Scary Tricks Lenders Retailers Play on Us • Everyday Cheapskate

Blood-curdling stories, tricks. and treats are all part of Halloween fun. But the last thing we expect are tricks from our friendly lenders, retailers, and credit card companies. So gather around while I tell you some scary tales of tricks out there just dying to be played on you!

Payday Loans

You’re broke but payday is still two weeks away. You request to borrow $100 from the Payday Loan Company. They make you write a personal check to them for $115. The loan shark makes you sign a contract with all kinds of fine print and agrees to hold the check until your next payday.

In two weeks the shark deposits the check or you can get your check handed back to you with VOID stamped on it by paying $115 in cash. But you’re as broke now as you were then, so for only an additional $15 cash you can extend the loan for another two weeks. In other words, the cost of the initial loan is a $15 finance charge—or 391% APR! Then you have to pay another $15 to start over.

Soon you owe more than the$100 borrowed in the first place. Payday loan companies are in the business of bleeding people for as much money as possible and then forcing them into bankruptcy. Now that’s freaky.

Courtesy Overdraft

Banks across the country have adopted a frightening type of overdraft plan with huge fees. Here’s the scary part: You may not even know you have this. Also known as “courtesy overdraft,” this is not the same as overdraft protection tied to your savings account or line of credit. This “courtesy” service uses the bank’s money to cover the debit swipes you rack up over your balance. And the fees can be bloody outrageous! Here’s an example, from Capital One:

“Courtesy overdraft is a service we provide where we consider paying a transaction even if you don’t have enough money in your account at that moment. Some customers appreciate the ability to overdraft in certain instances instead of having their debit card purchase declined at the store register or a check returned unpaid.” CapitalOne.com

The bank doesn’t even ask you if you want it as incidents arise—enrollment is automatic if you did a blanket “agree” when you opened that account. In addition to the bounce fee of $25 to $40 per overdraft, some banks tack on a daily fee of $2 to $5 until the checks are made good. Consumers must pay the money back within two to four weeks or risk facing severe collection actions. You do not want this service so if they will not remove it, it may be time to look for a new bank.

Credit Cards

Just how creepy are some of today’s credit card offers? My all-time pick for that category has to be the Visa card offer from Plains Commerce Bank (thankfully, no longer offered and gee I wonder why). It went like this:

You pay $79 to apply for the card. Once approved, you’ll have to shell out an acceptance fee of $225, an annual fee of $50 and a monthly participation fee of $6, for a total of $281. And it gets scarier.

When you add up all the fees, you’ve paid $360 for a credit line of less than $20 even though you’ve never used the horrid thing. Now if that’s not enough to send chills up and down your spine wait until you lock eyeballs with your interest rate: 19.92 percent APR! It’s hard to imagine a more scary credit card (although they’re plenty of competitors out there).

And so we come to the end of our storytime. But make no mistake. This is not make-believe. All kinds of scary tricks like these are just waiting to be played on you. Consumer, beware!

Amazon Reviews

Reviews on sites like Amazon offered by individuals who have actually purchased and used an item can be useful. However, I am keenly aware that not all reviews are sincere. That’s a nice way to say many are downright fake.

There are many sellers on Amazon who find a way to pay people with either free products or Amazon Gift Cards to post 5-star reviews and get away with it. And there are sellers who pay for 1-star reviews posted to their competitors’ product pages.

One person I know of bags thousands of dollars in free Amazon products every year—from mattresses to household appliances and electronics. Some he keeps but most he turns around and sells on eBay as new and unopened. Because he can write very realistic and believable, abeit fake, reviews. Why are they fake? Because he has doesn’t test, try or use. He just pumps out 5-star reviews. How bone-chilling is that?!

(One way to weed out the fakes is with an app like ReviewMeta.com that filters out unnatural reviews and offers an adjusted rating.)

Furniture Rental

It’s back. Renting furniture and electronics is regaining popularity among new homeowners who’ve just agreed to buy “the most house they can afford,” as determined by loan specialists and Realtors who have their own commissions in mind in the advice they give. And the newly-minted homeowners are certainly not interested in furnishing their new dream space with old hand-me-down furniture and last years’ model electronics.

It sounds like a great idea to rent stuff when you can’t afford to buy it. But don’t be so sure. You go to the local Rent-To-Own store. They say no problem, you can rent brand new 4k smart TV for only 52 payments of $33 each—and then you will own it.

It sounds great, but don’t believe it. Renting to own is a creepy way to throw your money away. In 52 weeks, you will have coughed up $1,741 for a television that retails in other stores for just $597. That translates to an annual percentage rate approaching 230%. If that doesn’t give you goosebumps, nothing will!