Credit cards: Be careful about those promos

Credit cards offer promos, but is a gift certificate for a big card purchase really worth it? See answer to question No. 7 in the reader mailbag.

Jonathan Bainbridge/Reuters
MasterCard credit cards are seen in this illustrative photograph taken in London Dec. 8. Credit cards offer promos, but check it out thoroughly before you change your spending habits.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Basic credit questions
2. How to make money blogging?
3. Favorite podcasts
4. Television compromise
5. Connecting with teens cheaply
6. Overly long “to-do” list
7. Maximizing credit card promos
8. Refinance or not?
9. Quibids?
10. Plant-based snacks

This year, I’ve found myself in two different Secret Santa exchanges.

When I was younger, I used to worry way too much about what I was receiving. I didn’t want to participate in such exchanges because I didn’t want to receive something awful while putting effort into giving something nice.

Now, I barely care what I receive. It’s all about making sure the recipient gets something worthwhile and enjoyable that puts a smile on their face.

Oh, how perspectives change.

Q1: Basic credit questions
I’m a 23 year old University student. I’ve had a credit card since I was 18 (which I just recently – and finally – paid off), and I have a student line of credit with at $12000+ balance. Furthermore, two years ago I took out a loan from my credit union to buy a car which is also paid off. My question is, how do I know what my credit score is and if it’s good or bad? Also, what’s the best way to actually build a good credit score? I was always told I could but something with my credit card (perhaps a CD or something, nothing more than $50), then pay it off right away rather than make minimum payments which just costs more interest. Is this true?
- Tyler

You can’t know your exact credit score without buying it from one of the credit agencies. They all offer programs where you can pay them some small fee to peek at your calculated credit score.

Of course, your credit score is based on your credit report, which you can view for free at annualcreditreport – it’s a site run by the Federal Trade Commission to allow people to view their credit report annually for no cost. Although you don’t get to see your actual credit score, you will be able to verify if there are any incorrect reports on your credit history and see what positive reports are there.

You can also use a number of credit score estimators, like the one at MyFICO, to use the information on your report to get a rough estimate of your credit score. From what I’ve seen, such estimates are usually accurate to within ten points or so.

As for improving your credit, you’re right in that making small purchases and paying them off is the best way to build credit because it demonstrates a positive payment history. I would suggest that you use the card to handle some routine purchase, like gas or groceries, then pay the bill in full as soon as it arrives.

Q2: How to make money blogging?
I have been wanting to find out exactly HOW to accumulate a few dollars of income through click-ads. You had mentioned in your Simple Dollar Rule #11 that we should all try to generate a few dollars from our blog. I know that without an appropriate amount of traffic, one may not generate enough each month to fill a pocket. But that’s not really my concern right now. I just want to know the ‘how-to” so I may feel more motivated about my (not-so-skillful) writings. You see, I love to write and I love to snap (photos). My dream is to one day quit my corporate cell, I mean, cube, and to be able to hold down a lower-paying job closer to home so that I can finally spend more time to write, photograph and jog, my three biggest passions.
- Rachel

Blogging is certainly one way to earn some pocket money, but there are many ways to do that. Earning money from a blog is very interesting because at first, you don’t earn much of anything at all, which weeds out people who won’t stick with it.

You earn money in the long run by having an archive of good posts that others have linked to. As a result, these older posts show up in Google searches, bringing people to your site. The more good older posts you have, the more people you’ll bring to your site without any additional effort.

What you need to do is to ask yourself if you’re writing anything anyone would care about. Can you envision a reasonable scenario where someone would Google a term, find your page, and be pleased with what they find, enough to stick around and read more? If you’re not writing that kind of stuff – either useful or entertaining or, ideally, both – then you’re going to have a very hard time succeeding at blogging.

Once you’ve done this, though, then earning money is fairly easy – just put some ads on the site and be patient.

The key is content. If it’s good stuff, all you have to do is get the word out a little bit (join some blog carnivals associated with your topic, for one) and then put some ads on your site. Then wait (and keep making good content, of course).

Q3: Favorite podcasts
As a fellow avid podcast listener, I’m always interested to hear what podcasts people regularly listen to. What are your favorites?
- Matt

Aside from a few NPR shows that I listen to in podcast form because it’s more convenient (Planet Money, Fresh Air, Wait Wait, Don’t Tell Me, etc.), I listen to these podcasts regularly.

Radiolab, which is a science podcast that’s probably one of the best things on the internet
Pardon the Interruption, a sports podcast that keeps me at least up to date on the “watercooler” talk in the sports world
This American Life, a collection of audio essays on a seemingly infinite array of topics
The B.S. Report, a podcast ostensibly about sports but tends to branch out into all sorts of topics
The Dice Tower, which focuses on board and card games
Grammar Girl, which is a very short entertaining podcast on grammar issues

There are a lot of great podcasts up there. This batch is pretty much all I can keep up with during a given week, since I usually listen to them in the background and play them twice or three times each so I can absorb more of them as I’m working.

