Balance transfer offer -- no thanks!

Chase just sent me a "great" balance transfer offer: 3% fee ($75 max), 0% APR until 3/2009. What a joke. Considering the risk in paying at the last minute plus the delay in getting the cash, that's only like 4 to 5 months for the promotional rate! At the amount I'm considering ($10k) that is hardly worth it. At ING I'd earn roughly $10k * 3% * 4.5/12 - $75 = $37.50 over the entire period.

Ah... upon closer examination, the promotional rate ends at the opening date of my 3/2009 statement... in other words, 2/2009. So make that 4 months max!

And furthermore, switching my purchases to another card would mean losing quite a bit of cash as this is my best rewards card.

Thanks Chase! But no thanks.

Notice that a 3% fee for 4 months equates to approximately 9% APR. I love how tricky they are, it's like a game.

Profit so far

In July, which was a partial month, I earned $7.64 in interest. In August, I earned $11.23. Not much but a good proof of concept. It certainly beats filling out little online surveys for 10 points (7.5 cents)!

At the end of the balance transfer, I'll transfer the leftover money in the account to my Fun fund.

My Prosper loans are doing well. I added a little bit more money and bid on three more loans. Prosper is fun but also scary. I spend quite a bit of time looking for loans I think sound reasonable and am pretty horrified at what some people are willing to bid on. I've seen listings that are entirely blank, but offer 33% interest or so, and have many people bidding. What are they bidding on?? Surely these loans don't make it past the review period. My only guess is that people with automatic portfolio plans have settings that pick up these awful loans. Good luck to them. Who knows what other garbage loans they catch.

One thing that irritates me about Prosper is how they strip out any identifying information from the loan application. I understand it's a safety issue, but it's kind of ridiculous.

Another is the waiting period after you bid on a loan where your money is tied up, earning no interest, until the loan is created or it expires. I don't know who bids on loans that are 10% funded with 5 days left, but someone does. I just sort the loans by time remaining and look at the ones that expire within a day.

The net result is it takes me a good week or so to find a few loans worth bidding on. Kind of silly for a $50 loan, in terms of return on my time investment. I guess I do Prosper mostly for the fun. If I ever invest serious amounts of money, it would probably be better to do one of those "Reinvest in Prosper" loans and let someone else do the work. I wonder if there are any stats about their performance versus Prosper loans in general.

Balance transfer trickiness

Well, I got a letter in the mail (how quaint) from Citibank confirming my balance transfer and got a rude surprise. They calculate the end of my 0% term as December 2008! Apparently the "12 month 0% transfer" is still from last year when I opened my account. I emailed customer service and they confirmed that.

Oh well, I'll still make some money. I'm glad I didn't do something rash like stick the money in a CD. And I'll still be on the lookout for other profitable balance transfer offers!

Kiva -- loan sharks?

I really like the idea of kiva.org but I keep getting dissuaded by one fact -- they charge a very high interest rate to borrowers, but expect you to loan them money interest free.

On the info page of any field partner (the local agency that actually lends the money and collects payments), you can see stats about how much interest they charge for Kiva loans. For instance, Fundación Paraguaya charges 20% interest, and you can see that the average charged by all Kiva partners is 22.77%. I have to ask... why?? The money is entirely put up by sponsors so there's zero risk to the lending partner. I understand that they have overhead costs, but come on, this is an outrageous interest rate. I could understand 5% - 10% to recover costs, but 20%?

Keep in mind that even though these are micro-loans, to the people borrowing the money they can be fairly large, like the equivalent of a year's income. Imagine getting a loan equivalent to your salary and then paying 22% interest on it! Good luck actually making a profit on your new farm equipment or whatever.

Credit card rewards

I'm getting my first cash-back rewards check from my Chase Freedom card -- for $200 of credit I'm getting a $250 check! Not bad.

On a related note, I used Chase's online credit limit increase request function to give myself an additional $22k credit. Holy crap! We're in a credit crunch, right? I'm not planning on using any of it until Chase comes through with a great no-fee balance transfer offer. I'm patient. Maybe I should open up a few more cards with Citibank, wait a while, and then increase my credit limits with them.

