SUVs have been around for awhile. However, their use was mostly limited to foresters, military folks, or any other people who had a need to venture out into treacherous terrain. But for the past 15 or so years, SUVs have been making their way into the lives of us regular folk. And now, seeing these big, monstrous vehicles driving along side us on the highway is a normal occurrence. There are probably just as many cars on the road as there are SUVs.

People love their SUVs. And often I have wondered why. I think it might be a power thing. Gigantic SUVs tower over teensy cars. Some maybe this gives the driver a feeling of supremacy… you know, a King of the Road fixation.

I don’t know… I’m just supposing here. But, I am sure there is a good reason why people love SUVs. I just don’t get it though. I personally don’t like them.

One time, I used my boss’s Expedition to run some errands. Driving that big ole thing felt so weird. I am no acrophobe but I do feel a greater sense of security the closer my feet are to the ground. I lost my spatial sense because I was so high up in the air. Everything seemed to be farther or closer away than they actually were. I was scared I was going to hit something… or even worse someone.

Anyway, there are other reasons I would never consider getting a SUV.

You see, here on Earth, we have this little phenomenon called gravity. Gravity works best we are close to the ground. SUVs are not close to the ground, so in a way… these vehicles attempt to work against the laws of gravity. But gravity is a mighty force.

Gravity, inertia, centripetal force, velocity…? I don’t know… I am no physicist. But I am sure one of these things play a factor into why there are so many horror stories about SUV rollovers.

Aside from the rollovers, SUVs cost a lot more money to provide the same service that smaller vehicles provide… transportation.

The 09 Escalade costs $59,000… and that is just for the base model! If you want to throw in a few bells and whistles… the price can jump upwards of $80,000. That’s quite a few pennies. But a decent alternative mode of transportation can be found in the CTS, which is still a Cadillac. The CTS is $34,000… $40,000 if you want to get fancy. There is a huge difference between 80 and 40 thousand dollars!

Plus SUVs are less fuel efficient. The Escalade… has a 26 gallon gas tank and each gallon will take you 19 highway miles. The CTS, with its 18 gallon tank, gets you 25 highway miles per gallon.

So at $4 dollars per gallon of gas, it takes $104 to fill up the Escalade you’ll get 494 miles. $104 dollars worth of gas in a CTS takes you a further… 156 miles further. Again, big difference.

Okkkkay, I understand that some people need more room to accommodate their large families…but there are other roomy vehicle options that are less prone to rollover, less pricey and easier on the gas bill.

However, automakers are trying the make SUVs more attractive by offering huge incentives.

Call me crazy, incentives or not… I just can’t make a case for SUVs.

Many of us have heard of the Roth IRA, but not many of us know about the man behind the name. William Roth, Jr., an Army vet and graduate of Harvard business and law, represented Delaware in both the House and Senate in DC for more than 30 years. Though best known for the retirement account that bears his name, he was also recognized as a virulent combatant of wasteful government spending. Mr. Roth passed away about 5 years ago, but his name and legacy lives on through is baby, the Roth IRA.

The Roth IRA is an individual retirement account that taxpayers may establish independent of any other employer sponsored retirement accounts. The Roth IRA offers tax benefits to its account owner. Initially becoming available in 1998, the Roth IRA differs in several ways from its predecessor and counterpart, the Traditional IRA. And in most situations, the Roth IRA is a more effective tax sheltering vehicle than the Traditional IRA.

The differences between Roth IRA and the Traditional IRA are quite simple. However, the implications of those differences are not as simple.

The Major Differences and Implications

1 – In a Roth IRA, contributions are made with post tax dollars. In a traditional IRA, contributions are mare with pre tax dollars.

Implication – Your taxable income is not reduced by the amount of your Roth IRA contributions. Your taxable income is reduced by the amount of your Traditional IRA contributions. Therefore an immediate benefit may exist with the Traditional IRA, as your contributions have the potential of reducing your tax liability in the current year.

2 – Your principal contribution in both accounts grows tax free. However, withdrawals from Traditional IRA are considered taxable income. But because Roth IRA contributions are originally made with post tax dollars, withdrawals are not taxable income.

