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YOUR BOTTOM LINE

Unemployed Benefits Ending; Re-Loadable Debit Cards; Spying Banks; Holiday Expectations; Cash Giving; Car Winterizing

Aired December 4, 2010 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CHRISTINE ROMANS, HOST: They know everything about you and your deepest, darkest secrets. It's probably your most important relationship. It's not your ex, it's your bank. You ever get those transfer zero percent balance offers in the mail? It's a sign your bank has a very strong opinion about you and your financial habits. We'll tell you about it and what it means.

Plus, all I want for Christmas is cold, hard cash, how to ask for money without seeming tacky.

And we'll talk about the four "C"s of winter car care and how to save another "C," cash. YOUR BOTTOM LINE starts, right now.

First up, trying to plan a New Year's resolution for your money? Maybe get your budget for next year in order. Good luck. Just about everything that matters to your money is being held hostage right now by Congress. Jobless checks, your tax bill, even the future of your beloved mortgage interest deduction are in the crosshairs.

Paul Steinhauser is CNN's deputy political director in Washington.

Paul, so much on Congress' plate, right now. A lot of people think they're trying to cram in a week what they had a whole year to do. Where do we stand right now about so many of these things? Actually getting them accomplished in the next few days.

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: Yes, that's a tall order. A lot to do, a big, long to do list. But number one on that list is that Bush-era tax cuts and whether they should be extended for all Americans or just the middle class and lower class Americans, Christine. And Democrats and Republicans definitely do not see eye-to-eye on this issue.

Democrats, President Barack Obama and most Democrats say that the tax cuts should not be extended for the wealthiest Americans because they say it would only expand and make the deficit worse in this country and they say the country can't afford those tax cuts to be extended for the wealthy.

Republicans, Christine, as you can imagine, say just the opposite. They say that the tax cuts -- that when it comes to the deficit, it's government spending, not tax cuts at all, a loss of revenue that's the problem. And they say if you don't extend those tax cuts for the wealthiest Americans, it's only going to hurt the economy more and that, of course, they say will increase the deficit.

ROMANS: Let talk to you a little bit about deficit reduction. Americans are tightening their belts, we have for a couple of years. And now it's time for Congress. Erskine Bowles said this week Americans want Congress to tighten its belt just like we've had to.

(BEGIN VIDEO CLIP)

ERSKINE BOWLES, FISCAL RESPONSIBILITY & REFORM: I think they want us to make the tough decisions. And none of these decisions are easy. The problem is real, the solutions are all painful and there's no easy way out.

(END VIDEO CLIP)

ROMANS: This is, of course, the president's deficit-cutting commission, which is tasked with trying to figure out a way to get the United States budget and the United States finances back on sustainable footing. How likely is it that Congress really takes this seriously?

STEINHAUSER: Well, everybody agrees. I think everybody in Congress agrees and most persons agree that the deficit is a serious, serious problem. So people are in agreement with that, but that's the easy part.

What to do to fix the problem, there is basically no agreement on this. There's not so much agreement in the commission. If it gets passed the commission and to lawmakers on Capitol Hill, you're going to see varied opinions from those on the right who don't believe that there should be any tax increases to help the deficit reduction, to those on the left who say do not trim government programs for deficit reductions, so it's a tough one.

ROMANS: And meanwhile, the architects of -- you know, the co- chairman of this commission basically say it is a life or death situation for the American middle class and living standards, what we do here right now, so it's serious in their eyes, but we still have politics on the Hill.

Also politics and jobless checks, for every dollar spent on jobless benefits, the Congressional budget office estimates, Paul, that we get back $1.90 in economic stimulus. To me, that seems like a good case for extending tax -- the jobless checks, if you believe those numbers. But it looks as though this is becoming more and more difficult to this environment on the Hill.

STEINHAUSER: Yes, it's becoming another political football. And again, Democrats and Republicans don't see eye-to-eye on this issue. Democrats are taking the side of the unemployed who are facing, losing these benefits, saying extend the benefits. And it's interesting here, on this argument, the Republicans are bringing up the deficit saying we cannot afford to do this, you can't extend the benefits for those Americans who are about to lose them unless you find cuts from somewhere else. So, once again, lack of agreement.

