One of the key roles of the Federal Reserve is to control monetary policy. What exactly this means and how it is done can all seem rather mysterious and beyond comprehension. However, a powerful tool in their bag of tricks is control of interest rates.

Whether we realize it or not, interest rates largely control our decisions to save, spend and invest. When interest rates are high, we tend not to borrow because it is costly. Saving is enticing, however, because we can earn comparatively more on money we leave in the bank. When interest rates are low, borrowing (and spending) is encouraged because it is comparatively inexpensive, and saving is perceived to be more costly given the lack of income from money left in the bank.

However, making money decisions based on Federal Reserve policies can impose more significant consequences than we are led to believe.

Leading up to the 2008 stock market crash, interest rates were falling, and investors were led to buy stock instead of accumulating money in the bank. Holding cash was perceived to be costly, and many investors put all their cash in the stock market. Behind the scenes, the Federal Reserve’s monetary policies were aimed at controlling the stock market for the benefit of a few wealthy investors rather than controlling monetary policy for the whole nation. The resulting stock market crash enabled one of the largest transfers of wealth our nation has ever known.

Rather than hold their positions, the average investor believed it was better to sell – when the market was going down or at the bottom. These sales completed the transfer of wealth. Few investors had cash to capitalize on the struggling market, and the fate of their investment portfolios and retirement accounts was sealed.

Although we’re told cash does not serve any useful purpose in an investment portfolio, this message is rather self-serving in favor of wealthy bankers and stock brokers.

The investors who did well during the market crash had plenty of cash in their portfolios, did not sell all of their positions, and used cash reserves to take advantage of discount prices, riding the wave back up.

Saving serves many useful purposes for the average person, even though it does not currently offer sexy returns. Cash ensures you have the resources to survive fluctuations in your income and address crises and emergencies that arise in your home. Cash enables you to take advantage of opportunities you would otherwise pass up without cash on hand. Cash insulates a portion of an investment portfolio from wild swings in the value of investments.

Urges to borrow and spend should be ignored, especially while interest rates remain enticingly low. When cash is scarce, values of assets rise because available cash is chasing a limited number of assets – think the housing market, again! To borrow during such a time puts you at risk for being underwater when values predictably fall. Then when the loan is foreclosed, whatever cash you invested is lost. This will particularly come true when the Federal Reserve raise interest rates, signaling investors to hold cash. An increase in spending also puts your financial plan on thin ice. Less cash means you have fewer resources to address emergencies.

When you are not insulated against market swings and personal emergencies, you become more at risk for financial disaster. Those in poverty and earning low incomes are more sharply affected during these times because they have fewer resources to address household needs, and losing even a small amount of money on investments and financed purchases can be financially devastating.

While Federal Reserve policies once favored a strong national economy, their more recent policies favor transferring wealth away from the common citizen. Buyer beware!
How you answer that question depends on which you perceive to be more important. So, have you decided?

In the last post, we considered the case of my son’s being bullied in school and how understanding manipulation techniques of the bullies gives us a starting point to deal with the likes of Edward Bernays, the father of modern consumerism, and his public relations manipulation techniques.

Every household has a set of priorities that demand attention before anything else – shelter, food, clothing, health care, transportation and utilities. Ever since you were a child, you have had some goals in mind for your life – career, education, climb Mount Everest and other accomplishments that give your life meaning and significance. And if you are human, there are a list of things you would like to have which are neither priorities nor goals – beach house, sports car, latest iPad, etc.

It took reorienting my son’s definition of himself to overcome the bullying, and that is our starting point here as well. The definition we have of ourselves controls how we handle manipulative marketing. Two key things help us define ourselves – the way we respond to what happens in life and what we accomplish in life.

First, we need a set of principles and behaviors that will guide how we respond. When _________ happens, I will do ___________. It was not enough for my son to have a definition of himself. He needed a way to respond. When I am bullied, I will turn around and walk away. The definition you hold about yourself will inform your response to situations, and you can respond to situations when you have a firm definition of yourself.

Second, we have an inner need to accomplish something or to feel significant, and we complete achievements by intentional behavior. That’s a fancy way of saying we need goals to help us get things done in life. Not just any goals, our goals must be interesting, achievable and measurable. Goals are what help us get out of bed in the morning and get through difficult times.

