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Women’s Suffrage and Financial Freedom

By: Brooke Kaelin
10/18/2008

We recently watched one of my old favorite movies, “Mary Poppins” with my daughter. With the elections so near, I’m having a hard time getting this song out of my head. Ever have that happen to you? Well, since misery loves company! I thought I’d give it a share:

This ridiculous and rather offensive little song nevertheless reminds me of all of the rights that I currently enjoy as a woman in this country. Rights to freedom, rights to vote, rights to prosper. Rights that were hard won by the blood sweat and tears of countless men and women throughout history. Rights that I am not normally even grateful for.

As the election presses ever closer I find myself hopelessly disillusioned by both the candidates. Economists they are not! In fact, both sides have recently spouted so much hogwash about the economy and the financial state of the nation that I have occasionally been speechless.

So, to my mind, the election of either set of candidates cannot be considered a huge political victory. It can however, be considered an amazing victory of equality. For the first time in the history of this country we have both an African-American man, and a woman on the tickets.

America, what a long strange trip its been eh? To come down to this.

There is another issue at play during these elections though. An issue older even than equal rights and suffrage. It’s the issue of the “haves” and the “have nots”. The ever widening gap between the rich, and the poor. Wealth: challenger of nations.

The issues of class and caste, old wounds uncovered by fresh economic blood. The lower and middle classes are hungry for a champion, and the rich are struggling to hang onto their wealth. Rarely has this issue been brought to the forefront in America, rarely has it moved from the shadows into the light of day.

This is still a land of plenty, a land of a billion opportunities, even in a time of great loss. It is a land where any man or woman, by the force of their own will and hard work can amass a fortune.

In what is now undeniably an electronic age, I would like to turn the spotlight on the heralds of opportunity. Those who are leading the charge today. As so many of our brothers and sisters in ages past have given of themselves for the betterment of others, so too are these writers devoting themselves to the cause of what they believe is just and right: Equal opportunity economics.

They spend their time each day, in public forums, freely handing out the secrets to wealth and success. And they receive little commendation for it, and sometimes little profit. Yet they persevere, and they lead.

Let’s take just a moment, to follow them as they go:



Stay Informed:




Cherry Picking:

My favorite article of the week!



Festivals, Carnivals and Celebrations:

Thanks to these carnivals who featured our articles this week:

We also had a guest post up at The Digerati Life; “Leverage Your Good Credit! Don’t Let Good Credit’s Rewards Pass You By.” Thanks SVB!

Special Note: We will be hosting the Carnival of Twenty Something Finances on Monday! Here’s an official invitation for you to stop on by!

Thanks for reading, and as always we value your comments! Please feel free to share your thoughts and opinions in the comments section below. You may also want to subscribe to our RSS feed – you can click here.

Organizing Your Personal Finance

By: Jason Steele
10/17/2008

One of the first things I learned about finance was to always pay my bills on time. It sounds obvious and easy to do, but is actually a little more complicated than most people think. At first, I was going through my mail every day, writing checks, and penciling in a date on the envelope about a week before the due date. On that date, I would put the bills in the mail. It was inefficient, costly and inaccurate, yet I still know many people who do it this way.

The Problems With The Traditional Method

One of the problems with having credit cards is that if you do pay them even one day late, the late payment fees and interest payments can go from zero to over a $100 in an instant. The credit card companies know this, and they do sneaky things like have the payment due on a day they are closed, such as a weekend or a holiday. Bills often arrive only two weeks before they are due, leaving you precious little time to send payment by mail. Incredibly, some banks have even been caught illegally charging late fees even when they received or even cashed them on time.

Fraudulent bank practices aside, there are several ways the traditional bill paying method can go wrong. You can forget to mail the bills on time. The post office can delay or lose your payment. You could be out of town on the day the bill is due to be placed in the mail.

How To Always Pay On Time While Saving Time and Money

For over a decade, I have done my banking with an Internet bank, one of the first to offer electronic bill payment services. It took me a little time to learn, but once I did, I couldn’t remember how I ever got along without it. Today, almost all banks that offer an electronic payment systems, usually one operated by a company called Check Free. When I direct my bank to pay a bill, I chose the date of payment and the amount that it gets paid. I just set it and forget it. There are several ways this saves me time and money. Obviously, I don’t have to purchase checks, or write them. I also don’t have to purchase stamps. Perhaps the best part is that the money stays in my interest checking account until the day it is paid. I am also guaranteed the payment is made on time, regardless of my travel plans or the vagaries of the US Postal Service. Finally, I can easily plan my finances weeks in advance, knowing how much I am paying and on exactly which date it will come out of my account. That is simply impossible when you are physically mailing checks around the country.

