Many readers wrote in to comment on my recent column on why college students should steer clear of credit cards.
There were those who agreed with me: "You hit the nail on the head in your opinion about college students and credit cards," wrote Tom Dillon of Virginia Beach, Va. "I have passed this lesson on to my college student daughter, and fortunately she has taken it to heart, avoiding the temptation of the banking industry."
And there were those who disagreed. One reader said his son has responsibly used his credit card. "I insisted he have a card for medical emergencies or any unexpected situation, especially one that involves his safety. Auto broke down? Bad part of town? Need an unplanned hotel because someone else didn't come through? You get the idea."
I don't doubt that many college students are capable of handling a credit card. I just worry that far too many aren't.
Speaking of Credit Cards ...
If you didn't read last Sunday's Washington Post business section, you missed a fascinating article by David A. Vise on the soon-to-be introduced 401(k) credit card.
This new credit card would give a worker the ability to borrow up to $10,000 from his or her 401(k) retirement savings account. There would be an annual $50 fee to use the card. The interest rate on the card would be the prime rate (currently 4.75 percent) plus an additional 2.9 percent that would go to the credit card company, Vise reported.
Honestly, I'm not sure I like the concept. On the one hand, perhaps knowing that you could easily borrow from your retirement plan would encourage more workers to save for retirement. After all, lots of folks don't contribute to 401(k) plans because they have a problem with tying up their money for 30 or 40 years or being penalized for taking it out if an emergency comes up.
On the other hand, I've never really believed in the concept that people save by spending. If you offer people the opportunity to borrow against their retirement savings, they will do it. While it's true that the majority of interest paid on debt accumulated on one of the new 401(k) credit cards would essentially be paid back to the account holder, the overall balance in that person's retirement account isn't growing while the loan remains outstanding.
What do you think? Is this a good idea? Let me know by e-mailing me at [EMAIL PROTECTED]. Put "401(k) credit card" in the subject line.
Let's Talk Online
I hope you all are participating in my regular Live Online Chats. Yesterday, I hosted Mary E. Martin and J. Michael Martin, co-authors of the Color of Money Book Club selection for October, the "Homefile Financial Planning Organizer Kit."
Click here for a transcript of the chat with the Martins.
A D.C. reader asked, "Can you explain the Check 21 a little more?" Check out two columns I wrote recently about this new legislation that takes effect today: "Federal Check-Clearing Act Is Less Than Clear" (Sept. 23) and "A Less Painful Conversion" (Sept. 26).
Paragons of Parsimony
Who knew I would get such positive feedback on my column about not spending so much on newborns.
Cherie Price, who reads my column courtesy of The Virginian-Pilot in Norfolk, Va., wrote: "I just wanted to say I very much agree with your article regarding new baby gift registries. ... I teach classes for expectant parents for our local hospital system and frequently tell parents that they do not need to go out and spend a fortune (or ask others to) on things for their new baby."
Price went on to write: "Babies have very few real needs other than food and loving arms to hold them. But I thought I'd mention another thing that mothers can do for their babies that will save money in a variety of ways -- breastfeed them! Parents can save upwards of $1,000 to $2,000 by providing mom's breast milk for their baby, depending on the form of formula you're comparing it to (i.e. powdered, concentrate, ready-to-feed). And as breastfed babies are generally healthier and need ... fewer visits to the doctor, money is saved in a variety of ways."
I totally agree with Price. I always joke that I breastfed all three of my children because the milk was free.
Read Past Penny Pinching Tips
You are welcome to e-mail comments and questions to [EMAIL PROTECTED]. They may be used in a future column or newsletter with the writer's name unless otherwise requested.
