News came out this morning that GMAC, the recipient of billions of dollars of taxpayer money since last December, is going back to the government to ask for more money. That would be the third round of bailout for what used to be the bankrupted General Motor finance unit (GMAC Financial was approved to be a bank holding company in December 2008 for it to receive government rescue fund). This is quite unique for GMAC because no other banks, not even Citigroup and Bank of America which have received much more money from the government than GMAC did, have asked for more than two bailouts. At GMAC, however, the trouble doesn’t seem to end, even after $12.5 billion infusion from the government. You may think that a bank receiving so much taxpayer money should have a better chance of surviving when there are signs that the condition of the economy and the financial market is improving. Unfortunately, that’s not the case for GMAC, which is still struggling to deal with massive losses from subprime mortgages. Now it’s going to ask as much as $5.6 billion more.

While GMAC is still in trouble, its subsidiary, Ally Bank seems to be doing quite well, at least from the rates it offers (Online Savings Account 1.70% APY, 1-year CD 2.00% APY). Actually, the bank has been giving exceptionally high rates since it switched its name from GMAC Bank to Ally Bank six months ago. Today’s news makes wonder how Ally Bank can afford to offer such high rates (Bankrate.com average 1-year CD rate is 1.70% APY). And Ally Bank ads are everywhere. Is it actually because of the billions bailout money it received? Of course, paying a higher rate can attract more savers (I was one of those ), but it also add additional cost to the bank that is in such a bad situation, even if it is a pure online bank.

Now that you know GMAC, or Ally Bank, is not healthy, will it change your perception of the bank?

I still remember what Washington Mutual did the week before it collapsed. After giving it so much money, I don’t think the government will allow GMAC to go under, but  the situation does concern me.

Original Post on The Sun's Financial Diary

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Membership Rewards

Here’s how it works. With the AMEX Premier Rewards Gold Card, you can earn points up to three times as fast. You can earn triple points on airfare and double points on gas and groceries, while continuing to earn points on all other purchases, such as double points on gas and groceries, and one point on every dollar spent on everything else. Best of all, rewards points have no expiration date, and there is no limit to the number of points you can earn.

For the Membership Rewards Points you earned, you can use them to redeem airline tickets to fly any airline, anytime with no seat restrictions or blackout dates. You can also book hotels, cruises and vacation packages. Use points to pay for your entire trip or a portion of it, and continue to earn points with your favorite frequent flyer and guest programs when you book. Points can also be redeemed for rewards from over 50 of the finest names in shopping and entertainment.

In addition, other membership benefits include:

• Fraud Protection Guarantee
• Return Protection
• Extended Warranty
• Purchase Protection
• Baggage Insurance Plan
• Emergency Check-In
• Assured Reservations
• Car Rental Loss and Damage Insurance
• Travel Accident Insurance

All of these come with an annul membership fee of $175. However, the fee for the first year is waived.

15,000 Bonus Points Promotion

Right now AMEX is running a promotion for the Premier Rewards Card which will give you 15,000 Membership Rewards bonus points when you spend $1,000 in your first 3 months after becoming a cardholder. The rewards points can be redeemed to up for $150 gift card. If you spend $30,000 per calendar year, you can get an additional 15,000 Membership Rewards bonus points.

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• Citi Forward Card 11,000 Bonus ThankYou Points
• Lending Club $25 Sign Up Bonus
• TradeKing $50 New Account Bonus in October
• CollegeAdvantage $50 Bonus

The reason for keeping the contribution limit steady for another year is that, according to Labor Department’s latest inflation report released on Thursday, Consumer Price Index (CPI) fell in the third quarter from the same period last year. Because there’s no inflation (at least as the CPI number shows), the annual contribution of 401(k) plan, as well as Social Security benefit, which is tied to the inflation, won’t be adjusted.

This isn’t the first time when the government maintained the maximum contribution of retirement plan unchanged. For example, the limit remained at the same level of $15,500 for 2007 and 2008. The maximum amount was adjusted every two years between 1994 and 2001.

While it makes sense to adjust the contribution limit based on the inflation, there are man people believe that CPI isn’t a good gauge for real inflation because goods that we consume every day, such as food and energy, are excluded from the calculation (the so-called core CPI) because they are volatile. Even though we spend a much smaller portion of our income on food nowadays than when CPI was first measured 90 years ago (the Labor Department started the statistics in 1919), food does become expensive year over year and the costs to fill up our cars and heat our homes also get higher and higher. Further more, since the Fed makes their rate decision based on core CPI, a low reading means the Fed can keep the interest rate low, which will lead to greater inflation risk, especially when the index doesn’t track the increase of  cost of living quick enough.

Now that there won’t be any increase in contribution limit next year, it doesn’t seem to be a big deal for one year. However, it is a big deal in the long term for those who max out their contribution every year. Just consider this: How much will today’s $500 be worth 20 or 30 years from now?

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• Citi Forward Card 11,000 Bonus ThankYou Points
• Lending Club $25 Sign Up Bonus
• TradeKing $50 New Account Bonus in October
• CollegeAdvantage $50 Bonus

From now till December 31, 2009, card members can earn up to 1,500 ThankYou points by simply using the card to make purchases in the next three months. Here’s how you can get the bonus points. For every month when you use PremierPass Card to make 5 purchases or more with at least $10 in each transaction, you earn 500 ThankYou points as bonus on top of the regular rewards you will receive when using the card (basically, you earn 2 points for every $1 spent at supermarkets, gas stations, drugstores, commuter transportation and parking merchants and 1 point for every $1 spent on other purchases).

Don’t have a Citi PremierPass Card? Apply for one now to receive up to 20,000 ThankYou points. More details on the bonus offer and how to earn and redeem ThankYou points can be found in my Citi PremierPass Card review post.