Nobody Is Perfect

Unfortunately, no system has ever been created that is entirely foolproof. About once or twice a year, I get a bill that indicates that my payment was not made on time. I then go through my records online to see if I had scheduled the payment correctly. Most of the time, it turns out that I had made a data entry error in the date or amount of the payment. In that case, I am usually able to get the recipient to waive the the late fees as a courtesy. Occasionally, it turns out that the error was the fault of the bill payment system itself. Fortunately, they stand behind their product, and they either resolve the matter with the merchant, or credit me with a complete refund of interest and late fees.

How To Keep Errors To A Minimum

These days, every bank offers an online bill payment system. You can get to know your bank’s system by taking an online tutorial. It will take a few minutes, and will probably be somewhat boring, but the time is well spent learning its features and avoiding mistakes. To reduce your error rate, double check the account number and the address of the payee against your bills when you pay them. If you are paying a large bill, like one of those “12 months same as cash” financing offers, triple check it and pay it a week early.

Reap The Rewards

As we all know, reward cards should only be for people who pay their bills on time and in full every month. Only once I was confident that I had a quick and accurate way of ensuring bill payment, only then was I able to seriously consider the advanced reward maximization techniques that involve holding many different cards for different purposes.

Your Credit Card Company Could Unexpectedly Lower Your Limit

By: Brooke Kaelin

Well folks, the economic crisis is starting to trickle down in a myriad of small ways. Banks have been hit especially hard, and many of them are tightening up in unexpected areas.

Several major credit card companies, including American Express and Bank of America have started reducing the credit limits on some of their customer’s credit card accounts – without warning.

The hard facts:

So, what does that have to do with your credit card company lowering your limit? Well, things are getting tight – very tight everywhere. Especially for banks.

There is a an overwhelming aura of fear in the financial market right now – anyone with a TV can tell you that. Lenders are beginning to decide that maybe they have been too generous with their offers of credit. And now, more than ever, banks are short on capital.

So they are reducing the available credit for many of their customers. It’s not just customers with low credit scores either. People with credit scores of 720 and above are still being affected. Business credit cards as well as personal credit cards are suddenly on the chopping block.

In a recent report by Javelin Strategy and Research (an advising firm for the financial industry) they found that 62% of credit card companies have cut back lines of credit to their existing customers. Sometimes reducing their credit lines by as much as half – that’s huge.

Can you prevent your credit limit from being reduced?

Not really. I wish I could tell you that you could, but at this point, you probably can’t fix things fast enough to sway a decision. Credit card companies are primarily going to base their decisions on several factors:

So, what can you do?

Keep your credit card balances as low as possible – This is one thing that will help you keep your credit score as high as possible. Also, in the event that your available credit is reduced, it will not affect your debt-to-credit ratio nearly as much as it would if you had been carrying a high balance. For more info on the Debt-to-credit ratio, you can check out our article “The FICO Score Breakdown” which talks about how your credit score is calculated.

Pay your bills on time – Again, this keeps your credit score up, and doesn’t invite trouble. Why tempt the bank to lower your limit, or raise your interest rate if you don’t have to?

Keep an eye on the mailbox – Credit card companies can make changes in the terms and conditions any time they want to – but not without notifying you first. If your credit limit is going to be reduced, or your interest rates raised, then by law they have to give you a notice of the changes.


What should you do if your credit card company does unexpectedly lower your limit?

First, be aware of the possible one-two punch – They lower your limit below your current balance. This immediately puts you over the limit. Then they tack on over the limit fees, and possibly raise your interest rates because you are now “over the limit” and in violation of your “contract”. Obviously, this would be a rare, worst-case scenario. If it does happen, call them immediately and harass them until they remove those fees and reduce your interest rate. You will have to speak with a manager.

Call your credit card company and request that they raise your credit limit again – Let’s face it, they probably aren’t going to be willing to do this, but it never hurts to ask. If you have a long, and positive payment history with them, then you are in a good position to negotiate. If they cannot raise your credit limit, then try getting them to at least lower your interest rate, or waive your annual fees.

Shop around – If your current credit card company has decided it no longer wants your business, there are still plenty of other banks out there that do! Try shopping around for balance transfer offers, or cards with lower fees that would benefit you more, or have a larger line of credit.

Lastly, keep in mind that this isn’t going to happen to everyone. It’s just happening to more people now than it ever has because the financial markets are in such a mess. Things will even out and return to normal eventually. Just look out for yourself and your lines of credit right now. Keep your balances low, and even if it does happen to you it should not hurt your credit score overly much.

