Penny Wise, Pound Foolish: Credit Cards and Millennials

Stack of Credit CardsRecent studies find that 63% of those 18-29 years old don’t own a credit card, with many interviewed stating that they have no interest in getting one. Reasons given were:

  1. Afraid of going into debt.
  2. Security issues – namely, the countless credit card breaches that have taken place in the past year or so.

In the short term, sure, it make sense to not want to go into debt (or more debt if you’re among the million still paying off student loans). And to be honest, the magnetic stripe is a 50-year old or so technology that in today’s day and age is sorely outdated. So much so that in many places in Europe, they’re just about fully on chip-and-pin technology for their credit cards. It’s also much harder today to get credit cards than it used to be, and with good reason. Before the Great Recession, it was pretty easy to get a credit card. You could lie on applications about your income and no one was really checking – you could be an 18-year-old making nothing, write down that you make $40,000 USD a year, and get a credit card with a $8,000 limit.

But in the grand scheme of things, you will need to have a history of responsibly using credit cards to have a good credit score – or at least be able to significantly alter it in a short period of time … if you want a new car, house, even a job. The article does a good job balancing millennial sense with what the facts actually are. Saying that you’re afraid of going into debt and therefore you should never have a credit card doesn’t solve your main issue – which is that you feel there’s no way you can spend within your means. That lack of control will harm you whether you use a credit card, debit card, checks, cash, bookies, or otherwise. You have to fix the root of the problem rather than just taking away the toys that enable it.

Plenty of millennials believe that their debit cards are safer, but that’s just simply not true. JPMorgan Chase, anyone? In most cases once money is taken out from your checking account, it’s gone and much harder to recover than if you simply have a fraudulent credit card charge. Plus rewards on credit cards if you spend and pay back responsibly are all the rage – whether it’s cash back or points for travel. I will admit that many debit cards now offer similar rewards.

The stat at the end of the article is the most disconcerting: Of those polled, only 40 percent of millennials who do have at least one credit card pay their balances in full, compared to 53 percent of adults who are 30 and older. Three percent miss payments entirely.

So basically those who do have credit cards habitually spend more than they can pay back, learning probably from the nearly half of those in the older generation who do the same. Are there times when there is a major emergency and you have to spend more than you can afford? Sure. But I’d wager that most of those not making full payments aren’t in that boat. A credit card is a tool, which can be used for good or it could blow up in your face. Simply avoiding them because you believe that you can’t be responsible is a poor short term choice to make that could have some terrible consequences for your future. Make a budget, find ways to live within your means, stick with it, and the peace of mind that you will gain with that is worth not dropping $670 on the new iPhone if you’re not up for a renewal.

When I was buying a car earlier this year and I had the full credit score and report Ford Credit pulled on me, I was thankful that I had avoided the big shiny objects when I was younger. It paid off in a great car loan rate. Five years ago buying a car was out of the question, but as I and many other millenials on the older end of the spectrum are quickly finding out … life changes pretty quickly.

Blogged on LinkedIn: Five Low-Tech Steps to Tame Your Email

Please don’t misunderstand me – I’m a fan of technology. If it wasn’t for technology, I wouldn’t have a job. I’ve spent the last seven years of my career covering technology both as a journalist a marketer. With that said, technology is just a tool. It won’t magically make you any more or less productive.

In fact, there are studies that find people check email at least 30 times an hour, get anxiety over how much their inbox is clogged, and get distracted from doing their actual jobs … then it bleeds into their personal life and can cause burnout. There has to be a time you don’t check your email. Everyone has to shut it down at some point – it’s just not that important in the grand scheme of things.

Not surprisingly, there is a market now for technology that claims to solve this problem. The problem with that? If you don’t watch it, you’ll get even more inundated with distractions.

