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    Earns JPMorgan Chase
    Mark Lennihan/AP
    JPMorgan Chase (JPM) is the largest issuer of credit cards in the country, and its quarterly results can reveal a lot about the health and mindset of the American consumer.

    Two metrics from JPMorgan's most recent report, released Tuesday, tell us a lot. Total spending on credit cards is up 7 percent compared to last year. And the percentage of people paying on time continues to increase. Only 1.3 percent of borrowers are 30 days or more delinquent. That means we are spending more, and we continue to make our payments on time.

    We Still Like To Spend

    Consumption is the motor of the American economy. And the fuel for American consumption is the credit card. Despite talk of becoming increasingly rational after the 2008 financial crisis, Americans are once again swiping their credit cards. Last year, Chase cardholders spent $118 billion on their credit cards. This year, they spent $126 billion. Spending continues to increase, as consumers feel more confident.

    The Chase data reinforces data released earlier in the year by the Federal Reserve Bank of New York, which showed credit card balances growing again. Total credit card balances increased by $20 billion, the fastest rate of growth since the crisis.

    We Are Paying on Time, and More Than the Minimum Due

    Unemployment continues to decrease, and consumers are making payments on time. After the financial crisis, credit card defaults soared. However, in the current environment, people are able to make at least their minimum payment on time. Credit cards typically have very low minimum payments. You can usually pay only 1 to 2 percent of the credit card balance and remain current. After the financial crisis, even that payment became too much for many American families. But today, American consumers look financially healthier and are able to pay.

    Even better, the data at Chase seems to indicate that people are able to pay far more than the minimum due. Although total spend increased by $7.7 billion, the total balances only increased by $800 million. We need to watch this indicator closely. When more of the spend is added to the balance, that means more people aren't able to pay their statement balance in full.

    Early Warning Signs

    An increase in spending, particularly now that people are fully employed, may not be a bad sign. Because companies like Chase create credit card products with robust rewards, a lot of good spending can happen on a credit card. Good spending means that the statement balance is paid in full at the end of the month, and people use the credit card to earn rewards and benefit from fraud protection.

    However, bad spending can also happen on a credit card. If you are unable to pay your balance in full, you will end up paying high interest bills. Funding living expenses with debt can be a warning sign that a debt bubble is building.

    Data from the last three months doesn't show a debt bubble. But it does show that we are spending again. The next 12 months will be important. If spending growth outpaces wage growth, we will inevitably start eating into our savings or start borrowing on credit cards. And 7 percent spending growth can't continue forever without wage growth, which has been absent from the economy.

    Long Term Threat To Credit Cards

    During this credit cycle, we may need to look at other products to determine whether or not a credit bubble is inflating. Younger Americans have fewer credit cards. And Silicon Valley is funding companies that are making it incredibly cheap to borrow. Companies like SoFi offer personal loans with variable rates as low as 4.04 percent. As JPMorgan CEO Jamie Dimon warned, "Silicon Valley is coming."

    Although Chase's lending business was able to generate a 23 percent return on equity, that could come under increased threat from marketplace lenders like SoFi. If consumers continue to use their credit cards for rewards, but shift their borrowing to marketplace lending, returns would reduce dramatically. Interest revenue accounts for more than 50 percent of credit card earnings. And most of the interchange income is used to fund rich rewards. Credit cards are profitable because people borrow. As marketplace lenders continue to attack the lending market, the most profitable part of the credit card business comes under attack. At the moment, that attack is barely noticeable in the incredible profitability at Chase. But all of that could change quickly.

    Nick Clements is the co-founder of, a price comparison business that helps people find the cheapest loans and the best savings accounts.


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    Worried Senior Woman Sitting On Sofa Looking At Bills
    Fees. Not only can they be unpleasant, sometimes they're sneaky. The financial industry is awash with fees that come in all shapes and sizes.

    Many of them are well-known while a few are so covert that consumers get caught off guard when they realize they've been paying thousands of dollars in fees without knowing it. Not all fees are bad, however. After all, financial professionals have to make a living.

    But that doesn't mean they have a right to keep you blissfully unaware of what you're paying for the services they're providing. Before you hire a financial adviser, it's a good idea to learn how they get paid. Ask them directly how they make their dough. If they dance around the question, take your business elsewhere.

    There are a few financial fees you should never pay. Many times, these are the sneaky ones that pop up when you least expect them. Avoid these, and you'll be well on your way to brighter financial future.

    1. Mutual Fund Loads. Some mutual funds have loads. For example, class A shares are types of mutual funds that charge an upfront commission. You might pay, say, 3.75 percent of your investment money up front to buy the fund. This is all fine and dandy until you realize that many of these mutual funds also charge an ongoing management fee (called an expense ratio). Add these fees together, and you're paying quite a hefty amount of money to own some mutual funds.

    Miranda Marquit, writing for, explains:
    Sometimes, when you buy or sell a mutual fund, you pay a load fee. This can be a real drag on your returns. Paying load fees doesn't make much sense, either, since you can find plenty of funds and brokers that don't charge these fees.
    Load mutual funds aren't necessarily a horrible option, but there are certainly better options out there. Ask several financial advisers what they would recommend and compare the differences.

    2. 12b-1 Fees. A 12b-1 fee is a marketing or distribution fee that is applied every year. This fee is considered an operational expense, so it is included in the fund's expense ratio. Take a look at your mutual fund statements and see if you're being charged 12b-1 fees.

    don't know about you, but I would never want to pay marketing fees. If a mutual fund has to be marketed, it may testify to the possibility that it's not a good fund in the first place -- otherwise the mutual fund would sell itself.

    3. Variable Annuity Fees. One day a prospective client walked into my office and told me she had been working with a big brokerage firm that she felt wasn't being completely honest with her. The adviser had sold her a variable annuity and some mutual funds. She wasn't really concerned about the mutual funds, but she let me know she wasn't exactly sure how the variable annuity worked.

    Never, never buy a financial product without understanding how it works! Back to the story ...

    I asked her how much she was paying for her variable annuity and she thought she saw a fee for around $50. That's not bad, right? Well, later we learned that she paid over $3,500 in variable annuity fees and didn't even know it. Your jaw should drop right about now. I'm not a fan of variable annuities. The fees are just too high -- and many times sneaky, too.

    4. Late Fees. Late fees are another type of fee you should never pay. These fees may occur when you're late paying your bills. The formula you can use to pay your bills on time is pretty straightforward. First, you must have enough cash to pay. It's a good idea to save up extra cash in your checking account to ensure you have enough for all bills -- including the unexpected ones.

    Second, you're going to need to process your mailbox, email, and other inboxes where you receive bills on a regular basis. Keep track of your automated bills and payment methods. Make sure to have a good system in place for remembering to pay your bills on time!

    5. Overdraft Fees. Nobody should ever have to pay overdraft fees. The only time you're going to overdraft on your checking account is if you intentionally do so (don't do that) or if you aren't keeping track of your transactions. This is yet another reason to keep a buffer of cash in your checking account.

    If you forget about a transaction it will be pulled from your buffer of cash instead of putting your account into the negative which may result in an overdraft fee. If you to spend that extra buffer, then work with your bank or get an online checking account that will automatically draft from a savings account. This way you keep the money out of your regular checking but still have that buffer to cover any mistakes.

    6. Foreign Transaction Fees. Credit card companies (and even banks) sometimes charge their customers fees when they use their cards overseas. These foreign transaction fees can be easily avoided by signing up for a card without foreign transaction fees or by using an alternative payment method such as cash.

    These foreign transaction fees can be easily avoided by signing up for a credit card without foreign transaction fees or by using an alternative payment method such as cash.

    "Would you rather spend an extra 2 to 4 percent of your purchases on credit card fees, or on a nice meal at your destination?" asks Gerri Detweiler, director of credit education at

    7. Low Balance Fees. Some banks, credit unions, and wealth management firms charge a fee when balances on certain types of accounts fall under various thresholds. Many times, financial institutions will reward customers in the form of a higher interest rate or other perks for participating in these types of accounts. Brian O'Connell, writing for, explains the joy of avoiding these types of fees:
    Saving a few bucks on bank fees is a cathartic experience -- it's a rare chance to pull one over on your bank instead of vice-versa.
    You should never pay a low balance fee. If you can't keep enough money in an account to meet the minimum balance requirement, skip the perked account and opt for a simpler, boring, and fee-less account.

    8. ATM Fees. ATM fees are brutal. Many times, customers will use an ATM to get a small amount of cash out of their bank accounts and be charged an exorbitant percentage of the funds they withdrew for the pleasure. For example, say you take out $20. You're charged a $1.50 fee. That's effectively a 7.5 percent charge. Forget about it!

    Instead, make sure to ask your bank or credit union which ATMs in your area are "surcharge-free" and within their ATM network. Nowadays, you're sure to find several surcharge-free ATMs where you need them most.

    9. Payment Fees. This is perhaps one of the most annoying fees I've ever encountered. Imagine being charged a fee for making a payment. Um, no thank you. Some merchants have been known to charge these "convenience" -- what I call "payment" -- fees when you make a payment over the phone or through a store representative instead of through their automated systems such as store kiosks. Avoid paying to make payments. It just doesn't make sense.

    10. Inactivity Fees. If you don't need or use an account, why have it? Some banks and credit unions (especially online banks) charge inactivity fees when the account sits idle. These fees can usually be avoided by any kind of account activity like making a purchase or initiating a transfer.

    Brokerage firms are starting to do this, too. I've noticed this with new clients bringing in their statements and finding "inactivity fees" or "small account" fees on accounts that don't generate any fees or commissions over a period of time (usually one year).

    The Bottom Line

    You can avoid these fees (and others) by doing a little homework before you sign up for a product or service. Read the fine print. Ask financial advisers about their fees. Talk with your bank's or credit union's branch manager to uncover every fee they might charge. Say goodbye to these nasty fees and hello to better financial accounts!


