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Bad Credit
by Max Smith
2006-03-01

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People have always made fun of my name. In grade school, kids called me Maxwell House Coffee. Got plenty of good-natured jokes and jabs when the old TV comedy shows Get Smart ( with Maxwell Smart ) and Max Headroom were on the air. And I'll never forget that Maximillian was the emperor of Mexico from 1864 to 1867 and that his reign ended when he was executed by firing squad.

Bad as his fate was, in recent months a business that's a terrible name association has opened: LoanMax. It is one of those auto title loan places. WARNING: Please do not do business with LoanMax! You will be expected to give them the title to your car and an extra set of keys. The maximum amount of the loan they give you is 50 percent of the trade-in value of your car. Pay the loan back in 30 days and keep your car. However, the trouble is its 30-percent interest rate. On a $400 loan, you pay $520 a month later. If you do not have that kind of cash, you can roll over the loan for another month, and another month after that until you do have enough cash. In three months, $760 is due—and they do not take checks. If it takes a year to pay them back, you're looking at a tab of $1,840—or they repossess your car. That kind of money is a good down payment on an almost-new car at CarMax, a used-car superstore. If LoanMax gets your car, they will sell it at auction. If your money emergency is that bad, sell the car yourself and avoid the hassle of a repossession, something that, like a bankruptcy, stays on your credit report seven to ten years.

There wouldn't be so many auto title and payday loan places that are open and profitable if someone who cares had gotten into the business of their patrons ahead of time.

Consumer education about borrowing money and the responsible handling of credit is available. Check out consumer credit counseling services and Bankrate.com before you borrow. Better yet, keep an accurate personal budget and realize that if you can't pay for it in cash, save your money until you can. Living above your means by buying things you can't afford is a poor way to try to impress someone. Lenders do not want you to be wise. The less you know, the more of your money they can get.

For instance, 'rapid refund' income tax places are all around. What they don't make clear is that they get your refund. The cash they promise in a day or two is a loan, with a large amount deducted as pre-paid interest. You are better off filing online or electronically through a reputable tax preparation service and waiting a few extra days for your refund check. Or, for more security, a small fee will allow direct deposit into your checking or savings account.

Another notorious way people lose money is through mishandling credit cards. A great place to keep credit cards is in a locked file cabinet at home. Carrying them with you allows you to impulsively buy things you may not need. For large pre-planned purchases they offer greater safety than carrying large sums of cash. But on purchases of any kind, a 20-percent credit card interest rate means you pay far more than the retail price. You may cancel savings of things bought 'on sale.' Paying the monthly minimum on a credit card bill may mean you end up paying several times the original purchase price over a decade or more.

Credit card companies monitor your credit report. Even if you pay them on time monthly, a late payment on your electric bill or a medical bill may cause them to increase your interest rate. Credit card companies claim they have to 'manage risk' because theirs is an unsecured loan to you. Make every effort to resolve other disputed bills before they go to collections status to deny the credit card reason to classify you as a 'deadbeat.'

Years ago, a popular book on economics had in its title the initials T.A.N.S.T.A.A.F.L., which stands for There Ain't No Such Thing As A Free Lunch. The basic point of the book is that in this capitalist society someone pays for everything you get. Often you pay for what other people get. Sometimes others pay for what you get. With over a million people a year filing for bankruptcy, you pay for loans they default on with high credit interest rates. That is your penalty for not saving and paying with cash.

Be sure to pay credit card bills on time—and early if possible. Payment due dates are strictly enforced. Some cards have a 9 a.m. deadline on that due date. If you think you will be late, pay online or by telephone. A $30 late payment fee makes that $30 sweater you bought 'on sale' cost $60, the non-sale price.

It is very embarrassing for the cashier to say your credit card has been declined, especially when shopping with a friend. Some credit cards will let you avoid that embarrassment by letting you go over your limit. But when you get that bill in the mail their $30 over-the-limit fee again doubles the price. A late fee and an over-the-limit fee makes you pay for three sweaters while you get only one. If you signed up for great perks, incentives and a low annual percentage rate on the card, they can increase your APR ( annual percentage rate ) in 15 days with a written notice. This should not come as a surprise. All along, it was right there in the fine print you chose not to read. Max says be careful not to max out your credit card!

Money can work for you when you are earning interest. Pay yourself first! Every month set aside some money. Put $25 or $100 into a savings account. Invest $1000 into a certificate of deposit. Also, think about long-term investments in stocks, bonds or other things like real estate that grow in value over time. Like it or not, this capitalist system we live in won't change much anytime soon.

Comments? Concerns? Contact MaxsonnCS@aol.com .

Black Film Festival Set for July

Film Life—a film marketing, distribution and production company—and HBO have announced that the American Black Film Festival ( ABFF ) will take place in the South Beach district of Miami on July 19-23.

The 2006 ABFF program will include independent film screenings, premieres, workshops, panels and seminars, according to a press release. Other highlights will include live entertainment and the ABFF Awards presentation.

The ABFF has four film sections, namely Narrative Feature Films, Documentaries, World Cinema and the HBO Short Film Competition. A total of $80,000 in prizes will be awarded. Films submitted must be postmarked by April 7.

For more info, see www.abff.com .


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