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The account works fine for me so far, with the only drawback that the account doesn’t pay any interest. Even though I don’t have a lot of money in the account, it still would be nice if I can earn some interests for the money I keep in it. A supplementary, interest bearing business account I am looking at is ING Direct Business Savings Account. Like ING’s Orange Savings Account, the business account has no minimum balance requirement and no monthly fee and it pays 1.15% APY as of now. The yield isn’t that great for a savings account, but better than other business savings accounts as far as I know. The account can be the savings option for many kinds of businesses, including

• Sole Proprietorships
• Partnerships
• Limited Liability Companies (LLCs)
• Corporations

The only requirement for the business savings account is to have a business checking account at another bank, which I do have with PNC, and link it to ING. Best of all, right now there’s a promotion of $50 bonus when opening an ING Direct Business Savings Account with promotion code BSA282.

I haven’t decided whether to get an account (yeah, another one) or not, but with no minimum deposit required, the $50 profit does looks pretty good

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As I mentioned early, though FHA has no minimum credit score requirement for FHA loans, many loan providers (remember FHA itself doesn’t issue loans. The loans come from private lenders) do impose a minimum score limit, usually starting at 580, on borrowers.

One of the reasons Fannie Mae decided to increase the minimum credit score is to “support prudent risk management and better ensure sustainable homeownership.” The revised requirement is clearly the response to the financial crisis that Fannie Mae, and Freddie Mac, had gone through last year (both Fannie and Freddie had to be bailed out by the government). While the increased minimum score is still much lower than what a private mortgage provider requires for a conventional loan, it’s a reminder for anybody, especially first-time homebuyers, that a good credit score is needed even if you want to buy a home with a FHA loan.

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Well, I don’t think being FREE is the excuse of doing such a poor job. So what I did was to check another popular and free web-based money management too to see how they compare to each other in handling transactions from the same BofA account. The one I chose is Yodlee and like Mint, I haven’t used the account since it was set up months ago. Thus, the comparison is equal.

And here’s what I saw in Yodlee’s Expense Report.

It’s not perfect either, but at least I don’t see hundreds or thousands spent on alcohol, entertainment, or sports. Instead, I see mortgage payments and spending on education (Ohio 529 Plan Investment). And when I go to the details of the transactions, the difference between the way Mint and Yodlee process each transaction becomes clear.

Unlike Mint, the description of the transaction in Yodlee is more complete.  In addition to the Payee’s name, Chase, it also information like payment ID, individual name, and company ID. Basically, the description in Yodlee is exactly the same as the description provided by BofA. In Mint, the description of the transaction only shows as “Chase”.

Both tools wrongly treated a DRIP investment I made to Exxon Mobile through ComputerShares as spending on Gas. I don’t blame them on this because this transaction may not be usual and if a transaction is categorized based on its description, then it doesn’t surprise me a transaction with Exxon Mobile in it being put in the Gas & Fuel category. However, Yodlee does a better job to categorize four external bank transfers as Transfer, not Entertainment as Mint did

Of course, the comparison is far from comprehensive and in order to arrive at the conclusion which one is better, I need to take a deeper look at both. But from what I can see now, Yodlee at least does a better job categorizing the transactions. No wonder many financial institutions use Yodlee too.

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• TradeKing $50 New Account Bonus in October
• CollegeAdvantage $50 Bonus

Here’s how you can get $50 bonus from CollegeAdvantage:

1. Follow the step in my previous post to open an account with reference code 2331122 before December 15, 2009;
2. Once the account is opened, set up a systematic saving program to invest in the plan automatically before January 31, 2010;
3. Receive the $25 bonus 90 days after the SSP begins.

Quite simple, right? In order to get the bonus, the following requirements have to be met as well:

• A minimum of $25 must be deducted per month.
• The EFT and payroll deduction must still be active at the 90-day mark.
• For EFT only, a minimum of three EFT pulls must have occurred within the 90 days.
• For payroll deduction only, at least one payroll check must be applied within the 90 days.

I have been using EFT to invest since I set up the plan more two year ago (I didn’t get any bonus back than). In my opinion, an automatic savings plan is all you need to put saving and investing ahead of spending.

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Last night, when I was writing the post about manageME 7, I logged into my Mint.com account first time in many months in order to make some comparison I needed for the post. I mentioned before that I mainly use a desktop version of Quicken to track my finance, not the online version, despite that the web-based too is absolutely free. So even though I have accounts with Mint.com and Quicken Online, I don’t really use them.

Anyway, after I got into my account, what I saw first really shocked me a bit.

Under the Alerts section on the account homepage, I saw messages like these:

• This month, you spent $566.27 on Alcohol & Bars. This exceeds your budget of $480 by $86.
• In the past 30 days, you spent $6,500.00 on Entertainment. Usually you spend $681.
• In the past 30 days, you spent $1,326.60 on Sports. Usually you spend $297.

Since I linked Mint.com to my Bank of America checking account, the only account I use to pay bills, and the downloading was automatic, the transactions are the latest shown in my BofA account. But no way in the world I could have ever spent $566 on alcohol, $1,326 on sports and $6,500 on entertainment in one month.

Realizing that there must be an error, I went back and forth between Mint.com and BofA to check out what those transactions really are. Well, it turned out that the $566.27 I *spent* on alcohol last month are actually payments I sent to Chase to pay my credit card bills; the $6,500 on entertainment are in fact ACH transfers from BofA to my savings account; and $1,326 on sports include more than $1,200 mortgage payment I made to BofA (used to be Countrywide).

We all know how important it is to track each and every spending correctly so the budget, developed based on past spending, can make sense. However, after seeing how Mint.com categorizes the transactions, I have some doubts on whether I can trust the tool to follow a budget and keep spending in check or not (though I don’t have a budget either). Sure, I can edit t the category myself to move the transactions to where they really belong, but that will reduce the value of the tool significantly if I have to manually correct many transactions.

