After linking ING Direct and Emigrant Direct directly, I just checked and my $5 test transfer from ING -> Emigrant over the weekend just posted to Emigrant today, so it is officially possible to move your money from 3.30% to 4.00% with just a few clicks!
Sweet. Emigrant Direct’s American Dream Savings Account is now paying 4% APY [Info Page, Bank Review], up from 3.50% and leapfrogging basically everyone in the liquid online savings arena, including Presidential Bank’s Premier Savings Account. And I just moved over ten thousand dollars out of Emigrant in the last two months. But I don’t think the interest rate wars are over yet. Things continue to look up for savers! An arbitraged $20,000 balance transfer at 0% APR would now earn $800 a year!
I’ll admit I don’t know much about PayDay loans, I just avoid them like the plague. So when a commenter posted a very interesting 4-part series from the Motley Fool about the merits of payday loans in my previous post, it made me think: who is actually getting these loans? If I were to guess, it would be someone making barely over the poverty line and just trying to make ends meet. According to the Fool.com article, last year 5 million people got these type of loans, and paid $3.4 billion in interest and fees! 5 million people? So about 2% of the U.S. population got one? Yet the default rate is only 2%. Hmm…
Google Answers is a site where you post a question and how much you’re willing to pay to get it answered. The cool thing is that after it’s answered it’s posted online for all to see. One guy offered $200 for information about opening up his own payday advance/check cashing shop. The answers were very interesting -
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Jim of Blueprint For Financial Prosperity and Nev of Neville’s Financial Blog were interviewed recently in a huge article in the New York Times today in an article called ‘Psst: Want to Know My Net Worth?‘ (annoying registration may be required). Nice job Nev and Jim!
Most people know Payday Loans are a bad idea. Except for, of course, the people that use them. This weekend I saw one of these places having a free BBQ outside their store, with a decent turnout. I can already imagine the banner: “Pay 600% APR interest, Start your downward spiral into debt, and get a Free Hot Dog!” Anyways, I guess it was just a matter of time before these guys went online. Bankrate.com just ran an article titled ‘Online payday loans: Borrower beware‘, outlining the many pitfalls of online payday loans. Besides the outrageous interest rates and numerous fees, you have:
I grew weary of my real estate textbook, so I picked up Freakonomics at the obligatory overpriced airport bookstore. You may have heard of this book as the one that suggests that the legalization of abortion is the main cause of recent decreases in violent crime. In short, this books tries to apply the math of economics to issues like crime, cheating, and parenting. It’s is co-written by an Economics Ph.D., and a New York Times writer. The NYT writer imparts a very strong “dumbed-down” flavor to the book, and as such the book reads like a newspaper article with a lot of sensationalization.
Still, the book was a fast read and mostly entertaining. It boils down economics to it’s basic idea: what do people do to get what they want? But it goes beyond supply and demand. For example, the book talks about real estate agents. It’s commonly known that the commission on a house is 6%. So on a $300,000 house that’d be $18,000. Sounds like a lot of money right? You’d think it would be a good incentive for your agent to sell your house for as much as possible. But wait.
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Yes, I used ‘Direct’ three times in the title. Many people have wanted to link their new Emigrant Direct account with their existing ING Direct accounts. However up until recently, unless you used your ING Direct account as your initial funding account, you couldn’t do this, as both required checks to link additional accounts. But thanks to a new check-less linking feature, it has been done! I got this idea from Consumerism Commentary.
First, log in at ingdirect.com, and click on the link about Externally Link Accounts. Then click on the Add Link button. You’ll need to know the name of your bank, the routing number, and the account number. For Emigrant, the name is Emigrant Savings Bank, and the routing number for Emigrant is 226070319. They’ll then send two small deposits to your Emigrant Direct account (free 43 cents for me!) which show up in a couple days and you confirm them again back at ING. I just confirmed my deposits and they’re all linked up. I’ll also send a couple bucks back and forth to amuse/assure myself, but I think it’s a go.
I-Bonds are currently paying 4.80% interest, which is pretty good. The rate changes every 6 months though, and I just spent the last hour trying to figure out how to predict it. As I’ve mentioned in an older savings bond post, I-Bonds pay a rate based on two parts, a fixed component good for the life of the bond and a variable component based on inflation that changes every November and May 1st.
