Paying Your Taxes on Credit

So you did not take enough out of your paycheck to pay your taxes all year. Now you owe the IRS. You are considering taking out a loan on your credit card to pay your taxes.  Paying Your Tax Bill with Credit? That convenience comes with a price. Let me give you the scoop on what happens if you put your tax bill on a credit card.
 

Some states also allow you to pay your state income tax bill with a credit card. Paying your taxes with credit cards is safe and secure, plus you can use the payments to count toward rewards if you have cards that offer them.

Let’s say you pay your taxes on credit and now your credit card is due. Now what?  

Paying A Price for ConvenienceHowever, you will pay for this convenience. The IRS doesn’t charge any extra fees. They don’t charge penalties for using credit to pay but service providers do. Uncle Sam isn’t going to eat those costs, you are.  Fees vary depending on how you’ve decided to pay.  

If you owe, for instance, $5,000, you might have to fork over $115 in convenience fees. And if you don’t pay your credit card balance in full, you could end up paying interest at the credit card issuer’s rate.  This rate might be higher than the IRS’ charge for installment payments.

Pay Now, Pay Later

If paying off your credit card bill for your taxes will be a hardship, you might want to consider whether you may qualify for the IRS’ installment plan. After an initial fee to set it up, usually $52 for direct debit, you’ll get a monthly interest rate on the outstanding balance which will likely be much lower than what a credit card provider charges.

Utility Fraud is Easy to Commit on You!

We talked about identity thief many times on this blog. By now you know to destroy all bills and documents with your personal information on it before you put them in the trash.  Even after doing that, you still may not be safe from thieves.

Identity theft is a very real criminal activity. Utility fraud is a much more popular scheme with lawbreakers than identity theft.  In fact, utility fraud is currently rated the number two type of fraud in the United States. In some states, utility fraud rates higher than credit card fraud.

Utility fraud is the illegal practice where identity thieves use your personal information to obtain utility accounts such as Natural Gas, Electric, Water, Sewer, Cable, and other services.  In many cases, you will have to go to court and fight charges that these bills amounting to thousands of dollars are not your bills. These fraudulent bills may stop you from getting that new job or purchasing that new home or car. 

These smart thieves can set up telecommunication accounts through your home or cell phone. In many cases, your name, address, and phone number is all that they need to commit utility fraud.  That can be done by a relative, friend, or just someone who knows your name, address, and phone number but can’t open accounts because of their own bad credit.

About 15% of senior citizens are victimized by an identity thief by obtaining unauthorized telecommunication accounts or access to utility equipment/services by using the person’s name.

You can fight utility fraud by doing the following;

•        Keep a tight rein on all personal information and never give it out over the phone

•           Shred any documents or mail with your personal information on it

•          Never put personal information in the trash without shredding it first

•          Never give out utility account numbers over the phone or to people who you do not have evidence that they belong to that utility company.  

•           Check your three credit reports at least once a year, looking for duplicate utility accounts.   

Planning Your Life Finances

In 1980, I had my BS and AAS degrees, my house, and new car. It was time to pay off my debt. Nearly all of us have some kind of debt, whether it’s a mortgage, student loans, medical bills, credit cards, or even a loan to our father-in-law we still need to pay back. Let’s look at freedom from debt and think about how we can get out of debt faster – or at least make sure we’re managing the debt we have most effectively:

• Some mortgages are definitely subject to being renegotiated. If you feel that your mortgage payments are unreasonable, your financial situation has changed, your rate is higher than current market interest rates, or other factors have made your mortgage too burdensome, look into refinancing your home mortgage.

• Whether undergraduates or PhD candidates, the one thing many students have in common is the student loan debt they’re accumulating. And like credit card debt, the traditional advice has been to pay off the highest interest loans first, especially if they’re variable interest rates that can rise or fall. One course is to consolidate private loans, but do so only if you have an excellent credit score, since many consolidation loans carry variable interest rates.

• Credit card debt, since it is usually the highest rate and nondeductible, is traditionally the debt financial advisors suggest tackling first, and with good reason. High interest rates and finance charges can keep you from putting money away toward retirement, a home, buying the car of your dreams, your children’s education or countless other significant expenses that may have to wait until you get “out from under.” Look at your credit card debt honestly and see if you can find more effective ways to manage it, whether it’s asking your card issuer for a lower rate, trying to get a better balance transfer rate, or credit consolidation.

Explore your options for more freedom from debt in these areas and you might be surprised at how relieved you’ll feel. You will also be surprise that you will have more money to do other things with.

Investing Using TV and on the Internet

The World Wide Web

About 99% of my stock and bond transactions are done on the internet. But don’t think that I am not careful who I use as my online broker.  Since I was in my early 20s, I ran into some character brokers as well as brokerage firms in my day. In the day of cyberspace and media hype, people have to be very much alert as to what is going on behind the internet curtain.  

You probably remember the media hype behind “Facebook.” They talked about this company going public for almost a year.  The week of May 14^th, all news networks on all the major stations and the financial news stations on cable talked about it like the world had no other news. By the day it was to open, that was all the news people talked about, like the world’s future depended on this company. They suggested that this stock was going to go up and that the people who got in on the ground floor were going to be rich. The news people gave others the idea that if you are not in on this good thing, you are going to miss the boat. 

