Louis Scatigna, Author of The Financial Physician

4 risky places to swipe your debit card

From Bankrate.com

Would you give a thief direct access to your checking account?

No? Unfortunately, you may be doing just that by regularly using your debit card. Debit cards may look identical to credit cards, but there’s one key difference. With credit cards, users who spot fraudulent charges on their bill can simply decline the charges and not pay the bill. On the other hand, debit cards draw money directly from your checking account, rather than from an intermediary such as a credit card company.

Because of that, even clear-cut cases of fraud where victims are protected from liability by consumer protection laws can cause significant hardship, says Frank Abagnale, a secure-document consultant in Washington, D.C.

He cites the example of the The TJX Companies Inc.’s T.J. Maxx data breach that exposed the payment information of thousands of customers in 2007. The incident resulted in $150 million in fraud losses, and much of it was pulled directly from customers’ bank accounts. While credit card users got their accounts straightened out and new cards in the mail within a few days, the case created major problems for debit card holders who waited an average of two to three months to get reimbursed, Abagnale says.

While debit card fraud is always a possibility, being careful where you use it can help keep your checking account balance out of the hands of criminals.

The idea that outdoor ATMs are among the most dangerous places to use a debit card seems a little bit absurd. But some ATMs present a perfect opportunity for thieves to skim users’ debit cards, says Chris McGoey, a security consultant based in Los Angeles.

Skimming is the practice of capturing a bank customer’s card information by running it through a machine that reads the card’s magnetic strip. Those machines are often placed over the real card slots at ATMs and other card terminals.

“Any transaction you do outdoors at an open ATM is going to be higher risk exposure,” McGoey says. “If the public has access to it, then someone has the ability to add skimming devices to it, position cameras on it and position themselves in a way where they could surveil it.”

He says you’re better off using an ATM inside a retail outlet or other high-trafficked, well-lit place.

Julie McNelley, senior analyst for Aite Group LLC, a Boston-based financial services research firm, says even the card terminals that card users must swipe to get into ATM vestibules are being used as a skimming site by criminals. You can spot ATM skimmers by checking for ATM components that look beat-up or askew, she says.

Gas stations are another danger zone for debit card use.

“You go to a gas station and you stick your debit card in there, and you swipe it through a machine,” Abagnale says. “I’m sitting across the street with a laptop and an antenna. I put a skimmer in there, and I’m picking up all the information. Before you even get home, I’ve debited your account.”

Gas station payment terminals have many of the characteristics card fraudsters love, McNelley says.

“In a gas station where you do have a whole bunch of pay-at-the-pump kinds of things and minimal supervision, it’s pretty easy for a bad guy to put a skimming device on and put a little pinpoint camera there and compromise debit cards that way,” McNelley says. Thieves often use small cameras to capture footage of debit card users entering their PINs so they can have free access to their money.

She says even if the thief doesn’t manage to get your debit card personal identification number, or PIN, from such a device, he still may be able to duplicate the card’s magnetic strip and use it for “sign and swipe” Visa or MasterCard transactions.

With the high potential for fraud in pay-at-the-pump debit transactions, it might make sense to use an alternative such as cash or credit cards the next time you fill up.

More…

Financial Physician’s Daily RX

Americans Forced to Put off Retirement Well into Their Golden Years

Newly released data from the Employee Benefit Research Institute is suggesting that more and more Americans do not have much confidence in a comfortable retirement.

 ccording to the study results, an alarming majority of those surveyed say they do not foresee an opportunity to retire at age 60 or 65, and feel the need to work longer and well into their golden years.

• The study found that 25 percent of American workers over 50 expect to retire at 70 or later.
• Five percent of those surveyed believe they will have to work until they are 80.
• One out of six questioned believes they will never be able to retire.
• Each of these percentages represents a dramatic increase from a similar study done in 2006.

It’s no surprise that many Americans feel retirement is farther away than ever before. The merry old days of giving a company 30 years and being rewarded with a lifetime check and benefits are way behind us.

During the last 20 years, a vast majority of private company pension plans have disappeared and been replaced with 401(k) plans.

The problem is very clear. Big company pension plans were governed by investment professionals whose focus was to insure the strength of the company’s retirement funds, so the company could afford to stay in business while honoring their pension obligations.

401(k) programs clearly put the investment and saving responsibility on the backs of the employees who have little to no knowledge about what investment options are right for them. They also have opportunities to borrow against their plans, withdrawing funds and otherwise have a very little understanding about how the plan works in general.

Another piece of the puzzle is those who have been putting money away for the last 30 years have seen their investments dwindle considerably. We are no longer seeing the high yielding markets of the 80’s and 90’s. In fact, markets have taken a huge hit over the past decade and for those everyday investors who have lost considerable amounts of their nest egg, returns on their existing investments are very hard to come by these days.