It turns out you can actually predict the variable component of the rate before it is actually announced officially. Inflation in this case is measured by the CPI-U, which is released every month by the government here. For example, the inflation information for August 2005 was just released today. The rate in May is a measure of inflation from the previous October through March; the rate announced in November is a measure of inflation from the previous April through September. Here’s how to use this information to compute the I Bond rate:
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Well, it happened. Delta Air and Northwest Air both filed for Chapter 11 Bankruptcy. Check out the 1-Year charts for Delta [DAL] and Northwest [NWAC]. This is going to be bad for current and future pensioners. United already broke its promise to workers and left them with about 60% of their expected retirement money. I have relatives in the airline industry and they needed to hear this like they needed a hole in the head. How would you like to hear that your 401k got chopped by a 1/3rd? And of course taxpayers will be footing the bill through the Pension Benefit Guaranty Corp. (PBGC). Delta’s pensions are already underfunded by $10.6 billion. Sheesh.
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I apologize if my post topics are a week late, I am a bit late processing this stuff. Several bloggers have touched upon this subject, all making good points. In light of current events, you can see how emergency funds are important. What if your ‘really stable’ job turns into rubble? At the same time, your house is underwater, and your car is an aquarium. Your online savings account is going to be a bit hard to access without electricity. Even something in a safety deposit box isn’t so safe. I like to think of emergency funds as Real Life Insurance, protecting your current way of life, not protecting against your death. So I’d like to brainstorm different ways of having some backup money first. In no particular order (more like stream of consciousness):
1. Cash - I usually keep less than $200 of cash in the house, but I’m definitely going to put more in the house. No electricity = No ATMs and No credit card swiping machines.
2. Liquid Savings/Checking Accounts - Of course not all emergencies involve loss of power, and having thousands of dollars in cash under your mattress is not going to earn you any interest. And it’s FDIC/NCUA insured.
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I hate carrying around spare change, I don’t know why. I put all mine into a jar by the front door the second I get home. I try to use credit cards exclusively, but somehow the spare change has filled two spaghetti sauce jars already. Coinstar machines are everywhere now, trying to cash in on people’s laziness and giving you bills after charging a surcharge of 8.9% (9.8% in Canada). For someone that is happy when my saving account rate bumps up 0.25%, that’s too much. But now, you can lug your change to the machine and get a gift certificate for the full amount to select Coinstar partner stores - including Amazon.com, Starbucks, Hollywood Video, Pier 1 Imports. [Coinstar Kiosk Locator]
According to this CNN Money article, they are doing this by buying discounted certificates and pocketing the difference. Very smart. But I’d note that I could buy gift cards for Starbucks and Hollywood Video at a Safeway grocery store using my Citibank Dividend Card and get 5% cash back, so that would be like paying a 5% fee on my spare change. The Amazon option sounds pretty neat though.
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Continued from 1st and 2nd Quarter…
June
» Finally made up my dang mind about car insurance.
» My current favorite savings account, Presidential Bank’s Premier Savings Account, was born with a great interest.
» Talked about using credit cards efficiently by getting the best cash back of 2-5% from using the right credit cards. Also here and here.
July
» Finally got serious about budgeting, and did some historical analysis and set some budget target limits.
» Revealed more about me.
» Shared about getting some free money action.
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Continued from December to February, here is the next installment:
March
» Started my 5 minutes of fame, with mentions in BusinessWeek and the Wall Street Journal online.
» Continued my 5-minutes with a blurb on television’s CBS MarketWatch. Download the video: RealPlayer format or Windows Media Player format.
» Ended it with a stint on top of Yahoo’s ‘Ten Money Blogs Everyone Should Read’.
» Provided a little insight into why I hate E-Trade, and am very satisfied with Ameritrade, even though they pulled the plug on the beloved FreeTrade.
April
» Had personal information leaked/stolen, so I made my own Identity Theft Recovery Plan.
» Re-stated my Mid-Term and Long-Term Financial Goals.
» Went to DisneyWorld!
» Picked up both Microsoft Money and Quicken personal finance software packages, and promptly got annoyed at Quicken.
» Had a little giveaway.
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Wow, today is the 9-month anniversary of this blog’s first real post. I’m sure most of you weren’t around then, so I’ve decided to make a bit of a flashback post collating what I think were interesting highlights of MyMoneyBlog. Here are the first three months:
December
» Opened up my financial life with my first Net Worth post
» Read two books that greatly affected my investing outlook - A Random Walk Down Walk Street, and The Four Pillars of Investing.
» Picked Vanguard as my Retirement Broker
January
» Chose Vanguard Target Retirement 2035 Fund VTTHX for IRA.
» While thinking about where to park my liquid cash to earn the best interest rates, I discovered online banks with high APRs like Emigrant Direct.
» Stirred up the pot talking about “Good” Credit Card Debt, and How To Play the 0% APR Balance Transfer Game.
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A family situation has come up, and I will be out of town for the next several days. Please redirect any good wishes towards New Orleans. I’m glad that I have the means to buy a last-minute ticket across the country if that is what I need to do. Please forgive any delays in answering e-mails, etc.