I guess this can be construed as a pay now or pay later scenario… either way, you have to pay. But there is one gigantic caveat… withdrawals consist of principal and interest. When withdrawing from a Traditional IRA account, the interest earned on contributions is also considered taxable income. Quite the contrary is true with Roth IRAs; interest earned is not considered taxable income.

Implication – In a Traditional IRA, both principal and interest earnings is taxable at the point of withdrawal. In a Roth IRA, neither principal nor interest earnings is taxable at the point of withdrawal.

So which account is better? Well it depends… in some situations it may be more advantageous to have a Traditional IRA and in other situations it may be more advantageous to have a Roth IRA.

A Traditional IRA might be right for you if…

- You are looking for ways to reduce your tax liability today

- You like the idea of paying taxes on the back end

A Roth IRA might be right for you if…

- You like the concept of paying taxes on the front end

- You expect your income tax bracket will be higher in retirement than it is currently (This way your contributions will be taxed at the lower tax rate)

- You do not want to pay taxes on the interest earned on your principal contributions

- You like to simplify your tax reporting (with a Traditional IRA, your have to report contributions and withdrawals on a 1040)

With that being said, for most people the Roth IRA is a better deal. Both types of IRAs have advantages, disadvantages and limitations. But don’t let the fancy tax talk hinder you from taking action. Regardless of the retirement savings tool you use, it works best when you take advantage of your options early. The sooner you start, the better.

On July 24^th, the federally required minimum wage increased to $6.55.  This is the second hike of a 3 tier increase.  The third hike will occur on July 24^th of 2009 and the minimum wage will go up to $7.25.

There has not always been a minimum wage.  Minimum wage laws were first established by the Fair Labor Standards Act in 1938.  The law was brought about to protect unskilled workers. 

In the thirties, there was a high supply of workers, yet a limited number of job opportunities.  Often unskilled workers were cornered into accepting extremely low paying and hazardous jobs.  Enactment of the wage law required employees to be compensated a minimum wage, at that time… 25 cents per hour. 

Since then, there have been several changes to the act.  It has been amended to extend coverage to more employees and, of course, to adjust the minimum wage as to keep up with inflation and the changing economy. 

More often than not, the issue of minimum wage makes its ways into political platforms.  Some candidates focus their campaign agendas on increasing the minimum wage.  Senator Obama proposes to index the minimum wage to inflation so that the wage increases with inflation.  Senator McCain has no strong stance one way or the other on the issue.

Though many people support an increase in the minimum wage, often the economic implications of forcing a minimum wage is overlooked.  In the short term, increasing the minimum wage has negative economic effects.  And in the long run, the impact is nullified as markets adjust to accommodate for the changes.

Let’s look at this a little closer…

In the short term

There is a limited supply of jobs and a certain amount of demand for those jobs.  Generally, the demand is greater than the supply.  This is what creates unemployment.  As the minimum wage increases, the labor force tends to grow as well.  This is because there are more people willing to work more jobs or longer hours at the higher wage rate. At the same time, the supply of jobs decreases because the jolt in labor costs causes employers to scale back jobs or hours.

So you have… more demand for jobs and a lower supply of jobs … or… more supply of labor and a lower demand for labor… either way you look at it, the end result is more unemployment.

Increasing minimum wage may benefit the few who are fortunate enough to have or find minimum wage jobs.  They get to bring home a bigger paycheck.  But that bigger pay check for one person may mean a smaller or no paycheck for another person. So, for the economy as a whole, changing the minimum wage is not a good thing.  It just means more people are looking for jobs, but there are fewer jobs to go around.

In the long run

In a free economy, over time the supply and demand markets will automatically adjust to new equilibrium.  In order to accommodate for the forced wage increase, other markets change.  The higher labor costs are eventually distributed to everyone in the form of higher prices for goods and services.  These higher prices affect the Consumer Price Index (CPI), which contributes to inflation rates. 

So in the long run, the economy is basically right back where it began.  The increase in wages eventually results in market adjustments… which results in higher prices… which results in inflation.  So whether you are making a lower minimum wage a year ago and a higher minimum wage two years from now… it still buys the same thing because of the changes in prices and inflation. 

