Table of Contents
This week on the Get Out of Debt Guy podcast, I want to talk with you about time running out, buying stuff for less than it costs, car payments over a cliff, and Baaaad people.
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Transcript
This week on the Get Out of Debt Guy podcast, I want to talk with you about time running out, buying stuff for less than it costs, car payments over a cliff, and Baaaad people.
This is Steve Rhode, your Get Out of Debt Guy from GetOutOfDebt.org
The Gift That Keeps on Giving and Taking and Giving
If you are like me, there have been times you’ve purchased a gift card to give to someone special.
We’ve all seen those racks at the grocery stores packed from top to bottom with every conceivable store gift card.
These gift cards seem to be available everywhere. Merchants that sell them get a small cut of the amount you load onto it. More choices mean more chances of us buying a card to give.
However, there is more to giving or receiving a gift card than you know.
More than $1 trillion will be loaded on gift cards this year. So there is no doubt gift cards are popular.
But not all gift cards are created equal. For example, some gift cards diminish in value if they are not used if the company behind the card charges a fee on the lingering balance.
So let me help make you a little wiser when it comes to gift cards and give you more information than all of your friends know.
Next time someone talks about a gift card, you can say, oh, that’s a closed-loop card. Then, you’ll sound like a gift card pro.
There are two types of gift cards. First, a closed-loop card can only be used at one store or related stores.
An open-loop card operates more like a debit card. It can typically be used in locations where a merchant accepts a debit card but can lose value from those pesky fees over time or expire.
Gift cards that are purchased but never redeemed are referred to as breakage. However, they should be more accurately labeled as pure profit. Grrr.
Starbucks has $1.95 billion in unredeemed gift cards on its books. Last year they decided that $181 million would never be used. So they got to keep all that money and did nothing for it.
Amazon had $5.2 billion in gift cards outstanding at the end of 2021.
Companies that have branded gift cards get excited not just for the unused value loaded on them, but people that use them tend to spend more than is loaded on the card.
A recent survey found that 41 percent of people given gift cards would spend more than $50 above the amount on the card.
So while it costs the merchant a percentage to the outlet that sold the card, they are getting more money back in the long run.
Not all gift cards are fan favorites.
Did you know gift cards can be resold for cash?
One company that purchases gift cards is CardCash. You can find them at CardCash.com.
For a $25 Walmart gift card, they will pay you about $21.
A Ross $25 gift card only fetches about $14.
People who use the CardCash service can even trade their gift cards in and get one for a different store. So while that Walmart card might only be worth about $21, you can trade up to a card from CVS or Lowes and get $23 in value.
Card Cash describes its service by saying, “We buy gift cards for less than their value from people just like you who don’t want them, and resell them at a discount so you can save.”
By visiting the CardCash website, you can purchase gift cards from the stores you will purchase from. You can buy a store gift card at less than face value but get the entire credit when you use it.
The discounts can be substantial.
For example, if you have spent money on games on Facebook, you can get a Facebook Game Gift Card at 34 percent off face value.
As of the time I’m doing this podcast, there is a bunch of other recognizable places that are about 30 percent less than the face value of the gift card. Places like Macaroni Grill, Harley-Davidson, NBA Store, NFL Shop, and Nascar.com.
Purchasing discounted gift cards is a way to get or give free money. For example, you win if you buy a $500 Harley-Davidson e-gift card for $350, which can be redeemed for $500.
You’ll wind up being a thrifty hero.
The person you give the gift card to will say, “You shouldn’t have,” but they won’t know that you didn’t.
One final point to remember about gift cards. Suppose you purchase a gift card and the company files bankruptcy or goes out of business. In that case, the card can instantly become worthless.
Ultimately, it will be up to the Court to determine if those cards have any residual value.
So there you go.
You now know that a smart gift card buyer can purchase name brand cards for less than face value and avoid giving those open-loop cards that will lose money to fees.
Car Payments Are Driving People Over a Cliff
In 2022 we set a new record when it comes to car payments. But unfortunately, this is not the kind of accomplishment that results in a trophy or ribbon.
The average car payment is now over $700 monthly for the first time.
That payment is more than some people pay on their mortgage.
Ivan Drury, senior manager of insights at the car buying expert Edmunds, said, “I joke with people that every new car purchase is a luxury car purchase. I don’t care what you’re buying.”
He’s right.
People’s ability to continue purchasing a new car is getting further out of reach.
I remember when all car loans were no longer than four years. But as prices have increased, the length of the loans had to extend to keep monthly payments manageable.
You can now get a car loan for 84 months. That’s seven years.
Unimaginable not that long ago.
So don’t be surprised if you don’t start hearing about eight or nine-year car loans shortly.
Some lenders are already willing to go to 96 months on car loans and up to 120 months on truck loans.
You see, if monthly payments are too high, there are only two ways to reduce them during times of relatively low-interest rates so people can make the payments.
One of those ways is to reduce the price of the vehicle. But unfortunately, that is not likely to happen. So the only other way is to extend the loans.
Longer-term loans are not wise for many reasons.
Even car lenders like Capital One warn people longer loans can result in substantial negative equity. That’s when you owe more on your car than it is worth.
In addition, the total amount you will pay in interest over a longer loan will be much more expensive.
You are also more likely to have unexpected repair bills on a car with an extended monthly payment. This is because the car warranty will end while payments are still due for many years.
The explosion in new car unaffordability has created a market where used cars are rising in value.
According to data available, used car prices jumped 16 percent last year while new car prices jumped 13 percent.
I know people that sold their used cars and bought a new car with a lower monthly payment.
