1. More Credit-Card Debt Needed

    Posted by Michael • June 17, 2011 @ 8:17 am
    2 Comments

    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.

    Filed In: Credit Cards, Economics

    Permalink: More Credit-Card Debt Needed

    2 Comments


     

     

  2. Document Storage: Digital or Paper?

    Posted by Michael • September 20, 2010 @ 8:25 am
    1 Comment

    Lately I’ve been kicking around the idea of going “95% digital” for my household’s record-keeping.

    Because digital storage is dirt cheap these days, my idea is to purchase a scan-to-PDF machine (such as this Fujitsu ScanSnap S1500, or its little brother, the ScanSnap S1300 machine), and gradually get away from paper record-keeping as much as possible.

    Status Right Now: Paper Is … Okay

    We have what seems, to me, to be a pretty good paper filing system right now. It’s been a long time since I wasn’t able to find what I needed pretty quickly. A couple of filiing cabinets, plus lots of manila folders, work quite nicely.

    Truth be told, the reason I’m considering this move is that most all of the banks we deal with offer perks for going paperless — and I’ve always signed up. So I’ve already taken our bank-statement filing into the digital realm. On balance, this has worked out nicely. I’ve got statements going back a few years … and no paper copies to shuffle through should I need to find something.

    Everything else, though, is still paper. Which means it takes up space.

    Considerations: Backing Up and Retrievability

    Hard drives crash. Your teenage son decides to use your laptop as a Frisbee. Your house becomes target practice for a lightning storm and catches fire.

    Stuff happens.

    The trick is: What do you do about it beforehand? Well, you try to plan for contingencies.

    So, as far as backing-up your records, it sure seems that digital files would be FAR easier to maintain on an ongoing basis. In case of a house fire, for instance, whatever’s in our filiing cabinets would be quickly rendered to ash.

    Digital records, however? That’s another story. With digital, you’ve got options.

    Thanks to previous hard-drive failures, I already have a second, external hard drive for backup purposes. If our house were to burn down, though, that wouldn’t be of much help. (Unless we had the time and forethought to grab the thing on the way out. Yeah, right.)

    Ideally, I would need to look into services like Mozy or Carbonite for off-site (read: as close to “truly safe” as you can get) storage.

    Paper can be stored off-site, too, of course. But what if the storage facility floods or burns? Your one and only copy of [insert document here] just went bye-bye.

    In the end, I have to think that the backup- and retrieve-ability of digital records FAR exceeds that of paper, no matter how you slice it. So digital gets two points here.

    Score: Digital 2, Paper 0.

    Consideration: Space Requirements

    This one’s a no-brainer: Digital records take up less space than paper. Duh.

    Of course, the scanner itself will take up some counter space. But then, so do the document folders I keep close at hand with my laptop. Could those folders be made to disappear, courtesy of the scanner? Glancing through them now — FSA receipts, use-tax receipts, small-biz documents — I’d have to say that most of them could.

    Most, but probably not all.

    Now, how much file-cabinet space could I save by going digital? Umm … a LOT. I have scads of file folders that are just BEGGING to be digitized.

    Score: Digital 3, Paper 0.

    Consideration: Price

    As evidenced by a quick Amazon link-click above, PDF scanners aren’t exactly free. Price tags of $250 to $450 are common.

    And should the need to print documents arise, at least in any appreciable amount, well, toner ain’t cheap, either.

    On the flip side, monster amounts of storage are easily had. Gigabytes and terabytes are (to my thinking) cheap, and getting cheaper. This applies to hard drives, thumb drives, and beyond. And online storage ranges from free to a few dollars per month.

    But what’s the cost of keeping the paper I already have? What’s the cost of keeping the paper copies we’re sent in the mail? Well, you have to buy folders every so often, but beyond that, it’s pretty much nil. (Aside from the physical-space aspect, which I already covered.)

    Meh … gotta go with paper on this one.

    Score: Digital 3, Paper 1.

    Consideration: Ease of Use

    Fun Fact of the Day: I’ve been known to be damn lazy at times.

    I know, I know. You readers can hardly believe that. (That’s what I’ll tell myself, anyway.) But it’s true.

    So if I bought a scanner, would I consistently use it?

    Depends how quick and easy it is to operate. And this, I can’t answer. I’ve never used a dedicated PDF scanner such as those linked above.

    (We have a Dell printer at my workplace that can scan to PDF and save on a USB thumb drive. While that functionality is a lifesaver at times, the Dell ain’t the fastest thing in the world. Its warmup time, to be blunt, sucks like no other.)

    If anyone out there has experience with a dedicated scanner like this, I’d appreciate your thoughts on this aspect!

    Given my scanning inexperience, I’ll tentatively apply “no advantage / no score” here.

    Score: Digital 3, Paper 1.

    Summary: Is Digital Worth It?

    At this moment, I sit at my table, staring at an accordion folder’s worth of small-biz documents — plus a few folders of standard household records. I think of the additional two filing cabinets’ worth of documents we have in our computer room. I think of all the paper that’s going to be coming into my life from this point on.

    Egads. That’s a lot of paper to deal with. And much of it will need to be stored.

