The Blog with No Title

I was aware of others talking about credit cards changing rules, raising interest rates, lowering credit lines, and the such in the face of the ‘credit crunch’ (another reason would be to sneak in things before they were limited by the CARD Act this month), but I had been pretty fortunate. For example, a lot of people have had trouble with Citi raising interest rates, but mine has stayed the same. Eventually, a few months ago, my Discover card sent me a notice that they were going from a low fixed rate on the card to a higher variable rate. I quickly wrote and ‘denied’ the change which closed the card. I then quickly paid it off so that I would not have to even worry about it anymore.

Chase though has quickly taken things to a new level, and honestly a new low. I have had a few problems with Chase in the past. I made a mistake and accidentally paid late (just a day or two) a couple times when I was not so ‘on top’ of making my payments on a specific schedule. As a result, they shot me up to the default APR on the account in question. Even though it has been approximately two and a half years since the problem first happened, they still have not come off of this rate. Of course, that was not a big problem, because at the time they distributed low APR balance transfers “for the life of the balance” both on the website and as physical checks (now if they make a similar offer, they limit the term to approximately 3 years or less).

I have another Chase branded card that I received from the Buy.com website. I signed up for it to get $30 off an order. This card did not get the default rate when I messed up on the other chase card and has a decent APR, so I used to use it as my primary credit card. In August 2007, I started consolidating some debt and getting my finances in order. I had a 5.99% balance transfer offer available on the Buy.com card and 6.99% (online) and 7.99% (paper) offers available on the other Chase card (I had to take advantage of both since I needed the 7.99% paper check to pay off my existing balance on the Buy.com card since you cannot typically do BTs within the same credit issuer). I then called and shifted $1200 of my available credit from the normal Chase card to the Buy.com card. At this point, I essentially filled both cards with balance transfers to consolidate and reduce the interest payments on all of my outstanding debts. Since then, I have just paid them down each month without adding to my burden (except that I BTed some more onto the Buy.com card from another card that was about to have the interest reset to a higher level at another point when 5.99% was offered again in December 2008).

So, now you have an idea of where I am at in June 2009, with two Chase cards at limits of $700 (regular), and $4100 (Buy.com) with balances of $520 and $3800. I then receive a one two punch that is what is causing me to write this post. First, they reduce my credit line on the Buy.com card to $3900, not a big deal but slightly annoying since it can affect my credit score adversely. That does not really matter though since we already had our mortgage approved.

The second is that they knocked the minimum payment up from 2% of the outstanding balance to 5%, at least on my Buy.com card. I think I received a notification that this was going to happen, but, in my head, the math did not click correctly and I did not think to act on it in any way. I could be wrong though as I received a separate notice that the balance transfer fee was going from 3% to 5%. Anyway, this annoyed me, but I knew it was in their rights (assuming they did send me notice which I cannot prove or disprove for certain) and probably to be expected since they need liquidity, especially with the WAMU takeover, etc. The annoying part though is what I read on Chase’s Consumer Affairs thread. While I fortunately can pay the increased 3% payment without much difficulty (I pay extra on a higher interest card, I can just shift over the difference), there are a lot who cannot because they had payments jump from from $390 a month to $950 a month. Normally, I would just feel a little bad for these people, but Chase says they will budge on requiring you to pay 5% of the balance… if you accept an interest rate hike! So basically, they are keeping their word to charge the rate for the ‘life of the balance’, but by manipulating other variables in their control to change what the ‘life of the balance’ is, they are effectively extorting people to give up their right to that low APR or have it forcibly taken away from them when they cannot pay (because of course, if you are even late on a payment, the ’special offer’ immediately ends). As far as I can tell, the CARD Act would not protect against the minimum payment changes, but just require them to give you 45 days notice as with other changes.

A lot of people are saying not to panic and change your 401(k) allocations in this time of economic uncertainty because you are passing up an opportunity for large gains. I agree that you should not reduce your contributions (especially if you get matching amounts) or reallocate funds that are currently down, but I am not so sure that I can abide by not changing your allocation of new funds into the 401(k). The reason is that despite the mantra of “don’t try to time the market”, a 401(k) investment is the antithesis of smart investing in a volatile market. In these days where the Dow might be up 700 points one day after falling 500 the day before, you are in a weak position if you have no control over when the funds are credited to your account, as in a 401(k). As a result, until the volatility of the market calms, I have decided to focus my new contributions out of equities and into a stable money market fund. Maybe this will bite me in the ass an I will miss out on the opportunity for some big gains on “down days”, but I think I have maximized my risk tolerance for the time being.