Here’s how you do it (hint, you don’t need an app for it):

Read the rest of this post on LinkedIn

Blogged on LinkedIn: How to Survive a Conference

For those fortunate enough to have the chance to attend industry conferences on their company’s dime, it can be an interesting experience: On the one hand, you want to take advantage of the fact that you have time away from the office in a (hopefully) fun locale where you can take in the sights and take a mini-break. On the other hand, you are going for work, after all. So how can you make sure that even though you’re out of your routine you can ensure there are no flaming fires in the office you have to try to put out from hundreds (if not thousands) of miles away AND get something out of the conference you’re getting paid to attend?

Read the rest of this post on LinkedIn

An Open Letter to Banks from a Millennial

The Street published an article yesterday that didn’t mince words: “Banks Have No Idea How to Handle Millennials”. The article basically highlights key points of a study that show which facets of banking my generation loathes the most – lack of mobile features, fees, not understanding our situation, and so on. It’s an interesting read for those who either are Millennials themselves (also deemed Generation Y) or otherwise.

Since I’m on the earlier edge of the Millennial age group, I can speak to issues my generation has with banks today. While I don’t necessarily agree with all of the points in the study – I think it largely depends on the bank itself – it did get me wondering what I would tell a CEO of a major bank if I had the chance to speak with him (or her).

Dear Banking Industry,

I’m sure you’ve thrown millions of dollars at the problem of determining what it is, in fact, that my generation wants from you. What we ultimately want is for you not to try to take advantage of us. To think that we’re stupid. Sure, there’s plenty we need to learn about personal finance since we never learned it in schools, but trying to hide it behind having to speak with one of your “banking specialists” who are really only specialists of the products you are trying to shove down my throat makes me never want to walk into a bank. Ever. I will do everything in my power to use my bank’s mobile app, ATM machines, and website to not have to set foot inside. In fact, in the last year I’ve only gone in there to get a bank check for a car and exchange $10 bills for quarters to do laundry.

In an age where I can YouTube how to fix or do virtually anything, you have got to make finance simple again. Leave your egos and your products at the door, and show us the basics. Then let us connect the dots. Let’s be honest – this isn’t just a problem with my generation. This is a problem every generation has right now. No one understands the finance industry. One person thinks it’s just fine, the other thinks it’s a house of cards ready to fall down (again), and a third probably keeps all of her money hidden throughout her apartment because she doesn’t want to pay fees. Stop trying so hard to make a buck and think about the long-term potential we have as customers. We’re in our 20s and early 30s now – you could have us for at least four more decades if you do it right. There’s a lot of things that we may be naïve about, but one thing we know for sure is that you’re in the business of making money – not just protecting mine.

Speaking of four decades from now – I am tired of seeing how much money I should save in order to have a “good” retirement. Do you know what I want for retirement? Do I even know what I think retirement will look like for me? Not really. I’m busy trying to either start my career or pay my bills. Stop trying to shove a magic number down my throat when, quite honestly, I don’t know what it is I want to do four decades from now yet. Do I know I should be saving money? Sure. So show me the best way to spread what little money I have to save across investments that will help my money grow faster than the pitiful .119% savings account rate for accounts with $2,500 and even worse CD rate average of  .113% (for a three-month CD). When you try to tell me how I should live my retirement, it makes me think about what that would actually be. And when I don’t have the answer to it, it makes me not want to save for retirement. Paralysis by analysis. What ultimately happens is that I don’t start saving for that because it’s something way off in the future I don’t have a plan for. Now I’m missing out on compounding interest.

Most likely, I’m probably not setting aside money for an emergency fund either because I think that nothing bad will ever happen to me. We all think that we’re invincible. We all think that we’re too big to fail. We also have a lot of money in student loans to pay off – and with that amidst a world that tells us we need to buy a house and a car, have a family, have babies, so on and so forth, again … paralysis by analysis. Show me how I can start to ease the pain right now, then the building blocks for what I could do in the future. Does it really make sense to plow money into something that gains less than two-tenths of a percent of interest when I can pay off loans that are charging me 6% of interest, if not more? Riddle me that, and maybe I’ll trust you enough to help me in the future.

