Libyan economy Versus Egyptian economy

Since I've been exercising more lately, I have more chance to listen to my podcasts, even if some of them are a month or more older by now.

Planet Money, from NPR, is one of my favorites. Perhaps the most educational one I caught recently looked at the public uprising in Egypt versus the one in Libya.  Why did the Egyptian army stay out of it, while the Libyan army opened fire?  Because the Egyptian army needs the people; the Libyan army does not.

The cast is an excellent introduction to the concept of a Rentier State and a the resource curse that can plague a third world nation.

The cast is from before the US and NATO go involved in the conflict, but that action has not impacted the relevance of the cast.  It's well worth the 20 minutes.  You can catch it here.

Vindicated against my guilty conscience

It's been two years since I last hauled all my shreddables to the industrial shredder.  I've had boxes of retired paper taking up space in my apartment throughout that time.  I probably should have gone last year, but, you know, bright shiny objects and all...

So everytime I passed those repurposed cardboard boxes filled with insurance solicitations, credit card statements, random coupon flyers, small racoons, thermal receipts, and assorted travel confirmations I could feel the growing stack of cardboard and packing tape mock me as I went out the door.  I let it grow and felt the metaphorical weight of it on my shoulders as my floor felt the physical weight on its carpet.

Last week things changed.

I got an email from the Accounts Payable department saying the couldn't find any record of the receipts for an expense report I submitted in April of 2009.  Granted, I would have appreciated it if they hadn't waited 15 months to let me know there was a problem, but these things happen. I searched my hard drive because I usually scan everything, but I couldn't find them either.  (So I guess the fault was mine rather than Accounts Payable.)

I pulled a box from the middle of the pile, cleared off the coffee table, fired up an episode of Eureka on the Tivo and dove into the layers of paperwork like the lamest archeologist ever.  Layer by layer I went -- August, July, June, May -- and finally April.  I slowed down and went through all those pages with a sieve. 

Finally, there they were -- all the receipts for that expense report, stuck in one fat envelope. 

I'm still not sure how they escaped my scanner the first go around, but once again, laziness and inaction proves victorious over ruthless efficiency.

And my conscience no longer feels guilty about the boxes.

New IRS Scam Email

I got this email today. I imagine others have too. It allegedly comes from "refunds@irs.gov."But beware. THIS IS A SCAM!

Tax Refund Notification

After the last annual calculations of your fiscal activity, we have determined that you are eligible to receive a tax refund of 1527.29 USD. Please submit the tax refund request and allow 6-9 days in order to process it.

Click Here to submit you tax refund request

Note : A refund can be delayed a variety of reasons, for example submitting invalid records or applying after deadline.

Yours Sincerely
Internal Revenue Service.

The was a hyperlink that would go to at eecu.net.

Again, if you get one of these, it is a scam.

How can I tell it's a scam?

First of all, the IRS will never contact you by email to offer you a refund. They will use regular mail.

Second, while the mail is mostly grammatically correct, The lack of a dollar sign on the amount is suspicious.

Third, the link goes someplace other than Irs.Gov

If you would like more information about phishing attempts and scam emails pretending to be from the IRS, please visit this page on the IRS web site.

Or if I've scared you away from clicking links, go directly to the IRS websites at IRS.gov. You'll see a link called "Report Phishing" in the upper right hand corner. There's some great information there.

If you receive a scam email purporting to be from the IRS, forward it to phishing@irs.gov

No more Money

A couple weeks ago, Microsoft made they sad announcement that they are discontinuing my favorite video game -- Microsoft Money. The current version will be the last one, and in less than two years, they will turn off the online updates service.

You can see the official announcement here, and the FAQ here. The software will keep working beyond that day; users just won't be able to make electronic payments through Money or automatically download updates. To get updates, they will need to manually download them from their banking provider.

Or switch to Quicken or another financial application.

It's too bad, really. I've been using Money to run my financial life for years. The first entry in my Money file is from 1995-02-17. I paid $17.72 to my Exxon credit card. I probably began using the application a couple months later (since I didn't have the computer until about March) but I went back and entered older data.

It was Money that showed me just how far in debt I was at my worst, and kept me on track for paying things off and minimizing my spending. The EPAY feature allowed me to make payments directly from the software instead of mailing in checks. That helped keep me from missing payments, incurring more late fees, and spending a ton on stamps.

The rising net worth chart gave me some positive reinforcement and encouraged me to continue. The drops in the net worth chart reminded me to refocus my efforts to pay down debt and save more.

A few years later I started traveling for work, and Money was an invaluable tool for managing my expense reports. The charts and reports made it easy for me to track my business expenses and separate them from personal expenses. It made it easier to manage the whole process of making interest free loans to large multi-national corporations.

And more recently, I learned to use Money to maximize my profit from Credit Card Arbitrage.

