Revolution MoneyExchange: New Person-to-Person Payment System and $25 Bonus Promotion

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Yes, here’s yet another new financial service vying for your attention. This time it’s RevolutionMoneyExchange, which is a person-to-person payment system similar to PayPal. It’s free to send, receive, and withdraw money, but the only funding source allowed is your bank account (no credit cards). It will be interesting to see if it gains some traction (and if eBay allows them as a payment option). Currently, they are offering a $25 bonus just for signing up. Here’s mine:

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However, you’ll have to submit your Social Security Number to verify your identity, so I had to do a little digging first. According to this article in American Banker, it is backed by Citi, Morgan Stanley, and Deutsche Bank AG, which participated in a $50 million venture capital round. The parent company was formed by bajillionaire Steve Case, co-founder and former CEO of AOL, and the son of the former CEO of Mastercard. Also mentioned in USA Today.

Also, there is no hard credit check done using your SSN. It says clearly at the top “This information is not used to review your credit history or to establish new credit.”

AAA Basic Only Tows 5 Miles?

It seems that my car troubles aren’t over yet. So the only financial thing I learned today was that AAA Basic only pays for the first 5 miles of towing. After that, it’s $6 a mile. What’s up with that? I won’t complain though, as a family member had AAA and not me and I think I still saved some money using the service.

I don’t buy AAA because my general philosophy on insurance is that you should only buy insurance for financial hits you can’t weather. I can handle paying for an occasional tow – or I can ask if others have AAA 😉

Earn Rewards For Paying Your Taxes And More

For a while, the site OfficialPayments.com has been offering people a way to pay a variety of federal, state, and local taxes with their credit card. While you can earn rewards for doing so, the 2.49% processing fee usually canceled everything out. Enter the Citi Cash Returns MasterCard, which offers 5% cash back on purchases for 3 months, with no caps or limits. (Update 4/23: Promotion has changed.)

The trick is then to load up your card as much as you can during the promotional 3 month period. In this case, if you used Official Payments to pay your tax bills which you used to pay by bank account, you’d stll be left with 2.51% of profit on your tax payments, or $251 for each $10,000 in taxes paid. This is especially applicable to me, as I underwitheld my taxes (without penalty) in 2007 by at least $10,000.

Who Else Can You Pay This Way?
Besides federal income taxes and estimated tax payments for sure, there are actually a good variety of options:

Official Payments is the trusted payment services partner of the United States Internal Revenue Services, 25 state governments, the District of Columbia, more than 2,500 local and municipal government agencies, more than 400 colleges and universities, and other public and private interests in all 50 states.

Use the the Who Can I Pay? and enter your zip code for the full list in your area. Being able to pay state income taxes online would be worth at least another $100 in my pocket…

Something More Controversial…
If you’re like me and you know you’ll owe some amount by April 15th to settle your tax bill and avoid late-payment penalties, why not just play it safe and overpay by a safe margin? Then you can file a tax return extension until October 15th and file your actual return at your leisure later on. When you do, you’ll simply be refunded any overpaid tax amount. This is what I had to do last year anyway, even without the carrot of instant 2.51% return on my money.

Timing The 3-Month Window
I’ve been waiting for a good 3-month window where I can max out this card. Given this tax situation and also all my upcoming new house expenses – home improvement, hardwood floors, furniture, moving, etc. – I think the timing is right. I applied tonight, but didn’t get an instant decision, most likely due to my recent move. I’ve been taking it very light on the credit cards lately, so I see no reason not to get approved. 🙂

Free Credit Score Monitoring With CreditKarma

Last week, I pointed out how to get a free Experian credit score via Prosper. You can already get free credit reports from AnnualCreditReport.com as well as in other special situations. But what about services like daily credit score monitoring?

Now, a new site called CreditKarma is offering free daily credit scores. For comparison, FICO’s own Score Watch program costs $89.95 per year. So what’s the catch?

  1. It’s not a real FICO score. This is another FICO-clone, with a score ranging from 300 to 900. (FICO is from 300 to 850.) It also doesn’t say from which bureau this score is based upon, as they say they can pull from any of the big three (Experian, Equifax, Transunion). My guess is that they’ll use whatever is available that is both cheaper than FICO and still reasonably accurate. That’s what I would do…
  2. You only get the score. The service is pretty barebones. You don’t get information about who’s pulling your credit, how often they are doing it, or information about your existing credit lines. So the “alerts” feature is missing. Instead, the primary attraction is the ability to see trends – is your score increasing or decreasing over time?
  3. They are advertiser-supported, so I guess they are counting on people to obsessively check their score every day. I’ve always been a bit mystified by such behavior, but I don’t check the stock market ticker all day long either. From their privacy policy it seems that they are using your personal information to target ads to you, but aren’t actually sharing your info with others unless you opt-in. I sure hope not!

