Imagine that you’re in a financial bind: would you be able to resist those ubiquitous ads around the web that entice you to “get a fast cash loan”? You may be one of those wondering how to get a personal loan in these tough economic times. These days, many people with little to no money are turning to high interest payday loans to assist them when financial emergencies arise or even to pay monthly bills. However, many do not realize the danger of payday loans until they are deep in debt with no way out.

Image from StopPaydayPredators.org

What exactly is a payday loan?

To put it simply, a payday loan is a short-term loan. An individual goes to a payday lender, writes a check for the amount they want to borrow plus a fee. The payday lender then holds the check for a short period, typically two weeks, and cashes it at the end of that period. The borrower may also have the option of extending the loan at the end of a two-week period if they don’t have the sufficient funds to pay. Now this is where people get into a lot of trouble because when loans are extended, these loans accumulate more fees. This is precisely why payday loans are dangerous — they’re extremely expensive because they charge an enormous amount of interest and fees, typically with an over 100% annual percentage rate. They are in no way, shape or form, a good way to manage money or borrow money.

Whom do payday lenders target?

It’s always the most financially vulnerable who fall prey to these arrangements. These loans are targeted at lower income individuals who have no other means of borrowing money when an emergency arises. You will notice that you will never see a payday lender in an upper class neighborhood, but you’ll often find these establishments well ensconced in geographically low-income areas. Customers of these establishments are individuals who need quick cash and are looking for an easy way to get it. And indeed, it can be a tempting “way out” for many poorer clients, since by simply writing a check (whether or not you have funds at the moment), you can get a loan and worry about the consequences later. It’s fast and easy, with no credit check required!

What are the consequences?

Financial counselors and experts will tell you that clients who begin using payday loans typically have a very difficult time paying them off. What typically occurs is an endless cycle of borrowing and paying until the individual reaches a point when they can no longer afford the fees and interest charges that have compounded from extending payday loans every two weeks. At this point, the borrower will call a credit counseling agency for help with paying things off. Unfortunately, it’s also at this point when their credit gets shot as they’ve become delinquent on their loans and see no way out, given the amount of income they are bringing in.

Have A Cash Advance Payday Loan? 3 Tips For Paying It Off

Unfortunately, most credit counseling agencies are unable to place payday loans on a debt management plan. Payday lenders rarely offer benefits or lower personal loan interest rates through credit counseling programs. Still, there could be constructive ways to help a payday loan borrower in a bind. If you find yourself in this position, then here are some options to consider:

1. Talk to the payday lender.
The first option is to try to negotiate. Call the payday lender and see if it is possible to speak with the manager of the establishment. You can then ask this person if they can place you on some type of hardship program where you can afford the payments and possibly have a lower interest rate. The same ideas apply here as you would if you wanted to lower your credit card interest rates. While payday lenders are in the business of making the most out of each loan they approve, they’re also eager to salvage agreements with those borrowers who are sincere about working out their payment problems.

2. Wait for your payday loan to go into collections.
Another option is to wait until your loan goes into collections. If you have borrowed money and the accounts are past due, you can expect your payday lender to go to great lengths to coerce and threaten you to pay. If you continue to be uncooperative, then eventually, your loan will be turned over to a collection agency. Once this happens, you may be able to roll over your accounts in collection onto a debt management program. This will provide you with a more manageable payment and an estimated payoff time.

3. Settle your debt.
Finally, you can try to contact a debt settlement company and proceed with a settlement, or file for bankruptcy. With this approach, you’ll need to deal with a bankruptcy attorney or debt professional.

Final Thoughts

You should avoid getting a payday loan as much as possible. Still, there are people who insist on securing such loans regardless of the consequences. If you are one such borrower, then make sure it’s truly your last resort to go down this path. Weigh the risks and the benefits of a quick cash advance or short term loan. The risks here are great, so your benefits (per your particular situation) better be worth the money you end up forking out, if you do decide to opt for a loan like this.

