The Blog Of TL Wall Accounting

Archive for April, 2015

How To Determine Whether Something Is A Scam

Last year we wrote a post titled 4 Scams Looking To Take Your Money. At that time, there were some specific types of scams going around that we wanted to alert people to.

This time around, we thought we’d indicate some ways that you might be able to figure out whether something is a scam or not.

Thousands of people fall for scams every year. Many of them get away relatively unscathed, but some people have been scammed for hundreds of thousands of dollars. If you really get scammed, even a lawyer might not be able to get you out of trouble. That’s because sometimes these people are elusive and hard to find. Also, sometimes it’s the person’s fault for not reading a contract before signing it.

We’re going to help you out. These things should seem like common sense but, sometimes, they’re not.

1. If you get a check in the mail and it’s not from anyone you know, it’s not a real check. Many times it’s an advertisement for something; just rip it up and don’t look back because they’re trying to trick you.

2. If you get an offer in the mail for a drastically large loan or line of credit and it’s not your bank, rip it up and immediately throw it away. No one ever gets that high loan and, if you check the fine print, you’ll see the interest rates can be pretty high. It’s not worth your time to even look at them.

3. We’re mentioning this one because, even though it’s the oldest type of scam on the internet, people are still falling for it.

If you get email from someone who doesn’t mention you by name and tells you that a relative has left you money but doesn’t tell you who the relative is, it’s a scam. If you receive email telling you that you’ve won a lottery, it’s a scam. Actually, any email you get from someone you don’t know is a scam; just ignore it.

4. While we’re at it you need to be wary of email you get from entities you know. There are a lot of emails sent out from banks and sometimes it looks like your bank is sending you something. Almost no banks are ever going to offer you potential loans or credit cards via email, though it can happen here and there.

A way to find out if it’s a scam or not is to copy the link the site gives you and paste it into your browser without having it go to the site. The reason you do this is to see if the initial link is actually going to your website or to a different site. For instance, if you do online banking at Chase, the link might begin If it’s a scam email from Chase it’ll begin with; they’ll leave “chase” in there because many people won’t pick up on it but now you know.

These are just a few more things to help you avoid being cheated out of your money. We hope they’re helpful.

Lower Interest Rates Aren’t Always The Best Option

If you’ve ever gone for a credit card you know that the biggest thing you’re looking at is the interest rate. Many cards will offer you an introductory period of free credit if you move a balance over to their card. If you pay it off then you owe only what you got, but once you reach a certain period now you start having interest added to it.

Still, this seems like a good deal, but you’re still shopping for the lowest interest rate card you can. At least with credit cards this is a smart move.

However, this yearn for the lowest interest rate isn’t the same when you look at other things. For instance, when you go for a car loan or a home loan, depending on your circumstances, it might be more prudent to go for the higher interest rate sometimes.

Does that seem unbelievable? Let’s take a look at an example.

Say you go to a car dealership to buy a new car. Before you went there you went to your bank and they said they’d give you a rate of 3.5%. That sounds pretty low so now you’re at the dealership, trying to see what they have to offer you.

They go back, crunch some numbers, and come back at you with a counter offer. You look at it and say “Hey, this interest rate is higher than the one the bank is giving me. This means their deal is better.”

The car person says “Yes, our rate is 4.25%, but we’re willing to give you an instant rebate of $2,500 up front and set the payments up over the course of 5 years. With our deal, you’ll pay less than you will if you take the bank’s deal.”

Does this sound kosher?

Actually, it is. The reason it ends up working better is because of the way interest is calculated. For most car loans, it’s calculated daily, but it’s based on the initial amount you’re starting out with.

Since the numbers will look convoluted if we actually show a daily interest calculation, let’s look at this a different way.

Even though interest is calculated daily, the percentage is actually an annual, or yearly, percentage rate. Thus, at the end of the year the rates have to equal either 3.5% or 4.25%. However, each month, after you make a payment, the amount you actually owe keeps getting lower, no matter what the interest rate is.

What we’re going to do is divide each percentage by 12. If we take these two numbers, 3.5% becomes .08625 and 4.25% becomes .086875. Those are pretty close, aren’t they?

Next, we look at the two deals we have. From your bank, the .08625 goes against $10,000, whereas the .08675 goes against $7,500. This means that on the first amount, without a payment, the amount of interest accrued is about $8.62; on the second amount, the interest accrual was $8.69. It’s higher but negligible.

At that rate is would take decades before there would be some kind of balance equality. However, your car loan is only going for 5 years in this instance; even if it was over 6 years, you end up with a lower payment and less to pay because more was put down on the car ahead of time via the rebate.

It’s for this reason that, when you’re looking to buy a new house, everyone recommends you find a way to put down as much money up front as you can. It lowers the amount you’ll have to pay monthly, the amount you’ll end up paying in full, and gives you the potential to pay it off quicker.

If you get an offer where the seller is looking to give you something like $10,000 off the cost of the house but the interest rate is slightly higher, it could be the better deal overall, even with a 30-year mortgage.

Of course, you’ll always want someone representing your interest to put the numbers together to make sure you’re protected from higher payments. But don’t immediately dismiss a higher interest rate if someone is willing to pony up a bit of money on your behalf.