Personal Banking E-Newsletter - December 2013
Christmas Savings Tips
Christmas is an exciting time of year but many of us are short on time and money. If you’re trying to tighten Santa’s belt this Christmas, follow our Christmas shopping tips this festive season.
Leave the credit card at home and bring cash or your debit card instead. Credit card debt can be very expensive if you can't repay it in full immediately or within a few months. When you are spending the cash in your pocket or in your bank account, you will be much less likely to overspend than if you pay with a credit card.
If you do need to use your credit card, then take a look at a credit card cost comparison. There are still some providers offering 0% interest on balance transfers. If you can't afford to pay your Christmas credit card bill in full, you could take advantage of one of these offers in the New Year. But before you sign up, make sure to check what rate will apply when the introductory offer ends and if there are any conditions attached to it.
List everyone that you intend to buy for, then budget a reasonable amount that you can afford to spend on each person. Making a shopping list will also help you avoid impulse buying and keep track of your spending.
Avoid shopping at the last minute and try to arrange to go shopping when it’s quieter. Shops are a lot quieter late at night or first thing in the morning. Leaving yourself plenty of time and avoiding busy shopping times will make your Christmas shopping a bit easier.
Try a new approach to buying presents. You could agree a spending limit with your friends and family or try an option like a Secret Santa, so each person only has to buy one present. Or if there is a special item that you really want to give to someone, consider splitting the cost with a friend or relative. Keep an eye out for coupons or deals on gifts wherever you can.
Do your research. If you have a present in mind, shop around and compare prices, both in store and online. Keep your eye out for discounts and promotional offers. If you do plan to do some shopping online, be careful. What might seem like a great deal could be more expensive when you add on delivery charges, so be sure to take them into account. Make sure you leave plenty of time for delivery too.
Don’t get caught up on credit. In the run up to Christmas, personal loans and in-store credit may look like attractive options, especially for larger purchases like PCs, electrical equipment or furniture, where stores may offer you 0% finance for a period of time. Before signing up to store credit or a personal loan, consider the full costs and not just the monthly repayment. Would the repayments still be affordable if your income dropped for any reason, or if you had an unexpected expense?
- Be realistic with your food shopping. It can be easy to buy more than you need, but bear in mind that most shops are only closed on Christmas Day and New Year’s Day, so there’s no need to go overboard.
Control Your Debt With an Annual Clean Sweep
If you choose to use debt to manage fluctuations in cash flow, simplistic advice to live debt free isn't helpful. Here's a simple, practical test for keeping your debt under control.
If you spend more than you earn month after month, you're letting your debt get out of control. On the other hand, sometimes there are expenses that you can genuinely afford that you just don't happen to have cash for when they need to be paid.
For example, maybe you don't have cash on hand to pay for the tux rental when your best friend asks you to be in his wedding. The cost of floating that expense on a credit card might be only a few dollars — easily worth it, if the alternative is telling your friend to get married without you. Or maybe you don't have cash on hand to buy pots, pans, and kitchen utensils when you're moving into your first apartment. If the alternative is eating out in restaurants, maybe outfitting your kitchen on your credit card will actually save you money. In any case, the interest payments from that one purchase, if paid off promptly, will be small.
When Does Occasional Credit Use Become Problematic?
The problem with using debt at this level is not the expense of the interest that you're going to have to pay. The problem is that, between paying off your old charges and charging the occasional new thing, it gets a lot harder to know for sure that you really are just managing fluctuations, and not living beyond your means.
A useful tool for verifying that your debt is under control is an annual clean sweep. Pick one month during the year when you'll pay off all your revolving debt.
It doesn't really matter which month it is. Doing it in January might be obvious, but collides rather badly with Christmas expenses. If you're a student, maybe do it in June after school is over, or do it in August before the semester starts. The month with your birthday might be a good choice — you'll feel the pinch of all your own cash going to pay off your debts a bit less in a month when you get a few presents.
Whatever month you pick, that month you pay every bill in full — and on your revolving debt pay every balance down to zero. That's what makes it a clean sweep.