Q4: Television compromise
My wife and I have strongly contrasting views on our television. To put it simply, I barely watch it. My wife watches about 10 hours of television a week. I watch roughly 3 hours and those are usually sporting events outside of our home. Our satellite bill is about $100 a month because of all the premium channels we get. Now, I don’t begrudge that money being spent, but each of us gets a certain “allowance” each month of money to spend freely. I think that money should come out of her allowance, but she says it’s just a shared bill. What do you think?
- Ronald

I think that you both have a point, to some extent. I also think this is an issue you need to resolve ASAP before it dissolves into something poisonous in your marriage, because I can sense some angst in your email.

Your wife’s point is that this is a service that you can use any time you wish and if you choose not to, that’s your choice, but it shouldn’t be eliminated because it’s a service that is actually used in your home. Your point is that it’s a service that I’m paying for and not using.

Here’s my honest suggestion: take note of how much television you both watch for a few months. See whether or not the disparity is really as big as you’re thinking. You might be surprised to find that your wife doesn’t watch as much as you think or that you watch more than you think.

If you have hard numbers that shows that you do spend a lot less time watching than her, then consider a proportional share of the billing. Take the cable bill, divide it in half, and then add that much to your respective “mad money” for the month. Then, you each pay a portion of the bill out of your “mad money” that lines up with how much you’re using it.

The important thing is to not let this fester, as it can grow into a much bigger problem over time.

Q5: Connecting with teens cheaply
Lately, I’ve felt like there’s a big gulf between me and my two daughters (age sixteen and fourteen) that didn’t used to be there. They’re not the partying type – in fact, they don’t leave the house all that much. It doesn’t feel like we have the same connection we used to have, though, and I’m trying to find inexpensive ways to rebuild that connection. Any ideas?
- Charlie

My usual suggestion is to tell parents of teens to institute a family night or two a week, but that doesn’t really seem to be needed in your case if your kids are already homebodies. What you need is simply some activities that you all do together.

If you want to make a formal thing out of it, start a family game night where, once a week, you all play games together. It gets you all around the same table for an hour or two, at least.

If you want something less formal, just ask your children what they’d like to do this evening together, your treat. You might be surprised as to what they come up with.

Q6: Overly long “to-do” list
I love the system and it’s helped me a lot. One problem I have though is that my “Next Action Steps” list is INCREDIBLY long. With everything personal plus work related (and a lot of work projects going on at any one time), it’s just a huge, huge list. David Allen suggests organizing by location where it needs to be done (i.e. “Phone”, “Computer”), but even that doesn’t help, as it’s still a very, very long list. (Many people must have this problem, as I’m not the only one with a lot on my plate.) I find the mix of important and un-important things on the list makes it difficult for me to get the most important things done, as the important next action steps get lost in the huge number of things on the list. Do you prioritize? Or organize it some other way? I find every morning I’m going through the list again and re-prioritizing, which takes a good bit of time and is not very productive (or in the spirit of the list, which is supposed to simplify). Do you have thoughts on this? (or could you share some old version of your “next action steps” list as it looks to you?)
- Valerie

My biggest trick is to simply recognize that a lot of this stuff is realistically never going to happen. If my list gets beyond about 25 or 30 items, I make a conscious effort to whack some items from the list, either by rapid-firing the very short ones or by other means.

Other means? I’ll just admit to myself that the closet isn’t getting cleaned out any time soon. Then, I’ll remove that item from the list and put it on a “someday/maybe” list. Or, I’ll recognize that returning some minor call isn’t really important and I’ll just completely purge the thing.

If you have a list that’s that long, then you’ve got a sure sign that you are stuffing too much into your life. That means it’s time to whack the unimportant stuff.

Q7: Maximizing credit card promos
you see saving is also a top priority for me, i do save, as much as my income is variable (i run a business) i can forecast my future earnings but I still set fixed savings.

here’s the deal. my credit card has a promo right now, if i use it for a single transaction of 10 thousand pesos (im from the philippines) i would get a P500 worth of gift certificates in return that i could used at various shops (mostly clothing stores) for FREE!!!

i was so excited when i learned about this promo!but want to make sure i am doing the right thing before i push through with it, you see i only use my credit card if they have appealing promos and freebies,and i ALWAYS pay my bill FULL and ON TIME,so that i could really enjoy the benefits. My business gives me the opportunity to use it for business purposes (PROMISE) and i consider that to be a huge advantage,because i get promos without spending on personal items.

i have a 150 thousand credit line with the card with this promo,i want to use it and charge 500 thousand (around $12,000 ) so i could get 25 thousand ($600) worth of free shopping!!! december is coming near so i can use this to purchase gifts for my family as well. the problem is like i said i only have 150 thousand credit line, and because i don’t carry any balance, i only need to have an extra credit line of 350 thousand ($8,200) for me to complete this target,to do this i will dig into my savings and withdraw this amount and make the advanced payment on the card so the ceiling would go to 500 thousand when i use it. is it worth it?