Bottom line, while it sounds nice when politicians say they will increase the minimum wage… changing wage laws does little to improve the economy overall.

About the card

The Gold Card from American Express OPEN (SM) is a charge card for small businesses.  Because this is a charge card, the entire account balance must be paid in full each month.  Most charge cards function more as a short term interest free loan rather than a credit card.  But the Gold Card from American Express OPEN can also substitute as a credit card.  When large purchases are made, the cardholder is given the option to pay over time.

The Gold Card from American Express OPEN (SM) is also a reward card.  Therefore each time you swipe the card you’ll earn points which can be redeemed for goodies.

The basics

• This is a business charge card, which means the entire balance is due upon receipt of the bill
• Annual fee: $125 for the basic card and $45 for additional gold cards, no annual fee for additional green cards (The additional cards are usually distributed to trusted employees.)
• Late fee:  the greater of $35 or 2.99% of outstanding balance
• No finance charges

The perks

• Enroll in the Membership Rewards program and get up to 40,000 bonus points in the first year
• Earn 1 Membership Reward point for every dollar you spend
• Redeem points for airline tickets, hotel stays, vacation packages and more, plus you’ll never have to worry about black out dates
• No limit on the points you can earn
• Points never expire
• Annual fees waived for the first year
• No preset spending limit
• Comes with an extended payment plan option
• OPEN Savings program allows you to save 3-25% when you use your card at participating retailers (Save 5% at FedEx Kinko’s, 20% as BizFilings, 10% at Symantec and much more)
• Comes with emergency roadside assistance… flat repair, towing, lock out services, battery recharge, etc. all for free

You will like this card if you are a small business owner who likes short term interest free loans to manage your business finance expenditures. 

You won’t like this card if you are unable to pay the entire balance of the card at the end of each month.

Credit card review

I think this card is a must have for small business owners.  The Gold Card gives businesses the freedom and flexibility to manage finances, interest free, in the short term.  Basically, a business will have access to an unlimited amount of credit, and when paid by the due date, there is no interest.  The cost of having this credit available whenever it is needed is minimal… only $125 per year. 

This card also comes with an optional extended payment plan.  So in the event that a large purchase cannot be paid in the short term, the card holder can elect to pay over time.  This can be vital when cash is flowing slowly.

Business owners will also have access to online expense reports.  This is a great management tool for tracking and evaluating spending.

But the best thing, every time the card is used, points are accumulated.  The points can be redeemed for various rewards such as gift cards and plane tickets.  A business owner can use these points for himself, or he can use it to give bonuses to worthy employees.

Overall rating

I give it 5 out of 5 stars.

Apply for the Gold Card from American Express OPEN (SM) here.

Hey Folks,

Even with all the Olympic fever in the air, at PFA we were hard at work participating in Carnivals. We even won a Silver Medal this week! So without further ado, here are the carnivals:

- Carnival of Personal Finance #165 (The College Football Edition) was hosted by No Debt Plan and you can find our post entitled Homeowners Insurance: Save But Don’t Skimp listed there.

- Finance Fiesta #11 (The Olympic Edition) was hosted by Wide Open Wallet and you can find our post entitled IRS Mileage Rates – Getting the Most Out of Your Business Use Vehicle listed there. We got the Editors pick for this post and won a Silver Medal.

- Carnival of Money Stories #72 (The Back To School Edition) was hosted by Broke Grad Student and you can find our post entitled Student Travel: The Start of A Great Love Affair listed there.

- Money Hacks Carnival #25 (The Olympic Edition) was hosted by The Personal Financier and you can find our post entitled AT&T Wireless Coupons & Promotions listed there.

- Carnival of Debt Reduction #152 (The Olympics Edition) was hosted by Living Almost Large and you can find our post entitled Using Credit Cards to Take Control of Your Credit listed there.

I personally like cash rebate cards. I use my cash rebate credit card for everything! And I mean everything. A while back when I’d paid off all of my credit card debts, I vowed that I would never use a credit card again. And for a long time I didn’t… I was a debit card swiping mama. But I kept getting all these offers in the mail for cash reward cards. At first I was hesitant to apply, but the temptation to get 1, 3 or even 5 percent back on my purchase was too strong. I caved in and got a card.