If you can do that without cheating, it's a pretty good sign that your debt is under control.
Of course you know that living debt-free is cheaper. Every dollar that you pay in interest is a dollar that doesn't go to supporting your standard of living. In the longer run, you'll want an emergency fund that you can use for unexpected expenses so you don't have to rely on debt. But a few dollars in interest payments can be a pretty cheap way of keeping circumstances from whipsawing your standard of living. And with the clean sweep, you can tell the difference between that and letting your debt get out of control.
How to Find the Best Holiday Travel Deals, Flights, and Solutions
Winter can be a tricky time to travel, what with holidays that bring insane fares, traffic-snarling snowstorms, and overhead bins stuffed fuller than a Christmas goose. But this winter is looking to be trickier than usual. Flights are fewer—which means deals will be tougher to find, planes will be full, and, should bad weather cause your flight to be canceled, it will be harder than ever to find seats on another plane. At the same time, pockets of value have cropped up in unexpected places, and new digital tools offer better solutions to age-old problems. Here’s how I’m planning to skate through winter:
1. Snag the deals
Sneak away between Thanksgiving and Christmas.
December 3 through December 16 will be the best window for bargains at warm- weather resorts, which are relatively empty between the holidays. Think Arizona, the Caribbean, Florida, Hawaii, or Mexico. For early-season ski deals, look to the Canadian Rockies, which has relatively good snow in early December, or to places with world-class snowmaking, such as Vail.
Book Presidents’ Day weekend, which is also Valentine’s Day weekend, in early December.
“Airlines won’t start to lower their January and February 2014 fares until late November,” says airfare expert Rick Seaney, founder of FareCompare.com, “so the perfect time to shop for Presidents’ Day week- end airfares will be the first couple of weeks in December.”
Escape to the sun in mid-January.
Unless you’re going to a popular ski destination such as Aspen or Vail, “the cheapest time of year to fly within the Northern Hemisphere is the last three weeks of January and the first two weeks of February,” says Seaney. Most airfares are 45 percent cheaper than peak summer rates. Go to Hawaii or Australia in late January and you’ll pay well under half what you’d pay at Christmas.
2. Ace the holidays
Hone your airfare searches.
The least expensive times to fly during the Christmas/New Year’s window are, of course, Christmas Day and New Year’s Day, as well as late afternoon and evening on Christmas Eve and New Year’s Eve. Other dates for low fares differ from city to city, depending on when school lets out, and can vary wildly, from $1,000 one day to $400 the next. It can be tough to determine which days have the lowest fares to and from your destination, so do a one-way airfare search rather than a round-trip search. In other words, if you’re trying to determine whether it’s least expensive to fly on December 20, 21, or 22, a one-way search for each of those dates will tell you.
Try alternate airports.
If you can’t find affordable fares to your Florida destination—say, Miami or Orlando—look at flights into Tampa or Fort Lauderdale, which are much less expensive over Christmas/New Year’s. As for California, consider flying into Los Angeles—an almost always affordable hub—and driving to San Diego.
Use the right Web tools to find beach resorts that aren’t sold out.
On a hotel company’s site you should be able to see, at a glance, which resorts still have rooms available. Go first to the chain whose loyalty program you belong to or whose credit card you hold. Let’s say it’s Starwood: At SPG.com, under Quick Links, click on “Hotel Explorer,” then click on the region and activities you want (for example,“Beach” or “Romance”), enter your dates, and you’ll get a list of matching properties with availability. You can also find last-minute holiday deals at Travelzoo.com.
Hit a fun city rather than the beach.
Instead of paying peak prices at a tropical resort, spend your money on restaurants, museums, and theater in a city—say, New York, Washington, D.C., or San Francisco— that loses its business travelers during the Christmas–New Year’s window and thus has steep discounts.
Splurge on business class—or at least premium economy—to Europe. It should cost little more than coach did last summer.
