We have something bordering on an obsession with trying to get as much for as little as possible. Coupon shows and stories abound of folks buying 10 pounds of meat for $.02 by running around the five stores and working their magic. Quantity per dollar paid seems to be the metric of many.
But might their be a more holistic approach? An approach that stresses quality of gain per dollar spent instead? I believe we should work hard to develop a shopping rubric, at least when it comes to comparing major products frequently bought that many people would tend to compare to one another. We might also be able to compare different product categories of similar price, an alarm clock versus a watch for example. Finally, it would be nice to have a value score of an item, so that we could figure out if buying multiples of the smaller item would equal the value of one “bigger ticket” item- ie should I buy 3 sweaters and 4 pairs of pants or should I get a new iPad mini? Thus rather than randomly spending money from day to day we might have more of an approach to shopping in what we look for, similar to have a sabermetrician might have a specific understanding of the precise of value of Adam Dunn or Gordon Beckham.
CredereArgentum is working hard to develop such a systematic approach to shopping, thus moving beyond a mere comparison of features and attempting instead to arrive at value and return. In a shopping season like the Holidays, this might be especially useful as we tend to focus most on getting and acquiring stuff versus using our scarce monetary resources to purchase items of long-term value.
With all of the review sites, shopping portals, and such shopping might be the most frequent thing we do that we are the worst at. A fool is someone who knows the price of everything but knows the value of nothing.
Do you have a system? What would go into your analysis?
The late rush into prepaid banking by most of the big national banks might make your scratch your head a little bit. Why is Chase’s Liquid card on the market when I can get one of their regular credit cards or just link my bank account to the card? Why is American Express, known for cultivating high-end consumers especially with its famous Black Card, now offering two different prepaid credit card options, including its latest offering called Bluebird? Why do I increasingly see large displays at convenience stores and gas stations for various prepaid cards of all different kinds? A I missing something, who uses these things? Just yesterday, US Bank bought a prepaid card operator in order to jump into the game as well. Also, various travel blogs, including ThePointsGuy.com, Flyertalk, and The Frequent Miler have had long running debates about the merits of these cards.
An article at northjersey.com does a great job of explaining the broader prepaid market and explains why it is becoming much more popular. You may want to read it in depth for yourself as it offers a broader explanation of why this is a market that seems to make sense for both banks and consumers. Simply put there are two valid reasons for getting one of these cards, but even then they should probably not be a long term strategy.
Reason #1: Your credit score is too low to get a credit card, or you can’t seem to find a way to get a checking account.
In the aftermath of the credit crisis some folks have found themselves frustrated by banks. They may have bounced too many checks or had to many overdraft fees. Many may have been in such dire straits that they have been banned from using certain banks and find themselves unable to access the regular banking market. More commonly, many may have found that their credit score is in the toilet, but they need a credit card in order to function in the modern economy, particularly with online shopping and bill payment. A prepaid card, which works exactly like a credit card in its acceptance and payment processing probably seems like a Godsend. You can load funds onto the card and conduct yourself just like any other person with any other credit card. Also, many of the cards allow direct deposit from an employer and direct bill payment to just about anybody (sometimes even including mortgage companies, landlords, and such) so you also have near checking account like functions that way. Finally, although some cards have fees you can usually get at least a few ATM cash withdrawals from the card as well. All this without a credit check or really any requirements at all on your credit history. You can even pick up the American Express Bluebird card at Wal-Mart.
Banks of course like this because they are exposed to nor risk (it’s all your money) and they charge you numerous fees to use these services. There is often at least a $4 load fee for funds, and numerous other charges can be raked up as well. Of course, they also collect those processing fees from merchants just as though the card was a normal credit card.
Here is a sample of what Consumer Reports said about prepaid card fees in its 34-page review of 16 popular cards:
- 9 charged activation fees, ranging from $3 to $14.95.
- 13 charged monthly fees, ranging from $2.95 to $9.95.
- 14 charged ATM withdrawal fees of $2 to $2.50 — not including surcharges imposed by ATM owners.
- 12 of 16 imposed a fee that ranged from 45 cents to $1 to check the balance on the card at an ATM.
- 5 charged fees that ranged from $2.50 to $5.95 if the cards were inactive for a prescribed length of time, typically 3 months.