If your available credit does suddenly decrease, then be sure you pull your credit score. Take a look at it and make sure that you are in a good position to apply for a new credit card before you try to replace the available credit that was lost. No sense in lowering your credit score with inquiries if that was why your bank decided to decrease your limit in the first place.

Have a question for us? Leave a comment below!

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Delta Reward Cards Devalued, And The Worst Award Award

By: Jason Steele
10/16/2008

Delta has had their ups and downs of late. They have flown in and out of bankruptcy, yet now seem poised to absorb Northwest, making it perhaps the largest carrier in the world. Delta’s reward card offerings from Amex are indeed robust, as I have covered here. Unfortunately, their SkyMiles program has deteriorated to the extent that their miles just don’t have the value they used to.

Why My SkyMiles Aren’t Worth As Much As They Used To

Delta has gone to a three tier system for rewards. Their basic domestic reward remains 25,000, but that is highly misleading. A quick glance at Delta’s redemption calendar shows that those awards are very rare. Even when scheduling a trip months in advance, there are few convenient domestic flights available at that level. Almost all flights include red eyes and multi-stop itineraries. If you are looking for an international flight, you tend to find almost nothing available in their lowest tier. For example, I was contemplating a flight to the middle east. The lowest tier was 80,000 SkyMiles, yet there were only one or two days a month where seats were available. There was plenty of availiblity in coach at the medium level of 130,000 miles. A few months ago, I flew round trip in business class on Lufthansa by redeeming only 115,000 United Miles. Like economy, business class is almost completely unavailable in the “low” category for 120,000, with the “medium” widely available at a whopping 230,000 miles! Simply put, my mileage was worth half as much at Delta than it was at United when applied to premium international travel. All of the sudden, those double SkyMiles promotions don’t look that attractive.

If that wasn’t bad enough, the Delta watchers over at the Travel Skills blog point out that: “Delta’s also snuck in some flat out increases in the cheapest redemption levels: Coach to Hawaii is now 40,000 miles, up from 35,000. Flights to the Caribbean will now cost you 35,000 miles, up from 30,000; Europe in coach is now 60,000 miles, up from 50,000. Plus, there are those previously mentioned pesky “fuel surcharges” of $25 to $50 for SkyMiles redemptions starting this month. ”

It Gets Worse

Delta has also implemented fuel surcharges for reward flights that are completely arbitrary. There is a $25 charge for flights in the 50 states and Canada, and $50 for all other international destinations. So a flight from Miami to Anchorage is less of a fuel surcharge than Miami to the Bahamas. Their press release indicated the charge was “temporary” for flights after August 15th, yet oil prices have plummeted $40 a barrel since then and the fee remains. I guess it is just the principal of charging for an award that is a slap in the face to customers. Finally, there are excessive award ticketing fees if your flight is within 21 days for the reservation that range from $75 to $150. That fee is waived if you hold Platinum Medallion status.

Should I Pay With Miles?

Delta has begun offering a pay with miles option. It is needlessly complicated, but essentially you can redeem your miles for 1 cent each towards most Delta purchases. Readers of this blog know by now that 1 cent per mile is really just the bare minimum a mile is worth, and that you can do far better with cash back returns from many reward cards.

Is Delta Doing Anything Right?

I do have to admit that I like the way award availability, or lack thereof, is shown by calendar. For me, I can use it learn ahead of time that it is not worth getting a SkyMiles reward card and accumulating SkyMiles when award prices are so high, and availability is so low. Seriously though, I can also applaud Delta for joining Southwest as the only major airlines without a fee for your first checked bag, although I wouldn’t bet the farm on this remaining the case.

My Award For The Worst Award

Every now and then, I come across an award redemption opportunity that is totally pathetic. The Citibank ThankYou rewards offers the option of a dining award. So far so good, as love eating out. They offer a $25 certificate from Restaurant.com, a company that I am a big fan of. The award costs 1,000 points which seems like a reasonable value of 2.5 cents per point. Scratch the surface just a little, and you will find otherwise. Restaurant.com sells these tickets at their web site for $10 each, so the award’s real value now appears to be only 1 cent/point.

As a frequent customer of Restaurant.com, I have signed up for their special offers. They arrive in my inbox several times a week, offering the opportunity to the same $25 certificates for as little as $2. Ultimately, the real value to these rewards is a mere $2, a measly .2 cents per point!

I wholeheartedly recommend these certificates, but ing them with your ThankYou points is no thanks at all.

How Does Co-Signing A Loan Affect Your Credit?

By: Christina

Co-signing can affect your credit both positively or negatively because it is reported in your credit report as “your loan”. In this post, we will explain the how and why it affects your score, as well as other relevant issues. Below is a brief “table of contents” on how we will address co-signing questions.