It's disappointing to see it go, but I suppose it makes sense for MSFT to do it. They seem to be streamlining their products lines and cutting products that are less critical to their success, less profitable, and with smaller fan bases.

And as a product it may have been reaching then end of its development life. Money is already a full featured home-finance application so there's not much more they could do to it to enourage people to buy the next version.

I guess I'll be doing some research over the next year.

Tax cuts are a bad idea

A stimulus package should encourage spending. In that respect, it's ironic to rely on this tool, since an orgy of debt heavy consumer spending on credit cards and silly mortgages is what got us here in the first place. A mild, several year long recession would likely be good for the economy in the long-term.

What it needs is a controlled burn in the forest to clear out the dead wood. That's what a mild recession would do for us, and we probably should have had one a couple years ago. But we didn't, and that controlled burn has now turned into a massive conflagration set to level a major metropolis. It's too severe to just let it burn. Thus, I am resigned to a massive stimulus package.

That package should focus on infrastructure -- transit systems, roads, new power transmission lines, enhanced nationwide broadband access, new energy technology, new materials, bridges, space exploration, and other items of that ilk. Some of these projects may be pork, but that's okay. The point is to put people to work -- get those private construction companies moving again. Make sure their employees spend money in their communities and employ even more people.

At the end of the stimulus period, either the economy will be moving again, or it won't. If it is, that's great. If not, well, at least we will have all this new infrastructure which we desperately need. And people had work. The money will not be wasted.

An additional benefit of the massive infrastructure spending is that not only will we get this cool new stuff, we'll get it cheap. People will work for less money. Steel, oil, and other raw materials are cheaper than they have been for years.

Plus, if we make these investments only when "we can afford it" in a strong economy we are also stealing labor and resources from the private sector's own growth initiatives. Let's get the infrastructure done now when we don't have to compete with the private sector. The country will be stronger for it and already have the key blocks in place when the next boom begins.

Of course this is all money the government is borrowing and we have to pay back, but that is also cheaper than it has been for years.

If you have the capacity to borrow and spend money this is now the best, cheapest possible time to do it.

There was a lot of stuff like that in the House version of the bill.

My concern is the tax cuts. The $800 billion package include more than $200 billion in tax cuts and rebates. The latest details are a bit challenging to nail down.

The problem with tax cuts and government stimulus checks in a bad economy is that they don't encourage spending. Responsible people will not spend that money on new stuff. Instead, it will go to pay down bills. Or it will go into savings for the hard times ahead.

And that's exactly what people should do with those savings. That demonstrates great personal responsibility.

But it won't stimulate the economy. It won't get other people employed. It won't bring more manufacturing on line. It won't drive increased investment by technology companies.

In short, it won't move things forward.

But I don't see anyone opposing middle class tax cuts anytime soon. As much as I hate to say it, the best compromise will be to leave the tax rates alone. Don't send out a "stimulus" check. Instead, provide tax credits for purchases.

I normally don't like tax credits and deductions. They make completing tax forms more complicated than they should be and are one of the reasons our tax code is such a mess.

But the point of the tax reductions in the bill isn't to save people money. It's to stimulate the economy.

So let's replace those tax cuts with rebates for buying things. For education. Or for buying a new, energy efficient car. Or for making substantial home improvements (spend $10K on your kitchen? Get a $5K tax credit). Or for paying for child care. Or for moving to a part of the country that needs a specific set of skills.

By putting those tax reductions in the form of tax credits, we take the money out of the savings accounts and put it to working creating jobs for people. The people in those jobs can now, in turn, make their own purchase.

Saving money doesn't move the economy forward. Spending does. Whether that spending is private or tax payer funded doesn't matter. Nothing happens until someone buys something. And that's what a stimulus package needs to encourage.

Tax credits for buying stuff will do that. Tax rate cuts and generic stimulus checks will not.

Investment choices for 2009

Last year, I made my annual deposit into my Roth IRA and then did the best thing I possibly could have with that cash -- nothing. 2008 was obviously a bad year for the stock market (worst since the thirties). I still managed to beat the S&P 500 by about 2%.

And outside of stock market, I did pretty okay with some credit card arbitrage. Hopefully in this era of shockingly low interest rates, I'll have more opportunities for that.

The stock market always has down years. You can't have the big up years without those occasionally plummets. And long term, the stock market is still the best investment choice out there. So I will continue to put funds I don't plan to need for 10 years into the market.

After the plunge, there are bound to be some good bargains out there. I'm in the early stages of my stock shopping now. I'm doing more research in the coming weeks, but here are the companies I am considering as investment opportunities.

• Apple
• Alaska Airlines
• Allscripts
• AMD
• Best Buy
• Costco
• Exxon Mobil
• Ford
• FedEx
• Google
• Intel
• Microsoft
• Starbucks
• TiVo
• Toyota
• US Bank

I already own some of these, but I will take a look at every thing I already own and decide whether or not to keep it. The key factor in deciding whether or not to keep it will be, "Would I buy it at this price?" If not, it's gone.

