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July 2009

Take Back the Beep Campaign

This article was written by in Consumer. 4 comments.

If you were to start adding a comment to this blog post, but we first made you wait fifteen seconds after pressing the “comment” button to make you hear some extraneous instructions, you’d be terribly frustrated. Now imagine if every Web site had the same problem, and imagine further that you were being charged for every second of time you spend online.

That’s basically the problem (well, one of the problems) with America’s big mobile phone companies. Anytime you want to leave a message for, say, a Verizon customer, you hear this:

At the tone, please record your message. When you have finished recording, you may hang up, or press 1 for more options. To leave a callback number, press 5.

We’ve heard these messages so much that we could all do bang-on impressions of them. For the most part, I usually just roll my eyes and my sense of the phone company’s collective intelligence goes down one more notch.

But David Pogue, technology columnist for the New York Times, sees a more serious problem: mobile phone carriers are using this extra-fifteen-seconds-per-call in a disgusting attempt to get more money from each of us. These seconds count towards our airtime usage. If you’re paying as you go, you see the problem right away. And even if you have a monthly plan, just four messages a month means a minute that you shouldn’t be using up.

But Mr. Pogue has an idea for fixing this (not to mention shocking data on how big the problem is). He’s started the “Take Back the Beep” campaign, wherein you and I send e-mails to the four biggest mobile phone companies, politely demanding that they quit this at-least annoying and at-worst money-grabbing activity. From the article:

cell executives admitted to me, point-blank, that the voicemail instructions exist primarily to make you use up airtime, thereby maximizing ARPU (Average Revenue per User)

If Verizon’s 70 million customers leave or check messages twice a weekday, Verizon rakes in about $620 million a year.

I’m heartened by stories that start out as a single complaint on Twitter, and end up getting a huge corporation’s attention, who is then obligated to rectify the matter. This should be even bigger than that. I took the time to send my complaint to AT&T. Won’t you?

Maybe if this is successful, we can then get mobile phone operators to admit that what we’re doing is just making phone calls, like we always used to do, and therefore, if you are the recipient of the call, you shouldn’t pay for it.

Take Back the Beep Campaign, David Pogue, The New York Times, July 30, 2009


If you are disappointed with the low interest yields offered by even the highest-yield savings and money market accounts, but you don’t want to tie your short-term cash in a riskier investment, consider certificates of deposit (CDs). CDs, however, generally carry penalties if you withdraw your cash before they mature. In other words, you invest in a CD designated with a length of time that represents when you would like your money, plus interest, back. But if you need to liquidate the CD, a bank may take away some or all of the interest that has accrued since the time of the deposit. Be sure to be aware of the best CD rates so you’re prepared for how much you can earn.

A certificate of deposit is considered a “deposit account” just like a savings account or money market account. You are allowed to earn interest, and if the bank enrolls in the program, your cash will be protected by the FDIC up to the limits allowed by law.

Banking Deal: Earn 1.05% APY on an FDIC-insured savings account at Synchrony Bank.

There is a way to structure your certificates of deposit in a form that reduces the risk of losing a large portion of your interest, and it is called a CD ladder. At staggered intervals, you buy CDs with staggered maturity dates until you only need to buy CDs with the longest maturity date. The result is every few months, a CD matures and you can roll the cash into a new CD or use the cash for your short-term expense needs.

The process consists of two phases. For this example, we’ll use the latest rates from Ally Bank which does not have a minimum balance requirement.

Setting up the ladder

These are the CD products and interest rates we will be dealing with. These are example rates, so check with your bank to determine the interest you’ll earn. APYs are as of August 14, 2016.

Duration APY
3 Month 0.30%
6 Month 0.60%
9 Month 0.64%
12 Month 1.05%
2 Year 1.30%
3 Year 1.50%
4 Year 1.40%
5 Year 1.65%

We can use this combination of maturities to create a ladder that provides us with a roll-over, or a chance to withdraw part of the cash, every three months. During Phase 1, this will require a combination, but by Phase 2, all CDs will be of the 5-year maturity, which usually offers the highest interest rates. Remember that five years is as long as you want to go; any money that you won’t need for more than five years can stand to be in a slightly riskier investment.

Assume that we have $10,000 that we’d like to begin rolling into certificates of deposit. Since the longest we want to go is five years, we can split this evenly over time at $2,000 per year. Our shortest maturity is three months, so we can tackle this in terms of $500 a quarter.