It will be less expensive to fly to London, Copenhagen, Oslo, and Stockholm this winter than it has been for the past several years, says Seaney, and the lowest fares will be to Ireland, Germany, and Spain. Rome and Athens will be tough, notes business travel expert Joe Brancatelli of JoeSentMe.com, since there are now few nonstop flights from the United States to those cities in winter. The good news, though, is steeply reduced business-class and premium-economy fares to Europe for the holidays, he says, since the business travelers who usually fill these seats aren’t flying then. At press time, you could fly from New York to Paris for Thanksgiving on British Airways subsidiary OpenSkies, in its PremPlus cabin, for only $1,300; from New York to London for Thanksgiving in Virgin Atlantic’s cushy Upper Class for $1,602; and from many U.S. gateways to many European destinations in Lufthansa’s business-class lie-flat seats for less than $2,000. “The airlines are not promoting these deals,” says Brancatelli— they’re doing their savviest elite travelers a huge favor by not informing the masses—so uncover such fare drops through an e-mail alert system such as Kayak’s price alerts.
3. Nip Problems in the bud
Fly in the morning.
The earlier in the day you fly, the less likely it is that your flight will be delayed. Especially try to avoid landing between 7 and 10 p.m.—tarmac rush hour. And consider alternate airports; instead of flying into Chicago’s O’Hare, for instance, which is notorious for winter hassles, choose Midway.
If you must book a connecting flight, choose a hub that is less likely to see bad weather or delays.
Stay away from the Northeast Corridor and Chicago. Opt for southerly cities such as Atlanta, Charlotte, Dallas, and Houston. European hubs that do well in bad weather, and are particularly pleasant and easy to connect in, are Copenhagen, Helsinki, and Munich.
Get a seat assignment at the time of booking.
Select the best possible seat using the airline maps on SeatGuru.com, which provide the pros and cons of each seat on the aircraft. If seat selection is not available at the time of booking, call the airline to get a seat assignment from a phone agent. Do not arrive at the airport without one, since this will significantly increase your chances of getting bumped if your flight is oversold (as is often the case during the holidays) or your aircraft is switched at the last minute.
Check in online 24 hours before your flight.
Checking in early reduces your chances of being bumped. It also increases your chances of getting a better seat—either an exit-row or bulkhead seat, or a better seat left empty by travelers with elite status who have just been upgraded from coach.
Traveling heavy? Ship your luggage, or get the right credit card.
If you’re laden with ski gear or holiday gifts, consider getting a credit card that exempts you from baggage fees. The $95 fee for the Citi Platinum Select AAdvantage Visa Signature Card, the Delta SkyMiles American Express Card, or the United Mileage-Plus Explorer card is waived for the first year—which means you and at least one companion can check bags for free for the entire year. The cards also give you priority boarding, enabling you to get to your seat—and the overhead bin—sooner.
When bad weather is brewing, be the first to find out if your flight is canceled.
The sooner you know, the better your odds of getting rebooked on an alternate flight. Check your airline’s Web site and Twitter feed for updates on airport closings and flight cancellations.
Have a Plan B.
If there are weather issues the day before your flight, delays may continue for days. So the night before your flight, go to FlightStats.com, open the drop-down menu under “Delays,” and click on “Global Trends.” At a glance you will see which airports and airlines are having the most cancellations and delays, and—just as important—which are not. Note which huge airports are having no weather or cancellation issues so that, if your flight gets canceled and there are no seats available on alternate flights to your destination, you can ask to be rerouted to a storm-free airport and from there to your destination. While you’re at FlightStats.com, sign up for a status alert for your flight.
4. Solve Snafus Fast
Canceled flight? Head to Vegas.
Consider flying to a huge airport with clear weather, even if it’s not in the linear path to your destination (see “Have a Plan B,” above). If you’re headed cross-country, Las Vegas is often a good option, since it’s got plenty of flights out, as well as inexpensive hotels. In other words, instead of sitting around Boston for four days trying in vain to get on a flight to Seattle, fly to Vegas and from there to your destination the next day. If you’re a family with kids and you cannot find seats together on the same plane, consider splitting up, with each parent taking one kid.
Know which alternate flight you want before you phone the airline.