Table of Contents

1. How Cosigning Can Positively Affect Your Credit?
2. How Cosigning Can Negatively Affect Your Credit?
3. How To Set Up Arrangements With Co-signee to help protect your credit?
4. Understanding Implications of Co-signing
5. Understanding Federal Rules for co-signers?
6. FTC’s Suggestions For Questions To Creditors and Precautionary Measures
7. Questions You Should Ask About Co-signees

How Co-signing can positively affect your credit? – Because co-signing a loan (whether it be a student loan, car loan or mortgage) is reported in your credit report2, it can actually positively affect your credit (assuming the co-signee fulfills his or her obligation and pays on time all the time).

How? Because co-signing appears on your credit report as if “you took” the loan, you get the benefits of it. For example, co-signing for a revolving credit like credit cards increases your “credit availability”. And if the co-signee uses that credit availability sparingly, then you get the benefits of “increased credit utilization ratio”.

Co-signing for someone could also potentially increase your “mix of credit” and your credit score could potentially increase because of the better credit mix. For example, co-signing for a car loan when all you have are credit card reporting to your credit report increase your “credit mix”.

If the co-signee pays on time, you also get the full benefits of that.

How co-signing can negatively impact your credit? – Co-signing can negatively impact your credit score in two ways. Just can it can improve your credit utilization ratio, a co-signee who max out his or credit limit on a revolving credit like credit cards can hurt your credit utilization ratio (and potentially your score).

But the area where it really hurts is if the co-signee pays late. That is the biggest worry for a co-signer because late payments do hurt your credit score.

How To Prevent Late Payments – Arrangement With Co-Signee – One way to prevent co-signees late payment from affecting your credit is to actually pay the loan yourself. And then get the co-signee to pay you.

For example, you co-sign a credit card for your son or daughter. Instead letting him or her pay the credit card issuer directly, you pay the credit card issuer instead. You then ‘collect the bill” from your child. That way, if he or she is late, the payment is still on time because it is paid by you. You then deal with your child (the co-signee) directly. Your credit score will then not be affect if your child has the occasional payment problems.

The key for this arrangement to work is to make sure you have the financial capability to pay for the co-signee in case they face financial difficulties. Because if you have problems paying the bill if the co-signee has problems, then that is not going to help the situation.

Understanding Implications of Co-Signing – If you co-sign a loan for someone, you are liable for the debt1,2. That means that if the co-signee does not pay, you are liable for the full amount. You could also be liable for late fees and interest charges. In certain states, creditors can come after you for payments before they approach the co-signee.

Because you are liable as a co-signer, the loan you co-sign is reported to the credit bureaus as though it is yours (even though you get no “tangible benefit or service”)1,2.

Federal Law and Co-signers – Under the guidelines of the Credit Practices Rule3, banks and financial institutions have to give you a notice that explains your obligation as a co-signer BEFORE you co-sign the loan. According to the FTC, this is a typical language:

Federal Law: typical co-signing language

FTC’s Suggestions For Questions To Creditors and Precautionary Measures – The FTC has the following suggestions for potential co-signers that might help you in the event that the co-signee is unable to pay the loan.

  • Negotiate Specific Terms For Your Obligations – The FTC suggest before co-signing that you ask the creditor to calculate the amount that you might owe them in the event the co-signee cannot pay. Once you have the figures, try negotiating the specific terms of your liability and obligations. That means you should try to limit your liability to the principal of the loan, or perhaps exclude late charges, courts costs and attorney fees. The FTC suggest asking the lender to include a clause in the contract that reads something like this “The cosigner will be responsible only for the principal balance on this loan at the time of default.”
  • Request For Notification of late payment – The FTC also recommends asking the creditor to agree in writing to notify you of any late payments so you have time to deal with it.
  • Request for documentations – You should also request for all important papers including loan contracts, Truth-In-Lending Disclosure Statements. Creditors may not be obligated to give them to you. So ask for them and keep them in the event of a dispute.
  • Check your state law for additional cosigner rights – Some states require that creditors try to collect money from the co-signee first before they could come after you. Regardless of which state you are in, having knowledge of this is important

    • Questions You Should Ask About Co-signees – Before making the decision, ask yourself the follow questions:

    Remember also that co-signers can be sued in court, just like the person who took out the loan in the first place. In fact, if you co-sign for someone, and they are late on their payment, lenders have the right to call you to collect the money, garnish wages, and seize property. Unfortunately, once you co-sign, you cannot just ask to have your name removed from the account if things go badly.