So, when society asks the question, “Are you going to be fashionable or are you poor,” you can confidently say, “I am pursuing a worthwhile goal that defines who I am, the thing you want me to buy does not fit into my goals, and achieving my goals will ultimately bring me more satisfaction.”

In other words, we don’t need to fit into society’s definition of a fashionable family to have satisfaction and meaning in life.

However, following these principles involves a system of trade-offs, otherwise known as opportunity cost. When standing in the check-out line, you consider how the candy bar might taste, but then you realize that buying a candy bar every time you visit the grocery store is going to slow down progress on your goal. You have to decide which is more important, and here are some tips that will help.

1. Reduce your exposure to media. Media includes television, smart phones, tablets, news, social media, radio, and internet. Marketing depends specifically on these channels to disseminate their campaigns. The less we are exposed to media, the less we can be manipulated into buying something we don’t need to solve a problem we don’t have. Facebook, as an example, openly admits your news feed is manipulated for the purpose of making a profit and influencing your thinking on current issues. Folks, they wouldn’t do this if it didn’t work, but the trouble is we don’t really detect what is happening in the moment.

Media is addicting and very time consuming. Stepping away from media requires an intentional decision to either limit time on media or carve out specific times each day when media is turned off. From time to time, I will go on a Facebook fast, and, while the task can be hard, the results are amazingly beneficial. I also use Facebook feed apps that greatly reduce the amount of time I need to spend online to keep up with my friends and causes that matter to me.

We have little respect for the amount of media and advertising our minds receive each day and the effect they have on us. Researchers at California State University report that by the time the average child finishes elementary school, he or she is exposed to 8,000 murders on television. By age 18, that number jumps to 200,000. Each year the average child is exposed to 20,000 television commercials. By the time a person is age 65, the total number of commercials they will have seen is 2 million. Nearly all survey participants acknowledge that television commercials make their children materialistic.

This is just television. Imagine how these numbers grow exponentially when you add in newspapers, e-mail, internet, smart phones, tablets, etc. We cannot simply take in all this information and expect it to have no effect or that we can easily counteract it.

Intentionally limiting your intake of media will have positive, healthy effects on your mind, body, relationships and personal finances.

2. Reduce your exposure to shopping, coupon and deal sites. If you are tempted to shop, browsing deals is not going to help. Couponing can be a big help for the family with a tight budget, but it can also create big problems by tempting you to buy. Remember, you save more by not spending than by spending with a coupon.

3. Live by a financial plan. The financial plans I create begin with the client’s needs, goals and desires. The person you want to become and the things you want to experience should be the number one driver of how you spend your time and money. Where we spend our money and time dictates who we will become. A well developed financial plan gives purpose to how we allocate our money and informs how we allocate our time. Time is an important factor here because we use time to spend and earn money.

4. Implement budget controls. Yes, you should have a budget. Whether a budget is important is not the question most people ask. The more pressing question is how to live by a budget. The only answer is to use budget controls. Some examples include an emergency fund, cash envelope system and a healthy reward system for good money behavior and reaching goals.

Public relations, Edward Bernays, marketing campaigns and all media content actively use psychology to manipulate your behavior to spend money or sway your opinion on cultural issues. It takes just as much psychology to respond – the psychology of money, self-control, and achieving goals.

In the last post, we opened a discussion on the exacerbation among low-income households and those in poverty of debt levels as a result of public relations manipulation techniques developed by Edward Bernays, the father of modern consumerism. Specifically, it was posited that Bernays’ manipulation techniques which created a desire to own things or to follow certain issues were blind to an individual’s ability to afford those things. As a result, there are equal levels of desire to spend among a heterogeneous population, some of whom have far fewer resources than others.

Let’s consider further what Bernays wrote, “Mass production is only profitable if its rhythm can be maintained – that is, if it can continue to sell its product in steady or increasing quantity... [T]oday, supply must actively seek to create its corresponding demand. A single factory, potentially capable of supplying a whole continent with its particular product, cannot afford to wait until the public asks for its product... As big business becomes bigger the need for expert manipulation of its innumerable contacts with the public will become greater.” (Propaganda, Horace Liveright, 1928)

Queue instant replay. Earlier, Bernays wrote, “Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society.”