There are too many variables in life, but that’s what makes it life. We’re not one-dimensional, and neither is the world we live in. We don’t expect you to know our situation intimately unless we tell you, so don’t pretend you know brass tacks what’s best for us. Give us clear information we can easily digest, don’t pressure us into making a decision, and stop assuming we’re derelicts. Every generation has thought the one ahead of theirs was going to ruin the world. You didn’t, despite your best efforts, and we won’t either. Get over it. Realize that you will want our business for the next 40 years, if not longer. Start to nurture that now, so that when we do have more money to diversify into different products, we’ll come to you first instead of sticking it under a mattress, keeping it in safes, or spending it to “keep our economy alive”.

Best regards,
Chris

 

Data Breaches Loom in the Executive Suite

In a move that probably doesn’t come as much of a surprise, Reuters just reported that Target Chief Executive Officer and Chairman Gregg Steinhafel is leaving the company in the wake of the retail giant’s tremendous breach of customer data in 2013.

For those living under a rock who missed the news, Target announced in December 2013 that it was the victim of a cyber-attack resulting in the loss 40 million payment card numbers and 70 million other pieces of customer data.

This gross breach of customer information led to Target promising free credit reports as well as credit and debit card providers issuing tons of new cards – complete with new account numbers – to virtually all of those impacted by the breach.

Considering that the theft of data came during one of the most important times of the year for retailers – Black Friday – the impact spanned far beyond simply issuing new cards. It led to a loss of consumer trust that Target could safeguard their information, and while I haven’t seen any specific data, possibly a decline in sales in Q1 2014. Given a Ponemon Institute report estimating the average amount of a data breach at $5.4 million, this was surely more than a blip on Target’s balance sheet given the sheer number of records impacted. Think about a decline in sales, the amount of money spent on litigation on behalf of Target, and for having to shore up its cyber defenses. $5.4 million is probably just the beginning.

The Reuters article has comments from analysts stating that this isn’t a surprising move given the scope of the attack, though it did come later than many thought. Personally, I had used my credit card several times in Target stores during the theft which resulted in being issued a new credit card months after the attack. While I didn’t experience any fraudulent charges or identity theft as a result of the attack, there are many who did.

With this attack, amongst the blatant disclosure of highly sensitive information accumulated by the National Security Agency by Edward Snowden in 2013, it’s no surprise that “privacy” was Dictionary.com’s Word of the Year. This has led to a lot of hard conversations companies have had to have with their customers to assure them their data is safe.

We live in an increasingly digital world, one in which not all payments are made with cash – which while seemingly prehistoric, does have the added benefit that it won’t disclose your most personal information.

While it’s unfortunate that it likely means the end or at least a huge detour for Mr. Steinhafel’s 35-year career as a retail executive, it should be another marker to begin to reassure you and I that companies do take data security seriously.

There’s not a lot that we can do to control how companies protect our data, but we can take safeguards to protect our own information in several ways. No, I’m not going to tell you to cut up all of your credit cards. I don’t know about you, but I like getting my cash rewards for using my Capital One card. Here are a few ways, though I’m sure there are many more:

  1. Take advantage of free annual credit reports offered by the big credit bureaus – Experian, Equifax, and TransUnion. An article from the Federal Trade Commission explains succinctly how you can go about doing this.
  2. Many sites are traps to get you to pay later, but using a site like Credit Karma can provide you with a truly free credit score you can monitor, especially if you’re thinking about making a big purchase that would require a loan (like a vehicle or home).
  3. Many credit card companies are great about sending you a notification if they feel someone has made a fraudulent charge with your card, but on a monthly basis make sure you review your credit card and debit card purchases to make sure there are no outliers. If you see one, call your bank or credit card company immediately to file a report. You can do this at the same time you’re looking at your monthly bill or reconciling your bank statement so that it isn’t any extra time taken.
  4. Keep all of your passwords, account numbers, and other sensitive information in a secure location (whether it’s photocopies you keep in a safe or a highly encrypted online document) for safekeeping. Make sure you also include the phone numbers for each of the companies with whom you have these accounts so that if you do lose your cards or feel as though your privacy has been compromised, you can quickly call to start to rectify the issue. Time is of the essence.

