Current Events in April 2016

Not all credit cards are alike, and some are better than others for certain periods of life. When you're young, it pays to have a credit card that takes that into account.

Fortunately, there are several credit cards designed specifically for young people still in school. Here are three pretty good ones.

Discover It Chrome for Students

The Discover It Chrome for Students has some forgiving features that might come in handy. There is no annual fee, no fee for going over your limit, no foreign transaction fee, and no late fee on first late payment. In fact, a late payment won't raise your interest rate, as it would with most other cards.

The rewards are pretty good too. You'll get 2% cash back at restaurants and gas stations, capped at $1,000 spending on the combined categories. You'll get 1% back on all other purchases.

Currently, Discover will match all the cash back received in the first year for new cardholders. It will also reward students for hitting the books, adding $20 cash back each school year your GPA is at least 3.0.

Freeze-It is a nice security feature, allowing you to prevent new purchases, cash advances, and balance transfers on misplaced cards instantly, using a mobile app or PC.

Wells Fargo Cash Back College Visa

The Wells Fargo Cash Back College Visa Card is another credit card that can benefit a young person with limited credit history. You can build your credit as you use the card – as long as you use it responsibly. There is no annual fee.

You can also rack up a few rewards along the way, earning 3% cash rewards on gasoline, groceries, and drug store purchases the first six months you have the card and 1% cash back on virtually all other net purchases.

Cash rewards can be redeemed in $25 increments and you can set it up so that the money is deposited into a Wells Fargo savings account. You can also apply the money to a qualifying Wells Fargo credit account or receive a check.

Journey Student Rewards card from Capital One

The Journey Student Rewards card from Capital One is another good choice for someone starting out to build a positive credit profile. You get 1% Cash back on everything you buy and there's no annual fee, so you are already ahead of the game.

Beyond that, Journey will send you text alerts so you know when your payment is due. Make the payment on time and Journey will give you a 25% bonus on the cash you've earned.

It's been a long time coming, but the manufacturing sector of the economy is growing again.

According to the latest Manufacturing Institute for Supply Management (ISM) Report On Business, the March Purchasing Managers Index (PMI) was up 2.3% from February -- to 51.8%. A reading above 50 indicates growth, while under 50 suggests contraction.

The March increase was the first since August 2015. The overall economy, meanwhile, expanded for the 82nd consecutive month.

Within the sector, The New Orders Index posted a gain of 6.8%, production was up 2.5%, and the Prices Index soared 13%, indicating higher raw materials prices for the first time since October 2014.

Industry performance

Of the 18 manufacturing industries, 12 reported growth in March:

1. Printing & Related Support Activities;
2. Furniture & Related Products;
3. Nonmetallic Mineral Products;
4. Miscellaneous Manufacturing;
5. Machinery;
6. Plastics & Rubber Products;
7. Food, Beverage & Tobacco Products;
8. Fabricated Metal Products;
9. Chemical Products;
10. Paper Products;
11. Primary Metals; and
12. Computer & Electronic Products.

The industries reporting contraction in March were:

1. Apparel, Leather & Allied Products;
2. Textile Mills;
3. Electrical Equipment, Appliances & Components;
4. Transportation Equipment; and
5. Petroleum & Coal Products.

Chrysler (FCA US LLC) is recalling 442 model year 2015-2016 Ram 1500 trucks manufactured January 22, 2015, to September 13, 2015.

Contamination of the Electric Power Steering (EPS) control circuit board may cause a short and result in the loss of power steering assist.

If the vehicle experiences a loss of power steering assist, extra steering effort will be required, especially at lower speeds, increasing the risk of a vehicle crash.

What to do

Chrysler will notify owners, and dealers will replace the EPS unit, free of charge. The manufacturer has not yet provided a notification schedule.

Owners may contact Chrysler customer service at 1-800-853-1403. Chrysler's number for this recall is S19.

Many years ago, my accountant looked at me sadly as he finished my tax return. "You are really getting hit this year," he said. "You need some dependents. My daughter is a lovely girl with three beautiful children. That's four deductions right there."

"What are you suggesting?" I asked. "I've never even met your daughter."

"You don't have to," he said. "It would just be for tax purposes."

He wound up in prison and all of his former clients, including me, were ruthlessly audited by the IRS. Another accountant once tried to rent me his house in the Bahamas and said I could write off the travel and rent as a business deduction, claiming I had attended a professional conference. 

The world is, of course, full of con men, scam artists, and chiselers of all stripes, never more so than at this time of year when the iron boot of the state falls upon us all, demanding its fair share of our income for the year.

While you are no doubt honest and forthright, not all tax preparers are and some, like my former CPAs, may make suggestions that sound attractive but in reality are paths that can lead straight to the federal penitentiary. It's your name on the tax return and if you let your preparer pull any funny business, you may be held equally responsible.

