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21 Reasons Dave Ramsey Sucks at Giving Credit Score Advice

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Dave Ramsey credit cards

There are huge disadvantages of having no credit score. I actually know this better than most. After living over ten years in Japan, I came back to the US naively assuming that the credit history I had built over there would transfer back to the US. That wasn’t the case and I found myself having to deal with numerous situations without a credit score. From my personal experience of having to deal with all the negatives that come with having no credit score, as well as knowing a number of others who experienced a similar situation to me when they returned, I can say with conviction that Dave Ramsey gives horrible credit score advice.

For those unfamiliar, Dave Ramsey refers to a credit score as the “I-Love-Debt Score” and makes the statement that “the only way to have a good credit score is to go into debt, stay in debt, and continually pay your accounts perfectly — without adding too much debt or paying too much off. In other words, stay in debt for as long as you can.” This is patently false as I currently have no debt whatsoever and yet have a good credit score. Others do too.

He then advises that since you are working to become debt free, once you reach that goal you “…don’t need a credit score, anyway, since you don’t plan on using credit!” While this might sound nice, I can attest that even when you are debt free, a good credit score comes in extremely handy. I would even argue that having one is essential if you want to truly be financially savvy since it can save you a lot of money. If you care about getting the most out of your money, a credit score, whether we like it or not, is important to have.

While you may have heard some of the below arguments before regarding why a credit score can be important, my guess is that some of my arguments you may never have considered before. Below are 21 reasons that it’s important to keep a good credit score even if you’re debt free (and why Dave Ramsey sucks at giving credit score advice).

Wasted Time

This one is huge and one that I rarely see mentioned. I can’t over emphasize this point enough, and I would argue for this reason alone, you want to keep a good credit score. Not having one will mean that you will have to spend a lot more time when it comes to numerous financial situations, including any of the ones mentioned below. If you believe that your time is worth something as I do, wasted time can be a huge cost. Even when you are able to get what you want, you usually have to spend a lot more time explaining why you don’t have a credit score even though you don’t have any debt. I had to spend countless extra hours, many being extremely frustrating, sorting out my financial situation which should have been straight forward and simple all because I had no credit history.

Difficulties Even When Successful

Another problem with having no credit score is that even when you successfully get what you want, it’s much more difficult to get it than if you had a good credit score. Not having a credit score often means going through several layers of management until you can reach someone who will approve what you need. The fact is that for most entry-level employees, if anything isn’t exactly correct, they can’t approve it. That means that people who don’t have credit scores have to work much harder to get things than others that have a good credit score can get without any hassles.

Poor Customer Service

This is another aspect of not having a credit score that is often not mentioned, but the reality is that if you have no credit score, you don’t get treated nearly as well in many situations as you do when you have a good credit. When institutions look up my credit these days, they always seem to come back with a smile and an attitude that they are willing to do anything they can to help me. When I had no credit score, they always came back with concerned looks and a demeanor telling me that it was going to be difficult to help me even if they did the best that they could. The fact is, having a good score means that you will get better treatment from anyone who looks it up.

Lack of Financial Flexibility

Having a good credit score gives you a lot of financial flexibility that isn’t available for those with no credit score. When you have a good credit score, there are many financial institutions that want to work with you. That’s not the case when you have no credit score. Having a quality credit score means that you can get a much better deal when it come to virtually any financial transaction than you could get with no credit score at all. When the unexpected happens and you need to get funds for something that you had never anticipated, you simply have more flexibility in getting them than you do without a score to your name. This include the flexibility of financially helping out others if you choose to do so.

Increase Large Transaction Risks

One of the things that I immediately realized when I was still trying to get a credit card (which I was having trouble doing because I didn’t have a credit score) was the additional risk that came when making large purchases. I have always put the purchase of my airline tickets on credit cards because years ago I had a ticket on an airline that suddenly went bankrupt. Since I had made the purchase with a credit card, the credit card company refunded the amount back to me since I never received the service I had paid for. Had I not paid with a credit card in that instance, I would have simply lost the money. I had to make a number of large purchases upon arriving back in the US and although I was able to make them in other ways, I felt a bit uneasy knowing that if things went wrong, I really had no protection simply due to the lack of a credit rating.