Always do your best to find other alternatives to borrowing. Perhaps you can find out how to apply for a loan through other avenues and sources. As an alternative, do your very best to save up for an emergency fund in a high interest savings account, so that you do not have to depend on a credit card, bank, or payday lender to get yourself out of an emergency. This is the best way to avoid falling prey to payday lenders.

Have A Cash Advance Payday Loan? Tips For Paying It Off

For us residents in California, we’re used to seeing budget cuts applied to a lot of things. The financial crisis in California is particularly apparent when you see its effects on the public school system. Well, this article from my local paper just made me wince, because as you can see, the story describes just another example of how our government (this time, at the state level) has been handling its finances.

Well, here’s the latest expose and more fodder on the California budget crisis — apparently, government employees have made off with pretty huge paychecks here in California, simply by NOT taking vacation time. Their unused vacation time translates into big six figure payouts, with the top 25 checks reportedly ranging from $203,921 all the way to a dazzling $815,736. Wow. Imagine this — those state government positions can be a gold mine, with overtime paying off for a whole lot of people. Here is an image that portrays this predicament (Click this link or the image below for a larger picture.):

And here’s a breakdown of vacation pay amounts across California agencies:

Small wonder California is broke.

Want to Attend A Suze Orman Event?

On another note, I’d like to inform you about a personal finance event that’s coming to Club Nokia in downtown L.A. this Sunday, March 14. Suze Orman is slated to speak at this club at an event called “Waves of Inspiration: Women and Money”. The seminar will feature Suze and other ladies and personalities who will talk about personal finance, self-growth and empowerment. For the curious, TD Ameritrade is the sponsor for this event. If you end up attending, you’ll also receive a free annual all-access pass to Suze Orman’s “Save Yourself Retirement Program” (reg cost: $40). There’s also a planned Q & A at the end of the seminar.

You can purchase tickets from Ticketmaster.com, or if you’re interested in picking up a complimentary ticket, let me know (contact me here) — I may have a couple to give away (while it lasts). Here are the event details:

WHAT: Waves of Inspiration: Women and Money with Suze Orman
WHEN: March 14th, 2010 at 2PM
WHERE: Club Nokia, 800 West Olympic Blvd., Los Angeles, CA 90015

Have fun!

Great Personal Finance Articles

• Wise Bread: Worried About Debt? Tips On Managing Your Loans
• Studenomics: Why Parent’s Shouldn’t Pay For Their Kids’ College Education
• Free Money Finance: Top Personal Finance Experts
• Lazy Man And Money: Build Your Financial Home Brick By Boring Brick
• Frugal Dad: Implementing PAYGO Rules For Personal Finances
• Million Dollar Journey: Canadian Income Tax Deadline
• Mighty Bargain Hunter: Would you out a friend’s spending patterns on Facebook?
• Miss Thrifty: The Festival of Frugality
• Simply Forties: Carnival of Personal Finance
• Don’t Mess With Taxes: Carnival of Taxes
• FIRE Finance: The Festival of Frugality

Vacation Pay for Unused Vacation Time? Plus A Suze Orman Event

We’ve covered some of the best high interest savings accounts in the past, and I’d like to add a few more savings products to the list. While I associate American Express with top of the line credit cards, they actually also have a banking arm through which they’ve been offering a couple of high yield savings account options.

So if you’re looking for a place to stash your cash, and would like to work with a familiar name in the financial space, then I’d like to point out the following Savings Accounts from American Express Bank, FSB.

Personal Savings From American Express

American Express Bank has two types of accounts for your savings. Here are some details:

#1 Online Savings Account

The High Yield Savings Account from American Express is an online savings account that currently yields a 1.30% APY, with interest compounded daily. This account does not require a minimum balance and does not incur any fees. You’ll also get 24/7 access to your account via phone or the web. And of course, your accounts are fully FDIC insured. You’ll be able to access your money through the standard methods of electronic transfer and check writing.

#2 Certificates of Deposit

The American Express Bank also offers a variety of certificates of deposit of varying terms. Just like their savings account counterpart, these accounts are FDIC insured, are accessible 24/7 and don’t charge a monthly fee. Their terms range from 3 months to 5 years (60 months); the corresponding interest rate you can earn ranges from 1.00% APY for the 3 month CD to 2.95% APY for the 5 year CD. A one year CD yields 1.50% APY at this time.

