Overdraft Fees, Unclaimed State Money, and How Balance Transfers Really Work

It is Monday, September 14, and today we are pulling questions from our community mailbag.We've got questions about 0% balance transfers, personal loans, and what changes financially happen when you have a baby.Plus, we've got a few things worth knowing in today's headlines.There's help opening up right now to pay for your winter heating bill.There's also a bank setting that switches off the $35 overdraft fee.And there's money your state may be already beholding in your name.

Becoming financially confident.

Welcome to becoming financially confident, where we are breaking free from money shame one conversation at a time.We're live every Monday through Friday from 11:30am to 12:30pm Eastern.

Yes.And I'm Ralph Estep Jr.I'm a licensed public accountant with 30 years of experience that I'm bringing here every day to our daily show.

And I'm Juliet.I'm just a regular person who's going to ask Ralph a lot of questions because if I have them, too, if I have them, you might have them, too.

Yeah.And we're very, we're two very different people having conversations about the things that affect our money and your money.And we got two house rules here that we make sure we go by.No shame in anybody about money on this show.What happened yesterday happened yesterday.Today's a brand new day and we're going to help equip you to make better decisions.And nobody's going to be judged for what they didn't know.You're never going to be called stupid or, hey, that was a bad decision.We'll walk you through those and tell you how to make better decisions.

Next time if you have any questions because this is a, this is a show that we want to just have lots of conversations and chats and learn about money mindset that everybody has.So if you have something that you want us to talk about something, send it to us@becomingfinanciallyconfident.com no question, no topic is off limits.

Yeah.And wherever you're on your financial journey, know it's a journey.And we're all on that journey with you.And you're not alone in that.And before we get started today, I want to send a special shout out to Mark and Krista Lawley from practical prepping.I was doing my morning working out exercise this morning and I heard him talk about our show and Juliet and I.So thank you, Mark, thank you, Christa for supporting us.We really do appreciate it.

Yes.Heating season is coming and there's a federal Program liheap, LI H E A P that helps people pay the heating bill.The part that people miss is that in most states the application window is opening right now and the money is limited.So when it's gone for the season, then it's just absolutely gone.So, Ralph, who should be paying attention to this and then what should they do this week?

Yeah, this is a big deal.And it's lihep, which I think stands for low Income Heating and Assistance Program of some sort.I don't know exactly what the vernacular is there, but no, everybody should be paying attention to this because, you know, you just think about that first cold month and that bill that's coming your way and you start thinking about, oh, yeah, that's gonna come up here pretty soon.Because right now, especially on the east coast, we're in this situation where it's not as hot as it was and it's not cold enough yet.Yeah.So today, I think right now as we talk, it's 74 here today, which isn't bad.Now, it got to be about 85 here yesterday.It was a little bit warm yesterday.But the reason I wanted to bring this up is, and I didn't even know this, renters qualify for this as well, not just homeowners.So.And the reason that you want to do this right away, it's a first come, first serve basis.So if you apply early, you've got a better chance of getting it.So this week, look up your state's LIHE pay program.You can just search LIHEAP and your state.Now, there's also a federal finder and we'll put this in the show notes, but it's www.liheapch.acf.gov.When you go there, they're going to show you what the income limits are.And if you're close to that, apply now before the season money runs out, because you can qualify even if you rent.And if you've never asked for help before, and this is one of those times where these heating bills are going to be higher the price of fuel.I guessed up my Suburban on Saturday.I like to faint at the G pump.It was $103 to fill my tank in my Suburban.

But how much did it cost per gallon?

So I think the price per gallon.I know you're getting ready to zing me on here because California is a whole different thing.Yeah, I think the price here was $4.50 a gallon.

I want to say out here in LA, it was $5.60.

You know, it's funny, I guess up.

And I was like, I guess.I guess I'm going to chill out on doing anything.

It's interesting because my youngest son, we went out to dinner last night and he says, daddy says, when are the prices going to come down?I'm like, you know what?I don't know the answer to that, but it's a big deal.I mean, and that's a big number and that's hurting a lot of people.So if you think about it, if you heat your house with heating oil, it's going to be the same situation.So you better expect to be paying more.So if you're right on the cusp of a point.And listen, when it comes to these benefits, if you qualify for them, go do it to me.There's no reason not to.That's what the programs are for.

Can you remind us just what that.What that program is titled?

Yeah, it's the liheap.And it's basically an assistance program based on your income.It's run by the states, it's run by the government as well.There's two different things, but again, it's one of those first come, first serve things.So the sooner you apply, the better.I don't know exactly when the windows open up, but pay attention to that.Do a quick.It might take you five minutes.Go take a look at what's available out there and see what you can get to.

Yeah, great.

And I see Dutchess put in here in New Jersey because she's Duchess of New Jersey.Gas There is 449.So her and I are kind of in the same boat.And she says, no comment on California prices.

Y' all lucky ducks out there.But we're.

Yeah, but what's interesting is diesel, Right.I noticed at the gas pump, diesel is well over 5, 5, 6, 5, 70 a gallon.So it's.So what that just means trickle down is when you go to the grocery store, everything costs more.So.And I know if you're watching this or listening to this, you know this is affecting you.And that's why I wanted to bring you this information.It's really important that you can find ways to help save a couple bucks here and there.

Yes.If your debit card does not have enough money behind it, you can tell your bank to decline the purchase instead of letting you overdraft and charging you a fee.Okay, so, Ralph, can you first tell us quickly what is an overdraft and then how can people set that up at their bank?

Sure.This is a Big deal, actually, because the cost of these are really a big number.So what that means is that let's just say you're out at the Walmart, and you go to check out the Walmart, you got a cart full of stuff, and you go to swipe your debit card, and your debit card, you don't actually have enough in your bank account.Well, the way that a lot of these banks work is they'll go ahead and let that charge go through, and they'll overdraw your account, which means they've taken money.You basically are in a negative position.The reason they do that is somewhat sinister, and that's because they're gonna charge you a fee.That fee could be 30 bucks, 35 bucks, 42 bucks.And then if you go do it again and again, these things add up.And if you think about it as a percentage, let's just say it's a real simple example.Let's say you go to McDonald's and you get the extra value meal, and let's just say you spend $10.