Don’t depend on an airline agent to find the best options for you—especially since there are better tools out there for digging up flight and seat availability than the agents’ computer systems. You want to be able to tell the airline agent where to look for the departures and seats that you already know are available. So go to FlightStats.com, sign up for an account, click on the “Flights” drop-down menu, choose “Flight Availability,” click on the “Advanced” search option (which allows you to specify the airline and connecting city—e.g., an American Airlines flight connecting through Las Vegas), and find the seats you need.
If an airline’s phone lines are jammed, call one of its overseas reservations numbers.
Avoid long waits on hold by phoning the airline’s reservations desk in the United Kingdom, Germany, or Australia. You can get those contact numbers on your airline’s Web site. Use Skype so the call is cheap.
Stranded in an airport? Consider joining the airline’s club for a day.
Not only can you escape the circus in the terminal, but you’ll get access to agents who will likely do a better job of helping you get onto an alternate flight. The cost is typically $50 a day.
If all else fails, turn to Cranky Concierge.
When you’re stranded and need urgent help getting on the first flight out, reach out to Brett Snyder of CrankyConcierge.com. For a $150 fee, he can work miracles for up to four people traveling on the same flights.
Online Shopping Security Tips for the Holiday Season
More shoppers than ever are turning to mobile devices and computers to do their holiday shopping. However, internet shopping has unique risks for consumers, so shoppers need to take steps to protect themselves from fraud and scams. Here are a few tips for novice and veteran internet shoppers.
Avoid using public Wi-Fi
Any purchases made online require transmitting your credit card and/or bank account information over the internet. Using a public Wi-Fi connection to do so puts that sensitive information at risk. Hackers can tap into unsecured Wi-Fi connections at hotspots like coffee shops and airport terminals to capture that information. If you're using a wireless connection to shop, be sure that it requires a password or WEP key.
Don't respond to text solicitations
During the holiday shopping season, scammers will send out hundreds of fake deals or gift card offers via text message. If you respond, you'll likely be prompted to divulge sensitive financial information (such as a credit card number). Responding also puts you on the "sucker list" which means you'll receive even more unsolicited scam texts.
Monitor your accounts
Proactively monitoring your financial accounts (such as bank and credit card statements) can help you catch errors and spot potential fraud at the first sign. To simplify this process, use a single credit card for all your online purchases. That way you only have one statement to check instead of several.
Do not click links on social networking sites
To avoid infecting your computer or mobile device with malicious software, never click on a link to a deal or special savings on a social networking site or in an unsolicited email. Scammers will often disguise a social media post or email to make it seem as if it's coming from a known retailer, but the link will take you to a fake site and infect your device. If you see a link that supposedly leads to a sale you want to take advantage of, visit the retailer's website directly rather than clicking the link. From there you can verify if the sale is legit.
Finally, if you do notice suspicious charges on your credit card or transfers from your banking account, contact your credit card company and bank right away to notify them. They will put a freeze on the account, preventing further fraud. Remember, whenever you're online: think before you click.
Making Your Gifts Count: 10 Smart Tips For Charitable Giving
Americans gave $316.23 billion to charity in 2012, equivalent to 2% of the U.S. gross domestic product (GDP). The majority of that giving, $223 billion, came from individuals – not surprising since 88% of households give to charity.
Making a charitable donation is not only a chance to make a difference: it’s also an excellent way to reduce your tax burden for the year. The tax benefit is considered a compelling reason for making charitable donations: more than two-thirds of high-net-worth donors said they would decrease their giving if they did not receive a corresponding tax deduction.