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    Amazon Prime Membership
    Paul Sakuma/APShopping on Amazon's Prime Day could end up costing you.
    By Kimberly Palmer

    For one-day only -- Wednesday -- Amazon is hosting Amazon Prime Day, which it says will feature more deals than Black Friday. Many of the best deals were kept under wraps until the last minute, adding to the buzz and inspiring other stores, including Walmart, to offer competing sales of their own.

    If you're wondering whether to take advantage of all the deals and make some purchases Wednesday, here are some tips to keep in mind:

    1. Focus on the big-ticket items. As with Black Friday, consumers have the chance to save the most on big-ticket items that are marked down by a significant percentage. Some of the biggest deals on Amazon that have been revealed so far feature electronics, including cameras, e-readers and stereo systems. Most of the deals come with limited time windows to make purchases as well as limited quantities, which brings us to our next tip.

    2. Avoid shopping when you feel rushed. Just as with one-day sales that center around holidays, this one-day sale can lead to shoppers feeling rushed and pressured, which can cause bad buying decisions. As consumer psychologist Kit Yarrow told U.S. News during the last holiday season, shoppers should try to avoid buying anything when they feel competitive pressure, because it often leads to overshopping. Instead, she suggests pausing before hitting the buy button, and spending some time away from your screen.

    3. Stick to your list. Buying items that catch your eye on Prime Day might mean spending money on products that you really don't need and end up sitting unused in a storage closet. Trae Bodge, senior lifestyle editor for and U.S. News contributor to the Frugal Shopper blog, encourages shoppers to consult their shopping lists of items they know they need, so they can avoid making unnecessary purchases.

    4. Remember that time is money. As with Cyber Monday after Thanksgiving, Amazon Prime Day presents a potential distraction to our work day: It falls on a Wednesday when many Americans are supposed to be working. If you're at work, spending time scrolling through coupons might end up costing you in terms of your lost output.

    5. Weigh the benefits of Amazon Prime membership. The cost of membership is $99 a year. If you aren't already a member, then you'll want to consider whether than investment makes sense for you and your budget. Benefits include free two-day shipping, access to free movies and music streaming, and free books through the Kindle Lending Library.

    Lisa Koivu, U.S. News contributor to the Frugal Shopper blog and founder of, urges consumers to think about their shopping habits before signing up: Are you likely to borrow free Kindle books or watch shows through Amazon Instant Video? Do you like to order household items through the mail? If so, your budget could benefit from a Prime membership.

    6. Look beyond Amazon. If you're browsing the Amazon Prime Day sales, then don't forget to hop over to other sites, like, to check out all the copycat sales going on Wednesday. Walmart has announced that it is discounting over 2,000 items online Wednesday across many departments, including electronics and household items. Shoppers don't need to buy a membership first in order to take advantage of those discounts, and free shipping starts at orders of $35.

    7. If you make a purchase, prevent the snowball effect. Researchers at the Stanford Graduate School of Business have identified something called "shopping momentum," which means one purchase can lead to more purchases. In other words, shoppers have a hard time stopping once they start buying. So if you are tempted into "clicking" your way to a purchase Wednesday, consider stepping away from your computer or smartphone to take a breather and break that cycle of spending.

    8. Keep your biggest goals in mind. It's easy to get distracted by the shiny, new items flashing on your screen, but your biggest goals might have nothing to do with a new DVD or headphones. You might be aiming to pay off debt, save money for a much-needed vacation or fund your emergency savings account. Despite all the distraction of Wednesday's sales, it can make more sense for your wallet to step back and focus on those bigger goals instead -- so you're living by your own agenda, and not Amazon's.

    Kimberly Palmer is a senior editor for U.S. News Money. She is the author of the new book, "The Economy of You." You can follow her on Twitter @alphaconsumer, circle her on Google Plus or email her at


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    Toys R Us FAO Schwartz
    Bebeto Matthews/APshoppers stand outside of FAO Schwarz in New York in November 2011.
    NEW YORK -- Tom Hanks danced on a large floor piano there in the movie "Big." Multitudes of children wandered through the aisles, wide-eyed with delight at the giant stuffed animals and other toys. And a fair number of parents winced at some of the price tags.

    FAO Schwarz on Fifth Avenue, probably the best-known toy store in the world, is closing Wednesday night.

    Owner Toys R Us announced the decision in May, citing the high and rising costs of running the 45,000-square-foot retail space on pricey Fifth Avenue. Though the flagship store is closing its doors for good, it may reopen elsewhere in midtown Manhattan.

    FAO Schwarz says it is the oldest toy store in the U.S., with a New York City location since 1870. Reported celeb sightings -- Kim Kardashian and Kanye West before they were parents! Moms Angelina Jolie, Britney Spears and Victoria Beckham! -- have helped fuel the fantasy since the flagship store opened in 1986.

    The Fifth Avenue fixture included a candy store, personal shoppers and three levels of specialty toy departments.

    "The baby department at FAO Schwarz is the ultimate destination when luxury shopping for little ones," the store's online fact sheet advised.

    When those babies reached 'tweenhood, they'd need specialty skin care products: "It's never too early to start protecting one's natural beauty!"

    The store was featured in several movies, including "Big," where Tom Hanks danced on its floor piano (signage called it The Big Piano.)

    Nick Jonas stopped by and hopped around the piano in December while singing "Jealous."

    Toys R Us of Wayne, New Jersey, has been privately held since 2005. It bought the FAO Schwarz brand in 2009.


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    NYSE Reacts To Eurozone Bailout Deal With Greece
    Spencer Platt/Getty Images
    By Chuck Mikolajczak

    NEW YORK -- U.S. stocks edged lower Wednesday following comments from Federal Reserve Chair Janet Yellen, as a decline in energy shares outweighed gains in the financial sector in the latter stages of trading.

    The energy sector, down 1.6 percent, was the worst performer of the 10 major S&P groups as oil prices retreated on concerns increased exports from Iran will add to a global supply glut. Brent settled down $1.46 at $57.05 while U.S. crude settled down $1.63 at $51.41 a barrel.

    We were positive the whole day and we sort of lost our gains right at the tail end.

    "We were positive the whole day and we sort of lost our gains right at the tail end," said Phil Orlando, chief equity market strategist at Federated Investors in New York.

    "If crude were to be going down, that would mean there is an assumption this deal may get through Congress or the President's veto won't get overturned by Congress such that this Iranian flood of crude comes onto the market."

    Financials, up 0.7 percent, helped curb declines. The group was buoyed by a 3.2 percent rise in Bank of America (BAC) to $17.68 and a 3.8 percent gain in U.S. Bancorp (USB) to $45.53 after their quarterly results.

    The S&P snapped a four-session winning streak, its longest run of gains since January.

    Celgene (CELG) climbed 7 percent to $131.39 after touching a record high of $135.98. The company said it would buy Receptos to get a potential multibillion-dollar drug.

    Yellen said she expects the economy to grow steadily for the rest of the year, allowing the Fed to hike rates, but gave no direct hint on the timing or pace of a hike. The Fed is broadly expected to hike rates in September or December.

    The Fed's Beige Book showed U.S. economic activity continued to expand from mid-May through June, with lower energy prices helping boost consumer spending but remaining a drag on manufacturing.

    The Dow Jones industrial average (^DJI) fell 3.41 points, or less than 0.1 percent, to 18,050.17, the Standard & Poor's 500 index (^GSPC) lost 1.54 points, or 0.1 percent, to 2,107.41 and the the Nasdaq composite (^IXIC) dropped 5.95 points, or 0.1 percent, to 5,098.94.

    Earnings Season

    Corporate America is expected to report its worst sales decline in nearly six years in the second quarter, while profit is expected to have fallen 2.9 percent, according to Thomson Reuters (TRI) estimates. The effect of the uncertainty in the Chinese markets and the strong dollar will also be in focus.

    Yum Brands (YUM) fell 2.9 percent to $88.88. The owner of Pizza Hut and KFC reported its fourth straight quarter of falling sales, indicating it is still struggling to regain lost ground in China after a food safety scandal last year.

    The Nasdaq is likely to get a lift Thursday on the heels of results from Intel and Netflix after the market close. Intel (INTC) jumped 5.4 percent to $31.30 while Netflix (NFLX) surged 10.4 percent to $108.20 in extended trade, sending Nasdaq e-mini futures up nearly 20 points.

    Declining issues outnumbered advancing ones on the NYSE by 1,841 to 1,223, for a 1.51-to-1 ratio on the downside; on the Nasdaq, 1,826 issues fell and 998 advanced for a 1.83-to-1 ratio favoring decliners.

    The benchmark S&P 500 index posted 30 new 52-week highs and 16 new lows; the Nasdaq composite recorded 140 new highs and 64 new lows.

    Volume was light, with about 5.8 billion shares traded on U.S. exchanges, below the 6.66 billion average so far this month, according to data from BATS Global Markets.

    What to watch Thursday:
    • The Labor Department reports weekly jobless claims at 8:30 a.m. Eastern time.
    • At 10 a.m., the Federal Reserve Bank of Philadelphia releases its survey of manufacturing conditions in Mid-Atlantic states for July, and the National Association of Home Builders releases its housing market index for July.
    Among companies reporting quarterly earnings Thursday are:
    • Citigroup (C)
    • EBay (EBAY)
    • Goldman Sachs (GS)
    • Google (GOOG)(GOOGL)
    • Philip Morris International (PM)
    • UnitedHealth Group (UNH)


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    Amazon Letter
    Mark Lennihan/APVisitors walk through the Hachette Book Group's exhibition at BookExpo America, the annual industry convention in New York.
    Literary types typically aren't confrontational or argumentative. But that wasn't quite the case last year when (AMZN) engaged in a nasty spat with a publisher.

    In the latest development in a saga that saw the retailer go several rounds with Big Publishing, it recently renewed its existing, comprehensive deal with HarperCollins. The latter company, a unit of sprawling News Corp. (NWS), agreed to a key point that had previously been a bone of contention between Amazon and one of HarperCollins' peers.