    The last thing to consider is that co-signing on a loan for your friend or family member may not actually help them in the long run. Although it will help them now by securing the loan for a house or credit card, statistically, when people have poor credit and the banks see a co-signer for a loan, they are more likely to ask that person to get a co-signer again. By helping them out now, you could actually be making it more difficult for them (and you) to obtain loans in the future.

    Whatever you decide, do not feel badly. Just be informed. If you go into a co-signing situation, be aware and prepare yourself for the risks that are involved. It is possible that co-signing can result in a winning situation. If you are unprepared, you run the risk of losing your own good credit history and owing the money that the other person borrowed.

    Considering that on average 3 out 4 people that co-sign on a loan end up paying it themselves, one would think that consumers would be extremely cautious when making this type of decision. Oftentimes it is against our better judgment that we sign our names on another person’s loan, but yet it is natural to want to assist a family member or close friend by helping them secure a loan and hopefully repair or build their own credit scores. Depending on the person and the circumstances, choosing to be a co-signer on a debt is not always the wisest decision.

    References
    1. FTC: Co-signing a lona
    2. Experian Forum: Being a co-signer can help your credit
    3. Federal Reserve Board: Staff Guidelines on Credit Practices Rules

    Extreme Rewards

    By: Jason Steele
    10/15/2008

    You laugh at frequent flier points, and are bored silly by a few cents on the dollar cash back. What you are looking for is something unusual in a reward card. Here are some of the more interesting rewards that I have found.

    Out Of This World

    The Virgin Atlantic American Express Card from Bank of America card offers all of the usual features including sign up bonuses, elite qualifying miles, and anniversary bonus, nothing too exciting. On the other hand, through the end of January 2009, cardmembers will earn an entry into a sweepstakes for a trip into space on for every $10,000 spent. If you haven’t heard, Virgin Galactic was started by Virgin Airway’s founder Richard Branson to be the first space tourism company. They have contracted with aviation pioneer Burt Rutan to develop the first commercial passenger space ship. Before you dismiss this as a dream, note that Rutan already has built and flown into space his first prototype, creatively named SpaceShip One. His follow on ship for commercial operation is being named….SpaceShip Two. Like SpaceShip One, SpaceShip Two will only fly sub-orbital, meaning it will only be in space for a few minutes. In contrast, NASA’s Space Shuttle reaches orbit and is able to circle the Earth for days. Virgin Galactic is expected to be ready for operation sometime in 2010.

    How Can I Go To Space?

    My first thought is how can I use the Virgin Atlantic card to earn points for a space flight with Virgin Galactic, other than winning the sweepstakes. After some careful research, I have been forced to conclude that I am out of luck. While you can redeem 2 million Virgin Atlantic Flying Club points for a flight on Virgin Galactic, there is some fine print that says that only points earned through flights on Virgin Atlantic are eligible for this award. There goes my credit card reward idea. Furthermore, my quick calculation says that I might have to fly from Los Angeles to Cape Town, via London, in a full fare, first class ticket 40 times in order to earn that 2 million miles.

    The good news is that if I somehow earned those 2 million miles, redeeming them for the Virgin Galactic flight would be a very good use of them. The Virgin Galactic flight sells for a coll $200,000, so that redeeming 2 million miles would be the equivalent value of 10 cents/per mile, outstanding! That kind of value might help when I am trying to convince myself that a few minutes of space flight would be worth my life savings.

    Save The Planet

    Once you have gone into space, and seen the world from above the sky, maybe you might try to do something to save it. GE offers it’s Earth Rewards card with the idea that your rewards will carbon offsets that will go towards reducing greenhouse gas emissions, thereby reducing global warming.

    In the movies, saving the planet requires some sort of super powers, yet in the real world, things are a little more complicated. With this card, it turns out that the devil is in the details. The first problem is that GE only devotes 1% towards the greenhouse gas reductions. Since that is pretty much the bare minimum in the world of cash back returns you would do as well or better to get a cash back card and donate the equivalent amount. Then there is the problem with the carbon offsets themselves. Even if you fully in to the concept of carbon credits, it is a little fishy that GE s the credits from GE AES Greenhouse Gas Services. So GE is ing credits from another division of GE, a company that also manufacturers coal fired electricity plants. To me, all this adds up to a mind bending conflict of interest rather than an Earth saving altruistic donation. I think I will skip this card and save up for a new Prius.

    Can Your Creditors Still Sue You After Bankruptcy?

    By: Christina

    I think my biggest fear after bankruptcy was that my creditors would still be able to collect money from me, or to sue me/ garnish my wages somehow.

    When my husband and I were finally able to declare bankruptcy, we had already been dealing with collection companies for several years. They regularly called us at work, at home, and they called several of our family members as well. We rarely answered the phone when it rang, and many companies called early, and late (past the hours they are allowed to call.)