ROMANS: All right, Paul Steinhauser, have a great weekend, Paul.

You know, that last unemployment check in the mail for hundreds of thousands of people, up to four million in jeopardy of losing their benefits by February. Congress missed the Tuesday deadline to extend jobless benefits and while we wait to see what happens in Washington, you should continue to file for extensions on a weekly basis just to keep your name in the system.

This is what some of the state agencies told us this week. Even if you don't know -- if you know you're not exactly going to get the money, right away, if or when Congress passes an extension, it might be a smoother transition and you'll get your money faster, so some of the states are saying continue to file for extensions online even though you know you're not going to get them.

But how do you make ends meet in the meantime if you're one of these people the so-called 99ers, people who are the long-term unemployed who have been relying on unemployment benefits for months now?

Ryan Mack is the president of Optimum Capital Management.

You know, people are starting, going to lose their checks, pretty much immediately. Number one, what do they do in the interim? I mean, this is a cash flow of $302 a week on average that's going to disappear.

RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Well, first of all, we have to budget. And a lot of individuals say why should I budget, I'm not making any money?

Well, you're certainly spending money. So, the budget is the most -- it prioritizes all your bills to see exactly what bills you need to get rid of. That extra cell phone bill, that cable premium bill, all those eating out, the clothing drives or anything that you did in your budget, it will point out things you need to get rid of immediately. It's the first that you should do is put that budget together.

ROMANS: There are families trying to decide if they need to consolidate, if they need to move in with grandma and grandpa, what are we going to do right now to try to get those bills in order to lower some costs because money is not going to be coming in. How do you ask for more time if you need it? Can you do that?

MACK: We have to ask before the deadline has comes. If your bill is due on the 15th, you should call as far in advance of the 15th as possible, let them know you situation. Say, here --

ROMANS: So, call the credit card company and say, look, you know, obviously you can see my jobless benefits have just expired. If you want to get paid anything at all, let's talk about what we can do here.

MACK: Because believe it, you're not the only one that's calling them, but usually they're the ones that's calling you first, making them feel less skeptical of the fact that you can actually pay those bills. But if you call them in advance and let them know, hey, I know my bill is due in two weeks, I don't have enough money to pay it, I just lost my job, here's my budget. Is there something that we might be able to can work out? Would be a little bit more successful to try to help you out.

ROMANS: Credit counseling, this might be a time to seek credit counseling, is that what you think?

MACK: Well, credit counseling is a misconception, a lot of credit counseling. A lot of people think it messes up your credit. Well, Fair Housing Corporation did a study a little while back of individuals who go though credit counseling pay off their debt more so than those who don't go to credit counseling. So, if that's an option for you, check out the fees, check out the interest rate that you can get for a credit consolidation if you do choose that and then see if you can get the best fit for you. And make sure it can maybe do a deferred payment program for you. And make sure you pay your bills the most responsible --

ROMANS: Important advice for those 99ers, those people, the long-term unemployed. I want to switch gears, though, Ryan, because you got real, real fired up about this much hyped Kardashian (ph) Card. You just -- it burns you that celebrities are hawking these goods that have a lot of fees. Tell me about that.

MACK: Well, it just seems that whenever there's an opportunity to capitalize off individuals are not knowing and a lot of individuals don't take time to be fiscally responsible, so you have a lot of individuals, like the Kardashian's. And the big red flag is that if there's ever someone sitting in front of you saying I would like to charge you to make you so you can spend your own money, you shouldn't have to spend money just to use your own money.

ROMANS: Say that one more time, because I think that is just -- it's your money. You don't pay to use your money.

MACK: I shouldn't have to pay a penny to use my own dollars. And I'm not borrowing that money, it's not attached to a credit line within that Rush card or that Kardashian card, so why should I have to pay to use that?

ROMANS: Well, we're going to talk about this after the break, because we're going to talk about this opening for this kind of -- there's a big market for this kind of a product, this pre-paid cards and they're being marketed to teens this holiday season. What you need to know next and we'll fill you in on the new ways that your bank, yes, indeed, your bank is spying on you.