What I wish I knew about money when I was 21

There was an interesting article on Credit.com where the author crowdsourced the Internet to come up with pearls of wisdom those in their later 20s would have for their counterparts turning 21 – most of whom are just getting their undergraduate degrees.

It got me wondering what I thought about money when I was 21, and what I wish I knew now that I’m, well, staring 30 in the face. On October 25, 2005, I was just a couple of months into my junior year at Seton Hall University, solely focused on legally purchasing a 12-pack of Corona from University Liquors after my Publications Editing class ended at 11:30am.

Besides knowing that drinking beer at 11:30am for the sake of drinking it – not including allowable activities like sporting events and boozy brunches – is probably not the greatest idea, here’s what else I wish I knew about money at 21:

Spread the wealth: I had inherited a decent amount of stock from my grandparents, all of it in an old utility company that, barring something ridiculous happening, will never go out of business. (In retrospect, another mistake is thinking that a company’s stock price solely has to do with their viability as a company. Man, I was so naïve. I’m looking at you, Facebook.) In 2005, the economy seemed pretty good, so I didn’t move any of the money and let it ride in the stock market. The stock rose, and rose, and rose. Then the stock split, and I thought I was in for even more money. Screw you, college loans! (more on that soon) But just a couple of years later, the stock market crashed and we entered 2008’s Great Recession. I lost all of what I had made and more. I realize now that if I had diversified the stock between aggressive, middle of the road, and safer investments like money markets, I would have lost less money. Case in point? By 2008 I was in the working world and had a 401(k) that I had split among aggressive, moderate, and conservative investments. I lost at least 60% of the value of my inherited stock, and only 30% of my 401(k) investments – which I eventually earned back and then some. The inherited stock never returned to its pre-recession value, even today after I’ve long sold it at all for a loss (and a tax write-off).

College loans seemed like Monopoly money but they require cold, hard cash: When you’re 18 years old, you have no idea how much $40,000 actually is. You probably don’t know how much $20,000 is at that age, and the prices of colleges even when I was 21 were getting crazy. When I was picking which college to attend, cost was a factor but it wasn’t as big of a factor as it probably should have been. Seton Hall cost $35,000 per year at that time, which was far more than any other school to which I applied. With that said, they also offered me the most money, so I basically paid as much as I would to go to a state school in New York to go to Seton Hall. Even though that was a great deal, I was in no way prepared to be paying almost $400 per month after I graduated college to make that back. I wasn’t even making as much money in a year as I took out in loans – it was a reality check. Sometimes you have to play the game, and unless you’re very fortunate you’re going to have to take out at least some money to go to college. But I wish I knew the power of interest and how hard it is to simply pay off principle on loans before I decided where I went to school.

If you save for a rainy day, use it on that rainy day: There is a lot of debate about this, how much you should save for an emergency fund, how much to invest, how much to spend on vacations, taking your daily latte fund and opening a savings account, et cetera. I think anyone who tells you that if you invest $250 a month from 25-65 years old you’ll definitely have over $1 million is out of their mind, because what goes up does come down, and not always back to where you thought. It’s taking into account a rosy stock market and I suppose bank savings rates will reach 1% again at some point. With that said, having 6 months of emergency savings is important. So is investing in your future, whatever that future may look like for you. But if you’re fortunate enough to have more to save for a purpose, like a new car, computer, vacation, the list can go on … you should actually use it for that. Don’t feel like you need to save and save and save for the sake of saving. You’ll hate yourself and probably stop saving money. If you have an amount you’re willing to part with for a reason you already determined, spend it. Don’t second guess yourself as to what may happen if you lose your job or you break your leg … if this money is separate from your emergency fund and you have health insurance (and now you pretty much have to), then don’t let that fear dissuade you from something you’ve had your eye on for months if not years.