    Hachette Job

    That peer is Hachette, owned by France's Lagardere. A fight between it and Amazon started last year when its hard-copy and e-book selling contract with the retailer came up for renewal. For reasons we'll dip into shortly, Amazon insisted on the publisher agreeing to a retail price ceiling of $9.99 for its e-books.

    Hachette took umbrage at this, claiming among other things that it would badly affect the revenues for itself and its authors. The resulting battle lasted for months, until the two sides nailed down a compromise last November.

    The publisher would be allowed to continue to set its own prices for e-books, but Amazon would offer it financial incentives to keep the costs low (although we're not sure of the particulars; neither nor Hachette made details of the new contract public).

    Determined to Discount

    Why was Amazon so stuck on the price of e-books?

    According to an official company blog post, keeping the price low actually increases sales, and thus brings in more revenue for all parties involved -- retailer, publisher, and author. Also, says the retailer, it's almost impossible to justify e-book prices that match or approach that of their hardcover cousins.

    "With an e-book, there's no printing, no over-printing ... no lost sales due to out-of-stock, no warehousing costs, no transportation costs," the company wrote.

    That argument aside, the natural gravitational pull of the e-book market is down toward modest prices. A great many self-published writers -- who often issue their work through Amazon's dedicated self-publishing platform -- set prices very low, in order to drum up interest for their work and make it readily available.

    The Biggest Store in Town

    After a few months of fighting, though, it appears Hachette realized that it had to bend at least a little bit to the retailer's wishes.

    Amazon is, after all, still a bookselling behemoth. According to recent estimates, the company is responsible for 40 percent of all new books sold, and a commanding 65 percent of the e-book retail space. Digging in too much against the company, then, can really hurt a publisher's results.

    Tellingly, according to a report in Business Insider, Amazon apparently managed to coax higher co-op fees (the monies it's paid by publishers to specially feature their books on its website) from Hachette in their renewed pact.

    The other "big five" publishers seem to have tacitly accepted Amazon's power in the marketplace. Mere weeks before the Hachette compromise, CBS' (CBS) Simon & Schuster renewed its deal with the retailer. In December, Macmillan followed suit, as did HarperCollins this past March, and Penguin Random House last month.

    Meanwhile, a quick glance at the retail prices of several recent e-books issued by the four publishers indicates that only the occasional title seems to be priced significantly higher than $9.99.

    During their dispute, Hachette scoffed at suggestions that it charged too much for its e-books, claiming that over 80 percent of its e-titles retailed at that price or lower. Amazon, meanwhile, alleged that "[m]any e-books are being released at $14.99 and even $19.99."

    Regardless of which side is painting the truer picture of the past, current reality seems to suggest that the retailer's preferred ceiling is becoming the standard.

    A Boon for Bookworms

    So Amazon has sewn things up with all five major publishers. With that, the landscape of the book-selling world has shifted toward a model wherein the retailer dictates pricing conventions, rather than the publisher. And if said conventions include $9.99 e-books, who's going to continue paying around $20 for a hardcover version?

    Not the consumer, that seems certain. Amazon and the publishers drew some blood and left some scars in their fight; luckily for us readers, we escaped from the scuffle largely unharmed, and are now saving money and will likely continue doing so because of it. Happy reading!

    Motley Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Try any of our Foolish newsletter services free for 30 days. Check out The Motley Fool's one great stock to buy for 2015 and beyond.


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    Couple standing in front of rental shop
    Getty ImagesRenting and returning -- instead of buying and keeping -- may be a better option.
    By Geoff Williams

    It's an expensive world.

    That's why the renting industry thrives. People rent homes, cars, trucks and movies because not everyone has a bank account with unlimited funds.

    Nobody needs to tell you any of this, but it's worth bringing up because you may not be aware just what you can rent these days. And sometimes it's far more practical, from a savings standpoint, to rent and try before you buy, than just go out and spend money on something you may not use or like.

    So with that in mind, here are some unusual things you may want to rent, instead of purchase. But this isn't an argument for renting-to-own furniture, electronics or anything else. As a general rule, renting-to-own won't save you money. But if you want to use something for a short time, there are things you could be renting and returning, rather than buying and keeping.

    Smartphones. Need a phone? Maybe you dropped yours or had it stolen, and you don't yet have hundreds of dollars lying around to replace it (and you don't want to indefinitely rent a phone through your carrier)? You could use, which offers short-term smartphone rentals.

    "We offer iPhones and Android phones for just about every carrier," says Sergio Vargas, the founder of "We ship all over the U.S. for free, and the cost of a monthly rental is less than $30."

    College Textbooks., based in Ogden, Utah, offers a service in which you can rent your college textbooks, rather than buy them. Instead of buying your books for a huge price, and then selling them back to a college book store later, you rent the books for a lower price -- and send them back. According to the website, you'll typically see a savings of 50 to 85 percent for the same new or used book that you could purchase elsewhere. Just remember that you are renting the books. They need to be returned. If you lose them, you'll have to pay a buyout fee, and in the end, you may not save money.

    Stuff. There's no pigeonholing what you might rent from It could be anything. William Noto, co-founder and CEO of, reels off a list of items you might rent off his website: "A keyboard, meat smoker, post hole digger, a water ski boat, a blender, a hitch for a car ... patio chairs, a drill, a steam mop."

    Noto, who lives in Niskayuna, New York, says he came up with the idea of an all-purpose rental site last summer.

    "I had to get my weed whacker repaired," he says. Noto sent in his weed whacker to be repaired, but it took so long, "and possibly I missed their calls," he concedes, "that I ended up never weed whacking that summer. I wondered, 'Why do I even own this thing I didn't use once?' The next day, my lawn mower broke, and I wondered if I could use a neighbor's. That was my eureka moment."

    Noto created, a website that lets neighbors rent their belongings to neighbors. The website is short for, "Hey, neighbor." You just type in your ZIP code and see what people are renting and hope it's something you want to rent.

    Drones. Yes, you can rent a drone, from a number of places, like Blue Skies Drone Rental and

    Generally, it's fairly cheap to rent a drone, but with some not-so surprising caveats. For instance, you could rent a drone from for $36 a day, but there is a three-day minimum, and a minimum (refundable) deposit of $650 is required, along with a shipping charge. You might also want to insure the drone through Lumoid, lest something go wrong.

    Wearable tech. Most people don't really need a drone, but a lot of people seem to be buying wearable tech like the Fitbit, an activity tracker.

    Lumoid also rents those. In most cases, for $25, you can try out five wearable tech items, say a sleep tracking kit, at home for two weeks. If you decide you want the items, then, sure, you can buy them, with that first $25 going toward the purchase price.

    Tailgating equipment. If you look around, your area may have a tailgating rental service. That is, if you're a college football fan and want to have a tailgating party but are short on supplies, you could go somewhere like Tailgate Ten in Columbus, Ohio, or Tallahassee Tailgating & Events in Tallahassee, Florida, which will let you rent everything from a tent and table to chairs. You can generally expect to pay about $200 at many of these places, or hundreds more, depending on whether you're going low-frills to renting a trailer with a grill and having someone do the grilling for you.

    Arcade equipment. Not sure if you want to spend upward of $1,000 for a Ms. Pacman or Donkey Kong arcade game, but you really enjoyed playing them as a kid?

    Most rental services around the country specialize in renting arcade games for company parties, high school after-proms and other types of special or corporate events, but every once in a while you'll find a company that targets families and avid gamers.

    "Our company rents out classic arcades for $75 per month," says Seth Peterson, co-founder and CEO of, based out of Antioch, California. So far, Peterson says, his company services Sacramento and the San Francisco area.

    "Each month our members can keep their games, choose new ones or can cancel at anytime. Pickup and delivery is free, and there are no long-term commitments," he says.

    And that is the beauty of renting merchandise for a short time rather than buying outright -- in the right circumstances, it can be an ideal financial strategy for the indecisive, money-challenged or commitment-phobic.


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    Couple Meeting With Financial Advisor
    Getty ImagesHigh-yield municipal bonds and international small cap funds are solid choices for active management.
    By Kate Stalter

    The debate between active and passive management may never be settled, particularly in the media. Plenty of investors, advisers and academics hold strong views on either side.

    But there are some who believe that a combination of active and passive management styles is in investors' best interest.

    Daniel Kern, president and chief investment officer at Advisor Partners in Walnut Creek, California, is co-author of a 2014 research report, "Investment Selection: A Framework for Combining Active and Passive Investments."

    The researchers used three metrics to evaluate passive and active funds in various asset classes: payoff, persistence and predictability.

    Kern explains the criteria, saying, "Payoff means: Does active pay enough to justify the higher risk and cost? Persistence is: How frequently do winners continue to win? Predictability is: How often do active managers outperform?"

    Kern and his colleagues identified a few areas of the market where active funds met those criteria. International small cap is one example. At Advisor Partners, Kern uses the Oakmark International Small Cap Fund (OAKEX), managed by David Herro.

    Another aspect of Kern's analysis is evaluating whether traditional benchmarks appropriately capture the investments and risk profiles he wants to include in client portfolios. In the case of high-yield bonds, his firm gravitates toward active management.

    "We think the benchmarks used for high yield are fundamentally flawed," he says. "Bond benchmarks reward those who borrow the most. Or, in less kind terms, benchmarks may reward bad behavior instead of good behavior."

    Focused on Investments

    When credit analysts and managers actively oversee a high-yield fund, they can focus on specific sectors and regions, and even narrow down selections to the better-quality bonds within the high-yield universe. Such selectivity isn't possible for a fund that simply tracks a benchmark.

    "With an asset class like high yield, we'll use an actively managed fund, largely for risk-management purposes," Kern says. "We like having an experienced credit team at the helm making that choice about how much to invest in high-yield energy debt, in the international fixed-income market, in the debt of peripheral European economies."

