1. Debit Card Drawbacks

    I’ve mentioned it numerous times on IYM: Debit cards are a great tool, but they have serious drawbacks, too. And there are some things for which they’re totally unacceptable.

    Cue the piece from USA Today:

    USA Today: Debit Card Holds Can Derail Travel Plans

    Dave Ramsey loves to talk up debit cards, but as the article tells us, there are times (vacations, for one) when you really ought to keep that particular slab of account-zapping plastic tucked in your pocket.

    What makes debit cards even worse? Well, as my daily dealings with Joe Q. Public have taught me, there are still a great many folks who have no idea how debit-card daily limits and hold policies actually work. (Though, to be fair, most people also have no idea how their credit-card policies work, either, so why would it be any different for debit cards?)



  2. Travel On the Edge

    As a guy who believes in keeping at least $50 in cash on me (plus the usual credit and debit cards) whenever I’m out and about, I simply do NOT understand why anyone would GO TRAVELLING WITH ABSOLUTELY NO CASH ON HAND.

    And yet, in the auto-service business, I see people doing this fairly often. Typically it involves someone’s vehicle breaking down, leaving them stranded — at least for a while — somewhere far from home. When this occurs, what are they carrying in their wallet or purse?

    A driver’s license, a debit card, some photos … and that’s it.


    Can people just NOT think ahead at all? Does anyone play “What if?” before heading out across the state?

    What if you’re 500 miles from home, and, for who knows what reason, your debit card doesn’t work? With no credit cards in your wallet, and no cash, what will you do then?

    As I’ve said for years, debit cards are often NOT your best friend. I love my debit cards, but they’re certainly NOT a foolproof payment method when travelling.

    (And no, I don’t care what Dave Ramsey says about “All you ever need is a debit card.” I, for one, try not to live my life at the mercy of my bank’s change-on-a-whim debit-card policies.)

    Big Tip: Always Have More Than One Way To Pay

    As I mentioned in a 2007 post, I consider it vital that we ALWAYS have more than one way to pay. Whether “Plan B” is cash, credit card, or debit card, I don’t much care. I just make sure that there always IS a Plan B. And that goes for quick trips to the corner store as well as cross-country jaunts.

    So much that happens in life is out of your direct control. Doesn’t it make sense to exhibit some control where you can, and always have a backup method of payment?

    It sure does to me!



  3. Rewards Checking Loses Some Lustre

    Well, there I was, practically giddy about the 4.38% APY our new-ish rewards checking account was paying us on our savings … and whaddaya know? Two months in, and the credit union is about to lower its cap.

    From the very top of my August statement:

    Effective October 1, 2010, there will be two changes to the Rewards Checking program. The cap will change from $25,000 to $15,000. For qualifying accounts, 4.38% APY will be paid on balances of $15,000 or less and .50% APY will be paid on amounts greater than $15,000. The dividend rate for non-qualifying accounts will change from 0.35% APY to 0.10% APY.

    “Boooo … hiss!” says the gallery. The change in the dividend rate for non-qualifying accounts doesn’t bother me, because unless I pull a complete brainfart, we should easily manage to hit all the rewards qualifications each month.

    The lowered cap for high-interest earnings, however, is another story. It means I’ll be moving a chunk of our savings right back to ING Direct’s Orange Savings (my review) account, from whence it came. ING’s current 1.10% APY is nothing special, but it’s better than the 0.50% APY that my greater-than-$15k funds would be getting at the credit union.

    At this point, it’s kinda silly to complain too much about the lowered cap, I suppose. Being able to get four-plus percent interest on ANY kind (or amount) of insured liquid savings is, in this environment, pretty much like stealing.



  4. 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!



  5. 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!



  6. Rewards Checking Gets a Shot

    As much as I love ING Direct, where my household’s money is concerned, I’m going to veer away from the orange guys for a while.

    I have to test out some new “banking waters,” you see.

    Like a great many financial bloggers, I’m a huge fan of ING Direct’s Orange Savings account. And I’ve had a tremendous experience with their Electric Orange checking account. I had doubts about the online-only checking concept initially, but the EO account has performed better than I could’ve imagined.

    On top of that, I and all savers are highly indebted to ING for ushering in the whole era of online-only savings accounts in general. Emigrant Direct … HSBC Advance … FNBO Direct … all those guys followed ING’s lead into the online savings space. While many (most!) of them have offered rates better than ING’s, none have executed the online savings account (OSA) concept better. (My personal opinion, of course.)