These look like great options for your cash funds. For more information on these offerings, you can always check out the official site for Personal Savings from American Express. You can read more about these products through the site’s FAQs, as well as open an account in no time.

Personal Savings from American Express Review

Some more retirement investing advice.

So how long do you think you will live? I am thinking I will make it to age 81. Well, if I’m lucky. My grandmothers lived to be 88 and 93 so that’s pretty good. The men in my family have all passed in their 60s or 70s. Uplifting thoughts, huh? Morbidity aside it really is important to think about your life expectancy and whether you are really ready to live for a century.

So, what do you think your chances of living to a hundred are? Of course, the fairer sex always wins this particular “race”, if you see it as such. Here’s how it generally breaks down:

This table shows the chances that an American man or woman will reach the target age specified, given that they’re currently middle-aged (in this case, that age is 40). If you’re looking for something more accurate, you can do a search for a mortality or longevity calculator. These statistics are for the “average” man or woman and do not really account for things like genetics, lifestyle, etc.

Following is a Wikimedia map to see what life expectancies are like around the world. If you can’t make out the label and details, just click the graphic and it will expand to a larger image. Basically, this is what the colors break down to: Dark Red = life expectancy of under 50 years; Red = life expectancy of 50 to 60 years; Orange = life expectancy of 60 to 70 years; Yellow = life expectancy of 70 to 75 years; Light Green = life expectancy of 75 to 80 years and Dark Green = you’re expected to reach 80 or older. Well isn’t that interesting! People in Australia and Canada on average, live the longest?

The good news is that there are more centurions alive in America today than in the past, and the U.S. has been in the forefront of medical advances. Also, lifestyle changes and diet allow us to increase our chances of living longer each day. The flip side of this are the issues posed if we do beat the odds: not many of us may be financially prepared to live long lives. For some of us, it would have a potentially disastrous effect on our families.

For instance, a poll by Money Magazine found that 3% of respondents worried about losing their health, 69% of losing their mental abilities, and 60% of running out of money. Where do you fall? What worries you most? Personally, my biggest fears are that of losing my health and running out of money. Not necessarily for my sake, personally, but because I would most likely become a warden of the state or a burden on my family or both.

Financial Retirement Planning For A Life Expectancy of 100

Let’s go through a few issues involved when planning for the distant future. Here are a few considerations I found important:

1. Review life expectancy numbers.
Of all the assumptions made in financial planning (inflation, rate of return, tax brackets, etc.), your life expectancy is probably one of the biggest of all. Using the wrong number can be detrimental. I would always suggest using a higher number than you think. The averages listed above are just that, averages. They do not reflect anything about diet, exercise, family history, etc. I have always focused on the century mark as a “worst” case scenario.

For instance, based on your projections, you may want to ask yourself: how would you fare should you live to a 100? But, this is the part that truly becomes overwhelming for people. Here’s an example I’d like to run:

Using the landmark ages above (85, 90, 95, and 100), how much would you need to cover your expenses should you spend $75,000 a year currently? The answer (excluding social security or pension payouts) would be $2.5 million (age 85), $3.6 Million (age 90), $4.6 million (age 95) and $5.9 million (age 100).

Those numbers look daunting for anyone. It’s no wonder that people run and hide from planning and avoid trying to provide for their future. But, with the proper planning and due diligence on your part, these numbers seem less awe inspiring. For instance, there are other considerations you’ll need to make — perhaps your expenses may not be that high, or you may be expecting social security and/or pension payments that will supplement your portfolio earnings. Some of us may even consider working past retirement, and may therefore need less. But the point of all of this is to have some idea and plan for it.

2. Visualize your retirement years.
I think it’s a good idea to visualize your retirement years as definitively and concretely as possible. This will help you narrow down exactly what your expenses will be. Part of that is knowing where you are going to live (check out this piece on best places to retire for cheap).