    We prefer to have active managers who say, 'There are problems. We don't want bonds from Illinois or Detroit or Puerto Rico.'

    Michael Ball, president and lead portfolio manager at Weatherstone Capital Management in Denver, says active management is the better choice when it comes to high-yield municipal bonds.

    "We prefer to have active managers who say, 'There are problems. We don't want bonds from Illinois or Detroit or Puerto Rico.' We like that people dig into some of those areas where it's often difficult to get a good view. It's not like looking at Pepsi versus Coke," Ball says.

    He notes that an active manager can analyze several factors before deciding whether to include a holding. For example, with high-yield municipal bonds, it may not be readily apparent why a particular issue is rated lower than investment grade. "Is it a smaller issue, and they didn't go out and get rating for it? What type of a revenue bond is it? There are a multitude of factors that come into play," he says.

    Ball leans toward tactical allocation, meaning he will adjust portfolios according to market conditions and other factors. He currently uses the Nuveen High Yield Municipal Bond (NHMAX) in client accounts.

    Rick Ferri, founder and managing partner at Portfolio Solutions in Troy, Michigan, has written extensively about the advantages of using index funds. His books include "The Power of Passive Investing: More Wealth with Less Work" and "All About Index Funds: The Easy Way to Get Started."

    However, he has identified three areas of the market where active management is advantageous: municipal bonds, high-yield corporate bonds and value-stock strategies.

    Ferri says value stocks aren't a unique asset class, although many investors and advisers refer to them as such.

    That's because value stocks offer exposure to a risk factor that is not sensitive to market-capitalization weightings. For example, market-capitalization sensitivity is typical in a passive investment that tracks a benchmark such as the Standard & Poor's 500 index (^GSPC) or the Russell 2000 index (^RUT).

    Value Investing

    In the area of value stocks, Ferri says even some products categorized as passive are, in fact, actively managed. For example, Dimensional Fund Advisors, whose products Ferri uses, employs factors such as price-to-earnings and price-to-book ratios when constructing funds. While the methodology is data-driven and there's no manager picking stocks based on an opinion or outlook, DFA's strategy does qualify as active, Ferri says.

    Ferri also points to Research Affiliates, which uses non-market-capitalization-weighted, automated strategies to construct indexes. Its indexes are licensed by other companies, which package them into funds. Ferri says those strategies, too, are forms of active management.

    "It's active management that's done with the creation of the index methodology," he says.

    He points out that products from DFA, or those that license Research Affiliates' indexes, have higher turnover and expenses than a simple value index fund from Vanguard. Those managers must generate a higher return to make their products worthwhile.

    Ferri says a fund that simply tracks a traditional index, such as the Russell 2000 Value index of small-cap stocks, may be a reasonable choice, but he sees potential problems. For example, because index fund holdings are well known, and rebalancing activities are publicized ahead of time, it's easy for hedge funds to make buys or sells before index funds. That can put a dent in returns for retail investors.

    In addition, a value index essentially consists of the value components of a larger index, split off into a smaller offshoot. Ferri says investors may not get the real benefits of a more targeted value strategy if they go that route.

    "You could probably get something more concentrated than that by using DFA or Research Affiliates," he says. "It requires some analysis of whether you want to do that or not."


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    Woman with debts
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    By Valerie Young

    WASHINGTON -- Wells Fargo is fond of pointing out that buying a home is the biggest investment most Americans will make in their lifetimes. That may be one of the reasons that home mortgages are among Americans' biggest gripes, a fact highlighted in a report released this week by the U.S. Public Interest Research Group Education Fund.

    In an analysis of four years worth of complaints to the Consumer Financial Protection Bureau, a government watchdog agency created after the financial crisis, researchers found that mortgage complaints accounted for 40 percent of the almost 363,000 claims, or about 138,000.

    The remaining 60 percent of the total complaints were dispersed between student loans, credit cards, consumer loans, debt collection and other financial products. The bureau, authorized by the Dodd-Frank Wall Street Reform and the Consumer Protection Act in response to the 2007-2008 financial crisis, has secured over $2.9 billion in refunds and relief by taking enforcement actions against more than 40 companies, according to the Public Interest group's research.

    Before the consumer protection agency was established in 2011, "people who experienced problems with mortgages or any financial products were really at the whim of negligence, deceit, and illegal practices by mortgage companies," said Mike Litt, a consumer protection advocate with the Public Interest Research Group. "Now, we do have that 'cop on the beat.' "

    Among the mortgage claims, the majority, 85 percent, were related to two categories of problems -- consumers who couldn't make payments or those who had problems doing so. That included difficulties with loan modifications, collections, foreclosures, loan servicing, payments, and escrow accounts.

    Borrowers who complained to the federal agency were able to resolve them by getting an explanation about 86 percent of the time; they received monetary relief in about 4 percent of cases, according to the analysis of its complaints database. Just last month, the bureau started allowing consumers to post their personal stories in the database, sharing both their aggravation and their confusion.

    Companies topping the grievance list, with the highest number of complaints, are Bank of America (BAC) and Wells Fargo (WFC), according to the report. Bank of America, based in Charlotte, North Carolina, generated the most claims in 45 states and the District of Columbia, a trend due in part to its 2008 acquisition of subprime lender Countrywide Financial. That company specialized in loans to borrowers with credit scores too low to qualify for traditional mortgages, and buying it made Bank of America, which didn't offer such loans, a leading mortgage provider.

    "The report reflects when we held the dominate mortgage servicing market share at the peak of the economic downturn," Bank of America said in a statement. "We have since helped more than 2 million customers avoid foreclosure and reduced the number of seriously delinquent mortgage loans to less than 10 percent of peak levels."

    Bank of America remains a significant mortgage lender, extended $16 billion in home mortgages in the second quarter and $3.2 billion in home-equity loans, according to its earnings statement Wednesday.

    Wells Fargo also cited market share as a cause for the volume of complaints; adjusting to account for that, the San Francisco-based company drops to ninth place.

    Wells Fargo predicted Tuesday when it reported second-quarter earnings that new home loans would drop from an almost two-year high in the third quarter after applications slowed during the past three months and its pipeline shrank by $6 billion. The company issued $62 billion in home loans in the second quarter.

    "No matter how we obtain customer feedback, we value it, take it seriously and we work with each customer to attempt to find solutions that meet the customer's needs and individual circumstances," said Tom Goyda, vice president of Wells Fargo consumer lending communications.

    Geographically, the Public Interest group's report showed, mortgage borrowers living in the District of Columbia, Maryland and New Hampshire made the most noise, filing the largest number of complaints per capita.


    The opportunity they now have to share their stories, unfiltered, has made the consumer finance agency even less popular with the mortgage industry, which had never been a fan. "It's a one-sided, unfiltered submission without any pre-checking or validation," said David Stevens, president and CEO of the Mortgage Bankers Association. "It's unfortunate that the bureau has chosen not to require some validation of the individual's complaints, just to make certain that we're not exaggerating what has already been a very difficult, challenging environment for so many homeowners and for other stakeholders in this housing recession that we are just emerging out of today."

    The bureau has offered significant help to consumers, Stevens said, but that doesn't eliminate its responsibility to provide accurate information about the behavior of both borrowers and lenders.

    "What bothers me, in this case, is that it draws an immediate assumption that all of these are accurate, definite, clear violations by the financial services industry and that's clearly not the case," he said.

    Mortgage lenders "try to argue that these are unsubstantiated complaints, but really what's happening is that they don't want a flashlight shown on their practices," Litt said. "The CFPB, the database, and all of their educational tools are perfect examples of good government working in the public interest."


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    GOP 2016-Trump
    Ross D. Franklin/APReal estate mogul and GOP presidential candidate Donald Trump
    By Karla Bowsher

    Donald Trump traveled an old-fashioned route to fortune.

    As he explained last month when he announced his bid for the 2016 Republican nomination for president:

    "I made it the old-fashioned way. It's real estate. You know, it's real estate."

    While Trump did have a big head start -- his father, Fred, was a multimillionaire New York real estate developer -- there's no doubt The Donald has created a fortune of his own. But even if he had stopped working 30 years ago, he could have done much better. All he had to do was shift away from real estate and park his money in the same place that you can: an unmanaged stock index fund.

    The Background

    To compare Trump's performance to that of an unmanaged index fund, we need to know two things: his beginning net worth and his current net worth.

    There's considerable debate about Trump's net worth. It's estimated at $4.1 billion in the latest Forbes 400 list, which puts him in the No. 133 spot of the richest folks in America. However, Wednesday he issued a press release announcing his net worth at $10 billion.

    Fine. Let's give him the benefit of the doubt and assume his net worth is $10 billion.

    Now we need to establish his net worth at some point in the past. Trump was on the Forbes 400 in 1982, when the magazine published its first annual list of America's wealthiest denizens.

    That year, Forbes said Trump's fortune was "estimated at over $200 million," but also acknowledged that Trump claimed it was "$500 million," according to Timothy L. O'Brien's book "TrumpNation: The Art of Being The Donald."

    Again, let's give Trump the benefit of the doubt and assume he was worth $500 million in 1982.

    The Math

    Imagine Trump had retired in 1982, sold his real estate holdings and invested his $500 million in the S&P 500 -- that is, 500 stocks representing the American stock market.

    From 1982 through the end of 2014, the S&P 500 index had an annualized return, including reinvested dividends, of 11.86 percent, according to MoneyChimp's S&P 500 Compound Annual Growth Rate calculator.

    Per this calculator, every dollar invested in January 1982 would have been worth $40 by December of 2014. That means Trump's initial $500 million would have grown to $20 billion. That's twice what Trump says he's worth today.

    You Can Beat 'the Donald'

    This comparison is notable for two reasons. First, it reveals that Trump may not always be as shrewd as he'd have you believe, especially since he's filed four corporate bankruptcies since 1982.

    More relevant to your life, however, is that you can do what he didn't: harness the twin tools of stocks and compound interest.