Do you have the same problem as I do if you are using Mint.com too? If so, how do you deal with it? Since I don’t use Mint.com that much, maybe there are other ways to sort the transactions, however it does seem that Mint.com needs to do a better job in categorizing the transactions.

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A few months ago, shortly after Microsoft decided to quit offering MS Money, I wrote a post on where to find alternatives to MS Money, which included bother Quicken Online and Mint.com. While both systems are excellent personal finance tools, they aren’t the only alternatives out there when it comes to manage your money for free. In fact, the arena is getting more and more crowded.

manageME 7 Quick Review

One of many players in this arena is manageME 7, another money management website that offers both paid and free tool.

At the first look, I feel the interface of manageME 7 is rather simple. It offers a few basic functions such as manage accounts (bank, cash, credit, and loan accounts) and transactions, build a budget, set up an alert, and generate reports. While I haven’t tried every tool out there myself, a few that I did used, such as Mint.com and Quicken Online, allow users link their accounts at banks and credit card issuers directly from the site so that transactions can be downloaded right to the manage tool once the connection is set up. This not only is convenient, but also prevents errors from happening as all are done automatically. At manageME 7, however, things are not so automatic.

Once I set up an account to manage in manageME 7, I can choose either to enter transactions myself manually, or import them from a statement that is downloaded from a financial institution. Obviously, I am not going to try to each transaction myself, so I chose to import a bank statement (in this case from ING Direct).

Before importing the transactions, I first downloaded transactions from the past 2 months into a OFX file (manageME 7 supports a few file format such as OFX file, QIF file, CVS file, and BAI file). Then I uploaded the file into manageME 7. The process of downloading and uploading transactions was quite straightforward.  However, the result wasn’t really what I expected to see, probably due to the limitation of the file itself.

The downloaded transaction file contains the right information such as transaction date, type, and amount. However, the final balance isn’t really the account balance, but the balance of the period specified when the file is downloaded. I tested with two file formats, OFX file from ING Direct and QIF file from EverBank, and got the same result. I also tried CVS file downloaded from ING Direct, but the system generated an error, saying the file format wasn’t correct.

I have to say that after seeing what Mint.com and Quicken Online do with transactions, I am a little disappointed by manageME 7 not allowing users to interact directly with their accounts at banks (and probably the same for credit card accounts) to avoid such “error”. If I have to choose, then I prefer the way Quicken or Mint manages transactions: less hassle, more accurate. The reason why accurate transaction information is important is that other management functions, such as budgeting, rely on complete and accurate transactions to work.

manageME 7 Giveaway

I also played a little other functions like set up an alert and generate reports, though I have yet to fully explore manageME 7. Thus, it’s possible that I may have missed the functionality that separates manageME 7 from other online personal finance tools. If you are interested in trying manageME 7 out, the company is offer the first 50 users who register using this link a free Plutus Package (priced at $15 for 40 days).  Check it out to see if you like it.

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Now taking another look at the three offers we got last week, they all have a few things in common: First, the offers are all pretty low, lower than our already reduced list price. Second, the buyers are all buying their home for the first time. Finally, they all will get a FHA loan. When we bought our house five years ago, all I knew was to get a  mortgage from a private lender and make 20% down payment. I didn’t know there are federally insured FHA loans (not that we needed one). Now all the sudden, all three potential buyers need to get a FHA loan in order to buy our house. So what is FHA loan and how is it different from a conventional loan?

What Is FHA Loan?

Well, FHA stands for Federal Housing Administration and FHA loan isn’t exactly a loan. Rather, it is a loan guarantee program insured by FHA. The borrower still has to obtain the loan from a commercial lender who qualifies for issuing a FHA loan. According to Wikipedia, the program started during the Great Depression to provide private lenders insurance for the loans they issued. Now FHA loans mostly serve low-income homebuyers who can’t afford a down payment required by private mortgage insurance companies or otherwise don’t qualify for a conventional mortgage from a private lender. Since each lender sets their own rates and terms, FHA loans will different rates, though most loans carry fixed rates throughout the term (FHA also insures adjustable rate loans).

FHA Loan Requirements

Since FHA loan is primarily to help low-income homebuyers to realize their homeownership, there are certain requirements in order to get a FHA loan. These requirements include:

• Credit score: Though FHA does not require a minimum credit score, many lenders have their own requirement on the borrower’s credit that are usually less strict than what lenders impose on conventional loans. Usually, before underwriting a FHA loan, the lender examines the borrower’s credit with more attentions on the overall pattern of how the borrower uses his/her credit to assess the risk. As long as the borrower shows that he or she has managed previous payments responsibly, past minor mistakes in the credit history will not prevent the borrower from getting a FHA loan. Even people with no credit history can borrow a FHA loan.
• Down payment: Another feature that makes FHA loan attractive to first-time homebuyers with little savings is that the down payment can be as little as 3% of the purchase price of the house. On the other hand, private lenders usually require 3 – 5% down payment and for a down payment that’s less than 20% of the home’s value, the borrower is required to get a private mortgage insurance (PMI).

There are some other requirements for FHA loan, but I found the above two are most related to many of first-time homebuyers, making FHA loan a good choice to help them own their own home

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However, for whatever the reason (nothing has changed in the environment since the Fed has kept the benchmark rate at the same low level for a long time), Ally Bank has decided to move up the rate of their online savings account from the current level of 1.70% APY to 1.75% APY, starting tomorrow. A strange move that I doubt will impress savers. Thought, this is a positive move, I am not impressed. Not only because the rate increase is so small (only 0.05%) that it’s almost meaningless, but mainly because I don’t feel there’s any stability in terms of rates at the bank right now. When I look at a savings account, I first want a good rate, then I want it to be stable. Unfortunately, Ally Bank offers neither from what I can see.

