From Pros and Cons, a Clear Choice

By Michelle Singletary
Thursday, May 24, 2007

In a recent online discussion, a questioner wanted to know whether there was a type of professional he or she could hire who would give unbiased advice on those everyday money issues that always seem to pop up.

I could recommend hiring a fee-only financial planner, but that would cost you $150 to $300 an hour. Increasingly, there are fee-only professionals willing to work with people who want more than just investment advice.

Scott D. Cole of Cole Financial Planning, based in Birmingham, Ala., part of the fee-only Garrett Planning Network, said he would gladly sit down with someone looking for everyday financial advice.

"There are so many choices out there, and the consumer gets mixed messages," Cole said. "So it's helpful to have someone that doesn't have a vested interest in the outcome to tell them what they think from a financial perspective."

However, Cole admits it's not economical for people to pay an hourly fee to determine whether they should buy or lease their next car. They aren't going to hire an adviser to help them figure out whether they should apply for more credit.

So what can you do if you need such advice? One technique is to create a pro-and-con list when faced with a financial question.

For example, I got this question during a chat: "What do you think of the stores that offer free interest if a product is paid off in 12 months?"

On the pro side of your list, you can write down that you get to buy an item and delay paying on it for a year. Typically with these no-interest deals, you apply for a credit card, and the amount of the purchase is charged to the new card. You get a monthly statement, but no interest or principal is due until after the 12th month.

On the con side, you should indicate that opening another credit card can lower your credit scores in two ways. First, the retailer or lender has to do a credit check. That inquiry alone can lower your score.

In addition, the consumer is often approved for a credit line in an amount close to the cost of the item being purchased. If you use more than 50 percent of the available balance on the credit card, that, too, will lower your credit score.

Also on the con side, make note that if you are just one day late in paying off the balance as part of a no-interest/no-payment offer, you will be hit with back interest, typically 18 to 20 percent or more. Lots of people don't realize that the interest starts accumulating from the date of purchase, not when the interest-free period ends.

To make this work and keep from paying a high double-digit interest rate, you have to make certain that in the next year you will have the money to pay off that card.

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