Liz Weston

Tuesday’s need-to-know money news

November 11, 2014 By Liz Weston

Today’s top story: The United States Postal Service is the latest victim of a data breach. Also in the news: The most common money mistakes made by people of all ages, your best defense against credit card fraud, and why retirement isn’t what it used to be.

US Postal Service Suffers Data Breach
Here we go again.

The Most Common Money Mistakes People Make at Every Age
What you can do to avoid them.

3-Pronged Plan Is Your Best Defense from Credit Card Fraud
Keeping data thieves at bay.

Why Retirement Ain’t What It Used to Be
The days of 65 and a gold watch are a thing of the past.

Should You Use Your Savings to Pay Off Debt?
The big dilemma.

Why millennials aren’t saving

November 10, 2014 By Liz Weston

Savings rates for adults under 35 plunged from 5 percent in 2009 to a negative 2 percent, according to Moody’s Analytics, and the consequences are potentially huge. Here’s how a Wall Street Journal writer put it:

“A lack of savings increases the vulnerability of young workers in the postrecession economy, leaving many without a financial cushion for unexpected expenses, raising the difficulty of job transitions and leaving them further away from goals like eventual homeownership—let alone retirement….Those who don’t save are unlikely to be wealthy in the future, meaning American angst over wealth inequality seems poised to persist if most millennials are unable to save or choose not to.”

Unfortunately, the two “real people” quoted in the story both have college educations and decent jobs. The first has credit card debt (a synonym for “frivolous spending”) and would rather spend on “her social life and travel” while the second finds investments “too complicated.” These two reinforce the narrative that the only reason people don’t save is because they don’t want to.

In reality, most people under 35 don’t have a college degree. They have a higher unemployment rate than their elders and much smaller incomes–the median for households headed by someone under 35 was $35,300 in 2013, down from $37,600 in 2010. As the WSJ article notes, wages for those 35 and under have fallen 9 percent, in inflation-adjusted terms, since 1995.

(Millennials, by the way, also don’t have much credit card debt. In the 2010 survey, the latest for which age breakdowns are available, fewer than 40 percent of under-35 households carried credit card balances, and the median amount owed was $1,600.)

Saving on small incomes is, of course, possible–and essential if you ever hope to get ahead. But any discussion of savings among the young should acknowledge how much harder it is to do in an era of falling incomes. Today’s millennials have it tougher than Generation X did at their age, and way, way tougher than the Baby Boomers. It may comfort older, wealthier Americans to imagine the younger generation is just more frivolous. But that does a disservice to millennials, and to our understanding of the real causes of wealth inequality.

Monday’s need-to-know money news

November 10, 2014 By Liz Weston

Today’s top story: A surprising way identity theft can hurt your credit.
Also in the news: Tips on how to manage major bills, rethinking retirement for Millennials, and financial tips for veterans from military experts.

The Surprising Way an Identity Thief Can Hurt Your Credit
Pay close attention to hard inquiries.

Utilize the Half Payment Method to Budget Around Major Bills
Don’t pay all at once.

3 Ways to Rethink Retirement for Millennials
A different look at the bigger picture.

Veterans Day: 6 Financial Tips From Military Experts to Service Members
Welcome home.

Q&A: Who is responsible for credit card debt after death?

November 10, 2014 By Liz Weston

Dear Liz: My mother, who is widowed, has credit card debt. When she dies, are my sister and I responsible for that debt? There is no estate, but she does have a small amount of life insurance that mainly would go toward her funeral expenses and fixing things in her home to get it ready for sale.

Answer: If your mother owns property, then she has an estate. If she has any equity in the property when she dies, some of that equity might have to be used to pay her debts.

You and your sister, however, are not responsible for your mother’s debts. The life insurance also does not have to be used to pay debts if your mother names a beneficiary (or beneficiaries) for the policy and at least one of the people named outlives her. In that case, the insurance proceeds would go directly to the beneficiaries, bypassing the probate process.

If she doesn’t name a beneficiary, the insurance proceeds may be included in her estate and used to pay her final bills, including credit card debt.

If your mother can’t pay what she owes, she should consider talking with a bankruptcy attorney about her options.

Q&A: Debit card fraud follow-up

November 10, 2014 By Liz Weston

Dear Liz: Regarding your recent answer regarding a mysterious debit charge, I beg to differ with your quoted source, Odysseas Papadimitriou of Evolution Finance, who said it was unlikely to be fraud. It took me all of 30 seconds to search online for “credit card fraud small amount” and found multiple reliable sites dedicated to just the kind of small-amount fraud your reader was asking about. I’m amazed that anyone claiming the slightest amount of expertise in credit card scams wouldn’t be aware of this. Ironically, nothing would help the scammers more than purported experts advising the public at large to ignore this type of fraud and assume instead it’s the result of their own oversight. Why such clearly wrong-headed advice is appearing in your column is beyond me.

Answer: Small-amount fraud is a problem — for credit cards. The original question and Papadimitriou’s answer related to a debit card transaction. While small-amount fraud is certainly possible with debit cards, Papadimitriou said the far more common pattern was for thieves to attempt to steal as much as possible before the card was shut down. That, and other details of the transaction, led him to conclude the credit union was probably correct that the transaction wasn’t fraudulent.

Dear Liz: In reading the story of the person with the errant charges on a debit card, I had a similar issue. I found a charge in a town where I had not traveled, at a business I was unfamiliar with. My bank wanted me to contact the business and explain my issue. I said NO! It turns out someone had “keyed” in my debit card number for a $19 charge in error. My response to my bank was that they made the error on giving away my money and that if they wanted to continue being my bank, they would resolve this issue and replace my money. It took about two weeks, but the merchant complied with the bank’s request and gave back the money.

Answer: In the original question, the transaction occurred in the questioner’s home town and the credit union said a PIN was used. It’s highly unlikely that both a debit card number and its PIN would be randomly entered in error.

But your experience highlights the problems inherent in using a debit card. Fraudulent transactions come directly out of your checking account, and you sometimes have to fight with your financial institution to get the money back.

With credit cards, you don’t have to pay the questionable charges until the credit card company investigates.

It’s vitally important to review all transactions on both debit and credit card accounts, and to question any unfamiliar charges. In this case, the merchant wasn’t clearly identified and the customer certainly has the right to push the credit union for more detail. But when all indicators point to forgetfulness rather than fraud, the reader may have to accept that the charge was legitimate after all.