Today’s Yahoo!Finance column looks at bank overdraft fees. Legislation pending in Congress would characterize overdraft fees as financing, and require financial institutions to show the fee as an annual interest rate (APR). Because these overdraft loans are short and the fees are high, they resulting APRs are triple-digit figures or higher. Here’s how I calculated the APR for the example in the story, in case you want to figure out how to do it for an overdraft fee you incurred.

In my example, the consumer thinks he has $1,300 in his account, but he only has $1,150. He conducts six debit transactions totaling $180, and then pays his rent, for $1,100. He’s overdrawn the account by $130.

Bob’s transactions arrive in one batch at the bank. Instead of paying the six transactions and charging a single overdraft fee on the rent check, the bank pays the rent check first, followed by one transaction for $50. It then provides overdraft loans for the other five payments, so Bob incurs five separate fees of $34 each – or $170.  

Two weeks later, Bob deposits his paycheck, and the bank gets its money back. Bottom line: When Bob pays $170 for a two-week loan of $130, the annual percentage rate comes out to 3,400 percent.

Here’s the math:

To figure out the annualized charge, multiply the two-week interest charge, $170, by 26 two-week periods per year (170 x 26 = 4420)

To get the annual interest rate, divide the annualized charge by the loan amount and multiply by 100 (4420/130 = 34 x 100 = 3400%

If he paid the overdraft loan back in one week instead of two, you would multiply by 52 instead of 26 to get the annualized charge. If it took a month, you’d multiply by 12. 

I’d welcome your stories about banks and overdraft fees. Comment here or email me at laura at laurarowley dot com.

This week’s Yahoo!Finance column looks at the wedding industrial complex, investigated by New Yorker writer Rebecca Mead in her new book, One Perfect Day. Mead, who is British, told me that in most countries, weddings aren’t the enormous production they are in the U.S. “There’s a lot of stuff people spend money on at weddings that isn’t about the core of a wedding, which is getting family and friends together and celebrating,” says Mead. “All of the accessories, the wedding favors and the bits and bobs that are all part of the package – that stuff is not what anyone really remembers.”Mead herself got married during the writing of the book. She and her fiancé were wed at City Hall in New York with a few witnesses on a Thursday and then threw a party for 80 friends in the garden of their Brooklyn home that weekend. “I described what I did to a wedding planner and she said, ‘oh, I’m planning a wedding just like that,’ and I thought, ‘no you’re not, because the point is, I didn’t have a wedding planner.’”

That said, it’s still expensive to throw a dinner for 100 of your closest family and friends. I wanted to include a couple of practical ideas here to save money:

Wedding Dresses: Consider cheap chic. Target has begun selling wedding dresses for $50 to $150. (The average price is $1,025.) J. Crew offers a few styles in the $200s. On Ebay, brides are offering both never-worn and second-hand dresses. Last fall, H&M offered a $350 wedding dress with its special Viktor & Rolf line. When I got married, my cousin made mine as her gift.

The Fake Cake: Companies like www.cakerental.com will ship a display cake that’s foam on the interior and contains a compartment to place a small portion of edible cake for the cutting ceremony. Then the display is removed and guests are served a regular sheet cake from a local bakery or wholesale store. 

Receptions: Consider renting a space rather than going with a full-service hotel or reception hall. Recent bride Anne Marie Acosta emailed me about her experience: “There was a new community center in the city of Coronado (near San Diego) right along the water with a breathtaking view.  There was a flat fee to rent but we could choose our own caterer and bring in our own alcohol with bartenders hired through the caterer (no corkage fee). We paid $400 for 2 bartenders and went to Costco to buy our alcohol.  For a total of $1500, we had open bar all night, and not with cheap alcohol either.”

I did something similar for my wedding — rented a ballroom space in New York that provided only tables and chairs and a catering kitchen. Like Anne Marie, we bought our liquor wholesale, and hired a friend to freelance cater the dinner. (We were lucky in that another friend owned a restaurant nearby where we could cook the food.) On the downside, we had to hire a day-of wedding coordinator to make sure the rental items, from tablecloths to glasses and utensils, were moved in and out of the space.

Engagement rings and wedding bands: Doug S., a Yahoo reader from North Carolina, suggests using a wholesaler like www.bluenile.com, which he says offer the same products as a jeweler at 33-50% off the retail price. “Just compare a basic platinum wedding band at bluenile to a retail franchise, and the difference in price is shocking,” he wrote in an email. You can take the ring to an independent appraiser to verify that you received what you paid for (and you’ll need to do this anyway if you want to insure the ring).

Musicians: Contact local colleges or universities, especially if the institution has a school of music, suggests reader Doug S. Most flagship state universities have these, and they typically keep a registry of contacts available for public distribution in their front offices. Ask for experienced student ensembles, such as a string quartet; or soloists who can play piano or organ, or even a singer.  

