Tuesday, August 28, 2012
Born out of a religious campground; site of an historic summit; place of evil spirits: Learn about the communities where we work and play.
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Credit, Debit or Prepaid?
Standing in the checkout line at a store, consumers have many options on how to pay for their purchases these days. Cash, check, credit card, debit card, gift card, or other prepaid card. Cash and check are pretty straightforward; however, there may be some indecision on whether to use a credit, debit or prepaid card. In order to help you decide, it is a good idea to have a basic understanding of exactly what these cards are and how they work.
As a general rule, you can count on paying interest on the outstanding balance on the card each month. Repayment options usually include paying it all off every month or paying it off over time by making monthly payments. The card issuer will provide you with the required minimum monthly payment, which can vary each month depending on the outstanding balance.
Credit card issuers may also provide you with other benefits, such as extended purchase warranties, extra insurance, cash-back programs, or "point" programs. Cash-back and point programs are popular these days. A cash-back program gives you a set percentage of your monthly spending back in the form of either a statement credit or credit towards other goods and services. Similarly, in a points program, you gain points based on your spending, which you can then redeem for a variety of goods and services.
One important thing to note is that if your credit card is lost or stolen, your liability is limited to a maximum of $50.00. In addition, using a credit card for purchases gives you the highest level of consumer protection in the event of disputes or unauthorized transactions.
One thing to be careful of is to not go over your available balance. If you do, you run the risk of either having your transaction denied or incurring overdraft fees. How the transaction is handled depends on your agreement with your bank. The bank cannot charge you overdraft fees unless you have given them written permission to allow the transaction to go through and charge you the overdraft fee. Depending on your bank, there may also be other fees associated with using a debit card. Generally, banks do not offer other "fringe" benefits with a debit card (such as purchase protection or points programs) like there are with credit cards.
For unauthorized transactions, your liability is limited to $50.00 if you notify the bank within two business days of discovering the transactions. However, if you neglect to notify the bank within those two business days, your liability goes up to $500.00 or even more, depending on the circumstances.
Prepaid cards can have a number of different features. For example, a general purpose re-loadable card has a card network (Visa, MasterCard, American Express) imprinted on it and can be used anywhere that brand is accepted. You may even be able to obtain cash at an ATM with one of these cards. A Visa Gift Card is an example of a general purpose re-loadable prepaid card.
A store gift card is a card that may only be used at a single merchant (Applebee's, Pep Boys, or WaWa gift cards). A prepaid card can also have a variety of fees associated with it, such as usage fees, dormancy fees, or loading fees. Be sure to read the fine print when you purchase one.
Liability on prepaid cards depends on the type of funds on the card. A payroll card has the same liability limits and rules as debit cards and is covered by some consumer protection laws. However, a general purpose re-loadable card or a store gift card has no liability limits. In most cases, if you lose one of these cards, it (along with your money) is just gone and you cannot recover any funds.
Big Buck Politics
No matter what shape the economy at any given time, we can expect a boost every four years as presidential elections roll around. This year is no different.
Estimates of revenue generated during the Republican and Democratic conventions alone bring $175 million to each Tampa and Charlotte this year. That's no small change.
Approximately 75,000 hotel rooms were booked in the Tampa area for attendees. These include 4,411 state delegates, 15,000 media representatives, the Republican National Committee (RNC), members of Congress, and major donors.
Restaurants, the travel industry and local businesses will all share a piece of the projected $1,600 each visitor will spend. Tropical Storm Isaac delayed events, but won't hurt the bottom line.
Each site spent a significant amount to secure the event. The Host Committee that persuaded the RNC to bring the convention to Tampa pledged $55 million for the event. They don't get to spend the money, that privilege goes to the RNC Committee on Arrangements to be used as need dictates.
The Democratic National Committee (DNC) is keeping their donation and expenditure data quiet until after the convention.
There is a certain amount of economic impact to the host cities as well. Many of those normally in the city will stay home, commuter travel will be down. But income lost from these sources isn't of an amount significant enough to put a dent in revenue gained.
While convention income benefits only the two host cities, campaign revenue benefits the entire country. The May 2012 edition of Readers Digest used President Obama's 2008 expenditures to show how just one campaign spread its cash. The amounts they revealed were staggering.
Travel alone cost $61 million. Significant expenditures included $6 million for commercial flights that often got booked at the last minute; $5 million to lease full-size jets for 60 days that made up to six stops a day; and $3 million for rental cars. Staffers rented two to five cars or vans in each city and recruited volunteer drivers.
The 2008 Obama campaign had a payroll of $65 million. The campaign manager earned $200,000 a year, its consultant $150,000. Field organizers were paid $25,000 each for 18 months not including perks.
Operations reached $54 million with as many as 700 offices set up around the country; all required rent and utilities, office supplies, computers, furniture and food for staffers.
Advertising costs were $435 million and spread across broadcast, Internet and print ads other materials such as signs, buttons and the like.
