1. More Credit-Card Debt Needed

    Last week we established that debt lifts young folks’ self esteem. The next step along this ridiculous path, of course, is that our struggling economy needs — wait for it — more credit-card debt.

    USA Today: More Credit Card Debt Might Be Good…

    I find this line of thinking fascinating, really. No one has any money; no one has any savings to speak of; no one is spending; thus, the economic recovery is faltering. The answer? More debt. That’s what it’ll take to get people spending now.

    Forget saving money and slowly repairing Joe Sixpack’s household balance sheet, so recently decimated by house-price declines and more than ten years of rollercoastering stock markets. No, what’s important is that those credit cards come back out and start lighting up cash registers again.

    Yeah, that’s the ticket.

    And I’m particularly enthralled with this last chunk of the article. Here we’re introduced to a Houston couple who’ve decided, apparently, that carrying $15k in plasti-debt is no reason to not “go get some stuff” again:

    Some are loosening up. Amy and Brian Stonesifer of Houston halved their $30,000 in credit card balances the past year after their interest rates soared and Amy, 45, began worrying about her job security at a promotions firm. But after a year of scrimping, they recently charged new clothes, a grill and other non-essential goods. “We just got tired of not having things,” she says.

    Only in America would you find someone who’d rung up $30k in credit-card debt lamenting the sad, sad state of “not having things.”

    My question: Which one of Dave Ramsey’s Baby Steps says to reduce your credit-card debt by half — to a level that’s still five digits’ worth, mind you — and then go out and charge a grill and some Dockers at Target?

    Hmmph. I totally missed that one.



  2. Business Credit Cards: Avoiding the CARD Act

    I imagine most IYM and Money Musings readers are seeing what I’m seeing: After a drop-off in 2008 and 2009, credit-card applications are hitting my mailbox with a vengeance these days.

    As a rule, such applications have a date with my shredder pretty quickly. I don’t really pay much attention to the type of credit-card application it is (personal or business). As a family who uses cards only for convenience and cash rewards, and with no debt other than our mortgage, we have no real need for more plastic in our wallets and/or purses. (‘Tis better to keep wallets as barren as possible, anyway, just in case of loss or theft.)

    According to the Wall Street Journal, though, our beloved credit-card companies have found at least one loophole in the Credit Card Act of 2009:

    WSJ.com: Beware That New Credit-Card Offer

    Yep — small-business (i.e. “professional”) cards aren’t covered by the Card Act and its restrictions. Therefore, card companies are now flinging these offers hither and yon.

    While the companies outwardly state that they’re not doing this to circumvent the Card Act, and that they’re not sending out more professional-card apps than they did prior to the Act’s passage, you and I both know the likelihood of bankers to not exploit a revenue-enhancing loophole is pretty much nil.

    According to the WSJ:

    Until recently, professional cards largely had been reserved for small-business owners or corporate executives. But since the Card Act was passed in March 2009, companies have been inundating ordinary consumers with applications. In the first quarter of 2010, issuers mailed out 47 million professional offers, a 256% increase from the same period last year, according to research firm Synovate.

    Wow. What a coincidence.

    And here’s a bit of contractual balderdash you’d never expect to see from a TBTF bank: Card issuers have “simplified” the professional-card applications so that just about anybody can be a “small business owner.” Yes. Really and for-true.

    Card issuers are easing their application requirements for professional cards, too. In July, for example, Chase sent out an offer for an Ink From Chase Cash Business Card that required much less information than earlier offers.

    In January, mailings for the card asked prospective cardholders to provide the name of their company, the nature of the business, its address and its federal employer identification number. In the July mailing, cardholders merely had to check a box that said “Yes, I am a business owner” or “Yes, I am a business professional with business expenses.”

    “We are always looking for ways to simplify our application,” says Ms. Rossi, the Chase spokeswoman. “All applicants are required to confirm they are a small-business owner or someone who is authorized to charge expenses to the business.”

    Whatever. I’m surprised the checkbox isn’t negatively geared, with text like “No, I am not a small business owner” or “No, I am not a business professional with business expenses.” That way, by NOT checking the box (which is what most in-a-hurry folks would do), you’d be saying that you were, in fact, a small-biz operator looking for more plasti-cash.

    Which your sneaky TBTF bank would be only too happy to provide.

    Watch Those Applications Closely!

    The moral of the story, of course, is that consumers will have to be just as vigilant about their post-CARD-Act credit applications as they were about their pre-CARD-Act apps. Big surprise, right?

