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

February 2012


The best online savings accounts offer high interest rates and great customer service. Savings accounts, particularly so-called high-yield savings accounts, are best for money you might need within a year. Any money that you don’t want to subject to the short-term risk and volatility in the stock market should be held safe in a savings account, earning as much interest as possible. Your emergency fund should primarily consist of money held in a high-yield savings account.

“High-yield” is unfortunately a bit of a misnomer these days; a decade ago, interest rates were 4% and 5% among select savings accounts and money market accounts. Today, the best rates are all below 2% while a fair amount are still hovering around 1%, many rates are now dipping below the 1% mark. This trend will continue until banks need more cash from depositors.

Interest rates. Interest rates are important because money shouldn’t lose too much purchasing power. In a perfect world, interest rates offered by banks should beat inflation while preserving the balance without risk. I am not aware of any bank offering a savings option with ongoing interest rates high enough to beat inflation, whether measured by the government-reported CPI-U or by any other meaningful measure of consumer prices. Nevertheless, if your savings is at a brick and mortar bank earning below 0.25% APY, choose one of the better options below.

Customer service. When evaluating customer service, there are two important factors to consider. The best banks offer all account maintenance and transfers through a professional, reliable, and easy-to-navigate website. Secondly, live customer service representatives should be knowledgeable, helpful, and available, although customers should have to deal with a representative infrequently if at all.

Based on my own experiences and reviews from other Consumerism Commentary readers, here are the most-recommended accounts for short-term savings. All of the listed interest rates directly below from our partners and in the table that follows are current but they are subject to change by the banks. Although I have nine accounts listed below the table of rates, you don’t need to have accounts with that many different banks. Choose one that fits you the best.

First, here is a list of the latest interest rates. Following this table, I offer a few of my own observations and opinions about savings accounts from nine popular online banks. Read the full article →

{ 278 comments }

In Finland, all young men are required to spend some time in the military. Finland also has a wealth tax, requiring citizens to report their investments to the government. As a result, researchers from the University of California, Los Angeles, Aalto University, and the University of Chicago have discovered data worth studying. Because all military personal are required to submit to intelligence evaluations, researchers looked at I.Q. scores to determine whether there was any correlation between these numbers and investing success.

The study uncovered interesting investment patterns.

  • People with a higher I.Q. were more likely to diversify their investments more.
  • With a higher I.Q., investors were more likely to invest in small-cap stocks.
  • Higher I.Q. correlates with heavier involvement in the stock market.

From the New York Times article discussing the study:

The authors didn’t claim that people with high scores had some kind of monopoly on stock-picking genius. What they did contend was that these people tended to follow basic rules of successful investing.

In some ways, it’s a puzzle why I.Q. scores would matter in this regard. After all, the view that people should diversify their investments, to avoid putting all their eggs in one basket, is widely accepted. It’s not hard to diversify a portfolio or to have someone do it for you.

BrainAccording to the paper, the study was controlled for external factors like wealth, income, age, and occupation. This is an important distinction to note because there is some controversy surrounding I.Q. tests. The typical I.Q. test may be biased in favor of people from families with a higher income or from a higher socio-economic status background.

I don’t know my I.Q. score, and I expect most readers don’t know theirs, either. It would be difficult to have an opinion on the results of this study without I.Q. tests being widespread. Sometimes, though, success in the stock market seems to rely on other factors: good research, good timing, and good planning.

While the habits above may be correlated to high I.Q. scores, what this study didn’t seem to measure is outright financial success in the stock market. We can assume that diversified investments, a focus on small-cap stocks, and more money invested lead to better results. That’s likely true over the long-term, but short-term success might depend on other factors. Those other factors might not be correlated to I.Q., or if they are, were not considered in this research.

Do you believe there is a link between intelligence (whether measured by I.Q. score or not) and stock market success?

Photo: dierk schaefer
The Journal of Finance, New York Times

{ 16 comments }

If you’re interested in theater and have money you don’t mind losing, you may consider expanding your horizons by investing in a Broadway or off-Broadway show. Be prepared to lose money, though, because according to a variety of producers, only one show in five breaks even.

When a play or musical is in the planning stages, producers seek out investors to cover the costs of getting the show to opening night. After the show opens, income from the box office should pay for operating expenses. Any positive cash flow after expenses is distributed back to investors until their initial investments are paid back in full. Any profits after investors are repaid their initial investment are distributed back to the investors and producers, 50 percent to each (in the United States). Some shows never make a profit, but if you’ve backed a hit, you could see healthy returns, comfortably beating the stock market.

Broadway showFor the most part, individuals who wish to invest in theater, due to the risky nature of the business, must be accredited. The investor’s household must have a net worth of $1 million or more, excluding primary residence, or income of at least $200,000 ($300,000 for a married couple) for the past two years. There are ways to invest as a non-accredited investor, but the competition is higher for these opportunities because producers are limited in the number of non-accredited investors they can accept.

While the average investment from an individual is $20,000 to $25,000, you can often invest with $10,000, and sometimes with as little as $5,000. This minimum investment is lower than some mutual funds. The bigger the show and the higher probability of its success, the harder it would be to find an opportunity to invest at these lower amounts.

Ken Davenport, a Broadway producer with experience working closely with investors, took this concept of attracting smaller investors even further. When producing Godspell, Ken took to the streets, accepting investors with as little as $1,000 as a minimum investment. Investors received billing outside the theater and the chance to profit. With the play opening late last year and with the show not exactly being the hottest ticket in town, some investors in ken Davenport’s group, “The People of Godspell,” have reported that they’ve received checks towards paying back their initial investment, though the show seems to be far away from profiting for these investors.

The pioneers of attracting smaller investors to Broadway are Richard Frankel, Marc Routh, Thomas Viertel, and Steven Baruch. This team has produced seventy-five shows, and if an investor had invested $10,000 in each opportunity since 1985 through 2009, he or she would have received an annual rate of return of 27%, compared with the 7.29% of the S&P 500.

If you are not interested in Broadway or the dramatic arts, you may want to avoid investing due to risk. While financial reward is what all investors are seeking, investors in theater often look for intangible or invaluable returns. Producers will often offer investors a chance to be a part of the show, like attending opening night performances and after-show parties with the cast and creative staff, access to house seats, and in the case of Godspell and it’s pool of smaller investors, your name on a poster. For some, these benefits make investing worthwhile despite the risk.

If these benefits are not appealing to you, you may be only focused on the return of an investment, and stand to be disappointed if the show you back is like four out of five shows that never turn a profit.

Similarities to investing in the stock market. Just like a mutual fund, the best returns are reserved for investors who make the best decisions. Assuming you’re familiar with theater in the first place, you may want to become familiar with the production team’s track record before handing over any money to a show. While investors in the stock market may diversify across a variety of investments in an attempt to smooth out the peaks and valleys of investing over time, diversifying among a number of shows could be difficult. There may be only one show a season you find worth your investment, so your diversification must cover a long stretch of time.

Differences to investing in the stock market. When you invest in the stock market, you can do your research from your bedroom. You can read financial statements in the comfort of your own home, transferring money electronically to your bank account to your investment when you’re ready to purchase a stock or fund. All the information you need is available without leaving your house.

Investing in theater is more like investing in a company directly with a major financial commitment or receiving a substantial share of ownership. Before you make a major investment, giving you a substantial stake in a company, you’ll want to meet the executive team, analyze the financial documents, and handle more of the due diligence in person. When investing in a Broadway show, much of the information you need is not available online. You can use the Theatrical Index to look at every active production’s gross receipts and you can use the Internet Broadway Database to verify information about producers and productions, but it’s best to meet the producers in person, learn about the production, and determine whether you believe the show has the potential to succeed.

Early investors in Rent made a fortune; investors in Spider-Man: Turn Off The Dark probably won’t receive their initial investment back until the show has been running for four years, if it survives that long. Despite it being the most expensive Broadway show ever put into production, Spider-Man seemed like a safer bet, with a big name producer and a widely-recognized brand.

If you’re interested in getting started, here are a few suggestions.

  • Ken Davenport’s introduction is a good place to start.
  • Consider signing up for the Theatrical Index newsletter (linked above) to have access to financial information.
  • Find producers you’d like to work with, and send them introductory letters via email. Even if the particular producers you’re interested in are not currently looking for investors, you will be on their list to be the first to know when they’re seeking investors for their next projects.
  • Meet the producers in person and get to know the show in its early stages by attending table-reads and rehearsals.
  • Don’t set your expectations too high.

Would you consider investing in a Broadway show?

Photo: kevin dooley
BroadwayWorld, CNBC, New York Times

{ 10 comments }

Last week, the White House released a Consumer Privacy Bill of Rights. This isn’t a law or regulation, but a set of guidelines that could possibly underscore future actions by Congress and enforcement by the Federal Trade Commission. Private, personal information should be private and personal, but when consumers enroll for any type of service, the terms of use of those services often require signing away the rights to this information.

If, for example, you’d like to use Facebook to share photographs with your friends and see what they’ve been doing lately, you must agree to the service’s policies which include the service’s ability to keep your personal data on file and use it to deliver targeted ads and to track the other, non-Facebook websites you visit.

FacebookThe Consumer Privacy Bill of Rights aims to give consumers more control of their personal information. Some of the guidelines are common sense, and many companies already follow these guidelines or come close. Codifying these principles is a positive step towards making consumers aware of expectations for the companies they interact with every day, like social media websites, banks and other financial institutions, and retailers.

Here are the main points:

Consumers have a right to exercise control over what personal data companies collect from them and how they use it.

  • Companies should give consumers choices about how companies collect, use, and share personal data.
  • The ability to make these choices should be easy to use and easily accessible.
  • The ability to change these choices after initially selecting them should be just as easy to use and accessible.

Consumers have a right to easily understandable and accessible information about privacy and security practices.

  • Companies should clearly explain how personal information is collected and used internally and with third-parties.
  • Companies should clearly define the policy for deleting private customer data.

Consumers have a right to expect that companies will collect, use, and disclose personal data in ways that are consistent with the context in which consumers provide the data.

  • Companies should not provide consumers’ personal information to third parties who will use that information for a different than it was intended. For example, if I, as a Facebook user, “like” the band Pink Floyd, I shouldn’t begin receiving emails from Amazon.com advertising Pink Floyd albums.
  • Companies have a right to ask whether any particular customer would consent to this type of information sharing.

Consumers have a right to secure and responsible handling of personal data.

  • From the text of the Privacy Bill of Rights: “Companies should assess the privacy and security risks associated with their personal data practices and maintain reasonable safeguards to control risks such as loss; unauthorized access, use, destruction, or modification; and improper disclosure.”

Consumers have a right to access and correct personal data in usable formats, in a manner that is appropriate to the sensitivity of the data and the risk of adverse consequences to consumers if the data is inaccurate.

  • Companies should ensure the data they collect is accurate and current.
  • Consumers should be able to review and correct stored information.
  • Consumers should be able to request stored information be deleted.

Consumers have a right to reasonable limits on the personal data that companies collect and retain.

  • Companies shouldn’t collect more information than necessary.
  • Companies should securely dispose of information when no longer needed.

Consumers have a right to have personal data handled by companies with appropriate measures in place to assure they adhere to the Consumer Privacy Bill of Rights.

  • Consumers should expect companies to follow these guidelines.
  • Both companies and consumers should expect the employees of companies collecting users’ personal information to follow these guidelines.

Time, CNN

{ 9 comments }

Harry Browne’s Permanent Portfolio

by Jacob

This is a guest article by Jacob, creator of the personal finance blog, My Personal Finance Journey. In the article, Jacob analyzes the Permanent Portfolio, a theory presented by Harry Browne, to determine whether investing along the theory’s guidelines can help investors beat the stock market. Investors in general always seem to be on the ... Continue reading this article…

20 comments Read the full article →

Podcast 149: Trends in Financial Planning

by Luke Landes

Today on the Consumerism Commentary Podcast, Bryan J Busch talks with Flexo and Michael Kitces, Director of Research for Pinnacle Advisory Group. They discuss how online money management tools compare to personalized financial planning and other trends in the changing field of financial advice. Consumerism Commentary Podcast Trends in Financial Planning: S06E19 / 149 Download ... Continue reading this article…

0 comments Read the full article →

Three Credit Card Benefits You’re Paying For

by Luke Landes
MasterCard credit card

I wrote about three credit card benefits you’re paying for but not using for GoBankingRates and BusinessInsider. Whether you pay interest on your carried credit card balances or whether you’re just subject to the natural increased cost of products due to retailers’ card processing fees, you’re paying for the cost of benefits that card issuers ... Continue reading this article…

7 comments Read the full article →

Buying a House With Cold, Hard Cash

by Luke Landes
Cash

When I write about the unbanked, the vast majority of this category of consumer avoids the financial industry due to lack of trust in the industry or a belief that living paycheck to paycheck doesn’t necessitate the fees and hassles of including a third party in financial transactions. Cash, in some respects, keeps you off ... Continue reading this article…

34 comments Read the full article →

Customers Say Retailers Are Not Living Up to Durbin Amendment Promise

by Luke Landes
Cashier checkout at Walmart

Retailers, represented by the National Retail Foundation, promised that consumers would benefit when retailers, particularly small businesses, were to benefit from regulated interchange (swipe) fees charged by Visa and MasterCard. The regulation, commonly called the “Durbin Amendment to the Dodd-Frank Act,” would lower the cost for businesses who were subject to an effective duopoly between ... Continue reading this article…

16 comments Read the full article →

The Best Small Business Credit Cards, December 2014

by Luke Landes

Small businesses often require a substantial line of credit early on to survive the start-up stage. In a perfect world, everyone would have the cash to fund their start-up but it’s not always that easy. These days, finding a bank that can lend to small businesses is extremely difficult, so one of the alternatives is ... Continue reading this article…

7 comments Read the full article →

Improve Your Finances By Modifying Your Behavior

by Luke Landes
Money

Improving your financial situation requires more than just trying harder. People who write financial websites offering advice often think or imply that the reason for financial misfortune is ignorance of the basics. Recently, there was one website that claimed that the only thing people need to know was spend less than you earn, as if ... Continue reading this article…

11 comments Read the full article →

Are You Ready For Higher Cell Phone Bills?

by Luke Landes
Tablet

As more consumers in the United States are jumping on the smartphone and tablet bandwagon — personally, I contribute to this mess with one of the latest phones with Android software as well as a first-generation iPad — there’s less room in the limited airwaves for customers’ needs to access the internet and occasionally make ... Continue reading this article…

16 comments Read the full article →

Your Dream Wedding: When to Save, When to Splurge

by Guest Author
The wedding bride

This is a guest article by Jennifer Calonia, Junior Editor at GoBankingRates. In the article, the author helps couples in search of their dream wedding decide which expenses are worth paying more money for. The pressure to plan a perfectly executed wedding is a monumental undertaking, especially for those lacking a savings fund or a ... Continue reading this article…

7 comments Read the full article →

Church Health Insurance: Effective in the Amish Community

by Luke Landes
Horse and buggy

The Amish community is exempt from the health insurance mandate that is now federal law. Members of this community rely on each other for taking care of their health, rather than relying on insurance companies. It’s an interesting approach to healthcare, and it is effective for communities where people rarely leave or enter. I visited ... Continue reading this article…

7 comments Read the full article →

Podcast 148: Capital One Merger With ING Direct

by Luke Landes

Today on the Consumerism Commentary Podcast, Bryan J Busch talks to John Taylor, president and CEO of the National Community Reinvestment Coalition. They talk about the benefits and drawbacks of Capital One merging with ING Direct USA, and how the Federal Reserve Bank is treating this merger. Consumerism Commentary Podcast CapitalOne Merger With ING Direct: ... Continue reading this article…

1 comment Read the full article →

Consumer Financial Protection Bureau to Streamline Regulations

by Luke Landes

The Consumer Financial Protection Bureau is seeking suggestions from the public about how the government organization can streamline the variety of regulatory responsibilities they’ve inherited from other oversight groups. leave your comments with the CFPB here. The industry and much of the public are never fans of over-regulation, and the CFPB intends to reduce regulations ... Continue reading this article…

2 comments Read the full article →

Do Retailers Know Too Much About Shoppers?

by Luke Landes
Target

It’s no surprise that retailers track your purchases. It’s obvious at the grocery store, particularly if you sign up for the supermarket’s loyalty discount program. If you provide your address, you’ll receive coupons and ads tailored specifically to your buying habits. My local supermarket allows customers to sign up anonymously; the coupons are offered right ... Continue reading this article…

23 comments Read the full article →

Credit Card Debt Consolidation

by Luke Landes
Credit card debt consolidation

According to the Federal Reserve’s research published last week, overall American credit card debt increased at an annual rate of 7.5 percent during the final quarter of last year. This could mean that consumers are feeling more confident about the economy and are willing to take the risk that they will have money in the future ... Continue reading this article…

8 comments Read the full article →

Simmons Bank Visa Platinum Card Review

by Joe Taylor Jr.

Although balance transfer offers have bounced back onto the market in recent months, consolidation among major lenders means you’ve got fewer banks willing to lure your business with low teaser rates. Credit card issuers reserve their very best deals for first-time customers. If you earned a high credit score by proving you’re capable of paying ... Continue reading this article…

3 comments Read the full article →

Federal Reserve Approves Capital One’s Acquisition of ING Direct

by Luke Landes
ING Direct

After several delays, the Federal Reserve Board has approved Capital One’s request to purchase ING Direct and ShareBuilder. This deal has been in the works for a while. When ING Direct’s parent company was bailed out, the Dutch government gave the condition that it must divest its business in the United States. Several buyers courted ... Continue reading this article…

18 comments Read the full article →
Page 1 of 212