10 tricky financial 'treats'
By Dana Dratch • Bankrate.com

It's never smart to play trick or treat with your finances. Some money moves sound great on paper and work just as well in the real world, but others can really backfire if you don't know what you're doing.

The key to staying out of trouble: Just like Halloween night, know the score before you open the door. Here are some money moves that have the potential to turn into tricks instead of treats.

Top 10 financial 'treats' that can turn tricky:   These may appear to be good money moves, but watch out!

Tricks instead of treats 1. Using default fund investment selection for enrollment in your work retirement plan. 2. Buying with "same as cash" offers. 3. Pay debt at expense of savings. 4. Not seeing downside of investments. 5. Borrowing from yourself. 6. Taking out a home equity loan. 7. Overwithholding. 8. Saving money in your child's name. 9. Opening store credit for one-time discount. 10. Keeping too much cash.

1. Using the default fund investment selection for automatic enrollment in your work retirement plan. It sounds like a short-cut, and that can be very appealing when you have to fill out that mountain of paperwork before starting a new job, says Wayne Bogosian, co-author of "The Complete Idiot's Guide to 401(k) Plans. "

Many times, it's not a smart money move. While employers will often still match the same percentage of savings (usually about 50 cents on the dollar), many times they cap the default selection at a lower percentage of your salary (for instance, 3 percent instead of the normal 6 percent). What that means: Use the default setting and "you're leaving money on the table," says Bogosian.

In addition, the default fund often yields a lower rate of return, he says. "So if you leave your money in there for a long period of time, the value will erode," Bogosian says.

2. Buying merchandise on credit with one of those "same as cash" offers. "It sounds like a great money move, but if you screw it up, it could cost you hundreds," says Clark Grinde, RFC, financial adviser based in Story City, Iowa.

With many same-as-cash offers, if you don't pay by the final due date, you have to pay the balance, plus interest going back to when you first made the purchase, he says. Sometimes the rates can go as high as 29 percent.

Too many things can go wrong. When the due date comes, perhaps you've had a financial emergency and don't have the cash. Or you forget. Or the date falls on a Saturday and you pay it the following Monday. "You're out of luck," says Grinde.

3. Paying off low-interest debt at the expense of your savings. Try to think like a bank, says Bogosian. If you've got extra money and you're deciding between retiring a 4.5 percent loan and putting it into a retirement account that's bringing you 7 percent or more annually, ask yourself: What's the smarter move.

4. Not looking for the potential downside of each investment. Every investment has possible pitfalls, but if you understand the investment and the potential problems, you can determine if the vehicle is right for you. If anyone tells you something is perfect, that should be a red flag.

One point that might help in the analysis: Ask yourself what the money could be earning elsewhere. Thomas Posey, CFP and attorney, president of Posey Capital Management Inc. in Houston, recalls one $100,000 investment vehicle that promised investors either their money back or their money back with interest.

But, the risk wasn't simply the principal, it was also about $27,000 in interest the investor could have made over the same term in a money market mutual fund. "It's not a bad investment, but there is a downside," he says.

5. Borrowing from yourself. Think that loan from your 401(k) sounds like a good idea? You might want to give it a second lthought.

"The true cost of the loan is the interest you didn't earn plus the administrative fees," says Bogosian. And if you calculate that into your APR, the cost of taking even $1,000 from your savings can be steep.

Plus, real life can change your plans. You're already in a bind, or you wouldn't be borrowing from your retirement. So what if something else happens and you can't afford to contribute and make your loan payments? You'll end up losing that money and the compounded interest, too.

The secret of saving for retirement is putting away "a little bit as we go along," says Bogosian. "Start changing that strategy and the consequences could be dire."

6. Taking out a home equity loan. Too many times, consumers think a home equity loan is a good thing because they get a tax deduction on the interest. "That bothers me a lot," says Grinde. In the big picture, they are going into debt and draining off the equity in their homes. Since the home acts as collateral for the loan, if anything happens and they can't pay, they lose the house.