Emergency Cash

Having lived through the Great Hanshin Earthquake (along with a number of smaller natural disasters), I know the importance of having access to emergency funds. When these disasters happen, it’s often impossible to get access to money that you have in your bank account (in the case of the Hanshin Earthquake, it was over 2 weeks before I had access to those funds). It helps to have cash in the days immediately after the disaster when many of the electronic transaction systems are down, but it also helps to have a credit card. During that time, my credit card was a lifesaver in securing a hotel room and other needs when I needed to spend thousands of dollars to get out of the city and find other lodging, but still didn’t have access to my bank accounts. Living in an area of the US where I knew a similar disaster could take place, I found that I needed to keep a lot more cash on hand in case of an emergency. I ended up losing interest on the cash I took out of the bank account plus there was the risk that it might get stolen, or in an emergency I wouldn’t be able to get to where I kept it in my house. Even with a large amount of cash on hand, I still felt my financial preparation was far from adequate had a true emergency happened. That is not the case now that I have good credit and credit cards.

Debit Cards Have Drawbacks

It’s often argued that there really is no need to have credit cards if you have a debit card, but in my experience, there are some definite drawbacks to this argument. I had a friend who had his debit card stolen and his account compromised. While he eventually got all the money that was taken out of his account back, his account ended up being frozen for a few weeks while an investigation took place. During this time, he had no access to any of his banking funds. As mentioned above, in an emergency you might need to access more funds than are in your debit card account with no way to transfer additional funds to it. It also doesn’t cover you with large transactions like an airline ticket refund if an airline goes bankrupt.

Difficulty Getting Security Clearance

One of my friends who came back after living overseas for a number of years landed a great job, but the job required security clearance. The lack of a credit score turned out to be a major stumbling block for him to get his clearance. He eventually did, but it took a lot of time and effort since his lack of one sent up a red flag, and even ended up meaning much more scrutiny in other areas of his life as well to get the clearance. Again, if you consider time and aggravation as a cost, then there is a definite one when you don’t have a score to your name.

Difficulty Getting an Apartment

I remember talking with one apartment manager when returning to the US that told me as soon as I mentioned that I didn’t have a credit score that I wouldn’t get approved for an apartment in his complex. He explained that there was high demand for the apartments so it simply wasn’t worth the risk to management even though I had a good explanation as to why I didn’t have one. While I did eventually find an apartment, the lack of a score caused some type of issue at each complex I looked at, making the entire process much more difficult than it ever should have been, and definitely much more so than if mine had been good.

The Possibility of Divorce

Nobody ever thinks they are going to get divorced when they first get married, but the truth of the matter is a high percentage of couples do. If you go into a divorce without a credit score, this can cause a number of issue both during and after. When people believe that they will never have to take out another loan when they become debt free, they are probably at a point where they never think they will get divorced either. The problem with divorce is that it can be an extremely expensive process and can quickly wipe out any savings and emergency funds that you might have had. Once divorced, financial circumstances can greatly change to where loans you thought you would once never need, might be needed to bridge gaps until you can create a new budget for your new reality. Hiring lawyers, finding a new job, getting a new place to live all become more difficult without a score in an already stressful time.

Difficulty Getting Loan Approval

If there is ever a situation when you need a loan, not having a credit score will make it many times more difficult to secure it than if you have a good credit. The thing is, even if you anticipate never needing to get another loan again, circumstances change and life could place a wrench into your best laid plans. Even if you are debt free at a moment and don’t anticipate ever needing a loan, that can quickly change if you unexpectedly lose a job and are unable to find a new one as quickly as you hoped. Life throws curve balls from time to time and if you are thrown one without a good credit to your name, recovering from it can be a lot more difficult than if you had it.

A More Expensive Mortgage

If you need to take out a mortgage, you will end up paying much more if you don’t have a credit score. The problem is that no credit score is equivalent to a bad credit score to most lending institutions. If they have no records that you can pay off your debts, they assume the worst and assume that you can’t. This means no score is the same as having a terrible score in the eyes of lending institutions. While you still may be able to secure a loan (and you may not), you will end up having to pay a larger interest rate to do it which can mean paying tens of thousands of dollars more over the lifetime of the loan.