However I do not regret it. I am using it very responsibly. Instead of swiping my debit card, I swipe my cash reward credit card. But at the end of every week, I transfer the money from my checking account to my credit card. Although, I can probably get away with transferring the funds only once a month, I prefer to do it more often. That way I won’t be tempted to spend the money that is in my checking account. And I can be sure to get the most out of a cash reward card because I never carry a balance.

Below I present one of the more popular cash rebate credit cards:

About the card

The Blue Cash Credit Card is issued by American Express.

The basics

• Variable purchase APR of 8.99%, 11.99% or 14.99%, depending on your credit rating, Cash Advance APR of 19.99%
• 3% balance transfer fee ($5 minimum, $99 maximum)
• 20 day grace period
• no annual fee
• $35 over the limit fee
• $19 late fee if the card balance is less than $400, $38 if card balance if $400 or more

The perks

• 0% APR on purchases for the first 12 months
• If initiated within the first 30 days of opening the card, 3.99% APR on balance transfers for the life of the transfer
• Earn up to 5% cash back on everyday purchases at grocery stores, drug stores and gas stations (Cash Rebates are credited to your account annually.)
• If your spend up to $6,500 annually, you get 1% cash rebate on you every day purchases, .5% back on other purchases
• If your spend more than $6,500 annually, then you get 5% cash rebate on you everyday purchases, 1.5% back on other purchases
• Car rental insurance provided free by American Express when you use this card to rent a car
• Provides free travel accident insurance up to $250,000 in the event of accidental death or dismemberment

This card may be right for you if like earning cash back rewards and if you pay your balance in full every month.

This card may not be right for you if carry a card balance from month to month. There are few other cards that can offer you a lower interest rate.

Credit card review

As far as cash rebate cards go, this is one of the elite. Overall, it is an excellent card! Most reward cards compensate for the cash rebates by charging higher interest rates. Although 8.99% isn’t the lowest interest around, it is definitely well below the norm. And what is nice about this card is that it is not only for those with superior credit. Even with an average credit rating, you’ll likely get the card if you applied. However, you’ll be paying a higher interest rate.

It is a great card, but don’t get enticed into moving to the 5% rebate tier. In order to get the highest rebates, you’ll have to make more than $6,500 in purchases annually. If you are not a big credit card spender, don’t start now. If you spend more than you can pay off at the end of the month, then the benefit of having this card diminishes.

Overall rating

I give it 5 out of 5 stars.

Apply for the Blue Cash® from American Express card here.

What I love about my city of Baton Rouge is that we have the best Park and Recreation Commission. They have been honored twice with a nationally accredited gold medal award. The Commission is known to us Baton Rougians as BREC. BREC operates over a hundred parks, golf courses, museums, and recreation areas throughout the parish.

This summer, as with every summer, my family spends a lot to time partaking in BREC festivities. Whether you are a native to the area or just visiting for a few days, BREC offers many activities… that are both fun and educational. And most cost less than $5.

Today I am going to talk about 8 BREC facilities or sponsored events that the family will enjoy. I tell you, it was hard to ratchet this list down to only 8. But even with these 8, you’ll find much joy and excitement for under $5 (and some are even free).

1 – Bluebonnet Swamp Tour ($2 for adults, $1 for kids, free for babies)

Ever wanted to get up close and personal with nature? Well, here is where you ought to be. The nature center is 100 acres of swamps, woods and wildlife. Here you can watch snakes slither and listen to the birds sing.

2 – BREC Zoo ($3 for kids, $1 for everybody on Wednesdays)

Chill out with the elephant, be terrified by the tigers! Croak with the frog, but don’t feed the bears!

3 – Highland Observatory (Zero dollars and zero cents)

Hang out with the stars… the real kind. The observatory is open every day… but on Friday and Saturday, they host a science academy and sky viewing. The science academy is really entertaining. Each week the focus is something new. Last week we made rockets, the week before we made short wave AM radios.

