Pragmatic Finance

There was speculation for awhile about Google’s new payment service with many referring to it as Gbuy, Google Payments, or even Google Wallet. Well, it appears that Google Checkout it now live. Interestingly, they struck a deal with Citibank to offer $5 bonus in dividend dollars or 1000 Thank You points if you enroll your card by Aug 1 and make a purchase with the card using Google Checkout by Sept 15.

Looking over the site it appears that its focused on buyers and merchants, allowing businesses to use it on their websites to accept credit card purchases. To be honest, I was hoping it would have all the features of Paypal and compete directly with them, even though they said it wasn’t aimed at challenging Paypal. Since I have been selling on Ebay recently, I have been getting eaten up by fees. Anything to add competition is always good. I guess there’s the chance that they will add these features later but I won’t hold my breath.

In case anyone out there does run a business that could utilize this, they are charging 2% + 20 cents per transaction and you get $10 discount off fees from sales for every $1 you spend on AdWords. Should have known they would tie those together. The NYTimes has a pretty good article discussing the details of Google Checkout (Use bugmenot for a login).

USAA is a military affiliated financial services organization whose trademark has been one of if not the lowest auto insurance available. They define military affiliation as someone who is currently serving or retired from the military as well as their children and spouses. You can also get membership by being the spouse or child of a current or former member. While their insurance is only available to those with a military affiliation, their banking has been available to anyone. It appears, though, that they are no longer going to offer banking services to people who don’t fit these categories after June 30th. People who are already members are supposed to be grandfathered in. So if you’re not already a member with an account, don’t have a military affiliation, and would like to use their banking services this could be your last chance for a relationship with USAA.

I have been using USAA’s banking services for a couple of months now and it is great. Some of the benefits are free checking and savings with no minimums, free checks for the life of the account, refunds up for atms up $15 per month, and quickpost. Quickpost is a service where you can send a deposit via UPS for free and the money will post to your account within one business day, no charge. Although I used to think this wasn’t too useful, I recently was paid with a check in a town where I didn’t have any banks that I had accounts with. It saved me the trouble of opening a new account and transferring the money later. USAA only has one brick and mortar bank in San Antonio so this might be very useful to someone who would use it as their main bank.

I haven’t looked at how long it takes to ach push money to another account, but when I have pulled money in the past it has shown up immediately. If you have ever used HSBC’s transfer service this is quite a shock

They also have a performance first savings account, I presume to compete in the online savings arena. However, it’s tiered and ranges from 4.51% to 4.88% as of the date of this post. This is probably the only thing keeping me from using them as my primary bank, as I wouldn’t qualify for the higher rate. If USAA would just raise the rates on this to near the top…

Oh, and I have to say that USAA has the best customer service I have ever encountered. I have spoken on the phone to them several times about banking and insurance, and each time they were extremely friendly and knowledgeable and almost no wait time on hold, even when they had to transfer me to another agent to answer a question. I was transferred with in about 3 seconds. There is a ton of more information in a post fittingly titled, The Ultimate USAA Bank Thread over at Fatwallet. Although some have become concerned recently by some of the changes, such as the membership limitation and changes to ach limits, overall they have an extremely good reputation.

I participated in two carnivals this week. My advice to Start investing early with a Roth IRA is at this week’s Carnival of Personal Finance and my discussion on how to Save 5% at gas stations, grocery stores, and pharmacies is at the current Festival of Frugality.

If you aren’t familiar with Carnivals, they are blog posts that list some of the interesting articles recently about a particular topic. They are gathered from articles submitted to that week’s host. They are a great way of consolidating and presenting a list of posts in a specific area for readers. It can also expose new readers to many blogs that haven’t seen and may be interested in reading, including yours.
If you would like to participate in one you can send a post using either Blog Carnival of Conservative Cat. Here’s a list of some of the blogs that I am going to consider sending posts to whenever I have one that fits the category:

• Carnival of Personal Finance
• Carnival of Investing
• Festival of Frugality
• Carnival of Debt Reduction
• Carnival of Entrepreneurship
• Carnival of the Capitalists
• Carnival of Taxes
• Carnival of Business

