Ask Dr. Per Cap

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. Nimiipuu Community Development is happy to share this column as partner with Native Financial Learning Network funded by Northwest Area Foundation.

Gift Card Exchanges

 Dear Dr. Per Cap: 

I got a bunch of gift cards for Christmas.  Some are for stores I don’t shop.  What’s the best way to exchange them?

Signed, 

Too Many Cards

Dear Too Many Cards,

With so many people social distancing and staying away from stores, purchases of gift cards were way up this past holiday.  Plastic or electronic, many people are stuck with gift cards they won’t use.

Fortunately, there are options for unloading unwanted gift cards.  A first step is to check out online gift card exchanges.  Spoiler alert – there are a ton of them so do your homework.  

Most exchanges are third party businesses that take a cut for connecting people looking to buy, trade, or sell gift cards.  Pay close attention to fees and red tape.  Some stores have kiosks where you can exchange gift cards too.  Either way check reviews to make sure you’re dealing with a reputable exchange that doesn’t charge more than 15% of a card’s value to take it off your hands.

Also, steer clear of consumer-to-consumer platforms like eBay and Craigslist.  Both are loaded with gift card listings where buyers and sellers can deal directly.  However, you face a much bigger risk of fraud so I don’t recommend them.

Interestingly, many businesses count on their gift cards to be only partially used or not at all.  In fact it’s estimated annually over $3 billion of unredeemed gift card balances end of booked as revenue by the businesses that issued them.  Gives a whole new meaning to the term “double dipping.”

Don’t let that happen.  If you find yourself with a small balance on a gift card, states such as Montana, California, Oregon, and Washington have “cash back” laws that require stores to pay a card holder for any balance under a certain amount, although it’s usually only between $5 and $10.   But even if your state doesn’t have a cash back law it doesn’t hurt to ask a store for a gift card balance refund anyway.  You might be pleasantly surprised.

Here’s another cool hack.  Amazon lets customers use small balances on competitors’ gift cards to buy their gift cards.  Since digital Amazon gift cards can be purchased in any amount, a few small gift balances applied to an Amazon account can up to a nice sum.

A final little known fact – some states will claim the balances of gift cards that have been lost or sitting around a few years.  They might try to track down consumers or list the funds as unclaimed property.  If you’re bored some evening check out https://www.classaction.org/gift-card-laws for an interactive map listing every state’s gift card fees and redemption laws.

Geez, I wonder if people that give gift cards realize how much of a hassle they can be.  I think I’ll take up knitting and give socks next Christmas instead of gift cards.

Risky Business

Dear Dr. Per Cap: 

I have student loans and a car loan.  Why did I have to provide so much more personal information when applying for the car loan as opposed to the student loans, especially when the student loans amount to a lot more borrowed money?

Signed, 

Studying Hard

Dear Studying Hard:

I’m glad you’re paying attention.  Banks that offer consumer loans dig deep into borrowers’ finances because they want to make sure the loans are paid back.  Common sense says the same logic holds true with student loans but not so fast.

Consumer loans are approved using the 3 C’s of Credit – Capacity, Character, and Collateral.  And yes, it gets very personal.

Capacity, the ability to pay back a loan, determines if a person has enough income to make loan payments.  Lenders review monthly debt payments and paystubs to make sure a person isn’t top-heavy with debt.

Character is a person’s reputation as a reliable and trustworthy borrower.  Late payments, repossessions, and other delinquencies show up on a credit report with a low credit score.

Collateral refers to personal resources and assets a borrower can use to guarantee repayment.  Collateral could mean money in the bank or an existing asset.  Get ready to fork over bank statements and car titles.

However, none of these rules apply when it comes to the no-questions-asked student loan industry.  Student loans come in two types – government student loans which make up about 90 percent of outstanding student loans and private loans backed by the government which make up the remaining 10 percent.

Uncle Sam lends students more than $100 billion annually to cover tuition at colleges and universities across the country, all the while disregarding students’ credit scores and fields of study.  The earning potential of a specific degree versus the cost of a student loan is also ignored.

