) or other retirement plan at work, especially if they offer matching money. Not only are you failing to save for retirement, you’re missing potential tax deductions and something rare in the financial world: free money.

Better move: Sock all the money you can spare into a tax-advantaged retirement plan like a company 401(k) or an IRA. Take advantage of employer matching contributions and tax breaks.

4. Being the first on your block to own the latest gadget

Bad move: Waiting in line, paying a premium, or worse yet, borrowing so you can own the latest tech bells and whistles.

Better move: Being first is an expensive pastime. Wait a few months and you can own a debugged version for less.

5. Paying retail for stuff you rarely use

Bad move: Spending big bucks on a ladder, lawnmower, snow blower, or other expensive hardware you’re going to use infrequently.

Better move: Borrow rarely used stuff from friends or family, rent it, or form a neighborhood co-op to share the expense, storage, and use among the people on your block. Going in on something with just one neighbor reduces both cost and clutter by 50 percent.

6. Paying extra for low deductibles

Bad move: Paying a lot more for car, home, or sometimes health insurance because it includes a low deductible.

Better move: Self-insuring by raising your deductibles to as high as you can comfortably afford. Raise your car or home insurance from $250 to $1,000 and you can cut your premium by 15 to 30 percent.

[Related: 5 Messy Money Mistakes]

7. Buying books

Bad move: Paying $29 for a best-selling hardcover that isn’t as good as your friend said and that you found too boring to finish. Even if it’s great, how many times are you really going to read it?

Better move: Reading the copy you already paid for – it’s sitting on the shelves of your local library. And you might not even have to leave your desk to get it, because it could be available as a free download – see our article Thousands of E-books: Free.

8. Paying for water

Bad move: Spending $1.50 for a plastic cylinder containing an abundant and freely available natural resource: water.

Better move: Buying an insulated water bottle and filling it yourself. Don’t trust your local water quality? Purchase a home water filter.

9. Buying into brands

Bad move: Paying $8.50 for 100 name-brand tablets of acetaminophen.

Better move: Looking a few inches further down the same shelf and getting the 500-tablet bottle of the generic brand with the same exact ingredients for $11.99, thus saving 70 percent. Read 7 Things You Should Always Buy Generic and stop contributing to some big company’s advertising budget.

10. Wasting savings

Bad move: Saving $500 a year being a little more frugal, then wasting it on a $2 coffee every weekday morning.

Better move: Whenever you figure out a way to carve a few bucks out of the budget, increase your savings by a like amount. Otherwise, you’re likely to fritter it away elsewhere – the financial equivalent of running in place.
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The Inflation of Life - Cost of Raising a Child Has Soared

