Personal Finance Blog

Tips And Stories To Help You With Managing Money

Liability Shift In Credit Card Fraud

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Smart-card-based credit card payment systems improve security.
About half the world’s credit card fraud happens in America. This new processing terminal uses technology that reads the latest EMV chip embedded credit card.

Due to massive losses that have occurred through large-scale credit card data breaches, there will be a change in credit card liability. Beginning on October 1, 2015, a shift in liability places the responsibility for fraudulent credit card charges on the merchant and/or banks that don’t use new technology to accommodate chip-based credit cards. The changes, the first major alterations in decades, will make credit card fraud more difficult.

The traditional magnetic strip credit cards now in wide use will be replaced with cards that have embedded chips and PINS. Fraudsters will find themselves stymied as more users turn to these cards, dubbed EMV cards, an abbreviated form of Europay, MasterCard and Visa.

The Losers

The losers will be the merchants who are not EMV ready and banks who don’t issue cards with the new technology. Historically, card issuers have eaten the loss due to counterfeit cards. Now the responsibility will shift to the merchant who processed the card without the new technology or the bank that issued the card without EMV technology. Magnetic card swipes are easily counterfeited, and now account for billions of dollars in fraud losses every year – an estimated 7 billion in the United States alone.

Start Dates

On Oct.1, when the rules change, merchants who have not installed EMV terminals will be burdened with the costs of fraudulent transactions, but those who offer EMV protected services will be off the hook. When the new technology was developed, the card networks decided that improving point of sale devices and the design of the credit card itself would be the best way to go.

It will take time for the new technology to settle in. Experts estimate that by the Oct. 1 start date about 35 percent of merchants will have the technology to process EMV sales. And only 15 percent to 25 percent of cards issued will have the chips to facilitate the secure purchases. By the end of the year, the expectations are that 70 percent of credit cards, 41 percent of debit cards and 59 percent of terminals will be ready for the new technology.

Big Retailers Comply

Predictably, the largest merchants are gearing up to lead the parade. They and others are trying to stay ahead of the curve in being prepared for the change. Widely publicized security breaches such as the devastating Target fiasco are impetus for the merchants to make themselves – and their customers – more secure. The cost of installing the new equipment is about $200 per terminal.

New Industry Created By EMV Needs

Those who produce and install the equipment are being hard-pressed to meet demand. Small merchants are at the tail-end of the parade toward EMV technology, and the demand is so great there are many competitors ahead of them.

What Banks Issue EMV Credit Cards?

Among the card issuers, large banks also are better poised to make the change, with regional banks less ready to distribute EMV-enabled cards to customers. There is no huge supply of EMV chips, and these institutions may see a lag in catching up with the technology, so they may face greater fraud losses. American Express, Bank of America, Chase, Citi and Wells Fargo banks all issue cards with the new chip technology.

Europe is ahead of the United States in implementation of EMV-protected card transactions, with experience going back to 2005. Since then, online sales have increased significantly. The experts expect the same jump in the U.S.

Looking Forwards

The shift in liability will open new doors for mobile payment processing in 2015. New technologies that process payments through mobile phones may lead to some steep learning curves by consumers, retailers and banks, but chances are the learning will be worth it in the long run.

Read More At Wall Street Journal

5 Tips To Cut Housing Costs

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Cut costs on your utility bills.
Cut costs on your utility bills.

If you’re a typical family, you spend about 33 percent – about $17,000 per year – of your income on housing. That doesn’t mean just the mortgage or rent payment, but all of those related costs that are the natural result of living in a home.

Here are some tricks you can call on to reduce those costs.

1. Upgrade Your Appliances

It may make sense to you to stick with your old washer and dryer and the old standby refrigerator, but they might be costing you more in the end. Often, they were not energy-efficient in the first place and to continue using them is costing you money you could save by updating. The Department of Energy says some $47 billion is wasted on energy used by refrigerators produced more than 10 years ago. Investing in an Energy Star-rated appliance might save you from $35 to $300 over the lifetime of a large appliance.