In the first phase, start on day zero by buying CDs in the following pattern:

  • $500 in the 3 month CD
  • $500 in the 6 month CD
  • $500 in the 9 month CD
  • $2,000 in the 12 month CD
  • $2,000 in the 2 year CD
  • $2,000 in the 3 year CD
  • $2,000 in the 4 year CD
  • $500 in the 5 year CD

At the end of the each of the first three quarters, withdraw each quarter’s $500 plus interest and use the funds to buy new 5 year CDs. For the sake of the example, we’ll withdraw the interest and place it in another bank account to use as income. To make more of your money, “reinvest” your interest each quarter.

Watch out for automatic renewal. At Ally Bank, CDs are automatically renewed for the same duration when they mature. During this stage, you will need to be proactive to withdraw the funds at maturity and use them to buy the next appropriate CD.

After one year of doing the above, this is what we have:

  • $2,000 maturing today (original 12 month CD)
  • $2,000 maturing in one year (original 2 year CD)
  • $2,000 maturing in two years
  • $2,000 maturing in three years
  • $500 maturing in four years
  • $500 maturing in four years, three months
  • $500 maturing in four years, six months
  • $500 maturing in four years, nine months

With the $2,000 maturing today, buy:

  • $500 in the 3 month CD
  • $500 in the 6 month CD
  • $500 in the 9 month CD
  • $500 in the 5 year CD

Do the same with the $2,000 that matures each year until you have 20 CDs, each maturing every quarter for the next five years. Once this process is complete, you can allow the automatic renewals to take effect except for when you need to withdraw your money.

Drawbacks of the CD ladder

You may notice that, as long as rates for long-term CDs remain higher than short-term CDs as they do most of the time, this method results in earning less than simply investing your entire $10,000 in a 5 year CD. But the CD ladder provides you some protection against losing interest if you need to withdraw your funds early. At Ally Bank, the penalty is not significant. This bank will charge you the amount of three months’ interest if you withdraw a CD with a maturity of 12 months or less or 6 months’ interest if you withdraw a CD with a maturity of longer than 12 months.

Another possibility to consider is that you might earn more interest in a high-yield savings account than you would in a short-term CD. Ally Bank’s Online Savings Account earns 1.00% APY as of August 14, 2016, making it more attractive than the 3-, 6-, and 9-month CDs. When this is the case, use a specially designated savings account rather than the short-term CDs.

We could have made this process easier by setting up a ladder that results in a turnover of $2,000 once a year rather than $5,000 every quarter. This method allows you to decrease the possibility of losing interest because you will always be able to access a portion of your investment within three months. In combination with a savings account, which is liquid at all times, you can earn consistently higher interest rates with less risk than using five-year CDs that mature only once a year.


Editor’s Note: This program is back on again and should be available through Labor Day, 2009

All good things must come to an end, and in some cases, prematurely. The “Cash for Clunkers” Program, or more formally, the Car Allowance Rebate System, has allocated almost all of its budget to rebates after only four days. The law called for the program to last until November 1 or until the funds are depleted, which ever condition occurs sooner, but I do not think there were many people who expected the funds to run out this quickly.

Consider yourself lucky if you were able to qualify for the program before it was suspended.

Car dealerships apparently saw active business this past weekend, and if all the funds were used up then the program was somewhat successful. While on the surface, Cash for Clunkers appeared to be a program designed to help consumers or to help the environment, but the real goal was to help dealers sell cars. It resulted in some short-term success despite setbacks due to the EPA’s recalculation of mpg, but we will have to wait for the car companies to report their finances to judge the success.

It’s also a possibility that Cash for Clunkers will come back. If the Congress decides the program is worth spending more money, we could see another Cash for Clunkers. And if we do, it might even improved to apply to more cars.

Update: While the Transportation Department called dealerships to tell them to stop accepting applications for Cash for Clunkers, the White House informed the public overnight that the program would continue. The House and Senate are now racing to re-authorize the program for another $2 billion.


“Now is a great time to buy.” That has been the advertising mantra of the National Association of Realtors regardless of the state of the housing market. The NAR certainly has a purpose; its mission and vision is clearly displayed on the organization’s website: “The core purpose of the NATIONAL ASSOCIATION OF REALTORS® is to help its members become more profitable and successful.”