Security and Privacy Concerns
Okay, it’s free, so price isn’t a barrier to using this service. But it’s definitely wise to think twice before giving out personal information like my Social Security number to a start-up company. I read through their site, and didn’t see any glaring security holes. They use common third-party systems like ScanAlert Hacker Safe, TRUSTe, and Verisign. If you do notice something fishy, please share in the comments. The CEO will be reading, given that he’s the one that told me about this site.

Reasons For Having Only One Spouse Apply For A Mortgage Loan

I mentioned before that we plan to have just my wife apply for our new home mortgage loan, and not have my name on the mortgage at all. I had been playing around with this idea for months, but it looks like we will be going through with it. Here are some of my supporting reasons:

Helps Prevent Overspending On A House
One of our primary life goals is to be able to live on the equivalent of one income so that we can both work less and enjoy our lives. In order to do so, obviously we will need to maintain a reasonable housing payment. Although it’s clear now that lenders aren’t always the best judges of what is “affordable”, if we couldn’t qualify using only one of us, that would surely be a bad sign. While going through the pre-qualification process, we found banks willing to lend us over 5 times our income!

Although this is usually one of the main drawbacks of only having one spouse on the loan, but we actually saw it as a positive way to help us make sure we weren’t spending too much on a house.

Saves Time and Hassle
We want the best mortgage rate possible, so we are doing a full-documentation loan to prove our financial worthiness. Not only did I only recently finish school again, but a chunk of my income is self-employment income. Doing a full-doc loan with self-employment income involves a ton of scrutiny and at least 2 years of detailed profit/loss records. They also only take the average income over the last two years into consideration. It was simply easier and faster to submit my wife’s more stable and salaried job information.

Projecting A Better Credit Score
Sometimes one spouse has bad credit, so you want to keep their name off the mortgage in order to get a better rate. In our case, it wouldn’t have really mattered since we already got both our scores checked while getting pre-qualified. But my wife’s score is still slightly better than mine – since she doesn’t play silly credit card games – so we figured it wouldn’t hurt.

Leaves Room For Future Mortgage
After we buy the house, I still won’t have a mortgage on my credit report. Supposedly having a mortgage helps your score, but I’ve been doing just fine for over a decade without one, so it doesn’t matter to me. However, if later on I apply for a mortgage myself (investment property?), then I’ll be able to use my full income to qualify since I’ll have no other visible liabilities. Hopefully this will result in a better rate later on down the road as well.

Worst-Case Scenario
Although we never plan on taking advantage of this, if our home does get foreclosed upon, ideally only my wife’s credit score would be hurt as she is the only one responsible for the loan. Of course, I’d also lose my interest in the house.

Both Spouses Can Still Own The House
In our case, we plan on putting both our names on the title of the house with rights of survivorship. From what I’ve read, in many states both spouses have equal interests in any purchased house no matter who is on the mortgage, so it may not even matter.

So no mortgage for me! 🙂 Let me know if I missed something, positive or negative.

Stimulus Package – What Does It Mean For You?

Confused about the stimulus package? Here’s a quick summary from Bloomberg:

Bush and House lawmakers yesterday agreed on a $150 billion economic stimulus package aimed at avoiding an election-year recession. About $100 billion would pay for tax rebates to about 117 million families and $50 billion for business tax breaks.

The package also addresses the growing number of housing foreclosures with a provision allowing Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, to temporarily buy mortgages of as much as $729,750, up from the current limit of $417,000.

And here’s my short version:

  • Singles: If you earn less than $75,000, you’ll get $600. Married couples: If you are filing jointly and earn less than $150,000 combined, and you’ll get $1,200. Additional $300 per kid. Additional details for each scenario in this Treasury Department Factsheet (thanks to commenter cek260).
  • This is just the proposal they’ve agreed to vote on, but nothing has been approved yet. Bush hasn’t signed anything. Therefore, there is nothing you need to file or do yet in order to get your check. It is an election year, however…
  • You won’t see any checks until May (read: June or July) at the earliest.
  • Raising the conforming loan limit is good for folks like me who don’t want to pay 1% more interest for a Jumbo loan. Doesn’t really seem like something to help most middle-class folks, though. Seems to be mainly a product of lobbyists for the banking and housing industry.

But again, nothing firm has actually occurred yet, despite the news frenzy.