(COMMERCIAL BREAK)

ROMANS: Before the break we were talking about pre-paid credit cards and some pretty high fees on some of them. You know, it's harder for teens to get a credit card because of new protections in credit card reform, but check this out, a "New York Times" article, this week, reported that more than 30 different re-loadable debit cards are being marketed to teens this holiday season. Still with us is Ryan Mack who is shaking his head. And joining us from Atlanta is John Ulzheimer, a credit counselor at Demint.com.

John, when a debit card, when is it a desirable alternative to a credit card? And when is it something that you're just losing money on it?

JOHN ULZHEIMER, DEMINT.COM: Yes, a debit card is generally not a desirable alternative to our credit card for a couple of reasons. A, you do not enjoy the same protections with the debit card that you enjoy with a credit card. And B, it's your money, it's coming out of your account practically immediately where a -- the use of a credit card obviously it's coming out of someone else's account under the promises that you'll pay it back, eventually.

Debit cards, if you look at them on the hierarchy of payment vehicles are probably better than cash, but definitely not as good as credit cards, although, consumers who kind of recognize that their budgetary responsibility is not necessarily the best, debit cards can be good for them because you're generally going to spend less than you'll spend with a credit card. But in the long-term, strategic use of plastic, a debit card should not ever be used in lieu of completely or replace a credit card.

ROMANS: I want to ask Ryan something real quick. We have numbers from Transunion this week that show that credit card debt is down 11 percent over the past year. Delinquencies down about 25 percent, people have cut up -- eight million people have cut up their credit cards, altogether. Are we getting serious about this debt problem?

MACK: Well, I hope that we don't fail to use credit because 15 percent of your FICO score is your length of credit history. So, we do still need to have some sort of stats or data points to make sure we do have sustainable credit. However, we are becoming more responsible, we are sustain our savings more between five and six percent. We're able to make sure that we can continue to pay back a little bit more. The debit card use outweighed credit card use in 2009 for the first time, it's going to happen in 2010. These things mean that we are getting scared straight again now and hopefully it remains to be so.

ROMANS: John, I can't wait to get this. You know, your bank is spying on you. OK, maybe not exactly spying on you, but your bank knows what you're doing before you do it. In fact, almost. They know more about your financial habits than anybody else, in fact, we teased a little bit earlier. If you get all of those zero percent interests offers, transfer offers in the mail, it says something about you. Your bank thinks something about you. What is that?

ULZHEIMER: Yes, that's absolutely right. Look, we're all -- we all know that banks use FICO credit scoring to assess risk. But, what we don't know is that there is an entire slew of analytic tools that banks use to make decisions about us. Yes, you're exactly right. The reason you're getting those types of offers in the mail, it's not scatter bomb, not a nuclear approach to a surgical type of problem. They know that you're likely to respond to those types of offers because they're using tools like response models and revenue model to say, hey, look, Christine Romans is likely to respond to this type of offer, let's make her this offer. They're not just sending it to everybody in your neighborhood, they're picking out the people, cherry picking, if you will, based on the likelihood of responding to that type of offer.

ROMANS: And so, that in particular, if you're getting the zero balance transfer offers, it means that they think you're going someplace else. They want to keep your business, they want to keep your business and they want to keep .

John Ulzheimer and Ryan Mack, a fascinating conversation as always, guys. Think about that the next time you get a little piece of mail from the bank in the mail. It means that they think they know what you're to do next. All right guys, thanks.

Listen up, Santa. There's just not the money this year for the holiday blowouts of the early 2000, so how to manage your kids and your family's expectations when Santa goes on a budget.

(COMMERCIAL BREAK)

ROMANS: Dealing with your kids' oversized wish list for holiday gifts, that could be a little overwhelming. How do you manage their expectations and your budget? Janet Bodnar is the editor of "Kiplinger's Personal Finance" and author of "Money Smart Kids." She joins us now from Washington.

Janet, my son picks those catalogs that come every day in the mail and he goes, I want this, I want this, I want this, I want this, and he's four. We know Barbie and video games are number one on the top toy list for boys and girls. How do you keep that list budget- friendly and tell the little 4-year-old, no, you're not getting this and this and this and this and this?

JANET BODNAR, KIPLINGER'S PERSONAL FINANCE: Actually, Christine, you know, that's what you do, you tell them no upfront so that they kind of know what to expect. And believe it or not, kids will actually listen to you. You're actually fortunate because 4-year-olds also have short memories. And some of the things that they're asking for -- right? -- in this week's catalog are going to disappear from the list next week. So, don't get too excited before you actually have to.