As I have mentioned before, my 401k company match comes in the form of SCANA stock. This had recently come to take up about 30% of my portfolio so I believed it was time to rebalance. I sold my shares the other day at $39.85 or so, and then they closed yesterday just over $41. The difference was only about $30 on the amount of money I was managing, but it sucks to lose that much (nearly a 3% gain if I am doing the math right. Oh well!

Whenever you sign up for an online bank account, you are nearly always expected to link it up with another account. I assume that they figure the person will logically choose a brick-and-morter bank for this purpose. To protect users, most sites make two small deposits of between 1 and 99 cents to the account and force you to verify these deposits before you may use this account as a funding source. I assume this is meant to protect from accidents and account fraud. Additionally, many sites allow you to link up to 5 or 6 accounts at once. Anyway, if we assume that these sites have no way of remembering deleted accounts (I am not sure if this is the case), you could set up a large amount of checking and savings accounts among the various high yield savings accounts and take a few minutes out of every day (or couple of days if the deposits are slower) to mutually link these accounts to each other. Over time, you should average a dollar profit for each transaction. If you have accounts at 6 financial institutions that all allow adding 5 linked accounts, then you could make an average of $30 re-linking accounts. Even if you could only do this once a week, that still leads to $1560 a year.

The only major problem that I see with taking advantage of this is that if you did it too regularly, you might be noticed and have your account closed. I think that realisitically if you wanted to employ a strategy of making money through this medium, you would need to have a large number of accounts that you applied this strategy to sporadically. This way, you would not go back to the same account too many times and if caught you could use the excuse that you had more than the allotted number of linked accounts and you kept deleting and changing accounts in order to make transactions between more accounts. With so many accounts open though, you do run an increased risk of identity theft.

If anyone wants to try this, let me know how it goes.

I thought I would present my current 401k asset allocation for your enjoyment. I know that from a traditional asset allocation point of view, I am way too heavy into my company stock, but it is cost prohibitive to constantly rebalance the portfolio when my matching contributions come in the form of company stock (not to mention that the stock is currently fairing better than my other holdings). I plan on rebalancing my portfolio to reduce the holdings either twice a year in the short term. Eventually, the company contributions will only be a small part of my overall portfolio and I may rebalance more infrequently, likely whenever SCANA common stock passes being 10% of my assets. Of course, this schedule is subject to modifications based upon market performance of the stock and the other equities I hold.

My asset allocation as of today is 74.9% domestic equities, 18.1% foreign equities, and 10% domestic bonds.

Domestic Equities – 74.9%
50.2% – Vanguard Total Stock Market Index
24.7% – SCANA

Foreign Equities – 18.1%
7.4% – Vanguard European Stock Index Fund
5.3% – Vanguard Pacific Stock Index Fund
3.2% – Vanguard Emerging Markets Stock Index Fund
2.2% – Euro Pacific Growth Fund

By country this is roughly
10.2% – Europe
5.3% – Pacific Basin
2.6% – Emerging Markets

Domestic Bonds – 7.0%
7.0% Vanguard Total Bond Market Index Fund

For what its worth, excluding SCANA common stock, the asset allocation is 66.7% Domestic Equities, 24.0% International Equities, and 9.3% domestic bonds.

So I found out about this thing that is like PayPal called RevolutionMoneyExchange. Supposedly the fees are lower, but the only reason I joined is because there is a $25 referral bonus until May 15th for joining. You get this immediately without having to fund any money. I was wary at first because you are required to give them your social security number since it is banking related, but I checked out the information about it and found two important things:
1. It is backed by an FDIC banking institution.
2. Everyone that has done it that I have heard about got their money.

Anyway, I mention it here because I can sweeten the pot a bit more so to speak. If you want to get in on this action, you can click my referral button below and I’ll get $10 each time up to $500 total, and I think free money is good. It will all be going to a worthy cause of debt reduction as well. Anyway, let me know if you have any questions.