Any thoughts on those companies as investment opportunities? What stocks are you looking at as we head into the new year?

Book Review 31: How to become wealthy

"The Millionaire Next Door" is a great read for anyone who wants to be wealthy, or who wants to understand what it means to be wealthy.

As the economy slows down and stock market declines dominate the news, it has never been more important to understand these issues than it is right now.

Are the nation's wealthy really bathing in Champagne, living in 100-room mansions, driving sports cars, carrying Hermes purses, and driving around in luxury BMWs?

According to Thomas J Stanly and William D Danko, in "The Millionaire Next Door" the answer is no. Most millionaires do not live the millionaire lifestyle. They drive older, domestic cars, shop at discount stores, and live in middle class neighborhoods. They don't wear flashy clothes and they didn't inherit their money from wealthy parents.

The book I read was published in 1998. It would be interesting to see how much or how little things have changed in the past 10 years. But I imagine it would mainly be some minor shifts in the statistics, an increase in younger entrepreneurs, and and increase in the number of female millionaires. The core elements of the book are unlikely to have changed, though.

There are two main points in the book:

1. The wealthy don't look wealthy; those who look wealthy are often in debt.
2. The most important key to wealth is to spend less than you earn.

What is so profound about these discoveries? Just this: Most people have it all wrong about wealth in America. Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.

Page 1

While each section may not appeal to every reader, there is something for every one. Those who relate to raw data will appreciate the charts and stats discussions. Those who prefer actual stories will find something here as well. And those who look for summaries of the key learnings will appreciate the authors' descriptions.

The book starts out with a description of the typical millionaire.

Usually the wealthy individual is a businessman who has lived in the same town for all of his adult life. This person owns a small factory, a chain of stores, or a service company. He has married once and remains married. He live next door to people with a fraction of his wealth. He is a compulsive saver and investor. And he has made his money on his own. Eighty percent of America's millionaires are first generation rich.

Page 3

The language here is intentionally gender specific. Generally, they discuss millionaire households where the husband runs the business and the wife runs the household expenses and budgeting. They don't do that to diminish the role of women in the millionaire household; in fact, appropriately managing the household expenses is a critical role in turning income into wealth.

They expand from this description of the typical millionaire and identify the key characteristics of millionaires.

1. They live well below their means.
2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying high social status.
4. Their parents did not provide economic outpatient care.
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They choose the right occupation.

Page 3-4

The authors get into deep discussions about the purchases most people associate with millionaires, and their data shows that millionaires aren't spending money on luxury cars, $1,000 suits, Rolex watches, and expensive homes.

About half the millionaires surveyed reported they had never spent more than $140 on a pair of shoes. One in four had never spent more than $100. Only about one in ten had spent over $300. If not millionaires, then who is keeping the high-priced shoe manufacturers and dealers in business? Certainly some millionaires purchase expense shoes. But for every millionaire in the "highest price paid" category of over $300,there are at least eight non-millionaires.

Page 34

The people who are buying the high-end consumer goods and luxury goods are not the wealthy -- they are people who may have a high income, but haven't accumulated wealth. Those individuals are often financing a millionaire life style with debt, and therefore, will never be wealthy.

The authors also touch on the question of immigration. It turns out that immigrants to the US disproportionately become millionaires. It's not that they are bringing wealth with them. They are starting from scratch and then building successful businesses.

Their grand children, however, less likely to become millionaires.

What about the number of years that an average member of an ancestry group has been in America? The longer the time here, the less likely it will produce a disproportionately large percentage of millionaires. Why is this the case? Because we are a consumption based society. In general, the longer the average member of an ancestry group has been in America, the more likely he or she will become fully socialized to our high-consumption lifestyle. There is another reason. First-generation Americans tend to be self-employed. Self-employment is a major positive correlate of wealth.

Page 21-23

The more integrated into American culture and ethnic group becomes, the less likely it will produce millionaires.

While the authors cite the mixing of cultures as the reason for that, I expect it has more to do with the individuals involved, and less the culture. The fact that someone is willing to uproot their life, move to a new country, settle there, and do what it takes to be successful indicates they have the level of drive necessary to start a business and grow their wealth.

The other area that is particularly interesting is the question of economic out patient care. In other words, what happens when parents give their children money. Do the children build on that?

Sometimes. We often hear stories about successful people who are that way because they inherited wealth and built on it. Donald Trump is one such example. But that's the exception to the rule. Remember, only 20% of millionaires inherited their wealth.

The authors tell stories of people with middle class incomes who live in upper class neighborhoods because their parents are wealthy. The parents subsidize the adult children to help them afford their lifestyle. The problem is that the life style still exceeds their income and subsidy. The adult children come to rely on these handouts and never develop the skills or drive to build wealth on their own. Further, since they do live beyond their means, even if they did have the drive, they don't have the seed money to build true wealth.

