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I took a big check to the bank yesterday and was worried that the bank would put a hold on my funds.  I had to pay tuition this week, so I needed access to the funds right away.  I was given $100 right away, but that left thousands still out of reach until the bank decided to give it to me.

I decided to look into the laws about holding funds, and thought you might appreciate a quick breakdown on Regulation CC, the Federal regulation on bank holds.

Regulation CC is the Federal Reserve rule created to enforce the Expedited Funds Availability Act of 1987.  Banks allowed to put a hold on personal bank accounts for one of several reasons.  The idea is to protect the bank from a loss if you withdraw the money and the check bounces.

The main holds are outlined below.  Information can be found at the Federal Reserve, though I found the chart below (from Wikipedia) to be the best explanation.  Remember, these are your rights.  If a bank violates the rules outlined below, they have committed a violation of law and should be held liable by the Federal Reserve.  If you think you have been wronged, or are being wronged, contact your bank first.  If that does not work, contact the Federal Reserve.

I just finished writing my book on Friday. I still have a bit of formatting to do and will be asking around to see if a couple of friends and maybe a couple of other bloggers will give me feedback. Expect it to be available in the next couple of months. No text was copied from the blog, everything is original and intended to be an in depth guide to simplifying your financial life.

For the first time, I am going to give exact details on my loan balances and how I am paying them off.  I will also discuss the popular “snowball effect” for paying off your own debt.

I have three loans with balances.  My car loan has a balance of $4,175.51 at 5.95%.  My unsubsidized student loan has a current balance of $2,698.57 at 6.8%.  The subsidized portion has a balance of $8,500 with no interest until after I graduate.  I have been paying far above what I need to for each of those loans to have them paid off quickly.

I pay my loans automatically.  According to the snowball theory, which I will describe in more detail shortly, I should be paying as much as possible into the 6.8% loan and a minimum payment in the others.  I am not.  I built my own plan.  I make payments into the two interest bearing loans automatically twice every month.  I don’t even have to think about it anymore, my bank does it for me.

I pay $150 every two weeks into the student loan, which is still growing quarterly.  That $300 per month is well above the interest only recommended payment of just under $20 per month.  I am not required to make any payment until six months after graduation, but I would rather pay as I go and graduate with less debt.

I automatically pay $170 per month into the car loan for a total of $340 per month.  I picked this number because, at that rate, I will have the five year loan paid off in three.  The initial loan was for $10,995 in August 2007.  I was paying double the $210 monthly payment until I started school.  I lowered my payment to ensure I had enough cash to make significant progress on the student loan while in school.

At the rate of payment above, I will have my car paid off when I graduate and will have the entire non-subsidized portion of my student loan paid off when the subsidized portion kicks in.  That will leave me with one loan requiring about $200 per month minimum payments.  I hope to pay it off twice as fast and be done with it 5 years after I graduate.

So, how does the snowball effect work and why am I not exactly using it?  I am so glad you asked!  Here goes:

Lets say you have 3 loans.  One has a balance of $5000 at 4.9% (minimum payment is $150), the second has a balance of $1000 at 5.9% (minimum payment $50), and the third has a balance of $3000 at 7% (minimum payment $100).  Which do you pay first.  (Please take this time to formulate an answer before reading on.)

If you said the third loan, you are right.  The smartest strategy is to pay for the highest interest rate loan first.  It doesn’t matter what the minimum payment is.  It doesn’t matter what the balance is.  All that matter is how much interest you pay per dollar.  There are psychological reasons to pay the 5.9% loan down faster, as it will be paid off quicker.  However, in reality, we should pay for the highest interest rate first.

Why am I not doing that?  The psychological reason.  My student loan is growing and will keep growing until I graduate.  My car loan is fixed and shrinking.  I want it to be over.  That is why I pay more into a lower rate loan.

The snowball effect is, surprisingly, not related to that famous scene in Clerks. (Rated R)

Snowballing, for loans, means you pay the minimum payment on all of your loans except for the highest interest. You pay as much as possible into that loan. Once it is paid off, rather than just lowering how much you put into loan payments, you put all of that into the next highest interest rate.  In the example above, you make the $50 and $150 minimum payments while putting $200 into the highest interest loan.  Once it is paid off, you just start putting that $200, in addition to the $50 minimum payment you were already making, into the 5.9% loan.  Once it is paid, you put the whole $400 into the 4.9% loan.  That is the fastest way to pay down all of your debt.