    But at Four Times the Return…

    So here we are: Savings-account rates are flat on the floor. As such, I can no longer pass up the offers I’m seeing out there for users of “rewards” checking accounts.

    In particular, an Oklahoma credit union at which my wife and I have held various accounts over the years has its own Rewards Checking account that stands apart from most. They’re offering rates currently four times higher than the rates I’m getting with ING’s Orange Savings … and seventeen times better than the payout on Electric Orange.

    Fort Sill Federal CU: FSFCU Rewards Checking (4+% APY)

    Also, since this is an Oklahoma financial institution, the first $200 of interest we earn will be state-tax-deductible for us. That doesn’t add up to much, but it’s better than the deductibility we get from our ING Direct earnings — which is nil.

    The high APY applies to the first $25k of money in the account. After that, if the various requirements (see below) are met, the APY on any additional funds over the $25k level will be .50% APY. If the requirements are not met, the APY on all funds drops to .35%. (Note that this yield is still higher than what’s offered currently on ING’s Electric Orange, which is .25% APY.)

    Rewards Checking: Always Requirements

    As with all rewards checking programs, there are some hefty requirements associated with this account. To get the advertised yield each month, users must:

    • Make at least 12 debit-card purchases
    • Make at least one Direct Deposit or ACH debit
    • Receive statements electronically
    • Access online banking

    For us, all of those “have tos” will be a snap … except one. That “one” is the debit-card purchase requirement.

    I Don’t Like Debit Cards

    Some folks (Dave Ramsey) will tell you that, in the case of fraud, debit cards are just as safe as credit cards. Some folks (Mary Hunt) will tell you they’re not.

    I’ve listened carefully to both sides … and then fallen back on that long-ignored guru, Common Sense. I reside in the camp that says since debit cards give others direct access to your cash funds, they by definition cannot be as safe as credit cards. (Like just about every financial blogger, I’ve done many posts on this topic.)

    Additionally, the daily spending limits associated with debit cards bring along an entirely different set of problems. And don’t get me started on what can happen to your checking account if you’re out of town, travelling, and a debit-card transaction (think rental-car preauthorization, for example) goes wrong.

    In fact, I can’t remember the last time I used a debit card for anything other than cash withdrawals from an ATM. (Actually, now that I think about it, it was probably back in 2008. Had to get that one-time $20 bonus associated with ING’s Electric Orange.)

    But each of those problems can be mitigated somewhat. I’m willing to give it a shot.

    I am, as they say, reaching for yield.

    Here’s What We’ll Do

    I’ve already set up Direct Deposit to the new account, so that part’s handled.

    As for the mandated debit-card use, my plan is for us to use the debit card early and often each month — to get the 12 purchase minimum out of the way as quickly as possible. I want to focus on smaller, necessary, in-person purchases here: auto fuel, weekday lunches, corner-grocery-store stops for milk, bread, and such.

    We won’t be using the debit card in any instance where the card itself will leave our immediate view. If we can swipe the card ourselves, that’s most preferable. If we can watch the cashier swipe it, that’s fine, too. We won’t use debit cards for online purchases under ANY circumstances.

    In addition, I don’t want to give up the “maximizing” of cash-back rewards that we get with our credit cards — refunds of five, two, and one percent on purchases can add up quite nicely. Therefore, we’ll endeavor to put only the smallest of transactions on our debit cards. We’ll still place the bigger purchases and the high-reward category purchases on our credit cards just as we do now. (Balances paid off in full each month, of course.)

    As Things Progress…

    As I get more comfortable with the rewards checking, I plan to move the largest portion of my household’s liquid savings into that account. This will include our Emergency Fund, our Freedom Account funds, and our operating cushion. I have several bills auto-pay from our Electric Orange account; my expectation is to change those to the credit-union rewards checking pretty soon.

    Since this particular credit union isn’t truly “local” to us, I’ll still be keeping cash in several local banks/credit unions.

    I’ll also not be closing our ING accounts. For one thing, while their rates are only “decent,” their ability to move funds from one bank to another quickly is invaluable.

    Related Resources

    Money Musings: Rewards Checking Gets a Shot, Part 2

    Fatwallet: “Available to All” Reward Checking Accounts Thread

    DepositAccounts.com: Reward Checking Accounts List