There are countless examples of the inverse relationship between economic productivity and the presence of substantial economic gifts. …Independent of college tuition, more than two-thirds of American millionaires received no economic gifts from their parents. And this includes most of those whose parents were affluent.

Page 165

The children of millionaires who receive the least financial assistance (excluding education) form their parents are the one most likely top be successful.

Most affluent people have at least two children. Typically, the most economically productive one receives the smaller share of his or her parent's [sic] wealth, while the least productive receives the lion's share of both economic outpatient care and inheritance.

Page 165

The book can be summed in this story told by one of the millionaires the author interviewed:

My family in Nebraska understood the value of a dollar. Dad used to say seeds are a lot like dollars. You can eat the seeds or sow them. But when you would see what seeds turned into…ten-foot-high corn…you don't want to waste them. Consume them or plant them. I always get a kick out of watching things grow.

Page 129

The presidential campaigns are all talking about wealth. The economic challenges the country faces raise questions of wealth. The housing crisis raises questions of wealth. To understand these issues, don't get caught up in media portrayals of what it means to be a millionaire. Those portrayals don't reflect reality.

The Millionaire Next Door does. It's a great read for anyone who wants to become wealthy or understand what it means to be a millionaire.

You can find more of my book reviews here.

MS Money Plus error: "This operation cannot be performed"

Two years passed since I last bought MSFT Money. That meant I could no longer use it for online banking.

It makes little sense to me why they cap the banking service at two years, other than to make people purchase the updated version. I didn't need any of the new features. I've been pretty happy with the feature set for the past six or seven years. Regardless, I had to upgrade if I wanted to continue to use on line banking in the same way.

The latest version of Money -- Microsoft Money Plus is no longer available in retail stores. You now have to purchase it and download it from Microsoft or a different vendor. I'm still a fan of shrink wrap software, so this was mildly frustrating, too.

Since I don't like Quicken, though, I bought and downloaded Money.

I made a back up of my data file and the downloaded application. Next, I installed the new software. It seemed to work well, and it seemed to import my file properly, but then the error started.

Every time I went to the main landing page, it said "This operation cannot be performed." It gave the option of clicking "Okay" or "More information." I clicked okay and got this error message:

"This operation cannot be performed."

It gave me the same option again. And I got the same result.

"This operation cannot be performed."

This went on for 10 or 15 clicks and then I would get to the landing page. Every time I tried to get to that page, it told me 10 or 15 time that the operation couldn't be performed.

If I chose the more information option, I got this:


You can see how helpful that is.

Everything seemed to work fine, but those extra 10 or 15 clicks were starting to wear out my mouse.

Google to the Rescue!

A quick Google search took me to this Live Journal page by Edmund Wong. He apparently went through the same thing.

When Money imports the date file from a previous version, it can corrupt the budget data. To fix the problem, delete the old budget. Once you delete the old budget, the error message goes away and you can create a new budget.

So now instead of an old budget that I never used, I now have a new budget that I'll never use.

And that's what we call progress.

An overview of the mortgage crisis

If you want to get learn more about how the current mortgage crisis came about, This American Life recently did a great broadcast on it. They dissected the situation all the way from the person who had no business getting a mortgage to the person who had no business making that loan to the person who had no business buying that loan, and on up the chain of money.

The coverage has a nice balance. They don't vilify anyone as evil. But they don't excuse anyone from blame either. At each step of the way it's average people made bad decisions based on greed and peer/societal pressure.

You can listen to "The Giant Pool of Money" here. Or you can probably download it through iTunes.

Comparison shopping can be a waste of money

In January, 2006, I bought a small-ish digital camera. I wanted one that I could geekishly attach to my belt and carry everywhere. In case you haven't guess, I gave up on being "cool" decades ago.

I scoured the product review sites, read all the reviews on Amazon, shopped around for the best deal, and in the end bought a Nikon Coolpix 7600. I paid about $240 for the camera. I am happy with it.

But was the process worth it?

In the March 2008 issue of Money, Jean Chatzky talks about the perils of comparison shopping. When you consider how much time it takes to read all the reviews and find the best deal, does it make sense? How much is your time worth?

Unfortunately, Chatzky's article is not online, but she suggest figuring how much you time is worth, keeping a log of how much time you spend shopping, deciding whether you enjoy the process, and finally determining if there is something else you would rather do with your time.

I probably spent about 8-10 hours looking at cameras. After all, it was a significant purchase. But is all that time really worth it though? If I chose a slightly different camera would it really have made that much difference?

Maybe with my due diligence I saved $20 or $30. I can easily blow that eating out or shopping for CDs at a retail store. In fact, I don't even think about it.

