Couples consistently report finances as the leading cause of stress in their relationship. Here are a few tips to avoid conflict with your long-term partner or spouse.
Be transparent. Be honest with each other about your financial status. As you enter a committed relationship, each partner should learn about the status of the other person’s debts, income and assets. Any surprises down the road may feel like dishonesty and lead to conflict.
Frequently discuss future plans. The closer you are with your partner, the more you’ll want to know about the other person’s future plans. Kids, planned career changes, travel, hobbies, retirement expectations — all of these will depend upon money and shared resources. So discuss these plans and create the financial roadmap to go with them. Remember that even people in a long-term marriage may be caught unaware if they fail to keep up communication and find out their spouse’s priorities have changed over time.
Know your comfort levels. As you discuss your future plans, bring up hypotheticals: How much debt is too much? What level of spending versus savings is acceptable? How much would you spend on a car, home or vacation? You may be surprised to learn that your assumptions about these things fall outside your partner’s comfort zone.
Divide responsibilities, combine forces. Try to divide financial tasks such as paying certain bills, updating a budget, contributing to savings and making appointments with tax and financial advisors. Then periodically trade responsibilities over time. Even if one person tends to be better at numbers, it’s best to have both members participating. By having a hand in budgeting, planning and spending decisions, you will be constantly reminded how what you are doing financially contributes to the strength of your relationship.
Learn to love compromising. No two people have the same priorities or personalities, so differences of opinion are going to happen. One person is going to want to spend, while the other wants to save. Vacation may be on your spouse’s mind, while you want to put money aside for a new car. By acknowledging that these differences of opinion will happen, you’ll be less frustrated when they do. Treat any problems as opportunities to negotiate and compromise.
Credit cards may offer convenience and opportunities to build credit, but they also come with terms and conditions that aren’t always advertised. Here are several credit card secrets that banks may not tell you about.
Minimum payments are a trap. Banks design minimum payments to look appealing (typically 2% to 3% of your balance). But paying only the minimum allows interest to grow on your remaining balance, which can result in you paying two or three times (or more!) of the original purchase price over time. If possible, pay your credit card balance in full each month.
Interest rates are negotiable. If you’ve been a reliable customer and consistently make payment on time, there’s a good chance your bank might lower your annual percentage rate if you ask. Simply call the customer service number on the back of your card and ask if you can lower your rate. Banks prefer to keep loyal customers rather than risk losing them to competitors.
The high cost of rewards programs. Banks design these programs to encourage spending, which increases the likelihood that cardholders will carry a balance and pay interest. Some rewards cards also have high annual fees that can erode the value of the rewards you earn. To truly benefit from rewards programs, only use your card for planned purchases and pay off the balance in full each month.
Late fees are avoidable. Many credit card issuers offer a grace period for late payments. If you miss your payment due date, call your bank immediately and explain the situation. This can often result in the bank waiving its late fee, especially if it’s your first offense. Banks don’t widely advertise this because they profit significantly from late fees.
Introductory offers have strings attached. Offers like 0% interest or bonus rewards often come with terms and conditions that are easy to overlook. For example, some rewards programs require you to spend a certain amount within the first three months to qualify for the bonus. If you don’t read the fine print, you might miss out on the offer or end up spending more than you intended. Always understand the requirements before applying for a new card.
Banks monitor your spending habits. Banks track your spending patterns and use this data to their advantage. For example, if you consistently pay off your balance in full, you might not be as profitable to them, which could result in fewer promotional offers. On the other hand, customers who carry balances and pay interest may receive more marketing for additional financial products. Being mindful of your spending habits can help you avoid falling into costly traps that are pushed by banks.
Credit cards can be a valuable financial tool, but only if you understand how they work and how to avoid the hidden pitfalls. By paying off your balance in full, negotiating fees and rates, and leveraging rewards strategically, you can take control of your credit card rather than letting it control you.
Immediate Required Action: Review your savings account interest rate and take necessary action to avoid potential deceptive, unreasonable, and obscure rules that are keeping your money from making a reasonable interest rate!
Background
When interest rates rose due to inflation, banks and credit unions quickly raised their interest rates on credit cards, mortgages and loans, but were reluctant to reward loyal customers with higher interest on their deposit balances. They simply decided to put the extra profit in their pockets or were afraid they could not afford to pay market interest on their deposits.
These deceptive and unreasonable practices are words used by the Consumer Financial Protection Bureau (CFPB) in describing one bank’s practice to avoid paying market rates to many of their loyal depositors. So which tricks are being used?
Some common practices
The mirror trick. Create a new savings account with a similar name to one that earns less than ½ of one percent of interest. But the new account gets a much higher interest rate (allegedly 14 times higher!). Then, don’t be great at telling the current account holders, so they do not realize they are being grossly underpaid for their deposits. Example: Capital One (See CFPB lawsuit) Why do this? It dramatically lowers the bank’s interest expense since they do not roll the old, low interest accounts into the new, higher interest account. But they still offer a competitive savings product to attract new money.
The CD trap. Grossly underpay those with savings deposits, especially small, local businesses. Instead, offer CDs with better interest rates. Then introduce EXTREMELY high early withdrawal penalties (compared to traditional early withdrawal penalties historically used on CDs.) Classic examples: Chase Bank and US Bank, but there are many more!
Why do this? It makes it a lot easier for the bank treasury group to forecast the bank’s net interest income spread, as their deposit interest expense is more predictable.
The trained seal mirror trick. A major national credit union took the mirror trick above, then created additional rules to ensure ONLY new money gets the better interest rate. So they only make the new, similarly named, high interest bearing account available to NEW deposits into the credit union. So, no transferring funds from another internal account to get the higher interest.PLUS, you are required to set up automatic deposits in the account each month to obtain the best interest. To get the high rate, you need to transfer your money out of the bank, then keep it somewhere else for a time, then transfer it back. In other words, you need to be trained in the tricks to get the reasonable interest rate. Just like a seal. Why do this? Banks don’t want to pay these higher interest rates on existing deposits.
What to do now
Understand the impact. If you aren’t watchful, your savings account is earning much less than 1 percent interest when you could be earning over 4 percent in a similar account EVERY DAY.
Fight inertia. What all these tricks have in common is the benefit of inertia. These practices are commonly used by cell phone companies. They give the best deal to the new guy while gently deceiving their long-term subscribers. When is the last time you looked? Well, look now!
Find the right account. Often the answer is within your bank by getting into the right account. But you may find it is at another institution. Be willing to set up the right account at the right place. Current high yield savings rates with FDIC coverage range from 3.5% to 4.8%.
Develop fluid management. With secure online transfers, it is now easier than ever to keep your money working hard for you (using high interest rates). This also includes moving excess funds in your checking account. So securely link these accounts, actively monitor them, and transfer your funds to their best use at the highest interest rate. You’ll be amazed at how much interest income you can earn!