Flowers: Green wedding coordinators suggest getting flowers from a farmer’s market. I was lucky again in that my future sister-in-law was a florist and did our flowers wholesale. But we put two bouquets at the entrance to the reception space and substituted votive candles on each table, a big cost-savings. For more on green weddings, check out this story at The Green Life.

Local discussions boards: Search online for a local website where you can get honest feedback on the prices and qualities of wedding vendors. Acosta says she found an array of affordable vendors through bridalinsider.com, a San Diego site where brides can chat about their experiences. As Acosta put it: “The best part of the discussion board: brides that finished their weddings and posted reviews of their vendors and mistakes they’ve made. A goldmine for a newly engaged bride-to-be.  I found all my vendors here and even a tip off for my venue.  Not all brides are Bridezillas, and are really great at helping one another!”

Alternate Registries: Older brides and grooms typically have a lot of the stuff you’d find in a department store registry. A number of websites allow couples to set up registries to fund their honeymoon, including The Big Day, HoneyLuna, Distinctive Honeymoons and Traveler’s Joy. Websites like Greenwish.com encourage couples to register for their “dream wish” – including a home downpayment. Click here for a sample from their registry. For the generous couple who would like their well-wishers to give gifts to charity instead, consider this site.

Looking for a little stress relief amid your wedding planning frenzy? Check out this site: www.stupidweddingcrap.com

I’d welcome your tips and ideas for minimizing wedding costs. Comment here or email me at laura at laurarowley dot com.

According to a study released today by the Consumer Federation, many consumers still don’t understand their credit scores, despite the increasingly powerful role they play in our financial lives.

Half of respondents called their knowledge of credit scores “fair” or “poor.” Three-quarters thought their income had an influence on their score. (It doesn’t.) About one-third thought that their state of residence and their education affected their score. (They don’t.) Another one-third didn’t know that paying off a big credit card bill would improve their score. Just 47 percent could name the three major credit bureaus (Experian, Equifax and TransUnion).

The study found that consumers with an average score would reduce card finance charges by $76 annually if they raised their score by 30 points. If all consumers raised their scores by 30 points, total consumer savings would exceed $20 billion. A few quick examples from www.MyFico.com:

· Raising one’s credit score from 580-619 to 660-699 on a 30-year fixed mortgage for $300,000 would reduce one’s annual interest expenses by $5,148.

· Raising one’s credit score from 620-639 to 670-699 on a 15-year home equity loan for $50,000 would reduce one’s annual interest expenses by $1,044.

· Raising one’s credit score from 590-619 to 660-689 on a 36-month auto loan for $25,000 would reduce one’s annual interest expenses by $708.

A few weeks back I wrote in my Yahoo!Finance column about a survey by creditcards.com, which also found that the majority of respondents didn’t understand how to boost their credit scores. For example, a majority believe that it would be financially prudent to have no debt whatsoever, close credit card accounts, and have unused credit cards.

All three can hurt. In the case of no debt, this does not mean you should carry revolving debt from month to month! It means you shouldn’t pay for everything in cash. You need to establish good credit history in order to get a mortgage, rent an apartment, etc. For instance, pay for groceries, gasoline and other day-to-day expenses on a credit card, and pay off the balance on time and in full every month. Never max out a card, and don’t play that game where you move credit from card to card.

As for closing credit card accounts, this can hurt your score because it reduced the amount of credit you have available, causing a higher “credit utilization rate.” (Example: You had $10,000 in available credit and use $2,500 of it a month — for a utilization rate of 25%. You close a card with a $5,000 credit line. Now you have $5,000 left, and you’re using $2,500 of it — or 50%. People with the best credit scores use 10% or less.)

Finally, never use your credit score to get 15 or 20 percent off a retail purchase by opening a store card. If you spend a day at the mall opening a lot of open credit, the credit bureaus look at you as having the potential to go crazy one day and charge up all those cards. 

Be sure to order your free credit report and clean up any errors. According to the Consumer Fed, only 59 percent of consumers have ever ordered their reports. Experian, Equifax and Transunion must make a report available to you for free once a year. You can request your free report by visiting www.annualcreditreport.com; by calling (877) 322-8228; or by sending a written request to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. (Beware of copy-cat websites that may be trying to steal your identity!)

For tips on getting out of debt, see this story.

This week’s Yahoo!Finance column is on sneaky traps set up by credit card companies. Another trap to watch out for is the cash advance. Consumer Action, an advocacy group in San Francisco, says cash advance interest rates are approaching those of pay-day lending firms. oir example, if you take a $100 cash advance for only one month, it can cost you $12.02 in fees and interest, according to Consumer Action’s survey. On an annual­ized basis, that’s nearly 145 percent interest.

