smart spending

How to be your own consumer protection agency

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Highlights
  • Do you pay off your cards every month or do you carry a balance?
  • "Most people have no idea why they have things in their portfolio."
  • Debt collectors will sometimes say whatever it takes to get paid.

America has no shortage of regulators in place, yet consumers are bamboozled every day. Ever wonder how you could be your own consumer protection agency?

Consumers themselves are the final lines of defense against bad investment products and shifty professionals, and that means employing some critical thinking and common sense to protect your finances.

Here are some tips for evaluating these common financial areas:

Credit cards

If you're shopping for a credit card, the options can seem endless.

In order to guarantee that you end up with a deal instead of a dud, Bill Hardekopf, CEO of Lowcards.com, recommends that consumers:

  • Determine what kind of credit card user you are. Do you pay off your cards every month or do you carry a balance?
  • Look at the meat of the offer in the terms and conditions.
  • Select three or four cards, look at the terms and conditions, rates, fees and rewards, and compare the cards.

Mortgages

Houses are the biggest investments most consumers will ever make; consequently home loans can be expensive and complicated. Shopping around for a mortgage lender or broker you can trust is the most vital step in finding the right loan for you.

Tara-Nicholle Nelson, consumer ambassador and educator for Trulia.com, recommends that homebuyers get a referral from their Realtor.

To find a competent lender or broker, Louis Spagnuolo, vice president of mortgage banking with WCS Lending in Boca Raton, Fla., recommends that consumers:

  • Ask how long they have been in the business. Experience is very important because there have been so many changes.
  • Make sure they are licensed in the state where you are looking to buy a home.

When it comes to shopping for a mortgage, Nelson advises consumers to get a good faith estimate from each lender.

"And read it!" she says. "You have to compare origination charges, not just interest rates and payments."

Investments

Despite layers of regulation, consumers get swindled every day when it comes to their investments. There are a couple of reasons for that:
  • Products are complicated with even more complex fee structures. Use this Bankrate calculator to see how fees can eat into investments.
  • The people selling the overly complicated products: Often there is a conflict of interest between commissioned sales representatives and investors.

 

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"What I've also found is that (consumers) are just not aware of all the fees. While the expense ratio might be 150 basis points, there could be an equal amount of other fees, including trading," says Robert Fuest, chief operating officer and head of investment research at Landor & Fuest Capital Managers in New York.

 

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