CNBC – Mon, May 7, 2012 11:03 AM EDT
Your little bundle of joy is going to require a wad of cash.
The cost of raising a child from birth to age 17 has surged 25 percent over the last 10 years, due largely to the rising cost of groceries and medical care, according to the Department of Agriculture, which tracks annual expenditures on children by families.
The government’s most recent annual report reveals a middle-income family with a child born in 2010 can expect to spend roughly $227,000 for food, shelter and other expenses necessary to raise that child - $287,000 when you factor in projected inflation.
And, no, the bill does not include the cost of college or anything related to the pregnancy and delivery.
’If you sat down to tally up the total cost of having children, you’d never have them,’ says Timothy Knotts, a father of four and a certified financial planner with The Hogan-Knotts Financial Group in Red Bank N.J. ’It’s a very expensive adventure.’
Talk about a life-changing event. That’s a lot of vacations, clothing, and restaurant dinners you may no longer enjoy.
Plan Early
Ultimately, of course, the decision on whether or not to expand your family has little to do with dollar signs.
For most prospective parents, kids are the central priority around which all other lifestyle decisions get made - career moves, housing choices, where to live.
Because of its financial impact, however, it’s wise to begin planning for parenthood as early as possible, says Matthew Saneholtz, a certified financial adviser with Tobias Financial Advisors in Plantation, Fla.
’You don’t want to get too hung up on whether you’re ready financially, because no one is ever really ready and it works out in the end, but you do want to think about how you see that first year with a new baby,’ he says.
Among the first issues you’ll want to address:
Will you both return to work or will one of you quit to care for the child?
Does your employer offer maternity or paternity benefits?
Are you going to need a bigger car?
How much will your health insurance premiums climb after baby makes three?
You won’t necessarily have control over the process, but you should also discuss how many children you’d like to have and when you’d like to have them, as that affects the timeline for getting your financial house in order.
Ideally, says Saneholtz, you should pay off your credit cards and put retirement savings on autopilot before you welcome a baby.
The four-bedroom house with a fully equipped nursery can wait.
Couples should resist the urge to splurge on a house at the top of their dual-income budget, says Knotts, since you may change your mind about whether or not to return to the office after the baby arrives.
’Our advice to clients is any time there’s a life changing event, be it a baby or your own retirement, don’t make any huge changes,’ he says. ’Take your time. Do you want to be in a different school district, or closer to relatives or work? There’s a lot to think about.’
Testing 1-2-3
Prudent parents-to-be should also practice living on less before the big day arrives, says Chuck Donalies, a certified financial planner with Investment Planning Associates in Rockville, Md.
’Review all your expenses and cut out what you can,’ he says. ’Almost every household budget has some fat in it.’
Keep in mind that your annual medical expenses will almost certainly rise after you bring your newborn home.
Mark Lino, a USDA economist, notes that healthcare costs for the average family have increased 58 percent over the last decade, faster than any other expense component in the survey.
’With kids in particular, you’re going to have emergencies, and while you might go without for yourself, you’re going to take your kids to the doctor when they have a fever,’ says Knotts. ’Someone’s going to break an arm or knock out a tooth, and that could cost you a few hundred or thousand dollars each time.’
As a starting point, Knotts suggests living on 90 percent of your after-tax income, using the money you save to fund an emergency account worth three to six months of living expenses.
If one of you plans to quit work to care for the child, your new spending plan should reflect the projected loss of income.
You can also apply those dollars toward a life insurance policy after the baby comes along, says Donalies, providing protection for your little one (and your spouse) in the event something happens to the breadwinner.
Donalies recommends a term life policy that covers your family until well after your child is out of college.
’The cost of a term life policy is so low that you should have a policy until your child reaches age 30,’ he says.
Ka-ching: Child Care
If you both plan to continue working, and you don’t have family willing to provide free labor, you’ll have to factor child care costs into your budget.