If you have a blog and have written a good post that is about one of these topics I encourage you to submit it that week. Oh, and if you would like to host one, normally you are eligible once you have participated in that carnival once. I am going to be hosting the Carnival of Personal Finance on….March 19, 2007. It appears that one is very popular and hosting is booked quite a ways out

EmigrantDirect has raised the rate on their online savings account to 4.8% apy while Citibank is now at 5%. Gotta love competition in the marketplace. It also appears that there are some new players that are in the online savings accounts arena. Well, I don’t know how new they are but I hadn’t heard of them until now as far as rate leaders go.

The first is BankUnited which is offering 5.25% apy. It has a 5k minimum deposit to open and you need to keep $300 to avoid a monthly service fee. Bank deals has provided alot of information about the account. However, some of the details are a little sketchy as the website, disclosures, and customer service representatives have given different answers as to what minimum has to be maintained to get the 5.25% apy. Another negative is that it appears that you can’t link it to other accounts so you would need to do ach pushes and pulls from another account. I think I will hold off for the time being until we find out some more info about them.

OneUnited is a little unique if you read their company profile. Here is a little excerpt:

OneUnited Bank is the first Black-owned internet bank, the first Black-owned interstate bank and the largest Black-owned and managed bank in the country with offices in urban communities of California, Florida and Massachusetts. Its mission is to provide affordable financial services to support economic development in urban communities and maintain superior financial performance to maximize shareholder value.

It has a competitive 5% apy and alot of the features that I have come to expect from online savings accounts such as ach, no minimum balance requirement, and the ability to add external accounts. You can also get an atm card with it but it appears to charge a $1 fee for withdrawals at other atms. The biggest negative that I see is that interest is compounded quarterly, not monthly, so if you closed your account you might end up losing a couple of months of interest. I decided to open an account this weekend. So far everything has been online. I will write a review of it after I get it completely open and get a chance to play around with it for awhile.

If there is one thing I really regret financially is not starting a Roth IRA years ago. A Roth IRA is a retirement account that grows your investments tax free. The money you place in there is after taxes but you won’t pay any taxes on any of it if you pull it out after your 59 1/2 and it has been open for five years. This is fantastic if you think you are in a lower tax bracket now than you think you will be when you get older. This makes it especially attractive for younger workers that are just starting to save for retirement, such as myself, who will almost assuredly make much more money later in life than they do now.

If you have an employee sponsered retirement program where they match your contributions, such as a 401k, then you will probably want to contribute to that before your ira. You can’t beat free money. If you don’t fit my profile you might want to check out a comparison of traditional versus roth iras. In order to qualify for a roth, your income must be under $160,000 for married filing jointly and $110,000 for single.

For IRA’s you are allowed to contribute $4,000 per year total to all iras, assuming you’ve earned that much income. So, for example, if you contribute 4k to a roth ira, you can’t contribute any to a traditional ira. In 2008 it will increase to 5k. Also, you can fund an additional thousand if you are older than 50. You have until April 15 to fund the previous year’s contribution. This also means that anytime after January 1st until tax day you can fund the current or previous year.

One of the biggest advantages of Roth IRAs is that you can take out your principal contribution at any time without penalty. The only downside being that you won’t be able to go back and replace that previous year’s contribution that you took out. You can also take out up to 10k of your earnings for a first time house purchase.

You can put just about any investment into an IRA, including stocks, bonds, cds, mutual funds, and index funds. Heck, I think there is even ways to put real estate, treasury bills, and limited partnerships into them. If you are just starting out you might want to purchase one of the retirement mutual funds from either Vanguard, Fidelity, or T. Rowe. The retirement funds consist of a mixture of domestic stocks, foreign stocks, and bonds. They have a target date and are adjusted to be aggressive when your young and more conservative as you get older.

For some more information about target year retirement funds check out my post on Simplifying Your IRA. I discuss many of the options available and why I chose Vanguard’s Target Retirement 2045 Fund (VTIVX).