Clearly, this can be a good deal for banks.
Reason #2: To play the travel miles and points games.
Perhaps those most ecstatic over the prepaid bank revolution were not the poor of credit and the unbanked, but rather the miles and points junkies who have long salivated at ways to get points and greater bonuses for things like mortgage and tax payments which are typically not chargeable on credit cards. By using prepaid cards they could now finally therefore rack up large numbers of miles for big bills that they pay every month. Moreover, many of the best rewards cards require big early spending in the first few months in order to trigger the full 50k point signup bonus or whatever promotion they are offering. These cards offered ways to goose minimum spending by buying prepaid reload cards with the new credit card they were trying to use enough to meet the minimum spending requirement. Finally, points enthusiasts loved the idea of basically being able to buy cash, create points out of thin air, and all for a low “load” fee. Even more powerfully were 5X points bonuses often offered at office stores for certain cards, allowing tens of thousands of points to be conjured out of thin air.
These folks tended to be high worth individuals and savvy enough to avoid the other miscellaneous fees. When done right and assuming no crackdown by either their credit card issuing bank, or some office store having to sell thousands of dollars of reload cards constantly, this could be extremely lucrative. So much so that in a a year of doing this you could probably earn yourself enough points for a multithousand dollar seat in business or first class.
Of course the banks still make a little money on various fees with these folks and are happy to see them using their product, but they are not the intended audience. The player who was most burned by this were the various stores and institutions, like Office Depot, CVS, and Wal-Mart, selling the reload cards for the prepaid cards (the Vanilla cards have been most popular). They would pay a large swipe or transaction fee to the credit card company the points junkie was using, and not actually sell any of their merchandise. Many have now required cash only. Some banks, like Citi, also would frequently treat these purchases as cash advances causing a large cash advance interest charge.
So, are they worth it?
I believe they are not worth it. The unbanked should try to become banked, and unless this is literally your only option other than carrying around wads of cash and constantly going to the post office for money orders, the fees can be hefty and hard to avoid. Even for all but the savviest and smartest points junkies, those able to play the game sparingly enough to not raise red flags but often enough to get the bonuses, the cards are a bad deal.
For today’s post I decided to go graphic heavy in presenting what I find interesting. These have little direct connection to each other, but are generally impactful on your macrowallet.
First is a graph on the federal budget, with spending and income side by side. I think it will help explain exactly where our money comes from and where it goes. There are often a lot of obfuscating rhetoric during debates over the budget and people try to hold beliefs that merely reinforce their own biases. But below are the actual numbers, from the Congressional Budget Office.
Second is a chart on doctors and the shortages we see in doctors we need more of, family practice and pediatricians. With The Affordable Care Act set to be fully implemented in 2014 there will be more patients seeking primary care now that they have coverage. Unfortunately, the economics of American health care vastly reward specialists over doctors we tend to rely on first. This comes from the site http://www.good.is/everyone
Finally in more positive news is a chart from the Philadelphia Federal Reserve showing that economic indicators point to continued expansion in the US economy. We also finally seem to be out of the hole from the Great Recession.
Debt Ceiling talks are continuing and, by most accounts, seem to be relatively cordial and focused on getting a deal done. Republicans have long refused to discuss raising taxes or increasing government revenue, and many have signed a pledge from influential lobbyist Grover Norquist’s organization never to raise taxes for any reason. This week, though, several prominent Republicans including Senators Lindsey Graham and Saxy Chambliss have decided to defect from the Norquist Pledge in the hopes of reaching a reasonable bi-partisan deal on the budget and the long term fiscal health of the country. Of course this doesn’t make them Democrats, but it is an important step towards compromise as the Senate filibuster, which requires 60 votes to end, is always a key hurdle to leap over for major legislation. By that count, the Senate will need 8 Republicans or so in the current Congress.
But just when you thought things were about to open up, the New York Times reports that now Democrats are challenging attempts to reform entitlement programs. It appears that in particular Social Security (pensions for the retired) has been taken off the table as a place to cut spending and save money. While spokesman Jay Carney is right in suggesting that it is Medicare (health care for those over 65) that is the primary cause of our booming deficits, taking anything off the table, especially a big program where lots of savings could be wrung out like Social Security, is not good for negotiations. You would want more options on the table for both sides if you truly hoped for a deal, especially a transformative one.
