Trent responded to a reader the other day about the real scoop on credit cards and, while the premise was correct in that if you carry a balance then the rewards on a card don’t matter, his logic was flawed. While he doesn’t come out and say that credit cards offer you rewards because they expect you to carry a balance (he sort of just says that Americans are badly in debt and those in debt are more likely to be in more debt and credit card companies want to leverage that) but that’s actually not why they offer you rewards, it’s merely a benefit that comes with a positive expected value.

The real reason why credit cards offer rewards is because they’re paying you less than what the merchant is paying them in order to process the credit card transaction. Everytime you charge something, several companies take a piece of the action and the merchant getes somewhere in the neighborhood of 3% off the top. In order to entice you to put their card in your wallet, they offer to kick back some of it to you as 1% cashback. Many consumers don’t know this and now all those “no charging to credit cards unless the purchase is over $10″ signs and the lack of Discover/American Express acceptance probably makes more sense now (Discover and AMEX have the highest fees).

Here’s another sneaky tactic since we’re on the subject. Some card issuers offer reward points such as 1 point for every $100 spent. If you can convert that point into a penny dollar, then you have basically 1% cashback but that’s often not the case because anytime they can shave a little off the conversion then the credit card company’s profits increase. They will generally offer products or giveaways or some other tangible non-cash item that, if you were to convert the points to cash, you wouldn’t buy at the stated price. So what about 5% cashback on gas? Aren’t the credit cards losing money on that transaction? Yes, but they figure to get into your wallet and so you might use the same card for something else and thus they expect to make money off the whole arrangement.

So, credit cards aren’t depending on you getting in debt but they certainly don’t mind it one bit.

If you’re a member of Upromise (it’s free to sign up), you get a free 1 year Good Start level membership to Identity Guard (details). Good Start is the first level of credit monitoring and it includes monitoring of your Equifax report, email alerts of any changes, and toll-free customer support. It’s not really all that great but it is free (you can get a six month trial by going to the site normally, so Upromise members get an additional six months). You have to cancel after the year or they automatically bill you. By comparison, their Level 4 Total Protection offers significantly more services (including the monitoring of illegal posting and trading of your credit card numbers because they monitor the black market, something I thought was pretty cool) but also costs $159/year.

Even though this particular perk isn’t that great, I think Upromise is a great “set it and forget it” service. I attached my grocery store’s loyalty card, some of my credit cards, and occasionally get free money for buying stuff I didn’t know I’d get free money for (thus it’s truly free!). I don’t look at the balance often but I’ve got a few dollars stored away in there.

Let’s say you’re in your mid-twenties and you’ve been going out with someone for a couple years and you think you know each other pretty well, where you want to go, blah blah. It’s getting to the point where you’re going to have to start talking about engagement, if that’s in the cards, what your plans are, blah blah. It’s also getting to the point where all of your friends and siblings and everyone around you is getting engaged (at least the first wave after college) and perhaps you feel a little left out. I’m painting a pretty broad scenario here and essentially the question comes down to this, what do you do when one person in the couple really wants to get engaged and the other is not in as much of a hurry?

How is this related to personal finance you might so? Well, other than the fact that this is the rest of your life (unless there is a divorce, but that’s not how anyone should approach marriage) and is probably one of the most important personal finance decisions of your life (though this itself isn’t one of those spender marrying saver situations, which would make it more personal finance related).

Fire away and enjoy the weekend! It’s a real humid sizzler in the Baltimore-DC area.

Fogo De Chao is a Brazilian churrascaria, or steakhouse, that features something they call espeto corrido, or continuous service. Anyone who has gone to a churrascaria knows it’s nothing but round after round buffet of grill meats like lamb, pork, sausages, steaks, etc. etc. etc; it’s really a ridiculously indulgent meal and that’s without even considering it’s ridiculous salad bar. Well, they just opened up a location here in Baltimore (just this month!) and eventually my group of friends is going to check it out and walk out about 23940823409 pounds heavier than when we walked in. It’s pricey but definitely worth it I think, especially if you’ve ever tried to buy a rack of lamb (ribs) at the grocery store.