2.1 million

The IRS and the Justice Department are onto just about any clever little tax dodge you can think of and the chances of getting caught are actually pretty high. Of the 150 million returns filed in 2014, the IRS identified more than 2.1 million as claiming fraudulent refunds totaling more than $15.7 billion. In 2015, 35 fraudulent tax preparers were shut down and many were prosecuted on criminal charges. 

“Every year, thousands of federal income tax returns are prepared by people who care much more about making a quick buck than about preparing accurate returns,” said Acting Assistant U.S. Attorney General Caroline D. Ciraolo.  “Most tax return preparers are honest.  But some preparers who charge clients a percentage of their tax refund intentionally prepare false returns to increase their clients’ refund, and thus their own fees."

Ciraolo said also that some preparers who charge by the form will intentionally prepare incorrect forms that their clients don’t need in order to increase their compensation. 

"Taxpayers might think that they’re getting a good deal on their taxes, or that as long as someone else prepares the return, they’re not responsible.  They’re wrong.  Taxpayers who have their return prepared incorrectly are required to pay the tax they owe, or pay back the refund they weren’t entitled to get.  These clients might also owe interest and penalties, which can be substantial," she said.

Red flags

Ciraolo lists some red flags you can watch for when choosing a tax preparer:

Your refund should never be deposited directly into a preparer’s bank account. To be sure your payment goes where it is supposed to go, it must be made directly to the IRS and your state tax collector. 

Never sign a blank return or a blank form, or sign a return or a form without reading it first. By law, a return preparer must provide a client with a completed copy of the return no later than the time the customer is asked to sign the return. Failing to review it carefully can land you in hot water.

Don’t use a preparer who mischaracterizes your expenses. Remember that trip to the Bahamas? The IRS nabbed a preparer who pulled a similar stunt, deducting purchases at Tiffany & Co., Louis Vuitton, and Royal Caribbean Cruise Lines as “medical expenses.” 

Don't set up phony businesses. One of the most common dishonest return-preparation practices is to prepare returns that include non-existent businesses, sometimes based on a client’s hobbies. Collecting trout lures is fine but don't call it a business if it isn't. 

Some other fraudulent schemes and practices that have been stopped by federal courts include:

• Fabricating fake Form W-2 (Wage and Tax Statement) information;
• Claiming bogus education and first-time homebuyer credits;
• Claiming phony child and dependent care credits or residential energy credits;
• Claiming fraudulent fuel tax credits;
• Falsely exempting foreign earned income;
• Inflating unreimbursed employee business expense deductions; and
• Fraudulently inflating or decreasing a client’s income or deductions to maximize the Earned Income Tax Credit.

The IRS advises taxpayers who ask a tax professional to prepare their return to be careful in the professional they select. The IRS offers some basic tips and guidelines and even a number of instructional YouTube videos. They're worth checking out.

No less a public figure than Donald Trump freely admits to doing everything legal to minimize his annual tax payment. There's nothing wrong with that but the key word is "legal." When presented with an option that sounds too good to be true, chances are it is. 

Travel plans change all the time, so it goes without saying that consumers need to be able to change flights or cancel them altogether. By law, all airline companies need to offer consumers one of two options: either they can allow travelers to cancel their flight within 24 hours and dispense a refund or they can put the flight on hold so that the consumer locks in the current price, allowing them to shop around for a better deal.

The vast majority of airlines have adopted the former rule, where they would allow consumers to cancel their flight and receive a refund. However, up until now, American Airlines was one of the few companies that offered the hold option. This left many consumers confused when they tried to cancel their flights in the past, but now that will no longer be an issue. The Washington Post reports that the company has said that it will be switching to the cancellation policy as of today.

Hold policy still active for now

The policy change will alleviate a lot of customer confusion over why they couldn’t cancel their American flight, especially when the option is so common with other carriers. “Up until now, we’ve done it a little differently than other airlines. . . Reasonably enough, people assumed the policies were the same,” said American Airlines spokesman Josh Freed.

While the new cancellation policy may be more attractive to some consumers, the hold policy does have its merits. The system allowed consumers to put a 24-hour hold on any flight reservation that was more than a week away.

This provided something of a safety net; if the price on the flight went up, then consumers could still get the flight on the old price. If the price went down, then travelers could re-book the flight at a lower cost. The holds could also be canceled and placed on other flights, which would then give consumers another 24-hour window to keep searching for cheaper rates.

Luckily, consumers who like the hold option don’t need to say goodbye to it quite yet. While the change goes into effect as of today, consumers who want to use the hold option will still have the ability to do so for some time. Freed says that travelers will still be able to place holds on 24-hour flights booked with reward miles, and those who choose to use the American Airlines website will still be able to use it too until the company phases it out at a later date. 