    We also had two judgments, one mine, one my husbands. The final straw that tipped the scales was a wage garnishment. It was the second time my husband’s wages had been garnished, and it was because of a medical bill that was way overdue.

    The month he learned of the garnishment (which went through his work, so all the HR people knew about it) we would not have been able to pay our rent, or food or gas if it went through. So, we decided that it was finally time to end the mess and just declare bankruptcy. We took $200 as a down payment to a lawyer, who thankfully agreed to a payment arrangement.

    Honestly I think he only agreed to the payment arrangement because we were totally organized. Before we approached him, we put together a 3 inch binder filled with all of our bills, and all of the information we knew he would need.

    He took our case, stopped the garnishment, and two months later our bankruptcy was discharged.

    For the first few months afterward, I kept waiting for the phone to ring. It did still ring frequently, but by then, I was happy to answer it because I knew that once I did, those collection reps could never call me again. It was very simple. They called, and called. It was usually an automated call which meant that I had to sit on the line for ten minutes or so. Once I reached a person, I gave them my case number, date of discharge, and my lawyers name and info.

    After that, most of the companies never called back again.

    I did have some lingering fears. For instance, I knew that we had debts that we had not listed on our bankruptcy application. We didn’t list them because our debt had been sold over and over so many times that we didn’t really know who owned it at that time.

    Still, one by one those companies got in touch with us. I gave them all of our information too, and they have not bothered us since.

    In my experience, a company cannot collect from you, or sue you once you have declared bankruptcy, as long as you give them the information they need. Even if, like us, you did not include the debt when you filed, it was still included as long as you had the debt before you walk into the lawyer’s office to file bankruptcy.

    It is important for me to say though, that we had one medical bill that we incurred between the date we filed for bankruptcy, and the date it was discharged. That debt, we did have to pay. Apparently once you file, that’s it. It cuts off from the day of filing, not the date of your discharge.

    We did not have any credit cards when we filed for bankruptcy, so I cannot tell you for sure whether or not we would have been able to keep them open. I can say that we had a very easy time opening up secured credit card account about six months after our bankruptcy. I seriously doubt that we had to wait six months to open those accounts either. We only waited to give ourselves time to get everything straightened out before we jumped back into the credit market.

    Also, for those who might be interested, my first unsecured credit card after bankruptcy was a Target credit card, about two years after my bankruptcy was discharged.

    Have a question for me? Leave a comment below and I’ll answer it!

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    Churning Cards

    By: Jason Steele
    10/14/2008

    Churning is not just for butter anymore, it is a strategy for canceling reward cards and then re-applying for the purpose of accumulating multiple sign up bonuses. It is not without its risks, and rewards.

    The Rewards

    Sign up bonuses can be quite valuable in and of themselves. I have received many cards applications with offers of up to 25,000 miles as a sign up bonus. The thought had always occurred to me: What if I could sign up, cancel the card, and then sign up again? According to my research, it is possible, but only with some cards. For example, Citibank, which offers and American Airlines affiliate card, appears to allow you to cancel and reapply eight weeks later. Chase, partners with Continental, United, and British Airways seems to allow reapplications after only 6 weeks. American Express appears to be on to this loophole, and has inserted language into it’s agreements reducing or eliminating sign up bonuses to previous holders of each brand of card.

    The Risks

    The most obvious risk is that to your credit for opening and closing so many cards. Since the credit scoring formulas are proprietary, there is no way to accurately quantify this risk. Some people report slight drops in their credit score, some report small but significant impact, while other find none at all. There are just too many factors in a credit score to say definitively what will happen to you. The one thing that is for sure is that this strategy is only for people with excellent credit scores who won’t be adversely effected by a small drop. Also, you probably want to do this slowly while monitoring your credit score. I wouldn’t recommend this if you are about to try to qualify for a new home. The last think that you want is to loose out on a home loan, just to make 20,000 miles!

    Other Important Tactics

    I know it might be obvious, but don’t cancel the card until you have your bonus. If the bonus is in you reward card’s proprietary point system, make sure you don’t loose the bonus when your card is canceled. If you are able to transfer points from a proprietary system to a third party system such as an airline or hotel loyalty program, make sure to confirm the transfer before canceling.

    Read the fine print, as some card agreements have clauses prohibiting churning and may even have provisions for penalizing you at a later date. They may say that they can revoke your bonus miles or charge you for them in the future if they do an audit. You don’t want that question hanging over you when you are redeeming miles.

