Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective
07.14.2009

A week or so ago I got an offer in my email inbox from the credit union where we have our car loan.  I glanced at it briefly — I wasn’t terribly interested in it since we’re only a few months away from paying off our current car loan, and we don’t have any plans to take out a new loan anytime soon.

However, before I clicked “delete” I noticed something interesting: Hybrid Vehicle loans enjoy a 0.25% lower interest rate than regular new or used cars.

It got me to thinking about why this could possibly be.  Are hybrid car owners actually a statistically lower credit risk?  Is the bank just trying to promote a “green friendly” image so that it can attract that demographic?

I don’t know what the answer is, and I’m sure that I’m not going to find out for sure any time soon, but I’m sure that this isn’t the last time that I will see Green based products get special incentives of some kind just for being green, even if it doesn’t actually make sense — like hybrid cars being allowed in the High Occupancy Vehicle lane with less than the minimum number of passengers.

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Flip Flops

Creative Commons License photo figure credit: rockstarassi

A couple of posts back I wrote about how my bank was implementing a fee for online bill payments.  Imagine my surprise when just a few days later I received this email:

You may have read in our recent Terms and Conditions update that on June 1, we will change the terms and conditions on our FreeNet® Checking and Yield PledgeSM Money Market Accounts. Because of your current relationship with EverBank®, the monthly account fee changes will not affect you at this time.1

1. We reserve the right to impose our most current terms and conditions without notice at any point in the account relationship.

Well, this certainly made my life easier and restored my faith in EverBank.  Although, I reserve the right to change my mind on this without notice.

Ecto-2

Creative Commons License photo figure credit: AdamL212

When I was a kid my family had a Commodore 128 computer.  The vast majority of the time spent on this computer was in playing video games.  We had a game called Ghostbusters which, of course, was modeled after the hit movie of the same name.

The object of the game was to respond to calls of high paranormal activity in buildings all around New York City.  At the start of the game you are given an allowance of funds with which you can buy gear for catching ghosts.  The amount of money that you start with is enough to buy the cheapest car and a minimum of ghost catching gear — just 1 Slimer trap, and not even enough money to buy an Ecto-1.  When the trap is full, you have to return to Headquarters to empty the trap.  You get paid for each ghost that you catch.

As the game progresses, the Keymaster and the Gatekeeper arrive on the scene.  These two wander rather aimlessly around the city until they finally arrive at Zuul.  When they arrive at Zuul, if you have caught enough ghosts (it was never clear to me what metric was used to determine whether you had caught enough), you are given the opportunity to sneak through the legs of a dancing Stay Puft Marshmallow Man, take a trip to the roof of Spook Central, cross the streams and win the game.  If you manage to do all this, you get a code that you can use the next time that you play so that you can enter the game with more money.

What does all this have to do with personal finance and avoiding lifestyle inflation?  Well, it was my experience that no matter how much money I earned in the game, it never did me any good to buy more and better equipment.  Some of the options available were 4 different cars, each faster than the next, as well as the ability to buy several traps.  Having more than one trap allowed you to catch more than one ghost before having to return to headquarters to empty it, and having a better car allowed you to get from ghost call to ghost call and back to headquarters much faster.  It seemed, however, that the more money that you spent up front, the harder and faster you had to work to catch enough ghosts before the Keymaster and the Gatekeeper got together at Zuul. In fact, it was so hard to catch enough ghosts, that I was never able to beat the game by using anything more than the most minimal gear available.

I’ve been thinking of the parallels between this game and personal finance for a long time, and more lately as I read the popular personal finance book Your Money or Your Life by Vicki Robin and Joe Dominguez (more on that later…).  I’m finding it less and less useful to want to make more and more money if one of the big problems that it’s going to create for me is to need to keep making more and more money to support our lifestyle.  I would much rather be happy with what we’ve got and use any money that we happen to make above and beyond what we need to boost our retirement savings and lower our retirement age.  Coming to realize that we don’t need more stuff or a bigger house to make us happy has been a very freeing realization, and one that will allow us to maintain our lifestyle more easily over time.

ING Bus Advert

Creative Commons License photo figure credit: CarbonNYC

This week I received a letter from EverBank, which is where our checking, money market, and some CD accounts are held.  We’ve banked with EverBank for a while now and have been happy with its services.  Until now.  The letter that I received indicated that EverBank will now start charging $8.95 for BillPay, which used to be free.  The catch is that it’s free if our account balance (daily average) stays above $5,000 for the month.  The letter also indicated that an account maintenance fee of $8.95 will also apply to any money market accounts with daily average balances below $5,000.