We should stop here and ask exactly what it means for human beings to cooperate and live together in a smoothly functioning society? In Bernays’ mind, “smoothly functioning” meant exploiting the people who trusted that business and government would not do anything to harm them or put our nation in jeopardy. Bernays believed our democratic society could only function if there was a massive transfer of wealth by which the working class willingly handed over their wallets to major corporations without holding anyone accountable.

It equates to a warped reality that is imposed on the population at large.

So, do we stand a chance at combating this manipulation? I turn to an unlikely place for the solution.

When my son was in kindergarten, he was bullied by a group of classmates. His classmates would bait him into a devious act, like unrolling the toilet paper, by asking him a question, “Are you going to unroll the toilet paper or are you stupid?” My son knew he was not stupid, so to prove it he unrolled the toilet paper. Of course, he got in trouble for it because his class mates tattled on him, and that’s when my phone would ring.

Like Bernays and those who actively engage in manipulative and deceptive marketing practices, the classmates who bullied my son lived in a warped reality where exploiting my son was their idea of a smoothly functioning school environment.

To make matters worse, no one in school administration was informing me about what actually happened. As a result, my son was labeled a trouble maker, which was completely against his nature. Once I finally uncovered the bullying, the first task was giving my son the skills he needed to respond. More importantly, he had to believe that these new tools would actually work. Although it was a long time ago, I can still recall his reaction when I said, “Next time that happens, turn around and walk away.” My son thought it was crazy because he saw walking away as admitting to them that he was stupid.

However, after some explanation, he came to understand that by responding to the classmates he was surrendering power to them. Walking away left these classmates hanging in their own mischief. He was affirming the true reality that he did not need their approval to be a healthy boy. By acting from a position of strength, he had power over the situation and developed great courage. The approach absolutely worked to reduce the bullying.

Big businesses want you to believe that you need the products they manufacture and sell to be happy, well-rounded and fashionable. That is only a reality they fabricate. It says nothing about the reality in which you actually live.

It turned out that the school administration was complicit in the bullying, and we ultimately had to remove my son from the school. I share this story because of the resemblance it bears to where many people are in our economic and political system today. Many people are being baited into buying things they don’t need to solve problems they don’t have and willingly do so to conform to society’s ideals. The majority of the big businesses regularly use deception in their campaigns, making it nearly impossible to decipher between legitimate business practices and manipulation. While all this goes on, regulators are often complicit in the deception and manipulation rather than protect people.

Imagine this question playing out in low-income homes and most definitely in middle-income homes across the country. “Are you going to buy this fashionable product or are you poor?”

Of course, people do not want to feel or look poor, so to be fashionable and accepted they will try everything to make the purchase. Because they do not have the means to make the purchase, it goes on a credit card. People wind up silently carrying a load of debt and pay a high emotional price in the process, but on the outside they measure up to a standard they think is worth following. Or their homes will be dilapidated while there is a new car in the driveway or furniture that does not fit the decor.

I know this happens because I counsel clients in this position. In the marketing war for control over our mind, these people have lost a sense of their own identity and their own needs and unwittingly surrendered control over to big business.

The only way to combat the manipulation and deception in marketing practices is to start with a healthy sense of your own financial situation and your own personal needs, goals and desires.

Next time we will look at some specific ways to put this into practice.
Edward Bernays, the father of modern consumerism, the designer of “public relations” as we know it today and the creator of modern marketing campaigns, wrote, “The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. We are governed, our minds are molded, our tastes are formed, our ideas suggested largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society.” (Propaganda, Horace Liveright, 1928)

When Woodrow Wilson was elected as President in 1916, he was chosen as the “peace candidate.” Our nation was at peace, and its people desired peace. Wilson campaigned on the mantra that our nation would remain at peace. After the election, Wilson’s mind was changed, and what followed was a systematic effort to change public opinion about going to war. Once public consent was given, the nation entered the war.

How did this happen? Public opinion was swayed from cries for peace to cries for war by following the road map developed by Bernays. Bernays ultimately orchestrated corporate marketing campaigns to sell Lucky Strike cigarettes, Ivory soap, Dixie cups, and other household name products. “Under the old salesmanship the manufacturer said to the prospective purchaser, ‘Please buy a piano.’ The new salesmanship has reversed the process and caused the prospective purchaser to say to the manufacturer, ‘Please sell me a piano.’”

