The New Checking Account That Will Pay Me $67.50 a Year for a One Time Investment of Ten Minutes

Disclaimer: I am not selling anything, doing affiliate marketing, or any other shenanigans. In no way will I make any money if anyone follows my lead and signs up for the account I describe in this post.

I went into more details on this previously, but for a while now, I have mainly kept my cash in a combination of a credit union checking account and an online savings account. First, it would flow into the checking account from my paychecks and various other sources. I was paid 7.5% on the first $500 in the account and .2% on the rest. Each month, I would pay my bills, transfer some to investments, transfer some to my online savings account, and leave a few thousand in checking. The online savings account paid me a better rate than the .2% I would otherwise have been paid on the balance above $500 left in the checking account and of course the investments paid significantly more (at least most of the time). Today, that online savings account is paying 2.45% and if the FED would stop letting the stock market and our very stock market oriented president intimidate it, that rate would continue to go higher.

Mostly, this is a pretty awesome system. I only keep around $10k of cash on hand (any excess usually gets invested) and of that $10k, the first $500 makes $37.50 a year and the last $6500 makes $159.25 for an average ROI of 2.8% which covers inflation and just a little bit extra – not bad for my emergency/float cash. So what’s the problem? I’m getting crushed on the other $3k I usually keep in my checking account, which makes only .2%. Previously, I had simply lived with this and considered it a small price to pay to have enough cash on hand to deal with any minor to moderate issues that came along. But no mas! Introducing the SoFi Checking Account!

The SoFi Checking Account is a hybrid account with a ton to offer. First and foremost, it pays 2.25%. Second, there are basically no fees of any kind to have to dodge using direct deposit, minimum balances, an absurd number of debit card transactions each month, etc. Third, and this is a big one for some folks, there are no ATM fees – ANYWHERE. There is a little bit of weirdness as SoFi itself is not an actual bank. So it uses partner banks to actually store the money. But not to worry; all of them are FDIC insured, which makes them just as secure as any other US bank.

It’s not every day that I change primary bank accounts but today is one of them! My new setup will be as follows. I will leave $500 sitting in the existing checking account since I’m not about to give up my 7.5% rate on that money. A minimum monthly direct deposit of $250 is required to avoid a monthly maintenance fee so I will deposit that much and then move it into an investment from there on a monthly basis. But the rest of the incoming cash will be destined for this new SoFi account, meaning the $3k average balance will earn me $73.50 per year. Subtract the paltry $6 a year that money was making me before and I’m left with a profit of $67.50. And if the FED gets its head out of its ass and continues its long, slow march back towards responsible currency management, that return is likely to go up rapidly. If it increases its funds rate to a historically normal level, this payoff would more than double!

What did it cost me to get this money? About ten minutes. The account setup process was actually incredibly easy and that took about five. The other five minutes involved printing out the ol’ direct deposit change form, filling it out, and emailing it over to our payroll lady, who is accustomed to getting these from me on a fairly regular basis and I’m quite sure loves me for it. For those ten beautiful minutes, I made a cool $405 an hour! I would work that job 24/7/365 if I could. And every year this account keeps paying out at this rate, or preferably higher, those ten minutes become retroactively that much more valuable. Sweet!

How to Choose a Car: The Best and Worst Brands

There is no getting around it. If it has four wheels and an engine, I love it! From a finance perspective, this can be a dangerous area. But a little knowledge goes a long way towards solving that problem. I could write at least one book on this subject but I think I’m going to approach it one topic per post. In this one, I’m going to talk about which brands are best and worst from a financial perspective. I’m not going to cover every single brand that exists – only the more common ones that are either at the top of the heap or the bottom. I will touch on cars and trucks here but I will not talk about SUVs simply because I know nothing about them. Why not? I’m a finance guy and approach everything from that perspective. So in my world, SUVs basically don’t exist. As you will notice as this post progresses, you need to look beyond the brand name because those get bought and sold all the time. Who actually does the manufacturing is much more important than the logo they’re slapping on the product.

With cars, I have to start with Toyota/Lexus. They are simply the best of the best. It starts with their manufacturing process. These guys are absolutely obsessive about efficiency and quality control and it shows in everything they produce. They have very few misses. Almost any of their cars are very reliable, efficient, and refined, and as a result, the cost of ownership is low. That said, they are not perfect. While they’ve gained ground in recent years, especially with the Lexus brand, they are a little weak on the design side, both interior and exterior. And as a former Supra owner, I am horrified and disgusted at the way the name is being bastardized today. That car appears to be more BMW than Toyota and bears little resemblance to the legend it shares its name with. That said, I’m sure it will sell very well; just not to those of us who loved the original for what it was – a beautiful, relatively reliable, extremely modifiable, high performance machine at a surprisingly low price.