Despite the tiny change, I still hope it marks the beginning of an upward trend. Is that possible? It is, but unlikely. It will be too funny if Ally Bank makes the rate up one week, then down the next.

Update: Ally Bank made another increase of its Online Savings Account in September, which is now at 1.80% APY.

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I got the card in 2006 when I started to make more and more purchases at Amazon.com. I thought getting the card makes sense for the 3% cashback it offers for shopping at Amazon.com (actually, 3 points for every dollar spent and the bonus points can be redeemed for Amazon gift card). Three years later I still have the card, but I only use it at Amazon because rewards for shopping at other places with this card isn’t really that rewarding. With the upcoming upgrade, however, it seems that the card can get a little more usages.

The upgrade will come on October 1, 2009 automatically for existing cardholders. With the new Signature card, card members can enjoy one more newly added benefit: get 2 rewards points for gas, dining and drugstore purchases for every dollar spent, in addition to the usual cashbacks for shopping at Amazon.com (3%) and elsewhere (1%).

These days, I can pretty much get 1% rebate with any credit card that offers a rewards program, but not many will go above the 1% mark and it is becoming increasingly difficult to get good rewards from card issuers because of changes in credit card rules (I think the new law actually punishes people who are using their plastics responsibly). In this environment, I think 2% cashback, though limited to only gas station, restaurant, and drugstore purchases, is a pretty good offer.

With the above being said, I don’t think I will switch to the Amazon card any time soon. Right now, I am still getting 3% cashback from Chase Freedom card at gas stations and grocery stores. When shopping at other places, I use Fidelity 529 card which gives me 2% back on every purchase. As long as I still have these benefits, I will stick with them for my everyday purchases.

BTW, the 2% rebate isn’t the benefit the new card will start to offer. The Amazon.com Signature card will also become a card with no pre-set spending limit, which I am not sure whether it’s a good change or a bad one.

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When I updated our July net worth early this month, I mentioned that I opened another savings account. That’s was barely one month after I got an account from Ally Bank. The reason is that I became extremely disappointed by Ally Bank, not only because of all the troubles I had with the bank, but also the rate. I thought I got a good deal from a bank with a long track record of offering competitive rates. It turned out to be a big mistake.

Before getting the new account in July, I already own a bunch of accounts from a bunch of banks. However, none of them really deserve my money since their rates are all in the 1.40% to 1.70% APY range, far below than the 2.00% APY that I’d like to have. Then I looked around, but didn’t find many options. Good rates are very, very rare these days. After some research, I decided to go with EverBank. The bank currently offers a bonus rate of 3.01% APY, which is much higher than any other bank I have an account with is offering. However, the rate rate is only good for the first 3 months, then it will drop to the current rate, which is at 1.75% APY  right now, still better than what I get from Ally Bank or Dollar Savings Direct.

The process of opening a EverBank Yield Pledge Money Market Account is quite simple, though it does have a couple of more steps than other banks. For example, after the online application is completed, then bank asked me to print out the signature page, which certifies that the SSN I provided during the application is correct, and mail it back to the bank. I heard before some people said that EverBank was more difficult to deal with because of their verification process. To me, however, everything appeared going quite well (read more about EverBank Money Market Account including minimum deposit and monthly fee). I opened the account on July 22nd. On July 28th, the bank informed me that they have received my signature page and the account is good to go. The processing time is a little longer than that of other banks I have dealt with, but still acceptable (I’d like to have the entire process finished online only, no paper work involved though).

Once the account is up, the next step is set up external ACH transfer so I can move money between EverBank and my checking account at Bank of America. EverBank uses trial deposit to verify account ownership which takes about 2 days to complete. However, setting up the external account is a little bit tricky with EverBank. On the account home page, it has a button to “Add External Account”. But I can’t use that function because Bank of America (New Jersey) isn’t in the list of institutions that EverBank supports. To add my BofA checking account, I had to go to Transfer Funds, then External Transfer, then Add Transfer Account, and manually enter the routing number to find my bank. I wish EverBank has the option to enter bank routing number on the “Add External Account” page instead of only listing some banks and letting you select from there.

Another thing I noticed at EverBank is that the ACH fund transfers take a little bit longer to appear in the account than at other banks. I made two transfers on the same day, one to EverBank and one to another bank. The one to EverBank, which was my initial deposit, took exactly 5 business day to appear on my account while only 3 days to the other bank.

Once the external transfer accounts are set up, EverBank seems to be working fine for me. Of course, I don’t really use a savings account that much, so I rarely have issues with the bank (Ally Bank is an exception though).

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Then last week, I received two letters containing price change from American Express for two cards I own: Costco TrueEarnings Card and Optima Platinum Card. Citing changes in the business and economic environment, AMEX says in the letters that it found it’s necessary to increase rates and fess on some of its products. Particularly beginning the bill cycle on October 1, 2009, it will raise APRs on purchases and cash advances and increase the late fee. Even though I don’t think these changes will affect how I use the cards (I never withdrew any cash using a credit card and was never late in making a payment), I decided to go through the letters carefully this time to see what will be changed, given how much talk there is on how credit card issuers are making changes on their policies when they still can.

Starting October 1, 2009, AMEX will change the standard APR for purchases to the Prime Rate plus 11.99%, which is 15.24% as of August 1. The APR for cash advances is increased to the Prime Rate plus 21.99%. Currently the APR for purchases on my cards is at 13.24%. The 2% increase actually isn’t too bad. However since I didn’t have any financial charge against me before, I thought I should be rewarded with a lowered APR for being a good customer, not a higher APR. As for the late fee, AMEX has decided to adopt fee structure that depends on the amount of balance instead of a flat fee. If the balance is below $250, the late fee will be $19; otherwise, the fee will be $39.

