As featured in The Wall Street Journal, Money Magazine, and more!

April 2011


****EDITOR’S NOTE: THIS OFFER IS EXPIRED AND IS NO LONGER AVAILABLE****

Since last summer, credit card offers have been a bit of a mixed bag. While rewards programs and sign-up bonuses have been increasing, the issuers have also been increasing fees and interest rates. If you use a credit card, always make sure to pay your balance off in full every month, keep your spending within your credit limit, and choose a credit card with the rewards program that best matches your spending patterns.

American Express is offering, the Blue Cash Everyday® Card from American Express, that could be a contender for a credit card to consider, if you qualify.

The previous version of the Blue Cash card included a very decent rewards program. Cardholders earned 5% cash back on everyday purchases (spending on gas and groceries and at drugstores) after spending $6,500 each year and 1.25% on those purchases prior to reaching that spending threshold. Spending on all other purchases in other categories earned 1.25% after reaching the $6,500 threshold and 0.5% beforehand.

The largest complaint from customers was that they had to spend too much money each year in order to receive top rewards, so American Express modified the offer to make the card more attractive.

The Blue Cash Everyday® Card from American Express now offers rewards so Cardholders may earn cash back in the following amounts for eligible purchases:

  • 3% cash back at U.S. supermarkets, up to $6,000 per year in purchases
  • 2% cash back on gasoline at U.S. gas stations
  • 2% cash back at select U.S. department stores
  • 1% cash back on other purchases

While the top cash back rate is now 3% rather than 5%, the possibility of earning the top cash back rate on more of your spending helps make up for the difference. And as an added bonus, cardholders can earn $100 reward dollars after you use your new Card to make $1,000 in purchases within the first 3 months.

To qualify for the Blue Cash Everyday Card from American Express, you will need excellent credit in order to be approved. To check your credit score, visit GoFreeCredit.com for a 7-day free trial.

The Blue Cash Everyday Card from American Express will redeem your cash back reward dollars into statement credits or gift cards for a variety of merchandise, and this can be done once you’ve accumulated at least $25 cash back.

The Blue Cash Everyday Card from American Express offers a 0% introductory APR on purchases and balance transfers for 15 months. Once the introductory rate has expired, your APR will be a variable rate, currently the standard purchase APR is 12.99 percent – 21.99 percent depending on your credit history. Compared with other rewards credit cards, that APR is at par with most reward cards. Even so if you do decide to sign up for this card, make sure to avoid paying interest by paying your bill in full every month. If you don’t, no rewards card would be worthwhile.

The Blue Cash Everyday Card from American Express has no annual fee.

American Express has seen the rewards program improvements with Chase and Capital One and is moving to be more competitive. With the other AmEx perks, such as extended warranties and roadside assistance, this card is worth taking a closer look. You must have excellent credit to be approved. Visit the application page for the Blue Cash Everyday Card from American Express for more information or to apply.

Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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Don’t let anyone convince you that credit card companies are having a hard time dealing with new regulation. I received a warning in the mail yesterday from Bank of America. In fact, I received two warnings, in separate packages, related to the two Bank of America credit cards I own but do not currently use. The second page of each package included, in a big, bold, typeface, that I would be subject to a penalty APR of (up to) 29.99% APR if I do nothing more than make a late payment.

The late payment would not need to be the type that gets reported to the credit reporting agencies. One day late, and Bank of America could hike this rate for any future activity on the card. This penalty rate can remain on the card “indefinitely.” The bank might review my credit activity and reduce the rate, but I am confident Bank of America would gladly leave a penalty rate as high as possible.

Graciously, the issuer will notify me — or any other customer this change in the terms applies to — 45 days in advance of the increase.

It’s been a long time since I’ve paid any interest on a credit card, and I avoid late payments by using automatic transfers that pay the full amount of each bill each month without my intervention. Despite this, problems can always arise. Half asleep and still jet-lagged, I logged into my credit card account Wednesday morning and happened to log into my checking account as well. I noticed the credit card bill was due that day but I hadn’t transfered money to the right checking account to cover the automatic transfer. Unless I intervened, the scheduled payment wouldn’t go through. I managed to link a different checking account and pay the bill before the end of the day. If I had waited until yesterday to log into my credit card account, I would have been late.

This is another reminder that I need to simplify my bank accounts. Also, anyone can make mistakes with their payments, and one late payment could send a Bank of America credit card customer into the penalty box. It might be difficult to get back on the ice. Nearly 30% APR is nearly usurious. A $10,000 balance at 30% APR would take twenty years to pay off and would cost a total cash outflow of more than $26,000 (assuming a minimum payment of the greater of 4% or $20 of the balance and paying no more than the minimum).