Mm.

I'm not sure you can fill up on El McDonald's with $10, but let's just say that you could.You swipe your debit card, or you enter your PIN number to your debit card.You get the transaction, you get your food, you get to walk away, go eat your.Have your fries and a Big Mac or whatever you're having.But then the problem is you look at your bank app, they just charge you $35.

Yeah.

So that $10 lunch just cost you 45 bucks.It's a big deal.Yeah.So here's what you can do.You can actually call your bank and you can say to them, I want to opt out of debit card and ATM overdraft coverage.Now, what that means, be prepared.It means when you're at the register, you know, you're at the McDonald's register and you hand the person your debit card or you swipe it and it goes declined.Might be a little embarrassing.I've actually been there and done that.But it saves you that $35 charge.

Yeah.

Understand that only covers your debit card, your ATM card.If you go write a check, you're out of luck with that one, because those are still going through.The old.If you've got automatic bill payments set up, that's a big problem there too.But this can save you money.

Yes.Definitely save you a lot of grief.Okay, so just for everybody to remember, call your bank, just check on the app or Call your bank and you can see if you have that set up or not so that you don't get overdraft fees.

Yeah, I mean, it's convenient because you don't have the embarrassment of, you know, being in front of somebody and be like, oh, my card's been declined.Really?The moral of the story here is build up some margin, have some extra padding in your account.And I know that's not easy.Listen, I've been there.I remember when my, when the kids were real young, my wife and I, man, we were scrimping and saving, trying to figure out how to do things, and there were times that we overdrafted our account.Listen, I'm the accountant, I get it.But those fees add up and see what happens.Normally, having worked in the credit union industry for a while, it's usually not one.It ends up being three or four.Well, at $35 each, that's well over $100 every time you have one of those downturns.So it's one of those things that you can do.It's one of those painful things, but it'll keep you from having to pay those fees.And I think that's one of the main takeaways from this particular headline today.

Absolutely right.There is a good chance that your state has a website where you can check whether it is holding any money that belongs to you.It could be an old deposit a, or even a paycheck you have never collected.This is the first time I am hearing about this.So, Ralph, how do I check?Because I, I hope I have some missing money somewhere.

So let me back up and explain from the start how this works.Having worked in banking in the state of Delaware as an example, and most states are this way.They have a rule called eschat that's E S C H E A T. And it's a statute that's enacted by the state.And it basically means if you have a bank account, if you don't do anything in that bank account except for draw, like get interest for five years, it's considered stale.And the states now can go in and say to the financial institution, give us that stale money.Give you an example.So when I ran the credit union, every month I had to run a report and I had to go out there and see who are now in credit union.They call them members.So what are the members who haven't touched their account or done anything on their account in five years?Technically, I would have to send the state that money for each of those people.And I would send them that money with a list.Juliet has $200.Ralph has $150, Abigail has $50.Whoever has all these things, you send this to them.And then what happens is the state lands with this money and they create this master list.It's basically an unclaimed property site.If you write a check to somebody, let's say you're a business and you write a check to somebody, and that check doesn't get presented for payment for five years.Same idea.So what?It's kind of a money grab at the state level, to be honest with you.So what happens is they park this money out on the state website somewhere, and they sit for a certain amount of time.And every state is different.And after a certain amount of time, if nobody claims it, hey, bonus for the state.They just swipe that money from the financial.Here's what it was trying to prevent, and I'll give you a real life example of this.It's trying to prevent that situation where someone passes away and no one knows about this account.

Right.

Great example.My grandfather on my mother's side, he passed away at age 72, and my grandmother actually lived to be 90 something.Well, anyway, this one day, I'm looking at the newspaper, and in the state of Delaware, at least, they have a list that used to.And they still publish it in the newspaper.Your name and what.What financial institution we're talking about.So I'm looking at the paper one day and I see my grandfather's name.I'm like, well, this is interesting.So I said to my mom, I said, hey, you gotta call grandma.Right away.It says that his name was Frank.It says, Frank has money, you know, and it didn't even tell me.The institution just said unclaimed money.Frank.

Right.

So it turns out, Juliet, my mother, calls my grandmother.My grandmother calls into the state.There was $3,500 that my grandfather had in an old credit union account that when he passed away, nobody knew about it.It was kind of money that he had scrolled away for a rainy day.So this money had been turned over by the bank to the state.The state did their due diligence and ran this thing.My grandmother was able to submit a copy of her marriage certificate and his death certificate, proving that that was her husband.And she got a bonus of $3,500.She wasn't expecting.

Wait, why did she.Was it like a rule that she had to submit the death certificate?Because it was her doing the claiming and not your grandmother?

Yeah, correct.Yes.Because he's dead.So she had to show lineage and show, hey, how am I connected to this person?So technically it should have been in his quote, estate like we talked about the other day.But this is a big deal and almost every state has these things.There's one out there called missingmoney.com.Just be careful.There are some fraudsters out here.Don't ever pay anybody to recover this money.But go there and look, you basically, you put your name in.If you've ever worked for a company and you got a paycheck and you forgot to pick it up, you know, some people, it usually happens when you move to another state or you have somebody that passed away or something like that.So it's really an interesting thing and a lot of people aren't aware of it, but it's unclaimed property.

Unclaimed property.Quick question here because you did mention potential scams.What are some ways.Because if every state or if most states have their own thing, what are some quick easy tells that you're in the right place and you're potentially not going to get scammed?

Well, I think number one is go to the state website.Every state has a dot us or whatever that is for that state.Go there first, look for unclaimed property.If they want you to pay a fee, that's a red flag.The state is not going to charge you a fee.It's always for free.If anybody says, hey, I can go and look in all 50 states and recover money for you, yeah, they're going to recover money and it's going to come out of your back pocket and they're not going to.And they might find stuff for you.I can't say that they're not going to find stuff for you.I mean, it's possible they'll find stuff, but you should never have to pay for.This is what I'm getting at.

Makes sense.

But it takes five minutes and you know, here's the thing, here's what you can do.Search your friends and relatives too, because you might have a little, a little game of this and gamify this and say, let's see who we can find.

Yeah, I like that.

So if you're in, if you're in Delaware, search my name and if you find anything in my name, reach out to me at the show.I'd be happy to, to know about that.