The stock opened on Friday May18, 2012 at $42.05 and collapsed from there and so did the volume on the stock. By the morning of May 22, 2012, the media was asking, “what happened? “  The answer was simple; the public did not buy into the media hype. They were burned in the market down turns of 1989, 1999, and 2008. They were burned in the housing and internet stock bubbles. The insiders who bought the stock before Facebook became public got a big surprise.  These insiders thought they were going to dump the stock on the unsuspecting public but they found that they had no buyers. By the opening on May 22, 2012, it was every insider for themselves to get what they could out of the current stock price. At 10:00 AM the price stood at $30.98.  

When I first started investing in the markets in the 1970s, it was illegal and unethical for the major media to advertise a company’s stock on TV. Today, they participated in this Facebook “Pump and Dump” scheme. “Pump and Dump” schemes are run mainly by unscrupulous companies, market making brokerage or large shareholders.  The goal is to interest unwary investors, who then drive up the stock price through a buying surge. The schemers stand to make substantial profits when they sell their cheap shares. After the price collapse, talk of the company ceases and the schemers move on, hyping a new stock.    

This type of thing goes on in cyberspace all the time. I wish I had a dollar for every email I received about a hot stock to buy to make me rich. As the internet gets more popular so will fraud using the internet as its tool. 

Beware and be realistic when it comes to the Internet. 

1.       Don’t expect to get rich quickly. That mess only happens in the movies. If you can trade in nanoseconds on the internet successfully, then you may have a good chance of striking it rich just like I have a good chance of becoming the King of England.

2.       Don’t assume your investment bulletin board is policed. Nothing prevents a con artist from posting stock tips for a swindle.  Only if people start complaining about something on the board does the cyberspace police do anything about it. 

3.       Don’t buy thinly traded, little-known stocks on the basis of online hype. These are stocks that are most susceptible to manipulation. With low volume, market makers and other interested parties can make the stock go up as well as down.   “Penny Stocks are good scam targets.” 

4.       Don’t act on the advice of a person who hides there identity.  They can be people with an interest in getting you to buy or sell a stock for their own interest. These people might be undisclosed brokers, investors, or company insider’s intent on driving the stock price in their direction by using false or baseless speculation that is difficult or impossible to disprove.  Don’t assume that two or more people talking up a stock are different people.   

5.       Don’t get suckered by claims about “Inside information.” It is extremely unlikely that genuine insider information will be broadcast on an investment bulletin board. Federal insider-trading laws prohibit such practices. 

6.       Don’t assume that all claims have been proved by information or visits. People who hype stocks make all kinds of claims that they say are backed up by visiting the company. Most of the time they don’t tell you who it is that is making the claims. In the case of Facebook, the media claims that Facebook is going to make a lot of money because of who they are. By the time Facebook became public, these claims were not realized. So the market trades are based on speculation of what Facebook may earn in future years.  Here is the reason for the stock drop.

7.       Don’t forget to look for potential conflict of interest. A growing number of online stock analysts receive cash or shares in exchange for a glowing comment about the company in question. Federal Law requires analyst to disclose this fact but some make little effort to do so. 

8.       Check out your investment opportunity first with your state or federal securities commission. In Pennsylvania this would be the Pennsylvania Securities Commission (1-800-600-0007). If you are in another state, check the internet for information for your state or contact the Federal Securities and Exchange Commission.  www.sec.gov

A Good Credit Score is to Your Best Advantage!

I have over 25 active VISA and MasterCards but I only use one credit card.  No, I am not crazy, I use them to increase my credit score and reduce any interest rate charged to me on future loans.  

I can identify people who have no clue how credit works just by listening to what they have to say.  If you feel like you’ve got too many credit cards in your wallet and you’re thinking about closing some accounts and you want to cut up the cards, forget about it.

It is a good idea to look at how the credit scoring process works and what affect closing credit accounts have on your score first. Pay close attention to your Credit Utilization Rate and the terms of the credit cards that you want to cancel.

Credit Utilization Rate 

One of the factors that figures into your score are your credit utilization rate, which measures how much debt you have compared to the amount of credit you have available. In other words, the more credit you have access to but don't use, the better your score. Consumers with the highest credit scores typically only use a small amount of their available credit at any given time. 

By closing a credit account, you have less credit available. This makes it look to credit bureaus as if you're using more of your existing credit, even though you might not have made any other changes in your credit behavior. And that raises your credit utilization rate, which could put a dent in your credit score. 

Terms of the credit card

Understand the terms of the credit card account you wish to close. To attain the optimum score, you need to have open, positive accounts that demonstrate a diverse mix of credit. 

If you do Still Want to Close Accounts 

When I do close an account, I close the accounts that carry a substantial annual fee; especially after a balance transfer introductory rate has expired. I suggest you do the same. Just be sure, if you feel you must close accounts, you're not about to make any major credit-dependent purchase, such as applying for an auto loan or even a mortgage. 

You’d be better off closing them once you’ve secured your mortgage. The lower your Credit Utilization Rate, the better your score, the lower your potential interest rate for new loans. 

A slightly lower credit score could result in a higher interest rate than you deserve and end up costing thousands more over the life of a loan.

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This is the end of the first 60 days of 2013 so how is my Individual Junk Bond IRA investments doing? My chart shows that my portfolio increased by 1.723% in the past 60 days (does not include my yearly contribution). Savings accounts at bank increase yearly at .5%. So far the stock market in general is ahead of me with a 7.52% for the past 60 days. If you pick the right stocks you can have that return.