2. Stop Keeping Up With Your Neighbors

Don’t add “frills” to your home that you don’t really need. So what if the Joneses next door throw in a swimming pool. Invest your money instead on an early pay-off of your home. Things such as swimming pools and Jacuzzis tend to lose their glamor over time.

3. Minimize Utility Usage

Be aware of heating and cooling costs and try to minimize. Put on a sweater when the weather begins to cool and keep the thermostat a couple of degrees low until you really need the heat. Use a ceiling fan and don’t kick in air conditioning until it is necessary. Get a programmable thermostat an set it to adjust the temperature in the house when you are away. Dropping the water temperature in the water heater a degree or two will save money without any significant dent in your comfort. You can save as much as 1 percent in your heating bill with each degree you drop the thermostat for eight hours of the day, usually when you are asleep or at work. Cover drafty spots, add weather stripping or insulation for further savings.

4. Monitor Water Usage

Monitor water use. Turn off the tap while you brush your teeth. Use cool or cold water if hot water is not essential. Clothing that is not heavily soiled will come as clean in cool or cold water. The difference could be as much as 56 cents per load of laundry. Having a full load of laundry or dirty dishes saves money.

5. Keep Up On Repairs

Make repairs as quickly as you notice there is a problem. Don’t ignore a leaky toilet or tap. Fix a small hole in a screen to prevent it getting larger. Postponing such repairs almost always costs money. Preventative maintenance, such as emptying the lint trap on the dryer, changing furnace filters and cleaning gutters routinely prevents problems. Make seasonal inspections of your home to see what is needed, than do it.

Putting aside approximately 1 percent of your home’s value toward maintenance and repair and maintaining that reserve is a good way to sidestep the wear and tear costs that are inevitable with home ownership. This is one area where the old “ounce of prevention” rule makes good common sense.

Do Women Shy Away From Financial Advice?

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The top 100 Financial Women Financial Advisors are listed at the Barron website
The top 100 Financial Women Financial Advisors are listed at the Barron website
Women control two-thirds of the private wealth in America, but financial advisors can’t seem to get the females to be interested enough to seek their advice.

The experts expect private wealth in the country to rise from $14 trillion to $22 trillion over the next five years, with women in control of two thirds of that amount. But during a recent conference of financial advisors, they agreed that “We’re doing a horrible job working with women as a whole,” according to the publicly aired conference report.

In the past, males largely dominated the management of family finances, but roles have been undergoing alterations over recent decades. In 40 percent of American households today, women are the breadwinners. A lingering perception that financial advisors cater more to men has been a deterrent, the experts agreed. And studies show that the perception is based on fact, they said.

Even when couples seek financial advice, men are the primary contact in 58 percent of cases, the studies say. Many women who find themselves widowed do not continue the relationship their late husband had with a financial expert. Seventy percent of the widows no longer seek advice after the first year.

An imbalance between males and females in the ranks of financial advisors is a significant factor. Only 30 percent of those in the field are women. Most women seeking advice say they would prefer to work with a woman. Although basic goals among advisors is the same, males approach financial planning differently from women. Females tend to put more emphasis on empathy and education when they seek advice and feel more comfortable with an advisor who shares those values. One of the top 100 female financial advisors, Karen McDonald, works for Morgan Stanley and she controls $21.2 billion dollars worth of assets.

Some large financial advising companies are catching on and hiring more women to deal with their female customers. That sometimes means working around the employee’s home and family demands, said Cathy Curtis, who is a certified financial planner for a large firm. She does her job while rearing a family of four children. But when women advisors can be accommodated, there are overall benefits for the workplace, she said.

The industry is making adjustments, taking pains to let women know of opportunities in the field and then trying for balance in their staffs. With two-thirds of the private wealth in the country as incentive, they are making inroads into the problem of bringing good advice to women clients.