4 – Magnolia Mound Plantation House ($3 for kids, free for everyone on Thursdays)

A historical landmark and a memento of times gone by! This plantation home even has a crop garden with cotton and sugar cane. Magnolia Mound is architectural wonder and a piece of history preserved.

5 – BMX Park (free if you have your own bike or you can rent one for $4)

So you fantasize about being the next Matt Hoffman? Well go to the raceway to practice your high flying tricks. Or if being a spectator is more your M.O., stop by to watch the daredevils play.

6 – Skate park (not even a cent, i.e. free)

Not into Matt Hoffman, then maybe Tony Hawk is more your style. Well kickflip, mc twist and primo grind until you break a hip. The skate park has ramps, rails and fun boxes. However, EMS is not on site, so have a blast, but be careful.

7 – Sunshine Socials ($2-$3 per person)

Sunshine Socials offers a time to relax and play for people with disabilities and their families. Depending on the night, the social is a dance, a movie night, or a karaoke night.

This next one is not sponsored by BREC, but it is still worth a mention…

8 – USS Kidd ($4 for kids)

Tour a real live U S Naval destroyer! The ship comes quipped with original bunks and machine guns. And if you want, you can make reservations to spend the night. Along with a ticket to tour the ship, your $4 also gets you a pass into the Veterans Memorial Museum. Inside there is a mini replica of the Vietnam Veterans Memorial Wall.

Have you ever slept at a Westin Hotel?  If not, you don’t know what you are missing.  A couple of years ago, I went to a business conference in Chicago.  The conference was held at a downtown Westin hotel right off of Lake Michigan. I was fortunate enough to get a hotel room in the same hotel.

What I saw of Chicago was nice.  I ate at Mike Ditka’s restaurant.  I window shopped at Burberry, Ralph Laruen, and Cartier. I took a stroll through the Water Tower Place.  But I did not get a chance to see much because I was too busy lying in the bosom of heaven.  The Westin hotel has the absolute best beds, ever! 

The bedding is white, soft and fluffy.  The mattress firmly supported, but smoothly contoured my body.  It felt like I was on a cloud. It was like nothing I ever experienced.

And apparently a lot of other people share the same sentiment.  That is why you can buy the mattress for $1,500 and the bedding for only $3,000 more.

Or if you don’t have $4,500 to spend on bedding, you can use the Starwood Preferred Guest Business Card to accumulate points for a free stay at the Westin or other participating Starwood Hotels.

About the card

The Starwood Preferred Guest Business Credit Card is issued by American Express.

The basics

• 14.99% APR for purchases, 19.99% APR for cash advances
• 3 % cash advance fee ($5 minimum, no maximum)
• 20 day grace period
• $45 annual fee
• $35 over the limit fee
• $19 late fee if card balance is less than $400, $38 if card balance if $400 or more

The perks

• 2.9% APR on purchases and balance transfers for the first six months
• Annual fee waived for the first year
• Earn points for free stays are Starwood Hotels, 1 Starpoint for every dollar spent on regular purchases, 2 Starpoints for every dollar spent at Starwood Hotels
• No black out dates
• Get 10,000 points with first purchase (that’s enough for a 3 night stay)
• Get extra savings with the OPEN Savings program, such as 5% off prepaid American Express cards, 5% off your Ruby Tuesday total bill, and 25% off ExpensAble software

This card may be right for you if you like spending time at Starwood hotels…Westin, Sheraton and W.

This card may not be right for you if you prefer a lower interest rate instead of points.

Credit card review

Overall, this is a decent card.  But, as with any reward card, there are trade offs.  To qualify for the card, you need good to excellent credit.  However, there are other cards in the good to excellent credit category that have lower interest rates.

The grace period on purchases is short.  Interest will begin to accrue before you get the bill.  Also, the cash advance fee has no set maximum.  Although, this is an emerging trend, there are still many cards that cap the cash advance fee at $50 or $75 dollars.

However, these things should not matter if you pay the balance in full every month and forgo cash advances.

The tier late fee approach is beneficial to customers who carry a negligible balance.  And the best part of the card… of course… you get to spend the night in heaven… for free.

Overall rating

I give it 4 out of 5 stars.