What kind of food do you think they spent the most on? Pizza! Almost $35,000 was spent on pizza alone.
These numbers sound staggering to most of us. Double them to get an idea of what both major parties will spend this year.
All trickling down to local economies. Someone designs those ads. A local restaurant makes that pizza. Someone fuels that jet, another sells office supplies.
None of it spells long-term profits. But perhaps an establishment will gain new customers. Or have a chance to show their stuff to a larger audience. Every little bit helps.
The markets continue their sideways momentum, as the DJIA bounced along in the "lucky" 13K range. However, most eyes are on Hurricane Isaac as he barrels toward the Big Easy, after sparing mainland Florida and the Keys. The track is eerily similar to the devastating Katrina almost exactly seven years ago. However, Isaac is not nearly as powerful of a storm as Katrina. And, hopefully, the authorities will be better able to deal with the lower threat.
While much is said about economic losses from disasters such as Katrina, economist John Maynard Keynes believed that such events actually increased output and long-term living standards. He thought the same of wars. There is disagreement, of course, but that is a topic for a different day.
Editorial Opinion: Balance of Payments
I promised last week that I would present the concept of "Balance of Payments" as it refers to wealth distribution. Balance of Payments has historically been utilized to describe the flow of funds between countries in international trade. The term can also be utilized to describe a system whereupon government payments to citizens are earmarked, tracked, and ultimately repaid. The flow of funds between citizens.
The basic premise is that, in cases where an individual's fellow citizens provide economic support (commonly referred to as a "safety net"), those funds are tracked, due and payable back to the public treasury (balancing the payments with repayment). Such a system has two main positive benefits. First, it provides accountability that greatly disciplines the market for such funds. Secondly, it much more precisely allocates funds to where they are best utilized.
The following example is very straightforward. Most would agree that a college education is, in most cases, beneficial to an individual's well being and lifetime earning potential. It is also generally agreed that educated citizens comprise a better society. So there is both a private individual benefit and a public benefit from higher education.
Few would dispute this. But how do we accomplish it?
Individuals who are from more affluent circumstances generally have the means to acquire such an education. This is a best case market scenario whereupon the individual receiving the benefit is also footing the bill. Yet most of us would also agree that such an education is certainly out of reach for many individuals born into more modest socioeconomic circumstances.
In some cases, the private market does provide financing to such individuals for higher education and such solutions should be embraced. That said, such financing is at best incomplete and creditors are understandably wary of extensions of credit for this purpose with no short term foreseeable means of repayment.
Enter a balance of payments system. Students could borrow freely from such a system for the purposes of a higher education (subject to certain conditions, such as course load, GPA, etc.). However, such funds would be earmarked and recipients would be expected to pay back such funds at a later point over an extended period of time. Most have suggested repayment via a small surcharge (tax) on income earned once coursework is complete and employment commences. This would be very similar to student loan payments made to private lenders.
At first blush, it might seem that such a system is harsh, as many social liberals have suggested that society "owes" such an education to all. Conversely, many social conservatives argue that it is not a government function or "public good" to provide an individual with an education. Both are wrong.
A balance of payments system is a middle of the road solution, recognizing society's role in providing services to individuals not attainable via the private market, yet unwilling to simply give such services away with no accountability. In a sense the government would be a "lender of last resort" for such purposes.
In a perfect scenario, the individual receiving the benefit would pay the tab, reducing the frequent "class warfare" that the welfare state often invokes. To be sure, such a system would sober up recipients and make them consider carefully any money they borrow from their fellow citizens.
On the other hand, the public at large would generally be much more in favor of their tax dollars being spent in such a way whereby the benefits to a recipient can actually be identified, measured and tracked. Polls overwhelmingly show the majority of citizens believe a large part of their tax dollars are wasted. The balance of payments concept could be applied to many other governmental safety net programs, such as unemployment benefits, among others.
Why do we need such a system? Because capitalism is bar none the best way to allocate precious resources and produce wealth. We must preserve it. No other system that has ever been tried can even come close. Yet capitalism has some very sharp edges, and while the creative destruction process may be beneficial to society in the long run, it is downright scary to the father of four who was recently downsized. It would be comforting to many to know that, in the short term, they could rely on their fellow citizens (safety net) in such dire circumstances - and with the honor of knowing that any such assistance is only a "loan."
Alternatively, fellow citizens generally feel much better about a system that ensures some level of accountability with their hard earned "loaned" tax dollars. Hence the middle of the road.
Some have suggested that productivity would be substantially increased under a balance of payments system, while overall government spending would decrease through a sharp reduction in waste. It is easy to envision more harmony between the classes as lower income citizens have greater access to needed benefits and higher income citizens are more willing to support government programs when they can ascertain their hard earned tax dollars are spent wisely.
Currently, neither situation exists. One thing is certain, the current system of ever-increasing benefits with continually eroding accountability is unsustainable. Left unresolved, the status quo will almost certainly bankrupt us at some point in the future. Think Greece. Give the balance of payments system some thought.
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