So why do a majority of Americans envision retiring later than ever before? Many Americans do not find it possible to live on Social Security alone. Those who do, do so with very limited ability to meet much more than just their basic necessities. 

With the slow recovery of the U.S. economy and the uncertainty of the ongoing financial crisis spreading through Europe and elsewhere, there has never been a better time to be educated and proactive when it comes to your personal finances and retirement.

Take my Financial Literacy Quiz and see what your financial knowledge rating is, you may be surprised. Click here to get started.

See these related Stories:

A Great Visual of the Extent Of The European and U.S. Debt Crisis

It’s Time To Make Financial New Year’s Resolutions

The jingle of jewelry at a Beverly Hills pawnshop

10 Money Wasting Habits Of Americans

Take Your Medicine and Be Financially Healthy

Stocking up for Doomsday: As economists predict meltdown, meet the families ready for the worst

All my videos can be found here

I bought a new television for my office yesterday and was stunned to find a 55 inch LED High Definition set for only $799. It’s a buyer’s market for TVs these days.-Lou

TV Prices Fall, Squeezing Most Makers and Sellers

New York Times

It’s a great time to buy a television, and Ram Lall, a television salesman, isn’t happy about it. In a basement showroom of J&R, the huge electronics store in Lower Manhattan, Mr. Lall says the days of making big money from televisions are in the past. Pointing to a top-of-the line, 55-inch Sony television, Mr. Lall said it would have sold for $6,000 a few years ago. The current price? $2,599.

“We are making less money because the company is forcing us to slash prices,” Mr. Lall said, standing amid rows of flickering television sets.

Televisions have become so inexpensive that the profits have largely been squeezed out of them, a result of a huge increase in manufacturing capacity that has led to an oversupply and continued downward pressure on prices from low-cost manufacturers and online retailers.

The near fire-sale prices are great for consumers, who can now buy a television for a fraction of what one cost just a few years ago.

But what is good news for consumers has been a nightmare for manufacturers of TVs and retailers that sell them. The earnings of mainstay television manufacturers like Panasonic, Toshiba and Sony have been hammered. Sony, for instance, is overhauling its television operations because of what one executive said recently was a “grave sense of crisis that we have continued to post losses in TVs.” Even newer and more nimble competitors like Samsung and LG have struggled to make much money on TVs, if any.

Seeking to stanch its losses, Sony on Monday said it would end its flat-panel joint venture with Samsung, which was set up in 2004 to capture the boom in televisions with liquid-crystal displays. Samsung, based in South Korea, will pay about $940 million for Tokyo-based Sony’s 50 percent stake; Sony aims to save on manufacturing costs while still buying panels from Samsung.

For retailers, the picture is not much better. This month, Best Buy reported a 29 percent drop in net income for the third quarter, in part because the retail chain had slashed prices on televisions and other electronics.

Perhaps even more ominously for the long term, the future of televisions appears to be more about what content they can provide, like Netflix and iTunes, than new hardware features like flat screens or 3-D technology. It is an area where television manufacturers have struggled with little success to get an edge, even as Apple and Google vow to upend the industry.

“Everybody is fighting for a limited amount of consumer dollars,” said Gregg Richard, president of PC Richard and Son, which has 66 electronics and appliance stores. “We are selling more TVs, more units, at lower retail prices.”

It does not help that consumers are reluctant to pay much more for the latest features, like 3-D and Internet connectivity. Instead, they are likely to wait patiently for a few months until the price inevitably comes down.

“People used to pay additional to get a Sony Trinitron,” said Riddhi Patel, director of television systems at IHS iSuppli, a market research firm. “But the industry has trained the consumer that any time there is a new technology, if they wait six months the price will come down.”

Paul Gagnon, director of North America TV research for DisplaySearch, which tracks the market, noted that a 60-inch LCD television by Sharp was now selling for as little as $799 — about half of what it was selling just a year ago. “Absolutely amazing,” he said.

The slump is a hangover of sorts for an industry that binged on years of double-digit growth, as consumers rushed to replace old television sets with flashy new models with new features like high definition and flat screens.

There were roughly 32 million television sets sold in North America in 2004, for an average cost of $400, Mr. Gagnon said. The average size of a television was 27 inches. Today, 44 million sets are sold a year in North America, with an average cost of $460 and an average size of 38 inches.

Consumers buy a new television set every seven years or so, and an average household owns 2.8 TVs, he said. While those numbers would suggest a bonanza for television manufacturers, Mr. Gagnon said the larger, more sophisticated sets were expensive to manufacture and cut into manufacturers’ profit margins.