So all those hours shopping for the perfect camera at the best price just get frittered away in other random spending over a weekend.

I guess the question then is did I enjoy the process? Maybe, but not so much to justify that much time.

So the lesson is to be careful about comparison shopping. I may be able to find a lower price and a better product, but it may not be the best deal.

Have you ever spent way too much time shopping for something, just to get "the best deal?"

New York State returns $318

Today I got a check for $318.74 from the state of New York.

After a certain period of inactivity, banks, brokerage house, insurance companies, and other organizations are required to turn over a customers' assets to the state for safe keeping. When you want it back, you contact the state it was turned over to.

I checked the database on the NY state website, and it reported I had unclaimed funds. I downloaded a form, filled it out, had it notarized and sent it in. About 6 weeks later I had my check.

I'm not exactly sure where the funds were from; I had done business with the institution in the past, though, and the state had the right address so I know it's mine. It was a pleasant surprise.

Check the websites for states you have lived in. You may find money you (or a deceased relative) did not know about.

Be careful, though. There are internet scammers that prey on the unclaimed funds issues. Some people will charge you a fee to do what you can do for free. Some may just be centers for identity theft, so exercise caution if you choose to deal with the 3rd parties.

The safest solution is probably to go directly to the states' websites. On the government site, search for "Unclaimed Property."

Here are the 4 sites I checked:

New York
Montana
Idaho
Washington

Let me know if you find anything. Good luck.

Ever Accidentally Store You Money Data on Microsoft Servers?

Here's how to delete it.

How to remove your personal financial information from MSN Money

It's actually a pretty nice feature. If you manage your finances with MS Money, you can sych your data for free to MS website. The nice thing is you can access all your information and do all your banking from nearly any computer in the world.

But if you travel with a notebook and keep the data secured there, it's not as useful. And, while I trust MS security on things like that, I still feel the less distribution of my data, the better.

The problem with this feature is that it's easy to accidentally turn in one when you try to set up on line access for new accounts. You actually have to read the dialogue box to realize what is happening. I've turned it on twice accidentally.

And while it's easy to remove the data once you have the directions, it's challenging to find the directions. They don't come up in obvious places in the help menu -- you have to go to the MS Knowledge Base to find the process. Or at least be better at navigating help files than I am.

I don't think MS is hiding this information in some sort of deliberate, conspiratorial fashion. It probably just didn't occur to the development folks that people might not want to use the feature. Or might try it and decide against it.

The Gender Pay Gap

Steve Chapman writes an intersting article about the gender gap in pay.

New Year's Day is called that because it begins a new year, and Thanksgiving has that name because it's an occasion for expressing gratitude. But Equal Pay Day, observed this year on April 24, is named for something that, we are told, doesn't exist -- equal pay for men and women.

The National Committee on Pay Equity used the occasion to announce that among full-time workers, women make only 77 cents for every dollar paid to men. The three leading Democratic presidential candidates have all endorsed legislation to fix the problem.

...
In reality, that's not clear at all. What we know from an array of evidence, including this report, is that most if not all of the discrepancy can be traced to factors other than sexism. When it comes to pay equity, we really have come a long way.

...more

Link originally found on Fark.com.

Shatner-Palooza: Financial Tips

When Jon and I watched Mind Meld a couple years back, it seemed like William Shatner was always looking for the next gimmick -- the next dollar so he could eat. It seemed like the 70s did not treat him well.

Leonard Nimoy, on the other hand came across as someone who saw Star Trek for the opportunity it was, thought it could be fleeting, and saved & invested his money quietly and well so he could live out a calm life.

Shatner's finances took a turn for the better in the Dot Com days. When Priceline.Com hired him as their spokesman, he did the job for stock, not cash. From Wikipedia:

For years, Priceline's official spokesperson was William Shatner, who agreed to do the spots for free in exchange for stock in the company. The arrangement turned out to be quite profitable for Shatner, who sold much of the stock shortly before its value plummeted in the dot-com bust.

But in an interview published in Britain's Globe and Mail (I found the link on Fark.com), Shatner offer additional financial advice. If you have just starting to save for retirement, maybe Shatner has some tips for you.

His tips include:

• "don't buy anything that eats while you sleep."
• the stock market is "chancy,"
• "If you had the hindsight, real estate would have been a really good investment"

The most important tidbit, though, is this:

"If you're saving some more, you can treat yourself," he said. "If you're starting to save, treat yourself to a saving."

Happy investing.

Arbitrage 05: My Process

Today wraps up Arbitrage Week at Cromely's World.

In the past few days, I covered the concept of the arbitrage program, some of the common pitfalls, options for more restrictive programs, and savings options. So how do you mechanically execute the program?

Execution is highly personal. It depends on your own bill paying system. If you have a system that works, there may be no reason to change it. Do what works.

The system I use relies on my favorite video game – Microsoft Money.