Difficulty Securing Utility Services

When I needed to get utilities in my name after returning from Japan, I couldn’t just call and have them turned on like I expected. Several required me to pay a deposit in order to put the service in my name since I had no credit history of paying these bills in the past. It makes for an extra step in the process, it takes more time to get the service and you lose the interest that you could have earned from the money that you must give as a deposit.

Trouble Getting a Cell Phone Contract

Upon my return to the US, I was actually denied the first cell phone contract I tried to get due to no credit history. I was eventually able to secure one, but I ended up having to pay a deposit to do so much like I had to when it came to the utilities. While the deposit wasn’t a huge amount, I did lose the interest that I could have been earning on it. Far more frustrating was the extra time and headaches (and the costs associated with them) caused by not having a score that would have never come into play if I had a good one.

Possible Negative Effect on Job Opportunities

One thing that many people fail to realize is that as many as 70% of companies will check the credit history of a candidate for a job before they hire. With so many qualified people in the job market these days, it’s often the little things that end up determining who gets hired. A lack of a credit score compared with someone with the same qualifications that has a stellar one could be the difference in who gets the job. Similar small details can make the difference on promotions within certain corporations, especially for sensitive positions. If you lose a job or are passed over a promotion, that can mean thousands of dollars in lost income.

Pay More for a Car

There have been a number of surveys over the years that show that some car dealers have a tiered system on how much they mark-up a car depending on the credit score of the individual buying the car. Those who are deemed the least credit worthy, which would include those with no credit score, can be charged as much as 3.5% more for a car than those with top scores. This has nothing to do with the interest rate on a car loan, but the actual amount that is charged for the car. That means that even if you don’t need a car loan, you can potentially end up paying more for a car when you don’t have a score.

Another way that lack of a score can cost you more, as pointed out by Anni in the comments, is that you can often get dealer discounts by financing a car worth thousands of dollars, then pay off the car loan soon after. I know that this situation arises because I did it once for one of my car purchases. I had the cash to purchase the car in full, but there was a deal to save $2000 through the credit section of the car maker if I agreed to finance the car, so it made good financial sense to do so. I took the $2000 discount and the loan, but as soon as the $2000 credit came through, I paid off the entire loan. The key here is that to take advantage of these car maker financing discounts, you have to qualify for them, and if you don’t have a credit score, you’re not likely to do so.

A More Expensive Car Loan

If you do need to take out a car loan, you will end up paying thousands of dollars more in interest charges with no score than you would with a good one. Interest rates for those with good credit are usually in the low single digits, while those without will pay double-digit interest rates on the exact same loan. While you may not think you will ever need to take out a loan again, something that you never expected like a divorce or a lost job could result in you needing to get one.

More Expensive Insurance

The insurance industry is in the business of assessing risk. They look at a wide variety of things to determine the risks of the individuals and families that use their services. One of the things that they look at is your credit score. Having one that is poor makes you a higher risk than an individual who has one that is high. The problem is that having no score doesn’t allow them to determine whether you are a higher or lower risk, so they will always make the assumption that you are a higher risk when the risk is unknown. What that all means is that if you have no score, you will end up paying more for life insurance, car insurance and homeowners insurance than you would if you hade a good score.

Difficulty Getting a Credit Card

One of the things that Dave Ramsey says is that you don’t want credit cards, but this is only true if you can’t control yourself. The truth is that credit cards are only a disadvantage if you don’t pay them off fully each month. Once you are out of debt and have built an emergency fund so that there is no need to put expenses on your credit card that you can’t pay off in full each month, credit cards are actually a financially savvy tool to use. They give you insurance in many transactions you may not have otherwise, they may provide additional insurance for you with certain purchases such as airline tickets and car rentals, and they can even pay you cash back for purchases you would otherwise make. The problem is that if you ever find yourself in a situation where you need a credit card, but you don’t have a score, it can be extremely difficult to get one. Even when you do, you can expect to have a very low credit limit that will take years to grow to where it can be useful for larger purchases. I know because the only credit card I could qualify for when I returned was with a bank that I had been with for over 20 years, and they still would only give me one with a $500 limit to start.