I mentioned previously about the rising interest rates for student loans. Well, I finally got around to consolidating my stafford loans. You have until 6/30/06 to do so. Any new loans taken out after that date will be fixed at close to 7%, so gone are the days of getting really low interest rates by consolidating when federal reserve is keeping them low. Since they were variable rate they were going to increase from around 5% to 7% after this month. Fatwallet has a good thread about some of the new changes recently to the consolidation laws. I am still in school so I will get to keep the deferment and subsidization only now the rates will be fixed.

In my case, it appears the only option was to get a Direct Consolidation Loan as my only loans are Direct Stafford ones. It was pretty simple to do completely online at the Direct Loan Servicing Center website. There was also alot of helpful information at the Direct Consolidation Loan site about the benefits and eligibility of consolidation. The process went very quickly as you are able to sign everything electronically. You have the option to print out the signature sheet and mail it in but online is probably much faster and easier. You also have to choose a repayment plan. I went with the standard plan as it pays off the loan the quickest and therefore you get charged less interest. If I had been able to consolidate these loans when rates were rock bottom I might have chosen one of the longer plans to take advantage of arbitrage. I will probably be taking out more loans over the course of my education so I will have another chance to consolidate in the future.

If you have other student loans than direct ones it might be a good idea to read up on some of the different consolidation deals available. For most people with variable interest rate loans it will be beneficial to consolidate before the end of the month. There is often rate reduction bonuses for automatic debit of payment from your checking account and not missing a payment over a certain period of time, for example, 24 or 36 monthly payments. After I graduate I will scrutinize the available deals to find the lender I find most beneficial.

If you are a rate chaser you’ve probably already heard that HSBC raised the interest rates on their online savings account to 4.80% APY. They had this rate for a promotion that ended after April and have not been one of the leaders since. What is interesting to me is about a month and a half ago I read an article at the New York Times that discussed the incredible growth of online savings accounts. If the site makes you register to view it you can always go by Bugmenot first.

What stuck out in the article were a few quotes by Kevin Newman, the head of personal financial services at HSBC Bank USA. He said that HSBC didn’t feel compelled to offer the highest rates any longer because they felt that online savings accounts customers were much more loyal than say credit card users who would change products looking for the best rate. I am very surprised he would say that, even if they believed it. Heck, after becoming frustrated with the number of days to transfer funds to an external account I was already considering changing banks. Those comments confirmed to me that I should find another account as my primary online savings.

This latest rate increase moves them to the top tier of rates. This increase is particularly interesting to me. I wonder if they saw too many people moving money out and changed their tune. I kinda agree that his logic will probably be right when the market is saturated and the average joe has an online savings account. But right now most who do have one are financially savvy and willing to consider other banks if they see higher rates or beter services. I, myself, assumed after reading that article that they would stay near the middle of the pack from now on. So I moved my money to the money market savings at GMAC Bank which not that long ago was also raised to 4.8%.

The Citi Dividend Platinum Select is one of the most useful cards out there. It allows you to get 5% cash back for purchases made at gas stations, grocery stores, and pharmacies which are commonly referred to as “everyday purchases.” If gas costs ~$3 then it effectively reduces the price by 15 cents. It also gives 1% back on all other purchases but that can be gotten from many other cards. Unlike some other programs, you don’t have to get points and use them for gift cards, you can get a check for $25 when you accumulate that many dividend dollars. There is also no annual fee so there is no reason not to have this card.

The only drawback is that there is a limit of $300 that you can earn in any calendar year. So if you only used it for purchases eligible for 5% back then you would be limited to receiving rewards on $6000 of purchases. If you spend more than that there are several options to supplement this one. As I mentioned previously, it appears that some of the 5% cards are no longer be issued. You can still get the AT&T Universal Card from Citibank which is pretty much the same just that you get thank you points instead of straight cash back. The closest cash equivalent redemptions available are gift cards and student loan repayments. The Discover Platinum Gas card is another option to give 5% back on the first $1200 for purchases at gas stations.

