This Week In Your Wallet: Buh-Bye Branch, Hello Mobile
The second of my two children is heading off to college in the fall. (To everyone who said this happens sooo fast, I can only say: You were right.) She’s also away much of the summer, so yesterday – in the form of a preventative strike – we printed out the dorm room shopping list from Bed, Bath & Beyond.
At the risk of sounding really, really old, does it seem to anyone but me that kids need more things for college than they used to? Mattress protectors and mattress pads and mattress toppers – all to go above the mattress itself? Bed risers? The list went on and on. This morning, in my search for a burst of sanity, I found my way to a HuffPo article from the team of Grown and Flown on 12 Dorm Room Shopping Mistakes. You may find it helpful, too.
Meanwhile, if your kids are still somewhat younger, take a peek at the story I wrote this week about how to prevent your kids from going on iTunes spending sprees on your dime.
So….what else happened this week?
Buh-Bye Branch, Hello Mobile
Consumers continue to check out of branch banking, and tap into mobile, according to a new report from Javelin Strategy & Research. In fact, mobile banking is now the second leading way people access their checking accounts with roughly one in four consumers (23 percent) using their smartphones first. Online banking sits at first place with 39 percent — and just 17 percent of people prefer to visit their brick and mortar branches.
There’s a rising generation of “mobile-first” consumers (i.e. whether it’s for information, shopping or banking, you look to your phone to find the answer). What does it mean for the big world of banking, and most importantly, what does it mean for you? For the most part, it’s a big “TBD” and Javelin says there’s certainly room for improvement in the mobile banking app department. But the report did uncover a few traits about you. If you’re a mobile-first banker, you’re more likely to work with large, national banks, you’re more open to switching banks and you’re more sensitive to fees. LowCards.com has the recap.
Leveling The Playing Field
On the topic of mobile, Level Money, a free personal finance management app (that I’ve covered for Today), introduced a new feature for people with variable incomes (think: servers with tips, salespeople on commission and side-giggers) and variable expenses (think: well, everyone). I’m sure many of us have a couple of bills that fluctuate from month to month (e.g. my grocery and utility bills can bounce around depending on my travel). They’re calling it “Flexible Money Management” and — in a nutshell — it manages your varying incomes and bills and updates and modifies your budget in real-time. It does the number-crunching — which can deter so many people from sticking to their budgets — for you.
Here’s why it caught my eye: We’re in a gig economy. I used to believe that job security, and therefore financial security, was just a matter of being valued by your employer. Not today. Today I believe having a portfolio of many streams of income may, in fact, be more secure than having a single job — and I say this from personal experience. Regardless, it’s certainly the way of the future. According to estimates from the General Accounting Office and Bureau of Labor Statistics, about 30 percent of today’s workers operate this way, up from 12 percent in 1999.
All of this is especially important for both new and recent grads to consider. The average time spent in a job is now just two to four years — meaning you’re constantly forced to think about what’s next. Unlike many of us Boomers and Gen Xers, who grew up working at the same company for many years (even decades, for some), Millennials and Generation Z will work for multiple companies and have several gigs over the course of their careers. And their financial security (and success) will boil down to having a budget that can easily adapt to their dynamic lifestyles.
(For more of this conversation, you might like this piece on how to budget without a steady income on Daily Worth.)
Costly Cash Advances
You know those paper “convenience checks” that credit card issuers send you in the mail? Those are cash advances, and they can cost you — a lot. According to a new CreditCards.com report, credit card cash advances are not only loaded with fees, but also come with high interest rates that start charging you ASAP. (Examples of cash advances include the aforementioned convenience checks, wire transfers and money orders.) The most common fee structure is either 5 percent of each advance or $10, whichever is greater, and — unlike your credit card purchases, which have an interest-free grace period based on the billing cycle — your cash advances begin accruing immediately. Oh, and the average advance APR is 24 percent (!) — a bit more than your usual 15 percent. Bringing it all together, a typical $1,000 cash advance would cost you an additional $69, after paying it in full within 30 days.
How often do people actually use cash advances? CreditCards.com says many people have unknowingly made a cash advance, but the exact numbers are hard to come by. (Card issuers either said they didn’t track them or that it’s proprietary information.) Though a recent Federal Reserve study shows it’s more common with cardholders who carry balances. In fact, 11 percent of these cardholders took out a cash advance in the past year. Moreover, 2013 research from the Consumer Financial Protection Bureau put the total amount dispensed via cash advances at $4 billion in the fourth quarter of 2012.
Are cash advances ever a good idea? For emergencies, maybe. As CreditCards.com’s Matt Schulz says in the article, cash advances are cheaper than payday loans and are more convenient than personal loans, but they’re something to avoid under normal circumstances (i.e. your weekend getaway doesn’t count).
Have a great week,
Jean