Finding A Buyer’s Agent, Part 2: Screening, Trial and Error, Signing a Contract, Offer Acceptance

This my second post on our experience in Finding A Buyer’s Agent. In Part 1, we tried our best to figure out what we wanted from an agent. Again, we are first-timers and are not real estate gurus. This is a long post, but it definitely shows a real story of how we found our agent – and how she helped us find our house!

Screening Tips

Given the hundreds if not thousands of real estate agents in our area, it was going to be a daunting task to find the “perfect” agent. We had to filter them down somehow. After reading up at a couple of books and websites about how to select a buyer’s agent, here’s what we were told:

  • Ask trusted friends for recommendations. Ask about the reputation of both the agent and the brokerage house he/she works for.
  • Ask potential agents for testimonials and references. A long list of references is good, but it’s unlikely you’ll hear from the unsatisfied folks.
  • Check the local real estate board if your agent has any complaints against them. This is pretty unlikely in my experience, they aren’t exactly regulated that closely.

Our First Experience

First, we asked our friends and family for experiences. One of our family members actually used to be an agent, but she retired a while ago. Another family friend volunteered to be our agent, so we decided to try him out. It didn’t work out as he seemed to only want to show us certain houses in certain areas, and wasn’t very responsive to our specific requests. I guess we weren’t the ideal “let’s see 3 houses you recommend and we’ll just buy one of them” couple. Not wanting to mix friendship and business anymore, we decided to find our own agents from then on.

Interviewing Agents

After browsing some newspaper ads, I decided to visit HomeGain.com and used their free “Find a Realtor” feature to compare some agents. You provide your information like neighborhood, price range, etc. and then a bunch of agents try to create a custom “proposal” for you. However, it’s all done online through their interface, and none of your contact info is shared without your permission. I liked the idea of not keeping my name and phone number private. You also get client testimonials and their experience level. Here is a sample (click for full size):

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Most of the proposals sounded the same… “I know all about your neighborhood, let me help you etc. etc.” We picked our favorite five, and asked them the same interview questions online:

[Read more…]

Free Experian Credit Score via Prosper Lending

Prosper person-to-person lending offers up another perk – a free credit score for prospective borrowers. If you’re a lender already, it’s not too difficult to become a borrower. I just had to verify my address and phone numbers, and they offered up my credit profile. You will need to provide your Social Security number, though.

After signing up and logging in, just click on “Get a Loan” and then “Get a Personal Loan”. Note that this isn’t your FICO score, but an Experian ScoreX PLUS score based on your Experian credit report. (Some people refer to these as Fake-O scores, or FAKO, as they compete with FICO scores.) Prosper makes it pretty clear that this credit profile will not affect your credit score:

Having Prosper obtain your credit grade won’t affect your credit score. Although we are making a request for your credit score, we’re doing so at your instruction so no inquiries viewable by subsequent users of your credit report will be placed in your credit file. That means your credit score won’t be affected when you register or post a listing.

In other words, it is a soft pull. However, if you do fund a loan, a hard pull will be performed. Here’s a partial screenshot of my profile:

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I’m not sure how the Experian score maps to FICO (they don’t officially), but it should give you a general idea of where you’re at. I’m glad to see I’m still at the highest AA grade even though I make money borrowing from credit cards, although admittedly I’ve been taking it easy recently. If you want access to your credit reports (not score), please check out the many ways to get a free credit report as well. Thanks to SlickDeals and reader Tim.

If you’re interested in lending on Prosper, grab your $25 bonus and a few tips from these posts:

In Escrow: Offer Accepted On House!

It’s official! We have an signed offer contract on a house, our earnest check is sent, and we are in escrow. Apparently our timing couldn’t be worse as the world is apparently about to implode, but ah well. Here are some quick bits of information:

  • The seller needed a quick sale, and we are buying as-is. We will have to hire a home inspector to make sure everything is acceptable.
  • We believe our offer price to be a good deal. It was below asking, and significantly below comparable houses. We literally bid the 1st day on the market.
  • The home price is more than we originally wanted to pay, but is still such that either one of us could qualify for the loan individually. Mortgage rates are also really low right now.
  • It’s a fixer-upper, but the “bones” are great. It hasn’t been updated much since the late 80s, so it’s pretty ugly to a lot of buyers. We already have lots of remodeling plans.
  • It’s a house that fit all of our criteria and more: good neighborhood, excellent schools, acceptable lot size, great square footage. If anything, the commute will be longer but we expected that.
  • I’m acutely aware that the housing outlook is bleak right now, but that’s how it is – You’ll see how my decisions work out, good or bad. In any case, there is still a long ways to go until closing. Props to my wife for checking the MLS diligently every single day and making this happen!