    As the kids would say, D/N/T (Do Never Test) the willingess of a card company to backdoor its way to profits. If you haven’t learned that by now . . ..



  3. Rewards Checking Gets a Shot, Part 2

    Back in June, I blogged about my household’s upcoming changeover from using ING Direct’s Electric Orange checking account (my EO review) to a rewards checking account offered by one of our in-state credit unions.

    The single reason for this change?

    Interest, baby. Interest.

    As of this post, ING’s Electric Orange pays a rate of 0.25% APY, and its Orange Savings pays 1.10% APY. Contrast this with the 4.38% APY offered by the credit union’s rewards checking (on balances up to $25k), and the difference is … well, huge.

    Now Our Interest Pays The Water Bill

    After consolidating various accounts, we’ve gone from earning $8 to $15 per month in interest to earning $60 to $70 per month. Nice jump, huh? Those earnings are enough, after taxes, to pay for our monthly water and trash bill … and then some.

    So yes, I’m pleased with the change. So far. I still don’t like using a debit card, but since we only have to use it 12 times per month to get the maximum advertised rate, I suppose I can live with that. (We use it only for small-amount, in-person purchases. Any other purchases go on one of our cash-back credit cards, which we pay in full each month.)

    I probably should’ve looked into rewards checking long ago, but my aversion to debit-card use is pretty darn strong!



  4. Contingency Planning: Lost or Stolen Wallet

    We all have our little fears. One of mine, oddly enough, has to do with reaching the end of a discount superstore checkout line:

    I have a cart-full of stuff. I put my stuff on the conveyor belt, and the cashier rings it up. I reach back for my wallet …

    … and find nothing but an empty pocket.


    And right there is where my heart cliff-dives into my stomach.

    Now, to be fair, my inner “fear” of this probably has more to do with me being placed in an awkward situation (needing to pay for stuff at checkout, but having no money to do it with) than it does with the actual loss of my personal filing cabinet (i.e., my wallet).

    But in reality, it’s that second condition that would cause the larger turmoil. And dramatically so.

    To date, I have never lost my wallet. But it occurs to me now that doing so would precipitate a huge mess in my life. I mean, I’ve never gone through any other guy’s wallets, but I suspect that I keep a lot of stuff in mine, relatively speaking.

    Careful consideration suggests that having all that “stuff” fall into the wrong hands could prove to be really, really nasty. And taking a few actions now, plus having some sort of contingency plan in place should my fears be realized, is probably a really good idea.

    Perhaps both of us, Dear Reader, should practice some wallet “preventative maintenance.”

    Know “What’s In Your Wallet”

    I will be deadly honest here: I have not inventoried my wallet in years.

    If that thing disappeared tomorrow, would I know everything that it held?

    Would I know what accounts were compromised?

    Would I know what banks and institutions to call to notify and/or close those accounts?

    Embarassing as it is to say, I certainly wouldn’t have those answers immediately. Sure, I could garner a lot of the required info from my Quicken 2010 Deluxe file, but that would take time. And it wouldn’t be exhaustive. For stuff like insurance cards, I’d need to dig through our filing cabinets as well. Which means more time. And more opportunity for bad stuff to happen with my information.

    So obviously, knowing what’s in your wallet is key. With that in mind, it’s time to see what I can do to, uh, mitigate the potential damage.

    Minimize Wallet Contents

    The way I figure, the best way to keep your wallet from becoming some identity thief’s Jackpot of the Month is to make sure that said wallet is (1) as empty as possible, or (2) as full of useless crap as possible.

    (When Mr. Thief scours all the hidden folds of your wallet, hoping to score a Benjamin or two, and finds only a couple of Arby’s receipts from 1997 … well, it’s fun to imagine the look on his face.)

    In this vein, I’ve read that some guys don’t even carry their driver’s licenses in their wallets. Instead, they elect to keep it in their vehicle … say, in a glove-box wallet, or in a console compartment. While I understand the goal — don’t let the thief get your address, etc. — the side-effects seem way inconvenient to me. And what if your car gets stolen? According to at least one source (though a flimsy one), that’s way more likely to happen than having your wallet pilfered.

    Anyway, considering your wallet’s contents, odds are that your name will be in there on SOMETHING. But if you’re good with keeping your driver license elsewhere, you might as well yank out anything else that could tip off a thief to your address, birthdate, workplace (think business cards), and other vitals. Why make identity theft any easier than it already is?

