Everybody Loves Your Money

I hope you all have a wonderful holiday season and a Happy New Year. It’s been quite a year on the economic front. I hope you have weathered the storms! If you haven’t, may 2010 bring you new prosperity and great opportunities!

Merry Christmas!!!

On a separate but related note. I just checked outside and, unfortunately, Santa did not leave a new BMW or Lexus in the driveway with a large bow on it. Oh well. Who gets those????

With the changing regulations on credit cards, banks are giving their card fees and rates a makeover. The latest bank to do that is First Premier Bank, which caters to the subprime market.

Previously the bank charged a whopping $256 in first year fees for a credit line of just $250. Incredible.

Now, due to changing regulations, they are capping their fees at the maximum allowed 25% of the credit line value but jacking the interest rate up to 79.9%. That would be $20 in interest per month on a $300 balance. Wow! This card will only be attractive the people with nowhere else to turn.

http://seattletimes.nwsource.com/html/businesstechnology/2010532431_apussubprimecreditcard.html

It didn’t take long for me to remember why I hate banks and love credit unions. In October, we finally bought my wife a car. She had been driving her Honda Accord for nearly 10 years and we decided now was the time to take advantage of great deals on cars. After doing a lot of research, we purchased a Honda CRV in October. While we had the cash to pay for it at the time, I decided to take out a small loan on the car in order to keep a comfortable nest egg in the bank.

Our original intent was to use our credit union for the short term loan. In the end, I got talked in to a better interest rate with Chase. I really didn’t think that much of it at the time because I was intending to pay the principal down quickly. Taking the loan just gave me a bit more flexibility. Strike one for me.

Yesterday I created my online account with Chase so that I could easily make additional principal payments. They were very clear on the payment slips that they sent me that I needed to check a box if I wanted any of the amount above the normal payment to go towards the principal. Otherwise they would apply the additional funds toward future monthly payments. The only problem with this is that I send all my payments via Billpay so I can’t check the box. The only way I could make additional principal payments would be to mail in a separate check. That seemed rather ridiculous in the age of the Internet so I logged on to Chase and figured I’d just transfer a payment electronically.

Once I had mapped my credit union account to Chase I went to the payment page and clicked on “pay additional principal”. As I was filling in the amount I noticed that they added an “immediate payment fee” of $10. Are you kidding me? I was not about to pay $10 for the privilege of paying down the principal. Frankly, I was disgusted. Still not wanting to burn up a large chunk of our emergency fund, I picked up the phone and called my credit union to explain the situation. They were happy to help and we created a new loan over the phone to pay off Chase. As a bonus, their interest rate has come down and is cheaper than the loan from Chase.

The main reason I’m happy to switch this over to my credit union is that I can make all the extra payments I want for absolutely no charge and it’s as simple as transferring money online in my, already established, Internet banking account. NEVER AGAIN will I let myself use a commercial bank.

I was doing a little browsing and stumbled upon this graphic. There is a lot of truth to this simple comic. It’s rare to find someone who is satisfied with what they have. I’m no exception. I am always thinking of what I want next, where I want to go, what I’d like to do etc etc..

In the graphic, each person takes for granted what they do have and instead yearns for something the other people have. While this isn’t exactly a revelation, it’s interesting to think about.

I suppose this is why so many people continue their quest to keep up with the Jones’. Why the Jones? Probably because they are the most visible. I mean, shoot, their shiny new car is right next door in the driveway. The new boat is crammed in to their garage, screaming at you as you walk by to get the mail. You can see the steam rising above the fence from their new hot tub. As you sit there in your backyard you can’t help but think what it might be like to have a hot tub of your own to soak in at your leisure. When your car starts sputtering you instantly think of the new sports car next door. I’m convinced the desire to always want more is wired in to our DNA.

So, if it’s just hard coded in our genes, perhaps rather than fight it, we should reset our desires to a more conservative place. Rather than try to keep up with the person next door, maybe we should set our sights on someone that has less than we do. If I can’t stop the desire to compare what I have to someone else, why not choose someone that drives an older car, lives in a smaller house and doesn’t own a boat?

I confess to having yearned to keep up with the Jones’ many times over the years, but I’ve also tried to “recalibrate” by considering how lucky I am compared to others that I know. It doesn’t always work, but it certainly has stomped out more than a few desires in the past.

How do you keep the desires in check?

As I’ve said more than a few times on this blog, have you considered a credit union? CNNMoney has an article on their site today that points out some of the benefits to switching to a credit union if you are unhappy with some of the changes that banks are making to their credit cards. As regulations tighten on banks and financial institutions, they are coming up with new ways to keep extracting money from you for the privilege of using their card. One of the latest trends is that if you are late on a payment, they will take away some of your credit card rewards. The only way you can get them back is to pay a late fee and a $29 charge besides. Pathetic.

I was happy to see that the co-branded Amex card that I use from Costco isn’t one of the cards that has this new policy. I’m guessing Costco wasn’t a fan of sticking it to their members like that. If I’m wrong, please let me know.

Anyway, the article goes on to point out that credit card fees at credit unions are much lower than traditional banks. Yet another great reason to switch.

On thing that I wasn’t aware of is that credit unions use collateral from other loans you have with them for your credit cards as well. That means that if you have a mortgage with the credit union and a credit card, they can use your home as collateral for the credit card. That isn’t the case with most banks. Since we never carry a balance on our credit cards, this isn’t really an issue for us.

Here’s a link to the article:
Credit unions best revenge for credit card holders