I don’t personally use Blockbuster’s Netflix-like plan, but I know some people who do. In the past, you were able to get unlimited in-store exchanges by taking a movie back to a store rather than mailing it back in. This provided a great value because it also immediately kicked the next item in your queue to start sending. Therefore, you had the option of playing upon the strength of a local Blockbuster (high availability of new releases) while having the more complete library of an online retailer.

Anyway, a while back, probably because they were losing money, they jacked up the prices for new sign ups for unlimited in-store exchanges and, in a convoluted process, either cancelled accounts of members in the old cheaper unlimited exchange account, automatically moved the customer to the limited exchange account, or inexplicably kept the account on the same status.

So, this guy Kevin realized there was a problem with the way Blockbuster was keeping track of these in-store exchanges and posted a blog post about it. He has since removed the post, so I will reproduce his findings here:

For those of you who subscribe to Blockbuster Online (Total Access), you’re probably well aware of the fact that a few months ago, Blockbuster decided it wasn’t making enough money and changed the plans around and jacked up the fees.

I had been doing the Total Access Premium plan which gave me 3 movies out at a time from the online store which I could then exchange in the store for a free movie while I waited for my next online movie to arrive. Now keep in mind that the previous plan had on cap on in-store exchanges. After the price jack, this plan became a little too pricey ($34.99/month + taxes) so I switched to the Total Access 3 DVDs at a time with only 5 in-store exchanges a month ($19.99/month + taxes).

Well, after I had blown through my 5 free in-store exchanges by mid-March (on the bottom of your Blockbuster receipt it tracks how many in-store exchanges you’ve done this month), I decided to see what happens if I go in and try a get 6th in-store exchange. Well, as to be presumed, I didn’t get a free exchange, but the online movie did serve as a $3.00 coupon off the price of the rental ($4.99 movie), which just further confused me. Apparently, buried in their FAQs it says “If the pre-determined number of free in-store exchanges is met during the calendar month, you have the ability to exchange your Online DVDs for discounted movie rentals for the remainder of the month.” The bummer is it doesn’t mention how much of a discount it is. For a .99 rental, is there even a discount?
In the process of trying to figure out the limits of the system, I realized that different Blockbuster stores are keeping track of the in-store exchanges separately. Yes, that’s right. After getting my free 5 in-store exchanges at one store, I simply took my next 5 online movies to another nearby Blockbuster and was able to get another 5 in-store exchanges during the same month.

Basically, I not only saved the $15 price difference between the unlimited in-store exchange and the 5 in-store exchanges, but then I got 5 more free rentals from the store. I haven’t yet tried going to a 3rd store to see if I can continue to take advantage of the separate accounting systems, but I encourage other readers to give it a try for the month of April and leave a comment with how it worked for you.

If you want more info on the breakdown of all the different plans for Blockbuster Total Access, I recommend you check out this article.

The official word from Blockbuster on this hack follows:

Blockbuster tracks whether individuals are abusing their online subscription plan and “gaming” the system to exceed the number of in-store exchanges they are allowed per month.
If an online subscriber tries to circumvent the terms of their plan, and in this instance gain more free rentals than allowed, we’ll know and ask them to stop if they want to remain an online subscriber, just as we’re doing with Kevin.

We have a number of online subscription plans to meet consumers’ entertainment needs. This include the tremendous value of $20 in free movie rentals with our 3 out program with 5 free in-store movie exchanges per month. And if someone wants the added value of unlimited in-store DVD exchanges, we have multiple plans to choose from.

We want subscribers to enjoy our service and we offer a tremendous value. But like any retailer, we can’t allow the misuse of our service. If we find this is taking place, we will take action.

My takes is that if they are unable to keep track of it at the store level when you attempt the exchange, it is probably prohibitive for them to monitor it at the corporate level easily as well. I recommend that you try it, and only stop if they contact you.

Also, see my own experiences in gaming Netflix in a different way here.