Difficulty Getting School Loans

If you ever decide to go back to school, having no score can make it difficult to secure loans. Again, many assume that they will never need to go to school again, but further education might be the only way to secure a job if you happened to lose the one you have. If you can’t qualify for student loans from your school or federally funded loans to pay for your education, you will have to turn to private loans which have interest rates much higher and can end up costing you thousands of dollar more for the same education.

Difficulty Getting Business Loans

If at any time you decide that you would like to start a business, not having a score can hurt you financially in trying to secure a loan for the business. When banks give business loans to individuals, they want to see that they have a track record of paying out the other loans that they have taken out. With no score to your name, that record doesn’t exist and you become a greater risk to give a business loan to. With no score, you might not be able to qualify for one at all without putting up a large amount of collateral, and even if you do, you are likely to pay a higher interest rate on the loan than if you had good credit. You will definitely have a much more difficult time securing the loan which can mean many more hours (if not days) trying to get the money you need.

Dave Ramsey gives lousy credit score advice because he fails to take into account that life can get messy in ways that we never anticipate. In addition, he doesn’t take into account the costs associated with the extra time and aggravations that can come with not having a score. If it were true that you needed to always remain in debt in order to have a good credit score as he states, I might give him some slack, but the fact is that this statement is patently false, I know because I’m currently debt free with a good score. While I’m certainly not saying that all the advice that he gives is bad, the advice he gives regarding credit scores sucks.

Finally, if you don’t like my analysis and want to see what Dave Ramsey has to say, think about getting a copy of his book The Total Money Makeover. The book is an combination of educational handbook, inspirational coaching guide and self study manual. It has sold something like 5 million copies – so its a good example of his best work.

How to Talk to a Live Person at Sallie Mae

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While most people rarely speak a single word with their student loan servicer, there are situations that call for a conversation — namely when you’re struggling to make your payments, although even then people don’t think of talking to their lender until it’s too late, if at all.

Perhaps Sallie Mae or a company associated with it handles your student loans. It currently has about $17.3 billion in outstanding loans — just a portion of the $1.48 trillion in overall student loan debt.

Sallie Mae offer other financial products including money market accounts and certificates of deposit (CDs).

How to Talk to a Live Person at Sallie Mae

If you need help with any of the aforementioned types of financial products, you may need to speak to someone at the company, and your best bet is typically a phone call to Sallie Mae.

To get through to an actual human at the other end of the phone, here’s how to navigate the automated menu

For student loans, dial 800-472-5543 (800-4-SALLIE) to begin the call. When the prompt asks you to press one for new applications or press two (or hold on the line) for all other calls, don’t press anything.

Keep Holding

Next, your call is routed through the system as though you are an existing customer. You’ll then be asked to enter your Social Security number or customer identification number. Again, don’t press anything.

You’ll hear that prompt twice. When a new set of prompts plays, asking you to “select from the following options,” just stay on the line and don’t select any options. Again, this will play twice.

After waiting through the prompts, your call is routed to an agent, as long as it is during business hours. Sallie Mae representatives are available between 8:00 a.m. and 9:00 p.m. Eastern, Monday through Thursday, 8:00 am to 8:00 p.m. on Friday, and 9:00 a.m. to 6:00 p.m. on Saturdays.

Other Types of Accounts

If you need to speak with a live person at Sallie Mae for something other than a student loan — including CDs, high yield savings, or money market accounts — dial 877-346-2756

Once the automated system starts, listen to the first set of options and don’t press anything. When the second set of prompts begin, you’ll get the opportunity to press zero to speak with customer care. Select zero and your call goes to an agent.

For Upromise GoalSaver accounts, dial 877-978-1710 and follow the same process of not selecting any options until you can route to a representative. For Upromise by Sallie Mae, call 888-279-2828 between 9:00 a.m. and 9:00 p.m. to reach a person.

It’s Actually Easy

Ultimately, getting a chance to talk to a live person at Sallie Mae is fairly easy. While you may need to ignore prompts multiple times, you’ll usually be routed to a queue for a representative in about one minute.

However, once you reach that point, wait times can vary. You may end up holding for 20 minutes or more if they are particularly busy, so make sure you have time to wait for a representative.

Additionally, it is wise to have information about your account available. For example, your Social Security number or customer ID is a requirement to look up your details in the system.

Getting those details ready in advance can make your call go smoothly, so take a moment to prepare before picking up the phone.

