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My Shocking Bank Experience and the Need to Read Terms and Conditions October 12, 2009

Posted by FWPrep in Consumer Financial Advice.
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                I recently had a bad encounter with a bank. However, there is a basic principle that I follow that kept me from financial harm.

                 I applied for a business credit card, which I wanted to facilitate payments and I intended to pay off each month. It was a little late in the day and the person who handled business accounts had left. Another person at the next desk over offered to “help” me. I explained that I wanted to take out a business credit card and gave him my business checking account ATM card, which he used to look up my account. He told me about a “great deal” on a card — I wouldn’t have to pay fees to get the frequent flyer miles, etc. I told him that I was confused because I had called the bank and they did not tell me those terms. His reply, delivered with a beaming smile, was that it was a special offer only given in person. I asked to see the terms and conditions, and he told me that they would be mailed to me after I applied for the card. I had to ask twice more. I flat out refused to apply for the card without seeing the terms and conditions first. He finally gave up and went to print them out. I told him I would read them and come back the next day. At home, I discovered that the right side of the print out was cut off and I couldn’t even tell what it said.

                The next day I came back and met with the person handling business accounts. I told him that I couldn’t read the terms and conditions. At this point I found out that they were for a personal credit card. Had I unknowingly been issued this card that I didn’t want, my credit record would have taken a hard hit, lowering my credit score. But much worse, if I hadn’t realized it was a private card and used it, I could have gotten in trouble with the IRS for trying to deduct any expenses on the card as business expenses. In addition, it might have caused my Limited Liability Company problems. Businesses owners can have their limited liability protection stripped from them in a law suit if it is found that the owner comingled their business transactions and personal transactions. Limited Liability Companies

                I was appalled. Had the person who tried to issue me the personal card intentionally deceived me? If so then why? My only guess would be that they were in charge of personal cards, and wouldn’t have gotten a commission on a business card. Hence, their attempt to intercept me and steer me into a personal card. The alternative explanation is incompetence. What sort of banker doesn’t know the difference between issuing a personal card and a business card? Worse yet, for years the bank had dealt with me in an ethical way. Has the financial crisis gotten so bad that “it’s every banker for himself” and abusive behavior is the now the norm? I know that this particular bank is feeling strains from the financial crisis.

                My experience only serves to demonstrate an important principle that I teach — ALWAYS READ THE FINE PRINT. Many people are uncomfortable asking, because they feel that they are questioning the other person’s integrity. This is simply not true. Pluck up your courage. You are not being rude when you ask. Any loan officer, mortgage broker, etc who discourages you from reading the fine print is in the wrong. They are behaving badly by discouraging you from understanding what you are signing, when it is only prudent and reasonable for you to do so. Stand tall and demand your rights!

Why Financial Wisdom Prep Was Founded September 20, 2009

Posted by FWPrep in Why Financial Wisdom Prep Was Founded.
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          I thought it appropriate in Financial Wisdom Prep’s first blog posting to tell you why I decided to found the Institute. There were three reasons that seemed to come together at the same time. The first came from my teaching introductory finance at Pepperdine. At various points during the course I was fond of making a short speech about something I felt was truly important. One of those speeches was my “teach your children well” speech, which I would give after showing my students techniques for financial planning. I would start by summarizing all of the things that caring parents do for their children, such as sending them to a good school, watching who they spend time with, feeding them nutritious food, and so forth, and so on. And yet, it is surprising how little time the typical parent spends teaching their kids how to handle their money. What an important skill to have! I would then ask my students — who don’t have to answer — how many had made a big financial mistake that caused them serious harm. Hands would shoot up. So many people would be so much better off had they received financial training before they set out in life. I then advised my students to put in the time to train their kids. Some day later in life, their kids would come back to them and thank them will deep gratitude.

          My second reason is the financial crisis that we have all been enduring. I have watched events unfold with deep dismay. There were so many abusive practices that occurred in mortgage lending. Compounding the problem was the lack of understanding that people had about taking out a mortgage, and what was in their own, plain, best interest. The results were tragic. How much devastation could have been avoided if people had solid training in how to handle their finances, and understood the risks that they were taking?

          The third reason is my son. He has been an absolute joy in my life. And some of the best moments of all revolved around our many projects, whether it was creating elaborate Halloween costumes, building a chess board, binding a handmade book in leather, or writing a script together. These projects were truly enjoyable and had an educational element as well. In addition, I followed my own advice and taught my son financial skills. His leaving for college was an exciting moment, but it was also a time to reflect. I realized that I found working with bright teens very rewarding, and something that I wanted to continue.

          These then are the reasons that I founded Financial Wisdom Preparatory Institute. My hope is that I can improve the lives of my students, and through the dissemination of financial knowledge, help in my small way to prevent future financial crises.

Dr. Joetta Forsyth