Where to Get a Good Credit Financial Education

Let’s face it; our public school system is broken. Even though credit and personal finance is one of the most important aspects of our daily living, basic financial knowledge is rarely taught in our schools. What little financial information learned is taught from our parents and that information is passed down from generation to generation. Unless your family has a business, it’s quite possible that you know very little about finance.

While this blog is about Saving Money Using Credit Cards, without a basic understanding of finance, you may not understand what I’m writing about. I was fortunate enough to be raised in a family that had a business that taught me how to balance the books, raise cash, and make a profit all at the early age of six. By the time I was in High School, I all ready worked 10 years when the kids my age were getting their first job at McDonalds.

Needless to say, the Los Angeles Unified School District did not contribute to my financial education.

But what about you, where are you in your financial education? My guess is that like everyone else, you have little financial knowledge and this, perhaps, is why you are reading this blog.

Regardless, you need to start somewhere and going back to High School may be your answer. I don’t imply that you physically attend classes, but picking up some financial reading material may help aid you in your education.

One of the best resources to get started with your financial education is What Every High Schooler Should Know about Credit and Finance, by Jarrod Williamson.

The reality is that many of the areas covered in this book are simply not taught to young people. Thus many people, including adults, don’t know the important and, in some cases, hidden and nearly secret information about the way financial things really work in American society.

– Thomas Mayhew, Publisher, CrimsonBooks.

I don’t think that I can sum it up better than what Thomas just did! You need a financial education that our public schools did not provide you.

Use Your Discover as an Airmiles Card

This quarter (January - March), remember to sign up for your 5% bonus at the Discover website and your card will be better than an Airmiles Card for purchases in the travel industry.

Every three months, Discover promotes different types of industries where you can increase your cashback bonus from 1% to 5%. If you book any hotel rooms, flights, car rentals using your card, you get a huge discount.

Typical discounts using your airmiles credit card are about 1%, but during the first three months of the year, your Discover card will pay you back 5x the amount.

The only catch is that you have to sign up for the bonus once you login to your account or just call the 1-800 number on the back of your card and ask for the bonus for January - March.

Don't Abuse Your Credit to Get "Free Money"

An interesting article on ArtWoo where the author makes some valid arguments that credit cards should be used only in times of emergency and living within our means is the prudent thing to do:

Credit cards make sense to use if you know and understand how to use them correctly. Americans abuse credit cards, mistaking them for "free money" and opening many different cards at the same time to satisfy their thirst for expensive things and, ironically, things they can't afford.

If you use your credit wisely, you can actually save money by purchasing on credit. This requires paying off your credit every month to avoid interest and fees. In this sense, the 30 day loan is "free money" since your money is increasing with interest while sitting in your savings account.

Also, if the credit card that you use is a "cash back" card, you're also discounting the purchase price from 1 to 5%.

Saving money to get "free money" is ultimately the plan you need to work at:

1. Pay everything in cash for two months.
2. Keep track of everything you purchase.
3. Use Quicken or MS Money to help you track and budget your expenses.
4. Accumulate enough savings for your monthly budget then start rotating monthly expenses on your card to get the cash back and interest free loans.

Remember the important thing is to save and budget. Use your credit cards wisely by paying off the balance each month.

5% October Cash Back Bonus Down the Drain

I really screwed up big last month using my Discover Card. I forgot to sign up for the 5% cash back bonus which is something you need to do every 3 months by either login into the Discover account center or by calling Discover.

The last quarter of the year, the 5% cashback bonus includes purchases at grocery stores, restaurants, movie theaters and movie rentals.

A major portion of our expenses are eating so it's not unusual to spend $1000 on food for the month. With 5% cash back, we would have saved about $50 in October, but since I forgot to sign up the first of October, we only saved $10 under the normal 1%.

The rest of the year we should be able to save more especially when planning meals for Thanksgiving, Christmas and New Years.

If you haven't signed up already, give Discovery a call or apply your savings online in the account center. It's never too late to sign up for the extra cash back -- just make sure that you remind yourself to do it as early as possible in January, April, July and October to take advantage of the savings accumulated over three months.

Using Credit Cards Hurt Gas Station Owners

Several Gas Station Owners have been hit hard by the rising gas prices, but not where you would expect. Credit card fees are eating into their profits and they're beginning to accept cash only.

This is how it works...

Credit card companies make it on both ends of the sale. First they collect merchant fees for every sale and then they collect interest on consumers who don't pay off their monthly short-term loan. Usually these fees run a few percent and sometimes as high as 5% for low volume merchants.

I can remember back when processing credit cards was a real pain in the butt. You had to look up the card in the "dead-beat" list that had a publication of thousands of cards that were stolen or over extended.

