With overdraft fees taking its toll on many banking customers, it is increasingly common that consumers are unwilling to pay them.

An overdraft is any “legitimate” transaction that results in a negative balance in a checking account. The most typical reasons for insufficient funds that lead to an overdraft are:

• too many charges on your debit card
• written checks you forgot about
• automated bill payments
• monthly account fees
• failed check deposits
• fraud

Whenever your bank chooses to honor a payment, charge, or check (despite leaving you with a negative balance), the penalty is usually an overdraft fee of at least $30.

How It Won’t Affect Your Credit Score
If you deposit enough money to correct the balance, which includes paying the overdraft fee, the overdraft will have no effect on your credit score since it is never reported to the credit bureaus.

But If You Don’t Pay The Fees…
However, an overdraft can hurt your credit score when your bank turns to a collections agency to retrieve the negative amount that you owe. This occurs only when you neglect funding your account for a certain time period (specified by your bank) to cover the negative balance. The collections agency would show up on your credit report and, therefore, will affect your credit score – in a very bad way.

Why can banks do this? When you opened your checking account, you signed off on a bunch of papers. Within those papers, it states that you agree to let them charge an overdraft fee and that the bank can send your account over to a collections agency.

The only preventive measure from having an overdraft hurt your credit score is to remove the negative balance as soon as possible. Keeping adequate funds, regularly checking your bank accounts, and setting up alerts will reduce your chances of an overdraft in the future.

Check if you have any red marks against your banking accounts such as checking and savings by requesting a free annual report at ChexSystems.

(Photo credit: Neubie)

An item at a garage sale catches your eye and you were able to take it home for a bargain price. You didn’t notice it but your process of haggling had the foundation for price negotiating.

In a business class I took, we had an exercise that simulated a negotiation where groups represented either a buyer or a seller. The sale of a used truck was up for negotiation and we were to learn the basics of negotiating a price.

Each group had to fill out a worksheet with their initial offer, target price, resistance point, and best alternative to a negotiated agreement.

• initial offer: This is the starting price each party intends to lead off with at the beginning of the negotiation.
• target price: This is the amount that the buyer hopes to pay and the amount that the seller hopes to get, realistically.
• resistance point: This represents the highest price the buyer is willing to pay and the lowest price the seller is willing to accept.
• best alternative to a negotiated agreement (BATNA): This is the backup option that each party has as a last resort – should they not agree upon a price.

The Scenario

Buyers: The buyers needs a truck to run a business. They saw an ad by the sellers for their truck and hopes to negotiate for a price that is better than the truck in a nearby town for $5,000, which is immediately available.

Sellers: The sellers have a truck that they have to get rid of. They have put an ad up for the truck so that they don’t have to settle for the $500 that the scrap metal shop will pay for it.

The only information known to both parties is that the truck has faded paint, worn tires and engine sounds. Neither party knows the other party’s BATNA but the parties may disclose it if they choose to do so.

The whole exercise was quite fun and educational. For many people, situations requiring negotiations is rare because they tend to avoid the confrontation. Even this simulation breathed fire into the students as each side were quite aggressive to get the best deal for themselves.

The fundamental terms above prepares the negotiator with a goal so that he/she does not succumb to an unfair agreement. The real-life application of this exercise will prove to be practical and beneficial should they stick to the basics of price negotiating – know what you want and get it.

Some points seen while negotiating:

• Look aggressive. Negotiating is a process that is constantly a tug-of-war and the side that appears dominant will use it as an advantage. An assertive attitude is essential to avoid being cheated in a deal. During the exercise, students were jumping off their seats and their volume was up there.
• Deceive within reason. In this case, lying during a price negotiation was a useful tactic. Some of the buyers revealed their BATNA but lied about the price of the truck so that the sellers would sell their truck at a price lower than that. On the other hand, sellers lied about how they had another potential buyer.
• Be creative. Because of the possible defects that came with the truck, sellers “offered” warranties or repairs without a price tag on them. Although it was not specified in the assignment, the professor welcomed any creative ideas during the negotiations.

You can simulate this exercise with your family and friends. All that is needed are a mediator, buyer(s), and seller(s). It is great practice for the real world and it will be a fun learning experience.

(Photo credit: CarbonNYC)

In the minds of most young college students, the word “credit” usually accompanies the word “card”. Debt, credit reports, and credit scores certainly do not have priority over getting A’s and surviving college life. But, credit will be a significant part of everyone’s life after college so it is crucial for a college student to pay attention to their credit.

Since I believe that I have great credit for a 22-year-old college graduate, how I got it may be a good example for those entering and those already in college. Last year, my FICO score was 728, which isn’t bad, and a recent checkup on my credit report showed that my credit was squeaky clean. So, with a recent credit limit increase on my one and only credit card, my score should be the even higher.