But with older kids, I think you can use those wish lists to your advantage. I mean, you can give them a budget. You know, if your child is 10 or 11, or, you know, maybe a little younger, say OK, what would they be -- if you had to pick, of all the 13,000 things on this list, if you had to pick five, what would they be. Or you know, if you had a budget of say $100 or $200 or $300, what would you choose? And it becomes a learning tool, as well.

ROMANS: You know, another learning tool, frankly there are 15 million people unemployed out there. If you're one of those people, as a parent, you're trying to figure out how to have a pretty serious conversation about cutting back with your kids. How do you do that without burdening them?

BODNAR: Well, you don't want to make them afraid of something that they can't really handle or manage. It's not really their fault. They'll feel very guilty, they really will even though they don't have anything to do with it and really can't do anything about it. But if you're just forthright with them and say, and again, you got to be age appropriate, you don't want to share too many details with kids when they're too young.

But simply saying, hey, this is what the holidays are going to look like this year. We're working on a budget, we're still going to have a holiday season, but, you know, we're not going to have as many gifts as we did last year. But again, if you had to choose one or two things that you really, really wanted, what would they be? And just kind of bring them into the procedure and be and be honest with them without scaring the bejesus out of them about something they really can't handle. Don't fake it.

ROMANS: Another part of that, though, is that some kids think, look, Santa's going to bring it for me. Mom and dad maybe not have the money, but Santa's going to bring it for me, anyway. That's something to be sensitive about.

BODNAR: Right, exactly. And you have to say, you've got to explain to the kids and say, look, mom and dad work with Santa. We're working together, so if there's something that is too expensive or something that we just don't like a gift that we don't think you should have, it's too dangerous or we don't think it's appropriate, Santa's really not going to bring it either. And, you know, Santa's also on a budget. I mean, he's got a lot of demand from a lot of boys and girls around the world and also limited resources, so he has to watch how he parcels things out, too.

ROMANS: Janet Bodnar, really good advice, a really good book. She's the author of "Money Smart Kids." Thank you, Janet.

BODNAR: My pleasure.

ROMANS: It's the one gift just about everyone wants this holiday season, and it's pretty easy to get your hands on. So, why are we so uncomfortable giving cash, cold, hard cash as a present when it's pretty much almost all of us want and need in return?

(BEGIN VIDEOTAPE)

(voice-over): Bills, Benjamin's, cold, hard cash. We have no problem spending it this time of year, but giving it?

UNIDENTIFIED FEMALE: Cash?

UNIDENTIFIED MALE: What do you think?

UNIDENTIFIED FEMALE: You got me cash?

ROMANS: Long before the recession, Jerry Seinfeld tried to give cash as a gift, and it bombed. JOEL WALDFOGEL, AUTHOR, "SCROOZENOMICS": Cash is really an awkward gift. It's socially acceptable for grandparents and aunts and uncles to give cash, but it really isn't socially acceptable for, say, friends to give cash to each other.

ROMANS: Awkward, yes. But 58 percent of Americans plan to give money as a gift this holiday season. So how do you give cash and not be tacky?

PETER POST, THE EMILY POST INSTITUTE: If you're going --

ROMANS: Peter Post is the great-grandson of Emily Post who, of course, wrote the book on such things.

POST: The time it's OK to give cash is when a person, after you've asked them what they would like, says to you, you know, I'd really like to get cash this year or money this year because I'm saving up for a computer and I'll put it towards that computer or towards my vacation or whatever it might be.

ROMANS: What if you don't want another sweater or set of bath gels? Can you ask outright, hey, give me money this year instead? Bad manners, says Peter Post.

POST: The person may have already chosen a gift for you and just because you say you'd like to receive cash or whatever gift it is you said, that doesn't mean the person's obligated to give that to you.

ROMANS: And they might, in fact, be offended. Bottom line, whether you're giving or receiving, it's always the thought that counts.

POST: I think that a gift should have behind it a sense of thought about the person that I want to do this for you, I appreciate you, you're part of my life in one way or another, and this is my way of showing that appreciation.