Tax Breaks For the Self-Employed

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Make sure you take all the deductions allowed when you are self employed.
Make sure you take all the deductions allowed when you are self employed.
The segue from holidays to tax time is fast. If you are self-employed or if you freelance to supplement your income, you can make the move smooth by being prepared in advance to take advantage of the tax breaks offered to those in this category.

If you work at home, the government might subsidize what are considered personal expenses. If you regularly use part of your home or apartment for business matters, part of your utility and insurance costs may be deductible. You can write off part of the rent or the depreciation if you own your own home.

To help those who might have failed to claim this deductible because of the scary bookkeeping, the IRS has simplified the process. You may deduct $5 for every square foot of space that qualifies. On a 3,000-square-foot home, for instance, the deduction is $1,500.

Health insurance premiums and expenses also are eligible for deduction, but you must itemize. And the deduction is only to the extent that your medical expenses exceed 10 percent of your adjusted gross income (7.5 percent for those age 65 and older.)

If you are still running your business after you become eligible for Medicare, you can deduct the premiums for Medicare Part B and Part D as well as the cost of supplemental (medigap) policies. You don’t have to itemize to claim these deductions and don’t have to factor in the 7.5 percent of AGI tests that apply to itemized medical expenses for those 65 and older.

Employees can’t deduct the 7.6 percent of pay that goes into Social Security and Medicare. But if you are self-employed and have to pay the full 15.3 percent tax yourself, you may write off half of what you pay. The deduction is on the Form1040, so you needn’t itemize.

When you work for yourself, options for tax-sheltered retirement plans are available to you. You may choose to contribute pre-tax money to a Simplified Employee Pension (SEP) or a solo 401(k), either one of which has a higher annual limit than regular individual retirement accounts. You may opt for a regular IRA account. Each of the plans has its own set of tax requirements that you must be aware of.

Buying equipment for your business also provides a tax benefit. You may depreciate the cost over the number of years the IRS has established as the “life” of the particular item. A computer, for instance, has a life of five years, so the tax break can be broken down into that time period. But it isn’t as simple as deducting 20 percent for each of five years. The schedule calls for 20 percent the first year, 32 percent in the second, 19.2 percent in the third, 11.52 percent in year five and 5.76 percent in year six.

Or you may choose the Section 179 deduction that lets you deduct 100 percent of the purchase in one year. Many small business owners find this the least irksome choice. For the 2014 return, up to $500,000 in equipment is eligible for the immediate write-off.

Being aware of these deductions for your personal business could save you money when you prepare your 2014 return.

Consumer Confidence Hits A High

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Sentiment Index was still higher than any other time since January 2007.
Sentiment Index was still higher than any other time since January 2007.
Americans are feeling more relaxed about the economy, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index (CSI). In January, the survey posted the highest level of confidence since 2004, before the Great Recession sent the country into a nosedive.

The CSI is an important measure that Investors, retailers and economists use to help determine what they will do next. When people are feeling good about the economy, the index rises and the economy gets a boost. Between 2005 and 2014, the monthly index averaged 77.1. The reading for December 2014 was 93.6 and the January 2015 reading was 98.1. Since July of 2014, the index has improved by 20 percent. Economists are encouraged by the fact that that the confidence level rose in households with income under $75,000, as well as in those with higher incomes.

At the root of the improved confidence levels are signs that the effects of the Great Recession are beginning to wane. Higher employment rates, small increases in wages and lower gasoline prices are among the factors.

Economic prognosticators, however, remain cautious, predicting that the gains will be slow, if steady. Most workers are expecting only modest gains in income over the next five years, so spending increases also will be moderate. Shoppers are likely to look for big price discounts before they will be convinced to buy, and that contributes to dis-inflationary pressure, the experts say.

Despite the cautious approach to predictions for this year, the signs all indicate that the country is regaining its economic equilibrium.