Before Bernays, customers made their own buying choices. After Bernays, choices were made for the customer, leaving the customer to salivate after certain products and issues. The obvious inference Bernays made in developing this grand scheme is that people are not intelligent enough to make their own choices and must be manipulated to do what a few people want them to do – those few people conveniently being the wealthiest and most powerful people in the nation.

Using the techniques he developed, corporations and governments caused the American people to want the things they wanted the people to have and to believe. By manipulating public opinion, choices on everything from paper goods and groceries to political causes and candidates have been systematically made for the American people.

Bernays wasn’t necessarily wrong in his assessment of a democratic society. We as a people of freedom can do great things when we are united. His tactics were also clever, perhaps even ingenious. One of his ideas for Ivory soap was the soap carving contest, which is simply brilliant.

However, Bernays himself understood that manipulation of public opinion could be used for evil purposes. Although he advocated for a standard of ethics to guide public relations, it is clear that public opinion has been manipulated toward products, political issues and national decisions that are not in our best interest. It is also true that deception has intentionally been injected into the process of manipulation.

Cigarettes and Dixie cups are two examples. Cigarettes are known to cause a myriad of health problems, including emphysema and lung cancer, not to mention deforestation of trees to make cigarettes, air pollution, addiction to nicotine, and littering of public streets. It is said of Bernays that he refused to smoke because he believed cigarettes were harmful, yet he happily developed the campaign that manipulate people into choosing to smoke, willfully disregarding the public’s health. This is where the standard of ethics he advocated broke down. Such attitudes overlook the best interests of the public and benefit only the person or corporation making the sale or the government pushing the issue.

While Dixie cups have their uses, the particular approach Bernays used to make people want to buy them was flawed. One of Bernays’ marketing campaigns showed two children sharing a glass cup to wash their mouth out in the bathroom after brushing their teeth. Because the one child was sick, both children were put at risk. Dixie cups solved this problem because they were to be thrown away after each use. Images of the cups being thrown away were included in the campaign. People obviously came to believe that they needed Dixie cups.

I don't know about you, but in my home as a child we never used glass cups in the bathroom. This did not matter to Bernays because by suggesting that a glass cup was in the bathroom he created a new reality. This new reality, of course, ignores the alternative people have used for millennia before – use their hand to collect water for rinsing out their mouth. While Dixie cups were sold to solve a problem that did not exist for the purpose of transferring wealth from the people to the corporation, their use has inevitably added to land fill development and deforestation of trees, both of which are unsustainable practices.

This has led to scores of people being burdened under credit card debt, personal loans, title and payday loans, student loans, car loans and mortgages because their level of want was far higher than their income. This issue is exacerbated among low-income households and those in poverty.

This has led to scores of people being burdened under credit card debt, personal loans, title and payday loans, student loans, car loans and mortgages.

In my next post, we will look at how to combat the public relations manipulation techniques.
There is no one-size-fits-all answer to this question. However, you should consider a number of issues and factors before deciding to consolidate.

First, let's ask why you are interested in consolidating debt? In a consolidation, none of the debt you owe is actually reduced. Consolidating simply moves the balance from one account to another, usually under one payment and interest rate. This may look tempting and might actually ease some of your strain. However, consolidating does not solve the bigger issue.

Let’s start with a few “don’ts.”

  • Don’t pay fees for consolidating your debt. You can do the same thing on your own, and paying a fee just adds to the amount you owe.
  • Don’t consolidate unsecured debt into secured debt. Unsecured debts include student loans, personal loans, and credit cards. Secured debt includes your home mortgage and vehicle loans. A common temptation is to tap your home equity with a line of credit, borrow against your home when refinancing, or using a title loan against your car. Although the interest rate on home loans may be lower, the length of time the mortgage is outstanding has a much larger effect than you may realize. Ultimately, you will pay many thousands more by tapping into your home equity than if you had left your unsecured debt alone. Also, unsecured creditors have no right to foreclose on your home or repossess your car. All they can obtain against you is a judgment. Combining unsecured debt with secured debt means that if you default on the loan you could lose your home to foreclosure or your car to repossession. And when you increase the amount you owe on your house or car, you are also increasing the chances of default. Unsecured debt is simply not worth putting your house or car in jeopardy. One other word of caution if you already tapped your equity to pay off unsecured debt and face foreclosure in the future is that many lenders are reporting any forgiven debt (the difference between what you owe and what the bank collects) to the IRS as taxable income to you. This means you could end up trading unsecured debt for tax debt.
  • Don’t consolidate low interest rate balances with higher interest rate balances. You're better off negotiating interest rates.
  • Don’t get sucked in by high pressure advertisements promising low monthly payments and interest rates. Zero interest rates and low rates are introductory, and when they expire, interest rates soar to 19% or even 29% over night if you are late or miss a payment or can't pay the full balance before the introductory period is over.
Now that we've looked a few don't's, let’s consider whether consolidating is the right choice.