If this sounds like riskier business than Tom Cruise in the eighties you’re not alone.  Many federal student loans go to student borrowers with sub-prime credit scores (620 and below on a scale of 300 to 850).  Moreover, it’s estimated that $435 billion of current government student loans will default badly enough to never be paid back.

At the root of the problem lies the fact that unlike consumer loans, student loans are guaranteed by the federal government.  That means if students don’t pay them back American taxpayers take the hit not a bank or a school.  This government guarantee has enabled total student debt to become the largest type of personal debt in the U.S. next to home mortgages.  It’s also why student loan applications don’t require as much personal info as consumer loans.

The problem has gotten so bad many voices are calling for student loan forgiveness.  In fact the incoming presidential administration hopes to automatically forgive $10,000 of student debt for every American with federal student loans.  Others want all student loans forgiven.  That’s right $1.6 trillion of debt wiped clean.

Naturally some folks who don’t have student loans or paid them back as agreed hate this idea, claiming it would reward people for bad financial decisions.  Others say that forgiving student loan debt would be good for the economy because the repayment money could be better spent elsewhere.  Still others point fingers at colleges and universities where average tuition has skyrocketed more than 1,300% since 1978.

Like every touchy financial topic, there’s no shortage of strong opinions.  But here’s an idea.  Just because getting a student loan is easy doesn’t mean a person needs to take one.  Instead students can do their own due diligence to determine if the 3 C’s stack up in their favor, regardless of how big a loan they qualify for.  Keep studying hard!

Happy Meal Price Hike

 Dear Dr. Per Cap: 

I know they’re not the healthiest option but for a single parent on the go, I buy a lot of Happy Meals.  I heard McDonald’s is raising the price.  What’s up?

Signed, 

Happy Dad

Dear Happy Dad:

I think Happy Meals are the go to treat for a lot of Native kids whose families live near a McDonald’s.  And while there are certainly more nutritious dining options – come on nobody chooses the apple slices over extra fries!  They sure are convenient and a huge hit with the kiddos.

This topic is close to my heart.  Our family has pretty much completely stopped eating restaurant food since COVID hit last spring.  However, our one indulgence comes on Friday afternoons when I take my six-year-old daughter through the McDonald’s drive thru for . . . . You guessed it – a Happy Meal!

Your question is timely because I’ve always wondered how those little red boxes can sell so cheap, less than four bucks where we live.  Especially considering that some Happy Meal toys are decent quality and cool enough to be sought by adult collectors.  I know I’ve got an old Cowboy McNugget laying around the house somewhere.

Turns out Happy Meal toys aren’t cheap even when manufactured at enormous scale. In fact McDonald’s actually has to subsidize the cost by providing store operators with a $300 monthly rebate to allow a lower sale price for all of those loveable little action figures, race cars, and spy kits.

Well, McDonald’s executives plan on ending the Happy Meal rebate party early next year.  Instead they want to spend the cash, which adds up to more than $4 million a month across all of its U.S. based restaurants, on technology updates and advertising costs which have gone up during the pandemic.  Yeah, you read that right – four million bucks a month to keep families lovin’ it.

Naturally many McDonald’s restaurants will raise prices to offset the added cost.  It’s estimated customers can expect to pay about an extra 25 cents to indulge in a kid sized burger or nuggets.  Not a huge price hike but every penny counts when it comes to the family budget.  So if a quarter is a deal breaker, stop by my house any day but Friday and join us for bologna sandwiches and carrot sticks.  Hey, I’m kidding!  Don’t stop by.

Hmm…on second thought, I guess you can stop by.  But only if you bring a classic Happy Meal toy to trade!

Making a Change

Dear Dr. Per Cap: 

Every month I try to manage my money better but I keep overspending.  I ask myself if something is a want or a need but in the end I keep making the same mistakes and fall further behind with my bills.  Getting ahead financially is not as easy as people make it sound.  Help!

Signed, Ready to Give Up

Dear Ready:

Your honest and straightforward approach is refreshing and brave.  Thank you for being real.  Furthermore, I understand your frustration.  There is no magic formula or easy answer for getting on track financially.  Sometimes people assume because I’m Dr. Per Cap I have all the answers and they’re disappointed when I have to tell them I’m only a guide.  The answers they seek lie within.