While not quite up to Toyota’s standard, Honda/Acura is a solid choice as well. Originally a motorcycle manufacturer, Honda is a little more performance oriented than Toyota. Their reliability and efficiency are also great although both are a definite step below Toyota’s. In my opinion, their design is hideous – especially with their Acura brand – but I suppose beauty is in the eye of the beholder. One other Asian manufacturer that deserves a mention is Hyundai/Kia/Genesis. These cars were much maligned years ago but they have come a long way. Today they are nearly competitive with Toyota and Honda on reliability and efficiency. And as a bonus, because they are still working through their reputation struggles of the past, they are very value oriented. They tend to offer features you normally don’t see at their price points. I would expect Hyundai’s new Genesis luxury brand to continue that trend and offer a very competitive value relative to that of its competition.

On the truck side, things are a little simpler; get a Ford. The F150 has been outselling the competition for a very long time and with good reason. It is the best truck, period. There are plenty of good competitors here – the Silverado/Sierra and the Tundra at full size and the Ridgeline, Tacoma, and Colorado/Canyon at mid size. That is the smallest trucks go these days unless you want a Nissan Frontier, which is the lone small, cheap truck left in existence (sadly, the legend in this category, the Ranger, is coming back as an F150 Light, a similar bastardization to that of the Supra). In general, I don’t recommend Nissan as it is a middle of the pack manufacturer but in this case, it is the only option. Trucks are very expensive so I would only advocate buying one if you genuinely need it. But if you are going to use a truck as a truck, a Ford is a no brainer.

Those are the best brands. Which ones should you stay away from? If we’re talking about cars, anything American is a pass. The big three (Ford, GM, Fiat/Chrysler) have huge legacy costs that go into every vehicle they produce. With big, expensive vehicles like trucks, they can make it work. With cars, it simply handicaps them too much. The best evidence of this is their reliability. With the better Asian brands, you can usually get the odometer to six digits without doing much more than changing oil, brakes, etc. If you pull that off with an American car, count yourself lucky and sell it soon because that luck won’t last forever. That trend only accelerates as the mileage gets higher.

And please don’t be fooled by Chevy’s incredibly irritating JD Power commercials. They are flat out bullshit. A lot of money changes hands when it comes to using JD Power awards in marketing and they are dubious at best anyway. In fact, some other manufacturers took Chevy to task on this recently, pointing out some of the most blatant lies and threatening to take legal action. While refusing to admit to anything, Chevy wisely pulled the ads in question, tacitly revealing the reality of the situation in the process. It shouldn’t have had to come to that but it’s a great example of how low the standard for truth in advertising actually is. I ignore 99% of it in all forms and I highly recommend you adopt that policy as well if you haven’t already.

Aside from American branded cars, I don’t recommend anything German because of reliability issues and overall high cost of ownership. They manufacture everything with very tight tolerances and the result is that while the quality of the better brands (BMW and Mercedes Benz) is very high at first, it goes downhill quickly from there and maintenance/repairs are not cheap. Volkswagen (including Audi, Porsche, and some other brands under the same ownership) is on the automatic pass list. I don’t recommend anything British (or formerly British brands like Jaguar) as their reliability is atrocious, particularly when it comes to electrical issues. And finally, while Fiat/Chrysler vehicles (Dodge, Jeep, Alfa Romeo, Maserati, and a handful of other brands are included under this banner) are usually cheaper than their competition, there is a good reason for that. They are simply some of the worst vehicles on the road. Efficiency and build quality are usually poor while reliability is worse. This was the case long before Fiat got involved and it hasn’t changed. And let’s not forget that the Ram logo is literally a vagina. You can’t make this stuff up.

To sum this all up, if you’re looking for a car, you want Toyota/Lexus, Honda/Acura, or Hyundai/Kia/Genesis. If you’re actually going to use a truck, stick with Ford. If I didn’t mention a particular brand or group of brands (ie German cars), that means it is somewhere in the middle – not among the worst but not among the best either. And who wants to pay good money for something average? Obviously you still want to research individual models but in general, if you stick to the best brands I’ve listed here AND take care of whatever you buy, you are very likely to come out ahead.

Are You Wasting Hundreds a Year on Car Insurance?

While combing through a friend’s finances with him in search of savings opportunities recently, we struck gold with his car insurance. He is going to save hundreds of dollars over the next year as a result of making one minor change and at this point in his life, that will go a long way for him. In the process, I realized that car insurance is probably a large potential savings opportunity for a lot of people and I was inspired to write a post on the basics. Please note that I am no insurance expert and none of this, or anything in any other post for that matter, is intended as legal advice. But I do know a fair bit and I may be able to help point you in a direction that will save you some cash.