It’s no all bad news though. In the letter, AMEX also says it will eliminate the over-the-limit fee at the same time when the above price changes take effect.

At the end, AMEX didn’t forget to remind me that it’s important to keep my balance under my credit limit and pay my bill s on time to avoid late fee.

Well, we all know they are the obvious when handling credit cards.  That’s what I have been doing for years and it’s why I don’t really care these price changes

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In July and August, Citi card members, who hold either their credit cards or debit cards, can get different live concert for as low as $5 each. The tickets are offered through Citi Private Pass, a loyalty program that rewards Citi cardholders with discounts for special events. If you are a card member, you can buy $5 ticket to a bunch of different concerts through the end of August. The concerts are called Lawn Ticket concerts and have different types of music, from Depeche Mode to Nickleback, a great deal for music lovers in this tough economic environment.

Don’t have a Citi card? There are a few cards that Citi offers are quite attractive with good benefits, some already being discussed here, such as the Forward Card, Forward Card for College Students, and PremierPass Card. Once you get the card, just go to Citi Private Pass and purchase tickets to the concerts you like with promo code “CITI” followed by the first two digits of your Citi credit or debit card number.

You have until August 31st to enjoy those cheap concert tickets of the summer

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Looks like there are a lot of drama. I wonder how long that $2 billion will last.

Anyway, I stumbled upon this Cash for Clunkers Calculator on Edmunds, the website where you can get free quotes and research a vehicle, etc.

Edmunds claim that the calculator can help you quickly determine:

1. If you have a vehicle that may meet the criteria for the Car Allowance Rebate System (CARS) government program.
2. If this Program makes financial sense for you based on the True Market Value of your current vehicle.
3. What credit amount you can expect to receive, given the vehicle you are interested in purchasing.

I didn’t try the calculator myself because I have no need of it so I can’t tell whether it’s good or not. But if you are interested in taking advantage of the incentive to get a fuel efficient vehicle, try the Cash for Clunkers calculator to see whether your car qualifies or not and how much credit you can get before you head to the dealership.

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• Lending Club $25 Sign Up Bonus
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Rent a smaller unit. Rent an apartment unit that is fairly small but closer to work. Once you graduate from college and starting working as a young professional, rent will probably become your largest monthly overhead expense.

Buy a used car. If you can’t find a job close to you or an apartment by your work and a car becomes a must- then buy used. Since I’m by no means an expert on vehicle purchases all I will say is that you should strive to find the most reliable and fuel efficient vehicle possible. Don’t focus on the shiniest rims or the loudest sound system because all that means is that you have too much money to spend.

IF possible- take bus. This is a major IF because I know how most 20 somethings feel about riding the bus. Believe me I feel the same way but the savings are just phenomenal. It costs me $2.75 each way so $5.50 to travel to school and back or to work and back. I’ve driven to school many times and believe it or not the $5.50 doesn’t even cover the parking fees.

Drink at home. You spent 4-5 years working hard and pulling all nighters, so obviously you’re going to want to enjoy your life a little more now. I’m not going to preach to you and give you judgmental advice telling you not to ever consume alcohol because no matter what a personal finance blogger tells you, you will still drink on the weekends.

The best way to still meet up with your friends on the weekends while trying to stretch your entry level paycheck is to take turns getting together at someone’s place. This can be a lot more enjoyable than waiting outside in the lineup to get into a night club where you will have to pay a cover fee and then buy overpriced beers.

Buy good clothing- just no name brands. I always try to dress my best when I go out, go to work, and even when I go to school. The thing is that there is no sense in always trying to keep up with the latest trends. When you go shopping for clothing try to find items that look great but aren’t necessarily apart of the newest clothing trend. Regardless of what type of clothing you decide to purchase, make sure to not break one of the credit card rules for college graduates by going to the clothing store with your credit card in your hand. Too many times have I left the mall with the nicest dress shirt courtesy of my generous credit card limit.

Now it’s time to turn the table here and I want to know what you guys have done to stretch an entry level salary?

This is a guest post from The Studenomist of Studenomics. A personal finance blog aimed at helping college students & young professionals make the most optimal career and financial decisions possible.

Original Post on The Sun's Financial Diary

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When times turn tough, any little cracks in our money handling run the risk of becoming giant, gaping fissures that suck our money and our life, or at least our peace and happiness, down through it.

The smart thing to do is stress test your budget when things are going relatively well as opposed to when things turn south. This way you can make changes based on what works now and in the future as opposed to just what it takes to try and survive this very moment.

Stress Testing

The core to any budget overhaul is comfortably reducing spending by adjusting your lifestyle gradually. Look for ways to reduce your monthly outlay in every area of your life.

• Rent/Mortgage – This is probably the hardest to save on since it requires moving to a new place and possibly selling your old one. That also makes it one of the biggest chances to stress proof your budget. Do you really need all the space? Can you live somewhere that is not quite as nice or in a little less desirable neighborhood? An alternative to moving is to refinance your home loan, when interest rates are going down this is a good option. The potential here is to cut several hundred dollars off your monthly budget.
• Utilities – I’m not talking about turning lights off when you leave the room or sticking a jug of water in your toilet tank to use less water per flush, although that probably wouldn’t hurt. What I mean here is cable, internet, and phone service.
  • Cable – 200 channels? Really? Can you watch even a quarter of those? Dump the gazillion pay channels and stick to a basic tier, or even cancel the whole thing. Reading, conversation, music, exercise – there are many free ways to occupy your spare time that are more beneficial anyway
  • Internet – Cut it back to the lowest speed offered. I’m not going all dial-up on you here, but the slowest broad band speed will suffice for most people.
  • Cell phone – cut back on the minutes, even if it means joining one of those goofy plans that allows unlimited calling to select numbers, because most of us use the vast majority of our cell minutes calling a few people.
  • Home phone – get rid of it altogether and join the cellular revolution. It’s not just for the young and hip anymore.
• Food – Stop eating out as much. Get used to preparing meals ahead of time for those nights when life has been hectic. Coupons are nice, but making eating in a habit will do more for your budget in the long run.
• Insurance – Be a ruthless negotiator for things like health insurance (if you have to purchase your own) and car insurance. Shop around twice a year and don’t be afraid to negotiate with several different insurers. Savings here can easily add up to hundreds of dollars a year.
• Cars – Learn to be content driving your car past the pay-off date and buy a used car when you finally do trade it in. No car payment can go a long way to stress proofing a budget.

