Basic Personal Finance: Know How Your Accounts Work
Sometimes it's the easy stuff that catches us off guard. We spend so much time trying to get the big stuff right, that we forget about the basics. I've had a couple experiences lately that left me feeling a little silly for missing the obvious.
Hassles with the “no hassles” card
This past summer, I signed up for my first personal credit card in nearly a decade. I went over all the legal stuff carefully until I was sure I understood how the account worked. I used the card extensively during our trip to Europe.
When I received the first statement, I was shocked to see that I'd been dinged for an $8.24 finance charge. “How can this be?” I asked the customer service rep who took my call. “This is my first month. I've never carried a balance.” Turns out I'd failed to understand an important part of the card policies: when I withdrew money from ATMs in London and Dublin, I agreed to be charged interest from the moment the transactions occurred.
I paid the bill in full and thought nothing of it. The next month, though, I was again surprised to see a finance charge of $3.26. I was baffled! A finance charge on a zero balance? Turns out that my card never did have a zero balance. Though I had paid my bill in full, I was also making new charges — the balance had never actually been zero. Somehow, through some twisted logic, Capital One didn't see my payment in full as covering my cash advances. Fine.
Rather than continue to be dinged for a dollar or two each month, I simply stopped using the card. I paid off the balance and a little bit extra. I just received the latest statement, and it shows I have a $1.06 balance in my favor. Finally.
Hurry up and wait
Last week I encountered another situation where I failed to understand how one of my accounts worked. I hold my Roth IRA through Sharebuilder. Under normal circumstances, I make automated Tuesday afternoon trades for $4. On Friday, October 19th, however, Washington Mutual (WM) fell sharply. Because WM is a stock I've been keen to buy, I decided I was willing to pay the extra $12.95 to place a market order. (A “market order” is a stock trade that executes almost immediately.)
I logged into my Sharebuilder account, entered the information, and clicked OK. Nothing happened. I didn't have sufficient funds in my account. I knew that my Sharebuilder balance wasn't high enough to cover the trade, but for some reason I was under the impression that Sharebuilder could perform an instantaneous transfer from my primary bank account. (In retrospect, this seems foolish, but in the heat of the moment it made sense.)
The soonest the money could be available was Monday morning. Instead, I decided to simply make a scheduled Tuesday investment. Here's where I made my second mistake. I scheduled a $1000 purchase of WM in my Roth IRA. But when I checked the account Tuesday morning, my planned purchase had vanished! Somehow I had forgotten to save my investment plan before exiting the system on Friday.
Disgruntled, I placed a market order for 35 shares of Washington Mutual. I also vowed to re-familiarize myself with the Sharebuilder interface. It's not pleasant when your own stupidity keeps you from making the money moves you intend.