Some people have even found a new side-hustle, buying and selling used cars. A cottage industry has emerged selling classes and courses on buying and flipping used cars.
Is this a fad or a sustainable way to make extra money on the side? I don’t know. What do you think?
Is buying and flipping used cars something you’d spend money on to speculate in and hope to sell for more?
Ultimately, the best way to make money buying and selling any asset as a side-hustle is going to be by educating yourself first about the prices buyers are willing to pay rather than what you think they’d pay.
My friend Damon Day who you hear on the podcast sometimes, is in the process of evaluating some different side hustles to share with you.
First, however, he’s trying them out to give you first-hand advice on his experience.
I’ll ask him if he’s willing to try flipping used cars out in his side-hustle trials.
If that’s something you’d like to hear more about, let me know, and maybe I can throw in some money to the side-hustle experiment.
I don’t want to spoil the surprise about the first side-hustle he will share with us.
Be sure to subscribe to the podcast to hear about his successful money-making side-hustle that just helped pay for part of his recent vacation.
Beware of Scammers in Sheeps Clothing
Every day I hear from a new person or research yet another scam.
This scam I just heard about struck me as a particularly destructive and nasty one.
None of us are immune from being scammed.
Sometimes I’ve been the target of a scam.
Not long ago, I received a phone call from someone claiming to be from my bank. They had the correct bank name and knew my name. It would have been easy to fall for the demand to give up account information to the scammer.
In this case, I told the caller to contact me via the banking app or website, and I’d be happy to assist him with his inquiry. But I was not going to give him any information based on his phone call. I had no way to verify he was who he said he was.
As soon as I hung up the phone, I logged onto my bank website and sent a message to customer service with the name the caller gave me and the phone number displayed.
The bank responded that the person was not an employee and had no record of that telephone number with the bank.
Trust me when I tell you I would have fallen for that scam call in my younger years.
But between all the work I do looking into scams and a bunch of years behind me, I’m a more challenging mark to scam.
A recent story about a group of military veterans getting scammed caught my eye.
These good trusting people learned a life lesson the hard way. But unfortunately, I think some are still in denial about being victimized.
The outfit behind this scam located its operations outside eleven locations next to military bases.
They would attract military veterans in and allegedly coached them on how to apply for maximum disability benefits.
But you are not going to believe the rest of the story.
Here is why I don’t think the military veterans spotted the scam right away. And this is going to surprise you.
The eleven locations next to military bases responsible for the benefits scam – were churches.
The whole story is those veterans who were coached on how to apply for disability benefits were then pressured into donating those benefits to the church.
The church allegedly offered fee-based biblical classes and stretched them out for years. In addition, it is alleged they often taught little and required students to recruit more members while soaking up their GI Bill benefits.
A 2020 letter warning of this scam also said students left classes early to recruit new members or do chores, like washing cars or construction work, for church leaders.
The leader of this church enterprise is said to have used the money he scammed from his members for lavish vacations and luxury Florida homes.
Reports state that when church members questioned what was going on, they were publically humiliated. If they tried to leave the church, they were stalked or harassed.
The FBI recently raided the non-profit House of Prayer Christian Church two years later.
No matter who someone claims to be, it probably is a scam if something doesn’t feel right.
If someone is asking you to give up money by manipulating you with fear, greed, or guilt, just take a breath and ensure you are not acting before thinking.
I can do my best to give you the education and tools to spot scams, but you are the best person to save you from being scammed.
Time is Running Out for Student Loans Forgiven
The Department of Education has had the Public Service Loan Forgiveness program on the books for many years.
This program allows government employees, non-profit employees, military service members, and public safety employees to get their federal student loans forgiven after making ten years of reduced payments.
The idea behind the program is that people who pursue lower-paying public service occupations, like teaching, deserve a break. So the program was supposed to encourage more people to pursue these valuable lower-paying occupations in exchange for loan forgiveness.
The program has been a disaster.
Promises were made.
People believed them.
And when it came time to deliver, the government did not honor the program and forgive loans as they said they would.
It has been a mess. First, student loan servicers gave student loan debtors incorrect information. They failed to put people in the right repayment programs, so their payments qualified.
Even when people made the ten years of payments and were told they complied with the program for forgiveness, they were rejected for forgiveness.
Under the Trump administration, the Department of Education said students had to continue working for public service employers after making ten years of payments because they had to wait for applications to be approved. Looking over forgiveness requests took more than two years and resulted in most forgiveness requests being denied.
It was a train wreck wrapped in a hurricane on fire.
The current Biden Department of Education cut many requirements to clean up the mess and honor the original program enacted by President Bush. In addition, it gave public service employees a cleaner way to be approved for forgiveness.
So far, 145,000 debtors have had their loans forgiven. But nearly 550,000 are eligible and would qualify for loan forgiveness if they just applied and asked for their student loans to be eliminated.
This special clean up the Public Service Loan Forgiveness program ends on October 31, 2022.
Unless the current administration extends the unique program, hundreds of thousands of eligible student loan debtors will miss the opportunity to have their federal student loans washed away and even get money back from overpayments.
If you know someone that works for the local, state, or federal government in any capacity, please tell them to visit StudentAid.gov and search for the Public Service Loan Forgiveness waiver.
Do it now. Time is running out.
Thank you for listening to another Get Out of Debt Guy podcast.
I’m here for you.
I believe in a better financial future for you.
And remember to always practice safe debt.
This is Steve Rhode, your Get Out of Debt Guy from GetOutOfDebt.org.
Bye Bye