• MightyBargainHunter writes about something I’ve advocated for a few years now, keep a journal while you’re learning something knew and you can make money with the journal (or just blogging about it!).
• Nickel shares his advice on how to make money in this stock market.
• Flexo shares his experience on how he got a great deal on bedroom furniture.
• FMF writes about co-signing loans and why it’s a terrible idea. TERRIBLE.
• Looks like JLP has something to say about Trent’s financial advice.
• Money, Matter, and More Musings wonders about being frugal.
• Jeremy takes a stab at a reader question about life insurance.
• Sun checked out Berkshire Hathaway’s portfolio and comes up with some investing ideas.
• Kids are expensive – you’ve been warned!
• Lazy Man joins the investing bandwagon and writes about market timing with 401k contributions.
• Ben also shares his thoughts on how you’d know when to invest in a down market.
• Over at My Retirement Blog, I posted a Twentysomething’s Quick Guide to Retirement, please let me know what you think of it.
• Cap shares a harrowing story about his home being burglarized, very scary stuff that happens every single day! Luckily only possessions were taken or damaged, no one was personally hurt which is definitely a positive (considering). It’s why we have insurance!
• Tricia shares with the world the value of dealing with her debt that I think is something everyone in debt should read. While it’d be nice to have it all POOF disappear, the journey itself has tremendous value. Where else can you get such transparency in emotion from someone about money? Nowhere, that’s why personal finance blogging is so popular.

No, Fogo De Chao didn’t pay me to post these pictures… I just think I’m hungry.

My post on why I sold off our Target Retirement 2050 fund received quite a few comments and I wanted to address those individually and in a way that simply can’t be done in chronological comments.

On the topic of not having a plan: There actually was a plan but the plan was bad or wrong or just not well thought out, so there . Usually people recommend that you shouldn’t in stocks unless your plan’s horizon stretches somewhere past 5 years, my plan doesn’t necessarily stretch past five years and I merely wasn’t sure about it. Since I wasn’t sure, that’s basically not much a plan now is it?

One thing I’m grappling with, when it comes to getting the most return for my money, is where should I put funds that I don’t know when I’ll need it? It won’t be this year but what if I want to put it towards real estate in over a year? Should I put it in laddered certificates of deposit (though honestly their returns are not much better than the 5%+ available through Emigrant Direct) or is there another mechanism? Since I didn’t know of any, I simply put it into the TR2050 because that’s where I thought it should’ve been.

On the topic of panic selling or market timing: I didn’t consider it panic selling because I looked at the situation, recognized the short term nature of my “plan” and thought the nature of the environment said it wouldn’t be a bad idea to sell. I only sold the TR2050, I didn’t adjust my 401k (it’s already at max or I would’ve increased it), SEP-IRA or my Roth IRA (where I am also in TR2050). Am I market timing? Sure, you can call it that and I’m okay with it.

On the topic of how subprime was too small to really affect anything: It’s already affected the employees of those companies considering how companies have either folded (American Home Mortgage is the biggest name to go under) or just folded their mortgage departments all together (if you’re curious for names, there are plenty in the news). Bernake and the Fed added additional liquidity to the market and dropped the funds rate half a percent. If Bernanke didn’t reverse course, bend to the market as easily as he did, it would be a totally different story right now (I call bullshit on his whole “you can’t watch the markets, you have to understand the undercurrents and the fundamentals” because he was watching the markets).

Hope that’s enough fodder for now.

The biggest question is what should someone who has a horizon of less than five years be in?

Yesterday I went to my LasikPlus free eye exam and consultation to get some more information about Lasik (which apparently stands for Laser in-Situ Keratomileusis and there are in fact many different variations on the “laser-on-eye” surgery) and to also see how much it costs. When I showed up, the entire appointment is split up into three distinct parts: preliminary eye exam, doctor directed eye exam, and the pricing and scheduling consultation.

Preliminary Eye Exam

This was conducted by someone in a blue scrubs (in other words, not a doctor) and consisted of your typical eye exam things, checking for prescription, eye pressure, eye health. They also added two additional tests such as a cornea mapping, cornea thickness measure, and a night vision test, which are tests they need to tell how difficult it would be to perform Lasik on you or whether it was a good fit for you. The end of this exam consisted of taking the pupil dilating drops and waiting to see the doctor, which included watching an informative FAQ-type video about Lasik.

Doctor Directed Eye Exam

This was conducted by someone in a white lab coat who introduced himself as doctor so-and-so (I’ll be honest, at this point I had the pupil dilating drops in, I couldn’t see and so I was a little disconcerted). He checked out my prescription again and went into whether or not I was a good candidate for Lasik. Apparently my pupil is slightly larger than average but that was fine and my cornea was thicker than average, which is a good thing; there was a 5-6% chance I would need corrective surgery after the first surgery, but that was all included in the price.