Don’t make the mistake my parents made by moving to some remote area in Colorado. Not only are their winters rough, but access for family members flying in for support is harder and expensive, medical care is less abundant, and networks to nurture and support their older days are few and far between. They also did not think about the practicality of living in a farm house structure. While charming in its own way, it offers a host of challenges for my father’s health now and will become more problematic when they reach their 70s and 80s. Of course, they retired in their 50s and did not think of these things. So, please know where you will live and why.

3. Don’t underestimate your retirement expenses.
You also don’t want to underestimate your retirement expenses. Many people assume that they will spend around 85% of their current expenses in retirement, but that’s pretty arbitrary. You must factor in again where you will be living, your expected lifestyle, getting help as you age, and the huge costs of healthcare. All these factors can lead to your retirement expenses (or income need) being the same or even higher than when you were working.

Some scary statistics from the Employee Benefit Research Institute study showed that a 65-year-old today would need to have socked away at least $122,000 to have a 90% chance of fully covering his or her future healthcare costs. And, that’s with employer-sponsored retiree insurance. As if retirement wasn’t hard enough for many people. So check if you’ve saved and invested enough for your retirement. Make sure to factor additional costs in and try to become properly insured to cover the extras (long-term care, etc.) Otherwise, as you reach the century mark you may easily run out of money.

So, how long do you think you’ll be around? How does that factor into your planning and your current savings and investment plan? Please do yourself and your family a favor and get as specific as possible about your retirement plans. You will most likely be around a lot longer than you think and you want to be prepared.
 
Contributing Writer: Todd Smith, CFP

Financial Retirement Planning For A Life Expectancy of 100

Would you know how to remove spyware, malware or any computer virus off your machines? Revanche of A Gai Shan Life shares her stories and questions on the matter of keeping one’s computer clean! For more of her delightful anecdotes on life and finances, you can subscribe to her RSS feed.

The pop-ups and virus alerts were off the charts for me yesterday.

When Avast and Microsoft Defender both failed to trace which nervy little bugger was causing Internet Explorer, the bane of my browsing existence, to pop up with nonsense and Failed 404 error pages, I did what any savvy netizen would do: I emailed my young cousin, the family tech geek.

It was a much easier diagnosis than usual. He promptly (for a footloose and fancy free college student) emailed back with his suggestion. The free anti-malware du jour, he said, is found at Malwarebytes, a program that his private college uses in their tech department. I had some trouble initially downloading and running the purportedly free program, but I eventually worked it out and was presented with a list of infections discovered in my computer (most of which I recognized from the invasive IE pop-ups) along with a Paywall to fix them.

Verdammt!

Intrepid cousin did a few more evaluations. I then ran the nearly hour-long scan for a thorough check. This time, the program came through with flying colors, finding and repairing all points of infections. We’ve been running a clean ship ever since. I highly recommend the Malware program as an adjunct to your primary virus protections.

How To Remove Spyware, Malware or Any Computer Virus?

The quick and free (but for family favors) service got my wheels turning. I almost always have the benefit of a family or family friend’s expertise when it comes to IT maintenance; the one time I used paid “experts” at the local Best Buy, I sorely regretted the experience.

In short, when it came to having “professionals” work on my computer, I did without my machine for two weeks whilst they “diagnosed” the problem and called me back to the store with a regretful, “We can try running a [insert unintelligible test here] but it’ll cost $200 and then the repair will be extra. Oh, and you’ll lose all your data whether or not we can fix the problem.”

Thanks but no thanks! Here’s what I ended up doing: I took my neglected machine home to find that the Geek Squad had left their mark in the irreparably broken brightness function. Robin managed to salvage the machine AND my data, but we co-existed with eye strain for another three years (always with a touch of resentment that my precious Vaio had been violated).

The late lamented CompUSA was always a decent resource for new parts and somewhat informed advice, but where does one go now for good IT and computer hardware assistance? Other than cultivating your very own Family Geek, do you have a reliable resource for troubleshooting? Would appreciate your thoughts!