Debt

I cannot stress enough the importance of having zero debt when it comes to stress proofing your budget. When the wolf starts knocking on your door, you will most likely have to make a decision between food and shelter or paying your credit cards, and this can be a gut-wrenching decision to make.

Use the upsurge in disposable income that you will have from methodically reducing your budget to pay down your credit cards at an accelerated rate. Consider using ‘found’ money to do this as well. Many people receive cash gifts for various holidays or stumble upon some rebate or other source of cash. Instead of just blowing it on yourself, consider paying down debt with it and really blowing it on yourself.

If you find it hard to free up cash to accelerate the debt repayment, consider a consolidation loan to help lower your monthly payment and use the balance to pay down the loan. Just be careful not to incur more debt on the credit cards you just paid off or you could wind up with a lot of stress, even in the good times.

Stress testing your budget shouldn’t be about cutting your expenses to the bare bones. Life should be fun and you should live a little. The goal of stress testing your budget is to adjust your lifestyle to the point that when tough times come knocking, you are already comfortably living a lifestyle that allows you to stay strong and not have to go looking for ways to survive today that may be detrimental to tomorrow.

This guest post was written by Jonathan over at Debt Loans.

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Features of Current by Discover

Discover claims that the Current card is the only prepaid card that helps parents monitor their teens’ spending (I don’t know whether this is true or not). With the Current card, parents can set up spending limits and restrict what their children can shop and where they can shop. This gives teens freedom of using the card to shop while helping their parents maintain control of the spending.

Other benefits of the Current card include free direct deposit for parents and teens, as well as free deposits from any credit card or bank account. Once money is added, teens can use the card to make purchases online, over the phone and in stores. In addition, the card can even be used an ATM card for cash withdrawals. The card also offer $0 fraud liability guarantee.

The Current card, however, is not free. It has an annual membership fee of $50, or $5 a month. Other fees include $0.50 per ATM withdraw (the first four withdrawals are free though), $3 to replace a lost or stolen card, and $5 to receive a card statement by mail. Free card statements can be viewed online any time and there is no inactivity fee.

Current Promotion

Right now Discover is running a promotion for the Current Card. If you get a Current Card now, Discover will waive the membership fee for first month, a $5 value, when using the promo code BT709. This offer expires on May 30, 2010.

BTW, I had a post on Zecco promotion code for $200 bonus for their Forex trading account a couple of days ago. It  turned out that only those who received the original email will get the bonus when all the conditions are met. I have updated the original post with this information. Apologize for the confusion!

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Since now I am working in the DC area and will soon be a resident of Virginia, I started to tune my radio to news stations in this area. Early this week on my way back from work, this piece of news got my attention. Virginia Governor announced on Monday that the state is setting up a Virginia State Employee Loan Program to help eligible state employees go through the tough economic time by lending them small, short-term loans from $100 to $500. The purpose for establishing this program, in partner with Virginia Credit Union (VACU), is to keep financially stressed Virginia state employees away from predatory lenders, such as payday loan stores.

To qualify for the loan, the applicant must be a VA state employee who is not on probation and a member of VACU with good standing. Even though there will be no credit check to determine the borrower’s credit worthiness, he or she needs to complete an “on-line financial fitness course and exam to keep them on sound financial footing” before being approved for the loan. While I believe the program is good for those need financial help in a difficult time, I am not impressive by the program itself for a couple of reasons.

First, I am not sure how much $100 or even $500 can help. Sure, the loan may be enough if one wants to buy back-to-school stuff for his/her kid(s), but he or she has problem making monthly mortgage payment, then the money probably won’t provide too much relief, even in the short-term. And according to the program, one can only have one loan at a time and a maximum of two loans within a year. Will that be helpful?

Second, the interest rate of the loan is not favorable at all. At 24.99% APR, the interest rate is more than 10 percentage points higher than the average consumer credit card rate, which is at 14.69% in June according to IndexCreditCards.com. People are outraged by the credit card industry’s practice of charging high interest rates even on those with good credit (hence the CARD Act of 2009), but I doubt there will be many complains about the interest charge. Sure, 24.99% is better than what payday loan shops will charge, but I don’t think I will use it if I want a few hundred dollars for an urgent need. Charging less than payday loans do won’t make it a good program. In my opinion, it’s just less bad.

In fact, I think there are better options out there, if only looking the money part of the program. The first comes up in my mind is borrowing money from credit cards. This idea may sound crazy with all negative coverage of the credit card industry recently, but it could be a valid option for those who use their credit cards responsively. I considered using credit cards as emergency fund myself when I lost my job two years ago. What I would do with this method is that I would get a couple of new credit cards with 0% APR balance transfer (now cards with 0% APR balance transfer are rare, but you can still find cards such as Citibank Forward Card and Discover Escape Card come with 6-months 0% APR balance transfer offer), then I would deposit the money into my bank account and use the money to pay my daily expenses. Usually credit card issuers will charge 3% fee with no maximum on the amount of balance transfterred (put the money in a savings account that pays 2.00% APY can offset a large part of the balance transfer fee), which can last from 6 months to one year, but the interest rate is much lower than the 24.99% charged by the Virginia State Employee Loan Program. Of course, there are risks involved in this approach:

1. You may not get the credit cards you want, depending on your credit history;
2. The credit limit you get may not be high enough since issuers have been very aggressive in reducing credit limit and closing inactive accounts;
3. You have to make at least minimum monthly payment in order to maintain the 0% APR; otherwise, you will end up paying the same interest rate or even higher if you miss one payment;
4. Getting a new credit may affect your credit score negatively.