When I get a balance transfer offer, I deposit the cash in my checking account.

Once the check clears, I go to the ING website and transfer the funds from my checking account to ING.

Next I schedule monthly automatic transfers from ING to my checking account for the minimum payment to the credit card. Now, every month for the next 6-12 months, the minimum payment for the credit card will show up in my checking account.

Then I schedule one more automatic transfer from ING to my checking account. I schedule this transfer for two weeks before the 0% rate expires. It is for the entire remaining balance of the balance transfer.

Now that all the transfers are in place at ING, I go to Money, my banking software. Because I use electronic banking through Money, I can schedule automatic payments months in advance. I set up the monthly minimum payment to the credit card company, and the final payment.

The entire process takes about 30 minutes, including the walk to the bank to make the initial deposit. With everything set up, I just have to check my statements each month to make sure there are no problems, which I would be doing anyway.

And I can sit back, and wait for the interest to come in.

Here is a sample timetable. The dates, offers, and amounts are made up.

2007-01-03: Receive 12 month 0%, $20,000 Balance Transfer offer. The minimum payment is due on the 20th of each month

2007-01-03: Deposit balance transfer check in checking account

2007-01-10: Verify that the funds are available in my checking account

Here are the transfers I would initiate from the ING site:

Date	Amount	From	To
2007-01-14	$19,500	Checking	ING
2007-02-06	$390	ING	Checking
2007-03-06	$390	ING	Checking
2007-04-06	$390	ING	Checking
2007-05-06	$390	ING	Checking
2007-06-06	$390	ING	Checking
2007-07-06	$390	ING	Checking
2007-08-06	$390	ING	Checking
2007-09-06	$390	ING	Checking
2007-10-06	$390	ING	Checking
2007-11-06	$390	ING	Checking
2007-12-06	$390	ING	Checking
2007-12-20	$15,210	ING	Checking

And here are the ones I initiate through MS Money:

Date	Amount	From	To
2007-02-13	$390	Checking	Credit Card
2007-03-13	$390	Checking	Credit Card
2007-04-13	$390	Checking	Credit Card
2007-05-13	$390	Checking	Credit Card
2007-06-13	$390	Checking	Credit Card
2007-07-13	$390	Checking	Credit Card
2007-08-13	$390	Checking	Credit Card
2007-09-13	$390	Checking	Credit Card
2007-10-13	$390	Checking	Credit Card
2007-11-13	$390	Checking	Credit Card
2007-12-13	$390	Checking	Credit Card
2007-12-27	$15,210	Checking	Credit Card

And then I can earn about $75-$100 a month in interest. Not bad for a half hour’s work.

Good Luck!

• Arbitrage 01: Making Money From Credit Cards
• Arbitrage 02: Pitfalls
• Arbitrage 03: Credit Card Transfers Only
• Arbitrage 04: On Line Savings Accounts
• Arbitrage 05: My Process

Arbitrage 04: On Line Savings Accounts

Now that you have the cash, what do you do with it?

Put it in the safest investment vehicle you can find. You have a limited time to profit on the balance transfer. While the stock market is tempting because of the historical gains, it is not an appropriate investment for the arbitrage program. You have to at least preserve your principal for the next 6-12 months and the stock market is too volatile for that.

There may be some options among bonds, Treasury Bills, Money Market Funds, and such. There is still some risk, but I do not have the knowledge or experience with them to comment in detail.

One of the best solutions is to use online savings accounts.

Online banks offer competitive interest rates and expertise in web transactions because that is their business model. They don’t have to pay rent for branches or hire a bunch of tellers, managers, and guards to service your account

Some physical banks also offer online only savings accounts not available at branches. These accounts cost the banks less so they pay their customers higher interest.

In the past, I’ve used INGDirect.com (4.5%), EmigrantDirect.com (5.05%), and HSBCdirect.com (5.05%).

INGDirect.com pays the least interest, but it has the best website. It is easy to open and manage one or multiple accounts. If you want to open an account with them, send me your email address. If you open the account with $250 or more, ING will give you an extra $25 and give me $10.

I like ING because the account opening process was easy, and the website is intuitive. Once you have one account open (which can take several days for security purposes) you can easily open an additional account -- simply click a button.

It’s also easy to schedule recurring transfers or one time transfers a year in advance.

If you want to maximize your interest, though, HSBC is an excellent choice. It can take several weeks to open an account. And once you open an account, it can take a while to authorize your checking account for transfers in and out of the account. The security is impressive, but can also be a pain.

Once you have everything setup and can access the account, the interface is fine. The options for creating transfers between accounts work well, though they aren’t as intuitive as ING.

If you’ve used HSBC in the past and didn’t like it, you may want to take another look. They made a bunch of changes in the past year and the website is a lot better.