As an aside, it’s always a good idea to be prepared for computer downtime. Check out these articles on this subject:

• Carbonite vs Mozy: Online Backup Services
• Back Up Your Data And Save A Thousand Dollars

How To Remove Spyware, Malware or Any Computer Virus?

Can this interesting stock trading strategy help you beat the market? Let’s see what Stephen Jeske, an independent option trader, has to say. He’s come up with themeatballeffect, a complete swing trading option strategy. If you’ve gotten your diversified, core investments off the ground, have picked up some free investing tips and ideas from brokers like TradeKing and Scottrade, but would like to be a bit more adventurous, then you may be interested in learning how to manage trades for maximum profit potential.

Disclaimer: the following information is not for the weak-hearted. What’s ahead is a description of some pure stock market plays (and trades) that I’d consider only relevant to those who are highly interested in active investing and trading (e.g. this may not be for the average long term equity investor).

Image from AutomatedStockTrading.org

Think of your favorite stock. Surely, there must be a price at which you would be willing to buy more. Conversely, there must be a price at which you would gladly sell your existing shares. Today, we’ll show you how to buy that stock at a discount and sell it at a premium each and every month. The goal is to do this consistently enough so that you increase your portfolio returns while reducing its volatility. This technique can also be a wonderful complement to a mutual fund investment portfolio or a basic stock portfolio.

Regular readers of The Digerati Life may already have read about using options to buy stocks at the prices you want. But it’s the combination of both techniques, buying at a discount and selling at a premium, that really makes the difference.

Getting Started With My Stock Trading Strategy

The best way to learn this technique is by discussing an example (but I’ll change the names). The only thing I will leave out is the commission and taxes. We won’t use any margin here either. So let’s check our favorite stock The Digerati Life (symbol TDL).

As I’m writing this, my discount broker account shows that TDL is currently trading at $127.47. Let’s buy 100 shares for a total cost of $12,747. I’m willing to sell my 100 shares of TDL for $135 if it hits that price over the next several weeks (e.g. 58 days).

So I sell 1 MAY 135 Call for $62. (100 shares equals 1 option contract).

I’m also happy to buy 100 more shares of TDL for $120 if it hits that price over the next several weeks. I have an extra $12,000 cash sitting in my online broker account, ready to buy those shares.

So I sell 1 MAY 120 Put for $107. (100 shares = 1 option contract).

Now whatever happens, I get to keep the $169 ($62 + $107) option premium that I sold. Let’s look at the possible outcomes:

1. Scenario 1: TDL reaches $135 or more at the end of 58 days. My stocks get called away. By selling that call option, I agreed to sell my stocks at $135. So I’m selling at a premium because I also collected $0.62 + $1.07 per share from the call and put I sold. I’ve made a profit on the stock, I’ve made a profit on the call option I sold, and I’ve made a profit on the put option I sold. Altogether it works out to a 26% annualized return.
2. Scenario 2: TDL reaches $120 or less at the end of 58 days. I have to buy 100 more shares of TDL at $120. That’s the agreement I made when I sold the put. (I’m buying at a discount but I’m also collecting $0.62 + $1.07 per share from the call and put that I sold). I’ll have a paper loss on my shares, but I will also have an extra $169 cash in my account. That’s from the put and call that I sold.
3. Scenario 3: TDL remains in between $120 and $135. Both the put and the call expire worthless. I will still have 100 shares of TDL and $169 in cash from the call and put that I sold. I’ve reduced the cost basis of my shares by $1.69 per share.

But what do we do in the next cycle?

1. In the first scenario, I could buy 100 shares again, then sell 1 call and 1 put.
2. In the second scenario, I could sell 1 or 2 calls, since I now own 200 shares. I could also sell a put, if I were comfortable with yet again owning more shares.
3. In the third scenario, I can sell 1 call and 1 put, since I own 100 shares.

Using Options to Enhance Returns: The Key To Making This Work

This strategy works best on the more stable stocks — definitely avoid dealing with the cheap stocks. Also, any companies in wacky industries will just cause you too much grief: sure, you can collect a lot from selling the options of volatile stocks, but that’s because these stocks move around a lot… in fact, too much in most cases.