And also pay.Maybe like end up paying them a little bit of a finder.

Well, you know, we can definitely do some kind of finders fee.I think That's a great idea.We're not charging a fee, but, you know, but think about it.This could be a kind of a cool side hustle, actually, at Juliet, if you think about it with your friends and family.You can go out there and try to find money and, you know, and at least you'll be the good friend if you do it like, hey, I was looking up your name and you know, I found this underneath.It'd be kind of cool, right?

I. I do think so.I do think so.

Very good.You know, so many of us have that envelope on our desk right now, and you know exactly what it is because it's been there for like 11 days or two weeks.And it's.It's not urgent enough to make a special trip to the post office, but it's not optional enough to throw it away either.So it just sits there.Well, stamps.com puts real postage on it from your own printer.No having to go find stamps or go to the grocery store, the post office and buy them.And then you get the carry to actually come to your door and get it.No trip, no standing in line.And the best part of stamps.com, you get 30 days for free.And then after the 30 days, you can get a program for just $14.99 a month.If you're interested in finding out more information about, go to becoming financiallyconfident.com stamps again.That's becomingfinanciallyconfident.com stamps and check out stamps.com.

We are so excited to get into the community mailbag segment.This is actually Ralph and I's favorite segment to do every single week.Today we have three questions, so let's just get right into it.Is that cool, Ralph?

Let's do it.I'm excited about these.We got some great questions from some listeners who are very engaged with the program.

So question number one.This is all about balance transfers.So this listener asks, my interest rates are high, and I keep seeing ads for 0% balance transfer cards.Is a balance transfer the best option?Balance transfer.That's tongue twister, right there.Is a balance transfer the best option or is that just moving the problem around?

You know, they say Freudian slips, right?And I think that it's important that you did that here because not necessarily because these things could actually trip you up.Balance transfers can actually trip you up because.And this is the thing a lot of people don't think about.There are good reasons to do those and there are bad reasons to do those.Now I want to key in on the word.One of the words a listener uses, the word just, they say.Or is that just moving the problem around?It might be, because if you're just going to get a balance transfer and then you're going to go charge that credit card back up again, that's not a good plan.Because now what you've done is you've basically increased your debt.

Right.

Here's what this gets right.No, go ahead.I'm sorry, Go ahead.

Oh, I was going to say, can we just give an example of, like, exactly what a balance transfer is?Is this for, like, a bank?Is it for a credit card?

What is this simple example?Let's say you've got a Chase.And I'm not throwing chase under the bus.You got a Chase Visa card.And what you notice is you get that statement every month and you're having a hard time paying it.And that interest rate is 24%.And you're like, oh, man, every month this rate is just knowing it.You've called them, they won't reduce the rate because remember, I talked about this.Call them and say, will you reduce the rate?And then all of a sudden, bank of America sends you an email or you see something on their website, hey, you can transfer your balances to bank of America and we'll give you 0% interest for the first 18 months.So you're thinking in your head, okay, I'm paying 24% over here at Chase, bank of America saying, hey, come to us and we'll do it for free for 18 months.Couple things you need to know about.Number one, most places charge a balance transfer fee.That is a percentage of the charge.A lot of them are as much as advertised.Correct.Read the fine print.Because basically what you're getting is you're getting a cash advance.And this is the other place they hide it.You're basically getting a cash advance.They're giving you the money, and then you're turning around and paying it off to credit card A.So in our, in our example, let's just say we decide we're done with Chase.

We're going to go to bank of America.

Bank of America says we're going to do a balance transfer for 18 months, but we're going to charge you a 5% fee.Okay?

Okay.

So let's just say you owe Chase $1,000 to make it simple.So they're going to charge you $50 to do that transfer fee.So now you owe $1,050 to bank of America, but you don't owe anything to Chase.

Right?

So let's talk through the math on this.I'm going to use a little bit bigger numbers.Let's talk about what this actually costs.Let's just say you had a $10,000 balance, right?And let's say that balance is at 24%.And we said the other day, 22.9% is the average rate right now, right.Let's say they charge a 5% fee.So if you take that $10,000 and you transfer it, do this balance transfer, they're going to charge you a fee of $500.So now, correct, that's $10,500.So what that means is that you are going to have to factor that into this discussion.

Right?

So as you're working, and this is a math equation, it really is.If you then say, okay, this additional $500 if I'm going to be able to pay this off in 21 months, because that's the whole game here, you will save a ton of interest.But you've got to be clear eyed at the front end.If I do this balance transfer, can I pay this $10,000 off in 21 months so that it's zero plus, don't forget you got to pay the extra $500 in that, right?

So what I'm really hearing is that when you're thinking about balance transfer, it's not just about oh, I can do a balance transfer.What is your plan after that?Right?To make sure you don't accrue more debt.

That's the big deal is that and a couple things on your credit.If you go and pay.Let's go back to our example of Chase.If you pay off the Chase card, that's going to look great on your credit report because now all of a sudden you've got a zero balance and your ability to charge that back up basically shows you know, your utilization is at zero.Utilization is a big deal.Let me talk about what that means.Credit card utilization is one of the biggest factors to your credit score.So let's go back to that example.You have $1,000 Chase credit card, if that's what you owe and your, your available balance is also $1,000.In other words, that's your limit.You're at 100% utilization.That will ding you every single day on your credit.What the credit card or what the credit scoring models look for is a utilization rate less than 30%.

Yes.

So if you have that thousand dollar limit, they want you to be around $300.So this balance transfer will help you on your credit.What a lot of people do, which isn't a great idea, is they turn around and close the card right away.

That's also going to ding your credit.

It can.So now, all of a sudden, now you're going to option two.You're going to card number two, which may be at 100% utilization, because maybe they're only going to approve you for whatever the transfer amount is.

Right.

The other side of that, though, is you don't close the card.Then you're, you know, you get six months down the road and the hot water heater breaks, or the transmission goes on your car and you're like, I, I don't have a good savings account.I haven't put the money aside.Then you start charging it up.So now you've got two things you're chasing after.You just made the problem worse.And unfortunately, what I have seen in practice is most people don't take advantage of the 21 months, as we use in this example, and they just end up owing more.And they need that money to live on.And that's no shame.There's no judgment here.It's just facts.