Why I Took a Social Media Nap

Almost 40 days ago, I joined millions of people around the world to give up something for Lent – some quit smoking, some drinking, others anything with sugar in it … but I found it ironic that people were announcing on Facebook that they were, in fact, giving up Facebook for 40 days. Were they closing down their notifications immediately after they posted? Did they only shut it down after they waited a couple of hours to see how many people liked their status update?

I wasn’t planning on giving up anything for Lent – some years I do, but I usually just use it to pick up something else to bring me closer to my relationship with God, whether it’s extra prayer, reading a new devotional, or otherwise. I did that anyway, but as I saw myself carving out what seemed to be no time – but ended up being 20 minutes – scanning my Facebook news feed, I felt myself getting angrier and angrier with each post I saw.

It was the same stuff, over and over again. The same people documenting the same issues, time after time. Maybe the people changed, but the issues remained the same. As I fumed over a Facebook member’s latest status update about breaking up with her boyfriend for literally the eighth time in six months, it finally clicked for me.

I was spending more time on others peoples’ lives than I was my own. Was I examining myself closely enough, or was I content to put that off because it’s easier to play Monday morning quarterback on other people’s lives, people in which I have no vested interest? I had grown content. I was losing myself in other people’s lives because I didn’t want to confront whether I was lost in my own.

So with that, I immediately shut down my automatic notifications for Facebook, Twitter, and LinkedIn – moved the apps to the last screen on my iPhone and off of the home screens of my Microsoft Surface and Asus Ultrabook. I had never done this before, but I was going to give it a shot.

I have to say, it was pretty liberating. Not feeling like I had to scan my news feed quickly as I downed my first cup of coffee headed to the gym in the morning allowed me to fill that time with reading other things, like an Easter devotional as well as the news of the day. I was learning about things happening in the world that didn’t involve an Instagrammed photo of someone’s food truck lunch, and it was great. There’s a whole big world out there, and I think that I was missing that by focusing on what was curated by my social circles.

This isn’t to say that social media isn’t a good place to curate news and updates – and that everyone I follow are shameless foodies, I actually have really smart, cultured friends. If you do it right, you can make sure you’re getting a very diverse view of things. But it’s like anything else, how diverse you get is really up to you. The very customizable nature of selecting your circle, or your followers, or your friends gives you freedom to choose what you want to see. But again, is that really giving you everything you should have? Or are you just content with what your other friends see and hear?

For me personally, I found that I wasn’t really updating my social media accounts all that much but I lurked an awful lot. I read up on everything, but never really engaged. I used it as a secondary news and events feed to standard news publications because I was too lazy to go look for it myself. I relied on others, but when I rely on others, I may not get exactly what it is that I want.

So in giving up social media for a brief time, I wanted to see if it made an actual impact on my life. If I craved the voyeuristic feeling of peering into others lives, but in a way that they allowed me to by giving me access to their daily updates and posts. If I missed wondering if a status update would get 5 likes, 20 likes, or a big fat zero.

It turns out that I missed it less than I thought I would, but now that I’m looking at it with a fresh set of eyes, I want to change the way I view social media. I’m going to much more liberally hide posts. I’m going to focus on the people I care about the most, and the type of news I care about the most. I’ve been really passive in shaping the conversation I want to be a part of, virtually, and it’s time for me to take that back. Like having to craft a strategic communications plan for an initiative at work, I need to craft a strategic plan for how I consume and engage through my own personal social media contacts.

I suppose social media is like anything else – you need to put it in its proper place in your life, and remember that you get as much out of it as you are willing to put in. This little nap I just took is going to help me do just that.