Most people consider consolidating because they want to reduce their total monthly payments, can't keep up with minimum payments, and want to get out of high interest rates. Most people also have a series of balances rather than one large loan. For example, a person with $50,000 of debt usually has some small credit card accounts, a personal loan, student loans, a car loan and at least one large credit card. 

If you consolidate all of these accounts (except the car loan) into one payment, your interest rate and payment will be level (fixed) for 3-5 years or more. Even as you pay down the balance, your monthly payment will not decrease. If you instead developed a plan to tackle your debts one at a time, each balance you pay off directly reduces your monthly payment. This frees up cash in your monthly budget quickly, which you can use to save a small emergency fund or put toward larger balances.

The majority of people who work with Zacchaeus Financial Counseling prefer this approach and are not interested in taking on the long-term commitment of loan consolidation payments.

But what about the interest rate? Most credit card companies are flexible in the interest rate on your account. All you have to do is ask.

Is it possible to reduce any of my payments? It might be if you can demonstrate financial hardship. Credit card companies especially have programs to help borrowers who are experiencing a legitimate hardship. Lenders would much rather modify the terms of your account than spend thousands of dollars in legal fees trying to collect.

Following these steps will help you accomplish at least the same, and probably better, results than a consolidation would have given you. Over time, your monthly payment will reduce even further, and you will have saved a lot of interest. You will also keep total control over the process and have the most flexibility too.

To ensure the success of your plan, start by trimming your budget as much as possible. If you have any extra money, put it on the smallest balance first. Why? Paying off a balance eliminates a monthly payment and frees up money to put somewhere else, and the quickest way to do that is by paying off the smallest balances first. Paying off the smallest balances first also gives you a much needed feeling of accomplishment, something you'll never have with a loan consolidation.
Let’s begin with a caveat. Zacchaeus Financial Counseling, Inc. does not engage in or endorse credit counseling, credit repair, debt relief, debt settlement and similar services. These services are heavily regulated, and for good reason. It has significant potential to damage your credit, often involves payment of debts into a "trust account" of a third-party who then pays your creditors on your behalf, and can land you in a worse position if not done correctly. If you want to ensure your creditors are paid in this type of situation, then you must have assurances that the organization is legitimate and financially sound, especially if they place your money in escrow or trust account. There are times when credit counseling can help to improve your credit, however, other regulation already covers the length of time damaging items may remain on your credit. Therefore, if you embarked on your own, careful journey, you could conceivably arrive at the same or better place as a credit counselor could produce for you. This makes credit counseling something which no one should take lightly and always be very suspicious of potential fraud.

With that out of the way, let’s discuss the topic: What is a debt management plan (DMP)? The long and short of it is a DMP restructures the terms of your debt. The DMP arranges for a payment plan over a specific time period, negotiates interest rates with your creditors, may negotiate balances with your creditors, and often arranges for the accounts to be closed. The theory behind a DMP is two-fold.

First, if you need help managing debt, your credit has probably already been damaged. Although the DMP initially creates further damage to your credit, the DMP also provides a mechanism for you to repay your debts and begin to rebuild your credit. Second, the DMP can offer relief from collections, high interest rates, and unmanageable payments.

If you are diligent and disciplined, which you need to be anyway, you can accomplish the same thing on your own. However, your creditors will likely want to interview you and review your monthly income and expenses. Basically, they want to know that you can pay under the new repayment terms. If you use a DMP, your creditors are taking the DMP sponsor's word that you are a worthwhile debtor.