    Only attempt this if you are a detail oriented person. In the past, when I have held more than a few credit cards, it was an invitation to make mistakes. Every so often, I would accidentally pay the amount of one bill to the correct address of a different card. When I only have a few cards, I know when the payments are due and can account for that when I am on a long trip. The more cards you have, the more due dates you have to remember, and it is only a matter of time until you make a late or incorrect payment.

    Where I Stand

    In my previous attempts at churning, I have had situations where the bank only informs me at a latter date that they will not give me the bonus. In some situations, it was because I had held their card years ago. On other occasions, I have successfully received a sign up bonus from a card that I had held in the past, so you never know. On the other hand, everything that I have heard about credit scoring says that when you open and close accounts within one year, your score may suffer. At this point, I am not willing to risk my credit score and increase my monthly admistrative burden on the hope that I will be able to profitably churn cards.

    In the future, I might consider it, but only if the rewards were great, and I had some very accurate information about the feasability of this strategy with a particular card.

    Changes At Amex

    By: Jason Steele
    10/13/2008

    Companion Airfare, Use It Or Loose It!

    I was thinking about the subject of companion airfare deals lately. I had received so many offers for free companion airfare that I finally had to take advantage of one. It was an offer in which I ordered a subscription to Travel and Leisure magazine, and then received a “companion travel certificate”. To make a long story short, the price I was quoted for a single ticket on my next trip with “free companion airfare” just happened to be exactly the same price as book two tickets on the same flight if purchased directly from theairline. What a coincidence! It also turns out I am not the first to discover that these particular certificates are nearly worthless.

    On the other hand, American Express themselves offers companion tickets to it’s Platinum Card holders. Apparently, these certificates do have value, however, I just discovered two interesting facts. One, these certificates are only given to non-business card holders. My Amex Simply Cash Business Platinum doesn’t count. Two, they are discontinuing the program. According to their web site,

    “For those Card members with current reservations, your tickets will be honored by the airline on which you are ticketed. Card members can also request new reservations through the Domestic Companion Airfare Program until November 15, 2008. Please keep in mind that ticket availability is limited by inventory, program conditions and blackout dates.”

    So find someplace to take someone soon!

    Speaking Of Things That Are Cancelled

    I found a great camcorder recently, but after I purchased it, I kept seeing the same model advertised for extremely low prices from other businesses. Then I remembered that Amex offered a “Best Value Guarantee” program. Just to be sure, I checked their website, and sure enough, the program appeared to be worthwhile. I thoroughly read through their program brochure to ensure that my purchase qualified. With a print ad in hand from a retailer offering the same camera for a substantially lower price, I called to take advantage of their program.

    Unfortunately, recording at the number currently given at their website informs callers that the program was discontinued in 2006. I can only imagine that I must have received some notice of the program’s cancellation, buried in the fine print of a 10 page card holder agreement. Shame on Amex for not updating their website to indicate the program no longer exists!

    Amex still offers many great features and rewards, but the trend is now clear; expect Amex features to be disappearing like pillows and blankets in an airline.

    Check Your Credit Limit

    According to several threads at FlyerTalk, American Express has started to restrict people’s credit. By some accounts these restrictions are arbitrary, and are affecting people who carry high balances, yet pay off their accounts in full every month. It doesn’t take a lot of imagination to conclude that this has something to do with the global credit crunch. My advice is to call Amex and double check on your current credit limit, especially if you are planning extensive travel or large purchases. During these times, you should always have at least one backup card if you are traveling.

    Even worse, there are multiple stories of Amex asking it’s customers to undergo a “Financial Review” It seems as if they want all sorts of documentation of your income as well as past tax records. It is this request that has gotten many loyal Amex customers quite offended. Aside from privacy concerns, many users are afraid that their accounts will be closed and their Membership Rewards points will be forfeited.

    While I am thankful I have not been selected for such a Financial Review, I am a little concerned about my credit card company potentially auditing me as if they were the IRS (at least the IRS already has my tax returns!) The situation seems to affect people who are spending tens of thousands of dollars a month, which unfortunately does not include me. If you do find yourself in that situation, the best advice would be to redeem you Membership Reward points for frequent flier miles with your preferred carrier. I guess it was only a matter of time until the global credit crunch started trickling down to cardholders like you and I.

    Repairing Your Credit After Bankruptcy Part Two

    By: Christina

    In my previous article, “Repairing Your Credit After Bankruptcy Part One” I went into some detail about how we cleaned up our credit reports after our bankruptcy, and established new lines of credit. In this article I’ll dish some of the secrets of how we continued to raise our credit scores despite having a bad credit history.

    After my husband and I established our new lines of credit (two credit cards each) there was still a long way to go. The most important thing to stress here is that credit scores take time to rebuild. We didn’t bounce back from our bankruptcy overnight. In fact, we still have not completely recovered as far as our credit scores go, but we are better off than we have ever been. In another couple of years, we should be able to pass all but the most stringent lending qualifications.

