Consumers and laziness
Many consumers today are looking for debt relief. Without knowing it, however, they have the solutions to many of their problems right in front of them. Due to the recession, now is not the time to be lazy about change or being proactive. Here are some things that need to be addressed because if they aren’t, the will cost dearly in the long run.
Optimizing savings rates
Many people are not proactive with where they put their money. It’s more convenient to put money into one bank and leave it there, even if there are higher interest-returning accounts available. Justin Prichard, bank expert at About.com, stated, “The best annual percentage rate consumers will get at traditional banks is about 0.75 percent APY. Internet banks can easily offer up to 2.25 percent.”
Though it seems like a small difference, over time it adds up. For example, on a $100,000 account, compounded monthly for five years, the 2.25 percent interest rate earns an additional $8,000 more than the 0.75 percent rate. Prichard added: “People are creatures of habit. If their money is somewhere, and they’re busy doing other things, they don’t necessarily try to do better. But if people have a decent chunk of change, it’s worth it.”
Having an IRA set up
Despite their perks, many people are putting off starting their IRAs. If a 40-year-old opens an IRA and saves $5,000 annually at 6 percent, that person will have about $291,000 by the age of 65. Whereas if he or she had started the account at 25, at the same deposit and interest rates, the account would contain $821,000.
The benefits of an IRA make it hard to believe that every consumer isn’t proactively using the tool as a way to save money. It’s tax-free money and matched by many employers. People should start taking advantage of these as early as they possibly can. Time is the key to compound interest.
Take advantage of department stores’ rebates
A great way to find extra money is to take advantage of department stores’ rebates. A lot of customers are lax when it comes to cutting off the barcode, filling out the application and sending it in. Rebates, however, can save customers up to 10 percent of their big-ticket purchase. When those items are dishwashers, refrigerators and computers, the savings is substantial. The key to finding debt relief is looking at small ways to cut back. Rebates are a great way to find extra money.
0 percent financing deadlines
Consumers also don’t normally pay attention to when their great 0 percent financing deal ends. Many stores offer 0 percent financing for a specific time period. These are great to take advantage of, but consumers need to remember that at the end of the allotted period, interest charges start.
For example, P.C. Richard & Sons sells $3,200 televisions with a 0 percent financing rate for 18 months. After the 18-month period, the interest rate is 22 percent. Say a consumer pays $3,100 prior to the 18-month period and has a remaining balance of $100. If he or she waits one day after the offer expires, that person will owe $800. The first $100 was the remaining balance, but $700 is the interest owed on the entire $3,200.
Savings are available
In the end, savings are available but consumers have to be actively involved in their management. It may seem like a lot to remember deadlines and rules, but if one action brings savings to apply toward debt relief, then it’s worth it.