That’s what a credit card advocate said to the Senate Banking Committee… the reason? You’re basically getting an interest free loan from the credit card companies if you are diligent and pay off your loan at the end of the month, then you aren’t making them that much money. If you’re like me, charge a lot of stuff but pay off your entire balance at the end of the month, you’re a “deadbeat” because you’re not making the credit card enough money! No this isn’t a Devil’s Advocate post because I think annual fee credit cards are crap (and I don’t really think I can make much of a case for you to get a card with an annual fee) but I think the reason given by the credit card company advocate is laughable.

When you swipe, the store you’re at pays interchange processing fees, something like 3% or so; but apparently that’s not good enough. It’s not good enough because the credit card companies get approximately 70% of their revenue from interest and penalties, according to the Government Accountability Office, so they obviously want more. The estimated $17.1 billion in penalty fees (not counting interest) the banks are going to get for 2006… that’s not enough. That’s like your latest bonehead highly paid athlete complaining that he needs more money to feed his family. No one has compassion for piggish greed. No one.

If they call someone who just pays their bill a deadbeat, I wonder what they call 0% balance transfer arbitragers (or just folks looking for extra breathing room with 0% balance transfers) and folks who just sign up for credit cards for the bonuses?

Foobarista made an excellent point in my Devil’s Advocate post titled “Rent Forever, Don’t Buy A Home that I felt was worth repeating:

The other thing about the mortgage interest deduction is you have to itemize to get it. Given that the standard deduction is quite high now, $10500 for married, filing jointly, only the amount of your itemized deductions above $10500 is actually a “win”. If you have, say, $12000 in mortgage interest and pay $4000 in property taxes, the “tax free” part of your mortgage is really only $5500, not $12000.

I lot of folks look to buy a home in part because of the great benefit of mortgage interest deductibility, but they fail to realize that you need to pay a lot more in interest and taxes than the standard deduction in order to come out ahead if you plan on getting married (and if you bought a home for that particular reason, which is probably a mistake in the first place). Just something to chew on… anyone have any thoughts? I’m surprised I hadn’t heard this mentioned earlier by anyone, probably because everyone I talk to on a regular basis is single, but I would think that it would’ve at least made its way into a mainstream article or something.

So I recently started the 401k to IRA rollover process, moving my assets from my former employer’s 401k plan to a Rollover IRA at Vanguard, and just today I received the check for the value of my assets that I would be sending off to Vanguard. The check is easily the largest single legitimate check I’ve held in my hand (beating a check that was the down payment for my house a year and a half ago) and I kind of wondered why the plan administrator would mail something so important in regular first class mail.

Anyway, I was very very tempted to just slap a thirty-nine cent stamp on the letter and mail it off but I thought better of it. While I’m pretty sure that there was a 99% chance the letter would make it there without any problems (I have faith in the USPS, even if Nick doesn’t), do I really want to deal with the hassle in that 1% case?

Let’s compare…
99%: I save myself a few bucks.

1%: I’d have a headache. First, it would take me a little while to learn that the check was lost, then I would have to request that my 401k plan administrator void the original check and reissue a new check. That request would likely come with some sort of (unreasonable) fee. Then, after I lose about three or four weeks of appreciation on a pretty sizable sum (to me anyway), I’d send it via certified mail this time. So… I think certified the first time is the route to go.

So, frugality can be a fault and in this case, saving a few bucks could potentially cost me a lot in terms of time, hassle, and money.

This is a guest post by Mapgirl, a single, 30-something woman with a mortgage who has all her student loans paid off. She’s outside most of the demographics being written about in mainstream personal finance media. She’s hoping to fill the niche. If you like what you read (I often do), stop by her blog or consider subscribing to her RSS feed.

Recently, I came across an old article from October 2006 Kiplinger about target-date mutual funds, and I agree with most of the arguments in the article about why these funds are aren’t for everyone. Jim recently wrote a devil’s advocate post about index funds, about which you could make some of the same arguments.

First of all, target-date funds are not without risk, and you’ll have to evaluate them on the same basis of performance as you would any other mutual fund. You could stick your money into one of these funds and get a piddly 4% return. If you’re not paying attention, you’ll be screwed when the targeted date comes around with an underfunded retirement. If you decide to go with a target date fund, make sure it’s performing to your expectations like you would with any other investment.

Second, the Kiplinger article points out that these funds are one-stop shopping and are meant to be the ONLY investment in your portfolio. However, if you already have investments, to reallocate them into these funds will have tax fallout. They say it’s probably not a good idea for someone already saving, but a great place to start if you are young in your 20′s. Sure, if you are young in your 20′s and you aren’t inclined to to save, nor to pay attention to retirement saving, then this is a perfectly fine investment vehicle.