I am happy to give you one on one help if you are trying to set up a plan like this.  If you send me your details through the contact form, I will put your plan together, in a spreadsheet, for free.  I just ask that you let me share it, anonymously if needed, on this blog as a feature about how one real live person is going to do it.  Most financial advisers would charge $100 or more an hour for this.  Remember, I have a finance degree and I am working on an MBA, so I do really know what I am doing.

If you were confused by any of this, please let me know in the newly fixed comments.  I can answer any questions, about my situation or snowballing, in the comments.  And no, I don’t like what they talk about in the video.

Photo Credit [1]

While I was approved for a new credit card this week, I have pristine credit.  Most credit card companies, including Schwab, are looking for excuses to turn people down.  Credit used to be easy to get.  Anyone with a credit history that was not too bad could get a credit card.

Millions of people are being turned down for credit.  I was given a lower limit than ever before on my card, and I have never had a late payment or missed payment.  Credit companies are looking for the smallest problems on credit histories.  A 30 day late payment used to be looked over without a thought.  Now it is a reason to turn down unsecured credit.

It is important to note the difference between secured and unsecured credit when looking at this issue.  Unsecured credit includes credit cards and “personal loans.”  If you stop paying these, the bank has no recourse to collect the money outside of damaging your credit report.  Secured loans, such as car loans and mortgages, give the bank the option of taking the property.  That gives the bank the opportunity to recoup their costs in the event someone stops paying.

What can you do to avoid the shared fate of millions of applicants?  Keep paying your credit card and loans on time.  If you are 18 and have never had a credit card, it is time to get a student card, but use it responsibly, to establish credit.  If you have negative information on your credit report that is inaccurate, dispute it.  If you really did screw up, pay off that card and close it.  Credit history is only good if you have a good one.

This issue is also impacting current credit holders.  Banks are looking for ways to make more money and cut losses sustained from bad loans.  As a result, people are getting credit lines slashed and seeing fees and rates increase.  If you are a regular reader, you saw that I was given a new $30 annual fee on my Chase card (which led to me closing the account).

If you are denied, don’t be discouraged.  The credit crunch is not over and people around the world are suffering as a result.  Just do the right thing with your current credit and things will slowly start to turn around.

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Whenever I put something in the dryer, I clean the lint trap.  I figured everyone did that.  However, I can easily tell if my roommate was the last to do laundry if the lint trap has an inch thick layer on the screen in our dryer.

I didn’t think much of this, but I started to do a bit of digging.  This is targeted to the guys out there, as (I know it is profiling but I don’t care) most girls seem to know how to do laundry already.

I did a little research on what can go wrong if you don’t clean the lint trap.  It turns out quite a lot can go bad.  There are two main issues with leaving the lint in the trap.  First, the dryer uses more electricity to run and is not as good at drying clothes, often leading to a second run through.  Second, the dryer can easily light on fire if the lint trap is full.

So, to recap (just like on MANswers).  Clean the lint trap because it will save you cash and keep your house from burning down!

I just wanted to write a quick update. I was called by a Charles Schwab bank representative to discuss my income and outstanding debt.

She said that everything looked like it is well handled and under control, but I have a fairly short credit history. I agree with that. I got my first credit card about five years ago, so I don’t have the long payment history most adults have.

I was given a $2,500 limit. I was hoping for $5,000 to cover what I am replacing, but I will not complain. I don’t spend all that much and will keep my balance low to keep my debt ratio in check.

I have a story for you.  A “perfect storm” of vacation credit card problems left my sister in Greece with only 100 Euros in her pocket.  The issues sprouted from another trip thousands of miles away.  Here is the rundown, and the lesson learned, from the experience.

About a month ago, my younger sister left on a trip to Greece.  Yes, I am jealous too.  She brought two cards with her, thinking she would be fine.  Her debit card was stolen, due to her stupidity, early on in the trip.  This left her with only a Visa card tied to my parents account.  Lucky her?  Not quite.