If I can 10x my balance transfer amount then I'll be making around $25/week even in this low interest rate environment. That is going to trounce my cash-back rewards.

Balance transfer account funded

The deposit from Citibank came in today and I immediately opened up a new savings account to hold it. I should earn 36 to 37 cents each day in interest. There's also a chance that within a year interest rates will rise.

The only snag is I don't know what the minimum payment is going to be until August because it still says 0 for the amount due at the end of July. I have to remember to check on that!

First attempt at credit card arbitrage

I randomly signed on to Citicards.com (Citibank's credit card website) to see what's up and I found a balance transfer offer on one of my unused, zero-balance cards. There's no balance transfer fee and no interest for 12 months. Let's make some money!

Just now I submitted my balance transfer request and the money should show up in my ING Electric Orange in a few days. Here's my plan:

1. Set up a new savings account and transfer the money into it.


2. Set up an automatic transfer from the new savings account to my Electric Orange monthly for slightly above the minimum payment amount required by Citibank.


3. Set up an automatic payment for the same amount from my Electric Orange to Citibank, scheduled waaaaay in advance of the due date.

I only transferred a few thousand dollars because A) I have a pretty small credit limit on this card and B) I've never done this before and I don't want to get burned too badly. Next year I'll pay off the balance and all of the interest will be mine to keep. I figure I'll make around $100. That's not much money over the course of a year, but considering it's going to be fully automated it's worth it.

Maybe in a few years I can build up to $50,000 or more in balance transfer offers and make some significant money. I bet that interest rates will be heading up (they sure can't get much lower) so it'll only become more profitable. Maybe credit card companies don't make such sweet deals when interest rates are up, though. We'll see.

Personal finance advice at Arby's

Arby's is one of my favorite fast food restaurants and served as my lunchtime destination yesterday (I had a good coupon). I was the only one there (I took a late lunch at around 2:30pm) and I paid with my credit card with a rewards program. The cashier looked at the card and said, "Be careful, this is dangerous." My confusion was evident and he continued, "I mean credit cards. They're all thieves and liars!"

So I talked with him for a few minutes about the evils of credit cards. He told me he had cut all of his up and always paid in cash. It was triggered by a combination of high interest rates and identity theft. The credit card companies gave him a hard time about which purchases were fraudulent and he finally had had enough.

It's pretty rare that someone randomly starts talking about personal finance issues, so I was surprised and pleased.

Interesting things from my credit report

I just used up one of my three free credit reports from annualcreditreport.com and found some interesting things.

• I have a $1500 Belk card with no balance. At first I had no idea where it came from. 15 minutes later I realized it is from when I had to buy a suit for my sister's wedding and I wanted the discount that came with a new card. Funny thing is they never mailed me the card! I guess I should cancel it.



• I had a $6500 Bank of America card when I was 10 years old. Luckily my 10 year old self never missed a payment. I think I vaguely remember that my (older) sister said she wanted to add me as an authorized user so I could start building a credit history. I guess she really did! The odd thing is it's listed as a joint account on my credit report. Maybe that's how authorized users are listed. I wonder if anybody who checks my credit report thinks "Whoa what was this kid doing when he was 10?" I'm also pretty surprised that a credit card company would add a 10 year old as an authorized user OR a joint account holder.



• My car loan is not with the company I thought it was. I write checks to Southeast Toyota Finance, but my loan is with World Omni. Well, a little searching reveals that World Omni is the parent company of Southeast Toyota Finance. This explains why, a few months ago when I had to call my credit card company to authorize a large purchase (new computer), the person who was verifying my identity by asking me questions from my credit report sounded so skeptical about my answers! She even asked, "Are you sure your car loan isn't with another company?" and I was like, "No, it's definitely Southeast Toyota Finance." Even with one wrong answer I passed the identity check.



• Discover Financial Services has made 15 credit checks on me in the last year. Apparently each check was followed up by sending me an incredibly thick envelope of credit card advertisements.