Apply for the Starwood Preferred Guest® Business Credit Card from American Express here.

Currently led by CEO James Wells, SunTrust Banks, Inc. is one of the oldest and largest financial institutions. Since its inception in 1891, SunTrust has grown bountifully. As of March 31^st the bank held over $170 billion in assets. SunTrust operates nearly 1,750 offices which are spread throughout 11 states in the southern and east coast regions. It also operates 5 full service office locations in the Grand Cayman.

In the second quarter of 2008, Atlanta based, SunTrust Banks, Inc. posted an earnings lost of 20.6%. Net income available to common shareholders fell from $674 million in the same period last year to $535 million. At the same time provisions for loan losses rose 328%… from $104 million in the second quarter of 07 to $448 million in the second quarter or 08.

The quality of the banks assets has also declined in the past year. The ratio of nonperforming loans to total loans increased from .64% to 2.22%. It was noted by SunTrust that the change is this ratio was due primarily to residential real estate secured loans and residential real estate commercial loans. However today, amidst the mortgage crisis, these types of changes are common place in the banking industry.

Though the losses are staggering, SunTrust does not plan to cut dividends or issue more stock to remain solvent. This is significant because analysts have long held that this was the only option. Instead the company opted to sell 10 million of its shares in Coca Cola. This is move seeks to increase its capital standing while simultaneously offsetting losses.

However, in the wake of this loss, Moody’s is posed to downgrade the banks long term debt rating. Currently the bank’s senior debt is rated at an acceptable Aa3. But before the rating is modified, Moody’s will perform a full scope analysis of the bank’s capital situation. In the event the rating is adjusted, it is likely to slip by only one notch. And there is also a negative outlook for the bank’s Standard and Poor’s and Fitch’s debt rating. However, its DBRS’s outlook is stable.

Despite its losses and debt rating outlook, the bank continues to expand its kingdom. SunTrust has taken over the one of Florida’s failing banks. The FDIC closed the First Priority, without notice, on August 1^st. As of August 4^th, First Priority Bank of Bradenton is now SunTrust. SunTrust assumed $214 million of First Priority’s $227 million in deposits and bought $42 million of its $259 million in assets.

And on top of it all, SunTrust remains a leader in customer satisfaction. A study conducted by J. D. Power and Associates ranked SunTrust number two in overall customer satisfaction. The survey focused on mortgage lenders and measured customer satisfaction with the application process, closing process, service representatives and problem resolution. Out of a possible 1,000 points, SunTrust scored 809. If they would have gotten only three more points… they could have taken first place over Bank of America.

Even when considering the loss in net income available to common shareholders, SunTrust remains dominant in it class. Its shares are trading at nearly $40 each, while its competitor’s shares aren’t trading for nearly as much. Wachovia shares are hovering about the $17 dollar mark. And Washington Mutual is barely trading at $5 a share. SunTrust has not been spared a hit within the housing bust. However they have not fallen so hard that they cannot rebound.

Hey PFA’ers,

For your enjoyment, here are the carnivals that PFA participated in this week:

- Carnival of Personal Finance #164 (The City Slickers Edition) was hosted by Squawkfox and you can find our post entitled Read This Before You Buy That Used Car listed there.

- Finance Fiesta #10 (The Nachos Edition) was hosted by Master Your Card and you can find our post entitled Fleeting Hybrid Car Tax Credit listed there.

- Carnival of Money Stories #71 (The Wander Around The World With Me Edition) was hosted by Value For Your Life and you can find our post entitled Last Minute Travel Deals listed there.

- Money Hacks Carnival #24 (The Dog Days of Summer Edition) was hosted by Greener Pastures and you can find our post entitled 50 Cent vs. Taco Bell, plus some coupons listed there.

- Carnival of Debt Reduction #151 (The Credit Card Debt Reduction Edition) was hosted by Mighty Bargain Hunter and you can find our post entitled Federal Student Loans: To Pay or Not to Pay listed there.

- Festival of Frugality #137 was hosted by Frugal Homemaker Plus and you can find our post entitled Bed, Bath and Beyond Coupons and Promotions listed there.