In general, you have to be very careful when borrowing money from credit cards. Don’t use it unless you can manage your credit cards very well (read more on how to transfer credit card balance).

Another option, which I think makes a better alternative, is using social lending to fund short-term project. Comparing to the credit card method I mentioned above, peer-to-peer lending is new, but gained a lot of attention recently as banks tighten their lending due to the financial crisis. Lending Club is one of the P2P lending providers that I am using. Even though I am using Lending Club as a lender, not a borrower, people who borrow money from private lenders through Lending Club can get better rate on average as comparing to borrowing money from banks. For example, depending on the borrower’s credit, interest rates of P2P loans can be as low as 7.37% APR for top rated borrowers. Even for people with less than perfect credit, the interest rates, at the maximum of 20.11% for G graded loans, are still significantly lower than the Virginia program’s interest rate. And with Lending Club, the loan duration can be up to 36 months. Longer duration means lower monthly payment, making it easier for borrowers to pay back the loan.

Even though there are alternatives available for people to borrow a small amount of money at relatively low rate, the Virginia program is still worth considering for those who are in need because 1) the requirements are rather low (not on probation and at least $5 in VACU checking account) and it doesn’t require a credit check; 2) applicants must take a financial course and an exam before being approved for the loan, which could be beneficial to the applicants in the long-term.

photo credit: swanksalot

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Apparently, my posts on Ally Bank have gotten the attention of the bank and yesterday I was contacted by Laura Johnston, the executive of Social Marketing at GMAC Financial Service. She offered to have a Customer Service manager contact me to address my concerns. Since right now I don’t have much problem with the bank (the transfers were stopped and I moved my money out of the bank already) that needs to be addressed immediately, I decided to give her a full recount of my experience with Ally Bank, especially the part when I opened the second account. To be fair, I have never opened more than one account with any other online banks, so I don’t know whether what happened with Ally Bank could happen with other banks or not, which means the problems I had may not be unique to Ally Bank. Nonetheless, I wanted to tell the bank my story and, hopefully, my experience can help the bank improve.

In my response, I listed a few issues I have with Ally Bank that contribute to my decision to leave:

1. During the processing of opening my second CD account last week, I was shown the same account application page when I got my first account after clicking the “open accounts” button from my account. It seems that I will have to start the process all over again because it says I will need my driver’s license number and SSN. Only until I clicked the “start application” and made a selection on “How Many Account Owners?”, I saw the option to open an account as an existing customer. It will be much easier if the choice to open an account either as a current customer (I am still logging in my account, so I must be a current customer) or a new customer at the is given at very beginning, instead of having to click a few button to see the selection.
2. After selecting “Joint Account”, I also chose “Current Customer with user name and password. I can access my Ally Bank account”, because that’s what’s applicable to me, and the type of account type I want to open and opening deposit. Then I was asked to log in. This is where the problem started. Once I had that log in screen, I logged in with my own ID and password without thinking too much because I am a “Current with user name and password. I can access my Ally Bank account.” However, after I logged in, I was shown an account page where my name appeared as both the primary and secondary account owner, which wasn’t what I wanted to have in a joint account. So I called customer service and was told that to have both my wife and me appeared on the account, I had to log out, start again, and log in with my wife’s ID and password (my savings account and first CD account are joint account with my wife). I did what I was told to do and remember, the previous application never finished. The second time I had both my wife’s name and my name on the account, which is correct. The question is what if I want this to be a joint account with somebody else other than my wife? It looks like I wasn’t given the chance to enter the other person’s information.
3. When I got to the fund the account page, I saw two CD accounts with two different account numbers and both ask for $56,000 initial deposit. Apparently, the first attempt somehow went through, even though the process was never completed. Since I only wanted one account, not two, I selected to fund only one of them. I was subsequently given an error message, saying something like I have to fund both accounts in order to proceed (I don’t remember exactly what the error message is, but I can’t continue if I don’t fund two accounts). Without any other choice, I selected to fund both accounts with $56K and finally got the congratulation page, saying my accounts were successfully opened (something like that).
4. The next thing I did was listing accounts I own. In addition to the savings account I opened early, I also saw three CD accounts and the last two required a total of $112K deposit. Realizing this could be a big problem, I tried to edit one of the transfers, but I couldn’t despite that Ally Bank has the option to edit or cancel a transfer. I asked the CSR and later a manager why I can’t change the transfer that I made only minutes ago, I was told once a transfer is submitted, I am not allowed to edit or cancel it. If that’s the case, then what’s that “Edit” function for if there’s no way I can use it? I have transferred funds between banks very frequently and many banks, like HSBC Direct, IGoBanking, and Dollar Savings Direct, let me make changes after submitting a transfer request minutes or even hours later. But not with Ally Bank.
5. The only choice for me to stop the transfer and avoid overdrafting my checking account , as I was told, was to call Bank of America to put a stop order. I did and fortunately, the transfers were stopped so I don’t have to pay a load of overdraft fees for transfers that are scheduled to occur later.

My overall experience with Ally Bank is that it doesn’t make things easier for its customers. Rather I think some information is  quite confusing. I like to use banks that are easy to deal with. Since there are many banks out there, I feel that I don’t have to stick to a bank that has caused me so much trouble so far, even though maybe nothing is the bank’s fault. I like simple.