More…

New Year’s is a great time to make resolutions to improve your financial health. Here is my article on the  Fox Business website. Below is my appearance on Fox and Friends last New Year’s Day.

Financial Physician’s Daily RX

The Corporate Disaster That Is Netfix

This year, I have brought you several articles related to Netflix and what I referred to on at least one occasion as Netflix – The Anatomy of a Self Imploding Company, and another relating to Netflix titled, Netflix – The Outlook is not Good.

Well, the saga continues, as it became apparent last week that Netflix CEO Reed Hastings, the person responsible for a series of blunders that resulted in a 71%stock price reduction since the summer, will pay for his missteps in the form of a $1.5 million reduction in his stock-option awards.

It all started back in July of this year, when Netflix blew it big time by announcing a nearly 60-percent rate hike and the creation of “Qwikster.” Essentially, their affordable $9.99, unlimited DVD and streaming video monthly service was split into two complicated and rather silly plans, each priced at $7.99. If you wanted the same level of service you had before the rate hike, the combo plan would cost you $15.98. Additionally, they announced a two DVD rental plan for $11.99 and a one DVD rental plan for $7.99.

Needless to say, Netflix customers went wild in protest, creating a PR nightmare by lighting up social networks with negative press, boycotts and the now infamous Twitter hashtag, #DearNetflix.

The blunder was so apparent that Netflix was forced to abandon their new pricing and Qwikster plan just a few weeks later, when CEO Hastings announced, “Consumers value the simplicity Netflix has always offered and we respect that. There is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case.”

What he really meant was, I made a huge mistake in underestimating my competition and valued customer’s tenacity. He also overlooked the power of the new Social Media environment, which has proven to start revolutions in the Middle East, has been the first source of breaking news the world over, which had 90 percent of people believing John Bon Jovi was a dead man last week and has the ability to spread news and negative vibes faster, and with more impact, than any other medium know to man.

Here is one ugly stock chart:

Basically, Netflix and Hastings are either very greedy or very stupid, and they are now paying for it big time. A vast majority of subscribers abandoned the service provider for competitors such as Red Box and even returned to Blockbuster’s similar program.

Occupy this – Hastings, who received $3 million in stock-options this year, will reportedly see his awards drop by 50 percent to $1.5 million next year. His base salary of $500,000 will remain unchained.

So the saga continues and lessons are learned. It wasn’t the economy or lack of disposable income that brought the Wall Street sweetheart down to a red-headed stepchild. In fact, at one point last year, their affordable form of family and personal entertainment was a godsend for many American’s.  Netflix, although facing much larger fees for movie rights, lost focus and appreciation for what they were and who they served. It is very possible that the cost associated with their aggressive plans to expand in Europe and elsewhere, may need to be put on hold until they can overcome their PR nightmare from their customer base here in the states, to help fund the expansion or they may face another epic failure.

As Hastings himself said. “There is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case.” Let’s hope that’s not the case with the costly expansion as well.

For more on the self implosion of Netflix, see these related articles.

Netflix – The Anatomy of a Self Imploding Company

Netflix – The Outlook is not Good

Signs of the times.-Lou

The jingle of jewelry at a Beverly Hills pawnshop

The chief executive of Beverly Loan Co. says more affluent people than ever need cash this holiday season, although most customers he gives loans to reclaim their expensive jewelry and other items.

By Bob Pool, Los Angeles Times

December 24, 2011

A Beverly Hills real estate broker is waiting for escrow to close on two upscale properties, but that won’t happen until after Christmas.

So what is a powerhouse agent to do to generate some quick spending money for holiday shopping?

This one hocked her diamond Patek Philippe watch at a Beverly Hills pawnshop for cash. She’ll reclaim her $15,000 timepiece when the deals close, said Jordan Tabach-Bank, chief executive of 73-year-old Beverly Loan Co.

“Never before have we seen so many affluent people needing cash,” he said. “People are in a cash crunch. You can’t go to the bank for a loan for holiday shopping.”

So that might explain why a Beverly Hills financial manager pawned his wife’s six-carat diamond engagement ring so he could reward his staff members with Christmas bonuses this year. And why an elderly woman decided to outright sell her $80,000, circa-1920s emerald and diamond bracelet to the pawnshop so she could buy Christmas gifts for her children and grandchildren.

There’s no pawnshop symbol — the signature three balls suspended from a bar — outside Tabach-Bank’s office in a South Santa Monica Boulevard office building. But people find the shop anyway. Most of his clients live or work nearby, he said.