I wrote previously about how bank fees are for poor people.  It seems that the definition of poor just broadened, at least according to my previous assessment.

We generally keep an average balance in our money market account of over $10,000, and previously we had been keeping a $1,500 balance or more in our checking account.  What this new fee means is that in order to keep BillPay free, we’ve got to forgo some increased interest rate on an additional $3,500 monthly.  Because of dismally low interest rates, the lost interest on that $3,500 amounts to just $1.87 per month.  But if when interest rates go back to where they were 2 years ago, this difference rises past $10 per month.

It looks to me like we have two options here: we can increase our balance in our checking account to meet the new minimum requirement — effectively costing us $1.87 per month at this point, or we can find a new bank to take care of our BillPay services.  I did some investigating for the latter option.  Rather than having to open a new bank account somewhere, I looked at banks where we are already customers.  The most appealing of these was our ING Electric Checking account.  By simply cancelling our BillPay service with EverBank, we will avoid the fee and be left with the ability to write checks on the account.  Our Electric Orange account will take care of paying all of our bills.  Since our EverBank accounts are already linked to our ING accounts, it will be trivial to switch our BillPay services over to ING.  All that will be required will be to replicate our Payee list and set up some automatic monthly transfers.

While $1.87 is not that much money, just over $22 per year, to me it represents a gradual erosion of my wallet.  We already pay so much money monthly for everything that we have.  If we simply accept EVERY $1.87 increase in cost for things, eventually it’s going to add up to a lot of money.  I’m inclined to stand on principle here and close our checking account with EverBank.  On the flip side, if I closed every account at a bank that irritated me somehow, all my money would be under my mattress (it’s not, by the way, so don’t look there…).

What do you think?  How far would you go to avoid a small fee?  What size fee is too big of a fee for you?

Bizarre

Creative Commons License photo figure credit: Kecko

Over the last several weeks we’ve put a lot of mileage on our rewards credit card. We’ve been stocking up on gift cards from our local grocery store due to the fabulous deal that they offered during tax season.  The use of our rewards card here sweetened the deal even more, since we get 5% cash back on grocery purchases, and the purchase of gift cards counts as groceries.  Unfortunately, the credit limit on this card was not high enough for us to be able to put all of the cards that we wanted to buy on it in one cycle, so I made two mid-month payments to ensure that we could receive all of the rewards we had coming.

Because of a too strange to explain here situation, we actually charged $3,000 online and decided to cancel the order before it shipped.  The merchant was great about the order cancellation, and we had no problem with this.  I noticed on the credit card website, however, that our available balance went down significantly.  I know how credit card transactions work, so I assumed that our card was authorized for the big purchase, which reserves the money on our card for some period of time, but the charge was never completed.

A few days went by and our balance was down to less than $100.  My experience was that authorizations only last for a couple of days at best.  I waited another two days, but there was no change in the available balance.  I sent an email to the credit card company’s customer service department inquiring about why the available balance was so low.  Here is the response that I got:

“Upon review of your account, the reason you are showing only $79.00 in available line of credit because you utilized your entire line of credit during this billing period in the amount of $XXXX.xx. According to the terms of [credit card company] Revolving Card accounts, you may utilize your entire assigned Line of Credit one time within a billing period. Even though you are making payments within the billing period, your available line of credit will not be reset until the next statement closing date on 04/30/09.”

So basically the credit card company was saying that the credit limit applies not to my balance but rather to how much I charge in total in a cycle.  I thought this response was strange for a number of reasons.  The first of which was that I had never heard of such a thing.  The second was that the amount I had charged was already greater than 125% of my credit limit.  I didn’t happen to have the terms of my account handy, so I took the company at its word and chalked this up as a way for the company to limit the amount of rewards they have to pay out each month.

Imagine my surprise when a day later our available balance suddenly increased by exactly $3,000.  It seems to me that there are only two explanations for this: the first is that the credit card company took pity on our plight and gave us a break on the terms, in the amount EXACTLY equal to the purchase that we made and then cancelled.  The second is that the authorization for the purchase finally rolled off the books.  I’m going to assume it was the second, but I haven’t contacted the card issuer to confirm.

What intrigues me the most about the whole situation is why the credit card issuer answered the way it did.  Either the terms cited are true but not observed, or they are not true and the customer service representative flat out lied.  If the latter is true, why?  Was it so hard to actually look at our account and see that there was an outstanding authorization that was limiting out credit line?  I’m just baffled by the response on this one, and if the rewards program wasn’t so darned good I might consider at least calling them on this or even finding a new card to use.  As it is, there’s been no harm, so no foul either.

Have you ever had a bank or credit card company do something bizarre like this?