I asked him whether I’d get a prescription of some kind, say for glasses or contacts, and he said that they didn’t do that, all their tests were geared towards assessing the candidacy of a patient. So if you wanted a free prescription out of it, you’re out of luck. If you wanted a thumbs up or thumbs down for eye health, you did get that.

Pricing and Scheduling Consultation

This was with someone at the front desk and this was a little hard for me because my pupil’s were dilated. They gave a 15% discount with my vision insurance provider, I assume they give this with practically all vision insurance providers, so the price was around $1400 an eye for a grand total price of $2800. Since I haven’t talked to any other providers, I have no idea where that is in the grand scheme of things (that’s just regular Lasik with a Bausch & Lomb laser).

As for payment, there were several financing options that including a 18 month 0% financing offer through Carecredit, but I haven’t had a chance to look at that.

Oh, one last thing, there wasn’t a hard sell at the Columbia location, which was something I appreciated. I hate going to a place and having them try their hardest to sell their service or product, even after I’ve told them I’m currently in a research gathering mode and not looking to make a decision at the moment.

There you have it, my LasikPlus eye exam and consultation experience, please feel free to ask any questions or share your own experiences.

The FDIC insurance limit now covers $250,000 per depositor. (subject to ownership structures)

I received the following question after the reader saw my post about FDIC and NCUA deposit insurance:

Jim, I have an FDIC insurance question for you. Bank of America has a 4mo 5.10% high yield cd that I’d like to put my funds in. I have more than 100k, if I split it up between myself, my wife, and then we open one together, will I be covered by the fdic insurance? Thanks,

It sounds like there will be three ownership types on the CDs, you, your wife, and a joint ownership scenario and in that case I believe your CD’s will each be individually covered under FDIC insurance up to $100k.

If you instead purchase three different CDs as an individual and for some reason it were to become insolvent, a maximum of $100k would be insurance regardless of how many accounts you have. It’s the legal ownership that matters and each type gets up to $100k.

Now, take that advice for what it’s worth because I’m not a banker and my opinion is based on what I read off the FDIC website, which I may have inaccurately interpreted.

So yesterday I did an analysis on whether identity theft insurance was worth it (it’s not) and my example ID theft insurance company was Lifelock, where the CEO posts his social security number directly on the website. Well, turns out that just recently someone tried to obtain a loan using his social security number and he discovered the social security number through the Lifelock website. Two things I wanted to say about that – first, the fact that he was caught is not a vote of confidence for Lifelock and second, you must be a fool to try to steal the identity of someone touting an identity theft insurance service. On the idea that it’s not a vote of confidence, the first thing the company does is request fraud alerts (here’s a do it yourself guide to do what Lifelock does for you, except it’s almost free), which means any strange looking loan request will get reported to you. You can request these fraud alerts yourself so the fact that the victim was the LifeLock CEO doesn’t really matter.

Robert Maynard, co-founder of Lifelock, has a less than sterling personal and business history. All this can be gleaned from a very interesting Phoenix New Times article I’ve linked to below. One of the popular stories he tells is how he spent a week in jail after being picked up for failing to pay a $16,000 casino marker (loan) at the Las Vegas Mirage. He tells the story as an identity theft victim but upon investigation it was shown that the loan was actually his and the Mirage had a copy of his driver’s license, taken when he took out the loan. In fact, Maynard may have stolen his father’s identity and opened up an American Express card that he charged $154,000 on. As if all that wasn’t juicy enough, Maynard’s credit-repair company was shut down by the Feds for false advertising and deceptive practice and he’s prohibited from working in the credit-repair industry forever. If you’re thinking about Lifelock specifically, I recommend reading that article because they also mention that they’ve only paid out three claims (no mention of how many denials).

On a sidenote, one interesting fact I learned from the Phoenix article, if you put a fraud alert at one bureau, they are by law required to notify the other two. That can save you two phone calls every 90 days, which is how long the fraud alert is good for, if you decide to go the DIY route (which is what I’d do if you’re fearful).

Much thanks to Josh for the Star Telegram article about the ID theft and much thanks to Jake for the Phoenix New Times article about the questionable history of Robert Maynard, Lifelock co-founder.

Update: Oh, if you want to read more, Phil points out this great article on TechCrunch.