≡ Menu

4 Bad Deals

The term “Bad Deal” is relative.  Not only is Necessity the mother of Invention, she is also the mother of many a Bad Deal.  Necessity has lots of children.  If a so-called bad deal is the only way, the only course of action between life and death, then maybe it isn’t such a bad deal after all (it’s called an opportunity cost).  The following cases are not life and death related.  These examples are interpreted in a day-to-day light, where urgency is not a consideration, but convenience, desire, and other potential budget-ruining emotions are. 


 


Speeding Tickets


Let me refresh your high-school math skills: 


Jack and Jill are in separate cars.  Both need to travel 60 miles to get to Amarillo.  Jack drives at 65mph and Jill drives at 75mph.  How much faster will Jill get to Amarillo than Jack?

Answer: 8 minutes

Follow up question: How much must Jill’s time be worth to make up for the $180 speeding ticket?

Answer: $1,350/hour.  Actually, the time it takes to get the speeding ticket will probably eat away the 8 minutes, so Jill loses money no matter what.   

I got a speeding ticket recently.  Needless to say, I monitor my speed much more closely now.


An Economical Alternative:


Don’t speed Smarty Pants, just leave 8 minutes early. 



 


Rent to Own


I found the research for this one a little disturbing; I’ll let it speak for itself. 


Here at BuddyRents.com, this TV’s cash price is $1,439.99


Buddy's 


In less than a minute I found the same TV (same model #) at Amazon.com for $549.99


Amazon


Thats a 162% mark-up.  Disturbing right?  


An Economical Alternative:


Well, there are actually a few alternatives:

A. Don’t get the T.V.


B. Save until you can afford the T.V.


C. Layaway


D. Heck, even your credit card has a better interest rate.

  


Western Union


Every Western Union commercial I have ever seen involves some sort of fire.  Ok, so they are marketing towards people who are in emergencies.    


I went to the WU website to see how much a $500 transfer would cost.  I chose $500 because a real emergency would call for at least that much (car repairs, hotel, clothing, food, bungee cord, etc).   


WU 


Fees:

  • Money in Minutes – $48 – 9.6%
  • Overnight Delivery – $36 – 7.2%
  • Economy (3 Days) – $28 – 5.6%
  • Direct to Bank – $19.99 – 4%

Again, in a true emergency, these fees may not make a difference.  However, I have seen people WU-ing at the grocery store who were clearly not on fire. 


An Economical Alternative:


You knew you were paying them for something, the USPS does money orders too.  Here is the information on domestic orders:

  • Purchase with cash, debit card, or traveler’s check
  • Valid for an unlimited period
  • Can be cashed at any Post Office or can be deposited or negotiated at your financial institution
  • Replace damaged, lost, or stolen money orders

Fees:

$0.01 to $500.00 …………………..$1.10
$500.01 to $1,000.00 ……………..$1.50
Postal Military Money Orders……..$0.30 (issued by military facilities)

I’m betting you could mail one of these babies in three days for less than $28.


 


Payday Loans


I know, shocking.  Payday loans are a bad deal even in an emergency.  Even if you are on fire.  I went to a few websites for these loans and most of them were smart enough not to put their rates anywhere obvious (not even in the FAQs); not 200cash.com, however.  Their site clearly states that there is a $60 fee on every $200 borrowed for up to two weeks.  That’s 30% every two weeks; not every year, but every two weeks. 


An Economical Alternative:


Most of the companies that I visited claimed that the payday loan industry is safe because it is highly regulated.  However, even the Federal Trade Commission doesn’t want you to use them.  Here are the FTC’s recommended alternatives:


  1. Consider a small loan from your credit union or a small loan company.
  2. Shop for the credit offer with the lowest cost.
  3. Contact your creditors or loan servicer as quickly as possible if you are having trouble with your payments, and ask for more time.
  4. Contact your local consumer credit counseling service if you need help working out a debt repayment plan with creditors or developing a budget.
  5. Make a realistic budget, including your monthly and daily expenditures, and plan, plan, plan. 
  6. Find out if you have — or if your bank will offer you — overdraft protection on your checking account. 



Article publié pour la première fois le 16/08/2010

2 comments