    While few of us have the resources to invest in the stocks of 500 of America's largest companies, nearly all of us have the ability to do so through mutual funds, like an S&P 500 index fund.

    You probably have an S&P index fund, or something similar, in your 401(k) at work. They also can be found at nearly every investment firm, either as a mutual fund or an exchange traded fund, commonly known as an ETF.

    If you decide to take on more risk and chase The Donald, you will need to make a couple of important decisions:

    1. Pick an asset class. You could buy stocks or bonds, as well as choose from a slew of other alternative investments. To keep things simple, however, we will stick with stocks and bonds.

    Many experts urge average investors to put their money in mutual funds rather than buy individual stocks and bonds. You can choose a stock mutual fund, a bond mutual fund or a portfolio of mutual funds that includes both stocks and bonds.

    In our hypothetical example above, we chose a pure stock mutual fund. That's because, in the long run, stocks offer a greater rate of return than other asset classes such as bonds.

    As Money Talks News founder Stacy Johnson explains in "Beginning Stock Investor? Here's All You Need to Know":

    Depending on how you measure it, stocks have averaged 8 percent to 10 percent annually over the last 100 years. Of course, stocks entail risk; that's why they pay more.

    Fortunately, mutual funds help mitigate risk because they are made up of a wide variety of stocks. That helps spread the risk -- if one company in your mutual fund goes bankrupt, it won't wipe you out.

    2. Pick active or passive management: Actively managed stock mutual funds are run by financial professionals who decide which individual stocks within the fund to buy and sell. They make these judgments based on their expectations of future market performance.

    Such managers aim to outperform stock market indexes -- and they charge higher fees for their effort.

    Passively managed stock mutual funds, often referred to as index funds, simply aim to mirror the success of a stock market index.

    Here's Johnson again:

    Owning an index fund is like owning the entire stock market, as represented by an index, like the S&P 500. Since all an index fund manager has to do is buy the stocks in the index, a chimpanzee could do it. And because management is simple, the fees charged are minimal.

    Study after study has shown that index funds historically have performed better -- at a lower cost to the investor -- than managed funds over a long period of time.

    Johnson is hardly the only expert who champions index funds.

    Warren Buffett, billionaire investor and CEO of Berkshire Hathaway, made headlines last year when he wrote in his annual letter to shareholders that his fortune is destined for index funds. Buffett wrote of the instructions laid out in his will:
    My advice to the trustee could not be more simple: Put 10 percent of the cash in short-term government bonds and 90 percent in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions or individuals -- who employ high-fee managers.
    Perhaps that wisdom is why Buffett is in the No. 2 spot on the Forbes 400.

    How would you have invested $500 million in 1982 -- real estate or index funds? Share your thoughts with us in the "Comments & discussion" section below, in our new Forums or on our Facebook page.

    Earning More on Your Savings: Stocks


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    Protesters hold a large Greek flag at the anti-austerity
    Michael Debets/Pacific Press/LightRocket via Getty ImagesProtesters hold a large Greek flag at the anti-austerity protest outside the Greek Parliament in Athens, Greece.
    By John Geddie

    LONDON -- At 86 billion euros, Greece's latest bailout package is less than 10 percent of the sum Italy and Spain need to borrow on markets before the end of 2017. The eurozone's debt problems are far from over.

    With Athens offered a temporary solution, sovereign debt bankers are turning their focus to the scale of the refinancing needs in some of bloc's other indebted states as the interest rate cycle turns and the crutch of central bank bond-buying is set to be whipped away in just over a year.

    No one is predicting investors will shun the likes of Spain and Italy, as they have with Greece. But the risk is that they demand a higher rate of interest at a time when both countries are struggling to get their debts back on a sustainable path.

    Some investors even see a situation where borrowing costs and the economic recovery in the bloc becomes so lop-sided that the European Central Bank has to extend its quantitative easing, or QE, program beyond its scheduled September 2016 expiration.

    "Debt-to-GDP reduction and structural reforms may not have happened quickly enough in countries such as Italy while the rest of the eurozone is progressing pretty well," said Neil Murray, head of pan-European fixed income at Aberdeen Asset Management.

    "In which case, we will need more QE programs."

    In Italy, where data showed public debt at a new record high of 2.2 trillion euros this week, the government has to refinance 635 billion euros of bonds by the end of 2017, a third of its outstanding debt.

    Spain has to roll over 351 billion euros in the same period, also around a third of its debts.

    Investor appetite for this debt has up until now been helped by a series of monetary easing measures which sent 10-year borrowing costs to record lows of around 1 percent in March.

    But even with QE in full flow, yields have climbed some 100 basis points in the last few months -- a trend that is worrying the bankers that arrange bond sales for these sovereigns.

    "It's a market where the gross amount of issuance is massively more than it has been in the past and rates are rising," said one banker on condition of anonymity.

    "We have been in this virtuous cycle and it is coming to an end."

    Via bond swaps and issuance of longer-dated debt, Spain and Italy have used this cheap borrowing to extend the average maturity of their debt and ease future pile-ups.

    It has also marginally reduced the government's overall cost of debt servicing, but crucially not enough for it to stabilize its debts.

    In order for a country to do that, the sum of growth and inflation rates must equal the debt-servicing cost as a percentage of gross domestic product unless the country can run a budget surplus before interest payments to cover it.

    Forecasts from the OECD, show that by the end of this year, the debt ratios of both countries will still be rising.

    This is important because without the numbing affect of cheap central bank money, investors will start to once again pay closer attention to economic fundamentals and demand a higher risk premium from those that have not been able to get their houses in order.

    No other central bank has so far been able to halt QE after just one round, and for strategists such as Standard Life's Andrew Milligan, economic divergence in the bloc will only encourage the ECB to follow suit.

    "Very sizable amounts of debt have been allowed to build up," said Milligan.

    "Traditionally, those would be solved by default, inflation, currency devaluation or a fast growth environment -- all of those look extremely difficult for Europe."


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    Unemployment Benefits
    Alan Diaz/APJob seekers attend a career fair in Miami Lakes, Fla.
    By Lucia Mutikani

    WASHINGTON -- The number of Americans filing new applications for unemployment benefits fell more than expected last week, pointing to a solid labor market.

    Initial claims for state unemployment benefits dropped 15,000 to a seasonally adjusted 281,000 for the week ended July 11, the Labor Department said Thursday.

    The decline reversed the prior week's rise and ended three straight weeks of increases.

    Claims tend to be volatile during the summer when automakers normally shut assembly plants for annual retooling. However, some of the companies keep production running, which can throw off a model the government uses to smooth the data for seasonal fluctuations.

    A Labor Department analyst said there were no special factors influencing the data and no states had been estimated.

    U.S. financial markets were little moved by the data.

    Federal Reserve Chair Janet Yellen said Wednesday that labor market conditions had "improved substantially," but added that they weren't yet consistent with maximum employment.

    The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, increased 3,250 to 282,500 last week.

    It was the 16th straight week that the four-week moving average of claims held below 300,000, a threshold normally associated with a firming labor market.

    While job growth has cooled from last year's robust pace, there is little doubt that the labor market is tightening.

    The current unemployment rate is 5.3 percent, within striking distance of the 5 to 5.2 percent range that most Fed officials consider consistent with full employment.

    Thursday's claims report showed the number of people still receiving benefits after an initial week of aid declined 112,000 to 2.22 million in the week ended July 4.

    The unemployment rate for people receiving jobless benefits fell to 1.6 percent, the lowest level since mid-May, from 1.7 percent the prior week.


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    Mixed race mother and daughter using laptop together
    Getty Images
    Direct Plus loans, frequently called Parent Plus, are probably the most irresponsible form of government lending in the entire student loan market.

    Even though the federal government knows the income and repayment capability of a parent, those facts are ignored when deciding how much money to lend. Instead, Parent Plus loans only consider how much the education costs, and how much money needs to be borrowed to fund that education. Credit requirements focus only on major derogatory items on your credit report. If you are seriously delinquent or had previous bankruptcy or foreclosure, you would be declined. But your ability to repay is ignored. Someone with an annual income of $20,000 could theoretically borrow $40,000, so long as they are current on all of their obligations.

    When new hires start working for a bank, they are taught the basics of underwriting. A very basic lesson is that you should determine whether or not the borrower has the ability to repay that loan. Every time we ignore a borrower's ability to repay, we end up in trouble. The 2008 mortgage crisis was probably one of the greatest examples of ignoring repayment ability. Unfortunately, the lowest income parents are most vulnerable to these loans. Because of the ever-increasing cost of education, parents are often asked to borrow additional money to fund their child's education.

    Here are some of the biggest problems with Parent Plus loans:
    • The responsibility of the loan remains with the parent and can never be transferred. Even in retirement, wages could be garnished and assets seized to collect the debt.
    • It is almost impossible to have these loans discharged in bankruptcy.
    • The interest rates have historically been much higher than federal loans granted to students.
    • Although loans to students aren't repayable until after graduation, loans to parents become due as soon as they are disbursed.
    If you need to take out a Parent Plus loan, you should consider your options carefully. I recommend that all parents answer these three questions:
    1. Can I afford the monthly repayments on this loan?
    2. Am I getting the cheapest interest rate?
    3. Should I really borrow with a Parent Plus loan?
    Can I Afford the Monthly Repayment?

    Remember that the Department of Education won't figure out whether or not you can afford the monthly payments. But you will need to figure out whether or not you can afford the loan.

    You should start by creating a written budget. Take stock of how much earn and spend each month. There are some excellent tools to help you do this, including Mint and LevelMoney.

    To see if you can afford the monthly payment on the loan, consider the 50/20/30 budgeting method, which is a useful guide. Specifically:
    • No more than 50 percent of your monthly take-home pay should be used for fixed expenses. That includes your mortgage or rent, car payments, insurance, gym memberships or any other fixed expenses.
    • 20 percent of your income should go towards your financial goals. That includes saving for retirement and saving for your child's college. It also includes goals like paying down your credit card debt. Your Parent Plus loan payment should fit into this 20 percent.
    • 30 percent of your monthly income can be used for flexible spending. That includes groceries, restaurants, entertainment, travel and more.
    Compare your historic spending, and see if you have been keeping within this budget. And consider your life if you took on the Parent Plus loan. Don't fool yourself, because the Parent Plus loan can never go away. If you are already spending 70 percent on fixed expenses and your credit card debt, you won't be able to afford more debt.