Sure I give tips and share tools and resources to help you get there but ultimately success is all up to you.  There are also tons of people giving personal finance advice on TV, online, and in books, but unfortunately much of it is the same – spend less than you earn, build a savings cushion, manage debt wisely.

Yes, much easier said than done I admit.  I know how hard it is to save when there are fun things to spend money on.  But here’s something I can tell you from personal experience.  The hardest part is getting started.  Those first few weeks or maybe months can be brutal. I won’t lie.  Making those first choices – less eating out, no bingo, less money on Christmas presents.  It can feel like going cold turkey.

But trust me it gets easier.  It really does.  Once you get past that initial shock of making a change it gets easier as you go.  And the key is not to try to condition yourself so you don’t feel the pain but to instead create a new lifestyle.  One where you don’t want those things you think you needed before.

Bad habits don’t usually develop overnight and while they’re not broken overnight either I think many people are surprised at how quickly they can make a positive change when they put their mind to it.  Every week you get stronger and more disciplined with a renewed sense of purpose.  And the longer you stay invested in a new goal the more you have to lose if you slip up.

That’s probably the greatest motivator – the fear of sacrificing all of your hard work.  Diets are the same way.  It’s no big deal to cheat on a new diet you’ve only been on for a week.  But it’s a huge deal to cheat on a diet you’ve been sticking to faithfully for 3 months.

When you get through the suffering you’ll be able to enjoy the rewards – more savings, bills paid on time, less debt.  Confidence soars and you’re on your way.  Hang in there.  The best is yet to come.

OST Name Change

Dear Dr. Per Cap: 

Why did the Office of the Special Trustee change its name and how will this impact my IIM account?

Signed, 
Interested Beneficiary

Dear Interested Beneficiary:

On October 1st the Bureau of Trust Funds Administration assumed the fiduciary duties previously managed by the Office of the Special Trustee for American Indians aka OST.  

This transition dates back to 1994 when OST was created to facilitate trust reform following a lawsuit against the Bureau of Indian Affairs for failing to uphold trust responsibilities to Native American beneficiaries.  Originally OST was intended to be a temporary office under the Secretary of the Interior but the organization endured for 26 years.

I recently spoke with Treci Johnson of External Affairs at the Bureau of Trust Funds Administration aka BTFA.  She explained that although there is a new name the mission of BTFA remains the same – to manage the financial assets of American Indians held in trust by the Department of the Interior.  These tasks include annual disbursements of over $1 billion and active day-to-day management and investment of over $5 billion on behalf of tribal and individual beneficiaries.

Ms. Johnson also stressed that BTFA will operate under the Indian Affairs umbrella with improved collaboration, better efficiencies, and shared resources.  Staff, such as fiduciary trust officers who work with beneficiaries at the community level, will maintain the same duties and OST email addresses will remain active through the end of 2020.  After which they will change to the BTFA.gov domain.  Local field offices will also remain in operation when safety permits.

Other resources such as The Trust Beneficiary Call Center will operate as before and improvements will be made to the OST website which will also eventually move to BTFA.gov.  Moreover, Individual Indian Money (IIM) Accounts will continue to issue statements and funds will be safely managed and accessible to beneficiaries.  There are also plans to roll out an app based mobile experience for beneficiaries needing user friendly access to information.  BTFA will feature different branding too so keep on the lookout for a new logo, messaging, and related images.

Another interesting development is a partnership between BTFA and a Native owned capital management firm.  This will mark the first time that an outside investment manager working on behalf of the federal government and Indian Country will also invest back into Indian Country.

For more information about the Bureau of Trust Funds Administration and the ongoing transition from OST contact the Trust Beneficiary Call Center at 888-678-6836 or tbccmail@btfa.gov.  You can also reach out to local staff within BTFA’s twelve regions to check IIM account balances, update an account, or change your address.  Contact info is available at https://www.doi.gov/ost/contact-us.