• Household Bank is my biggest stalker, with 18 credit checks in the last year. I've never heard of them, never gotten a credit card offer from them, nothing. Maybe they run checks for other banks.

This is only the second time I've ever checked my credit report. It was pretty fun. Credit reports should be free and unlimited, though. It doesn't cost Equifax anything to let me access it on the web. Maybe they're concerned that some of their big customers, like car dealerships, would let people log in and get the free report rather than paying for it themselves. Oh well.

Prosper Progress

I started lending on Prosper almost two months ago, mainly for the $25 signup bonus. It turned out to be pretty fun looking through loans so I ended up loaning out $325. I thought I'd occasionally make a post on how my loans are doing. Here are the loans I've made so far:



As you can see, I'm going for fairly high interest rates. I'm interested in people who are taking out small loans to rebuild their credit. Essentially they're gaming the system by getting a small loan and having Prosper report positively when they repay it on time. Since the loans are small and will probably be paid back early they can afford exorbitant interest rates.

The other interesting one was from someone with an AA credit rating who needed capital to start up a youth home. He claimed he already had contracts with the city so it seemed like a pretty sure thing.

Here you can see a summary of my account:



If you'd like to sign up for Prosper, use the following referral link and you will get a $25 signup bonus (as will I):

Shocking marginal tax rate

I just got a raise of $250/month at my job. My take home pay increased by $150.37. At first I thought that must be a mistake! I'm in the 25% tax bracket, but this represents almost a 40% tax rate! Sure enough, when I added up the various taxes that are taken out:

25% Federal
6% State
6% Social Security
1% Medicare
-----------
38% Total

Holy crap! What kind of country do we live in? This is a seriously socialist level marginal tax rate, and we're not even looking at consumption taxes yet. Of course, my overall tax rate is a bit lower, but it's crazy that of every new dollar I earn, I get to keep just a little over half of it.

When I think about stuff like this, I realize that economics is the most important issue that the government should be concerned with. Lower my taxes. Reduce the deficit. Cut educational spending in half to put us more in line with other developed countries. Get out of Iraq or charge them for our expenses. Phase out Social Security over a 20+ year period... and no I don't care that I won't get any benefits.

The tax refund cometh

For once I filed my tax return in a timely fashion and now I'm reaping the reward. I already have my refund! It was direct-deposited into my ING savings account on Friday. Now the question is what do I do with it? Well I already used it all up (or rather, it's partially used up and partially scheduled to be used up on Monday).

My tax refund was bigger than I expected -- about $1100 total. I put $700 in my Scottrade account, $100 in my emergency fund, and $300 in the Sharebuilder account I set up for my nieces and nephew. In one fell swoop I took care of presents for their birthdays and Christmas! Of course I still have to get them tangible presents, but they can be pretty cheap and thus easy to pick out. For instance, my nephew's birthday is next week and I bought him a jigsaw puzzle of the cover of a Beatles album.

The shocking thing is that the account now has almost $700 in it (including the $50 opening bonus). Granted, that's to be divided between the three of them, but it's a not insignificant chunk of change! Seeing that large figure really validated this idea to me. I could have bought $600 worth of stuff and today there would be hardly anything to show for it. Certainly most of the presents I've bought for them in the past have been put away or forgotten.

Buying patiently

I haven't done much trading in the last few months. I haven't sold anything despite the market falling and showing no signs of stopping. It's a liberating feeling to not be tied to the whims of the market.

I bought some shares of Washington Mutual while it was down (it's still down). I suspect that it will survive, or be bought by a larger bank, and in a 5 years the credit crunch will be a distant memory.

I also bought some more shares of AAV while it was down (it's also still down). It's mysterious in the way it moves, but I think the future for natural gas is strong. In 5 years we'll see if I'm right!

It's interesting to look back and think about the profits you could have had, while also trying to remember what you thought at the time, your hopes for the future. I could have (and desperately wanted to) sell AAV when it was up 40%, but at the same time I thought, well I don't need the money, and 40% is peanuts compared to what it can do over the long term. I still think that's right, although wouldn't it be nice to get both!