The other part I can’t really say better, so let me quote:

The alternative to not remaking your existing portfolio is to undermine the purpose of the target fund. Suppose, to take an exaggerated example, you throw $1 million into a target fund that has three-fourths of its assets in stocks and one-fourth in bonds. But say you have another $1 million socked away in municipal bonds. Presumably, your goal in investing in the target fund is to acquire a portfolio that’s 75% stocks and 25% bonds. But if you keep the munis, you end up with a portfolio that’s 62.5% in bonds and only 37.5% in stocks.

Third, they write that a 55 year old investor is 9 years away from retirement, but the target date fund has only 60% stocks in it so a target date fund isn’t a very good choice. I have a way around that which is to move to the next one with a date in the future which will carry more stocks. I personally like a lot of risk and I would move to the fund designated for people 5-10 years younger than me just to keep a higher level of risk. I’m surprised the article doesn’t mention this as a possible strategy for being in a target date fund when you don’t think it’s holding enough stocks.

The final point of the article is the piece de resistance. They write that most people don’t have the stomach to sit in one investment for 30 years, which is the whole point of these target date funds. I would agree. I couldn’t have just one iron in the fire when it comes to retirement. Seems
kind of a bad idea, but I suppose a fund like this is better than holding onto CD’s or US Treasuries, which is certainly what some people do with their money.

What about you? Can you stomach holding onto one investment for 30 years? Are you in a target fund? Why?

I’ve decided to stop divulging hard numbers in my “Net Worth” series of posts where I publicly track our progress towards financial prosperity. The reason why I started the series was because other personal finance bloggers were putting their net worths out there and I felt like it was the cool thing to do – and it was. Had I not been so public I wouldn’t have had the honor of appearing in the New York Times, quite possibly the coolest thing that has happened since starting this blog, but I feel that the usefulness and “cool” factor of posting a net worth has been exhausted.

If you’re struggling through debt, posting the amount of debt you have gives you motivation to work harder at paying it off. As you pay, you watch that number shrink. As you pay, your readers celebrate your one step closer to debt freedom. But who celebrates when Random Joe Blogger adds another X% to his net worth? I know I don’t really care and I’m pretty sure no one else really cares either.

What people care about are the things you did, not the amount you saved, and so my monthly personal finance updates will now focus on any personal finance related decisions I’ve made in the last month and not on the dollar amounts. Do you think it is a mistake? Do you welcome this change? Do you not really care? Please share your thoughts!

You would think that most people know that payday loans are ripoffs and the ones you use them are either in dire financial straits or think they’re in dire financial straits but as it turns out, a lot of folks don’t realize refund anticipation loans are ripoffs too because they usually are offered by reputable companies like Jackson Hewitt, H&R Block, and other big tax preparer names and not Fast Cash, Check Cashing R Us, or other seedily named joints. However, if you ever look at the fine print, you’ll see fees and interest rates that would make a check cashing shop blush. And an even scarier tactic nowadays is that a lot of these preparation houses don’t even need a W-2, they’re offering paystub loans and you only need to bring in your December paystub in order to apply for these loans.

(Click to continue reading…)

Given the new passport rules, I thought it might be helpful to give some helpful instructions on how one goes about applying for and getting a United States Passport.

What You’ll Need

• Passport application form. If it’s your first time (or first time in a long time), you’ll likely need the DS-11; if it’s a renewal, you’ll likely need DS-82. Both have online versions you can fill out online and print out (DS-11 Online, DS-82 Online). DO NOT SIGN those documents, you must sign them in person!
• Two photographs of yourself. The photos must be 2″ x 2″, identical, taken within the last six months, full color, frontal with a white or off-white background, and some other specifications. Basically, you need to have them done at a place that does Passport photos.
• Proof of U.S. Citizenship. This is most easily achieved by an expired Passport or a certified Birth Certificate (one with a raised or embossed seal); but you can also use a Consular Report of Birth Abroad or Certification of Birth, Naturalization Certificate, or a Certificate of Citizenship. A military ID is not sufficient. If you don’t have any of those, there is a full list of acceptable options here.
• Valid form of photo identification. Again, if you have an expired Passport then that’s your best bet but if not, you can try a Naturalization Certificate or a current and valid Driver’s license, government ID (city, state or federal), or a military ID. If none of those work, there are a few more options here.
• Your social security number – Not sure why this is necessary but if you don’t, apparently the IRS can impose a $500 penalty. The State Department doesn’t specify if you need your social security card but I’d bring it if you have it handy.

(Click to continue reading…)

Today, I severed one of my last ties to my old job, my 401(k) plan. The process for rolling over my 401k to a Rollover IRA at Vanguard was fairly painless but there are several areas that you need to keep an eye out.

(Click to continue reading…)