Most of the thousands of pieces of high-end jewelry, artwork and collectibles are locked in a bank vault downstairs from the pawnshop. Ninety percent of the items will be returned to their owners, who pay a state-regulated fee of about 4% a month on the loan amount.

More…

I found these interesting and revealing debt charts on Chris Martensen’s  fine blog.-Lou

To begin with, what the chart is showing by the width of the arrows is how much money is owed to banks of other countries — the wider the arrow, the greater the amount.

Here’s Greece:

Now let’s compare that to Ireland, which was rescued (for now):

And here’s Portugal, which is apparently in the process of being tossed under the bus, at least judging by how its interest rates are still punishingly (and ruinously) high:

See the pattern? Now let’s look at Spain and Italy, both of which have recently enjoyed a nice decline in their yield

Just for kicks, and to complete the story, here are the charts for the UK and the US, which hopefully make clear why these two countries could never be allowed to fail, for surely the whole world would fail to spin on its axis

The other takeaway from these charts is that everybody owes everybody, a point I’ve made before, but not as nicely as these charts manage to do. Kudos to whomever thought these up.

Financial Physician’s Daily RX

10 Money Wasting Habits Of Americans

The Census Bureau recently released a study showing that the average American household income was forty-nine thousand four hundred forty-five dollars last year. When you factor in inflation, that puts us exactly where we were fifteen years ago. Want to hear something even more hope-killing? Our poverty rate last year was over fifteen percent. That’s the highest rate since 1993, and a number that translates into forty-six million people. It’s an understatement to say that Americans do NOT have a lot of excess money in their pockets. That’s why we all owe it to ourselves to keep a tight handle on the cash that we DO have.

Spending wisely and putting a stop to wasting money can help deliver you safely on the other side of hard times. Reckless spending during a recession, whether on a personal, business or governmental level, can only perpetuate or deepen financial problems.

Here are the top ten ways that you – and most Americans – blow money when you don’t need to.

The first item on the list?

Buying New Things

Buying things new when there is no good reason not to buy secondhand. When you “have” to buy something with its original packaging, you can usually bank on paying double what you should. Experts will tell you that automobiles are the biggest offenders here: nobody should buy a new car, they reason, because it inevitably makes better financial sense to buy a solid used car.

Eating out

Eating out is one of the most expensive habits you can have. Consumers spent an average of $28.47 on each restaurant meal in 2010 and averaged 82 restaurant visits during the year — adding up to $2,341, according to Mint.com. Bars and alcohol is another money sucker, with people paying even more per transaction for alcohol than they did for dining out last year. On average, people spent $42.27 each time they went bar-hopping.

Infomercial impulse buys

Only $19.95! Call now and we’ll double your order! Such promises have lured in many unsuspecting consumers to what they thought was a great deal. The infomercial industry brings in about $400 billion a year, according to the Electronic Retailing Association. But it’s no secret that many impulse purchases go unused.

Initial Offers

Americans also waste a lot of money by accepting initial offers when they buy things, says Penzo. Do you pay what you are told at the doctor’s office? At the hotel desk? For your cable bill? Well, most people do – we are not really a haggling society, and we are trained to view the prices of such intangibles as non-negotiable. Big mistake. As Penzo points out, it never hurts to ask – and you might be blown away by your success! Penzo got a twenty-six hundred dollar discount on the cost of having new windows installed in his home and thirty percent off his dining room furniture, just because he ventured to negotiate a bargain.

Brand-name groceries

Food products from popular brands may come in prettier packages, but that doesn’t mean they’re superior to their generic counterparts. While a 9-ounce box of Rice Krispies costs $4.79 at one New York City grocery store, its 12-ounce generic brethren costs only $1.99, with an identical list of ingredients.

Buying Bigger

Buying a bigger home than you or your family needs is another huge way that you could be wasting your hard-earned money. In 2001, Americans consumers spent about twelve percent of their incomes on “residential and transportation energy,” but this year they’re projected to spend almost twenty percent. Living in a big house with unused rooms or bigger rooms than you need is like driving a stretch limo: You’re buying energy for unused space. A bigger house means more furniture, higher maintenance, higher taxes, and more time spent taking care of it. When home prices were rising, there was some logic to leveraging potential profits by buying the biggest. Now, that extra space is nothing but a cash drain. If you are already in a big house, the conditions of the market make it likely that you are stuck with your mistake. If you are still in the buying phase, however, there is no excuse to be stupid.

Gourmet coffee

Spending a few bucks a day at the local coffee bar may seem cheap. But imagine all the money you could save if you simply brewed your own coffee at home. Americans spend an average of $8.43 each time they stop at a coffee shop, according to data compiled by Mint.com. With caffeine fiends filling up an average of 46 times last year, this adds up to a total annual bill of $385.97.