The notice also identified revised limits for cash advances and reiterated the regulation that requires credit card companies to apply payments to the balance with the highest APR first.

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Whether it’s extreme couponing or group-couponing, the idea of saving money has the country frantically searching for deals and spreading the word through social networking. I’ve had to hide a number of friends whose total social discourse has been reduced to posts about their favorite deals — and WRITING IN ALL CAPITAL LETTERS when they’re sharing a deal that benefits them if their friends sign up, too. The fact that “couponing” is an accepted word in a culture that doesn’t frequently verb nouns unless the words truly speak to the zeitgeist indicates that we may be working so hard to save money that it may have the opposite effect.

Don’t get me wrong. In general, saving money is a great idea. Most people need to do more of it. Although the trend seems to be embedded in today’s social consciousness, perhaps due to the recession and the struggling middle class, couponing does not always coincide with saving money.

In fact, couponing encourages consumers to spend more than they would have otherwise. Getting new deals every day in an email inbox lets marketers walk in your home and sell you products you don’t need and wouldn’t have purchased if you didn’t willingly invite them in. Spending hours scouring for coupons or driving miles out of your way to save a few dollars is an inefficient use of time and money. Your time spent attempting to save $0.50 on a can of beans could be better spent earning several dollars with a quick task or more working overtime at your job, helping you afford beans at the everyday price — and more.

Furthermore, certain deal sites are known to make deals appear more attractive than they are. For example, one coupon I saw recently looked like a great deal: $200 off a notebook computer, for a limited time, through a deal website. A price history check showed that the deal was only $50 off that retailer’s normal price — and another major website without a special deal was offering the same computer for $100 less than the “deal” price.

The deals propagated online — especially those that persist from the same retailers — are only popular because they work for the retailers. Retailers pay fees to companies like LivingSocial and Groupon, so if they weren’t profiting from the arrangement, they would stop offering the deals. Merchants are profiting because consumers respond to these marketing tactics with the belief that they’re saving money. According to the latest government surveys, consumer spending is increasing. The increase may be due to the perception of deals or due to an improving economy, but regardless of the reason, retailers are not slowing down their relationships with deal-broadcasting services. This is an indication that people aren’t just shifting purchases from a non-deal to a deal; they are purchasing more than they would be otherwise.

From a retailer’s point of view, a deal that goes viral is great at first. It brings in a good profit right away — but these customers don’t stick around. In fact, many retailers complain that these are some of the worst customers they have. These buyers will be off looking for the next deal. No retailer would be able to afford creating once-in-a-lifetime deals every month to retain extreme bargain hunters, and some don’t want to.

I’m not calling for an end to the frenzy over the possibility of saving money. I do think it’s best to be an educated consumer, and that means taking a second to ask yourself a few questions rather than blindly jumping on the deal bandwagon.

  • Is this something I need, or am I only buying this because it was marketed to me?
  • Is this really a good deal or does it only look like one?

This may be too much to ask for many people, but any pause filled with a short burst of mental activity before a purchase can’t hurt.

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A few months ago, I initiated the process to roll over my pension to an IRA at Vanguard. Leaving my job early, but after having worked at the company long enough to be vested in my pension, I chose to receive a lump sum of my accrued pension, about $18,000, rather a lifetime annuity of $65 per month. The transfer was finalized this week after a long delay. It’s time to turn my attention to my 401(k).

It often makes sense to roll over a 401(k) when you leave a job. I’m considering a 401(k) rollover to a discount brokerage to alleviate some of the problems I have with my former employer’s retirement plan. These problems are common among employer plans, even those managed by the same discount brokerages you’d likely consider to receive a rollover.

  • Management fees. Most employers’ 401(k) plans have expensive management fees. One third of the investment options in my company’s 401(k) have expense ratios over 1%. I am choosing Vanguard for comparison because most of my other investments are held there and the management fees are low. My 401(k) balance right now is a little above $100,000, so a difference of 50 basis points in an S&P 500 index fund is worth $500 a year. I normally wouldn’t throw $500 out the window.
  • Investment options. In my employer’s plan, I’m limited to 15 investments. That may be a larger number than what many other employers offer, but it’s a drop in the bucket compared to what I’d have access to if I move the 401(k) elsewhere. A brokerage can provide investment opportunities in the form of stocks, bonds, mutual funds, ETFs, metals, real estate, and more. All of these can be part of your IRA, in many cases allowing you to defer tax on your gains until you start receiving your distributions. My choice, though, is Vanguard, where I would choose to invest only in Vanguard’s mutual funds. Even this option provides more flexibility than leaving the funds in my former employer’s retirement plan.

