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Infographic: 3 Ways Companies Legally Take Your Money
How Companies Are Legally Stealing From You (And How to Stop Them)
These are three ways billion-dollar companies are legally stealing thousands of dollars from you.
Here’s how to stop them – from someone who passed the CFP® exam at 16 and has helped millions improve their finances.
TRAP #1 – Introductory APR Offers
Retailers advertising 0% APR for 18 months make it sound like free money. And it is, but only if you use it right. But most people don’t, and that’s how they legally steal from you.
Imagine you spend $3,000 on a card with 0% APR for 18 months and make regular payments to reduce your balance. By the end of the intro period, you have a remaining balance of $200.
So ideally, you should be charged interest on just the $200. But that’s not how it works.
If you carry a balance of even $1 when the promo period ends, the store will charge you interest for every single month you had a balance during the intro period.
So you could face over $700 in interest even though your final balance is just $200!
This sounds crazy – because it is. But there’s a fix.
If you sign up for a 0% intro APR store card, you must be absolutely sure you will pay off the full balance before the intro period ends. And if you can only pay the minimum, do not open the new card in the first place.
TRAP #2 – Buy Now, Pay Later
With Buy Now Pay Later, a big purchase magically turns into “just four easy payments,” making spending feel frictionless.
By delaying the payments, people spend way more when using BNPL versus paying everything upfront, and that’s exactly what the companies want.
And here’s what’s hidden in the fine print: missing a single payment means you’re hit with late fees as high as 25% of your original purchase price.
And on longer term BNPL plans, you’re charged high interest if you don’t pay off the full balance before the deadline.
But there’s a fix: before you split anything into 4 easy payments, write down the full price – not just each installment – and then wait at least 48 hours.
You aren’t denying yourself the purchase, you’re just giving yourself time to consider the full cost. You’d be surprised how often you don’t even want to buy the thing anymore.
TRAP #3 – Whole Life Insurance
While studying for the CFP® exam, I saw the many ways wealthy people use whole life insurance for estate planning or as investments.
And the sales pitch sounds great for people like us, too: insurance with investment so you’re building cash value automatically over time.
But for 99% of people, it’s a complete waste of money. Whole life insurance premiums can be 10 times more expensive than term premiums for the same death benefit.
And while there is technically an investment component, calling it an investment isn’t really accurate. It grows at around the same rate as your savings account, when most people won’t touch it for decades.
So you’d be better off buying term and investing just half the money saved in the stock market, and then spending the other half on whatever you want.
Let’s look at an example. For the same coverage, a whole life policy costs $300 per month while a term policy costs $25 per month.
If you invest just half the difference, or $135 per month, you’d have $1.6 million by retirement, compared to less than $300,000 cash value for a whole life policy.
So for 99% of people, it’s a far better idea to buy term and invest the difference in the stock market.
But just avoiding whole life insurance is only half of it. You also need to invest the right way.
Check this out for a step-by-step guide to start investing today, so you can take advantage of compounding and start building real wealth: The Ultimate Gen Z Investing Guide