You also need to acknowledge the fact that you can’t predict prices. You can’t be greedy nor resentful; you need to focus on your own success. Use this technique consistently and you won’t have to worry about stock market timing.

If the stock shoots way up and it’s called away, you can’t be too upset. You made a good profit, be happy. If the stock drops to the strike price of the put ($120 in our example) you have to be comfortable buying it. You can’t be second guessing yourself and constantly changing course mid-stream.

In order for this to work well, you need to be consistent, systematic, disciplined and capable of following a plan. But aren’t those the hallmarks of a successful investor anyway?

My Stock Trading Strategy: Using Options to Enhance Returns

Have you ever felt scammed or ripped off? There were a couple of times in my life when I’ve realized that somebody had indeed gotten the better of me and my money. The unfortunate thing is that many scams are conducted by nameless, faceless individuals who are hard to pin down. But the good news is that you don’t have to take this sitting down, because the FTC offers you some recourse (and course of action). For instance, if you have enough information to identify someone or something that you’ve got an issue with, you may be able to bring this up to the Federal Trade Commission (or FTC). So if you feel that someone has scammed you or ripped you off, then here’s how to file a consumer complaint. The FTC put together the following public service announcement video to get you going:

How To File A Consumer Complaint With The Federal Trade Commission

The FTC encourages anyone who has come across a scam or fraud to report their experiences to them (the FTC), through their web site. Here’s a list of Top Consumer Complaints in 2009, as reported by the FTC:

2009 Top Consumer Complaints

So have you ever come across a scam? I’d also like to take a look at a few popular scams to watch out for, care of Bankrate. Here’s a sampling:

1. Advance fee scams: anyone who asks you to send them a payment in advance can be suspect. Typical examples include dealing with unscrupulous lenders (or people pretending to be lenders) who hand out bogus loan applications or stimulus grants.

2. Email prize scams: this is pretty common. I get one of these every few days in fact. But thank goodness for my spam folder!

3. Online auction scams: so you’re purchasing something online? Make sure you work with reputable sources so that you actually receive your online purchase and get what you expect (for the money you do spend). Here’s more on shopping scams.

4. Fraudulent employment opportunities: unemployed folks are vulnerable to this sort of fraud. So make sure you ask the right questions when looking for a job.

5. Make money fast scams: these are a dime a dozen, it seems. Heard of cash4gold? Pyramid schemes that entice you to send money to the next guy on the “list”? Run away from these as fast as you can!

There are many other scams you should keep an eye out for, such as fake charities, phishing and false advertising. It’s always best to take preventive measures when it comes to situations like these (e.g. take steps to prevent identity theft or see if credit monitoring is something you’re comfortable doing). But if you find yourself caught in someone’s web of deceit, you can at least turn to the FTC for guidance on what to do next.

More articles on this topic:

• Should You Get Identity Theft Protection?
• Top 10 Scams Of 2006: Some Personal Encounters

How To File A Consumer Complaint With The Federal Trade Commission (FTC)

Last week, I held a giveaway for those who were interested in trying out a new debt management program online. This service is called DebtGoal, which looked to me like a cousin (or variant) of the more popular money management software tools that are available online, which help you manage your budget. After all, if we have online programs like Mint.com that can help us control our budget, then why not use sites like DebtGoal.com to help us control our debt? The difference though, is that DebtGoal charges a monthly subscription fee for the use of their service.

But our giveaway last week would have remedied this matter for 5 people, since we were offering free subscriptions (with no expiration date) for the use of this tool. Although I would have liked to see more people join the giveaway, we still snared enough entries to be able to give away all 5 free subs. Here’s the winners’ list: Kimberley, Anthony, Libby of As You Wish, Ann and last but not least, Ken of Money Making Sense. Congratulations to all!

In other news, I’m hoping to meet up with a few personal finance bloggers this weekend. We have a “guest of honor” who’s visiting the SF Bay Area — none other than J Money of Budgets Are Sexy. Here’s looking forward to meeting the man behind one of the most fun and quirky personal finance blogs around!