One other way of utilizing this card is to buy gift cards at supermarkets or pharmacies. You could buy them for other stores you know you are going to shop at and effectively get 5% back for many other purchases.

This card also has a very useful no fee 0% balance transfer offer. However, citibank has similar offers of 0% interest for 12 months on many of their other cards. One of those would probably be more appropriate for those looking to go that route. If you do take advantage of the bt, however, make sure that you don’t use it for purchases because the purchase apr is a regular rate. You would also probably want to get another card for everyday purchases. This is what I did. The BT offer is for 12 months from the time you make the transfer and you can do it anytime within 12 months of getting the card. This is one of the good features of most Citibank BTs, the ability to delay the start of your offer normally as long as the actual offer itself.

This is one of the cards I would recommend to everyone. The 0% bt rate ends in a few months on mine and it will probably become my most used after I fully pay off the card.

I can remember back when I was younger and it was monopoly or Super Mario Bros. Now my favorite game is without a doubt the 0% Interest Balance Transfer Game. Its a fun game I like to play in order to actually make money, instead of giving it, to financial institutions such as credit card companies. If you have glanced over my networth and wondered why I have such high credit card debt this will probably be a good read.

I first learned of this game a little less than a year ago when I got a Citibank Dividend Platinum Select card for the 5% off on gas, groceries, and pharmacies. When I activated the card the csr offered to transfer a credit card balance for no fees and 0% interest for a year. When I told him that I didn’t have any credit card debt he told me he could send me a check and I could deposit the money in my bank account. I was a little shocked at this as I had never heard of this. I think I must have asked him 3 times about the 0% interest and no fees before I decided to try it out. I could tell he was a little annoyed at having to repeat and confirm the same information over and over. I am certainly glad I did try this out as it has become a decent source of income, definately worth my time.

Simply put, I borrow money from credit card companies at low or 0% interest rates and then invest the money in an online savings account in order to earn a very good interest rate and therefore free money. Its really a form of arbitrage. It is very important if you decide to attempt to play this game that you are very aware of the details and fine print of the offers. Sometimes they are sneaky about the fees. I guess it would be helpful to have a little introduction on the whole process.

Selecting Offers: The first thing to do is to find the offers you want to take advantage of. Citibank is probably my favorite. Most of their offers are for 0% interest from 6 to 12 months and they allow you to get a check to deposit at your bank. Chase and Discover also have some interesting offers available, and there are many more out there. You need to make sure that you read the terms and are well aware of when you need to pay the money back so that you do not get charged interest. I normally pay mine back before the statement of the money it is supposed to end just to be sure I won’t get charged interest. Also some companies, for example, Discover, use a two month cycle to factor in interest rates. You must be very careful here to not get charged interest.

Putting the money into your bank account: This can sometimes be the only tricky part. Citibank will send you a check to deposit if you wish and you can request it online. I have also received offers for balance transfer checks from chase that I could deposit. If you can get the company to do this its the best. Otherwise you may have to transfer a balance into a Citibank card and then request a check online. I believe they will even allow you to request a check for a negative balance.

Making money from this game: The next step is to make sure the funds are in a safe, high interest online savings account. You want to place the funds into an account with a guaranteed return. Right now you can make close to 5% interest in these. If you plan to invest the money in stocks or buy a new car or something similar then you probably shouldn’t be playing the game. Otherwise, you can make some decent, passive income. If you had $10,000 invested in an account paying over 4% interest you’d be getting over $400 for a 12 month offer. If you were able to get much higher credit limits, for example, 50k, you could get over 2k for a year. Not bad at all in my opinion.

Potential pitfalls: You are still required to pay the minimum payment every month for the card. If you are late with a payment normally they will end any promotional interest rates and give you the default rate, essentially making the money maker into a money loser if you don’t fully pay off the card. You probably will want to set up automatic payments or have reminders with an online calender or yodlee. I will discuss some of the negatives in more details in a future post, but be warned that taking advantage of these deals will lower your credit score at least temporarily. Also, there is the potential that you could invest the money in something with risk or spend it on things you wouldn’t normally buy.