Once you decide that you don’t want to keep your 401(k) at a former employer, you will need to decide the destination of those funds. These are the typical options:

  • A brokerage, providing the most investment choices.
  • A mutual fund company, like Vanguard, offering limited but low-cost choices.
  • Your new employer’s retirement plan, possibly offering limited and expensive investment choices.
  • Your bank account, possibly triggering income tax and penalties.

For the first three options, you can limit yourself to as small an amount of trouble as possible — rollovers seem to involve at least a minimum of some trouble — by initiating a direct rollover. This way, the funds are sent directly to the new retirement plan provider. There’s no risk of you accidentally keeping some of the funds. The fourth option should be considered only as a last resort. If the funds are designated for retirement you might as well leave them in an account that you can’t touch, avoiding extra expenses.

When you are considering a rollover, keep in mind the form of your funds in your 401(k). For example, some of my retirement funds at my former employer are in a Roth 401(k). When I move these investments to Vanguard, I will need to handle the rollover separately to ensure they end up in a Roth IRA. If you have an after-tax 401(k), these funds will need special consideration, as well. Some brokers and mutual fund companies won’t accept Roth or after-tax rollovers, so verify your chosen recipient can handle your entire 401(k) before you initiate any changes. I’ve found it helpful to speak with a representative at the company who can review your entire 401(k) to increase your confidence that you’re choosing the correct retirement plan options.

The last consideration should be whether your new asset allocation, after the rollover, should match your old asset allocation. My current allocation is a bit of a mess:

International 23%
Large Cap Growth 22%
Large Cap Value 22%
Real Estate 14%
Company Stock 8%
Mid Cap Growth 5%
Mid Cap Value 5%
Small Cap 1%

I could choose either to invest similar amounts in funds that roughly match this investment mix or just put everything into the total stock market index fund. This is the my current dilemma, and I’d want to decide what to do before initiating the rollover. It won’t hurt you in terms of taxes to transfer money from one fund to another within your 401(k), so take this opportunity to rebalance your portfolio.

These are the steps I plan to follow once I’m ready to begin:

1. Contact the recipient. In my case, Vanguard. I can either create a new account or roll over my 401(k) into an existing traditional IRA and an existing Roth IRA. I’ll need to make Vanguard aware that my former employer will be sending a check. In some cases, you can initiate an asset transfer. Regardless of the type of transfer, the recipient will offer instructions for sending the funds.

2. Instruct the former employer’s plan management. You may need to complete forms to be mailed in or you might have the option to submit your transfer request online. You’ll need the information provided by the recipient to avoid having a check sent directly to you.

3. Choose your new investments. Remember to look at your entire collection of assets when determining your optimal asset allocation. Your investments should also match the amount of risk you’re comfortable with.

4. Verify your transfer is complete. Although I initiated my pension rollover in February, it wasn’t complete until the end of April. The process was long, but both companies completed the process as they agreed. I expect the process of rolling over my 401(k) will be somewhat faster.

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Why I’ve Hired a Maid Service

by Luke Landes

For almost two months, I’ve been paying a maid service. After the initial cleaning, I waited a few weeks, and then set up a recurring appointment for a cleaning once every two weeks. For years leading up to this arrangement, I’ve balked at hiring a cleaning service. Cleaning is not a particularly difficult task, and ... Continue reading this article…

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Silent Inflation Is Destroying Your Net Worth

by Luke Landes

According to the government’s figures, inflation was a modest 2.7 percent over the twelve months ending in March. The Consumer Price Index (CPI) is the Bureau of Labor Statistics’ popular measure of economic changes affecting typical consumers in the United States. It’s a figure we often compare to after-tax savings interest rates, reminding us that our ... Continue reading this article…

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Working With a Financial Adviser: Building Your Relationship

by Kathryn

This is a guest article from Kathryn. Kathryn has been working in the financial industry for 11 years. She is the founder and author of Kathryn’s Conversations, a money and lifestyle blog for people who like to get stuff done. This article continues the series covering working with financial planners and advisers. First dates are ... Continue reading this article…

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How to Financially Succeed as a Couple

by Elle

This is a guest article by Elle, the author of the blog Couple Money. Handling personal finances can be an intriguing, challenging, and rewarding process. Being married and handling finances can double those effects. My husband and I have learned through the years that working together can be powerfully effective and motivating. While every couple ... Continue reading this article…