A unique HSBC feature is the ATM card. Unlike ING or Emigrant, they send you an ATM card so you can access your cash from any ATM. It may not be a good idea to use that at all for the arbitrage program, but it’s nice to know you can get cash in an emergency. Like if you need bail money.

Emigrant is a nice solution, too, but there’s not much to recommend it over ING or HSBC. I’ve used it in the past, and had no problems, but the interface on both ING and HSBC is nicer. It’s easier to open an account at Emigrant than it is at HSBC, and, since there’s no minimum balance, it doesn’t hurt to have an account. I just don’t find them all that compelling.

There are dozens of other high-interest savings accounts out there, but these are three of the biggest. Check them out on your own and see what you like. If you decide to open and ING account, email me.

Do your research and form your own opinion. After all, it’s your money.

• Arbitrage 01: Making Money From Credit Cards
• Arbitrage 02: Pitfalls
• Arbitrage 03: Credit Card Transfers Only
• Arbitrage 04: On Line Savings Accounts
• Arbitrage 05: My Process

Arbitrage 03: Credit Card Transfers Only

To make the arbitrage program work, you have to get the credit card’s cash into your account. Usually when the credit card companies extend a 0% offer, they include “checks” that you can use to deposit the funds in your account.

Sometimes, however, they don’t. Instead, they ask you fill out a form with the account number of the credit card you want to transfer the balance from. Or sometimes the “check” they send doesn’t qualify for the 0% offer.

So how do you get around this obstacle?

First, you can call the company that offered the 0% transfer and ask if the will send those funds to your checking or savings account.

If that doesn't work, you can use another credit card.

If the card with the balance transfer offer is card 1, then you can use card 2 (if it has a $0 balance) for the transfer. With a credit limit of $30,000 on card 1, you can do the arbitrage program for $29,500.

Do a transfer from card 2 to card 1 for $29,500 by putting the account number for card 2 on the offer form from card 1. Once the balance transfer goes through, you will owe card 1 $29,500 (plus the balance transfer fee). Card 2 will now owe you $29,500.

Call up customer service on card 2 and ask them to so send you a check for your “overpayment.” Once they send you that check, deposit it into your savings account and proceed as normal.

There is more risk involved here. You may lose a month while card two process the large payment, and then processes your refund. And since there are more players involved, there are more opportunities for mistakes.

• Arbitrage 01: Making Money From Credit Cards
• Arbitrage 02: Pitfalls
• Arbitrage 03: Credit Card Transfers Only
• Arbitrage 04: On Line Savings Accounts
• Arbitrage 05: My Process

Arbitrage 02: Pitfalls

Credit Card companies offer Balance Transfers because they want to make money. It’s that simple. They don’t expect you to take their money and stick it in a bank. There are two main ways they can make money on this program.

The first is if you actually transfer the balance from another credit card. They give you 6 or 12 months at no interest with expectation that you will not pay it all off in that time. Once the program expires, your interest rate spikes.

The second way is if you make a mistake and charge something to the credit card you are carrying the 0% offer on. Or if you miss a payment and they spike your interest.

When you follow the arbitrage program, you are costing them money. There’s nothing wrong, immoral, or illegal about it. They are taking a gamble. If they win, you pay lots of interest. If you win, you use their money for free for a period of time, earn lots of interest and then pay it all back.

So you are both gambling. To win, you need to avoid some common pitfalls.

• New Purchases
  
  Usually, the 0% offer does not apply to purchases. You should only do the arbitrage program with a credit card you already have a $0 balance on.
  
  When you make a credit card payment, the company will (usually) apply the payment to balances with a lower interest rate first.
  
  For example, Joe has a $30,000 credit limit on his visa. He spends $2,000 on clothes for whatever reason. The credit card has a 12% interest rate. Every payment he makes on that card means he will pay less interest the following month, because the balance is declining.
  
  If Joe now gets a 0% balance transfer offer, he might take $27,500 on it. That leaves him with two balances on the card – one for $2,000 at the purchase rate, and another for $27,500 at the balance transfer rate.
  
  Unlike in the first scenario, Joe will pay more interest each month because all payments he makes will go to the $27,500 balance, and none to the $2,000 balance. Additionally, since the purchase balance is not going down, but is instead accruing interest, that balance may actually go up.
  
  If you think you might need the card for purchases, the arbitrage program may not be for you.


• Universal Default
  
  Some credit card companies include this clause in their agreement with you; others don’t. It means if you make a late payment to any creditor, your 0% BT can go away and they’ll raise your interest to (in some cases) more than 30%.
  
  If there’s a chance you will be subjected to the Universal Default, the arbitrage program may not be for you.


• Credit Score
  
  Taking out a large Balance Transfer will lower your credit score. Exactly how much it will affect your FICO score is anybody’s guess. But your credit score affects mortgage rates, car loans, employment opportunities, and insurance rates.
  
