Mary Pilon at the Wall Street Journal tells us that total outstanding student-loan debt has now overtaken total outstanding credit-card debt:
WSJ: Student Loan Debt Surpasses Credit Cards
As of June, there was roughly $830 billion outstanding in student loans, compared to $826 billion in credit-card debt.
Swell, ain’t it? I tell you, this country can strap on the anchors and leg chains of debt like nobody’s business.
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!
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.
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!
Now here’s an interesting article from Yahoo. Apparently someone has taken the time to compile a list of the worst-paying college degrees out there:
Yahoo: 20 Worst-Paying Degrees of 2010
I get a kick out of lists like this — especially ones that reinforce my own views on the relative value (or lack thereof) of higher education. Which is that “higher education,” in and of itself, is very rarely the Ticket to Financial Success which society makes it out to be. (Check out this article in the Harvard Business Review; the difference between “knowledge” and “skills” is immense. The higher-ed conglomerate may disperse knowledge, but usually, what employers want are skills.)
And oh yeah — if you take on lots of debt to get that higher ed, you can easily end up worse off — far worse off — than if you had no degree at all.
Because I’m lazy, I won’t reprint the whole list here. However, the top five worst-paying degrees…
| College Degree | Starting Pay | Mid-Career Pay |
| 1. Child and Family Studies | $29,500 | $38,400 |
| 2. Elementary Education | $31,600 | $44,400 |
| 3. Social Work | $31,800 | $44,900 |
| 4. Athletic Training | $32,800 | $45,700 |
| 5. Culinary Arts | $35,900 | $50,600 |
… are pretty much what I’d expect. (Wait — where is Underwater Basket Weaving?)
I do, though, have to take issue with how the author finishes out her missive:
I’m not so sure about that. I mean, politicians seem to do pretty well financially. And it’s obvious that math was never a core requisite at any point in their lives.
This past week, I replaced my laptop (a 5-year-old Dell Inspiron) with a fresh ‘n’ shiny Toshiba Satellite A665-S6050.
Inherent in this upgrade was my switchover from Windows XP Home, which I loved, to Windows 7 Professional, for which I don’t yet have a verdict.
(No, I never so much as bothered with Vista. In fact, a couple of years ago, I purchased a second Dell laptop for my wife. My first out-of-the-box change? Wipe the hard drive and its Vista operating system, and replace it with a clean, non-OEM-cluttered full version of XP Home.)
However, based on something I just discovered, Windows 7 just got big bonus points in my book. If you’re a power user of the calculator in Windows, as I am, you just gotta love this revamp:
Giggity.
And yes, I am a complete dork.
A couple of weeks back, I spent some time thumping on How to Get What You Want in Life With the Money You Already Have, a book written by Carol Keeffe in the early 1990s. While not a literary prize by any stretch, the book deserves some credit: It did get me started in the world of personal-finance reading.
One of Keeffe’s particularly egregious recommendations — and this is just kerfuffle waiting to happen — is for folks to make minimum payments on all their bills and credit cards until they’ve saved up six months’ worth of salary as an emergency fund. To me, such a plan would almost guarantee failure. How many folks do you know with the financial (and disciplinary) ability to pull that off?
Not many, is my guess.
I much prefer Dave Ramsey’s Baby Steps plan, and its suggestion to make “minimum payments only” until one saves $1,000 (or $500, if you’re a low-income household) … and THEN to attack the debts full-force and head-on.
However, as I was finger-flipping through How to Get What You Want a little more, I managed to find a few paragraphs that stood out — in a good way! Actually, I found this to be quite insightful, and a bit Suze-Orman-esque:
Well, I’m not so sure about the “making dreams come true” part, but I’ll vouch for the utter goodness of financial security. Having money available for emergencies changes everything. Life looks far different when you’re ready for the speedbumps and potholes.
Keeffe continues:
You know what? I agree with this. One. Hundred. Percent.
As a guy who’s made it through Step 3 of Ramsey’s Baby Steps (no debt except for the mortgage; fully-funded emergency fund is in place), I found that for me, while paying off that last debt felt great, hitting my savings mark felt even better.
As Keeffe notes, “Eliminating a bill creates only a temporary feeling of relief, compared with the deep and lasting feelings of power and security that money in hand creates.” To this I say: AMEN.
Debt-free is sweet, but there is no substitute for savings.
As much as I love what Keeffe says here, she is still presenting it in the context of “You need to have a bunch of money saved BEFORE you begin seriously paying off your debts.” The logic of this baffles me entirely. While it sounds silly, I want to scream at her, “Hey! The longer your readers stay in debt, the less likely they’re ever going to get out of it!”
Though of course I have no quantifiable evidence to support this, everything I’ve learned to date, and everything I’ve seen, points toward the assertion that the more you muddle through life, simply “living with” your bills and debts, the less likely you are to ever get out from under them. Let’s face it: Banks and other lending institutions endeavor to make it so.
At some point the lack of progress, the years of frustration and stress — all of it accumulates into the deadly “This is just how everyone lives!” attitude.
At which point, you’re sunk.
The answer to Jim’s question is “No, I don’t.”
Great. That’s out of the way.
So what was the question?
Bargaineering: Do You Use Online Personal Finance Tools?
Call me crazy. Call me “stuck in the 1990s.” Call me whatever you like. But I’m very much a guy who feels better when my personal-finance software, and the vast amounts of sensitive data therein, reside right on my hard drive.