    Cheapest Interest Rate

    The federal government sets the interest rates on Parent Plus loans. However, there are now private lenders that can beat those rates. In order to qualify for a private loan, you would need to have a good credit score and strong income. You can find variable interest rates as low as 2.03 percent with some of the new lenders. You can compare the Parent Plus private loans at MagnifyMoney.

    Should I Really Use a Parent Plus Loan?

    If you take out a Parent Plus loan, it will be with you until it is paid off or you die. So, your goal should be to get the lowest interest rate possible. If you have equity in your home, using that may be a better option. Home-equity lines of credit are returning. Interest rates tend to be very low. The interest is tax deductible. And in many cases you can borrow over a longer term, reducing the monthly cost (although that will drive up the total amount borrowed).

    Make sure you go into a Parent Plus loan with your eyes wide open. Only take out the loan if you can afford the monthly payments. Don't think that your only option is the government. And consider other ways of borrowing, like home equity, before you make a final decision.

    Nick Clements is a former banker, author and co-founder of He used to run the largest credit card company in the United Kingdom, and now he is helping you save money.


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    NEW YORK -- Walmart's (WMT) counter-offensive against Amazon's big sale called Prime Day seemed to pay off.

    The world's largest retailer, which discounted about 2,000 items Wednesday, said that the last three days have been been some of its best ever for online orders, though didn't give specifics.

    The discounter, based in Bentonville, Arkansas, also said that shoppers were finding ways to speed up the delivery of items. It noted that Wednesday was the highest day of the year for same-day pickup at its stores, with orders increasing triple digits over the same day last year.

    That service allows shoppers to order online and then pick their purchases up at the store the same day. Among the top-selling items Wednesday were a Apple iPad Air 2 for $399.99 and $12.35 for Anna and Kristoff dolls from Disney's "Frozen."

    Last week, Amazon announced a sale it called Prime Day that it promised would have more deals than the Black Friday shopping bonanza. The sale, which commemorates Amazon's 20th anniversary, was aimed at Prime members, who pay $99 annual fee for free shipping. But some shoppers expressed disappointment in the sale because they thought the discounts weren't deep enough or the items were less than desirable.

    But it still drove traffic and sales for the online retailer. (AMZN) said that by 1 p.m. Wednesday, the speed with which customers were ordering had already surpassed 2014 Black Friday. ChannelAdvisor, which tracks sales of third-party sellers on Amazon, said sales jumped 80 percent compared with the same day a year ago in the U.S. and 40 percent in Europe.


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    APTOPIX Amazon Smartphone
    Ted S. Warren/AP

    NASHVILLE, Tenn. -- Amazon (AMZN) turns 20 on Thursday. Here's a timeline of 20 investment bets Amazon made in the past 20 years:

    1995: Amazon opens its virtual doors as an online bookseller.

    Late 1990s: Amazon invests in startups like and that promised to change the way people bought pet food and ordered delivery items. But they both went bust shortly after the bubble burst in 2000, causing Amazon to lay off some staff and scale back elsewhere.

    1999: The company launches Amazon Auctions, a separate site that resembled eBay's auction sites, which didn't succeed. "I think seven people came, if you count my parents and siblings," reminisced founder and CEO Jeff Bezos.

    2000: Amazon launches Marketplace for third-party sellers to sell on Amazon. Today, 40 percent of Amazon's units are sold by more than two million third-party sellers worldwide.

    2005: Amazon starts its Amazon Prime loyalty program: $79.99 a year for free two-day shipping. Today, there are an estimated 35 to 40 million members.

    2006: Using technology developed for Amazon's internal infrastructure, Amazon begins offering businesses a suite of products and services by way of the "cloud," remote servers that enable users to access applications on any machine with an Internet connection. Revenue rose 49 percent in the most recent quarter to $1.57 billion.

    2007: Amazon launches the Kindle in 2007 when e-ink was just going mainstream as a device for reading digital books. Since then, it has branched out into several different versions of the Kindle including a kid-friendly version, Fire color tablets and dedicated e-book readers

    2007: Amazon launches a niche website in 2007 called that focused on selling high end handbags and shoes. The site failed to attract fashionistas or carve out much of a distinctive niche for itself, and it was shuttered in 2012.

    2007: Amazon begins testing Amazon Fresh grocery delivery in Seattle. It has since expanded that service to Los Angeles, San Francisco, Philadelphia and parts of New York. After a free trial period, for $299 a year members get same-day and early morning delivery on groceries The goal is to expand to more cities over time, but a nationwide rollout has proved elusive so far.

    2010: Amazon Studios launches in 2010 to create and acquire TV shows to supplement its Prime Instant Video offerings. In January 2015, its original show "Transparent," starring Jeffrey Tambor as a transsexual dad, won two Golden Globe awards.

    2012: Amazon buys robotics company Kiva Systems in 2012 and has been implementing robotic technology in its warehouses to speed distribution.

    2012: Amazon launches Amazon Game Studios. It has been beefing up the unit ever since it launched the Fire phone and Fire TV offerings last year in order to offer stronger gaming options for those and other platforms. But there hasn't been no breakout hit as of yet.

    2013: Bezos announces on "60 Minutes" that the company is developing drones to deliver packages to customers in 30 minutes or less. Amazon has been testing advanced drones abroad and the FAA hopes to have drone regulations in place within the next year.

    2014: Amazon launches its Fire smartphone with features like visual-recognition technology. It received mediocre reviews, a steep price cut to entice buyers and significant write downs on the cost of developing the phone.

    2014: Amazon has a public spat with publisher Hachette. It was reportedly over e-book revenue. It led to the largest U.S. bookseller removing pre-order buy buttons, cutting discounts and reducing orders for books. The rare public fight led to a black eye for Amazon's image. Eventually Amazon and Hachette signed a new contract.

    2014: Amazon opens its 3D-printed products store in July 2014 to let customers have access to 3D printing technology. With 3D-printing expected to eventually upend the manufacturing and retail industries, the store gives customers a glimpse of what is to come.

    2014: Prime Music streaming music service launches and offers Prime members access to tens of thousands of albums from artists including Beyonce, The Lumineers and Macklemore & Ryan Lewis. But there's no deal with top-ranked Universal Music Group. Amazon says "several million" Prime members listen to Prime music each month.

    2014: Amazon surprises many when it made a nearly $1 billion bet on videogame streaming site Twitch. But a year later, it's not clear what Amazon's plans for the site.

    2014: Amazon debuts the Echo, a WiFi-enabled speaker that responds to voice commands to play music, give updates on news and weather and even reorder some products. The Echo, which sells for $179, can also sync with Belkin WeMo and Philips Hue products to control home light bulbs and other devices.

    2015: Amazon debuts the Dash button: stand-alone buttons you can push to reorder common household goods like Tide detergent. The buttons are invite-only and can be requested via Amazon's web site.

    2015: The final frontier for Amazon is finding new ways to speed up delivery time, or so-called last mile delivery. They've rolled out Sunday delivery via U.S. Postal Service and reportedly have been in tests with startups Uber and Postmates.


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    Financial Markets Wall Street
    Mark Lennihan/AP
    By Noel Randewich

    NEW YORK -- Wall Street ended stronger on Thursday, with the Nasdaq up more than 1 percent at a record high after earnings reports from eBay and Netflix boosted optimism.

    Sentiment was also bolstered after the Greek parliament voted in favor of austerity measures. Dour quarterly reports from Goldman Sachs and UnitedHealth, however, capped gains on the Dow.

    It just proves the U.S. market continues to be resilient in the face of what seems like an endless list of global worries.

    The S&P has surged almost 4 percent from eight days ago, when widespread fears about Greece and a Chinese stock selloff pushed the index to its lowest level since March.

    "It just proves the U.S. market continues to be resilient in the face of what seems like an endless list of global worries," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa.

    The Dow Jones industrial average (^DJI) rose 70.08 points, or 0.4 percent, to 18,120.25, and the Standard & Poor's 500 index (^GSPC) gained 16.89 points, or 0.8 percent, to 2,124.29. The Nasdaq composite (^IXIC) added 64.24 points, or 1.3 percent, to end at 5,163.18, just beating its previous record-high close of 5,160.095 on June 23. The S&P was also near a record high.

    Nine of the 10 major S&P 500 sectors were higher, with the utilities index's 1.54 percent advance leading the gainers. The materials index was the lone laggard, down 0.24 percent.

    After the bell, Google (GOOG) jump as much as 7 percent after reporting its second-quarter revenue rose 11 percent.

    The S&P 500 trades at 16.8 times forward 12-months' earnings, above the 10-year average of 14.7 times, according to StarMine data.

    Earnings Season

    U.S. companies are expected to post their worst sales decline in nearly six years in the second quarter, while profit is expected to have fallen 2.9 percent, according to Thomson Reuters estimates. But expectations are low.

    "What this season confirms is that we are in a modest growth and modest inflation environment," said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis.

    Netflix (NFLX) surged 18.02 percent to a record high of $115.81 a day after reporting strong subscribers numbers.

    Citigroup (C) reported its highest quarterly profit in eight years and its shares rose 3.77 percent to a six-and-a-half year high of $58.59.

    EBay (EBAY) rose 3.39 percent to a record high of $65.59 after reporting better-than-expected quarterly profit and announcing the sale of its enterprise business.

    But Goldman Sachs (GS) fell 0.8 percent after posting its smallest quarterly profit in nearly four years, while UnitedHealth (UNH) fell 0.7 percent after missing analyst cost estimates.