Yeah.

So what it comes down to is look at the apr, the annual percentage rate on your credit cards on every statement.Multiply that balance between 3 and 5%.That's what the range typically costs for a transfer.Know what that is up front, and then divide your balance by the number of months in that offer.And if you can't pay that number every month, the rest of the math doesn't even apply to you.Don't do it.It's not the wrong answer because this will end up costing you money.

I got a question for you.So like in this example, $10,500 for 21 months, right?And okay, I need a calculator real quick.But I don't know what that monthly payment is going to be.Let's say this person is like, hey, I can actually pay off that $10,500 in 24 months.Just like three months after, you know, more than the 21 months.And then they have a plan.Would you, what would you say to them?Like is, are.Do you think it would be okay for them to take advantage of that 0%?

It depends.And that depends is if the interest accrues anyway.So you got to be careful with these.Some of them, like these buy, buy now, pay later situations, right?That interest accrues, and if you don't have it paid off in that 21 months, even if you go past one day, they accrue all the interest from the first day.So that's a question you need to ask the credit card provider.

Got it?Okay.

If so, following your scenario, if they're really going to give you 21 months for free and then in the 22nd month it starts to accrue interest.Yeah, I would still do it at 24 months.Yes, I think that's a valid thing to do.But if they're all of a sudden, and I've seen this happen, I had a client, it's been a several years ago, they did one of these buy now, pay later situations and they did like a two year thing on some furniture they bought and they forgot about it.They got to the end of two years and they hadn't paid the whole thing off.

I thought buy now, pay later, it kind of goes automatically onto your credit.

Not always.Because you got to understand some of the lenders want you to fail.Because in this particular case, they had borrowed like $10,000 for furniture and as long as they had it paid off in two years, there was no interest.

Right.

But even though they owed a couple hundred dollars, after the two year period, the interest was accrued back to day one.

That's crazy.

This is what happens and this is why so many lenders, so many businesses partner with these lenders, because the lenders love it.Because so many people don't get it done in the 24 months.

I'm kind of shocked that that kind of math calculation is legal because it just feels so predatory.

It feels icky, doesn't it?

It does, it does.

But you know, the argument is always, well, we're doing a service, we're giving them, we give them the option.You got plenty of time to pay this thing off.So if you ever do one of these things, make sure you read the fine print, make sure you understand all of the pieces to the puzzle and make sure you're going to pay it off ahead of time.Like I'll give you a great example.I'm doing this right now.My wife and I bought a sleep number bed and those are not cheap.And when we were in the store, I don't usually use these.The lady, the sales lady says, hey, you know, we offer same as cash for 36 months.I'm like, 36 months?That sounds kind of good.But as soon as I got home, I put on my calendar, I took the total balance divided by 36 and I came up with a number.I said, nope, here's what I'm going to do.I'm going to take that total number.I'm going to divide by 30, and I'm going to pay extra every month so that by the time 30 months come around, it's paid off just in case something happens.But every month I'm looking at the thing.Have they posted my payment?Because I don't want to get hit with that.Because here's the thing.A lot of people don't think about this.Let's use that $10,000 example.The interest rate on this thing is 35%.So 35% on $10,000 is 30$500 a year.Multiply that times three.That $10,000 bill just cost me $20,000.If you don't pay it to the zero balance number.And that's what they're banking on.They want you to fail.Yeah, I know that sounds sinister.I know that sounds icky, but that's how they make money.Now, you can use these to your advantage, but you've got to have the discipline ahead of time.And unfortunately, I agree with you.I think these are predatory.A lot of times they're affecting people who, like in my case, and I don't mean to sound arrogant about this, I could have put it.I could have paid cash.I could have put on another credit card.And for me, it was a decision of, okay, I, I could pay for it with their money, or I could pay for it with my money.I'm going to pay for it with their money.But if you're in a position where I can't afford to buy this right now, you got a different decision to make.And that's why, coming back to this question about credit cards, and I know I've taken us all around the block back to it, understand the underpinnings of what's going on with your finances.If you're doing a balance transfer and you're still leaking money and bleeding all over, this isn't going to help you.If you're doing a balance transfer because you finally figured out how to make this work.You're using a debt snowball, using Avalanche, you figured out you're not spending all your extra money, you're building up margin.This is a great tool.So full circle to answer the question, it depends.If you've got your financials in order, you understand where your money's going, what's coming in, what's going out, and you've got a plan.These are fantastic.Use them every day and twice on Saturday.

Okay, so Duchess has a comment.I also have a comment.And I have a question for you, Ralph.So Duchess of NJ says those chargers are absolutely in the teeny tiny fine print.Yes.So I have a question actually on this is is it possible for somebody to negotiate on the fine print before they do a bank transfer?

You can try, but this is one of those things where a lot of these are these behemoth companies like bank of America and Chase and Fulton bank and all, you know, the big one.So you can try.You might be able to negotiate.But even listen, even if you can negotiate, let's say the going rates 5% and they'll do it for 2% to transfer fee.Hey, it doesn't hurt to ask.

That's true.That's true.

It doesn't.

And then I was going to, I'm.

Going to throw one more thing out there.But understand, because one thing we hadn't talked about that a lot of people get these checks in the mail from their credit card.Understand that those things carry a fee usually as well because it's called a cash advance.It's not simple as well.I'm just going to charge it to my credit card.A lot of people don't read to fine print.And Dutchess is right about this.It's teeny tiny fine print.But understand what you're doing.That's the big takeaway from our show in general.Understand what you're doing, have wisdom and education.

And I want to call out one thing that you said and I'm thinking we could talk about it on another show or another segment.You said you had the option when you did the buy now, pay later.It's either spending their money or spending their money to pay.Spending their money or you're spending your money.Right.And I think that's a very important money mindset that hopefully everybody can get to.If you get to that point where you can be like you got options and then you can make a decision off of that.I think we should, we should do a deep dive and really uncover those like money mindset, rich, rich money mindsets.