Then you called Visa or Mastercard to get approval for the sale. You talked to a live operator stating the facts about the card. The whole process took several minutes while angry customers wait in line behind them.

Sometimes you were instructed to cut up the card in half which was sometimes golden especially if the customer was a real prick. But as a merchant, you lose out on a sale and make your customer angry at you.

Today, you just swipe the card thru a card reader and you get back an approval in a few seconds. The process is all automated and hardly justifies the merchant fees they charge since there is no live operator anymore.

So are Gas Station Owners Justified in not Accepting Credit Cards?

Not really since the 2% merchant fee is built into the price. Eighty-percent of their customers are going to use credit and the other 20% will pay by cash. By using your gas card or cash back card, this price increase goes back to you in rebates.

Basically what they can do is lower the price of the gas to compete with other local gas stations. They will push their customers away, have lower sales and eventually go out of business.

May 2008: My Discover Card Paid Me $14.15

One of the common themes in saving money by using credit cards is the cash back you get each month just by shopping. We pretty much use Discover to cover our expenses for the month and highly recommend the card.

Now I don’t go out and charge my card up to its limit, but pay off the balance each month to avoid the daily period rates credit card companies charge you. Also, remember to pay it off early so you don’t get chardged a late fee.

This month I saved $14.15 by spending $1,532.74. I was expecting to earn $15.33 back or 1% of the spending. I’m not exactly sure why I didn’t get the full month, but April is my anniversary so sometimes they reset the annual amount so the first 1,000 you spend, you get 0.5% back instead of the full amount. It’s only a dollar, so I’m not too concerned at this point.

Taking a look at what I bought:

Merchandise/Retail: 363.60 (23.7%)

Gasoline: 345.80 (22.6%)

Services: 12.88 (0.8%)

Supermarkets: 638.49 (41.7%)

Home Improvement: 171.97 (11.2%)

Almost 25% of my spending was in the Merchandise/Retail sector. Unfortunately Discover Card categorizes CVS perchases into this area. Thus, any pharmacy items that you use to charge on your credit card get lumped into Merchandise/Retail category.

I like to keep Merchandise and Retail down to about 15% of my spending budget $1,500 per month. With rising gas prices, it’s not too difficult to exceed my monthly credit card budget.

You Can Actually Save More Than 1%

Here just are a few examples you can save using your Discover Card by shopping online:

• 5% Circuit City
• 10% Nike
• 15% PetSmart
• 20% FTD.com

To get these discounts, you need to login to your Discover account and connect to the merchant sites.

On a final note for this month’s saving tip, always pay off your credit card and if you can’t pay as much as possible to get out of debt as soon as possible. Send out your payment a week earlier that it is due or login to your Discover Card to schedule your payment the day before it is due.

Discover Card Saved Me Over $4000

I received my new Discover Card in the mail last week. Since I still had a month remaining before the old card expired, I set it aside until I had some time to call in to get it activated.

Normally you call the activation number on the sticker pasted on your credit card and enter your number and you’re all set. But this time, instead of a pre-recorded message, I got a live person.

“Hi, this is Jenna! Thank you for activating your card. I see that you’ve been a member since, ah, 1984. Wow you were one of the first members!”

Not that she was trying to make me feel old, but that was 24 years ago when credit was rather tight. Back then, Discover was owned by Sears — who extended me a whopping $200 credit line on their Sears Credit Card when I was a sophomore in College — and Sears offered their customers a new credit card that you could use at other retail stores.

For the first few years, not everyone took Discover so many times I had to pay with cash. (What a novel idea.)

Since I mostly charge my all my expenses using Discover, I get around $20 back every month. So for being one of the “first members,” Discover Card paid me around $4000!

Jenna continued, “Would you like to enroll up this summer for the 5% bonus payment for Gas and grocery purchases?”

“Does it cost anything?” I said.

“No. Just by saying you want to enroll, you qualify for the offer.”

“Thank you, please enroll me!” I buy all my gas and groceries using credit cards, so instead of the normal 1% kickback, I’m going to get 5%!

“Jenna, how can I automatically enroll in these offers?”

“You can’t. You have to enroll by calling us or by activating the offer using the internet.”

“Ok, I call back next month to enroll, thanks.”

Now the up-sell and why they want you to call in to activate the bonus payments: “Would you like to enroll in our privacy protection?”

“No thanks. Perhaps I’ll consider it sometime in the future.”

“Ok, you’re new card is activated. Please sign your card and remove the sticker. And thanks for using Discover!”

No. Thank you Discover! You’re a great credit card company that saved me thousands for being a valuable member.