Readers, what has been your experience with trying to get a hold of a live person at Sallie Mae? While we’re at it, tell us about your experiences with phone-based customer service at other companies: Which ones have been the best or the worst?

Read More

Looking for more great articles? Here are a few to get you started.

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

Detailed American Express Savings Account Review

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personal savings from american express

That’s right – American Express offers more than just credit cards. They also offer a way to save money – by way of an actual savings account. This was news to me as well until recently.

I want to start this article by saying that this is an article for personal finance perfectionists. Why? Because the interest rate environment is still very poor for us savers. Savings account interest rates don’t vary much. One bank may offer .5% and another .7%. Trying to get the very best rate possible won’t make a difference in your quality of life. However, if you are a savings perfectionist, keep reading. It’s still smart to maximize your dollar. After all, once you get into a high-yield savings account, the income you generating is passive. Passive income is worth the effort to get rolling.

We’ll review this American Express savings account to see what it has to offer. Is it worth leaving the comfort and convenience of your current bank? Let’s see.

Let’s get the deal breakers out of the way…

First off, the account is backed by the FDIC. Should AmEx suddenly file for bankruptcy, you can still get to your money. Second, you do not need an American Express credit card to open a savings account. That’s a relief for those of us who don’t want to apply for yet another credit card. Third, it is an online only bank account. This means you cannot deposit physical money into this account – no way, no how. This means you’ll still need another account for depositing paper checks and cash. Better yet, go electronic. Fourth, the current interest rate (the day this post is being published) on this account is .90% APY. That’s a phenomenal rate by today’s standards. This rate is about competitive as it gets although Ally does offer a slightly better rate at .99% APY.

If you’re anything like me, those were your 4 biggest questions answered. But there are a still a few more issues to cover.

Customer Service

You can reach customer service 24/7 via phone or web. You can also setup alerts so you automatically get notified when something with your account changes – no need to call. Customer service quality appears to be just fine based on the anecdotal evidence to be found on the web. Even if it’s not – you likely won’t need to ever talk with a human being anyway. Remember, this is no brick-and-mortar bank. Online banks save money by not needing to hire staff to field calls. So if you do ever call and wait, understand that this minor inconvenience is how you get such a phenomenal interest rate.

Hidden Fees and Other Annoyances

There are NO fees to open or maintain an account. You only need $1 to open and there’s no minimum balance required. Most high-yield savings accounts require you to keep a minimum amount. This is a hassle but it’s how those other banks make money off your money – they lend it out. It doesn’t do them much good to only lend out $1. However, American Express makes its money off credit cards. They can offer this great rate because of that, apparently. It’s kind of like how the state of Florida doesn’t have state income tax because of the revenue Disney World generates.

Application Process

Applying for this high-yield savings account is as simple as any other.

american express high yield savings account

There are no gotcha’s. I personally haven’t signed up for this account (I use Ally for savings) but I know someone who has gone through the process. He said it’s easy and straightforward. He said it look less than 5 minutes.

Final Thoughts about the American Express High-Yield Savings Account

This savings account is very good. I’ve read about this account for quite a long time and I didn’t uncover anything unsettling. The two competitors in this high-yield savings account world are Ally Bank and American Express. Choose which one works for you. Ally weighs in at a slightly heftier .99% APY. American Express weighs in at .90% APY. Expect a post about the Ally savings account. It’ll get published shortly.

Click here to read 70 customer reviews for the American Express high-yield savings account. Let us know what you decide!

 

What is the Costco Return Policy?

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Besides being able to buy all of your favorite foods and household items in bulk, Costco is known for another amazing thing that impresses its customers — it has an unbeatable return policy. Although most retail stores offer some type of return policy, very few are able to compare to the one offered by Costco.

What’s Costco’s return policy?

Costco’s return policy allows customers to return all items purchased at the warehouse (except certain electronics) at any time. This has been Costco’s policy for quite some time, and most customers have been pleased.

What’s Costco’s return policy on electronics?

Costco updated its return policy in 2007 to be a bit more specific on certain items to curb abuse. In reference to electronic items, Costco now says these may only be returned within ninety days from the date of purchase. All other non-electronic items, however, are still under the umbrella of Costco’s generous allowance for returns.

