Advanced Personal Finance

Less well known than their savings account cousins, high yield checking accounts do exist. Even with the recent Fed rate cut, many of these are excellent deals for checking accounts. Here’s a quick run down. [Incidentally, none of these are affiliate links or sponsored in any way.]

Schwab offers a 4% APY checking account with no minimum. Has the further awesome feature of rebating ATM fees charged by other banks.

ING Direct has a checking account with APY of 3.5% up to $50,000 (higher after that). This account also automatically opens an overdraft line of credit, so if you overdraw your account, you won’t get hit with high fees for doing so.

SalemFive Direct offers a 4.7% APY for balances up to $9,999 (higher after that). This one also reimburses ATM fees up to $15 per month.

If you have at least $5,000 to deposit, ETrade has an account with a APY of 4.0% with ATM fee reimbursement.

Everbank has a great…oh, wait. Never mind.

I just saw that Sun’s Financial Diary has a much more extensive list of interest-paying checking accounts.

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One of the great things about writing this blog is that I’m constantly learning new things about personal finance. That’s why I started writing it. I wanted to continue learning and share what I’ve learned about personal finance with others. So it’s always interesting when I learn something about a topic I knew all about, like FDIC insurance.

FDIC stands for Federal Deposit Insurance Corporation. It’s a government agency that insures money that’s deposited by people into banks, S&Ls, and the like. The credit union equivalent, by the way, is the National Credit Union Administration (NCUA), which is basically a mirror of the FDIC.

It’s pretty common knowledge that the FDIC insurers $100,000 in deposits. But here are a couple of additional facts you may not know.

• The $100,000 limit is based on account ownership. In other words, if you and your spouse have a joint savings account, the insurance on that account is $200,000.

• The $100,000 maximum is per owner per institution. So if you have more than $100,000 to deposit as an individual, you have to open accounts at different institutions. Different accounts at the same bank won’t do it.

• IRAs are covered up to $250,000. As of 2006, IRAs have a different and separate maximum. That’s in addition to any other deposits at that institution. So you could actually have $350,000 in insurance as an individual at one bank.

Just a couple of quick clarifications and facts about FDIC insurance.

Here are a couple of posts from others about FDIC:

FDIC and NCUA Deposit Insurance at Blueprint for Financial Prosperity

FDIC Insurance Higher on Retirement Accounts at Five Cent Nickel

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USAA - Best. Bank. Ever.

The other day, I canceled two credit cards. That left me with just one, issued by my all-purpose financial services company, USAA. The problem is, I realized that card didn’t have a rewards program associated with it. No problem - I go to USAA’s site and look up my card. Sure enough, one of the options listed on the right sidebar is ‘choose rewards program.’

Here’s where I screw up.

USAA offers two rewards programs for credit cards, a points-based one and straight cash. So I fill out the little online form and hit ‘Go.’ It was at this point that things went wrong. At the next screen, it was apparent from the message that I’d just opened a new credit card account and closed my old one. The old one that I’ve had since about…forever.

Well, as Suze Orman and just about every other personal finance writer, blogger, or speaker will tell you until they’re blue in the face, it’s a bad idea to close your oldest credit card account. Closing credit card accounts has a negative impact on your FICO score, but I don’t generally care. In this case, however, I did.

Back to the point. I realize I’ve just closed my oldest account and I didn’t intend to. I call USAA and here’s where they re-demonstrate their coolness.

Me: “I was trying to convert my credit card to one of your rewards programs and I completed the process and got a message I’m not sure about. I read this message and I think it means I just closed my old credit card account. Is that correct.”

CSR: “Yes, you’ll be getting a new card in about a week.”

Me: “Ok, I don’t want to do that. Can you undo it?”

CSR: “Let me check on something. Can you hold on a second?”

Me: “Sure.”

…

CSR: “Ok, I’ve gone ahead and just converted your old account to the new rewards program. You’ll keep the same credit card number.”

I didn’t even ask if that was possible or for her to do it. This woman fixed a problem for a customer without the customer even having to ask her.

And that is why I love USAA so much.

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Finding room in your budget for saving and investing isn’t always easy. Here are some painless ways to find that extra couple hundred dollars per month.