That leads us to the job of the DMP sponsor. The Federal Trade Commission and U.S. Trustee Program, which is an arm of the U.S. Department of Justice, regulate credit counseling, in addition to most, if not all, state governments. These regulations require that the DMP sponsor help you with budgeting and offer ongoing assistance to help you stay on track. The federal government and state attorneys general warn you not to work with a credit counseling agency that only wants to do a DMP without assisting you with budgeting. Creditors rely on these regulations before accepting a DMP proposal, and you can imagine the harm which results from doing a DMP without the budgeting aspect. The federal government goes further and recommends that you only work with credit counseling agencies which provide ongoing budgeting help and guidance. The recommendation protects both you and the creditor.

In other words, to make the DMP successful, you must have a budget that works, use effective budgeting controls and make wise decisions with your money throughout the duration of the DMP. One reason for this is that being unable to successfully complete the DMP puts your credit at further risk of damage and quickly thrusts you right back into the position you were before signing up for the DMP – high interest, unmanageable payments, etc. Credit counseling agencies are doing you a disservice if they do not help you with budgeting.

One final note is that credit counselors don’t work for free. There are fees associated with the DMP. Those fees may be paid by your creditors ... and they may not. One common method of payment is to collect a higher amount from you than the agency pays to the creditor. For example, if your creditor agrees to accept 70% of the balance as payment in full, the DMP sponsor may collect 75% from you and keep the 5% difference as payment of their fees.

As a CFP® Professional, R. Joseph Ritter, Jr. CFP® of Zacchaeus Financial Counseling, Inc. provides a comprehensive review of your situation to determine what is possible and whether a particular strategy will work best for you. If you need help formulating a debt payment strategy, we can certainly assist you with developing an effective budget and advocating for you with creditors.
Have you ever wondered what the catcher and pitcher discuss during a time-out in a professional baseball game? From time to time you will see the catcher go to the pitching mound, have a brief discussion, go back to home plate, and then the game resumes. What are they doing?

The catcher is not presumptuously giving the pitcher advice or telling the pitcher how to do his job. Runners are on first and second bases. Rather, the catcher is generally reminding the pitcher of the basic elements of the pitch and providing the pitcher with encouragement and positive support.

Imagine this scene – Walter Johnson or Nolan Ryan take the mound to pitch to Ty Cobb or Babe Ruth. At what point might the pitcher – skilled and proven as he may be – momentarily question his ability to strike out such storied hitters? The pitcher might quietly say, “Do I really have what it takes?” Or, when the pitcher makes a mistake, does he really have the confidence to play through the rest of the game? The pitcher might say, “Boy, I’m just no good. I should throw in the towel.”

If that was you on the mound, how would you get these nagging thoughts out of your mind? Then, up runs the catcher and says, “Com’ on, Walt. Com’ on, Nolan. You got this. Shake it off. You have what it takes. Plant your feet, finger the ball, wind up the pitch, and release. You’re doing fine.”

And then, the pitcher effortlessly strikes out the next three hitters to end the inning.

This is the job of the financial planner. When you hit an obstacle greater than your resources, or you find yourself reeling from the consequences of a life mistake, or you have questions about navigating our complex world, nothing can help more than a time-out with a catcher – a coach of sorts who can focus your efforts, lift your spirts and help you shake off the dust of life’s flub-ups.

It’s your job to get the ball down the field. No one said you had to do it alone. A coach is just a phone call or click away.
Don’t close this window just yet because you don’t know what EMV is. If you think EMV does not apply to you, think again! Credit and debit card issuers are using EMV technology to change the way you pay with your card. So, even if you never heard of EMV, you will be affected by it.

Card issuers are pushing for each credit or debit card in the U.S. to be equipped with EMV-chip technology and for merchants to have EMV card readers by October 1, 2015. Why should you care?

EMV technology (EMV stands for Europay, Mastercard and Visa) works through a chip on your card that transmits a one-use code to the card issuer for payment authorization. This technology already exists with garage door openers. Each time the remote button is pressed, a unique code is transmitted to the opener.

This technology is designed to be more secure because it prevents copying. For example, a data thief can copy card information when the merchant suffers a data breach and then use that information to create a fake card for making fraudulent purchases. With EMV technology, the data thief must have your physical card to make transactions. Without the physical card, the data thief does not have the one-use code and is unable to gain access to bank funds or your credit limit.

In addition to this change, EMV card terminals require different interaction than the traditional swipe and sign/PIN pad terminal. EMV terminals read the chip, not the magnetic strip. As a result, the card is inserted into the terminal where it remains until the transaction is completed.