So what is up? A couple of things. First of all, Republicans are scared that their push towards the right and more extreme behavior is driving away independent voters. Their electoral college map, in particular, looks quite difficult going forward. This explains their willingness, at least by some, to be a bit more moderate in their rhetoric. However, Democrats see the Republicans on the ropes and just won an election by arguing for tax increases on the wealthy and the important value of these social programs. They won pretty big, so why now go back and give in to the argument you just defeated? Finally, as always happens to second term Presidents, the person with biggest incentive in getting a deal done is Barack Obama. He would love to be seen as solving big problems and being a true statesman, especially after the bruising reelection campaign. However, he has just won his last election and really doesn’t need his party, and so they are less inclined to go out on a limb for him. Democrats have dreams of retaking the House in two years, and in four years many of the new Republicans who swept into the Senate in 2010 will be up for reelection and potentially vulnerable. So, we are in a bit of a bind.
Unfortunately, the biggest problem with this is there is no consensus in society about what to do. We like low taxes. We adore our social programs and millions depend on them. We like the idea of a pro business atmosphere with lower rates for the rich and small business owners, but we also like to take care of the needy and spend on schools and such. we have an increasingly diverse electorate who all have different and sometimes competing goals and issues.
Is it any surprise that Congress and our political system is equally chaotic, complex, and finds it hard to reach consensus on anything? In the fiscal cliff discussions, we truly have the politicians we deserve, and until all of us understand the issues better and what we would give up, it is hard to imagine our politicians who merely reflect our interests doing much better. In case your eyes gloss over about all of this, though, there is a lot at stake for all of us. It does matter. Here is just one interesting explanation of how a tax bubble could be created for those in a certain income range.
I much prefer today’s festivities to those of Black Friday as my aversion to throngs of people and sweaty malls has already been discussed. Cyber Monday is much more style, you can comparison shop more easily and sort of brainstorm better ideas by just randomly strolling through various categories. Yet the online experience can be overwhelming (and I suppose therefore underwhelming at the end of the day!) when you consider the quantity of all the stores around. So, without further ado, here is a list of six sites to use that will hopefully simplify the online experience while still saving you big money!
These two sites will update you on various cash backs and points multipliers for all of your purchases. Generally then you should NOT get rid of cookies as these portals and their bonus points usually track by cookies on you browser. Also you are supposed to pay with your card from that particular bank (ie Chase if it is a Chase portal) but many say this doesn’t matter. Take screen shots, though, as sometimes the cash back incentives through portals are finicky. Still, this is a powerful tool when spending a decent amount of money and you can be well on your way to your next trip if you spend a fair amount of money today and play the bonus point game properly.
Amazon come also has a special Cyber Monday page here. Although I have some issues with Amazon not paying taxes in my home state and I wonder what it will do to shopping districts and such, Amazon is obviously a powerful site with just about everything on it. You can see everything easily and the pricing is clear.
3. Overstock.com, Buy.com, Zappos.com
I put these three together as they are essentially giant online department stores. A bit more curated than Amazon and much more like the experience of puttering around a mall or a Macy’s or a store of that ilk. Each of these sites have a lot of content and merchandise, are cheap, and run a lot of sales and discounts.
I include this mainly because Best Buy is a 5X bonus point merchant on the Chase Freedom card this quarter. If you are comparing electronics items of computer gadgetry, you may find that even if Best Buy is slight more expensive, that the 5X earnings on the Freedom offer big reward (that’s 5% cash back or 5x the Ultimate Rewards point for travel). Do the math for yourself, but it can be good to remember.
I include this because Discover is running a promotion where you receive 5% cash back on all online purchases during the Christmas shopping season. That to my knowledge beats any other point or cash back deal there is on the market, except for the Chase deal I mentioned above. I would still rank Chase Freedom higher as Ultimate Rewards points can go to air travel where the return on the point value is higher. You do have to have a Discover card and sign up for the promotion on their website after logging in.
If you know exactly what you want to buy the easiest way to see a lot of comparison prices is by plugging in the item on one of these two sites and seeing the prices. They typically also show you shipping costs as well.