I agree with you.And if I'm going to go back to our show from Friday, if you missed it, we had Karen on this show from Marriage, money and Marriage and she had a great story about her daughter.And I'll tell the story again because it was brilliant.If you missed the show, you can go check it out on our feed.But she said her daughter went to the store and she was going to buy this Christmas tree and the ornaments and all that kind of Stuff.And Karen looked at her and said, okay, did you bring your purse?Again, she's having to use her money.The reason I go back to that story is this is your money.A lot of people don't think about that when they're borrowing money.They don't realize that it's their money.Oh, it's the bank's money.No, it's your money.You are going to be responsible for this money at some point.So ask yourself the question, are you.Are you cool spending this money?If you.If you're thinking it's somebody else's money, it's not somebody else's money.It's your money.And here's a dirty little secret.If you take the annual percentage rate on a credit card and you only make the minimum payments, that's how many years.That's how many years it's going to take you to pay off a credit card.So.And it's.It's kind of a roundabout thing, but we talked about 24%.If you only make the minimum payments, you will pay that credit card balance for 24 years.That scares people, and it should, because that is the truth.Credit cards are not your friends.Credit cards are a tool.If you use them wisely, they can make you money.There's no doubt about that.But if you don't use them wisely, they will sink you.You will end up bankrupt, you will end up upside down, and you will end up hurt.So pay attention.I'm not one of these guys.Like Dave Ramsey out there said he'll never use credit cards.I don't agree with that.There is a time and a place for a credit card, but you got to have, like you said, the money mindset of understanding you're using someone else's money, but you have an ability to pay that in a timely fashion.There are times when I've paid credit card interest.I get it.It happens.Big comp, big expense comes up.You had no other options, but you have a plan around that.That's really the key to this whole thing.

I really like that.Let's segue into the second question.Because it's somewhat related to credit card debt.How about that?

Now let's do it.

So the second question our second listener asked, what is the best way to tackle credit card debt?Should I get a personal loan?If not, what are my other options?So I'm assuming, and you can correct me if I'm wrong, is the other options would be like if you found a balance transfer and you're able to do something like that.Personal loan is separate from balance transfers, right?

Yeah.Basically a personal loan is where you'd go to a bank, a traditional bank, and say to them, what I would like to do is I would like to consolidate my debt.The reason you would do that, I'll give you a great example.When I worked in the credit union industry, we would offer personal loans.It wasn't a credit card, it wasn't a revolving charge like you.You borrowed the money and you paid it back over a certain amount of time.And when you paid it back, it was paid in full.You couldn't go charge that back up and all that sort of thing.Here's a great example.Let's say you had a $5,000 credit card and you're paying 24% interest and you go to your credit union.And a credit union says, we're having a deal right now on personal loans.12% On personal loans.And you go, wait, okay, Ralph said apr 24. Credit union says apr 12 12.Much lower.Right, good.This is a good thing.Right.So do I borrow at 12% in 2040 instead of 24?Absolutely, yeah.So I go borrow that money from the credit unit.12%.I gotta pay it back over whatever their period is.

Right.

I close that credit card after the payment is posted and all that sort of thing.Or keep it open, don't use it.You know, put.Here's a funny thing.Somebody told me one time, they take their credit cards, they put it in a glass of water and put that in the freezer.So it's literally frozen.So you can't use it.So you can't.It takes a couple hours for it to thaw.So it's not like one of those things you jump to.The other thing you can do is just flat out, I've done this before.Take the credit card and put it through the shredder.Yes.The account still open.So it's not going to affect your credit score in a negative way.Correct.You're not going to use it, or you pick it and just use it once at a time.So this is the particular idea here, is that's where you go get a personal loan.Unfortunately, what I've seen most of the time though is are you going to actually qualify for a personal loan?Because somebody like me is going to.

Qualifications?Yeah.

Well, yeah, they're going to look at your debt ratio.They're going to look at your unsecured debt ratio.You're going to see, are you making your payments, Are you doing most of the time you're in trouble.You're right.You're at your capacity on your credit cards.You're.You're charging it up, you're paying it down.It's like two steps forward, three steps back, two steps forward.You know, can you cover the minimums on this?

Right.

What generally happens, and this is the truth, what we've seen, what, what generally happens here is people end up getting the personal loan, but then they turn around and charge the credit card up again.So now if I'm the lender, I'm like, I just made things worse.

Right.

Did I save them money in the end?Yeah, a little bit.But again, this comes down to a money mindset of do you want to be in debt?Do you want to continue to pay interest?If you have set it up that, yes, I can pay this off, this $5,000 in 24 months, yeah, it's going to cost me 12% interest rather than 24.Do it.It's a great savings, but don't get yourself into a jam up.

Yeah.So what I'm hearing here is that banks that do personal loans, they are a lot more conservative of who they lend out to, whereas I feel like credit cards.Yes, they'll, they'll, I think a lot of credit card companies will give you a credit card with a, I don't know, smaller limit or something because they're like, I can charge you interest, but for banks and personal loans, they actually want to make that money back.

Well, yeah, and it comes down to the three Cs of borrowing, character, collateral, and capacity.That's really the things we're talking about.So do you have the capacity to pay it back?They're gonna look at your income, look at your debt ratios.Oh, they can afford to pay.Then they're going to look at your character and they're going to say, okay, I look at Julia's credit score, she looks like she pays her bills and all that kind of stuff.The final thing they're going to look at is collateral.Well, if it's a personal loan, there's no collateral.You don't have a car as a, you know, so if you go get a car loan, if you don't pay your car loan, the bank or the lender can take the car.

Right.

It's an unsecured loan.

Got it.

So the interest rates are.I'll give you some numbers right now, According to the Fed, In May of 2026, the average bank personal loan for 24 months is at 11.86%.

Whoa, that's low.

Yeah.Credit cards at 22.15 for that same period.So there is a difference.But understand something.The underwriting for a personal loan is going to be stricter than the credit card.Credit card companies charge 22.5 because their charge off rates are high.People don't pay them.And the thing is, the credit card company can only do so much.It's an unsecured loan.So understand.Now, here's something a lot of people don't think about.One of the other ways you could do this is if you have a house.And this is, according to Bankrate on September 9, 2026, the average home equity line of credit rate ready for this one, 7.26%.So if you've got that 22% credit card and you've got a home, and even if you've got some equity in your home, meaning equity, meaning you owe less than what the house is worth value, you might want to talk to the bank about getting a home equity line of credit, because you can pay it off much faster.But just understand what you're getting into, because then there are also subprime personal loans, like online.You can go look for these places that charge anywhere from 29 to 36%.I saw one the other day when I was looking at this.It says, get out of debt.We'll consolidate your loans.And the problem is the mentality of people are like, oh, yeah, I got six credit cards and I'm paying this and this and this.And they see this advertisement, they're like, oh, this is a consolidation.Oh, this is what I've been hoping for.This is going to work so great.And like Dudgey said, they don't look at the fine print and the rate is 36%, but they got you down to one payment.They're consolidating your loans.Of course they are, because they're making 36%.