The NAR looks out for its due-paying members. Notice that the mission of this non-profit organization is not to help consumers either find bargains when buying a house or to help sellers find the highest bidders. Real estate brokers, particularly those who qualify as Realtors (which according to the organization, should be represented in all uppercase letters, include the registered trademark symbol, and be pronounced in the unnatural American English combination of phonemes “REAL-TORE”) stand to be more “profitable and successful” by increasing the number of transactions they broker.

From what I understand about commissions, a 6% commission is often split between the buying agent and the selling agent, and if the agent is part of a realty company, the 3% is split with the company. A real estate agent holding out for a buyer’s asking price of $250,000 rather than $220,000, a difference of $30,000, stands to increase his income approximately $450. That seems hardly worthwhile if it takes several months before the asking price is met. The $450 is hardly an incentive for the broker; he could do better by closing the deal and moving on. On the other hand, the $28,200 (the $30,000 in price difference minus the 6% paid to the agents) is a significant difference for the seller. This just illustrates that real estate agents have little incentive to work hard for either the seller or the buyer except to create a good relationship in order to foster referrals.

That’s not the point. The point is that the National Association of Realtors’s only goal is to encourage more real estate transactions, and this is why they have been saying that, “Now is a great time to buy,” no matter what’s going on in the world around them. This is also why any data provided to the public by the NAR should be regarded as marketing rather than a true gauge of the economy.

For a well-accepted measure, media generally turn toward the Case-Shiller Price Index (CSPI), measured by Standard & Poors (a company with its own conflicts of interest as well). The CSPI shows that home prices increased for the first time in May. Other positive data include June numbers: new housing starts and existing home sales were both up 3.6% and sales of new homes were up 11%.

Is this a sign that the housing crisis is over? It must mean that there is increased confidence in the ability to find the right price as well as increased availability of loans.

There are some problems, though. Unemployment continues to rise, so consumers may find themselves in financial trouble. That could result in fewer purchases and more mortgage defaults. The increase in purchases may be due to speculators trying to snag deals rather than families moving from apartments to houses. Even if we are at a bottom, the numbers could mean that real estate is leveling without significant increase for some time.

What do you think? Are we headed for a recovery or are there still dark clouds ahead?

Looking for a Housing Recovery, Casey B. Mulligan, New York Times, July 29, 2009.


EPA Disqualifies Shoppers From Cash for Clunkers Program

by Luke Landes

The Cash for Clunkers Program went into effect recently, but so did changes to the official EPA-estimated mpg ratings of several cars. For example, the 1987 Mercury Grand Marquis, according to CNN Money, was rated a combined 18 mpg last week, but as the program began this week, the rating for this year, make and […]

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FICO Suing the Credit Bureaus Over VantageScore

by Luke Landes

Fair Isaac, the company that created and owns what is generally known as your credit score, is suing Experian and TransUnion, two of the three credit reporting bureaus, for creating a competing product that blurs the line between the “real” credit score and the others. The third credit reporting bureau, Equifax, agreed to settle with […]

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Stealing Entertainment, Revisited

by Smithee

A week ago I wrote a post called “Is it Ever Okay to Steal Entertainment?”, which produced great comments from our readers, many of whom were clearly incensed that I would ever try to rationalize stealing from content creators. I’ve been thinking about the criticism and understanding that was added to the original article. I […]

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Growth Career Fields for the Next Twenty Years

by Luke Landes

If you happen to be entering college and would like to decide the field you would like your career to be or feel the need to choose a major, you may want to consider a field that has growth prospects over the next twenty years or more. Even if you are already a few years […]

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Podcast 14: ING Direct’s “We, the Savers” and the AICPA’s Feed the Pig Campaign

by Luke Landes

Episode 14 of the Consumerism Commentary Podcast includes interviews with representatives from ING Direct and the American Institute of Certified Public Accountants (AICPA). Our discussion with Jim Kelly, the chief operating officer of ING Direct, focuses on the bank’s “We, the Savers” campaign and we also discuss ING Direct’s beginnings in the United States and […]

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Posts of the Week

by Luke Landes

Here are a few articles from around the web I recommend reading. A Journey of a Thousand Miles Begins With a Single Step. A few days ago, Tom, the producer of the Consumerism Commentary Podcast, and I spoke with Matt Jabs and recorded most of that conversation for an upcoming episode. Part of the discussion […]

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