Finally, I told Laura that I was initially attracted to Ally Bank because it had better rates. Now, after less than two months, that’s no longer the case. What bothers me even more is that Ally Bank adjusts its rate every week. I am not aware any other bank does this on the savings/CD/money market accounts. When I open a savings account, I want a good rate and I want it to be relatively stable. Unfortunately, I have neither from Ally Bank now.

Do you have any issue with Ally Bank?

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For the two weeks that I banked with Ally, I felt very disappointed about the bank, not only because the trouble it caused during the process when I was opening my second CD account last week, which is very discouraging, but also the way the bank adjusts its interest rate. I was attracted to Ally because it had very competitive rates when the bank was re-launched in late May. However, in less than two months, the bank has reduced rates of all its products (CDs, Savings, and Money Market) significantly. What bothers me even more is that Ally Bank now seems to change its rates every week!!! Unlike other banks that made an adjustment then stay there for a while (a few weeks or even a few months), Ally Bank kept making small changes on a weekly basis since early June when it reduced its rates the first time. What I see from these small, but constant adjustments is that they just can’t make up their mind on how much they can afford to offer their customers. I really can’t figure out the reason behind all these frequent changes, even though they have every right to make whatever change they feel like to make. It’s like every time they looked around, they found that they can go a little bit lower and did exactly that.

I don’t understand it and I am not going to try to understand what they are doing. As I said, the only reason I opened an account with Ally Bank was that I liked the rate. Now that factor is gone, there is simply no reason for me to stick around. So today I moved the $1,000 initial deposit I have in the savings account back to Dollar Savings Direct, where I can earn 2.00% yield. After the transfer, I only have $1,000 left with Ally Bank in the 9-month CD account at 2.15% APY.

Maybe it’s a mistake to open the account with Ally Bank in the first place, with all what happened with the bank in the past two weeks.

BTW, I am very happy to see that two transfers I made last week didn’t go through after all. Bank of America blocked the two withdrawals, so no negative balance on my account any more. Maybe the stop order did work

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Last Thursday, I opened an Ally Bank 9-month No Penalty CD account. However, due to some errors in the process, I ended up opening two accounts, not just one as I wanted, each with an initial deposit of $56,000. Since I don’t have that much money in my account and Ally Bank said they can’t help me cancel the transfer, I called Bank of America immediately after initiating the transfers and paid $30 to put a stop order on the Ally Bank ACH transfers. I don’t want my bank account show a negative balance and to be charged any fee if that happens.

Then last night when I logged into my BofA account, I saw what I really hate to see: a negative balance of $51K, but it was not what I expected $110K. Among those pending transactions, there are two $56K withdrawals and one $56K deposit. Apparently, the stop order didn’t work. I can see where those two withdrawals came from, but couldn’t understand why there’s also a credit. So I called BofA again. After talking to a CSR, whose explanation didn’t make any sense to me, I spoke with a supervisor. She said since those transactions are still pending, she didn’t know much about them either and told me to wait a couple of days when the transactions settle to get an idea. Well, I don’t think I need anybody’s help to figure out what those transactions are if they already settled because at that time each transaction has a description tell me exact what it is. When I asked the supervisor the possible source of the credit, she said maybe the bank puts the credit in because I don’t have enough money in my account. But that’s also weird. If the bank can put $56K in my account, why can’t they put $112K to cover both withdrawals? The supervisor didn’t have anything more to say except asking me to wait.

Since I had my first bank account 13 years ago, I never had negative balance on my account, not even once. I always make sure I have enough money in it to cover our everyday expenses. Now that I have some -$51K in my account for the first time, I want to know what will happen next time. The manager told me I probably will be charged a $35 overdraft fee for each withdrawal until the account is replenished.

$35 for each withdrawal? This couldn’t have happened at a worse time because for years, I have scheduled to make nearly a dozen mutual fund, DRIP stock, and 529 plan investments on the fifth of every month, all withdrawing from my BofA account. In addition to the three $56K transactions, there are also a bunch of small withdrawals on my account because of these investments. If I have to pay $35 for each of them, I could lose hundreds of dollars in this mess

The first thing I did this morning when I woke up was checking my account again. While it still shows the same amount of negative balance, one thing did become clear: the $56K credit didn’t come from the bank (it’s quite naive to think the bank actually did that, isn’t it). It’s my own money. What happened was after I told BofA to stop those two transfers last week, I arranged to transfer the money to Dollar Savings Direct instead because I don’t want Ally Bank to have my money any more after what happened. That transaction appeared to be cleared on Monday, but somehow BofA took the money back. At the same, DSD also sent me a message saying that transfer failed. The two Ally Bank transfers, however, are still there.

As the last thing I wanted to do to stop the damage, I called Ally Bank today to cancel one of the CD accounts I opened and transfer the money back to BofA. Of course, I had to go over my story again with the CSR. They said they can do that, even without having to pay the penalty (because the account is opened for less than 6 days, so it’s not penalty free).

Now I can only hope this whole mess go away.

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optionsXpress, one of the brokers that I have an account with and have talked about a few time in the past, is currently offering 12-month 0% APR balance transfer for its optionsXpress Platinum Visa Card. Even though the card also charges 3% balance transfer fee, but the fee is caped at $75 ($5 minimum), which is good if you want to transfer a large amount.

The card has no annual membership fee and it basically rewards cardholders 1% for shopping with the card. Rewards are given as optionsXpress points (1 optionsXpress point for every dollar spent) and once you accumulate 1,500 points, you can redeem them for $15 that will credited to your optionsXpress account. Therefore, you must have an optionsXpress brokerage account in order to receive the rewards points. If you don’t have an optionsXpress investment account, then all your points will be forfeited. In addition, points will expire after 24 months if not redeemed.

While optionsXpress Visa is a good card for balance transfer if you want to move balances from high-rate cards to this card, it seems that it isn’t an attractive choice if you want to invest your rewards. If investing credit card cash back rewards is what you are thinking about, then there are better options out there.

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