Grocery shopping with a child usually means ending up with a few items in your cart that wouldn’t have made it there if you had gone solo. Kids may be small, but their influence is anything but -- especially in the eyes of marketers.

Many of the products that make it into households -- and by extension, onto parents’ radars -- are because a child first wanted it. “It’s the circle of retail life,” says David Sprinkle, research director of Packaged Facts. “Child demands product, parent learns about product through child, child ideally grows up to encourage his or her own household to use said product.”

Indeed, a Packaged Facts report reveals that more than a quarter of parents (26%) learn about a new product as a request from their child. Targeting children age six and older is especially important to marketers; it’s the age where lifelong dietary habits and brand loyalty begins. To ultimately capture their future loyalty, marketers will have to focus on developing products that appeal to younger kids.  

So how are industry players taking on the challenge? According to the new report, Kids Food and Beverage Market in the U.S., 8th Edition, three trends are currently shaping the kids food market.

Millennial mindsets

Millennial parents -- who accounted for some 42% of all households with children last year -- have a big influence on the U.S. retail food sector. Industry players are taking into account the millennial mindset toward spending.

They might have a tighter budget, but the authenticity-loving group is willing to spend more on items and services they perceive as being higher quality. Natural foods that are free of artificial ingredients are especially loved by millennial moms. And even better if the healthier foods are affordable.

Multicultural children

As the population of multicultural children continues to grow, it’s become more important to marketers to be able to effectively communicate with and target children across the cultural spectrum.

A big part of reaching multicultural families is understanding their traditional cultural values. Families values, especially, should be understood by industry players in order to appeal to the multicultural consumer and their kids. This could mean taking into consideration that extended family such as aunts, uncles, or grandparents might be doing the purchasing.

Real food movement

For adults as well as kids in the U.S., obesity numbers have been on the rise over the past 20 years. Improving kids health and nutrition means marketers will have to double as advocates of kids’ health.

The stealth health movement -- where fruits and veggies are hidden in kid-friendly foods such as pasta, pizza, and desserts -- is one way to help kids meet daily nutritional requirements. Parents and marketers alike are feeling the positive effects of helping to increase kids’ fruit and vegetable intake.

Another vein of the real food movement is the concept of better-for-you (BFY) kids’ food and beverages. Some of the buzzwords that go along with the real food movement include, “clean,” “local,” “green,” and “organic.”

Equifax and Black Book Avtivator are teaming up to give consumers an easy way to check their credit score before heading to a car dealer. The tool – Black Book Activator eCredit – will be accessible on participating dealer websites.

The tool will allow car shoppers to check their Equifax Risk Score at no charge. While it isn't the consumer's FICO score, generally regarded as the industry standard, Equifax says its score is a key measurement that can help consumers better understand the financing options they will be offered.

Knowing your credit score going into a vehicle transaction is generally regarded as an important piece of knowledge. A good score should get you a good rate. A lower score may limit your financing options.

The information provided by the new tool is both instant and private. Equifax says it is not shared with third parties, including the dealer. The dealer will access the consumer's FICO score if and when the financing process begins.

Social Security number unnecessary

Equifax says using the new tool will also be secure. Unlike some sites providing free credit ratings, users will not have to enter Social Security numbers. The tool only needs a name, address and a couple of answers to a multiple choice quiz, to verify the identity of the user.

"Our testing and consumer feedback have shown that car shoppers want access to their credit scores as they are making buying decisions, but until now, there hasn't been a simple, non-intrusive way for auto shoppers to get an instant, accurate score without sharing a lot of detailed information," Mike McFall, president of Black Book Activator Division, said in a release."Working closely with Equifax, we've created an easy plug-in for dealers, and a truly risk-free way for consumers to gain insight about which vehicles might make the most sense for their budgets, moving them one step closer to purchase."

Market testing

The tool has been tested with several dealers before the rollout. Frances Looper, Internet Manager at Love Chevrolet in Columbia, S.C., says the tool is helpful for a dealer that makes its initial contact with prospective customers online.

“As a bonus, users don't leave our site to get the information, and they don't feel as if their privacy has been compromised,” she said. “It makes everything friendlier.”

Your credit score not only determines what kind of loan you receive, it may determine whether you can actually get a loan. Carfax notes that auto lenders generally have a more flexible definition of excellent credit than mortgage lenders.

It says a minimum credit score to finance a used car might be 640 to 680, depending on the dealer. Below that, you might be assigned a subprime loan, with rates three to five times higher than prime borrowers.

Credit score benchmarks are generally higher for new car loans.

For another month, U.S. consumers paid more to drive a new car. The average transaction price in March was $33,666, up 2% over March 2015, according to Kelley Blue Book (KBB).