learning from the simple dollar self discipline and clear goals makes me hesitant to touch my savings,if i do this, the possible time that i could return the said amount to my savings would be in february next year. because the goods that i will purchase with the card would be sold at terms and will be paid by my clients in 60 days,this means i will get the amount by the end of january,that’s why i said i would have surely placed it back in my savings account by february. should i do this?should i touch my savings so i can get advantage with the promo? if it helps,i would still have my emergency fund even if i do this,i just feel a little uncomfortable doing it and parting with my savings for almost 3 months,just to have some sort of free shopping spree. I just want to hear your opinion on touching savings for things like this.
- Leon

This is a very bad idea, in my opinion. You are putting cash savings at risk in order to cash in on a fairly small credit card reward while also leaving yourself in a very precarious position where your entire emergency fund is held by the credit card company. I would never, ever put my family at that kind of risk for a few Christmas presents.

If you want a much better solution, take the $250 from your savings account and use that to buy the gifts. Then, over the next few months, replenish that money so that you’re right back where you started.

Credit card rewards are a nice perk, but you should never put your own money at risk in an effort to try to squeeze out more of them, especially when it requires you to hand over your savings and charge the card like crazy.

Q8: Refinance or not?
Should we refinance our mortgage into a 15-year fixed mortgage from our 30-year fixed?

Our current mortgage has a balance of $358,000 and is at 6.5% fixed. We have 25 years left on it (it started out at $380,000 and we made some extra principal payments over the last few years).

We suspect that our house might appraise at between $330K and $350K. Yeah, that sucks…

We have about $100,000 to put down on the mortgage. About $60,000 is in a full-service (non-retirement) brokerage account that we were hesitant about touching until now. The rest is in savings accounts. We would like to only put down $80K – $90K because we still want to have some savings for emergencies. We have about $190,000 in retirement accounts that we don’t plan on touching. We are in our early 30s. Together, we make about $160,000 yearly gross income. No other debt (besides this awful mortgage) and no kids (yet).

Do you think we should pull that money out of the brokerage firm and refinance? I don’t feel so bad about doing it because the interest rate on our mortgage is so high and I really want to avoid paying PMI if we refinance.

I’m calling the mortgage broker tomorrow, but do you think we’re making the right move? I just hate the fact that we’re paying 6.5% interest on our mortgage. (When we bought the house, we accepted a higher interest rate to avoid PMI.) We also really, really want to have the house paid off in 15 years or sooner, so it’s not really about the lower monthly payment for us.
- Michelle

From my perspective, it depends on how much you would have left in your savings to cover emergencies if you did this. If this move would devour all of your savings and leave you at risk in the case of an emergency, then I absolutely would not do it.

What should you do if you can’t swing it right now? Wait, and save. There’s no real emergency rush to do this, as mortgage rates aren’t going to climb rapidly in the near future.

What’s an adequate emergency fund? I would make sure I could cover two months’ worth of living expenses for each dependent in the house. So, if there are three of you there, you should have six months’ worth of living expenses on hand.

Q9: Quibids?
What are your thoughts on or Websites that claim to allow consumers to win auctions on items at ridiculously cheap prices. Seems like a scam to me requiring entirely too much time.
- Darren

I view sites like this as a combination of a game and a pretty ordinary retail site.

Take the example that Quibids uses. You have to buy bids from them – say, 300 bids for $180. Then, you use those bids in an auction – each time someone bids, the value of the auction goes up one or two or five cents.

I tried out Quibids and most auctions seem to keep getting bids up to about 25-30% of the retail value of the item. Let’s say you’re bidding on a Wii – that means it goes up to $40 or so. To get to that value, literally thousands of bids had to be tossed out there, meaning the site just made about $300 or so from that auction.

Remember, when you see the price paid for an auction, that’s not including the value of the dozens or hundreds of bids the person had to spend to get the item (at a cost of $0.30 to $0.60 per bid) and the hours they had to sit there bidding until they won the item.

However, they do give you the ability to buy an item for the retail price minus the number of bids you placed.

If you were strictly bidding on items that you would buy anyway and don’t care about paying retail price on them, then it’s fine, but I’d rather shop around and get the item below retail. If you’re not doing that, then it’s just a very expensive game.

Q10: Plant-based snacks
My biggest problem whenever I try diets is cravings. I’ll do fine at meals, but in the middle of the day, I’ll start craving foods and without thinking, I’ll snarf something. How do you deal with that with a plant-based diet?
- Mel

There are lots of good vegan snacks, and I keep quite a few around at arm’s length.

Fruits. Pumpkin seeds. Larabars. Nuts. Things like these are my snacks, and they’re very important because they keep me from overeating at meal times. Instead, I just eat a reasonable amount at meals because I’m already at least somewhat full.

I find that having such foods at arm’s length ensures that I’ll eat those snacks instead of being ravenous at meal times or eating something less healthy.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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