What’s Costco’s return policy without a receipt?

To return an item, it doesn’t matter if you no longer have the receipt as long as you have the same membership you had when you made the purchase. This allows Costco customer service to look up under your membership purchase history to confirm you purchased the item you’re returning. If it is there, you can return it even without the receipt. If you shop at Costco without a membership and lose your receipt, you’re out of luck.

What’s Costco’s return policy for online purchases?

Costco offers full refunds on all purchases, either made online or in a store location. You can receive the refund or exchange simply by visiting one of Costco’s warehouse locations. Even if you are not able to physically visit a store for a return, there is no need to worry. Costco has a customer service phone number which you can call and make arrangements for the return to be scheduled via United Parcel Service (UPS). All you need to do is take your merchandise, in its original packing material, to the closest UPS shipment center.

Is the Costco Return Policy Unlimited?

Besides the limit 90-day return limit on electronics, many wonder if the Costco return policy is unlimited. For anything reasonable, the answer is “yes.” In the strict sense, the answer is “no” for those who are trying to abuse the system.

Costco states its return policy aims for a “100% guarantee on all merchandise.” Costco is also quick to clarify the return policy is left up to the individual discretion of each location’s manager. This is necessary, because like any good thing, it seems there will always be those people out there who decide to take advantage of the generous return policy. There are stories online of customers attempting to return ten-year-old products, just to test whether or not Costco will honor the return policy. Apparently, even Costco has limits, and that’s why managers are given the discretion to decide on an individual basis whether or not to accept a return.

Like most retail establishments today, Costco is aware that customers demand satisfaction, and it goes out of its way to please its customers with a highly-regarded return policy. As long as you aren’t trying to abuse the system, you should be able to return any product you aren’t satisfied with without any issues at all.

For more on Costco and what you should and shouldn’t get there check out these articles.

Does Costco Accept Manufacturer Coupons?
A Review of Costco Cakes
Costco Comparison: How Does It Rank Among Competitors?
Does Costco Offer A Free Trial Membership?

 

(Photo courtesy of Jeepers Media)

13 Important Skills Kids Learn When Running a Business

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lemonade stand

When I was growing up, there was a girl up the street who was constantly running some sort of business. She did lemonade stands in the summer, bake sales, dog walking, car washing, lawn mowing, rented books and toys to other kids (this was long before Blockbuster made the rental model profitable), and any other things she could think of. She sold insurance and practiced “law” one summer. She even designed some of her own products to sell. Some of her ideas were truly horrible and some were pretty good. Some of her businesses were successful, and some went down in flames.

This wasn’t just a fad for her. It went on for years. She started at the ripe old age of five and was still doing it when she moved away at eleven years old. Most of the kids in the neighborhood thought she was nuts. Why was she spending her whole summer working when she could be out playing with the rest of us? We always made fun of whatever crazy idea she came up with. (But we also wondered why she always had enough money to do whatever she wanted, too.) Her parents never discouraged her, no matter how zany the idea. They just let her do her thing and if she failed, they just let her move on to the next thing. (Her parents were former hippies, so that may have explained a few things, too.)

I doubt that would be the case today. Today, many parents seem bent on preventing their kid from ever failing at anything. When the kid comes up with some terrible, guaranteed to fail business idea, the parents try to talk them out of it. Either that or they do things to make it successful, like funding all of the operating costs, or conning coworkers and family into buying all the product. But this sort of coddling is a mistake. Kids can learn a lot about money and business by trying out some business ideas. If they make money so much the better, but even if they don’t they’re still learning valuable lessons that will serve them well in the work world.

Money Management

Running something as simple as a lemonade stand requires money skills. You have to have enough to buy your startup lemonade mix and make a few signs. And you have to balance the urge to spend all of your earnings on video games against the need to save some for more lemonade mix and better advertising. If you take out a loan from mom and dad to get started, you have to plow some of your earnings into debt repayment.

Government Involvement (or interference) in Business

I can’t remember exactly which business it was, but one of my friend’s summer businesses got shut down by “the man” because she didn’t have the necessary permits. It was a harsh lesson in government involvement in business, but I’m sure it was a lesson she never forgot. I’ll bet you that she always got her permits thereafter and was aware, as an adult, of tax implications and licensing.