I had this interesting idea today that would allow you to float a new credit card balance without paying interest for quite a while. Let’s say that you have an unexpected car problem happen that costs $1000 to repair. Ideally, you should have emergency savings for this purpose, but let us say that you do not have that or that you don’t want to use it even if you do have it. The important thing is that you have to have at least $1000 (or whatever amount) worth of spending a month that can be done on a credit card within your budget and two empty credit cards as well as a means for paying it off eventually.

At first, you charge the $1000 car repair to the first credit card. This lets you keep your savings up to a month before the bill come due (depending on your credit card cycle). The most efficient method would be to put it on the card with the furthest closing date from the day of the charge. Either way, you have up until your payment due date to pay it off without incurring interest.

So, during this time, you charge up to $1000 worth of purchases on the second card, and at the closing date, you use all the money that you did not spend on purchases to pay off the first card.

Now, during the next month, you do the exact opposite (charge to the first card, use the extra money to pay off the second card).

You could theoretically continue this in perpetuity, but I think the smart thing to do would be to set aside some money each month into a savings account, and once you have enough saved aside so that it is equal to the debt, then you should pay it off. Alternately, if you don’t think you have the willpower to keep that savings separate, you could only charge 80% onto the “purchase card” each month and then pay the other 20% from your pay.

Anyway, the same method could also be applied for a “do-it-yourself” no-fee balance transfer from a high interest credit card to a lower interest one. I think the main problem there is that you do not qualify for those sweet low APR balance transfer offers. Of course, if you did this between two cards that got accepted most anywhere, you could create your own 0% APR offer of sorts.

My two warnings are:
1. Do not do this with more money that you can shift from cash or debit purchases to credit purchases as you will find it hard to maintain the float.
2. Do not charge anything on the purchasing card before the previous pay-off is credited. In some cases the bank may say you did not actually have a $0 balance at any point and they’ll try to charge you interest.

I haven’t explored this in depth yet, but I think it may be possible to game the Netflix subscription system to reduce the amount you pay each month for a subscription. I downgraded to the 1 DVD out, 2 per month maximum plan last month because we had been sitting on a movie for a while (we were busy) and I did not want to have to pay the extra for an unlimited plan when we were not going to get out two movies in the time frame.

Anyway, today, after returning some movies, I logged into my account and saw “Upgrade to one at a time Unlimited for $3.38″. I did some calculations and that confirmed that the amount for the upgrade is pro-rated for the month you are in.

Thus, I suspect you could set your account to one at a time, 2 per month max, and then once you return your second from the month, upgrade your account to one at a time unlimited, pay the pro-rated difference, and then set your account to downgrade back to the one at a time, 2 per month max at the start of the next month. This way, you only pay extra when you are actually using your account extra.

I figure the same theory applies to larger plans but might be less efficient because you will actually be getting less of something during the time your subscription is reduced. Though, since your only penalty for not returning a movie that is “extra” above your plan is that you cannot rent anything else until you return below your plan number, I could see bumping up a couple discs higher for the last 5 days or so of each month, getting a pile of discs, and then riding the cheapest plan until you have returned all of these discs.

I’ll run some math on this when I get more time.

Update: Right now (Wednesday March 5th 7:35PM) they are giving me the same offer for $2.99. Based on the fact that I think I saw it higher today, that means that 3 days of reductions have been applied which tells me that they are reducing the upgrade cost by $0.13 per day (obviously this will vary depending on the dollar amount between the plans). Anyway, it does seem you could upgrade 3 Netflix business days (Monday-Friday) before your subscription ran out and definitely have time to then downgrade again before the next cycle. I suspect you could do it less than that, but the risk is greater that your DVDs might not make it out in time.

Update #2: The first month that I put this into use (March 2008), I ended up paying, with tax, $5.34 for the basic 2-out subscription and then $2.36 additionally to upgrade it when I turned in our second movie at mid-month. This totals to $7.70 versus the $9.62 I paid for a full month of unlimited movie watching for a savings of $1.92 or 20%. I used the subscription for the latter part of the month to get out 2 additional movies for a final cost of $1.93 per rental. I could have done even better if I had remembered that the new plan month starts on the 29th of March instead of the 1st of April by strategically getting a movie back right before it flipped.

Update #3 This month (April 2008), we did not use Netflix much and ended up paying $5.34 for 2 movies for a total cost of $2.67 per rental.