A grand-daddy but still my favorite place to find quality reviews on all products that have undergone CR’s expert testing and analysis. No point in getting a good deal if what you are buying is not going to last long.
Watch out for shipping prices and happy Cyber Monday!
A quick link to an interesting post from last month on Adam Smith, free markets, and politics. It is lengthy but an intellectually stimulating read. It essentially argues for a more nuanced approach to economics, politics, and life. Unfortunately we seem to be an age where such thinking is not appreciated.
Today is American Express’ small business Saturday. Amex gives a $25 statement credit for purchases at participating small businesses if the purchase is at least $25. I looked on a map near my home and there are LOTS of participating merchants! Enjoy! All you have to do is register your card here.
Since this weekend is the official kickoff of the 2012 Holiday Shopping Season, I thought it might be a good time to post again on credit card signup bonuses. Also, I would like to introduce the concept to my readers of a credit card app-o-rama.
An app-o-rama is the idea of applying for multiple credit cards all at once with the goal of getting big signup bonuses from multiple different cards. Also known as a credit card “churn”, many do this on a quarterly basis to maximize their return over the course of the year. When done with some care, you can reap huge rewards from signup bonuses, and actually improve your credit score. I will post more on credit scores in future posts, but basically your score is dinged temporarily from the credit applications, but then usually rebounds in the future as a big part of your score is how much available credit you have that you are not using. The ding from the credit application can also be mitigated as it is only short term (it stays on your report for two years, but only affects it for one year, and sometimes seems to decline in importance after several months) and you can spread out your applications to different banks who hopefully pull from each of the different three credit reporting bureaus, thus making it look like you had fewer applications to each of the bureaus.
The problem with doing this though is that almost all credit cards now require a somewhat substantial minimum spending requirement to reap the bonus at all, or to get the entire advertised bonus. Many travel blogs and such play down the amount of minimum spend required and even go to great lengths to show people how to “goose” your spending, but at the end of the day, you have to spend the money. It is standard to require $2000 in spending in three months to get many signup bonuses. Some cards with the best current bonuses, like the Chase INK Bold card require as much as $10,000 in spending in a few short months to get their full 50000 point signup bonus.
It is obviously a horrible idea, then, to signup for a credit card and not get their bonus. It is an equally horrible idea, though, to spend more than you otherwise would just to get the bonus. Worse yet, it is bad to overspend and not pay the bill off, thus running up finance charges which negate the value of the bonus. Many people must actually do this, as I am sure the banks and credit card issuers are smart enough to know what they are doing and how to structure their offers to maximize their returns.
So, what to do? Well, obviously then credit card apps should be tried to be tied to times when you know you will easily meet the spending requirements for purchases you would have made anyway. For many folks that is this time of year! Find a couple of good cards with minimum spending in an area you are comfortable with, and grab them all right now. Spend the money you would spend anyway, and get a big signup bonus that can be exchanged for cash back (50k points often equals $500 in cash back) or travel (5ok points is often equal to two domestic roundtrip airline tickets) Many people would advise you on getting cards int he Ultimate Rewards program from Chase or the Membership Rewards program from American Express as these points are flexible and can be moved to many different airline or hotel programs for maximum value.
Another benefit of doing this now is the magic of the billing cycle. Credit cards have a 30 day billing period where you run up charges and then usually don’t require the bill to come due for 30 days after that. So anything you charge now on a NEW CARD, wouldn’t have to be paid back until late January or early February. This is nice as it can allow you to smooth out your spending over two months. Make a first payment when the bill is generated in one month, and then pay the full balance off when it is due the month after that. It is essentially a way to take greater control and smooth out spending a time when people tend to spend more than normal.
I stumbled across a post yesterday about the real “Lessons From Thanksgiving”. It is out of date, from 2008, and it was linked to in a comments section on another blog. I was going to post on it, but decided to let it go since it was from years ago. I couldn’t keep it totally out of my mind, though, and instead googled Jerry Bowyer as his picture and general expression looked like one of those fake columnists from The Onion. Then, what to my wandering eyes did appear, but more or less the same article about Thanksgiving, slightly reformatted and with a few new zingers! Oh boy!