    Don’t Be An Idiot

    Yes, these should go without saying. But a little reinforcement can’t hurt.

    Don’t carry your Social Security card in your wallet.

    Don’t keep your Social Security number anywhere in your wallet.

    Don’t keep ATM pin numbers in your wallet.

    Do Consider Human Nature

    If you think human nature matters, regardless of situation, then you might want to keep baby pics in your wallet, though. If you do, display them prominently. There’s no charge for playing to someone’s sympathies!

    Think It Over: Debit vs. Credit

    Remember: In the event of a wallet or purse mishap, debit cards will give Mr. Thief direct access to your bank account. Credit cards will not.

    “Reward checking” programs that require some minimum number of debit-card purchases each month can bring pretty fat interest rates to your account. But there is a cost here that many people don’t consider: You’re making your debit-card info that much more available to folks who would like to do bad things with it.

    (Lisa and I have had our credit-card accounts compromised at least once, and it was practically a non-event. We’ve never had our debit-card numbers fall into the wrong hands, thankfully, but we’ve heard from folks who have. And it wasn’t pretty.)

    Inventory Those Wallet Contents

    Now that we’ve cleaned out (hopefully) a bunch of peripheral stuff from our wallets, it’s time to do a bit of Contingency Plan record-keeping.

    • Scan, photograph, or photocopy fronts/backs of cards.
    • Keep a list of website URLs / contact phone numbers somewhere. (My personal choice is a filing cabinet, using a folder labeled WALLET INFO and the current date.)
    • Keep photographs/scans/copies in safe place. (The above-mentioned filing cabinet seems good enough to me.)

    After all this, we’ve hopefully done enough thinking ahead to mitigate some of the hassle associated with a lost wallet … should it ever occur!



  5. Paying the Minimum … Forever?

    Digging through my piles of personal-finance books this weekend, I came across the very first money book I ever purchased: Carol Keeffe’s How to Get What You Want in Life with the Money You Already Have (1995 edition).

    It really is quite amazing how much different the advice can be from one author to the next. On page 111, Ms. Keefe summarizes why she advocates paying only the minimums on installment bills:

    Why should anyone pay only the minimum payment due on his or her installment bills instead of getting them paid off as fast as possible and eliminating those high finance charges? Two main reasons. One is to diffuse the emotional grip bils have over us by putting them in last place, making them unimportant. The other is to free up money so we can begin to pay ourselves. Paying the minimum on the bills is a tremendous boost in moving us from the credit card trap to the freedom of choice that comes with having money.

    What? Diffuse the emotional grip bills have over us? That sounds precisely like the kind of psychobabble crap you’d get from an author who’s made her paycheck by telling people what they want to hear. (It’s what the guys at Chase and Citibank want their customers to hear, for sure.)

    I didn’t think much, one way or another, of this advice back when I first read it. It didn’t make much of an impact on me, apparently, because not long thereafter I was back at the bookstore, buying copies of other (better) money books. (If memory serves, Mary Hunt’s Debt-Proof Living and Joe Dominguez’ Your Money or Your Life were the next guideposts on my debt-free journey. Both were, and are, fantastic.)

    What Keeffe advocates in her book, to be fair, is that one should pay the minimums on all bills until s/he has six months’ salary tucked away in savings. At that point, s/he won’t need credit cards any longer for month-to-month living and emergencies — making it easier to get rid of the things once and for all.

    FACT: When you take your focus off the bills and pay the minimum, the installment bills do go away.

    FACT: You can do it.

    FACT: Paying the minimum will make you want to quit using the cards and start living in the present.

    FACT: By choosing to pay the minimum on your credit card bills, you are taking action that says, “My goals and I are more important than the bills.” You have taken charge.

    I’m sorry, but Ms. Keeffe is reaching into the realm of the absurd. Readers who take this path are playing right into their creditors’ hands.

    Obviously, we’re all different in how we react to money. Perhaps Ms. Keefe’s advice would work for someone out there. Like all finance authors, she has plenty of satisfied-client stories dabbled throughout the book.

    But there’s a reason why card companies love customers who make minimum payments. And for an author to advocate that people do this for an extended period — how long would it take most folks to save up SIX MONTHS’ SALARY? — strikes me as … pathetic. And ridiculous.

    I suppose I could give this book away, but I won’t. Probably better that I keep it stuffed in a dismal corner of my bookshelves, never to escape and/or pollute the mind of some naive debt-choked consumer who thinks How to Get What You Want in Life actually offers a valid way out.