Such costs vary by region, as does the type of care provided, but the average annual price tag for full-time care in 2010 for an infant in a child care center ranged from $4,650 in Mississippi to $18,200 in the District of Columbia, the National Association of Child Care Resource & Referral Agencies reports.
The average annual cost for full-time care of a 4-year old drops to $3,900 in Mississippi to $14,050 in the District of Columbia.
Nannies are more expensive still.
According to the International Nanny Association, nannies who live outside your home can cost more than $3,000 per month for full-time care, and as an employer you’ll be required to pay their Social Security taxes.
Ka-ching: College Tuition
There’s no rule that says you have to help your child with college expenses, of course, but if you plan to do so, you’d better start budgeting for that as well.
The average cost of a four-year college for in-state residents, including tuition, fees, room and board, climbed 6 percent for the 2011 and 2012 academic year, averaging $17,131, the College Board reports.
A public four-year school for out-of-state students cost an average $29,657 this year, while four-year private colleges cost more than $38,000 per year.
Knotts cautions parents, however, to save for retirement first before throwing money into a tax-advantaged 529 college savings plan. After all, there are no scholarships or loans for retirement.
Manage Money and Expectations
Finally, remember that it’s ultimately you who decides how much you’re willing to spend on your kids.
Families with higher incomes, for example, tend to spend more on discretionary expenses like Apple (AAPL - News) iPods and Decker Outdoor’s Uggs - things your child may want, but doesn’t need.
The USDA report shows that a family earning less than $57,600 per year can expect to spend a total of $163,440 on a child from birth through high school; parents with an income between $57,600 and $99,730 can expect to spend $226,920; and families earning more than $99,730 can expect to drop $377,040.
’Kids don’t have to have all this stuff,’ says Knotts. ’We are a generation where we feel like we need to give our kids all of these experiences, but you can do a lot with your kids without spending a lot of money.’
Children may be a blessing, but they don’t come cheap. Families that plan ahead not only have better control over their budgets, but are often able to do more with less. They’re also better positioned to ensure their own financial goals don’t get derailed along the way.
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Banks slash retailers’ debit card fees
By Jose Pagliery @CNNMoney May 3, 2012: 5:12 AM ET
NEW YORK (CNNMoney) -- With every swipe of a customer’s debit card, small businesses and other retailers must pay transaction fees to the card issuer.
But those fees have been sliced almost in half, due to a government cap that was imposed last year, according to a Federal Reserve report released this week.
The fees Visa (V, Fortune 500), MasterCard (MA, Fortune 500), Discover (DFS, Fortune 500) and several smaller companies charge for each debit card transaction now average 24 cents, down from 43 cents in 2009, according to the Fed.
Before the cap was instituted as part of the Durbin Amendment, many small shops complained that transaction fees were excessive and cut into their revenues disproportionately. The amendment barely made it into the 2010 Dodd-Frank financial reforms after a bitter Congressional fight.
I can’t find qualified employees
Retail and grocery industry trade groups said this week that the measure has largely helped businesses. The cap, which went into effect Oct. 1, has pushed down costs and revealed just what each card processing company charges on average.
’For the vast majority, this has been an improvement,’ said Mallory Duncan, a National Retail Federation lawyer who lobbied for the law’s passage.
Unexpectedly, some shops selling low-cost items have been hurt, trade groups say. As part of a push in the last five years to get dollar stores, coffee shops and the like to add swipe machines, credit card companies agreed to charge them transaction fees lower than other retailers.
But those fees have more than doubled in recent months, reaching the 24 cent average like all other shops, Duncan said. So retailers selling 99-cent cups of coffee may now be paying almost a quarter in fees on a sale.
Card companies ’followed the rule but not the spirit of what the Fed said,’ Duncan said.
Following the Fed’s report, which was released Tuesday, the retail federation issued a statement saying debit fees haven’t fallen far enough.
According to the Fed report, Visa and MasterCard are charging shops 24 cents on average, while Discover’s rate is lower, at 17 cents. A dozen smaller companies fall into a similar range.
It’s a sharp fall from what the big three were charging in 2009, when the average was 55 cents for each transaction.
Today, the cap is set at 21 cents, plus a percent of the sale amount.
In the age of plastic, the total amount buyers put on debit cards has grown. In 2009, $1.4 trillion was spent in 37.6 billion debit card transactions. Last year, $1.8 trillion was spent in 46.7 billion transactions.
End of FDIC program may hurt small firm lending
It’s still unclear whether the savings from lower fees are being passed on to consumers. It’s even unknown whether most shops have seen the savings themselves.
Some have fallen victim to a legal loophole, according to Robert Day, managing partner of Merchant Relief Council, a Tustin, Calif., group which seeks to protect retailer profits.
His explanation involves credit card processing companies, which fill middleman roles between shops and banks.
’Debit card companies had to lower fees to processors, but there’s no rule that says the processors have to pass that on to the merchants,’ he said. ’They’re pocketing that savings for themselves.’
Retailers are also having a hard time determining what they’re being charged per transaction because what they pay is sometimes bundled with other fees, according to Tom Wenning, a lobbyist with the National Grocers Association.
But it’s better than the non-negotiable, unregulated rates grocers saw in the past, he said.
’While it’s not everything we’d hoped for, it was at least a step in the right direction,’ Wenning said. ’This put in place at least some transparency.’
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A mortgage broker is promoting refinancing although I only expect to be in this home another year. He claims that it will not cost anything and our rate will drop saving hundreds a month. Does anyone understand how this could work?
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