    So, that said, here’s the rest of the story:

    1) I accepted the fact that raising my credit score was not going to be cheap. See, the thing is, when you have great credit, you can save money. The worse your credit is, the more simple credit – any type of credit will cost you. Whether that is in increased interest rates, or fees tacked onto credit cards, it’s pricey.

    2) I accepted the fact that in order to build my credit score, I was actually going to have to use credit, and use it responsibly.     It is very, very common for people coming out of bankruptcy to stop using credit altogether. Especially if the credit cards are what led to their bankruptcy in the first place.

    If you choose to do that (and it can sometimes be the right thing to do!) you will have to accept the fact that it will take 8-10 years, instead of 4-5 years to be able to get a reasonable home or car loan.

    3) I began monitoring my credit reports and scores regularly – This is not cheap. At a minimum it’s $30 a month, and usually more depending on which scores and reports you want access to. I chose to do this because I wanted to know exactly what impact my actions were having on my credit score. There was no point in paying high interest, or yearly fees on a card if the card was not raising my score.

    I will continue to monitor my credit, probably forever. Not just because we are in the process of repairing our credit, but because I will never have to worry about my identity being stolen, or about bad information being put onto my report. Heck, my credit report looks bad enough, I don’t need the credit bureaus making mistakes and lowering my score instead of raising it. Monitoring my credit score also lets me check up on my credit cards. Since they are cards designed for rebuilding credit, they are supposed to report my regular payments to all three credit bureaus. Since I do monitor my credit reports, I know when they do report, and when they don’t.

    4) I worked hard to educate myself – Obviously, since I went through bankruptcy, I didn’t have the right knowledge or attitude. I didn’t know what I was doing financially, and worse, I developed a pattern of ignoring my finances over several years. (Bills came in, and into a drawer or the trash…sometimes not even opened because I just couldn’t stand to look at another bill we couldn’t afford to pay.) And yes, with that attitude, it’s no wonder we ended up bankrupt. I know that now – I couldn’t deal with it then.

    So, I read every book on money or credit that I could get my hands on. I checked them out from our library, asked friends for recommendations, everything. I’m happy to say that some of it did stick with me, and moving forward got a lot easier.

    I also looked into several “repair your credit after bankruptcy” seminars and such available online, but the only one I liked was over $500! Can you believe that? Charging newly bankrupt people $500 to learn how to repair their own credit?

    Let me tell you honestly, that information is out there for free. Heck, most of it’s right here on this blog! Don’t pay for stuff like that, please. Do yourself a favor and spend some time reading instead. You can figure things out for far less than $500. Don’t let your misfortune make someone else rich any more!

    5) I keep the balances on my cards low, and I make my payments on time, every time –     This really is the secret to great credit. Don’t have more cards than you can manage, charge less than 20% on the card each month, and pay the full balance on time each month.

    Now I realize that some of you out there cannot do this yet. I’ve been there, I understand, believe me. If you have cards which are charged up, and you cannot pay the full balance off yet – that’s ok. It really is. Just pay them down as quickly as you can. The sooner you get them under 30% of the available balance, the sooner your credit score will go up. There’s no race. You have all the time you need to do this – just set it as a priority, pay more than the minimum, and stop charging for now.

    6) We purchased a proper amount of health insurance – since not having adequate health insurance was the biggest cause of our bankruptcy, it was one of the first things we changed once our bankruptcy was discharged. I never again want to be afraid to go to the hospital if I , or my husband needs to go. I never again want to be turned down for treatment because the physician knew I had no insurance.
    Health care is expensive, there is no way around it. But it is far more expensive not to carry any sort of insurance at all!

    We are only thirty – we thought we had plenty of years before health insurance deserved a place in our budget. We were wrong about that. And if you are out there, right now, with no insurance, please, do whatever you can to get some sort of coverage. No one can see the future.

    And that, in a nutshell, is what we’re doing to rebuild our credit. It’s not hard. Nothing earth shattering. You can do it too, no matter what your credit score is.

    The hardest part about repairing our lives after bankruptcy wasn’t getting the finances straightened out. That just required a little work and some education.

    No, the hardest part is changing the mental attitudes my husband and I have. The “We deserve to be poor” attitude. The “I’ve always done things this way, so I’ll keep doing them this way” philosophy. Well, our past attitudes put us into debt. Put us into bankruptcy. No matter how well we might understand the physics of money management, the emotional side has been the hardest for us to change.

    I do welcome your questions! Please feel free to leave me a comment below. Thanks!

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