The survey I mentioned in the story by creditcards.com also found consumers don’t shop around for a new credit card. More than half of credit card owners said they use a card that’s not a good fit for them. Yet, they don’t like any of their options for finding a new one. Only one in five has actively searched online for the credit card best suited to their needs. And survey respondents are universally dismissive of the offers they receive in the mail, with nearly 90 percent saying they shred the promotional offers or throw them away.

I’m guilty of this. I have a Citicard that offers American Airlines miles, which was great when I lived in New York City. But now I live in New Jersey, and Newark airport (20 minutes from my house) isn’t an American Airlines hub. I tried to redeem miles for a family trip someplace warm next February and there was literally nothing available, anywhere. (I checked Florida, the Caribbean, Mexico, Texas, etc.) The card also charges an annual fee, which is stupid, since there are a million cards out there with similar benefits that don’t charge a fee.

I need to switch to a good cash-back card…if you have a card you like, let me know! Comment here or email me at laura at laura rowley dot com. Meanwhile, if you’re working your way out of debt, click here for tips.

I bought a new chair for my office. It’s a modern-looking thing, olive green fabric with a curving pattern and walnut legs. I looked around for more than a year before settling on a piece from homedecorators.com, which has decent quality for the price. The new seating replaced an Adirondack stick chair that my cousin gave me a long time ago — a rugged, outdoorsy thing suffering from a bad case of claustrophobia. It now lives on the patio, and I can tell it’s happier there.

I know this is true because I spend more time on the patio than I used to, thanks to a gift I bought for my husband on Father’s Day. The gift was objectionable on two counts: It was completely unromantic, and was actually for me, not him. I got a Mosquito Magnet Defender at Home Depot for about $300.

It’s a contraption that looks a little like a gigantic plastic decapitated mosquito head on a stick – Freudian perhaps, as the thing is awesome at extinguishing the little blood-suckers. You insert a little octenol, attach a propane tank and plug it in. The mosquitos think it’s a human, fly inside and die of dehydration. The woman at Home Depot told me I should have installed it in May, because it takes four to six weeks to disrupt the breeding cycle. But a week after installation, the trap was sucking ‘em in by the dozens and my patio was a new oasis of bite-free calm…and style, thanks to the new green outdoor pillows from Home Depot I picked up on the same trip. (They’re identical to ones I admired from Pottery Barn — at about 1/3 the price.)

When I found myself dropping a few hundred more on sale items from Crate and Barrel and Red Envelope (justifying them as early Christmas presents, with a few for myself) I realize I was in deep in lifestyle creep.

Both my husband and I are having stronger years in our respective businesses than last year. But since we hadn’t set specific goals for the extra income, I was distributing it randomly in ways that may not have been optimal to my economic utility…or, to put it more frankly, pissing it away. That’s lifestyle creep – this unconscious thing that happens when you get a raise, or bonus, or a repeat client. The money just disappears on stuff that will probably provide little thrill in a few months.  

I would argue I am getting utility out of my new office chair, the Mosquito Magnet and even the outdoor pillows. I probably could have skipped the shopping spree at C&B and Red Envelope. But the smart approach would be to sit down and be thoughtful about the extra income. Here are a few things I should have asked myself before going shopping:

-Am I directing enough of my income to real necessities – retirement, college savings, debt pay-down? (We have no debt, other than our mortgage, but that would be the first place a windfall should go.)

-What maintenance necessities are around the corner? The entire house will have to be painted in the next few years, and a very old, very dead tree has to removed from the front yard. (I frankly can’t think of a less satisfying way to spend thousands of dollars. But this is the joy of homeownership. And will prevent it from possibly falling on the house, turning an annoying expense into a catastrophic one.)

-What experiences do I want to have, and with whom? Research shows you’re better off creating memories than purchasing stuff. For instance, we went canoeing with the kids on Sunday. I know they got a bigger bang out of that than my office chair.

-Can I use the money to create more time? One of my goals has been to work half-time in July and August and spend more of that time with my three kids. But I somehow forgot that I could use the extra cushion to cover ordinary expenses and work less in those months.

-Can I use the money to invest my career, and make the income boost self-sustaining?

A jump in income is a great opportunity to take some time and really think about what you value most in life; to create a picture of what you want to accomplish in a holistic way. What are your goals for close relationships and friendships? Continuing education? Career? Family pleasures, like travel? Housing? Public service and charity – what difference do you want to make in the world? And how can money facilitate that picture?

I’m in the process of revisiting five-year, one-year, six-month, and one-month goals based on what I value most in life. Then I’ll figure out what I need to do this week, and today, to make them happen. If I walk through this exercise and our family income continues to grow as I hope, the money will be a tool to serve our values, and create long-term happiness…rather than just fund a mindless shopping spree.

How do you avoid lifestyle creep? Comment here or email me at laura at laura rowley dot com.