How to play the money game [so it doesn’t play you]

We live in a world where you need money to survive, so you need to, as I like to put it, “play the money game.” As a financial counselor, I’ve seen many ways that companies can trick the people I serve into losing money. I’ve also seen scammers steal money and personal information. Learning how to deal with these “tricksters” will give you a leg up on them, help prevent you from losing your hard-earned money, and reduce your financial stress.

Here are a few tips to help prevent you from being played by the money game.

Read the fine print of each financial document you sign or agree to.

Low or no-interest credit cards 

These cards are very attractive, especially if you need to manage a large credit card balance. If an interest rate is very low or 0%, it is most likely a promotional offer. Understand what the promotion covers, how long it lasts, and whether there are any hidden fees or rules. Then follow every rule and nuance, because if you don’t, you will pay.

Here are two common examples of no-interest cards and the problems they can create for you.

Example 1: The 0% rate is for balance transfers only. If that is the case, DO NOT use it for purchases, too. If you do, the purchases will be at a higher interest rate. Most often, you cannot pay the purchase balance off until the balance transfer balance is paid off first, so the purchase balance will keep adding compounded interest month after month. Know that the interest is also being charged interest each subsequent month, which adds even more to your purchase balance. You can see how much interest is accruing each month by viewing your statement.

Example 2: The 0% rate is for a specific purchase or purchases within a specific time frame. If so, don’t use the card for anything else. Otherwise, you will be stuck with a higher interest rate for anything else that doesn’t fall within the promotional offer. You also cannot pay the higher interest rate balance off first. The credit card companies create these provisions so they can continue to collect compounded interest on a balance at the higher rate month after month. 

Loans with no listed interest rate.

This is common with payday loans, and it is a huge red flag. The amount you pay back will be much higher than the amount you borrowed if you don’t pay it back according to the rules detailed in the fine print.

Loans with no interest or no payments, which require information about your car or home.

The fine print in these types of loans might require you to give up your home or car if you don’t comply with the terms of the loan. I would recommend you file a complaint online with your state’s Attorney General’s office if you encounter a loan like this. 

Debt repayment companies

Many for-profit debt repayment companies are debt settlement companies. If you use one of them, know what you are signing up for. 

• When a debt settlement company tells you to stop paying your debts while you wait for a settlement, your credit score will plummet.
• You can still have judgments filed against you and be sued by creditors if you don’t pay your debts.
• Even if you pay a company to settle the debt, they cannot pay it off until there is enough money there for a settlement.
• You can settle your debt on your own for free. You do not need a debt settlement company to do it for you.
• There are other options besides debt settlement. LSS Financial Counseling offers a Debt Management Plan that can combine your debts into one monthly payment (often at a lower amount and a reduced interest rate) and help you become debt-free in five years or less.

Protect yourself from scams.

Phone scams

The Federal Trade Commission has tips to recognize this type of scam.

1. Be wary of callers who say you were selected to win a prize. If you have to pay money to win, it is not a prize.
2. Know the caller can’t arrest you for a debt. If the caller says you will be put in jail for not paying off a debt, know that real law enforcement officers don’t make arrests by phone.
3. You don’t need to decide now. Honest businesses would give you time to think about and decide to accept their offer. Scammers pressure you to make a decision NOW. Take your time.
4. Only scammers demand you pay certain ways. Scammers will insist you pay in ways that make it hard to get your money back, such as a wire transfer, gift card, cryptocurrency or payment app.
5. Government agencies won’t call to confirm your sensitive information, like your Social Security number.

AI impersonator scams

If someone calls you in desperation asking for money, your first reaction needs to be, “This is probably a scam.” Scammers can use artificial intelligence (AI) to impersonate the voice of a loved one and might call to send money immediately. To protect yourself, end the suspicious call, and call your loved one to see if the request for money is real. You can also ask the person claiming to be your loved one a question that only your loved one would know. Talk to the older adults in your life about this type of scam, because they are common targets for this. 

Build your savings.

Building savings is essential to avoiding the debt cycle. If you build savings and have to spend it on a needed expense, don’t see that as failing; your savings are exactly for this type of situation. Build it up again so it is ready for the next emergency. Drawing from your reserves frees you from going into debt and high interest payments you cannot afford.

Use credit to help you, not hurt you.

Have one credit card that you use to pay one bill, like a phone bill, and pay it in full each month. The timely payments will help you improve your credit score. Never have a running balance, and never accrue interest.

We’re here to assist you.

If you have questions about managing debt, building savings or addressing other financial challenges, please contact us to schedule a free, confidential appointment. Call 888.577.2227, email us or set up a financial profile online. Our certified, nonjudgmental financial counselors can direct you to resources and work with you on strategies to play the money game successfully.

Author Sarah Jannusch is a certified financial counselor with LSS Financial Counseling.