Here is a quick overview of my credit relationships since college:

• Freshmen Year. Despite the bombardment of credit card marketers, I didn’t fall victim to their aggressive tactics and free T-shirts. Based on my FAFSA, I qualified for a $2,625 subsidized Stafford loan and took it – opening my first line of credit.
• Sophomore Year. Nothing much changed here. Again, my FAFSA qualified me for a $3,500 subsidized Stafford loan and took it.
• Junior Year. This year, I started Realm of Prosperity and learned a little more about credit so I did not take any loans. I was able to afford tuition because I received a $3,000 federal grant for good grades. But, I did get my first credit card. It was a student card with a $3,000 credit limit and received a $1,000 credit limit increase every 6 months.
• Senior Year. Because I changed majors, I was ineligible for a $4,000 grant so I took out a $2,852 subsidized Stafford loan. By graduation, I had $9,297 in debt and a credit card with a limit of $7,000.

Sticking To The Basics

1. Always paying my balance in full was my goal with a credit card. The sole purpose of my credit card was to receive cashback while paying for my living expenses. Do not listen to anyone who says carrying a balance is good for your credit. Develop good repayment habits early.
2. Take out loans only in the amount that you need. I was naïve during freshmen year when I received a school refund and thought it was free money but it was actually the extra money from the loan after covering tuition. Afterwards, I took the time to calculate how much I’d need to borrow instead of just accepting the total amount offered.
3. Stick with federal loans as much as possible. The terms on private school loans are subpar compared to the advantages of federal loans. Here is some great advice for college students to help reduce their financial burden.

A Changing Future in Credit
With the upcoming credit legislations, those under the age of 21 will have need a co-signer or proof of income before they are issued credit cards. When I signed up for a student credit card, all they needed was proof that I was a college student.

This doesn’t mean students can’t build credit. A secured credit card, which is a basically a credit card backed by readily available funds, is a great option to start building credit. All that is needed are some student loans and a small revolving line of credit with no violations of any kind.

Responsible use of a credit card in college is a sure-fire way to come out of college with a good credit history.

Any other recent graduates or even current students care to share your credit scores along with what lines of credit you used to achieve that score? Everyone has a different financial scenario in college and the more insight we get, the more future students will benefit. Even those with bad credit can help warn against the mistakes a student might make in college to ruin their credit.

(Photo credit: inkynobaka)

Looking to get the hottest selling video game console of 2009 and want to practice frugality while doing so? Here a guide that I’ve created from my experiences of purchasing a PS3 system along with games and accessories. I hope these tips will help you with reducing the stress on your wallet.

Getting the System
Very few major retailers will offer a lower price than retail for a video game console. So, always head over to sites such as Fatwallet.com or Bensbargains.net to see if there are any recent discounts for a PS3 system. Dell or Newegg would occasionally reduce prices or provide coupon codes for the PS3.

In addition to that, those two sites are participating in cashback programs at Bing or Fatwallet., which means more savings for you. Whatever the deal may be during the period you are looking to purchase a PS3, take it or wait for a possible better deal. Just make sure you are not paying retail.

Getting the Games
Don’t ever think about buying a new game ever again. Why? Because you are paying extra just for the “new” and the plastic seal. Take a look at a previous post of mine about how used video games are perfectly fine. Go find some used games or pre-owned games and don’t pay full price for them. Remember: you can always sell games that you no longer play.

Another option would be to rent video games through Blockbuster or Gamefly. Be sure that you are (or going to be) an avid gamer to make it worth the membership fees.

Getting the Accessories
In order to maximize your PS3 gaming experience, the right accessories make a difference. And they, too, do not have to cost you a fortune. Here’s how you can save on these must-have PS3 accessories:

• HDMI/Component cables. A PS3 exists for high definition gaming so it is essential to get the cables that will permit 720p (for games) and 1080 (for Blu-ray) playability. You do not need to buy cables from the overpriced Monster brand. Visit Monoprice.com for HDMI/component cables that cost less than $10. They work just as well as the $100 cables.
• Controllers. Like getting the PS3 system, controllers don’t always go below retail. Again, just look for the best deal possible and remember to get cashback when possible.
• Bluetooth headset. The official Sony PS3 headset costs $50 retail and it is totally worth it but you don’t have to pay that much. Instead of buying just the headset, look for the game bundles that come with the official headset. The two bundles you should look for are those with Warhawk or Tom Clancy’s EndWar. Check them out at eBay or Amazon and you should be able to get a bundle for less than $40. After that, you can sell the game alone for at least $10 and save even more money on the Bluetooth headset that you keep.

How Much You Can Save
Depending on your perseverance and some luck, you may come across some amazing deals and you could be saving hundreds, if not thousands, over the course of owning your PS3. At the least, you should save $100 by the time you’ve made your first several PS3-related purchases and $100 can buy plenty of games that can last you quite a while.

Just some advice of caution: it is easy to become addicted to video games, which would result in compulsive spending. Here’s something that’ll keep you from running through your games too fast – many previous PS3 owners have burned out their systems after playing for hours on end. Take care and maintain your system to prolong the life of this precious toy. (Hint: keep the system cool!)

(Photo credit: DeclanTM)