The first thing I tell anyone about insurance in general is that in many cases, loyalty counts for nothing. In my experience, the only reward for staying with a company long term is a consistent premium increase. This doesn’t necessarily apply to all companies but it also doesn’t cost you anything to get a few quotes to make sure your existing company is still competitive. I recommend doing so every couple of years or so. Companies seem to make fairly regular changes to the way they rate drivers, vehicles, etc, and the only way to find out about them is to shop around and see who is offering you the best deal today. Don’t assume that anything will be consistent from person to person or even from year to year for the same person. Numerous variables go into what premium is charged. Some agents seem to be very willing to shop around for you as a new customer but very reluctant to do so when you are already on the books. This has to do with their business model. However, just as with almost any other service, if you are less valuable as an existing customer than you were as a new one, become a new one again – for someone else.

Another important thing to look at with car insurance is your coverage itself. Liability coverage is required in most states now and is required by common sense and basic human decency everywhere. Sometimes the legal minimums are lower but I recommend at least 100/300 for bodily injury and 100 for property damage – and 200/400/200 wouldn’t be overkill either. Remember, if you run out of insurance coverage, you’re on the hook from that point on. And things can get expensive very quickly whether you’re paying to repair cars or people so skimping on this to save a few bucks on premiums could be a very painful decision in the long run. Liability coverage also benefits you in the form of uninsured/underinsured motorist coverage. There are simply far too many irresponsible people out there and as usual, people who make one bad decision, such as not having car insurance, tend to make others as well. In my relatively young life, I’ve already been rear ended by not one, but two uninsured drivers while stopped behind lines of cars at stoplights. It doesn’t get any more “not at fault” than that. In both cases, I was very glad to be covered by my own insurance company even though the drivers who hit me hadn’t had the decency to get coverage of their own.

So where can you save money on coverage? In the physical damage section. For this part, you need to consider both the car you’re driving and your financial situation. First of all, if your car is worth less than $5000, you may want to consider passing on collision coverage altogether. Of course, this means if you are in an at fault accident, you have to pay to repair the damage to your car. But most accidents are minor ones that involve little more than replacing a bumper, which is usually around $1000. Plus, if your car is worth that little, chances are you’re not going to repair minor damage anyway. So by not having the collision coverage, you’re really betting that you either won’t get in an at fault accident or that if you do, it will be a minor one. I like those odds. That said, if you don’t have a reasonable emergency fund of at least $5000, you may want to think twice about this.

Please note that if there is a lien on your car (in other words, if you have yet to pay it off), you cannot do this because it will put your loan in default status. You probably don’t want a visit from the friendly repo man anytime soon – even if your lender is likely to call and threaten you for a while before they go to that extreme.

If you want to follow a more minor version of the no collision coverage strategy that doesn’t put an auto loan in default, you can raise the deductible. Going from $500 to $1000 usually makes a decent difference in the premium. I have never seen going higher than $1000 do much of anything so I leave it there. This should pretty well confirm what I said above about most accidents amounting to a $1000 bumper replacement; insurance companies literally bet on it with their pricing.

Aside from coverage changes, there are a few other more traditional methods of lowering your car insurance premium. You can pay for six months at a time or annually if your insurance company offers that option. This usually saves you a little and offers the bonuses of both a head start on any credit cards you may be churning and locking in the premium for the full term you’re paying for. For example, I will only do a full year here in Houston since premiums are rising very quickly as insurers work to recoup their Harvey related losses. You can also get a discount for getting your car insurance from the same company as your homeowners/renters policy. You can talk to your agent to make sure you’re getting all the discounts you may be eligible for (good student, membership in certain associations, completed safety classes, etc). In the case of many insurers, you can also get a discount for letting them use a gps to monitor your driving habits. However, as a safe driver, but one who also likes to get where I’m going in a timely fashion, I’m always going to pass on that offer.

This obviously isn’t exhaustive of every possibility but hopefully it will give you an idea or two to try out. Good luck and safe travels out there!

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.

Bank Account Basics

Happy weekend, everyone! I hope you’re having a great one. The title of this post should be pretty self-explanatory. For whatever reason, a lot of people seem to get tripped up by banks. So I thought I would write a post to make sure no one who reads this blog is getting screwed. I will start with general rules and then move into what I specifically do to illustrate things a little more.

First off, if you are paying any fees, you are doing it wrong. Almost all checking accounts have monthly fees but almost all of them also have ways to avoid them being charged. Usually you just have to either run a minimum monthly amount through with direct deposit or maintain a minimum balance. I recommend a bank with online bill paying services and there again, fees being charged equals pass. It’s nice to have physical checks too just in case and many (although not all) credit unions and some banks throw in a lifetime’s supply for free. Otherwise you should pay no more than $20-25 and again, that is for a lifetime’s supply of checks if you’re doing things right. That is about it for fees aside from the stuff that should be obvious. For example, reconcile your account on a regular basis so you never overdraft. That can turn into a slippery slope quickly so just make sure it never happens. That is one of the reasons I reconcile my accounts weekly.

You should divide your money into three categories – checking account money, savings account money, and investment money. Checking account money should only be what you need in order to pay your bills each month plus a buffer of maybe a thousand or two just in case anything weird happens. Savings account money should be your emergency fund plus any other cash that you aren’t using for investments right now. And investment money should not be with a bank at all since there are far better options regardless of what you’re investing in. So the remainder of this post will focus on just the first two categories.

I have accounts with several different banks but a lot of these are holdovers from when personal bank account churning was worthwhile that I simply haven’t gotten around to closing yet. I guess that’s a “to do list” item for me. In general, I use three banks for deposit accounts. One is my primary checking account bank that I pass the money I need for my monthly bills through, one is my secondary checking account bank (more on that later), and one is my savings account bank.

My primary bank is almost always a credit union. This is because as non-profit organizations, credit unions are usually much more customer friendly than banks. Their fees tend to be fewer and lower and their rates tend to be more competitive whether you’re paying (auto loans, mortgages, etc) or being paid (savings accounts, CDs, interest bearing checking accounts). As I said, I use this account to pass my bill money through. My current credit union’s checking account pays 7.5% on the first $500 that is kept in it, meaning I get about $40 a year for using it. Nothing to get too excited about obviously but it’s free money since I would be passing my monthly bill money through a checking account somewhere anyway. Many credit unions offer a small sweetener like this one way or another but watch out for the ones that have some absurd requirement like completing ten debit card transactions per month. That reminds me, DO NOT EVER USE DEBIT CARDS. I will explain why in an upcoming post but for now, if you’re using them, please stop for your own good. Anyway, if I were going to get an auto loan again, and I might for a very specific set of reasons (more on that in yet another upcoming post), this credit union would be my first choice as their rates are excellent.

Your secondary bank can be whatever bank you want although of course another bank that pays you in some way is the best choice. Why have a secondary bank at all? Banks aren’t perfect. I once had a bank freeze my account on a Friday evening because I attempted to make an external transfer to one of my accounts at a different bank. This happened in spite of the fact that I had already completed the external account verification process. The friendly, but incredibly inept call center employees (I spoke to several over what amounted to about two hours) were unable/unwilling to restore my access even after I had correctly answered every security question they had. Why did they bother asking the questions then? I would love to know that myself. Anyway, I couldn’t touch a dollar of the money in my own account until Monday when I could go into a local branch, show multiple forms of ID, restore access, and then obviously withdraw all my money, close the account, salt the earth, etc. Another time I had $1000 deducted from an account because someone totally unrelated to me made a transfer using a wrong account number that didn’t exist and mine was the closest actual number. Seriously, that is the best explanation I ever got – and I talked to several people and demanded better because that is obviously bullshit. It took a few days to get that one resolved and my money returned to my account. These things can happen at any bank and they do. Keep in mind that the banking industry is not what it once was and today many of the employees are nothing but glorified cashiers. It’s reality. And that $1000 could just as easily have been $10,000 or any amount at all or my entire account as in the other situation. If I had needed access to my cash at one of those moments and I had only the one account, I would have been screwed through absolutely no fault of my own. The only real way to avoid a situation like that is to have a backup account at another bank to use when your primary bank does something idiotic. As a little extra precaution, I keep a reasonable amount of cash in my safe at home as well. And yes, I also have guns at home and yes, that home is in the great state of Texas where the law is comfortably on my side should anyone me an ill-intentioned visit. Enough said.

My third bank is for my online savings account. Why have an online savings account? Aside from friendly little gimmicks like my credit union has, brick and mortar banks don’t pay enough to merit keeping your savings account money with them. Don’t believe me? Go check. You will be hard pressed to find a rate above .2% without the ridiculous debit card shenanigans I mentioned earlier. Meanwhile, my online savings account at CIT Bank is paying 2.45% and I can have that money in hand in a day or two if I need it. Want a bonus? CIT’s customer service is actually very good (we’re talking Americans answering the phone here and acting as if they actually care about you as a customer to boot) and I recently discovered that they send wires for free! Wires typically cost $20 and up to send so this is amazing, particularly for a guy who needs to send them for his side business every now and again. CIT is FDIC insured up to $250k just like any other reputable bank. If you’re looking for an online savings account and you’re not sure, just look for the FDIC (or NCUA which is the same thing but for credit unions) logo. If it isn’t prominently displayed, you will want to find a different bank immediately.

There you have it – my basic bank account guide. Hopefully it helps you to either save or make at least a little bit of money. And now I have to go close some accounts and add a few more items to my list of upcoming post topics.

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.