I finally got my latest net worth calculations together. I haven’t been able to post much lately because of a combination of being very busy and not having the internet hooked up at where I’m staying. I’ve got a connection now so I should be back to posting more often.

If you look at last month’s net worth you will notice it doesn’t match up with what I’m reporting here. I realized that I forgot to include an account in yodlee when I set it up last month. I thought about just ignoring that but it contained about $2500 so this would have thrown off the calculations significantly. The information in this update should be accurate for this month and last. I also updated my NetworthIQ account to reflect the mistake.

As mentioned before, all credit card debt is either at 0% interest or in the cases that its not it will be paid off before its due so no interest is charged.

There was a significant decrease in savings as I decided to fully fund my IRA contribution for 2006. I also opened up a TD Ameritrade account. However, almost all of the money invested here is in short term bond funds which are fairly safe. Sadly, with the way the stock market has been lately, its been one of the few stocks that I have bought that has actually made me money.

I am a little disappointed in the gain, I had expected more. This is mainly due to my IRA losing alot of value. In fact, I believe I have lost about four to five hundred dollars there since my last update. Ouch. I also had some one time expenses that I had to pay for due to my internship. I expect to gain significantly more next month.

I started this deal last week and it looks really great so far. TD Ameritrade is offering a $500 account opening bonus and 45 free days of trades. You must deposit $10,000 when opening a non-IRA account and qualify for Apex status by making 5 trades per month for 3 months. The deadline is 09/05/06 for the account to be opened and funded. They say you will receive your bonus 3 to 4 weeks after qualify for Apex status and you will keep the bonus as long as you keep $10,000 equity in the account. One thing you must watch out when trading is that you follow day trading regulations. To make a long story short, if you do four or more day trades within a rolling 5 business day period you will classified as a day trader and must keep $25k equity in your account. There is a very long thread at Fatwallet discussing the deal.

I opened this account very earlier last Thursday morning. When I went online around lunchtime my money was already in my account and ready to be traded. A free day of interest on your money never hurts anyone. I made 15 trades and emailed customer service saying that I had made the minimum number of trades and had qualified for apex status. To get the fastest service you should click on the contact us link at the bottom of your account, then select email and put the topic as client services and then apex status. I did this and they emailed me back without an hour or two and told me I had qualified and would get Apex status at the next system update.

It seems that one safe way to do this deal is to buy a stable, low risk stock such as a bond fund. I went with iShares Lehman 1-3 Year Treasury Bond (SHY). Then get your bonus, sell your stocks, and purchase a 9 month CD or a no transaction fee mutual fund with. Your effective interest rate then is 5% + whatever your cd/mutual fund gains. It should be easy to get 8 to 10% interest on your money.

If your experienced and knowledgeable at trading, unlike me, then the 45 free days of trading could be as good or better than the bonus. I played around buying a share or two such as Haliburton (HAL) and Apple (AAPL) and U.S. Oil Fund LP (USO) but I don’t really know what I’m doing at this point Probably best to avoid too much trading if your not experienced.

I put most of my money in SHY. You can also set up your non invested money to be swept into a money market fund through their TAP. You have to mail or fax the Total Asset Plan form to them. There are many choices of Reserve Funds but the Primary Class R seems to be the best for me since I’m not concerned about taxes. You will gain ~4% interest at the time of this post as long as you have 2k in non invested funds. I signed up with it but I’m not sure I will utilize it. I will probably put most of my money into one of their mutual funds, most likely a no fee one, once I start losing money trading stocks.

This is a fantastic deal. Even if you simply left your funds in the Tap account you would be getting about 9% APY for no risk. Of course, you could leave small amount of dough to have a little fun with no commision trading. Just be aware of the day trading rules if you do. If anyone has anything to add, or any tips about maximizing this deal, I’m all ears.