    So I wonder if the several hundred bucks I’d be laying out for a scanner isn’t really a bargain. Perhaps my largest obstacle here is getting over the “comfort” of paper. Because my current system has worked well, I’m comfortable dealing with paper. Moving to a digital library of PDF’d documents means creating a new system. It means moving away from comfort.

    Which makes a guy like me — a guy who strives for control — nervous.

    Any considerations I’m missing? Am I seriously late to, or overly cautious regarding, the digital-document revolution?

    Filed In: Banking, Organizing, Planning Ahead, Record-Keeping

    Permalink: Document Storage: Digital or Paper?

    1 Comment


     

     

  3. Rewards Checking Loses Some Lustre

    Posted by Michael • September 7, 2010 @ 8:15 am
    2 Comments

    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.

    Filed In: Banking, Debit Cards

    Permalink: Rewards Checking Loses Some Lustre

    2 Comments


     

     

  4. Business Credit Cards: Avoiding the CARD Act

    Posted by Michael • August 30, 2010 @ 8:04 am
    No Comments

    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 . . ..

    Filed In: Banking, Credit Cards

    Permalink: Business Credit Cards: Avoiding the CARD Act

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  5. FedReserve: Credit Conditions Reports

    Posted by Michael • August 29, 2010 @ 11:47 am
    No Comments

    The stats junkies out there will undoubtedly want to take a look at this new website, courtesy of the Federal Reserve:

    New York Fed: U.S. Credit Conditions and Quarterly Report

    Look for the New York Fed to update its nifty Report on Household Debt and Credit every quarter. As of this writing, the first (and latest) report is for 2010 Quarter 2.

    Lots of charts there (viewable as JPEG or PDF) for the economics dorks among us!

    Filed In: Banking, Statistics

    Permalink: FedReserve: Credit Conditions Reports

    No Comments


     

     

  6. The Bankless Among Us

    Posted by Michael • August 12, 2010 @ 8:09 am
    3 Comments

    Well, here I am dithering on about my recent experiences with rewards checking accounts, and off goes USA Today to do a story on those folks who live bank-free lives, primarily due to necessity:

    USA Today: Many Shun Bank Accounts, But Pay More…

    Well, yes, those close to the poverty line have long been “left hanging” by standard Main Street banking institutions. Short of overdraft fees, where’s the profit in the bricks-and-mortar managing of checking accounts that’ll be lucky to see a $1k balance at any point during the month? (According to one 2004 study, 83 percent of “unbanked” families make less than $25k per year.)

    And savings accounts for these folks? Fuhgettaboudit.

    From the article:

    Nearly 8% of U.S. households, or about 17 million people, don’t have bank accounts, according to a 2009 study by the Federal Deposit Insurance Corp. An additional 18% — 43 million people — are “underbanked,” which means they have bank accounts but occasionally use check-cashing companies, pawn shops, liquor stores or other alternatives to cash checks, pay bills and borrow money… .

    In an effort to bring more consumers into the financial mainstream, the board of the Federal Deposit Insurance Corp. is scheduled to vote today on a program to encourage banks to offer no-frills, low-cost checking and savings accounts. The FDIC’s model checking account would allow customers to open an account for as little as $10. While banks may decide to charge a low monthly maintenance fee, the accounts won’t have the kind of surprise fees — such as overdraft protection fees — that have led consumers to abandon banks, says FDIC Chair Sheila Bair.

    Hmmm. I really feel like this sort of banking program has been tried before, another pilot program of some kind, and with not-so-good results. Meaning that participation rates were low, and dropout rates high. But perhaps I’m imagining that.

    “While the majority of banks have offered free and low-cost checking accounts for many years, all banks will need to reconsider the feasibility of continuing to offer free accounts, given current economic and regulatory pressures,” Carol Kaplan, a spokeswoman for the American Bankers Association, said in a statement.

    A 2009 analysis by Novantas, a consulting firm, estimated that even in a “good” year, about half of checking accounts are unprofitable, and that regulatory and economic changes could raise that figure to 75%.

    Gotta love the American Bankers Association. Setting the rest of us up already for new fees and/or fee increases!

    Filed In: Banking, In the News

    Permalink: The Bankless Among Us

    3 Comments


     

     

  7. Rewards Checking Gets a Shot, Part 2

    Posted by Michael • August 10, 2010 @ 9:07 am
    4 Comments

    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!

    Filed In: Banking, Credit Cards, Debit Cards

    Permalink: Rewards Checking Gets a Shot, Part 2

    4 Comments


     

     

  8. Contingency Planning: Lost or Stolen Wallet

    Posted by Michael • July 26, 2010 @ 8:35 am
    1 Comment

    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.

    Ack.

    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!

    Filed In: Banking, Credit Cards, Debit Cards, Planning Ahead

    Permalink: Contingency Planning: Lost or Stolen Wallet

    1 Comment


     

     

  9. Paying the Minimum … Forever?

    Posted by Michael • July 12, 2010 @ 10:19 am
    9 Comments

    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.

    Filed In: Credit Cards, Debt

    Permalink: Paying the Minimum … Forever?

    9 Comments


     

     

  10. Rewards Checking Gets a Shot

    Posted by Michael • June 10, 2010 @ 8:20 am
    No Comments

    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

    Filed In: Banking, Debit Cards, Spending

    Permalink: Rewards Checking Gets a Shot

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