A Skill

Whatever you’re making or selling requires at least some degree of skill. It’s a talent to make great lemonade or be able to wash a car without leaving water spots. If a kid is making jewelry or cookies, it takes skill to make something that people are willing to pay for. These may not seem like life changing skills to an adult, but being good enough at something so that others will pay you to do it is a confidence builder for kids.

Marketing/Sales

Kids learn how to make their product attractive to others and to target the people who will buy the products. A sign on butcher paper might not cut it. They might have to take out an ad in the local paper, or refine the product to target a certain group of kids or adults. They might have to learn how to hawk the advantages of their product over others. All useful skills when it comes to marketing themselves on school applications and resumes.

Failure Isn’t the End of the World

If the business goes belly up, the kid will learn that failure isn’t the worst thing that can happen. Maybe he’ll realize there are things he could have done differently, or that this idea just wasn’t for him. Conversely, if it succeeds, the kid learns the rewards for hard work and perseverance.

Customer Service

While the kid probably isn’t answering a customer service phone line, he or she may have to deal with a disgruntled customer or two. At the very least, they have to learn how to treat their customers well, how not to be rude, and that a better attitude attracts more customers.

Practice Those Math Skills

Making change and tallying up purchase prices requires basic math skills. Keeping the books and estimating costs requires yet more math. It’s a great way to practice outside of school, especially if the use of calculators is limited.

Work Ethic and Self-Motivation

Running a business requires a strong work ethic, even for a kid. If he’s promised to mow a lawn on Saturday morning, he has to get up and do it even if he’d rather watch cartoons. Kids learn that strong efforts are often rewarded, while weak, sloppy efforts are not. They also learn how to motivate themselves to get things done rather than relying on prods from mom and dad.

How to Develop a Concept and See It to Completion

It takes skill to think of an idea and then turn that idea into a salable product. Even something like a lemonade stand has to first be conceived and then developed into “the” stand of the neighborhood. Kids learn how to take a product from the idea stage all the way through to the sales stage.

How to Deal with Competition

If the neighborhood competition for jobs like lawn mowing and car washing is fierce, the kid has to learn how to deal with competition. This is a chance to learn things like how to differentiate your product from others so that you stand out (do the best job, offer the best service, or do something that no one else is doing), or how to compete on price and still make a profit.

Goal Setting

If a kid is starting businesses to save up for something specific, they learn how to set the goal (save for a cell phone, for example) and then which steps to take to reach that goal. Even if they’re not saving for something specific, just running a business requires goals (make $200 this month, or make more this summer than I did last summer for example). Setting and achieving goals not only feels good, it teaches the child how to work for bigger goals later in life.

Time Management

Kids have school and other responsibilities like chores or sports teams. If they’re running a business, too, that has to be worked into the schedule. They learn how to budget their time effectively so they can get their homework done, go to sports practices, create some jewelry to sell, man the sales stand, and still have some fun.

How to Take Criticism

You may have some ideas for their product, or helpful critiques to offer about how they’re running things. Customers may criticize a job or product, too. (“You cut my lawn too short,” or “You left streaks on my car.”) Kids have to learn how to take criticism, evaluate it, and incorporate it going forward (and how to politely ignore the crazy curmudgeon who complains about everything).

If you’ve got a kid with an entrepreneurial bent, let them try it. The idea may seem silly and doomed to you, but the worst that can happen is that it doesn’t work out. The kid will survive. On the other hand, the kid could be a successful genius and end up developing a product that makes enough money so you can retire. And between these extremes is a solid middle ground of moderate success that teaches the kid about some of the harsh realities of work, money, and business while giving him a little bit of financial reward.

I lost touch with the kid from up the street years ago. I’d like to think she’s got her own mega-successful company now and is busy developing some highly sought-after widget. Whatever she ended up doing, I suspect that she ended up better off than some of us whose idea of summer fun was playing on the Atari for hours on end and then lying out by the pool. She was probably more prepared for real life than any of us.