“March average transaction prices reveal continued increases for nearly every manufacturer, with the industry average up 2% year-over-year,” Tim Fleming, analyst for Kelley Blue Book, said in a release.

But Fleming points out that carmakers had to increase their spending on incentives, meaning the car companies themselves paid a portion of that higher price.

In another troubling sign, an increasing share of consumers had to finance their purchase over six to seven years in order to afford the monthly payment. That's bad for both consumers and carmakers.

Buying cars they can't afford

For consumers, it suggests they are buying vehicles they can't really afford. If the vehicles depreciate faster than consumers can pay for them, a number of consumers could quickly find themselves under water, owing more for a car or truck than the vehicle is worth.

The bad news for carmakers – if a consumer is taking seven years to pay for a car, he or she will be less likely to replace it until after that time.

Just because the average transaction price continues to rise, it doesn't mean the price of all cars in the showroom are rising. It simply means that consumers are choosing to purchase more expensive cars, or cars with more options.

With lower gasoline prices, consumers are buying larger cars and trucks which tend to be more expensive than their smaller, more fuel efficient counterparts.

Good more for Chrysler and Toyota

According to KBB, Fiat Chrysler scored the largest percentage increase in transactions prices in March, rising 3.3%. The Dodge brand was particularly strong – up 5% – on robust sales of the Challenger, Charger and RAM pick-up.

Toyota was close behind, with transaction prices rising 3.1%. Toyota scored gains on every model except the Venza, which has been dropped from the fleet line up.

Among brands, Volkswagen group was the laggard. Its transaction prices were down 4.5% as it continues to wrestle with the diesel emissions cheating scandal.

That may create opportunities for consumers looking for a bargain, since the prices of both the Jetta and Passat, two models affected by the brand’s diesel crisis, were both down 9%.

If you are getting ready to buy a home or refinance an existing one, send Janet Yellen a thank you note.

The Federal Reserve Chair has just ensured you'll continue to have a nice low interest rate when you are ready to close.

Yellen made a speech to the Economic Club of New York this week that is having widespread impact, and not just on mortgage rates. Yellen made it clear she now believes economic conditions have changed since December, when the Fed announced a 25 basis point rise in the Federal Funds interest rate.

It was a minor increase, but with it the Fed served notice that six years of 0% interest rates was ending, and monetary policy had to get back to normal. More rate hikes were expected this year.

The Fed was worried that the unreasonably low cost of credit had distorted the value of assets – especially stocks. It also wanted to be able to lower rates in the future if inflation got out of hand.

Reality intrudes

The problem was that the economy – both in the U.S. and globally – showed real signs of weakness. The stock market plunged as Wall Street realized the cheap money party was ending and interest rates were rising into the teeth of a possible global recession.

When Yellen made her speech this week, signaling that the Fed is backing away from its plan to boost rates several times this year, stocks soared. More money also poured into U.S. government bonds, raising their price but lowering their yield – the interest they pay.

That is significant to home buyers because 30-year mortgage rates are closely linked with the yield on the government's long-term bonds.

Rate the same as a year ago

Bankrate reports that its March 30 survey of large mortgage lenders show the 30-year fixed-rate mortgage rate fell immediately, from 3.9% to 3.83%. That's almost the same as it was a year ago, when mortgage rates were at historic lows.

Conventional wisdom called for mortgage rates to steadily rise throughout 2016, taking some of the pressure off rising home prices, especially in the nation's hottest markets. Now, it looks like mortgage rates will stay low, at least for the foreseeable future.

That doesn't sound like a problem, but it might be. Lower interest rates mean buyers can afford to pay a little more for a house, meaning sellers can hold out for more money.

The problem comes in because there are so few homes – new and existing – for sale. Economists worry that could force prices to unsustainable levels that would not be healthy for the housing market.

The Manhattan Toy Company, of Minneapolis is recalling about 2,500 Busy Loops table top toys in the U.S. and Canada.

The round plastic beads can break, posing a choking hazard.

The firm has received two reports of beads breaking off the toy. No injuries have been reported.

Busy Loops table top toys have orange, green, blue and purple plastic tubing with plastic beads threaded on the tubing that can slide up and down. The tubes sit on a blue plastic base with an orange plastic suction cup.

The toy is about 4.5” W x 4.5” L x 7” H. The model number 700470 and lot code FH are printed on the bottom of the blue base.

The toys, manufactured in China, were sold at BuyBuy Baby and other toy stores nationwide, and online at Amazon.com and Kohls.com from September 2015, through January 2016, for about $15.

What to do

Consumers should immediately stop using the recalled toy and return it to the store where it was purchased or contact Manhattan Toy for a full refund.

Consumers may Contact Manhattan Toy Company at 800-541-1345 from 9 a.m. to 5 p.m. (CT) Monday through Friday or online at www.manhattantoy.com and click on Recalls for more information.