A tax deduction for charitable giving isn’t guaranteed just because you’re feeling generous. As with everything in tax law, it’s important to follow the rules. With that in mind, here are 10 tips for making your donation count:
Itemize. In order to claim a charitable deduction on your tax return, you must itemize your deductions. You report itemized deductions on Schedule A on your federal form 1040 using lines 16-19:
- Choose carefully. Only donations to qualified charitable organizations are deductible. If you’re not sure whether an organization is qualified, ask to see their letter from the IRS (many organizations will actually post their letters on their web site). If that isn’t possible, you can search online using IRS Exempt Organizations Select Check. Keep in mind that churches, synagogues, temples and mosques are considered de facto charitable organizations and are eligible to receive deductible donations even if they’re not on the list (some exceptions apply so be sure and ask if you’re not sure). You can also find out more about a charitable organization’s tax exempt status – as well as review financials, mission statements and more – by check out a third party evaluator site like Charity Navigator.
- Get a receipt – even for cash. Cash deductions, regardless of the amount, must be substantiated by a bank record (such as a canceled check or credit card receipt, clearly annotated with the name of the charity) or in writing from the organization. The writing must include the date, the amount and the organization that received the donation. You don’t have to submit the writing along with your return but you need to be prepared to show it at audit. This is a relatively new requirement: the rules changed in 2007 to require written evidence for all monetary donations, including cash.
- Don’t overlook payroll deductions. Increasingly, employees rely on charitable giving opportunities available through their employer. If you make a contribution by payroll deduction, record keeping requirements under the Pension Protection Act of 2006 require you to retain a pay stub, form W-2 or other document furnished by your employer that shows the total amount withheld as a charitable donation along with the pledge card that shows the name of the charity. For federal workers, a pledge card with the name of a Combined Federal Campaign will meet these requirements.
- Pay attention to the value of any incentives. A charitable donation is deductible only to the extent that the donation exceeds the value of any goods or services received in exchange. If you make a donation and receive something in exchange – anything from a coffee mug to a dinner – you can deduct the cost of your donation less the value of the item received. If you’re not sure of the value of an item or service received after a donation, just ask. Most charitable organizations will do the math for you and document the value of your donation on their thank you letter or receipt.
- Consider donating appreciated assets. Donating property that has appreciated in value, like stocks, can result in a double benefit. Not only can you deduct the fair market value of the property (so long as you’ve owned it for at least one year), you avoid paying capital gains tax. Normally, appreciated property is subject to capital gains tax at disposition. There is an exception for donations to charitable organizations: you escape paying capital gains tax altogether.
- You can’t deduct the value of your time. The IRS does not allow a charitable deduction for volunteering your services. The good news is that out of pocket expenses relating to volunteering so long as they are unreimbursed; directly connected with the services; expenses you had only because of the services you gave; and not personal, living, or family expenses. Out of pocket charitable expense which might be deductible include the cost of transportation (including parking fees and tolls); travel expenses while you are away from home performing services for a charitable organization; unreimbursed uniforms or other related clothing worn as part of your charitable service; and supplies used in the performance of your services. As with other donations, keep good records since documentation is key.
- Document the value of your gift. Good records are always important when it comes to charitable giving but even more so for donations of non-cash items. You must be able to substantiate the value of your donation. You can generally take a deduction for the fair market value of the items, or what the item would sell for in its current condition, but you’ll want to be able to establish an appropriate value. If self-documenting the donation because it’s less than $500, be specific, noting the description and condition of the items. If you contribute property worth more than $5,000, you must obtain a written appraisal of the property’s fair market value.
- Limits may apply. Many taxpayers aren’t even aware that there are limits on charitable contributions but they do exist. If you contribute more than 20% of your adjusted gross income (AGI, found on line 37 of your form 1040), pay attention to limits. The specific limitations can be fairly complicated – with numerous exceptions – but here are some quick rules of thumb: you can deduct appreciated capital gains assets up to 20% of AGI; you can deduct non-cash assets worth up to 30% of AGI; and you can deduct cash contributions up to 50% of AGI. If you exceed those limits, you can carry the deduction forward for five years.
- Pay attention to the calendar. Contributions are deductible in the year made. To make it count during the tax year, gifts must be made by December 31. That doesn’t necessarily mean cash out of your account. Credit card charges – even if they’re not paid off before the end of the year – are deductible so long as the charge is captured by year end. Similarly, checks which are written and mailed by the end of the year will be deductible for this year even if they aren’t cashed until 2014.