In a couple of days I will be begin my first internship. I guess it could be more appropriately described as being part of a summer research program, but it serves the same function. I am pretty exciting as this will be my first professional job other than a teacher’s assistant position, which I’m not sure even counts. This gives me a perfect opportunity to discuss some of the benefits of having an internship while your in college. After thinking about it, I’d have to say that they fall into two categories: gaining personal knowledge and abilities and making yourself more marketable for jobs after college.

It seems that one of the biggest benefits of an internship is that you get some hands on real experience that you can’t obtain by reading books or taking notes. You can learn new skills and abilities and develop the ones you already have. Probably most important of all, as you get this experience you can see if you would really like working in that industry. I am finding more and more people who end up majoring in one subject and end up working in another. They may have enjoyed the subject but they really didn’t like the type of work that went with it.

The other major advantage is enhancing your ability to find a quality job that you will enjoy after college. I would say its fairly obvious that an employer, all else being equal, would take someone with experience over someone without any. The person that had the internship would need less training and the employer could be more confident that the person was committed to that field and had good abilities. Its safe to assume that its rare for someone who is the opposite to get a good internship without some connections. The position will also afford you the opportunity to make important contacts in your field. This can be great when trying to network for a job or needing someone to vouch or possibly write a letter of recommendation for you.

And besides, it will look much better that you participated in one than if you worked at the supermarket or as a pizza driver. There is also the possibility that it could lead directly to a full time job. If the company is impressed they might offer you a position once you are finished with school.

I guess there are some negatives too. One of the most important is the opportunity cost. Some people may have a business that is starting to become successful or some other opportunity that they might not want to neglect. And the issue of pay is also a concern. Some positions may not pay much or any at all which would cause you to take out even more student loans to deal with it.

I guess I am lucky in that my position will be paid well. I believe I would have taken it even if it wasn’t. I have changed my major once and contemplated changes many, many other times. Although I enjoy the subject area, I am not 100% sure that I would want to pursue a career in that area. And besides, I need a few more things to put on my otherwise fairly sparse resume. That should about sum up my ramblings. I think it will be interesting to look back at this article in a year or three and see if I still have the same opinions about the benefits.

I have collected a mountain of different banking and investing accounts and it was pretty difficult to keep track of all of them. About a month ago I started looking into getting Yodlee Oncenter. Adding accounts is very simple and it makes it easy to stay on top of all your finances. You merely have to browse each category and select the account you have and later it will ask you to input your login and password. It then aggregates all of your accounts together on one page. I had been wary of trying the service for a long time because I was a little uncomfortable with one account having logins and passwords for all my accounts. Well, after sitting down to figure out my networth I gave in. I think I will use a different password than the one I have been using for most accounts, however, as an added precaution.

It has been extremely useful. I am able to look at all my bank accounts, investment accounts, credit cards, reward programs, loans, bills, and even email. It includes the amount in the account, any transactions, and lists the holdings you have in your investment accounts. This is also useful if you have accounts that aren’t compatible with ms money or quicken. The only account that I couldn’t find was tradeking, a fairly new brokerage company, and HTH bank, a rather unknown bank. This is pretty impressive as the number of bank and credit cards I have is in the double digits each.

I recently found out at Savvy Saver that there are many other companies who provide their own version of yodlee. So I decided to test out Fidelity’s Full View. It was pretty much the same although there were a few things that seemed to be missing. I didn’t see a section of alerts or bill reminders, which is especially useful for credit cards. I also couldn’t find chase’s rewards program, choose myrewards. It does seem less cluttered though, and I also like the way they displayed the portfolio section better. Nothing real major though.

I would definately recommend getting it. Ironically, I discovered I could view my Federal Direct student loans at Yodlee before I realized you could view them at Direct Loan Servicing. If you don’t see an account you have, you should probably head over to the yodlee forums, one of which is a forum to request new accounts to be added. I actually feel more comfortable now as I think I will be able to spot any fraudulent transactions faster than I did when my Citibank Debit card was stolen. The price of free is also cheaper than that of MS Money or Quicken. And I don’t even know if both of those services are compatible with all of my accounts.