Ask The Readers: What’s Going On With The Stock Market and the Economy?

I’m not very good at keeping up with market fluctuations in general, but Bernanke cutting the Fed Funds Rate by 0.75% got my attention. I’ll be honest – I was totally distracted this weekend by other things, and I barely noticed the drop in stock prices over the last week. The S&P 500 is down nearly 3% right now from Friday. The new headline for CNN is “Recession Watch 2008”. What did I miss?

Discussing Home Buyer’s Agent Commission Rebates

Up until a few years ago, the status quo was that the real estate agent who helps you buy your home get half of the 6% commission, so 3% of the sale price of your home. On an average (again, around here) $600,000 home, that’s $18,000. That may be split between the principal broker and the agent (unless you have an independent agent), but that’s still quite a pay day. Nowadays, there are several websites and agents who will offer you a cut of this 3% commission – often for a reduction in features. Here are a few of the more prominent ones:

(*Our eventual agent was found using this service.)

However, the National Association of Realtors is actively lobbying against this practice. Currently, these states ban buyer rebates: Alaska, Iowa, Kansas, Louisiana, Mississippi, Missouri, Montana, New Jersey, New York, Oklahoma, Oregon, Tennessee, and Wyoming.

But should this practice be illegal? Many people – most real estate agents – sure think so. I disagree, and find this stance very anti-consumer. Hey, I can understand not wanting to lower my income. But that’s capitalism. If an agent can operate well without rebates, then they should do so and refuse to offer any such rebates. But if someone else is willing to negotiate their fee, what’s wrong with that? I feel that like for any service provided, both the price and the features should be negotiable. Imagine every car costing $20,000 no matter what, every computer costing $1,000, every haircut costing $50. Yes, a discount agent might offer discount service. But a full-price agent can also offer poor service. In the end, each home buyer should be able to make their own value judgments.

Even our current arrangement is primarily a result of legacy and tradition, not logic. Until the 1990s, in many states there were no “buyer’s agents” at all. All agents represented the seller, which means they had a fiduciary responsibility to the seller – and only the seller. Only within the last decade or so have agents who solely represent the buyer become widely accepted. I believe commission rebates are simply the next evolution in real estate practices.

In the end, not everyone has the same needs. If someone wants a full-service agent who works for a big company like REMAX or Century 21, who will interview the client and figure out the best neighborhood for them, call them with updates every day, and drive them to each house in their nice car (why do they all drive either a Benz or a Lexus?), then they should have the right to do so. On the other hand, my agent has almost 20 years of experience, and is her own principal broker. She drives a Honda Accord, and I’ve never been inside it. We get full MLS access and we e-mail her what houses we want to see. We already have a lawyer who reads real estate contracts all day long in the family.

In addition, if price is such a key ingredient to agent quality – why can’t I offer $5,000 plus the 3% commission to my buyer’s agent? By that logic, that should get me a sweet agent who’ll bargain the pants off the seller and get me a house 20% below market… right?

Bought a Diamond Since 1994? Diamond Class Action Lawsuit

First. it was credit cards and their foreign transaction fee settlement. This time, it’s the De Beers diamond company accused of being a naughty monopoly and artificially raising diamond prices. They have reached a tentative settlement which you can learn all about at DiamondClassAction.com. For the consumer, they are proposing to split about $135 million (less fees) to the following eligible consumers:

All persons located in the United States who purchased any diamond or diamond jewelry or other products containing gem diamonds for personal use and not for resale between January 1, 1994 and March 31, 2006. For example, Consumers include people who purchased diamond jewelry to wear or to give as a gift.

Lawyers will get at least 1/3rd, so the pie is more like $80 million. The money will be pro-rated across all claimants, so the more approved claims that there are, the smaller the individual payments will be. In addition, if your share is less than $10.00, no check will be sent to you as a result of “prohibitive administrative costs”. Still, I filled out the form – they asked for name, address, e-mail, and basic jewelry info. Regarding proof:

If you did not buy a diamond or piece of diamond jewelry that cost over $10,000, you do not need to submit documentation at this time. Please remember to keep all documents showing your purchase, such as a receipt, invoice, insurance statement, appraisal, authenticity certificate, or other proof of purchase. You may need to send the documents to the Claims Administrator to prove your purchase at a later time.

I look forward to receiving my check for $15.61 in the year 2011. 😛 Thanks David for the tip.