Now, when I say “personal finance software,” what I’m talking about is stuff like Quicken. Spending, saving, and account-balance tracking software. And I know there are lots of super-cool online-based tools out there these days — heck, Quicken and Quickbooks offer online-access versions, but even here, Intuit is way late to the game. I, however, am not yet sold on the concept.
I like knowing that my household’s financial data is stored locally. “Locally,” as in, in my laptop. On my kitchen table. (And in a backup hard drive that’s also “locally” stored.)
Actually, Jim’s (the Bargaineering author) feelings on the subject very much mirror mine:
Precisely. It could be, though, that I’ll rethink this stance in the coming years. Since I don’t ever use Quicken’s “transaction download” features, and thus would never store any account-access credentials with Quicken/Mint or whomever, the only info I’d be leaving on their servers would be account-balance and spending data. And who’d give a crap about that, aside from some data-mining, consumer-research enterprise?
(Note to any data-mining, consumer-research entities who read this post: My life is boring. My spending patterns are boring. Steal my data, and you will be underwhelmed. I promise.)
As they say in the Bud Light commercials, “Here we go!”
Now that the mortgage mess and its ensuing economic sinkhole have trashed the credit scores of lots of people — many of whom are pissed because they can’t go out and borrow like they used to — we’re going to be deluged with calls for more credit-reporting regulation. Here’s the latest missive I could find:
NY Times: Credit Score is the Tyrant in Lending
Allow me to state here my whole and undying support for credit “tightness,” to use Federal Reserve terminology. I get almost giddy whenever I read, as in the article above, how the lending industry has become draconian in its insistence on minimum credit scores for certain products.
What? Mary Sue couldn’t get a mortgage because her FICO was a 619, and Fannie/Freddie require a minimum of 620 just to get the computers off standby?
Good. That is fan-freaking-tastic news. Mary Sue does not meet the lenders’ qualifications. Therefore, she gets to remain a renter OR continue living in mom’s basement. This is as it should be.
From the article:
Spare me the “Credit scores are unfair!” and “Lenders won’t lend and it’s hurting the recovery!” whining that is, day by day, getting ever more prevalent. These folks who think credit ought to be thrown at anyone who can cast a shadow or write his name almost legibly … well, they can bite me. They got to roll around in financial frolic and tomfoolery earlier this decade.
That time’s gone — for now. But because people never learn, and because today’s collapse inevitably sets the stage for tomorrow’s bubble, you can bet we’ll go full circle at some point.
I, for one, relish these little stories of payback I’m seeing. Of course credit scores aren’t infallible — credit-reporting agencies aren’t in the business of getting it right. They’re in the business of getting it, getting it compiled, and then getting paid.
Because Fannie and Freddie are practically the only entities willing to buy and securitize mortgages, they have enormous clout; most lenders simply won’t make a loan if Fannie or Freddie won’t buy it. Their bottom line number is 620 — the company will buy mortgages only if the borrower has a credit score of 620 or above. Which means, given the current state of the mortgage market, that anyone with a score below 620 can’t get a mortgage. Even if that score is 619.
But the difference between a 620 score and a 619 is utterly meaningless.
So’s the difference between 420 and 419. What’s your point?
There’s money at risk here, Joe, you dolt. Lots of it. Lines have to be drawn somewhere — unless, of course, you really do think that everybody ought to have all the same access to all the same stuff, regardless of what abilities and resources they bring to the table.
If that’s what you want, well, that record got played from 2003 to 2006. It didn’t finish up so well.
Anyhow, these days, borrowers and brokers know the situation going in. Right now the line happens to be at 620. Deal with it.
It doesn’t. “Sound underwriting” would be when that prospective borrower got laughed out of the office the moment he presented a credit score that started with a 6-handle. Had he sauntered in with, say, a 720, THEN you can talk to me about moving further into a “sound underwriting” process. That is, you know, where the crazy stuff happens. Where income gets verified … proof of employment is provided … along with several years of tax returns … and proof of capacity for down payment and all related expenses.
WAY OUT THERE underwriting.
The kind they did when credit wasn’t poured out like cheap candy.
When it didn’t go to children who threw tantrums because they didn’t get it.
When we didn’t reside in an economic and financial system so debt-gorged and credit-reliant that it locked smooth up without it.
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.”
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.
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?
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.
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!
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.)
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.
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!
Those of you with an interest in default rates — student loan default rates, in particular — will want to set aside a few minutes to read the following:
Chronicle Of Higher Ed: Student-Loan Default Rates: Understated
Of course findings such as the following will come as a complete and utter shock to everyone (not!):
One in every five loans that entered repayment in 1995 are in default? Yikes. That is nasty. As in, subprime nasty. This is worth mentioning because, according to the fine folks at S&P in July, 2009 …
So the folks issuing student loans to pretty much anybody with a pulse still have some work to do to reach those vaunted levels we associate with subprime default rates. Keep at it, guys! You’re making progress!
Back to the Chronicle piece:
Boy — this would be really troubling to hear if we didn’t recognize that student loans are undoubtedly “good debt” meant only to help you reach your dreams!
Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).
My financial life began turning around when I took responsibility for it. — Dave Ramsey
Yes, I'm nuts: I'm usually reading anywhere from 4 to 6 books at a given time, plus watching DVD sets as I can.
Here's what I'm digging into now: