Answers to Some Common Questions About the Equifax Data Breach

The mischievous look in this guy’s eye makes me suspect he may be an identity thief. Image courtesy of Jean-Marc Buytaert

You would have to be living under a rock to have completely missed the media frenzy over the recent Equifax settlement. It is still going strong, even though it is nothing but a basically meaningless parody of justice to show the rabble that “the bad guys are paying the consequences.” And as a result, I’ve been getting a lot of questions about the situation and credit reports in general. Here are my answers to some of the more common ones.

How do I claim my $125?

Unless you signed up for credit monitoring services, nothing. Because that’s exactly what you’re eligible to get. If you did, you can claim your pittance here:

https://www.equifaxbreachsettlement.com/file-a-claim

What if I had my identity stolen?

If you had actual, quantifiable expenses resulting from it, you can theoretically recover up to $20k. You probably won’t get nearly that much, even if your expenses exceeded that amount. After all, there are hungry law firms at the front of the line, tons of people who will make claims, and a finite amount of money to cover it all. But again, if you want to make a claim, go to the link above. 

I never even gave Equifax permission to collect my data. How did they get it?

Yes, you did. Any time you signed up for a credit card, auto loan, mortgage, personal loan, or basically anything else that would show up on a credit report, you most certainly agreed to let all three major credit bureaus (Equifax, Transunion, and Experian) collect your data – and to allow many other things to happen as well. However, like any normal human being, you didn’t read it and like any human being who isn’t an attorney with an ass ton of time on your hands, you wouldn’t have understood most of the terms and conditions even if you had. Don’t like it? You can try “living off the grid.” As for me, I’ll keep my electricity, internet, car, home with an address that can have mail delivered to it, having living, breathing women willing to have sex with me (and that’s really the only reason for any of that other stuff to exist in the first place if you think about it), and so forth.

Should I sign up for credit monitoring?

Nope. Credit monitoring is just one more way the credit bureaus, including the one that potentially lost your data in this case, profit by selling the information you unwittingly gave them right back to you. It won’t give you an ounce of data you can’t get for free but you will pay for it anyway. Unless you’re determined to be part of the settlement. Then you can get the information that is already available to you for free…for free. Long story short, credit monitoring is bullshit.

Ok, then what SHOULD I be doing to stay on top of things?

1. The credit bureaus are each required to give you your credit report for free once a year. Go to www.annualcreditreport.com to get them. Get one every four months and keep track of which ones you’ve gotten and when. This way, you can space it out over the course of the year and be as on top of things as possible. They won’t have scores, but I have at least half a dozen credit cards that give various versions of my credit score for free and you probably have at least one. Besides, that isn’t the point. The point is to go through everything on the report and make sure it’s correct (or more likely, that the mistakes that are there aren’t materially adverse). Like any faithful churner, my credit reports have dozens and dozens of accounts, active, historical, etc. But even so, it takes me no more than ten or fifteen minutes to scan through them (again, this is three times a year) and make sure there are no issues. The point is, it’s not difficult, especially for someone with a more normal amount of financial activity.

2. Know what to do if identity theft happens. You should already be monitoring all your existing accounts weekly. So even if your finances are absurdly complex like mine, you will quickly realize if something happens that you were not a party to. Call your credit card company, bank, or whatever entity issued the financing ASAP and ask to speak to someone in the fraud department. It is a simple process from there. If you find an account you didn’t know about on your credit report, you have a bigger problem. But you just have to work through the process. First, make absolutely sure that you’ve really been a victim of identity theft and this isn’t just something you did when you were drunk and since forgot about or that is reporting differently than you would have expected it to. Then, call the police. Not 911 obviously. File a report with them. Go to www.identitytheft.gov and file a complaint with the FTC. Report the issue to the credit bureau in question. Freeze your credit with all three bureaus. This step will create additional hassles any time you want to do anything financial, but it is almost certainly necessary at this stage. You may even have to get an attorney involved. But if you pay attention, you will almost certainly learn something from the situation too. So at least it’s not a total loss.

I have the first form happen about once a year on average as I would imagine most people with a ridiculous number of credit cards do in an era where identity theft is so rampant that I once read that credit card skimmers with a thousand numbers on them were going for about thirty bucks on the black market. But thankfully, I have never dealt with the second. I’m sure I will eventually and when I do, I will attack the situation with great vengeance and furious anger (anyone else remember Pulp Fiction?) and maybe I will write a post about it and turn it into a net positive. But until then, I will just keep watching. And waiting. Keep that in mind, identity thieving assholes.     

How worried should I be?

Not. This shit happens almost every single day. There are twelve year old computer geniuses, in horrible countries where their gifts are being tragically wasted, coming up with new ways to hack into the most secure databases on the planet as we speak and many of them will succeed. It’s an inevitability. But luckily, you live in a country where the consumer is basically the only thing keeping our vastly overinflated economy afloat. No one, and that includes most politicians, has any interest in seeing what would happen if consumers lost that precious confidence that keeps them borrowing money to buy shit they don’t need to impress people they don’t like (I believe that one is a bastardized version of a George Carlin quote – that guy was a genius and he was right about 89% of the time, which is way more often than almost anyone, ever). The economy is basically the only thing keeping people just happy enough to prevent them from realizing (or caring) how corrupt those politician pieces of shit are and thus, consumer confidence is to be kept sky high. And it follows that the laws are extremely in favor of consumers when it comes to matters such as identity theft. Do your basic diligence and you will be fine.

Should I get identity theft insurance?

Probably not. Insurance is an industry run by a combination of typically beautiful crooks and people who are extremely good at math. It wouldn’t be so bad if insurance companies didn’t do all they could to screw the marks customers out of the money they should be entitled to at literally the only time they’re expected to do anything whatsoever in exchange for the money they collect year after year in the form of premiums that consistently go up for literally no fucking reason at all. But they do. Ever make a claim on your car insurance or homeowner’s insurance? Remember the experience? Now imagine trying to get those bastards to pay for something intangible. If I recall correctly from the last time someone tried to upsell me on my insurance (talk about barking up the wrong tree), it’s about a seven dollar a year premium addition and there’s probably an excellent reason for that. It’s bullshit and they will never pay you a dime, no matter what happens.

Why was this post so sarcastic and profane? My delicate sensibilities are offended.

I don’t care. This is my blog. Get out. And to answer your question, I’m not sure. I’m in a funny mood tonight. I hope I succeeded in providing some worthwhile information and entertaining at the same time. Maybe more people would read this blog if I could master that skill. I guess this post will serve as a test.

Some Ways to Make Driving Great Again!

Between the low double digit gas mileage and the tight quarters inside, this Ferrari may not be the best choice for a road trip

My job involves a lot of driving. How much? Over the last three years of doing it, I’ve put on well over 100k miles. So I know a thing or two about this stuff. Today I’m going to throw out some random tips that I use to make life on the road a little safer, more efficient, and generally better.

Take care of your vehicle and it will take care of you.

This is an easy one. I’ve written about basic maintenance before. Whether you do it yourself or you have it done at a shop you trust, make sure it gets done.

Drive gently.

I’ve read about hypermiling techniques that allow people to get some pretty insane gas mileage. A lot of it isn’t necessarily practical for every day driving but the most important concept is; drive gently. Accelerate gradually, maintain plenty of following distance, and avoid abrupt braking. Not only will you save gas, your car will last longer and you will be much less likely to get into an accident. This can easily save you thousands of dollars over the life of a car.

Google Maps is pretty awesome!

I don’t even use the in car GPS systems anymore because Google Maps is way better. In addition to basic navigation, it allows you to search for gas stations and see many of their prices on the fly. It doesn’t have prices for every station, but it at least gives you a good idea of what area you’re likely to find the best prices in. And for anyone who doesn’t know, no matter where you buy your gas, it is exactly the same stuff. I talk to oil industry people all the time and that has been confirmed time and time again. So this is a commodity item and that means price wins.

But my favorite Google Maps feature is definitely the speed trap notifications. It isn’t a perfect system, but it is more effective than a traditional radar/laser detector in my opinion for two reasons. One, the range is much better. You can see speed traps miles away on the map. Two, there are far fewer false positives – a huge problem with even the best detectors. But the system is only as good as the data it has so please, let’s all be good citizens and put the word out whenever a revenue generation agent police officer is spotted trying to ruin someone’s day. Disclaimer: I support police most of the time and believe they provide a valuable service. But in this particular area, I believe Google is providing a much more valuable service than they are. To report a speed trap, click the little plus button on the right side of the screen in Google Maps. We need as many people doing this as possible!

I tried an app called Upside and well, not everything works out.

The app supposedly pays a rebate whenever you buy gas. But you have to take a picture of your receipt every time and that’s a pain – even if the pump isn’t out of receipt paper, which is often the case. And in my experience, after the teaser rate on the first fill up, it was almost always one cent per gallon. Also, usually only the more expensive gas stations in the area were available on the app. A one cent per gallon rebate isn’t worth much if you’re paying ten cents more per gallon to begin with. There was also a restaurant option available that paid much better, but the selection was atrocious. I did, however, use that to buy enough chicken sandwiches at Burger King, which are surprisingly decent now, to get over the $10 cash out threshold and make the whole thing at least pay off a little.  

As usual, Costco rocks.

If you can get your gas there, you will likely save at least ten cents a gallon versus the next cheapest station in the area.

Speaking of gas, if you’re getting less than 3% back on it, you’re leaving money on the table.

Both the Wells Fargo Propel credit card and the Bank of America Cash Rewards card offer 3% back in this category. Occasionally the quarterly 5% cards like Chase Freedom will pay out on gas. There are probably several other cards that do at least this well, too.

AAA is a pretty worthwhile service if you drive long distances often.

Peace of mind is worth a lot when you’re in a strange place. If something happens, it’s nice to know you’re a phone call away from getting help and that in many cases, you won’t even have to pay for it. In a lot of places, especially in the more rural areas, the tow truck business is quite a racket. With AAA, even if you do end up having to pay, you will at least be dealing with one of the more reputable options in the area (or at least one that likely doesn’t want to risk losing its AAA business by pissing off customers) without having to do the research on your own.

If Discount Tire is available where you live, you’d be a fool not to buy your tires from them. And yes, I know that my favorite store sells tires. Even Costco isn’t the best at absolutely everything.

These guys have the tire business down to a science. They have great selection, the best prices, and great service. They check/correct your pressure whenever you want and free rotation is included with your tires. But the best part is their warranty. 99% of the time I am not a warranty advocate. But Discount Tire is an exception. For about twenty bucks a tire, they will repair or replace any tire you have any issue with during the warranty period. This is all fresh in my mind because on a recent trip to the oil country, it was so hot that one of my tires exploded as I was driving. Thankfully, I wasn’t far from the nearest town when it happened. I did have to wait a day for the specific tire I had to get there (to be fair, they did have another option available, but I didn’t want mismatched tires so I opted to wait), but given how far out in the middle of nowhere oil country is, that was actually impressive in my opinion. And rather than having to pay $200+ for a replacement tire (high performance, 18 inch, low profile tires are expensive anywhere you go; Discount Tire’s price is still easily the best), I only had to pay the twenty bucks to renew the warranty on the tire that was being replaced for free. With tire prices being what they are these days, and with roads being as bad as they are in many places, this warranty is a no brainer and has already paid off more than double for me with about half the life of the three remaining tires left to go.

Have a great Wednesday, folks! And be safe out there!

This Is What I Do When Conditions Change and I Start to (Gasp!) Lose Money

Can’t be getting paid subpar interest rates on savings if you want to visit the Texas themed lazy river cause there’s no way in hell admission is cheap! Image courtesy of Jean-Marc Buytaert

Recently I was taking my routine, virtual stroll through all of my financial accounts when I noticed something funny – and I most certainly don’t mean “ha ha funny”. My CIT savings account was only returning 2.4% APY. That’s odd, I thought. I’m almost sure that had been at 2.45. I did a little checking and sure enough, I was right. Now I don’t want to miscommunicate here; I understand why this happened and I don’t blame CIT Bank for it. Our long overdue recession has started and not only have rates stopped rising, but they’re actually already coming down slightly. Futures traders have even priced in one to two decreases by the FED by the end of the year. So I’m far from the only one making this call and it doesn’t surprise me in the least to see CIT Bank, a for profit business, doing what management feels needs to be done to protect the bottom line in changing conditions.

That said, what’s good for the goose is good for the gander. When conditions change, I also re-evaluate what I’m doing to make sure it still makes sense. Here’s a recent example in case you think I’m making this up. So I spent a half hour or so on good ol’ Doctor of Credit doing a little research. It turns out that currently, the highest rate on online savings accounts that don’t require absurd shenanigans like 10+ debit card (yes, people apparently actually use the things; but they shouldn’t) transactions per month is currently 2.51%. However, interest rate isn’t the only consideration. Many bank accounts also pay bonuses up front, which can quickly shift the balance when we’re talking about such low numbers. After all, in the grand scheme of things, 2.51% is still an awful return on investment, even if I do feel that cash is king in current circumstances.

So ultimately, and somewhat coincidentally, I decided not to move my savings account money very far, at least from an alphabetical perspective. I’m moving it from CIT Bank to Citi Bank. Citi’s online savings account pays 2.36%, even less than the 2.4% that started this whole conundrum in the first place. However, by performing a little financial gymnastics, which basically just involves making sure I stay within the rules of the promotion, I can also get it to pay me a $400 bonus for keeping $15k in the account for sixty days – more than the CIT account would have paid on that amount in an entire year! And meanwhile, I’m collecting the 2.36%, virtually the same rate as CIT was paying, on top of it.

How does the math work out on this? With $15k in the CIT account, I would have made $364 in interest over twelve months. But with that same $15k in the Citi account, I will make $459…in two months! If left in the account for the same twelve months as the CIT Bank account for the purposes of making an apples to apples comparison, that figure becomes $758. That, ladies and gentlemen, is what we call a win. The only downside here is that unlike credit card reward money, bank account bonuses are taxable income. But that’s more about credit card reward money being in an extremely privileged class of its own than it is about this being a bad deal; almost any income under the sun is taxable – even income that isn’t income at all in some cases (Ever hear of imputed interest? Look it up. It’s disgusting!).

The way I see it, there are two lessons here. One is that you should be regularly evaluating your available options, particularly when something changes with your current one. I preach that all day long. But the second lesson is one I need to be taking to heart myself going forward. Given our current economic circumstances, I’m not compromising on holding as much cash as possible until further notice. But with available interest rates on cash being as pathetic as they are, and with sign up bonuses being as large and plentiful, it could very well be worthwhile to move savings account money around two or three times a year. For example, if there were three options as good as the Citi bonus available (I don’t believe there are; but there are others that are close and again, conditions are always changing), I could make over $1500 in a year on $15k of cash – a damn good return considering it’s 100% risk free. Yes, it would be a little bit of work, but with emphasis on the “little” part. When all is said and done, I will have less than an hour into this little project. Would the extra $1200+ over and above what the CIT Bank account would have paid without any bonuses be worth three hours of my time? You bet your sweet ass it would! I do pretty well for myself (for now…) but I don’t make anywhere near $400 an hour…yet.

Good day to you all!

Happy Fantastic Friday (I Wanted to Up the Ante From Last Week)!

I was looking for a picture of destruction. I found this picture of hurricane damage. It will do. Image courtesy of Jean-Marc Buytaert

Holy cow are we in some suddenly dark days! I’m seeing some genuinely good people and businesses getting hurt and some being taken down altogether and it is all happening so quickly. And this, of course, only intensifies my problems. I’ve seen this recession coming on paper (or at least screens, the 2019 equivalent) for a couple of years now and while I may have made some early calls, I would much rather have been early than late. And more importantly, I believe we are now almost definitely in it. I see more real world signs of it every day and I hear similar reports from my contacts all over the country. If you haven’t started preparing yet, I strongly recommend doing so right now because you won’t get a better opportunity. Anyway, mercifully, another Friday is upon us and here are some random observations and anecdotes from the week.

Don’t Let Car Dealerships Take Advantage of You Because You’re Lazy

In spite of what I wrote above, I have been quietly watching the market for my next vehicle for a while. I’m not saying I will pull the trigger any time soon, but as I believe I’ve mentioned before, I typically watch the market for months before I so much as set foot on a dealer’s lot. I don’t just want to take the internet’s word for it; I want to know for a fact whether a price is good or not. Plus, I predict some amazing recession discounts on cars this time around. Plus, I enjoy the research. Yes, because I’m weird like that.

Anyway, I’ve noticed that these “no haggle” dealerships have gotten very popular. I’ve also noticed something else; their prices are absurdly high! I’m talking 10-15% higher than average in most cases! After doing a little googling and perusing some forum posts, I’ve confirmed that this is exactly what it appears to be – another example on the long and growing list of times American companies have had the balls to fairly openly exploit laziness for profit – and succeeded at it. Two quick notes on this.

One – and I know this doesn’t apply to all of them, but only some of the very most millennial-ly ones that may as well be throwing in a year’s supply of avocado toast with their overpriced cars – but any dealership that will not let you inspect a car in person first at a minimum, needs to be avoided at all costs. Cars, particularly used ones, are not commodity items. If you aren’t going to test drive one before you buy it, you deserve whatever you get. And if you’re not willing to spend a hundred bucks or so to have a qualified mechanic check a used car out, you’re taking an awfully huge risk. Sure, you may get lucky. But you could also wind up out thousands and thousands of dollars. And sure, some of these “dealerships” allow returns. But do you really want to stake that kind of money on these policies being honored? Better you than me if you do. But then, I’m just a car freak who has done extremely well with car purchases over the years. Not only have I had to do almost zero repairs beyond preventative maintenance, I have even pulled off the seemingly impossible feat of selling one car for a profit after driving it over a year and another for exactly what I paid after driving it for several months. But then, I don’t like to toot my own horn…

Two, these dealers literally believe they can overcharge people by thousands of dollars because the average person either doesn’t even have the courage to sit and talk to a salesman (or woman), or is too lazy to do so. Are you really willing to validate that theory for them? For the sake of all of us, I hope not. But based on the fact that some of these companies appear to be extraordinarily successful, it would appear the mob has already spoken. In any case, at the risk of sounding like your parents, do you want to get ripped off just because a million other people have been?

Aldi Now Accepts Credit Cards

This could be old news, I don’t know. I stopped going to these stores years ago because I didn’t like playing roulette with the possibility of getting stuck waiting in line for fifteen minutes because there was one employee in the entire store. Also because I don’t do business with anyone who doesn’t accept credit cards outside of incredibly rare, possibly life threatening circumstances. Anyway, I stopped in to an Aldi for the hell of it recently and was pleasantly surprised to learn that the company has joined the rest of the civilized world in accepting credit cards. Someone must have had a eureka moment and realized that not accepting by far the most popular payment method on earth to save a few nickels per order, which could easily be accounted for in the pricing of everything (again, like the rest of the civilized world does it), might not be quite the brilliant business tactic they had once thought it was. No, no sarcasm here at all. And by the way, speaking of spare change, I genuinely believe the quarter deposit thing they do with their carts is brilliant. I don’t know if I’ve ever seen one freely roaming a parking lot en route to damaging someone’s several thousand dollar vehicle because someone else is a lazy, entitled asshole. My goodness, I’m in an interesting mood today. But I promise this is happy, if cynical. Remember, Friday.

Anyway, the line thing still happened. As it turned out, the only employee in the store was in the bathroom. There was a line about half the length of the building when he came out. I probably won’t repeat this experiment anytime soon. But if you’re looking for absolute bottom line grocery prices, this store may be worth a visit for you – especially now that you don’t lose out on 3% of the purchase price (it’s actually 5% until the end of June with Chase Freedom) because management doesn’t believe in pricing its products according to the costs of doing business with the vast majority of all possible customers. Seriously, charging credit card users extra is basically like installing pay toilets in the bathrooms since a few people may have a phobia of using public bathrooms or something. Or in the case of shady gas stations, who tend to discount their cash prices by several times anything approaching a possible credit card merchant rate, putting up a giant “IRS, please audit me!” sign outside one’s place of business. And not accepting them at all? Well, it’s their business, not mine. Yes, as old fashioned as I can be, I get incredibly irritated when people fail to adapt to the overwhelming convention of the times in this particular area. We are all hypocrites; the only difference is that some of us are at least willing to admit it. Anyway…

Time to Make a Dietary Change

Sugar is the devil. We all know it deep within our sad little souls and just in case we’re intentionally ignorant anyway, there are about forty million studies rightly screaming it. Recently, I finally accepted that I’m weaker than I need to be at standing up to its cocaine-esque charms. So I’m cutting it out. No, not all of it. We all have to find a balance that works for us in life. In this case, I need to be somewhere between excessive, gluttonous consumption at will, where I have been for much of my life, and eating only what I grow on my isolated, non GMO (if that is even possible given the selective breeding that has gone on with just about all crops for hundreds, if not thousands of years – but I digress), 100% organic farm in the middle of some God forsaken backwater town no one ever visited, let alone lived in, on purpose.

The logical choice seems simple. I’m not going to try to police every gram of sugar out of my life. Cutting out only the stuff that is primarily sugar (cookies, my beloved Nutella, my even more beloved Freddy’s chocolate custard concrete mixers with various mix ins, etc) will amount to a major improvement for me. I recall reading somewhere that habits take seven weeks to form so I’m going to do two months for good measure. I started on Tuesday so that means I’m going until July 28. I’m hoping that by then I won’t even want the stuff anymore. But we’ll see how it goes.

Happy Friday, Everyone! Have a wonderful weekend!

Credit Card Fun – A Couple of Recent Developments

Happy weekend to you! A while back, I wrote a post about exactly how I use credit cards to make an extra $2k a year of tax free income. If you haven’t read it already, I recommend doing so now because parts of this post are going to build on it. I have a couple of minor changes to tell you about that are going to make things just a little bit better. This is a great example of a procedure I engage in periodically – redoing my research to make sure I am still getting the best deals available in every area of life.

The Bank of America Cash card recently prompted me to do this when it introduced a small upgrade. Now, instead of paying 3% on gas purchases, it will pay 3% on your choice of a handful of categories – gas, dining, travel, and some others. You can even change your selection as often as once a month. So if you have a vacation coming up, for example, simply switch your selection and boom – you’re now getting 3% on travel! The card will still pay 2% on Costco purchases. Please note that I’m sticking with the format of my last post in only listing the optimal bullet points. For example, I didn’t mention the 1% this card offers on the “all other” purchases category since the Citi Double Cash card already pays 2% there. In my case, of the new options, I was leaning towards rotating between dining and travel depending on how much travel I had planned for any given month. However, the situation suddenly became more complicated – in a good way.

Since as part of this I wouldn’t be earning 3% on gas purchases anymore, I decided to do a quick check to find out if there are any current offers that beat my default 2% for gas. The first stop on this search was www.doctorofcredit.com. This is an excellent financial hacker type blog that does a far better and more thorough job of covering credit cards, in particular, than I’ve seen anyone else do. And today the good doctor had some good news for me; there is a newcomer on the scene that will put a little extra money in my pocket!

The Wells Fargo Propel card, which apparently came out last year, has two claims to fame. First off, it appears to offer the largest sign up bonus (30k points/$300) of any credit card available that doesn’t charge an annual fee. Second, it pays 3% on a nice range of categories – travel, gas, dining, and streaming services. This is an excellent no fee card and it’s going to have a place in my wallet as soon as the snail mail can get it to me.

But here is the rub. The Bank of America Cash card, which prompted me to redo my research in the first place, is suddenly looking irrelevant. For those following along at home, the Wells Fargo Propel card covers each of the most valuable Bank of America Cash categories – except that instead of paying 3% on one of them at a time, it does so on all of them. So is the Bank of America Cash card facing the cruel fate of offering an upgrade and being rewarded with a “do not pass go, do not collect $200” style trip through my shredder?

Not so fast. Bank of America offers a 10% bonus if you redeem your rewards into one of their checking or savings accounts. So for every $100 I earn on the Bank of America Cash card, I get $110 if I put it into the savings account I already use to maximize the rewards of my Bank of America Better Balance Rewards card. There is also the Bank of America Preferred Rewards program that could give you bigger bonuses than that. But I am strictly a low effort level hacker so I will have to refer you to www.doctorofcredit.com if you want to learn more about that angle. In any case, that 10% bonus, plus the 2% paid on Costco purchases (the Wells Fargo Propel card is an Amex and Costco only accepts Visa right now), means the Bank of America Cash card will narrowly avoid the shredder although now it will only be used for whatever category I’ve chosen to pay 3% in any given month.

Keen observers of big business will probably note that the proximate timing of these two events is almost certainly no coincidence. This is how things work. So when one company does something of note, you should automatically be watching its competition because more likely than not, there will be a response and it may just benefit you.

So there you have it. One opportunity begets another. In this case the gain will be $300 this year plus a modest amount in the low hundreds in subsequent years. But given that applying for the Wells Fargo Propel card took me no more than five minutes and switching my Bank of America Cash category selection here and there will take me no more than that over the course of an entire year, this is still a more than worthwhile maneuver.  

Why You Should NEVER Use a Debit Card

In my bank account basics post, I said you should never use debit cards and I promised to write a follow up post with my reasons. I’m a man of my word so here I am delivering on that promise. I’m following up quickly because this is very important. There is absolutely no reason to have a debit card at all much less use one. I ask banks not to order one when I get a new checking account and if they insist on doing so anyway, I shred it the minute it shows up without ever activating it. This is because as I will explain, debit cards aren’t just useless; they are not safe. I know, they also serve as ATM cards. So plan ahead. Keep whatever cash you might spend in a month in your wallet and replenish it when it runs low. Actually, do people still use cash? I’ve had the same sixty dollars or so in my wallet for as long as I can remember. Anyway…

As a little change of pace, I’m going to try a list format today. So without further ado, here are my reasons you should never use debit cards.

1. They are dangerous.

With a debit card, any criminal that gets ahold of your card, or more likely your card information, has direct access to your bank account. The minute that happens with your debit card, a clock starts. If you report the situation immediately and no fraudulent charges have been made yet, you aren’t liable for anything. Of course in many cases your first indication of fraud will be a fraudulent charge so you aren’t likely to be this lucky. If there are any fraudulent charges made and you notify the bank within two business days, you are only liable for the first $50 – still not a disaster, but more than I want to be paying for some asshole’s actions. If you miss the two business day mark but you do notify the bank within sixty total days, you’re on the hook for the first $500. Keep in mind that this is by far the most likely scenario. And finally, if you fail to notify the bank for a full sixty days, you are liable for ALL fraudulent charges. Ouch.

Now compare that to what happens with a credit card. You are liable for up to $50 but the vast majority of banks waive that because being able to advertise “zero fraud liability” is a bargain at that price. That’s literally it. You sleep easy knowing that when (yes, that’s WHEN, not IF) your card information is stolen/hacked/etc, your problem is limited to the inconvenience of a short conversation with the bank’s fraud department and waiting a few days for a replacement card to show up.

2. Direct access to your bank account affects more than just fraud.

I stay in a lot of hotels and when I check in, I usually see a sign informing me that if I use a debit card, a hold will be placed for more than the total expected cost of my stay to cover incidentals. I have no idea how much more because I don’t use debit cards. But it is enough that they almost always have a sign and I’m guessing that’s because they get a lot of complaints otherwise. This hold likely won’t be released until you’ve paid the final bill upon checking out and that’s at the earliest. I wouldn’t be surprised if it takes a day or two after that. And keep in mind that with a debit card, this means you literally don’t have access to this money even if it is in your bank account. If you’re not maintaining a high enough balance to account for this, you could literally wind up overdrafting because of it and no, neither the bank nor the hotel is going to pick up your overdraft fees. I often see similar signs at gas stations and I’m sure there are plenty of other businesses that do this too.

3. Debit cards aren’t very “rewarding.”

I’ve already written a post detailing how I get paid back an average of about 3% on anything I am able to pay for using credit cards. That’s not counting the churning, which gets me free flights or cash in $500-700 chunks. You always want to be looking for extra sources of income and simply using credit cards for purchases gives you a nice one that requires almost no effort and is tax free to boot. I believe debit cards do offer very limited rewards but nothing close to the bonanza credit cards do. This is because the transaction fees charged to merchants by the banks are legally limited and thus, there is less kickback money available. So by using debit cards, you are literally costing yourself money.

4. Debit cards do not help you build credit.

You need a credit score for lots of things now and rightfully so. If you don’t pay your bills on time, that is directly applicable for a creditor or a landlord but it’s also helpful information for insurance companies, employers, and many other entities that may be considering doing some sort of business with you. Why? If you don’t handle your finances responsibly, there is a strong likelihood that you make similar choices in other areas of your life. Or put another way, credit reflects character. Yes, people run into unfortunate circumstances sometimes. But those things happen to all of us. If you’re handling your finances well, you have built a nice buffer of resources and you can weather the storm as long as it isn’t something totally catastrophic. There are certainly cases where people get hit with something very few could withstand but those are outliers and far more often, this is simply an irresponsible person making excuses. Long story short, credit scoring isn’t going anywhere because the concept is sound even if the execution occasionally isn’t. Debit cards don’t build credit in any way, shape, or form; credit cards do. P.S. I think I’m going to have to write a post on the ins and outs of credit scoring. Stay tuned.

5. Debit cards don’t give you an interest free loan.

Don’t misinterpret this; in no way am I advocating carrying a balance on a credit card. Ever. But when you use a credit card to pay for a purchase, you are not billed until the statement date. At that point, you have at least twenty days before your payment is due. This means that depending on when in a month you make a purchase, you get an interest free loan of anywhere from 20-50 days. To anyone who understands the time value of money principle (there’s another post to write), that is a sweet deal! Mind you the bank is betting you will fail to pay the full statement balance by the due date and then…well, you know what happens then. Pull your pants down, bend over, and by the way, they’re fresh out of lube today. But if you’re following the credit card rules I included in my credit card post, this will never happen to you. And consequences of irresponsibility should not concern those of us who are responsible.

6. Debit cards don’t give you rental car insurance, extended warranties, price protection, and all sorts of other extra benefits.

This may seem like a minor point until you buy something for $399 and it’s marked down to $299 two weeks later. If you used a debit card to make that purchase, tough luck. But if you used one of the many credit cards that offers price protection, you’re a phone call, a simple form, and some processing time from getting your hundred bucks back. If you rent a car, most credit cards include insurance so you can laugh when the agent generously offers to charge you some exorbitant amount “for your peace of mind.” Make sure to verify that your card offers this first though. Credit cards offer all kinds of little goodies like this that debit cards do not.

In closing, I know there are people who use debit cards because they’re afraid of overspending on credit cards. But the answer to an alcohol problem is to fix your thinking and habits, not to stop drinking anything and instead start taking in fluid only through an IV. In another manner of speaking, don’t try to get rid of your disease by bleeding yourself like they did in the revolutionary war era. Hurting yourself more is not going to help. Credit cards are the adult method of paying for things. Basically, think of them like condoms; they require just a tiny little bit of thinking and planning ahead but they also protect you from being directly exposed to some really bad things. The only flaw in that analogy is that condoms turn down the volume a little whereas credit cards actually enhance the experience of paying for things. Enough fun for today. Please, shred your debit cards and start managing your finances like an adult. I promise it is much more rewarding than making excuses for not doing so.

Credit Card Fun

Well that was harsh. I lost both my adopted team and my long-time favorite in back to back playoff games. On the upside, they both had better seasons than I expected and at least in the case of the Seahawks, they are a young team again so they should be back even better next year. And they played a pretty good, entertaining game. Not so much the Texans. They came out flat and stayed that way. Also, I don’t hate the Cowboys. I just didn’t want to beat the Seahawks. Anyway, on to today’s post.

Today I will literally put money in some people’s pockets but I have to start off with a very important disclaimer. This information is strictly for people who use credit cards responsibly. Responsible credit card use is charging only what you have the cash to pay for and paying the full statement balance on time every month. If you ever fail to follow this, even once, then you absolutely should not be using credit cards because they will cost you far more than they will benefit you. I cannot stress this enough. With credit cards, you are playing a very dangerous game so if you can’t or won’t handle them responsibly, then don’t handle them at all. That said, if you choose to ignore my warning and those of so many other finance people, thank you. Without people like you fattening up the banks, those same banks wouldn’t be doing what I’m about to describe for people like me.

One more small disclaimer I should make is that most, if not all of the credit cards I’m about to mention require a credit score of 750+. If you don’t have a score above that, you will have to work on improving it before you can make much money with your credit cards. I will write a post about how to do that another day.

Credit card churning is very popular these days. Too popular in fact. If you don’t know what it is, it’s when people game the sign up bonus system. Step one, sign up for a card with a high bonus offer and a high annual fee, which is often waived for the first year. Step two, charge the minimum amount required to get the bonus in the first three months. Step three, get the bonus and close the account prior to having to pay an annual fee. Step four, enjoy your bonus – usually $500+ or 2+ round trip flights. And no, this is not taxable income; the IRS considers it a purchase rebate. Note that this is not the case when you play a similar game with bank accounts as those bonuses are paid out in the form of interest income. But the bank account version of this hasn’t been worthwhile for a while now, save for the occasional credit union giveaway that is only available to people who are eligible for membership.

Anyway, the banks are losing their appetite for the credit card churning game as more and more of us hop on the gravy train. American Express has made churning virtually impossible for those who aren’t willing to get absurdly creative and even Chase, the longtime favorite of every churner, has started to make things more difficult. I could write an entire book on just the ins and outs of credit card churning at this moment but by the time I finished it, half of it would probably be obsolete. The rules change rapidly in this game. So I don’t play it to the extent I did in the past. During the golden age, $3-5k was a fairly attainable annual goal. Today, that would take more dedication to accomplish than I feel it is worth.

These days I keep things simple and usually only churn two cards a year. That keeps me from running afoul of Chase’s infamous 5/24 rule (open more than 5 cards in 24 months and you will automatically be declined) and still allows me $1000+ in annual churning income. If you do want to get into churning more, I suggest exploring the business side. The restrictions are lighter and the profit potential is higher. But that is another post for another day.

In 2018 I churned Capital One Venture ($500) and started churning Amegy Amazing Cash ($550 when combined with a checking account and money market account for 90 days). I will be cancelling the Capital One card soon but I won’t need to do that with the Amegy card because it doesn’t have an annual fee. However, it’s a “sock drawer card,” meaning it isn’t for regular use. This is because it only pays 1%. I will also note that this was one of those oddball local bank deals – Texans only in this case.

My next one will be the Barclaycard Arrival Plus World Elite. It lives up to that fancy name with a generous $700 bonus – although the $5000 minimum spend requirement means it will take some planning even for an expense report beneficiary like me. If you have trouble meeting the minimums, I recommend timing your account openings to coincide with major expenses like annual insurance renewals, vacations, furniture purchases, etc. If you still can’t meet the minimums, enlist the help of a friend you trust who doesn’t care about credit card rewards. I’ve been working the non-Chase cards lately because you can only churn each one every other year. Of those, Chase Sapphire ($625) and Southwest Rapid Rewards (2-3 round trip flights) are my usual choices. I see they have a United Airlines one too now for folks who don’t care even a tiny bit about customer service when they fly. But watch your details with any churning because all the banks have been making cutbacks and increasing hoops that need to be jumped through.

The Southwest card in particular has a sign up bonus that fluctuates a lot throughout the year so make sure it is at least 50k points when you do it. One more important point on the Southwest card is that you can get the companion pass pretty easily if you use both a business and personal card. This allows you to book a second person on any flight for free for up to nearly two years if you do it right. I don’t have a consistent companion and don’t plan to ever again but for those who do, this can be quite the golden goose, especially when you consider that you can alternate with your spouse and have a companion pass between you basically all the time. There are other churning cards as well but I’ve mentioned all the ones I regularly use now that American Express cards aren’t worth the hassle anymore. At two a year I don’t have to scrape the bottom of the barrel the way I used to.

Other than churning cards, I use non annual fee cards and I rarely change those up. Right now, my wallet has the following weapons in it: American Express Blue Cash, Citi Double Cash, Bank of America Cash, Chase Freedom, Target Redcard, and Bank of America Better Balance. American Express Blue Cash pays me 3% on groceries. Citi Double Cash pays me 2% on any purchases I can’t get a higher rate on. Bank of America Cash pays me 3% on gas and 2% at Costco (I need this to get my minimum 2% because Costco only accepts Visa right now and Citi Double Cash is a Mastercard). Chase Freedom pays me 5% on categories that change quarterly. Right now those are gas and tolls meaning until the end of March, I’m buying gas with this card and my tolls are being charged to it instead of the Citi card I regularly use. The Target card pays me 5% instantly on Target purchases on the rare occasion I still go there. And last but not least, the Bank of America Better Balance card pays me a flat $120 a year for making one small charge a month. I won’t bother going into the details of that one because it isn’t available anymore; you can probably guess why.

This may sound like a lot to keep track of but it doesn’t have to be. I have a little chart that shows me which card to use for each type of purchase. I rarely have to look at it now unless something changes which is rare outside of churning. When I’m churning, I just divert as much of my 2% spending as necessary until I’ve met the minimum. And the payoff for doing this? I average around 3% back on anything I can pay for with a credit card. Combine that with what I get from churning two cards and it comes to around $2k a year in non-taxable gifts from the banking industry. Not bad for a hobby that takes up maybe an hour or two of my time per year.