Social Security, Charity Fraud, and Credit Card Deadbeats

May 22, 2009

It’s been a good week around here. We’ve been pretty busy with client and prospect meetings, but things are starting to calm down and get back to normal. I’ve received many interesting emails and articles over the past week, and I feel like some of them are definitively worth sharing with you.

The first article I came across that I thought was pretty interesting was from a listener telling me about a Charity Fraud Announcement from the Federal Trade Commission. I find this email especially interesting because I’ve been doing financial planning for some years now so, if you do the math, you will realize that this is the second big recession I’ve been through, the first being from 2000 – 2003. What I’ve noticed is that as the economy suffers, individuals are forced to become creative. This creativity often leads to recovery in the economy. Unfortunately, however,  good people aren’t the only ones  who become creative. It seems like every time there is a hick-up in the economy, a whirl-wind of get-rich-quick schemes and scams pop up. Some are absolutely fraudulent, and some are really just complex multi-level marketing schemes (such as the ones springing up all over my neighborhood). Now I’m not saying that all of these are bad, but it is unique how they become ever more prevalent during down periods in the economy.

The two articles, Avoid Charity Fraud and Supporting the Troops: When Charities solicit Donations on Behalf of Vets and Military Families, highlight some of these ways to avoid becoming a victim of charity fraud:

  • Ask for the charity’s name, address, phone number, and written information about its programs.
  • Ask whether the person contacting you is a volunteer or a professional fundraiser and how much of your contribution will actually go to the cause you are supporting.
  • Check the history of the organization with the office that regulates charities in your state.
  • Avoid high pressure pitches. It’s okay to hang up.
  • Be weary of a ‘thank you’ for a pledge you don’t remember making.
  • Avoid requests for cash.
  • Avoid charities that offer to send a courier or overnight delivery service to collect your money.
  • Avoid charities that guarantee sweepstakes winnings in exchange for a contribution. According to U.S. law, you never have to give a donation to be eligible to win a sweepstakes.
  • Avoid charities that appear to spring up overnight.
  • Donate to charities that have a solid track record and history.
  • Check out the organization before donating any money. Some phony charities use names, seals, and logos that look or sound like real ones. When in doubt, contact the legitimate charity to find out for sure.
  • Ask for a receipt that shows the amount of your contribution and that it is tax deductible.

The second article I came across was from the New York Times and it was titled, Credit Card Industry Aims to Profit From Sterling Payers.  What this article is basically saying to me (a ‘deadbeat’ who uses a cash-back card, doesn’t carry a balance, and grins from ear to ear every time I receive my cash-back check) is that my free-ride may be coming to an end. The article explains that banks are looking to revive annual fees, curtail cash back and other rewards, and also begin charging interest immediately on a purchase instead of allowing a grace period of a few weeks. Edward Yingling of the American Bankers Association was quoted as saying “Those that manage their credit well will in some degree subsidize those that have credit problems”.

I don’t know if I agree with this, however. I have to believe that if my credit card company started charging me interest on my purchases immediately, and I didn’t receive any rewards for using it, then I would probably just use cash every chance I could, and when I needed the convenience of a card, I would use my bank debit card.  It goes on in the article to explain that these banks and credit card companies aren’t charities. They, too, are businesses operating for profit and have shareholders to answer to. The article also shares some interesting statistics. While banks are not required to reveal how much they make from penalty interest rates and fees, Robert Hammer, an industry consultant, noted that the amount of money generated by penalty fees like late charges and exceeding credit limits had increased by about $1 billion annually in recent years and should top $20 billion this year. However, the government stress tests did show that the nation’s top 19 biggest banks will take on $82 billion in credit card losses in the next two years. This could be even worse, though, considering the method for valuing assets for the stress tests.

The final article I wanted to share that was of interest (and when I say interest I also mean that it scares me to death) was an article concerning the finances of Social Security and Medicare. A new study found that Medicare is currently paying out more than it receives, and Social Security will start paying out more in benefits than it collects in taxes in 2016, and the giant trust fund will completely run out by 2037. Medicare is currently slated to be insolvent by 2017. Obviously the reason for the dates being sooner than originally anticipated is the current state of the economy. According to the article, since December of 2007, 5.7 million jobs have been lost and the unemployment rate hit a 25 year high in April of 8.9%. Fewer people working plus more people retiring (i.e. 78 million baby boomers) means less money flowing into the system. So, the way I see it, there is only one real option so solve this problem: whether you are Republican or Democrat, taxes are going up! In the show, I use a piece of research we have made available on the premium member side that details government spending, tax collections, and the federal deficit over the last forty years.

At the very end of the show, I ask for your opinions on an in depth FairTax show as well as general interest in the P90X workout routine. I do this podcast for you, my loyal listeners, so I am always interested to hear your thoughts!

Most Recent Episodes

How to Win With Money in 2023!

Financial resolutions are always near the top of the list of Americans’ most popular New Year’s resolutions. Whether you want to save and invest more, pay off debt, or have other financial goals, we will give you the tools you need to win with money in 2023.   In this...

TikToks That INFURIATE Financial Advisors

The most powerful time to get serious about building wealth is when you’re young. So, what is the younger generation learning? Financial Advice (good and bad) is being produced in massive rates across online platforms and TikTok is the new frontier. Is there good...

5 Levels of Wealth AND How to Achieve Them! (2023 Edition)

We believe there are five distinct levels of wealth, but they aren’t solely dependent on income or net worth. We’ll walk you through each of the five levels - including how to know where you are at, how to advance to the next level, and signs you are doing it right.  ...

Average Net Worth By Age in 2023!

It’s time for one of our most anticipated shows of the year: our annual Net Worth By Age show! In this year’s edition, we’ll shared updated numbers and data for 2023 and discuss the most important things for you to focus on in each decade.   In this episode, you'll...

Win Financially During a Recession! (Everything You Need to Know)

The bear market we've experienced in 2022 has been longer than many in recent memory - and some are concerned that the economy may soon enter into a recession. Here's everything you need to know to stay on-track and win financially during a recession!   In this...

The Fed Just BROKE the Car Market! (What You Need to Know)

Car prices have been on a rollercoaster ride the last few years, and it looks like they might finally be coming down. In this episode, we’ll discuss what you need to know about the current car market, pitfalls of buying a car, and how to do it the right way.   In this...

Top 4 Money Mistakes People Make During the Holidays!

There’s a reason why financial resolutions are always near the top of the list in January - many Americans spend the holiday season making financial mistakes. In this episode, we’ll discuss the top money mistakes people make during the holidays and how to avoid them....

Financial Advisors Share What They WISH They Knew About Money Earlier!

Have you ever felt like if you just knew this one thing about money earlier your finances would be in a better spot? In this episode, we’ll share the five biggest things we wish we knew about money earlier!   In this episode, you'll learn: What we wish we knew earlier...

Dave Ramsey vs. The Money Guy: Which Strategy is The Best?

Dave Ramsey has an incredible legacy of helping folks get out of debt and take control of their financial lives. We agree on a lot of things, but there are a few points of contrast. In this episode, we’ll discuss differences between The Money Guy Show and Dave Ramsey...

Top 4 Financial Mistakes We Saw This Year! (2022)

We saw some wild financial mistakes this year during the bear market. From making extreme changes to portfolio allocation, chasing the hot dot, and using too much leverage, we’ll talk about some of the biggest financial mistakes we saw in 2022 in this episode.   In...