Don’t Be a Sucker: Financial Pitfalls to Avoid
Anyone who has been alive long enough has been guilty of making the wrong decision when the right one was glaringly obvious. It’s easy to laugh when someone else does it. But when you are the sucker, it isn’t so easy to let it role off of your back.
You adopt the universal mantra of stupid-mistake-makers everywhere: “I should’ve known better.” Maybe you bought a car that turned out to be a lemon or got talked into renting an apartment that had some obvious drawbacks. Everyone has been there, though not everybody admits it. Smarter suckers learn from these embarrassing mistakes and grow wiser. They are more likely to spot pitfalls in the future.
Usually, people who are on their toes can avoid cons, bad deals and outright rip-offs. Here are some less obvious sucker traps to watch out for.
The commercials are everywhere: make thousands on the foreign exchange market. It is true that money can be made on currency exchange markets. Billions of dollars change hands every day in this 24-hour global free-for-all. Profits can be big because margins are big. You can control $50,000 or even $100,000 with only a couple thousand dollars in a brokerage account. The problem: it doesn’t take that much to lose that couple thousand.
While you can make fractions of a cent per dollar per trade, which can add up to a couple hundred bucks, you can lose everything if the trade goes against you. This is because the broker will close your position if you lose more than your original $1,000 or $2,000. In addition, you have to beat the spread charged by your broker, meaning that you don’t make any profit until your currency of choice is on a real, sustained uptrend. Despite the commercials and books, the forex market is no place for beginners.
The world’s most well-known online marketplace is past its prime. There are so many other ways to sell your products online (though Google Checkout, eBay alternatives like Bonanza, and even Craigslist). Can you call people who still pay eBay’s high fees suckers? I think so, especially when they continue using the site after not selling their product because it was buried on page 38 of its category surrounded by products that were obviously spam or lame attempts at ripping naïve customers off.
The US government has cracked down on online poker, but here are still options for computer savvy US players and those able to make it to the nearest casino for a live game. ESPN’s coverage of the World Series of Poker has created a whole generation of wannabes. I’m certainly not going to argue that good card players can’t make a profit, but I do know for a fact that making your living on the real or virtual felt takes a hell of a lot more work than the glamorous image that is in most people’s minds. For most pros, wealthy or just getting by, poker is life and playing 40-80 hours per week makes it more than a full time job. Any poker rookie who has dreams of winning big is a sucker if he thinks he can do it without making it his life.
OK, so you have heard thousands of stories about how people get into debt by using credit cards irresponsibly. There is nothing else to say about credit card debt. But what if you are one of those people who chooses a card based on its rewards or interest rates? 0% introductory APR deals are used to lure new customers by offering them a year or so of interest-free purchases or balance transfers. The problem with these offers is that they end, usually too quickly. If you can get one, a low interest credit card with a fixed rate is actually preferable to a 0% card because most 0% cards have interest rates that spike once the intro period is over. Suckers end up with a 24% interest rate when their 0% period expires.
On the other hand, using certain credit cards (responsibly, of course) can save you from other sucker traps. You’ve probably been offered a 1 or 2 year warranty at the checkout when you buy electronics or appliances. Retailers are banking that you will get scared and want to protect your new purchase. If you have a credit card with purchase protection (look through the fine print for those keywords), you can cancel out the fear factor and forgo any extended warranties. What’s more, card companies can help you with returns even if the store doesn’t accept a return. Tools like this can keep you from paying for un-needed warranties and can actually be more useful in the long run that a 0% APR card.
Bank of America started a mass exodus of customers from major banks when they instituted a debit card fee earlier this fall. The backlash was so bad that BoA withdrew the fee. But the damage had already been done. Staying with fee-happy major banks is not necessary unless you are a sucker who likes paying fees. With many credit unions and community/local banks opening their doors to new customers, there is no need to sit around waiting for the next fee or checking account balance limit to be announced. If you can get into a credit union, even if you have to spend $100 to buy shares (a membership requirement at some, but not all, unions), this is the time to do it. With the movement towards smaller-scale banking, some credit unions and community banks are relaxing their requirements, making it easier than ever to open an account.
At least you can avoid these finance-related pitfalls and save your embarrassing mistakes for something else: like dating the wrong girl or saying something embarrassing in front of your family or friends.
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About Josh Lew Josh Lew lives in the Midwestern US when he is not traveling. He is a columnist for Gadling and has contributed to Hackwriters and Skive Magazine.