UNIDENTIFIED FEMALE: Let me just give you your receipt. Do you want to carry that for your mom?

(END VIDEOTAPE)

ROMANS: All right. What about gift cards? Gift cards are essentially the same as giving somebody cash, $25 or a $25 gift card. Peter post said etiquette rules still apply. The bottom line is, know your audience and give a gift that you think they'd like, because that's the whole point. It's not their job to tell you they want 50 bucks or a gift card unless you've asked them first.

Next, protect a very big investment, your car. Winterize it properly, and it puts money right back into your pocket.

(COMMERCIAL BREAK)

ROMANS: Snow, ice, sleet, rain, hail, winter weather, but it causes all sorts of issues for your car. And the last thing you want to do is get stuck on the side of the road in any of these conditions so let's keep that car running smoothly during the winter months. Automotive analyst Lauren Fix is the author of "Lauren Fix's Guide to Loving Your Car." There are four "C"s: check, change, carry, clean. What do you check?

LAUREN FIX, AUTOMOTIVE ANALYST: Well, the first thing you want to do is check your tire pressure. This is very easy to do, that tire pressure gauge. Remember these gauges?

ROMANS: Oh, yes.

FIX: Completely useless. Get a digital one. Really, you want to know what the correct tire pressure is, and you get that inside your driver's door, check it once a month and you can top it off, they have little kits you can buy, really, really smart.

Another thing is then, pop the hood. Now, you don't have to be an expert, just like a doctor might treat an x-ray if you break your arm, this is something you can see visually. It's easy to tell if this belt needs to be replaced.

ROMANS: That needs to be changed.

FIX: Or this hose is damaged. And if you're still in doubt and you say well, I don't know, that's OK, look in your owner's manual. If you don't have one, the Car Care Council offers a free guide in English, Spanish and French. The secret is once you've download one or get one in your hands, get an ASE-certified technician to do the work. You don't want just somebody to do it yourself, because you want to make sure it's done right.

ROMANS: The next thing is change, meaning things like this.

FIX: Snow tires and wiper blades. You want winter wiper blades or you can use a flat blade, flat blade will actually be used year round, and they are about $10 apiece, so a really good investment. And also headlights, they need to be replaced every other year whether you have those bright white xenon or the old halogen lights. They're reasonably priced and it really makes a lot of sense. And then the fluids. There are eight fluids in a car.

ROMANS: Eight fluids in a car. And this is an example when you don't take care of that.

FIX: Right, this is someone who failed to replace the coolant or even check the coolant and this is a water pump and the vehicle will not run if it doesn't work properly, and it actually started rotting the engine from the inside out. So, that's why synthetic oil and changing that coolant are really, really important parts of keeping your engine running properly.

ROMANS: The third "C" is carry. It has to be about what you need to carry.

FIX: An emergency kit, very important with jumper cables or a self-enclosed battery jumper, flashlight, extra hats and gloves and boots, things you need. Plus instead of a flare, look for an LED Light source, it's smarter choice, it's reusable, it's magnetic. You're stuck on the side of the road, just pop it up on the roof, turn on the light, and people will know you're there and a tow truck will see you as well.

ROMANS: Nice. And the final "C" is clean.

FIX: Clean. Very important to clean your headlights. If you've got an older vehicle, maybe five, six years old, you'll start noticing that the plastic on the headlight gets smoky. You need to clean the headlights. You can do this yourself, it takes 20 minutes to a half hour and a wax coat will not just protect your investment, but the snow will come off your car easier.

But if you do all your basic maintenance, the Car Care Council figures you can save up to $1,200 a year if you do all the basic maintenance instead of waiting for that problem to be something broken.

ROMANS: See that, folks, we just saved you 1,200, Lauren Fix just put $1200, back in your pocket.

FIX: Absolutely.

ROMANS: Thank you very much, Lauren Fix.

FIX: Thank you.

ROMANS: That's going to wrap it up for us this morning, but I'll be back at 1:00 p.m. Eastern for "YOUR MONEY" with my friend, Ali Velshi. We got a lot more on tap about your tax bill next year, your jobless benefits. The clock is ticking for Congress and it matters to millions of you.

Time now, though, to send it back down to CNN Center for more of CNN Saturday and this morning's latest news, that's with T.J. Holmes.