About three weeks into her month long trip, I took a vacation with my mom.  We each had multiple cards with us.  I had my main credit card, the same Visa as my sister in case my mom wanted me to buy something on her behalf, and my ATM/Visa Debit card.  She had one of the family Visas and a backup card.

On the fourth day of my trip with my Mom, she asked me to buy a present for my Dad using the family Visa.  Declined.

What happened?  Why was it declined?  I had cash and another card, so there was no problem on that front.  My mom tried hers.  Same story.  We called my Dad, who called Visa.  The card was stolen in Alaska, where I was on vacation with my Mom.  At some point, someone skimmed my Mom’s credit card number and tried to buy a plane ticket.

As I said, we were fine in Alaska.  We had cash and cards on hand to get us through.  My sister, though, lost her only remaining card.  I didn’t feel that bad for her, as she lost her first card on her own.  It was a bad situation though.

It took us about a week to get her a replacement card.  Visa sent it priority to her hotel on a little island of about 3,000 people.  They were very helpful, but you have to know to ask.  Visa will get a card into your hands in 24 hours most places in the world with little or no charge.

Because we were locked out of the account, we could not pinpoint where the number was stolen.  We had the card, so it was not like my Mom was careless and lost it.  Someone was sly about it and stole the number.  It is that simple.

What did we learn?  1. Always have a good backup, or two backups if you are across the world on little islands.  2. Call Visa right away and ask for a replacement card to be expedited to you if you are away for an extended period.  3. Be careful when using your cards of vacation.  You never know where the number will be stolen.  It happens in the United States too.

I know that comments have been broken for a while now.  I did not figure out a way to fix it, but I did figure out a nice workaround.  All handles will now be handled through the Intense Debate comment system.  I use it on my Israel blog, but was hoping to use the built in Wordpress comments here.  No such luck.

Talk to me.  I’ll be listening.

P.S. The blog is going to change URLs soon.  We will be moving to narrowbridge.net so you have less to type when you want to visit.

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Do you struggle with making your minimum credit card payment every month but pretend that the issue does not exist?  Do you ignore that you are behind your payments on student loans or a car loan?  If so, you might be suffering from debt denial.

I hope that readers of this blog do not have the common debt denial problem.  However, your savvy financial mind might be able to recognize the problem in someone else and help them deal with it.

In the UK, for example, 37% of those who have fallen behind in their payments have found debt counseling or assistance.  That means, though, that the remaining 63% have not tried to find outside help for their problem.

While it is true that many of these people may be formulating a plan to deal with the problem, many of them are ignoring it.  Just stopping your payments is a bad idea.

While we don’t all have debt problems that are spiraling out of control, we need to always be prepared to deal with future uncertainty.  If you don’t have one already, put together an emergency fund that can cover 3-12 months of your expenses.

Do not buy things that you don’t need.  It is just not necessary.  You are smarter than that.  Only use credit cards to make purchases that you will be able to pay off in full so you do not have to pay interest or get stuck in a rut making monthly payments.

If you are in trouble, get help.  While those ads on the radio mislead people to think they have a “right to lower your debt”, you don’t.  However, there are people that will help you.  Bank often are willing to settle, though that will cause severe damage to your credit report.  Do not pay some company a lot of money for help, most legit agencies are not for profit and will help you for free.

Debt is like alcoholism.  You have to start by admitting you have a problem.  Don’t skirt around it, deal with it head on.

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Drum roll please… Charles Schwab Invest First Rewards Visa.

So, after hours of agonizing consideration (sarcasm), I made a decision.  The flat 2% rewards is the best option out there for my spending habits.  The card does not have an annual fee.  I get paid out in cash every single month.  All seems well.

I put in my application on the Charles Schwab website and have to wait “3 to 7 days for a response”.  I am sure I will be approved due to my strong credit.  If I am given a credit limit above $5,000, I will be given a preferred Visa with additional benefits.

Based on everything I have read, this is the best cash rewards card out there in the Visa/MasterCard world with no annual fee.  The only catch is that users need a Schwab account for the rewards to be deposited into.

Thanks for following the beginning and decision stage of my credit card search.  I hope you found it educational.