    Advancing issues outnumbered declining ones on the NYSE by 2,159 to 942; on the Nasdaq, 1,852 issues rose and 945 fell.

    The S&P 500 posted 46 new 52-week highs and 13 new lows; the Nasdaq composite recorded 182 new highs and 63 new lows.

    Volume was light, with about 5.6 billion shares traded on U.S. exchanges, below the 6.6 billion average so far this month, according to BATS Global Markets.

    What to watch Friday:
    • General Electric (GE) and Honeywell International (HON) report quarterly financial results before U.S. stock markets open.
    • At 8:30 a.m. Eastern time, the Labor Department releases the Consumer Price Index for June, and the Commerce Department reports Housing Starts for June.
    • The University of Michigan releases its preliminary assessment of consumer sentiment for July at 10 a.m.


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    Concept isolated photo of cutting cable cord
    Getty Images
    More and more often these days, we hear about American consumers "cutting the cord" on cable television -- canceling cable TV subscriptions in favor of Internet streaming. But does this mean that cable television is doomed?

    That's what the headlines would have you believe. In fact, The New York Times reported in May that at Comcast (CMCSA), for instance, cable TV subscribers were down 8,000 in the first quarter -- while 407,000 new customers signed up for high-speed Internet (through which you can stream television shows without a cable TV subscription). Rival cable provider Time Warner Cable (TWC), meanwhile, is said by International Business Times to be facing a "mass exodus of pay-TV subscribers."

    All of which sounds sounds like bad news for the cable companies, and good news for consumers. According to the New York Times, even though Comcast now has more Internet subscribers than cable TV subscribers, it gets 77 percent more revenue from its TV business ($5.3 billion) than from selling high-speed Internet ($3 billion). The more the TV business shrinks, therefore, the less money Comcast earns, even if Comcast's Internet business expands.

    And not coincidentally, this tends to imply that customers' cable bills will be shrinking as they migrate away from cable TV and toward streaming Internet TV instead.

    Statistics ...

    However, it's not quite time to chisel out a headstone for the cable industry -- yet. Consider, for example, this latest report out of Internet statistics portal

    Citing research by Big Four consulting firm Deloitte, Statista reports that America's youngest consumers (ages 14 to 25, a grouping now often being referred to as "Generation Z") are about 37 percent less likely than its oldest consumers (ages 68 and up) to pick "pay TV" (which would include both cable and, for example, satellite television) as one of the top three most important communications and entertainment services to which they subscribe. The implication being, these young folk may currently get cable -- but they wouldn't mind so much not getting cable.

    Young consumers are likewise 35 percent less likely than baby boomers (ages 49-67), 28 percent less likely than Gen-Xers (32-48), and even 23 percent less likely than Millennials (who at ages 26 to 31, are apparently no longer our youngest generation) to "value" pay TV among their top three services.

    All of this seems to suggest that America is "aging out" of the habit of paying for television. The younger the cable viewer, the less likely they'd be to miss having a cable subscription after cutting the cord. At the same time, Deloitte's data show that the youngest consumers are more likely than any other generation to value being able to "stream" their television (and their music, too) over the Internet. And again, as Comcast advises, that's not as profitable for the cable companies -- and logically, must therefore be cheaper for consumers.

    ... Can Be Deceiving

    At the same time, though, Deloitte also confirms that while Generation Z is less likely than any other generation to value having cable access a lot, most young consumers still do value it some. In fact, a clear majority of America's youngest consumers say they value cable.

    Either way, fully 58 percent of the group ages 14-25 expresses a "media preference," as Statista puts it, for watching pay TV. Even if many customers of this age group value streaming video (72 percent) and music (42 percent) over the Internet more than they value cable TV, it seems clear from the data that they're streaming in addition to watching pay TV -- not instead of it.

    What It Means to You

    When you get right down to it, the whole concept of consumers saying they're "cutting the cord" on cable by canceling their TV service is a bit self-deceptive. Fact is, even after you ditch cable TV and switch to streaming, you're still cutting a check to the cable company every month -- for the Internet service.

    One way or the other, as long as they control the "pipes" that bring Internet and cable into our homes, you just know the cable company is going to "get you." If too many customers cancel TV service in favor of Internet streaming, the cable company can simply hike rates on Internet service to compensate for the lost TV revenue.

    And yet, the good news is that given that so many younger-generation customers, down to and including "Generation Z," still say that pay TV remains one of the "most important media services" they subscribe to, cable companies may not feel like they need to hike Internet rates just yet. If consumers want to put off the day that cable companies feel compelled to hike those rates, such that Internet streaming becomes just as expensive as cable TV, maybe we should all cool it with the "cutting the cord" talk.

    There's no need to give Big Cable an excuse to raise our rates sooner than absolutely necessary. Wouldn't want to spook 'em.

    Motley Fool contributor Rich Smith doesn't own shares of any of the stocks mentioned above. (Nor does The Motley Fool.) He tried to get out of the habit of paying for cable TV once, but they pulled him back in.

    Try any of our Foolish newsletter services free for 30 days. And check out our free report on one great stock to buy for 2015 and beyond -- no cable subscription required.


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    USA, New Jersey, Jersey City, Portrait of senior woman with shopping bag in kitchen
    "Thanks for shopping with us! And make sure to visit our website and give us your feedback. You'll get 50 extra fuel points for filling out the online survey -- and you can enter once a week!"

    If you've ever gotten one of these after-sales pitches from your grocery store checkout clerk, you may have wondered -- 50 "points"? Huh! That sounds pretty good, but what is it really worth? Well, we've crunched the numbers for you, and in the following few paragraphs, we'll explain exactly how much filling out a customer feedback survey is worth to you.

    Origin of an Idea

    Supermarkets awarding points for feedback is a relatively new phenomenon in the grocery store game. It began, if you recall, back when a sharp spike in oil prices in the mid-2000s led to a similarly sharp spike in consumer gasoline prices. Back then, supermarkets such as Kroger (KR) and Giant decided to encourage loyal shoppers to spend more by rewarding them with "points" on their store loyalty cards -- which could be traded in for discounts on gasoline purchases like so:
    • For every $1 you spend at the grocery store, you earn a point.
    • Collect 100 points in a month, and you can trade that in at the gas station (by swiping your loyalty card) for a $0.10 discount on the price of a gallon of gas.
    • Points would generally expire at the end of a month, or 30 days after accrual, or some variation on that schedule -- to encourage continual repeat grocery shopping.
    With us so far? OK, so out of this scheme grew the idea of supplementing these gas points with extra points for filling out customer feedback surveys. In this way, supermarkets were paying a sort of virtual currency to have their customers help them identify trouble spots and improve their operations -- while at the same time further ensuring customer loyalty. (At least in theory.)

    The way these surveys work today, when you get your checkout receipt at the supermarket, it contains a time-and-date stamp, and a unique identification code that, when entered on the supermarket's website, will permit you to fill out a survey giving feedback on your latest grocery shopping adventure. Complete that survey and you'll get 50 points added to whatever number of points you've already accumulated -- points that can likewise be traded in for a discount on your gasoline purchase.

    Easy-peasy. But is it worth it?

    Supermarket Math

    Cheap gas sounds great in principle, but to find out precisely how great of a deal it is, we took the Kroger feedback survey out for a spin, to try to nail down the economics of this deal. After completing a purchase, we sat down and filled out the online survey, attempting to nail down the monetary value of the time required to fill out one of these surveys. Here's how the math worked out:
    • It took about 6 minutes to complete (your mileage may vary).
    • At 6 minutes per survey, hypothetically, we could complete 10 surveys an hour (albeit, that hour would have to be spread over at least 10 weeks, because Kroger only accepts one survey per customer per seven days).
    • At 50 gas points a survey, times 10 surveys an hour, Kroger is therefore compensating you with 500 points an hour of survey work.
    • 500 points, times 10 cents off each 100 points, equals a maximum savings of 50 cents off a gallon of gas purchased.
    • According to USA Today, the most popular vehicle in America today is the Ford (F) F-series pickup truck, which says has a 23-gallon fuel capacity. That's about twice the size of the average small car's gas tank, but to be very generous to Kroger, let's assume its average customer uses his or her gas points to fill up an F-150 from empty.
    • Under this scenario, 50 cents in per-gallon savings times 23 gallons equals $11.50 saved for an hour of time invested in filling out surveys. (Note that in practice, you might need several months to rack up all 500 points used in this example, saving perhaps 20 cents a gallon for 200 points one month, 10 cents a gallon for 100 points the next, and 20 cents for 200 points the next.)
    Result: Filling out a Kroger (or Giant, or Safeway, or Wegmans) survey might deliver for you the equivalent of an $11.50 hourly wage, assuming you: (a) fill out each survey quickly; (b) maximize the value of your gasoline purchases by filling up only when you're "running on fumes"; and (c) fill up a very large vehicle with a very large gas tank.

    Under other scenarios we ran (e.g., smaller car, partial fill-up, fewer than 500 points), the savings from gas points, and consequently the value of filling out a grocery store customer feedback survey, could work out to savings less than the hourly U.S. minimum wage. And of course, if you're already earning more than $11.50 an hour, then even under the most optimistic scenario, filling out grocery store customer feedback surveys will be a "money-losing" proposition for you.

    Simply put, you can probably earn more doing an hour of other work than you could save on gas expenditures by filling out customer feedback surveys. Or if you value your free time... maybe you'd be better off doing no work at all.

    Motley Fool contributor Rich Smith doesn't own shares of any of the stocks mentioned above. The Motley Fool recommends Ford. Try any of our Foolish newsletter services free for 30 days, and check out our one great stock to buy for 2015 and beyond.


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    Advertising Week Day 4
    Brian Ach/Invision for Advertising Week via APFrank Abagnale, a former fraudster and subject of the film "Catch Me If You Can," speaks at Advertising Week in New York City in 2012.
    By Eric Reed

    NEW YORK -- Choosing a financial adviser is one of the most important decisions an investor can make. Good judgement can make the difference between a retirement spent traveling around the world and anxious weeks between Social Security checks, so competence is a big must.