Yeah.

And the longer you keep it, the better.And a lot of those have penalty rates.If you miss a payment, it goes to 50% interest, it goes to whatever.That's another thing you gotta be aware of.This happens on credit cards, too.A lot of people don't know this.Most credit cards have a penalty rate, meaning that if you are delinquent on your payment, if you don't make your payments, if you're over your credit limit, they can actually increase your credit card interest rate and put you in what's called a penalty rate.A lot of people don't know that.

So pay attention to That I did not know that.I mean, I knew it could increase, but I didn't know, like, there was a whole, you know, that they do.Look at that.

It's a big deal.So before you apply for anything, here's one thing I'm going to recommend that you do.Call the number on the back of your credit card and ask two questions.First question, can you lower my interest rate?

Right.

It doesn't hurt to ask, right?You call up and you say, hey, my name is Raf.I've been a Chase customer since I was 12 years old, silly.But I'm just saying, you really like my business.You see, I always pay my card.Is there something you can do to cut this interest rate down?The unfortunate truth is sometimes they'll cut the rate if you don't have a balance because they want to keep you using it.Because they're also earning money from the merchants as you use your card.

Right?

Right.If you owe a lot, they're already looking at this thing like, well, this is going to be a charge off at some point.Charge off, meaning you're not going to pay it and they're going to have to get rid of the debt.

Right.

That's question number one.Second question, do you have a hardship program and what are its terms?And a lot of people like, you know, I don't want to admit that I'm having a hardship.Look, face facts.You're having a hardship.It's okay.No shame if they've got a program for that.Even if they lower your rate for a certain amount of time, if they lower your rate for.For six months or whatever that is, that can help you.Another thing you can also ask them to do is if you're up against that situation where your capacity on the card, in other words, your percentage charged up, ask them to increase your.Ask them to increase your available balance, because that can make your credit score move a ton.What happens a lot of times is people get themselves into financial jams, and then they call the credit card company and say, you know what?I don't want to ever get in this problem again.Can you reduce my available limit?Then they start using that card again, and now they're hitting 50, 60, 70%.Yeah, they're using the car wisely, but it's hitting their credit score, it's dinging their credit score because they're always at that percentage being higher than 30%.I know there's a lot of doors open here, but just understand what you're getting into.Understand the ap, the Annual percentage rates.Understand there's any fees.Read the fine print, you know, and make sure you understand.Do I have a plan of how to get to where I need to go instead of just continuing along this path of not getting anywhere?I think that's a big deal.

Yeah.And I see Duchess of NJ said, or prepayment penalties too.This one always fascinated me because I've seen them before, prepayment penalties.And I just don't understand why any financial institution would want to charge on prepayment penalties.

Because they make money based on money being out and lent out.That's the bottom line.And it costs money.Yeah, I know, and it sounds sinister, but it costs money for them to book a loan.They've got to pay somebody to do it.They've got to pay a loan officer, they've got to pay an underwriter.There are fees associated.So I'm not, listen, I'm a capitalist guy.I'm never going to poo poo on the lenders.There are bad lenders, but their lenders are in business to make money.So we got to understand that.

Yeah.So let's like just go back to the question and see if we have exhausted all of the answers.So the question was, what is the best way to tackle credit card debt?Should I get a personal loan?If not, what are my other options?What I hear from you is that first try contacting your credit card first and see what options you have there.And then if those options are not available to you, then consider personal loans.And then also depending what you have available, like if you have a house that you can negotiate with or other kind of assets, you can talk about that.Is there anything else that is missing?

So the thing that I would start off with before you even call the credit card company is understand why you're bleeding, understand what's causing this situation.Because you can call and get the interest rate reduced.You can call and get a hardship.But if you don't know what's triggering this, go look at your spending, go look at what you did.And we're going to talk a lot about this tomorrow.We're going to be talking about the dollar job framework.We're going to get into the beginning of this discovery and understanding where your money's going.So before you do any of these things, go look at your statements, go look at where you're spending money, look at how much interest you're paying every month, look at where your money is going.What subscriptions do you have?What are you paying for?All of those things are at the front end.Once you do that, then you say, okay, what am I going to do here?Am I going to snowball this to get rid of it?Am I going to avalanche this?What is the plan to do this?I'm going to throw two more things out there.I hadn't mentioned maybe you have a 401k at work.You could potentially take a loan against your 401k.Again, there's a lot of nuances to that.You could take a loan against, you pay it back, but you're paying yourself interest at that point.We talked about the home equity line of credit, and I say two more things.Two more things that you could do, and these are not fun.You could do a settlement.Let's say you've gotten to the point where you look at this credit card and like, Ralph, this is going nowhere.

Right?

You could pick up the phone and you could call the credit card company and said, hey, this is Ralph.You.I've got this $5,000 balance with you.There is no way I'm ever going to pay this.I can't afford to do it.I've lost my job, I'm disabled, so on and so forth.It doesn't matter to them.And you say, look, how much would you accept to settle this debt?Most of the time they're going to make you ruin your credit first.They're going to make you not pay it for six months to where it's basically charged off.Charged off.This is just because they look at it like this, Julie.They're like, well, we'll just let you keep paying.

Yeah.

But let's just say you take this approach, I'm going to do a settlement.They might settle it for $1,000 on a $5,000 loan.

Okay?

But here's the part a lot of.

People don't know about.

You've ruined your credit.And wait till you hear this one.They will then send you a 1099 at the end of the year for forgiveness of debt that you have to pay tax on.So let's use that example.So let's say you have a $5,000 credit card balance.I won't pick on any of the banks.Just with the bank.