  If you anticipate the sort of major life change that requires the highest FICO possible, the arbitrage program may not be for you.


• Discipline
  
  
  • Paperwork
    
    The arbitrage program doesn’t require constant attention, but you do need to closely track your bills and credit card statements. You also need to monitor your checking and savings accounts to make sure all monthly transfers are happening correctly and on time.
    
    If you don’t balance your checkbook, or keep close watch on your statements and other paperwork, the arbitrage program may not be for you.
  
  
  • Bill Paying
    
    I mentioned it before, but having the discipline to pay the minimum on the monthly 0% BT bill on time is critical. It’s also important to pay all your other bills on time during the program to make sure the Universal Default doesn’t kick in.
    
    If you aren’t absolutely sure you can meet all your monthly obligations, the arbitrage program may not be for you.
  
  
  • Chunk of Cash
    
    While you are doing this program you may have a $40,000 balance in a savings account from your 0% Balance Transfer. The whole point of the program is the give that money back after 6 – 12 months. It has to be there.
    
    If you (and others with account access) do not have the discipline to leave the cash there, the arbitrage program may not be for you.
  
  
• Random Errors
  
  Things happen. Credit card numbers get compromised. Billing errors pop up occasionally. Unexpected issues can derail the plan.
  
  If you are not comfortable handling these issues, the arbitrage program may not be for you.

For those that are aware of the risks, and comfortable managing them, the arbitrage program can be a great gamble. But beware of the pitfalls and details. And you just may beat the house.

• Arbitrage 01: Making Money From Credit Cards
• Arbitrage 02: Pitfalls
• Arbitrage 03: Credit Card Transfers Only
• Arbitrage 04: On Line Savings Accounts
• Arbitrage 05: My Process

Arbitrage 01: Making Money From Credit Cards

Please note -- Posts in my Arbitrage series describe one way a person can profit from differences in interest rates. I do not guarantee that anyone will be successful doing it. I am not a financial advisor. I'm merely a hobbiest. As with any program, there are risks that you need to evaluate for yourself. Things can go wrong. You could lose money. If you try this and it doesn't work out for you, I am not responsible. There may even be an error or two in these posts that I haven't caught yet. In short, please don't sue me.

Credit Card companies constantly poach one another's business with Balance Transfer offers. If you have a credit card, or an address, or maybe once smelled a credit card, you get these offers in the mail.

If the Balance Transfer is for 0%, you can make some money with it.

When I get a 0% Balance Transfer Offer on a credit card, I take it. I love it when the credit card company let's me play with their money for free. I stick it in a savings account and make more than 4% interest on their cash. In two years, I made $2300 using this strategy.

How to make Money from Credit Card Offers:

1. Receive a Balance Transfer offer for 0%.
   
2. Check the fee. They usually have a Balance Transfer fee of 3%, with a maximum fee of $75-$90. If there is no maximum fee (read the fine print) shred the offer, and return to your normal viewing.
   
3. Check your outstanding balance on the card. If it's anything other than $0, shred the offer and return to your normal viewing.
   
4. Check your credit limit on that card. If it's too low call the credit card company and ask them to raise your limit. How low is too low? That's up to you, but I wouldn't take the offer unless I have at least an $8,000 credit line on the card. If they won't raise your limit, or you don't want to ask them to, shred the offer and return to you normal viewing.
   
5. Check your credit limit on the card. If you have a large credit line already, you may want to see if they can raise it event more.
   
6. Check the Balance Transfer check to make sure you still get the 0% rate if you deposit it in your checking account. If not, read a future post on funneling the cash through another account. Or shred the offer and return to your regular viewing.
   
7. Check the expiration of the Balance Transfer offer. Call the company if you aren't certain. This is very important.
   
8. Deposit nearly your entire credit line in your checking account. Leave $100-$500 of available credit on the card in case something weird happens.
   
9. Once your deposit clears, transfer the money to a high interest savings account. Ingdirect, HSBCDirect and EmmigrantDirect are all great choices.
   
10. Schedule a monthly transfer for the minimum payment (usually 2-3% of the balance) from the online savings account to your checking account.


11. Make the minimum payment to your credit card one week before the due date.
    
12. DO NOT SKIP STEP 11
    
13. Pay all of your other bills on time. This is critical. This is one of the potential pitfalls.
    
14. Two weeks before the offer expires, transfer the remaining amount from your savings account to your checking account.
    
15. Make sure the payment arrives at the credit card company one week before the program expires.

Congratulations, you have now made several hundred dollars in interest that is now earning even more interest in your savings account and you owe the credit card nothing.

Lather.
Rinse.
Repeat.

• Arbitrage 01: Making Money From Credit Cards
• Arbitrage 02: Pitfalls
• Arbitrage 03: Credit Card Transfers Only
• Arbitrage 04: On Line Savings Accounts
• Arbitrage 05: My Process