1. Ask service providers like satellite TV companies and credit card companies to lower your rates. A simple call to DirecTV got me $10 off per month for a year. I just called and told them I could get such-and-such deal with Dish Network and would they lower my bill. Their response - sure; no problem. Took five minutes. If you have a credit card balance, the exact same technique can work. Call the issuing bank and simply ask them to lower your rate. Most times, they’ll do it. This technique works anywhere there’s good competition and/or customer acquisition costs are high.
2. Get quotes on auto and life insurance. Though the phrase is cliche, fifteen minutes actually can save hundreds on car insurance. It’s really easy to compare with tools like Lowermybills.com. Life insurance premiums, too, have dropped significantly over the last several years. Getting a quote is free and can save several hundred dollars per year. And you won’t necessarily have to switch insurance companies. With a better offer in hand, you can use it in the same manner as tip #1 above with your current insurer.
3. Cancel unused or underused subscriptions. Take a look at subscriptions you pay for - magazine, DVD, whatever. How much use do you really get out of them? If you’re not sure, just try living without them. Call the company and tell them to suspend your subscription for a month or two. If you don’t miss it, cancel, and don’t forget to get a refund for the remainder of your subscription. The same goes for pay TV channels like HBO.
4. Use the library. If you read or watch movies at home a lot, get acquainted with your local library. The books are surprisingly new and DVD rentals are a buck or two.
5. Review your auto insurance coverage. Check out what your deductible is, what add-ons like rental reimbursement you have, and your collision coverage. It doesn’t pay to pay for collision on older cars, so drop it and save a couple hundred bucks. Deductibles should be set as high as you feel comfortable. Check also to make sure you’re not paying for an add-on twice. By that I mean if you have AAA, it makes no sense to pay for towing through your insurance, for example.
6. Eat out once less per month. Just eating out once less per month can save decent money. For the three of us at a ‘regular’ sit-down restaurant, we’re looking at $40.
7. Pack your lunch. By eating yesterday’s leftovers for lunch every day at work, I figure I save in the neighborhood of $120 per month. Besides, it’s most likely healthier.
8. Ask for discounts. Make the most of being a AAA member or a student - ask for a discount. What’s the worst that can happen? They say no.
9. Compare prices on drugs. The legal kind. It’s shocking the variance in prices for prescription drugs from retailer to retailer. So before you fill that prescription, just call the pharmacies for a couple of different places.
10. Consider consolidating investment accounts. It’s common for investment companies to charge a quarterly ‘account maintenance fee’ for balances under some amount. We used to be charged every quarter because our mutual fund account was under $10,000. Once I consolidated, we were over their minimum amount and the charge disappeared.

None of these ideas are going to pull you back from the brink of bankruptcy, but if you’re looking for a little bit of extra room in your budget, trying one or two might do the trick.
Photo credits: fief.org, cri-dove.org, maine.com

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I wasn’t going to ever write about credit card arbitrage, but a couple of fellow PF bloggers have had some experiences within the last week that I felt deserved comment.

First I read Q’s post at $1 Million to My Name about how he’s finally succumbed to the lure of 0% balance transfers. Credit card arbitrage, or 0% balance transfers, are a common way some personal finance-savvy people make a little ‘free’ money. Essentially, you apply for a 0% balance transfer credit card with a large credit limit, borrow the money, then deposit it into a high-interest savings account like INGDirect, Emigrant Direct, and so on. Depending on the amount you borrow, you can make several hundred dollars a month in interest.

I’ve not done this for one main reason - hassle. I don’t want to keep track of a bunch of credit cards I’ve borrowed against. I also don’t want to have to worry about making a mistake somewhere along the way that wipes out all the work doing this. Basically, doing this would complicate my life and I don’t think it’s worth it. The other (much less important to me) reason is that doing this seriously negatively affects your FICO score.

Which brings me to the second reason I finally wrote on the topic - doing credit card arb could cost you in other ways.

Sun at Sun’s Financial Diary came across a Discover card that gives a balance transfer rate of 3.99% APR until 2011. He thinks if he were to apply for the card, his application may very well be denied because he currently plays credit card arb. He’s got balances of $50,000 on various cards.

Something like this might save you much more money but you can’t take advantage of it because you’re in debt for a huge amount of money playing the 0% game. Or what if you suddenly need a car loan you didn’t anticipate? My wife had that experience when she got into a car accident and the insurance company declared her car a total loss.

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