Yeah.

And you say, I can't afford to pay.And they say, okay, we understand, they don't pay us.So you don't pay them for six months.Your credit score goes ba ding, ba ding, ba ding.But it's get paid.But then at some point, you get a loader, a letter in the Mail.And they say, hey, we're getting ready to charge this off, Meaning they're going to write it off because you're not paying them.

Yeah.

Then you pick up the phone and you call them and you say to them, hey, will you accept the settlement?And they'll say, yep, if you can send us $1,000.Get this in writing, by the way, pay charged up, fine, do it.Here's what happens next, though.They then send a tax form at the end of the year that says, we just wrote off $4,000.You understand my example?Five minus the one is four.That becomes income to you.The IRS sees that as income.Now, here's the thing.Understand?But you're still better off because you're still not paying the 4,000.You're paying a percentage of the 4,000.If you're in a 22% tax bracket and it's going to cost you 800 bucks, but you still save 4,000, so you're still ahead $3,200.

Right?Right, right.

Then you might have to talk about bankruptcy.That's one more thing we don't talk a lot about.Bankruptcy is there to help people who can't get out of the debt they're in?I've known a lot of good people who have filed bankruptcy because they had no other options.It has a stigma attached to it, but it's not as bad as people think.

Okay.I have a question.Even before bankruptcy is like, after the settlement.Right.Is it possible for someone to still get a credit card or.

No, it's hard because they're going to.You know, if you're going to a lender, you are applying for credit, they're going to get your credit and they're going to see this charge off from the credit card.They're going to say, this person doesn't pay their bills.

Right, right, right.

Yeah.I mean, but.But you might get to the point where your credit is so bad.

Yeah.

That bankruptcy is a better option.Because with a bankruptcy, you start over.Yeah.Will it take 24, 36, 48 months to rebuild your credit?Juliet, I know people that have filed personal bankruptcy who within two years had a credit score over 700.Because once they filed bankruptcy, they started doing the right thing.They got a secured credit card, they went and bought a car loan with, put half the money down.There are ways to recover from this.I'm not an attorney, so I can't speak specifically about bankruptcy, but it may be at the point where that is your only option.And I see Dutchess made A comment here.Let me see if I can put it up on the screen here.She says that I've tried and done both loan and calling the credit card company.Yeah, great.I mean, that's a fantastic thing.So this isn't, you know, again, you know, I'll use a funny term, but desperate times call for desperate measures.And sometimes that's where we are.And we just had to admit that that's where we are.So sometimes that's the only choice you have.

I think we talked about we.I think, I feel like we essentially gave a lowdown about all of your options within the credit world and like all the different possibilities that you have.Maybe not into all the details, but it was kind of like a mini masterclass for.

Absolutely.Well, let me ask you this.When is the last time you actually looked at your credit score?This is what you're just talking about, right?Most people avoid it and it's not because they don't care.It's because they're scared of that number.And here's the thing, you've heard me mention this on this show before.The Federal Trade Commission found 1 in 4 people, 1 in 4 have an error on their credit report and 5% are paying more on loans because of a mistake that isn't even theirs.And here's the sad truth.You can't dispute what you don't look at.And that's why we have WalletHub.WalletHub is free.It updates your credit score daily and it tells you what's dragging your number down.If you're interested in finding out more information about WalletHub, go to becomingfinanciallyconfident.com Wallet Again, that's becomingfinanciallyconfident.Com Wallet.It's a great service and it doesn't cost you a dime.

For our final community mailbag of the day, we have a question that says my husband and I are having a baby.What are some things that they need to change with their money mindset now that they have a growing family?

So this is very present for me because my daughter in law and son just gone through this.And I actually reached out to them last week as we were planning the show for today and I said my son's name is Ryan and his wife is Hunter.And I said tell me about what that was like when you decided to start a family.And it was interesting conversation because my daughter in law's decided for her and for her situation, she's not going to work.And I think that's Great.She's going to be there to raise my grandson, which is a fantastic thing.My son is in the military, so he doesn't set the world on fire income wise.

Yeah.

So they had to have a tough decision.They had to have a tough discussion like what do we do?Because they went from two income earners down to one.And Juliet used a word earlier and I think it's the truth.They had to have a mindset.I can't give you a checklist of do this and do this and do this.There are things that you need to do.

Right.

But there are also things.You just have to have a different mindset.You got to realize you're going from two incomes to one.Even if you're not doing that.There are going to be, let's just say you're going to take some time off when you have the baby.You're going to go back to work, you're going to have more costs, you're going to have another mouth to feed, you're going to have surprise cost.I was shocked when my youngest was born how much CO pays added up, going to the doctor.We thought we had great insurance.Except for you.This baby goes to the doctor like every other day.

It felt like I was gonna say.And then we also talked about last week how the cost of putting a child through daycare or something was like 16,017.

Exactly.So again, you have to factor that in because yeah, maybe you still have two incomes but now all of a sudden one of your incomes.I use the word impaired because now you've got that.So that's what we talked about.Do the, the pre tax money for the child care credit if you have a flexible spending account.I want to point out two other things a lot of people don't think about.Yeah, two things that I'm going to say.The clock is starting.You have 30 days from the birth of your child to add them to your employer sponsored health plan.So understand that.Write that down.If you're on the marketplace, in other words, you're getting your insurance in the marketplace.You got 60 days from the birth.Even though they'll retro that back to birth.

Right.

You gotta talk about both.None of these is automatic.Your employer is not gonna say, oh, you had a baby, let me sign that baby up for coverage.It doesn't work that way.

Never.

It's retroactive, but it's not free.They're going to charge you those premiums, so pay attention to that.So these are the things like in addition to you're going to have to have a different mindset.Where's your money going to go?I mean, all these things are surmounted.So I finally, I asked Hunter, I said, so how did you finally make that decision?She said it was easy.Ryan is great with money.That's my son.I'll brag on him a little bit, but he is.

Yeah, yeah.

And now, of course, they've had different conversations now because I've overheard them and he's like, hunter, we are on one income now.And so they've had to make decisions like, you know, do we eat in more often?Do we not go to Target as often?Do we use non name brand stuff?Do we use the generics?Do we, do we curtail our travel?Do These are all discussions that you and your spouse have to have a conversation about because this is going to change your world.It's going to change the world.You're not going to get much sleep.That's the first thing.But you are going to understand.And you may have hospital bills, you may have co pays related to having a baby.All of these things need to be presence of mind.You may need to redo your w forward work, like we said, flexible spending, make sure everybody's insured.And one more thing I threw out there and we don't really have time to talk about is your will and a guardian.This was the hardest decision for my wife and I to make.When we had with the kids real young was like, who do we leave them to if all of a sudden we're not there anymore?

Did you guys, did you and your wife have this conversation early on when your kids were born or was it like, I guess I'm trying to understand how much of a leeway, time leeway do people with new babies usually have.

I think these are the conversations you have before the baby's born.Honestly, I think you need to start thinking about that because you got to approach these people.Let's just say Juliet has a sister and Juliet's sister has a baby.Well, Juliet's sister might say, hey, Juliet, if something ever happens to me, would you raise my child?That's not something you drop on somebody over the weekend.I mean, that's a conversation talk about because you.But Juliet's sister might be a clown too.And like, I don't want to leave.This is the, like my wife and I had this problem.Like we're like, who do we leave these children to?Because we're looking at our parents going, I don't think so.They screwed us up good.We look at the other parents.I don't think so.They screwed them up good too.So this is tough conversations to have, but I think you have to have those as part of your planning for a child and part of the implementation.That sounds really generic, but part of having a child, I think it's a big deal.

Duchess of NJ in the chat.So Abby, our producer wrote current male back what changes financially after having a baby?And Duchess goes, everything changes.We found our best laid plans went out the window once our first daughter arrived.But I think the key thing here is that it is important to have a plan.Right.And then the other thing that I hear from you, Ralph, is like, you know, in it is it is important to have financial conversations not just with you and your partner, but it's also with the community that you want to raise your baby in.Right.I think in one of our pre shows we were talking about how do you have conversations if your grandparents are spoiling your baby and that's not the way that you want to raise your child.Right.It does feel like that is an important conversation with your community that you have and that you're building.

Yeah, absolutely.This is the time.And I love what Dutchess said.Plans, yes, have plans.Don't just willy nilly this thing and say hope everything for the best.Yes, plans don't always work out.But you have no plan.You are planning to fail.It's my, I can hear my oldest son Ryan saying that now, dad, if you don't have a plan, you plan to fail.And it's the truth.But while we're talking about plans, this is interesting.70% Of people don't have a will.We just talked about this and it's not because they decide against having one.They just never got around to it.They didn't realize, oh, the baby's born.We didn't realize we have this change.And if you don't have it, here's what it costs.It costs probate court, it costs a judge who never met your family deciding who gets what.Think about that.If you just had a child and you haven't set these guardianship up, you haven't set that will up, some judge is going to make a determination of who your child goes to.Everybody's guessing.Well, Easy Will and Trust handles it online in one sitting for $149.It's attorney reviewed and it's built for your state's laws.If you're interested in finding out more about Easywill, go to becomingfinanciallyconfident.com EasyWill Again, that's becomingfinanciallyconfident.Com EasyWill and this is one of those things, Juliet.Everybody needs to pay attention because that number.

We are now onto our this week's money move.I'm really excited for this one.It is a whole new week.And just remember, I will be doing this with all of you guys, and so will Ralph.So, Ralph, what is this week's money move?

Yes, and here's this week's money move.And I'm going to cheat because I did this on Saturday, but you open up a separate High Yield Savings account this week.That's what we're asking you to do.And then once you do that, set up one automatic transfer into it.Time to when you actually get paid.Now, why did Ralph do that ahead of time on Saturday?I was working on my tax return.Yes, I'm the accountant.My tax return gets done at the end.So it's like the tax deadline is October 15th, but I'm actually a month ahead.So anyway, I was looking at my different accounts and I realized I have this account.And I was like, you know what?I just have it sitting in a checking account.This would be a great opportunity to set up a High Yield Savings account.So I went online and I set up.Took me five minutes.Here's the best part.It went from paying 0.3% to 4%.

Beautiful.

Same money.So that's what we're asking you to do this week.Go and create a separate High Yield Savings account.One of the things I recommend you do is do it at different banks.So make it hard to go get that money.Put some obstacles, put some friction inside of you.That's piece A, piece B is then set up an automatic transfer to happen every time you get paid.It could be a small amount, it could be a percentage.It's all about building up that buffer because that's what keeps you out.Like we Talked about, the $35 overdraft fee.If you've got a High Yield Savings account, that can help you but understand the difference between the two.So that's your work for this week, if you choose to do it.I think it is a brilliant thing to do.

Yes, amazing.And I will start getting to it.I have five days to do it now.

Absolutely.And you will find it'll be an amazing thing to do.Well, let's talk about tomorrow's show.Tomorrow we're going to start building the dollar job framework.We talked a little bit that last week.So tomorrow we're going to break it down.We're going to talk about that dream, what you're trying to accomplish.We're going to define it, and we're actually going to get into the initial stages of design.So don't forget about tomorrow's show.11:30Am Eastern Time.And as always, you can grab these on YouTube, you can grab them on Rumble, you can get them as a podcast after the fact.And if you know somebody that could benefit from what we're covering here, do me a favor.Share the show with them.Send them to our website, becomingfinanciallyconfident.com because we're giving you information.Hey, think about how cool it is if you could share that information with somebody else at the same time.

Absolutely.And that is it for today's episode of becoming financially confident.

I'm Ralph Estepp Jr. And I'm Juliet.So if you've got a question for the show or you want us to talk about what's going on, go to becomingfinanciallyconfident.com and here's one more charge I'm going to give you.They say don't do a lot of calls to action, but go one more.Leave us a voicemail.Tell us how this show is helping you.Tell us what you're gaining from this show, what you'd like us to talk about on this show.Go to becomingfinanciallyconfident.com voicemail.It is so easy to do.You go right to that link.You press record and then we'll hear you because this show is all about breaking free from money shame.One conversation at a time.And we'd love to have that conversation with you.So go to becoming financially confident.Thank you, everybody.Julia, you have a great day, my friend.

You too.Talk to you guys tomorrow.

We'll see you tomorrow.