For more on the PF blogosphere, check out these articles!

Personal Finance Articles

• Bargain Babe: Dealing With Banks? Read The Fine Print First
• Lazy Man and Money: The Key To Living Frugally
• One Mint: HSBC Brazil Equity Fund
• Christian PF: My Strategy for Giving Away Millions
• Million Dollar Journey: 5 Ways To Reduce Financial Clutter
• Trees Full Of Money: Lessons from Our Debt Free Success Story!
• Gen X Finance: Birthday Freebies Worth Checking Out
• Monevator: Are you wasting your money on memories?
• My Dollar Plan: 5 More Ways to Earn Some Cash
• Online Investing AI: Would You Pay A Million Bucks To Eat Steak With Warren Buffett
• The Sun’s Financial Diary: Know Thy (Financial) Self
• PT Money: International Personal Finance Carnival (woot! new carnival!)
• Taking Charge: Carnival of Personal Finance
• Miss Thrifty: Festival of Frugality
• CoDR: Carnival of Debt Reduction

Debt Management Tool Free Trial & DebtGoal Giveaway Winners Announced!

Another high yield savings account and a suite of certificates of deposit to consider for your stash of cash.

Guess who just launched a couple of online savings products with competitive rates, along with the strong endorsement to try out Upromise? The largest private originator and service agent for federally guaranteed student loans, that’s who! That would be Sallie Mae, otherwise known as SLM Corporation. While this outfit is best known for granting and managing more than $180 billion in debt, they’ve branched into the savings (and even credit business), having purchased Upromise.com in 2006 and now, by elbowing their way into the savings realm.

Well, that’s great! We certainly need more options here when it comes to our short term savings. Recently, I’ve seen some interesting products such as the PerkStreet Financial Checking Account, which offers rewards or perks instead of a yield (see our review of PerkStreet Financial), as well as SmartyPig, which is a savings account that allows you, along with other people, to make savings contributions to the same account. It’s an account that allows you to collaborate with others to fund a savings goal. I actually consider the Sallie Mae (SLM) offerings just as interesting. So let’s take a look at some details on the SLM savings products.

Sallie Mae High Yield CD & Online Savings Products

Sallie Mae offers two types of accounts for your savings.

#1 Sallie Mae Online High Yield Savings Account

This high interest savings account sports an APY that’s 5 times the national average. Currently, this account is returning a 1.25% APY. In addition, this savings account has the following desirable features:

• It requires no minimum balance, making it easy for anyone to open an account.
• It’s got no monthly fees.
• Interest is compounded daily.
• It’s FDIC insured.
• You’ll earn an interest of 1.25% APY.
• You have the potential to earn a cash bonus based on some additional requirements.

The Upromise Connection

So what’s the cash bonus all about? While all this sounds pretty standard for a savings account, with the advertised interest rate falling in the middle of the pack when compared to other online savings accounts, there’s one thing that makes this product stand out. And no, it’s not just that this product is being offered by Sallie Mae, a familiar entity that you can feel you can trust with your loans AND savings; the fact is, Sallie Mae is also the institution behind Upromise, which they acquired a few years ago.

I am actually a member of Upromise and one who can really vouch for the program, whose goal it is, is to help you save for college. Through Upromise, you can get anyone to help you save for college through everyday spending. You can shop online, dine at participating restaurants and purchase groceries, and by using a registered credit card or Upromise credit card, you’ll earn rewards — actually, cash back that will help fund your Upromise account. You can then link your Upromise account to 529 college savings plan accounts in order to further your investment. And much like SmartyPig, you can invite your family and friends to participate in the savings process with you.

That said, the extra feature that the Sallie Mae Online High Yield Savings Account provides is the ability for you to receive a 10% annual match on your Upromise earnings, and it works this way:

• Open a Upromise Account and a Sallie Mae High Yield Savings Account.
• Link these two savings accounts together in order to be eligible for the 10% annual match.
• Set up an automatic savings program with a contribution of at least $25 per month OR deposit a minimum of $5,000 into the SLM account (within 90 days of opening the account).
• Start earning through Upromise by spending on everyday things.

After these requirements are met, then at the end of the calendar year, your Upromise earnings will be assessed. Upromise will then match 10% of these earnings and will deposit this bonus into your SLM savings account in February of the next year (given that your accounts remain in good standing).

Note that these terms may change at any time.

#2 Sallie Mae Certificates of Deposit

In addition to the savings account, Sallie Mae is also offering certificates of deposit with the following terms:

• A one year CD returning 1.50% APY
• A three year CD returning 2.20% APY
• A five year CD returning 3.00% APY

These online CDs won’t require any minimum deposits, have no hidden fees and no monthly fees, and can be automatically renewed. And as usual, they’re FDIC insured.

You can also review our article on the best CD rates if you’d like to see additional options for bank CDs.

High Yield CD & Online Savings Products From Sallie Mae

Get a fast cash loan and pay through your nose!

There are many of you that can’t wait to file your taxes each year because you are expecting a decent refund. Unfortunately, it’s only too often that families in need of some fast cash will not think through the consequences of getting a refund anticipation loan. And it is precisely that lack of patience which ends up costing people a lot of cash at a time they can’t really afford to waste any money.

Have you heard of a refund anticipation loan? Many people haven’t — and that’s a good thing. In this case, ignorance would be bliss! Here’s a quick definition: refund anticipation loans (or RALs) are short-term loans that tax payers can take against their refund amount. Taxpayers often request this option if they want access to their expected refund amount as quickly as possible, as soon as they’ve filed their returns. They want the money quickly since most regular tax refunds take 6 to 8 weeks to be accessible.

A Waste of Good Money?

In the past, RALs may have made a bit more sense than they do now; these days, we have technology and electronic direct deposits that have made it much easier to receive our refunds promptly and which have taken the place of paper checks in the mail. However, people in need often don’t think past the fact that they need cash right now. They neglect to consider the true cost of what taking such a loan involves. Some lenders will charge anywhere from 30% to 200% in interest. Highway robbery! Taxpayers end up losing a big chunk of their money just to get cash a week or two faster than they would with direct deposit. I really doubt that people would fall for such loans if they truly understood what they are signing up for with RALs. Failing to read the entire contract of the loan is what leads to the costly loss of cash, and the reality only hits when the refund comes back smaller than anticipated.

RAL loans are still popular but there is an increase in the negative press surrounding them. Consumers are being warned to read the fine print and the IRS is becoming more vigilant about how the loans are marketed to taxpayers. New guidelines are being sent to tax preparation services and companies that outline responsibility to their clients. It will still take some time for the government to stabilize the tax industry with regards to ethics, so consumers considering a refund anticipation loan need to take it upon themselves to ensure that they are not getting ripped off.

Alternative Choices

Taxpayers expecting a refund who are in need of fast cash do have other options outside of the loan arena. For instance, filing online through electronic forms will return a refund faster than traditional paper methods, especially if you do a direct deposit to your bank account. Also, in preparation for the next tax season, taxpayers who traditionally get a large refund back each year should amend their tax withholdings to get more money back through their regular paychecks instead of through a lump sum refund.

Know Your Tax Preparation Company

If your tax preparation company heavily pushes refund anticipation loans, you may want to rethink your plans. While not all companies are looking to take advantage of your need for cash, many new preparation services and agencies spring up around the nation to do just that. For those who are really in need, my suggestion is that you inquire about those different options for getting refunds faster that don’t involve loans. If you do need to take a loan to access your refund quickly, you should first read your RAL contract thoroughly and be sure that you are clear on how much it actually costs you to rush a refund. A tax company representative should be willing to explain exactly what your contract states and should allow you time to decide if you can really afford the potential high cost of a refund anticipation loan. If you are looking for a new service to do your taxes, stick with reputable companies that have good reviews from the Better Business Bureau.

This guest post is by Arjun Rudra, who writes for Investing Thesis: Credits Towards Financial Freedom. For more of his insights, please consider subscribing to his feed.

Beware of the Refund Anticipation Loan!