Although you might still be able to use your PIN, don’t be surprised if fewer merchants have PIN-enabled terminals as EMV technology is embraced.

Besides these adjustments in the way you use your credit or debit card, there are other reasons you should know what is in your wallet. EMV technology allows card issuers to shift liability for fraudulent transactions. Currently, the card issuer is responsible for covering fraudulent transactions. The recent Target data breach is testing that rule, however, because card issuers are claiming the merchant should bear financial responsibility for inadequate security of the data.

With EMV technology, liability for fraudulent transactions is shifting. Instead of the card issuer, the merchant will be liable in some cases, particularly if their card terminals are not equipped with EMV technology. Merchants do have to cover the cost of installing new EMV card terminals at cash registers, however, if merchants needed any incentive to comply with EMV technology, the shift of liability should be enough.

EMV technology does have its limitations, however. EMV technology only protects your account from in-store fraud. If a data thief steals card information from the merchant, the thief cannot use the information in a store. Without the chip on your card, stolen information is useless at a store terminal. However, the thief can still use stolen information to make transactions online or in transactions that do not require the card to be present.

For that reason, in-store fraud may decrease, but online fraud is likely to increase dramatically. That means there is likely to be an increased level of internet hacking and attempts to steal your data online.

Bottom line: EMV technology is going to change how you use your card, but it is not going to stop fraud. You should still take all available precautions to protect yourself. If you are a merchant accepting credit cards, take some time to consider whether you are prepared for EMV and how you can ensure your customer data is secure.

If you would like to receive more information on cyber security and our identity theft seminar, feel free to contact us to schedule a seminar.
Can you identify this object?
This is not a trick. It is a real object with a specific name. Think you know what it is? Comment on this blog post with your guess.

I will give you one hint. The camera has been zoomed on the object to produce a close up image.

Two years ago, my family and I flew to Philadelphia to visit my grandparents. Just a few months after that trip, my grandfather passed away. This was the first time my children had flown. While in the air, I was excited to show them what things looked like back on land from 7 miles up.

From that height, it is practically impossible to make out houses. Cars are mere specks, and things like diamonds, prized artwork and other valuables were completely unidentifiable.

As far as we know, outerspace is infinite. If houses are barely identifiable from 7 miles up, imagine what our belongings and most valuable possessions look like from space.

These are the things, or the lack thereof, which cause us grief, stress and strain. They also drive workaholism, greed and oppression of the poor. If they are absolutely unidentifiable from 7 miles up or from millions of miles away in space, then why are we driven by the pursuit of such things or by the lack of such things in our lives?

From our perspective, our most prized possessions are our lives. We are comfortable with our routines and feel safe in our homes. If you could have a perspective on our possessions or on the possessions we seek from millions of miles in space, we would find that the planet of Earth itself is a mere speck. We would see just how fragile, defenseless and vulnerable these possessions are.

The things in which we place so much significance are completely susceptible to loss that we cannot place any meaningful trust in them. Perhaps, then, there is something else which should be driving our lives.

Oh, and if you would like to find out what the object is, you will have to book one of our free seminars to find out.
Is your short-term financial literacy program effective? A new research study says it is probably not as effective as you think. Researchers at the Wharton School found that “it is not enough to simply offer a program on budgeting, saving and investing and assume the knowledge will linger until the participant needs it." Instead, an ideal program will target specific people, be comprehensive, and provide long-term follow-up. Those who choose to attend a financial literacy program perceive they have something to gain. That means the people who probably need it the most – individuals under age 40 and those in low-income brackets – choose not to attend because they perceive there is little to gain. In reality, everyone stands to gain something, and it is only a false perception which stands in the way. Counselors, pastors, and other professionals who have a level of influence in a person’s life are best suited to refer an individual into an effective long-term program.

Since its inception, Zacchaeus Financial Counseling has offered the type of long-term, comprehensive program the Wharton School recommends. Contact us today for a free consultation on how you can offer our programs.

    Climbing the Money Tree


    R. Joseph Ritter, Jr. CFP® is a CERTIFIED FINANCIAL PLANNER(TM) and founder of Zacchaeus Financial Counseling, Inc., a non-profit organization providing financial planning services to low-income households and households experiencing financial strain.

    View my profile on LinkedIn