(Photo courtesy of stevendepolo)

When The Manufacturer Won’t Honor The Warranty: How to Get Service

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warranty

You’d think that if a manufacturer offers a warranty, getting service or a replacement under that warranty would be easy. You’d think that al you’d have to do is call the manufacturer, provide proof of purchase, and get your problem taken care of. Oh, if only it were that simple. While some manufacturers are great about honoring their warranties (and some will even help you out if the warranty is long expired), others are less so. Some will do all they can to get out of doing an under-warranty repair because they know they aren’t getting paid for it. They’d rather make the process are difficult and frustrating for the consumer as possible, seemingly in the hope that you’ll just give up and go away.

If you ever have trouble getting a manufacturer to honor its warranty, there are several things you can do to improve your chances of success. Here are some ideas and steps you can take.

Make sure that your warranty covers the repair you need

Most warranties are very specific and exclude even common problems. Get your paperwork out and read it thoroughly. You may find that you are being denied because your problem is excluded from protection.

Make sure you have the required documentation

It’d be nice if the company would take your word for it that the item is still under warranty but they’re going to want to see a proof of purchase. If you’ve tossed all your receipts and paperwork (or you bought the item used and didn’t get the paperwork) you’re in trouble. This is why keeping your receipts is important.

Make sure you haven’t voided the warranty

Many warranties prohibit modifications of the item and will refuse to pay out if the item wasn’t properly maintained or was damaged due to user carelessness or improper use. If you need service and you fall into one of these categories, you’re likely out of luck. Keep any paperwork showing that maintenance was done by the manufacturer or to the manufacturers’ timetable. If you have something extra like a police report that shows that the damage to the item wasn’t your fault, be prepared to submit that, too.

Make sure you’re calling the people who can help you

Often, the standard customer service line isn’t the line you need to call for warranty work. Depending on the sophistication of the manufacturer, the customer service department may not be able/willing to connect you with the warranty department. Check your paperwork for the correct number.

Work your way up the chain

If the first person you speak with blows you off, ask for a supervisor or manager. If you don’t get satisfaction there, work your way up the corporate ladder. Sometimes you have to get all the way to the top (and detail all of the problems you encountered along the way) before you get any satisfaction. Send any letters return receipt requested and keep copies of all of your correspondence. Take notes of your phone conversations, too, including the date and the name of the person who helped you. All of this may come in handy if you have to prove that you tried to get help but were unsuccessful.

Try the store

If the manufacturer is stalling you, try going to the store from which you bought the item. They may be able to exert some pull on your behalf. I once bought an appliance that failed under warranty and the manufacturer was no help. I went back to the store and they jumped all over the manufacturer and got me the help I needed. They basically told the manufacturer, “Look, if you won’t stand behind your product, we won’t sell it anymore.” Since the store was quite a large retailer, the manufacturer took notice.

Try Twitter or Facebook

It’s either sad or funny (I can’t decide which) that many manufacturers these days give priority service to the people who complain in the most public forums such as on twitter and facebook. They don’t want their reputations damaged. If you’re not getting any help over the phone, put your complaints out in public. You might get a call back.

Seek consumer protection

You can contact your state’s consumer protection office for help. They may be able to help you, or at least verify that you’re doing things correctly. They can also direct you to dispute resolution organizations that may be able to help.

Keep records of any work you pay for

If, during your dispute, you just have to get the item repaired (as with a car that you have to get fixed so you can get to work), keep all records so that you can get reimbursed if the dispute is eventually resolved in your favor.

Keep your emotions in check

It’s tempting to scream at people and write long, rambling missives, but stick to the facts. Just report what your problem is, why you believe it’s a warranty issue, and what you’ve done to resolve the issue. Getting all emotional will only get your complaints relegated to the “crazy customer” bin, so it’s important to learn to complain effectively.

Know when to quit

You don’t want to spend years of your life trying to resolve a warranty issue that amounts to just a few dollars. At some point you have to give up and simply resolve to never buy from that manufacturer/seller again. However, if you’re dealing with big money, you’ll want to keep going until you’re satisfied.

If, after trying these items you still have no success (and you are positive that you’re in the right and have the documentation to prove it), it may be time to think about suing the manufacturer. If your claim is for less than $750, you can usually get it taken care of in small claims court. For larger amounts (as with cars and houses), you may have to take the manufacturer/seller to court. Get the advice of a reputable attorney before you proceed. While no one wants to be overly litigious, sometimes it’s your only choice when a manufacturer refuses to honor their promises.