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Podcast 105: Investiphobia

by Luke Landes

Today’s guest on the Consumerism Commentary Podcast is Paul Puckett, author of Investiphobia. Consumerism Commentary Podcast #105 Financial Literacy Month: S05E01 / 129 Download – RSS – iTunes Table of contents [00:00] Introduction from Bryan J Busch [00:34] Interview with Paul Puckett – [00:51] Should I keep up with the Jones’ investment decisions? – [04:02] ... Continue reading this article…

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Gold Delta SkyMiles® Credit Card from American Express Review

by Luke Landes

Editor’s Note: Thank you for your interest, this offer expired and is no longer available. There once was a time that pulling out your “gold card” showed you were an important person in the world. If you can remember that far back, you know that credit card issuers reserved gold status for people with high ... Continue reading this article…

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Moving Back With The ‘Rents to Take Care of My Finances

by Glen Craig
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This is a guest article by Glen Craig, the publisher of Free From Broke and Parenting Family Money. See how he currently deals with his family and finances and find out how you can too. In the article, Glen shares his story of how moving back with this parents provided a second chance for his ... Continue reading this article…

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Florida’s Beach Property Boom: A Real Estate Lesson

by Dr. Dean Burke

This is a guest article by Dr. Dean Burke, author of The Millionaire Nurse Blog. Many years ago, someone I knew was fascinated with the real estate market in Florida, and he set up an investment company to allow others to invest through him. He promised his investors 20 percent returns. Needless to say, I didn’t ... Continue reading this article…

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The Zombies Are Here and They’re Hungry… For Your Personal Finances

by Jeremy Simon

This is a guest article by Jeremy M. Simon, a reporter and columnist for CreditCards.com. He is a blogger at Taking Charge. They’re lumbering toward you, their eyes dead and arms outstretched. And they’re hungry. No, personal finance readers, I’m not talking about debt collectors: I’m talking about zombies, which over the past several years ... Continue reading this article…

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Escape by Discover Card Review

by Luke Landes

I’ve covered many of Discover’s cash back opportunities, but I haven’t written about some of the other credit cards they offer to consumers. Discover also produces a wide variety of student credit cards and points rewards credit cards. Their most prominent travel rewards credit card is the Escape by Discover® Card. This card has a ... Continue reading this article…

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5 Legitimate Work-From-Home Options

by Michael

This is a guest article by Michael, chief editor of DoughRoller.net. DoughRoller.net helps consumers figure out the best Netflix plans for their home movie experiences. There is a lot of bad information online about working from home, with scammy and spammy websites offering ideas about quick ways to make money without doing much work — ... Continue reading this article…

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Working With a Financial Adviser: How to Show Up Prepared

by RJ Weiss

This is a guest article by RJ Weiss, one of the youngest Certified Financial Planners at the age of 26 and the founder of the blog Gen Y Wealth. You can download his free Financial Freedom Blueprint to create your own financial plan. RJ Weiss is contributing to Consumerism Commentary’s series on finding and working ... Continue reading this article…

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The Budget Deficit and Debt: Is the Government Like a Household?

by Luke Landes

Financial experts tell families to “spend less than they earn” and “don’t pay interest to borrow money.” The government does the opposite, running a budget deficit and paying billions of taxpayer dollars every year in interest payments. There is no question that deficit spending by the federal government is a problem. Or is there? There’s ... Continue reading this article…

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The Good Side of Stocks’ Lost Decade

by Rob Bennett

This is a guest article by Rob Bennett, a personal finance journalist and author of the blog A Rich Life. Rob developed the Passion Saving approach to money management; Passion Savers save not to finance their old-age retirements but to enjoy more freedom and opportunity in their 20s, 30s, 40s, and 50s. Most view the ... Continue reading this article…

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Podcast 104: Financial Literacy Month

by Luke Landes

Today’s guest on the Consumerism Commentary Podcast is Kim McGrigg, Manager of Community and Media Relations for Money Management International (MMI), which is sponsoring Financial Literacy Month. MMI is the largest nonprofit, full-service credit counseling agency in the United States. Consumerism Commentary Podcast #104 Financial Literacy Month: S04E26 / 128 Download – RSS – iTunes ... Continue reading this article…

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Working With Financial Planners and Advisers

by Luke Landes
Financial Blueprint

Over the past few weeks, I’ve been working on a series of articles about working with financial planners and advisers. The information about this aspect of the financial industry can be confusing, considering the variety of certifications, similar-sounding services, and hidden agendas. The first thing to consider is whether to work with a financial planner ... Continue reading this article…

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