    Not investing in is just one step, though. A good financial adviser also needs to be honest, because trusting your retirement plan to a crook can be nothing short of devastating.

    Financial fraud is nothing new; from bogus IRS collection schemes to sweepstakes scams, financial scams cost the elderly alone nearly $36.5 billion a year. Most cons rely on a little bit of distance between predator and prey, though, generally with a volume approach to finding victims. As a result, people are inclined to trust someone they meet in person.

    It's not like your email scheme where you can get nickel and dimed, which is a lot more common. This is a much more mile-deep kind of fraud.

    That might be a costly mistake. According to spokesman for the Commodity Futures Trading Exchange Michael Herndon, fraudulent financial advisers don't just operate in person. They thrive that way.

    "It's not like your email scheme where you can get nickel and dimed, which is a lot more common," Herndon said. "This is a much more mile-deep kind of fraud. People turn 65 and think that they're investing with someone who's legitimate, they give [the adviser] their entire life savings, and then find out that it was a scam."

    "It's financially devastating," he added. "Literally it destroys lives sometimes."

    Herndon tells stories about phony advisers that sound like something out of a Hollywood screenplay.

    Operating in well-appointed offices, they fleece people out of their life savings with promises of investment riches. They take clients' money without investing a dime, and can eventually skip town with hundreds of thousands of dollars in ill-gotten gains.

    It could almost be entertainment if the consequences weren't so ruinous. On film, con men operate with a wink and a smirk, fleecing the wealthy out of easy money. No one ever sits through an epilogue where the mark's children have to drop out of college or a family loses its home. That part would hit closer to home.

    Financial adviser fraud works by first stealing the trappings of legitimacy. They'll operate in person, shaking hands and arranging to meet in their neighborhood office, generally one with degrees on the wall and support staff in front. They stay in communities for years at a time in order to build up trust and the word of mouth reputation that brings in new clients.

    Building Trust

    In fact, according to Herndon, reputation is key to the business model. They need the victims' trust, and there's no better way to do that than by getting references from neighbors and friends.

    "It's not fly-by-night, like a grifter drifting in and out," Herndon said. "People have built some credibility within the community, and that may take months or even a few years."

    "People watch the movies and think, 'That would never happen to me. I've seen it on the screen, I know what happens,'" he added. "But the victims over and over again say, 'I believed it. They had an office and they were nice. They came over when I broke my leg.'"

    Generally most fraudulent advisers work in communities to create networks among friends and neighbors. Churches are popular targets for their close-knit nature, where the con men will join a local congregation and sing hymns for a while before offering that first someone the deal of a lifetime. It's all about building trust so when the time comes to ask for a check people will take a chance.

    As for the money, it's a straightforward Ponzi scheme. Despite the promises of grand returns, phony investors never actually place a dime in the stock market. They will publish earnings reports and fake account statements showing fantastic returns month after month in order to keep clients from asking questions.

    When someone asks for their money back, it comes out of the next investor's capital in exactly the same way that Bernie Madoff beat the market for decades in a row.

    "They'll start sending out fake account statements," Herndon said, "so in the first month, your $50,000 went to $55,000. In the next month it goes to $60,000, then it goes to $70,000, and you'll think this account is doing great, but that's just a piece of paper. The money actually went to Vegas with him and up his nose in a line of coke."

    House of Cards

    An investment scheme is a house of cards, one that lasts as long as the con artist can keep money in the account. When too many people want their money back, or when the con artist can't line up a next investor, it's time to pack up and leave town.

    In the adviser's wake, he leaves a community of empty retirement accounts and wiped out investors.

    So with this note of caution, how can investors safely watch out for con artists in the guise of a friendly, neighborhood fund manager? There are a few red flags to look for.

    First and foremost, beware of the hard sell. Phrases like "act today" and "it's your loss" rarely come from legitimate or cautious traders. Instead, they're the stock and trade of someone trying to pressure you into an emotional decision, shortcutting reason in favor of fear.

    "And," Herndon said, "always, always look out for 'guaranteed return.' That's the scariest word."

    Don't get greedy. They say you can't con an honest man, so beware any promises of easy money that sound too good to be true, and when a friend recommends services, ask if he's actually seen any of those returns. It's one thing to have pulled out a few thousand here and there, but has this investor ever turned over the full value of someone's account?

    Investors should also run background checks before handing over any money.

    Due Diligence

    The challenge with investment is that once you've given someone the money, there's almost no way to control what the adviser does next. Consumers trust their broker, and to some extent the law, but ultimately there's no mechanism in place that actually stops someone from cashing out and running. Threats of law enforcement can only do so much, so it's worth making sure the gentleman with the nice office and Harvard degree is who he says he is.

    On the website Smart Check, individuals can check the background of an investor and whether he is registered as a financial adviser. The overwhelming majority of fraud is committed by outsiders to the system, con artists rather than professionals gone bad.

    "Just because someone is registered doesn't mean that they won't commit fraud," Herndon said, "[but] if that person doesn't show up in a database where a financial adviser is supposed to show up, that's a huge problem."

    Finally, trust experience. Although it makes life harder for new advisers looking to cut their teeth, the reality is that spotting a con can be incredibly difficult for the average consumer. Someone whose firm has been around 20 years is less likely to have a scam running than someone who got to town 18 months ago.

    Or at the very least, maybe that experienced adviser will have some property to seize if things go wrong.


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    Using a credit card.
    Getty ImagesOnly paying the minimum due is going to come back to bite you.
    By Lars Peterson

    Consumer credit makes buying the stuff we want and need easy and convenient. Credit can also bail us out of a jam, especially if our emergency funds aren't quite up to the task. Unfortunately, that convenience comes at a price. Aside from uncontrolled, in-the-moment spending, credit card use opens us to a variety of dangerous financial mistakes, some with long-term effects.

    You probably already understand the dangers of running up those credit card balances, but here are few more dangerous mistakes you may be making, plus some tips on how to avoid them.

    1. You only pay the minimum due. Banks use several formulas to calculate the minimum amount due each month. Most start with a percent or two of the outstanding balance and then add in any fees for late payments, exceeding the credit limit and monthly interest charges. However it's calculated, simply paying the minimum will result in lots and lots of interest payments over time.

    You can find out how your credit card issuer calculates the minimum payment by visiting your issuer's website. Your bank's site may also include a calculator that shows you how long you'll owe -- and how much interest you'll pay -- if you merely pay the minimum. If not, try this credit card debt calculator.

    2. You pay late. According to FICO, which generates credit scores, payment history is the largest component of a credit score -- 35 percent of the score, in fact. This makes sense because lenders want to know how promptly borrowers have paid in the past, and nobody likes getting paid late. Late payments mean a lower credit score.

    There's a second danger here as well. Late payments will result in late payment fees from your bank, which not only cost you a bit more (or a lot more, depending on your agreement), but may also boost your monthly minimum (again, depending on your agreement).

    3. Your utilization ratio is too high. After payment history, FICO looks at "amount owed," which makes up 30 percent of a credit score. The key calculation here is the borrower's credit utilization ratio, which is how much available credit you use. For example, if you have a card with a $5,000 credit limit and a $2,500 balance, your utilization ratio is 50 percent. In generating the score, FICO analyzes each account and the total of all your accounts.

    A high utilization ratio can harm your credit score, which impacts your ability to secure loans on favorable terms. It also means you have less credit available for emergencies. High utilization ratios may also indicate some deeper financial difficulties. If yours is creeping up, it may be time to do some serious budgeting.

    There is no hard-and-fast rule, but many personal finance experts advise consumers to keep their utilization ratio below 30 percent.

    4. You don't read your statement. With more banks pushing us toward paperless billing and automatic bill pay services, it's getting easier to skip looking over the monthly statement. The first danger here is that you may overlook erroneous charges and pay for products and services you haven't actually bought. You may even miss that you have been a victim of identity theft or other forms of credit fraud.

    A more subtle danger associated with ignoring the monthly credit card statement is personal finance complacency. When we don't review and monitor our spending, we stop being in command of our finances, making it that much more difficult to reach our personal finance goals, whatever they may be.

    Set aside a few moments every month to review your statements, whether paper or digital, and make it part of a monthly budget review routine.

    5. You haven't read the fine print. Do you know how your credit card issuer calculates and applies interest? Do you know what the fees are for late fees or credit limit overages? What about fees for cash advances?

    Your bank is required by law to make all of that information available to you (and more), in an easy to read and understand format called the "Schumer box," after Senator Charles Schumer of New York, who championed the law.

    Before you apply and sign up for any credit account, make sure you understand the key terms spelled out in the Schumer box.

    6. You apply for too many accounts at once. Every time you apply for a credit card you trigger a credit score inquiry. A couple inquiries won't impact your credit score, but several inquiries in a short period of time will affect your score, although the effect is minor. Experian, one of the big three credit bureaus, notes that while minor score adjustments don't harm those with good or excellent credit, consumers with weaker scores are at greater risk. Even a modest reduction in score, combined with other risk factors, can make it harder to secure additional credit.

    There is an exception: Multiple inquiries made while rate shopping home and auto loans within a 30-day period are treated as a single inquiry.

    7. You take cash advances. If you look at the line item for cash advances on your Schumer box, you may be stunned by the interest rate your bank charges. A May survey found that the average for cash advances is 23.53 percent -- or 8.54 percent higher than the average rate for purchases. Some banks even charge as much as 36 percent for cash advances! But the dangers of cash advances mount. Unlike charges for purchases, most banks begin applying interest the moment the advance is taken -- and this is on top of the 5 percent fee most charge to execute the advance.

    Needless to say, consumers are wise to avoid cash advances, lest they find themselves caught on a never-ending debt treadmill.

    Lars Peterson is an editor for Wise Bread, a personal finance blog that covers financial products and help readers find the best cashback credit cards.


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