It is hard to imagine a more breathtakingly stupid piece from a highly read publication and from a professional columnist. While it gives me hope that this experiment in blogging has a low water level to at least outshine Forbes, I still can’t believe intelligent people read this for any enlightenment or benefit of any kind- other than maybe just for more fun in their own personal echo chamber.
Bowyer’s basic point is that the Pilgrims in Massachusetts were able to celebrate the Thanksgiving holiday only after they put aside a failed experiment in socialism and the intellectual fads of the day/ Saving to these fads nearly killed them as they almost starved. He cites neither historic research nor uses much primary evidence other than some random quotes from the Mayflower Compact. I assume this is directed at a conservative audience, to make them feel good, so this is probably why he also ignores the broader context and problems caused by the Pilgrims’ intense religiosity, and that it was this desire to create Heaven on Earth that grounded most of their thinking and actions in those early days. Funny though that he doesn’t know this when patron saint Ronald Reagan actually mentioned it in a famous speech that was his farewell from the White House:
First of all, the first real Thanksgiving was most definitely in Virginia. The day was made a national holiday by Abraham Lincoln during the Civil War, and as such credit could not be given to the disloyal South and Virginia, so the holiday was instead given to the Pilgrims at Massachusetts.
This is historical quibbling, though, so I will put it aside and take on the full thesis of the column. Bowyer should have said that the Pilgrims came to America to establish a religious collective, literally enacting the spirit and words of the Bible and establishing a new Jerusalem. This is widely accepted in historical interpretation and requires only reading John Winthrop’s City Upon a Hill speech to fully grasp. As Winthrop say:
“the onely way to avoyde this shipwracke and to provide for our posterity is to followe the Counsell of Micah, to doe Justly, to love mercy, to walke humbly with our God, for this end, wee must be knitt together in this worke as one man, wee must entertaine each other in brotherly Affeccion, wee must be willing to abridge our selves of our superfluities, for the supply of others necessities, wee must uphold a familiar Commerce together in all meekenes, gentlenes, patience and liberallity, wee must delight in eache other, make others Condicions our owne rejoyce together, mourne together, labour, and suffer together, allwayes haveing before our eyes our Commission and Community in the worke, our Community as members of the same body, soe shall wee keepe the unitie of the spirit in the bond of peace, the Lord will be our God and delight to dwell among us, as his owne people and will commaund a blessing upon us in all our wayes, soe that wee shall see much more of his wisdome power goodnes and truthe then formerly wee have beene acquainted with”
Brother would work for brother, and each would live by the golden rule. This is more Christian community than socialist experiment. They were also intensely Calvinist, an austere Protestant faith that believe in an all-powerful and all-knowing God who directly intervened on Earth,perhaps something modern evangelicals can identify with. So, they felt that if they were “selfish” and sought their own financial and familial gain they would betray their true mission. This is not some Progressive white-washing of real history, but actual real history, the kind that relies on documents and evidence.
This spirit eventually eroded as younger generations of Bay Staters came of age, but it was still very strong in the early days of the colony. Even still, most cultural observers would say the idea of American as a City Upon A Hill might still be part of our essence, with our experiments in democracy, civil liberties, union, and freedom- and missionary zeal for spreading these experiments around the world- still observeable today
So if the first Thanksgiivng should be remembered as a lesson on how to run a society after a near-failure, as Bowyer assets, rather than taking the first Thanksgiving as some lesson on how you should oppose an all-knowing bureaucratic and political elite, it should instead be a lesson on the danger of religion mixing with the secular job of government. You should oppose that system instead.
More broadly, and not to knock religion too much, the lesson of the early settlers is that society and the world are complex things. Complex things require complex solutions, and values and ideology are fine as long as you can adapt them enough to meet the real needs of real people. Therefore, silly throw-away comments about all regulations and attempts to make the world a better place as mere steps on a steady march to socialism is just as ideologically foolish as the early Pilgrims.
So if looked at in that way, Bowyer would have written a better and more accurate column about Thanksgiving if he attacked the overuse of religion and endorsed a mixed economy. This would of probably lead to Bowyer having trouble with his readers, so instead he invents the past and uses Thanksgiving to centrists and liberals. What a way to celebrate a holiday.