Pay Another Person Electronically for Free
A couple of friends owe me some money. How can they pay me?
Mail a check. This is the old fashioned way. We all know how it works. The stamps are not free, but pretty close. As the recipient, I have to make a trip to the bank or I put the check in a postage-paid envelope provided by Fidelity mySmart Cash account.
Online Bill Pay. They can set me up as a payee in their bank's online bill payment system. Their bank will send me a check. I deposit the check. For a one-off, it's an overkill. If it's recurring, it's easier for the sender than to remember to write and mail that check every month.
Is there a way to do it electronically? Because mailing a check and online bill pay are free to close to being free, paying electronically between friends and family also has to be free, or else it doesn't make much sense to do it.
Mortgage and Home Loan
I kept saying I refinanced my mortgage. Actually I don't have a mortgage. Nor did I ever have one. A mortgage does not have financial terms. Refinancing it makes no sense either.
The word "mortgage" is probably one of those most widely misused words that eventually the misnomer will trump its true definition. When people say they are applying for a mortgage, paying a mortgage, refinancing a mortgage, they really mean they are applying for, paying, or refinancing a home loan.
A home loan is a loan. It has its terms: principal, interest rate, number of months to pay, etc. etc. The home loan is evidenced by a Promissory Note. The Note is secured by the borrower's home. The security document that pledges the home in exchange for the loan is called the mortgage in some states.
Personal Line of Credit vs Credit Card
My personal line of credit is all set up. I tested it by making a transfer from it in the morning and transferring the money back in the afternoon. I don't think I will owe any interest that way. It worked as advertised.
A personal line of credit and a credit card are both unsecured open-end ("revolving") credit products. In a nutshell, a personal line of credit is like a credit card without a grace period or rewards, but with better cash advance features. Lines of credit are very common for businesses whereas credit cards are more common for individuals (there are also business credit cards). Based on my own personal line of credit with Wells Fargo and my three credit cards from American Express, Chase, and FIA Card Services (Bank of America), I summarize the differences in the table below. Red indicates inferior product features.
| Personal Line of Credit | Credit Card | |
| Secured | No | No |
| Document income for application | Yes | No |
| Purchase | Yes, by check or card | Yes |
| Grace Period | No | Purchase: 20 – 56 days Cash advance: No |
| Credit Limit | Lower | Higher |
| Credit limit for cash advance | 100% | 20% |
| Cash Advance Fee | None | 3%, min. $10 |
| Rewards | No | Purchase: Yes Cash advance: No |
| Annual Fee | Waived | No |
| Interest Rate | Prime + 8.5% | Purchase: Prime + 6-10% Cash Advance: Prime + 16-22% |
NY Times Podcasts without iTunes
I wanted to subscribe to some podcasts by New York Times, in particular Your Money by Ron Lieber. To my surprise, they only publish the podcast links for iTunes. Hello? What about people who don't use iTunes or iPod?
Luckily I have their Weekend Business podcast in my open-source Juice podcast receiver from some time ago. New York Times must have published the plain podcast RSS links back then. I don't know why they only give iTues links now. Is Apple paying NY Times for only showing iTunes links? It will not surprise me if that's the case. All monopolies behave the same way: Microsoft, Apple, Google, in their respective world. They want to make it difficult to use anything except their product.
Using the Weekend Business link, and some trial-and-error in guessing the file names for the other podcasts, I got the plain podcast RSS links for these NY Times podcasts.
Home Valuation Websites vs Actual Appraisal
For my recent mortgage refinance, an appraiser came and did a full appraisal for my home. It cost $500. Here's what the various home valuation web sites said what my home was worth, compared to what the appraised value was:
| % of Appraised Value | Range | |
| Zillow | 120% | 107% – 130% |
| Cyberhomes | 100% | 90% – 115% |
| Bank of America | 107% [1] | 94% – 120% |
| eppraisal.com | 113% | 96% – 130% |
[1] B of A does not give a point estimate. The mid-point between low and high in its estimated range is used.
The Credit Crunch Finally Hit Me
In last week's post Emergency-Proof Your Emergency Fund, I said I decided to apply for an unsecured personal line of credit from Wells Fargo, where I also have a checking account.
I submitted the application online. The questions were as expected: name, address, Social Security Number, employment information, income, size of the credit line requested, and the purpose of borrowing. They said a decision typically takes two business hours. I waited all day but I didn't hear anything. I finally called and they said my application was declined! If you can believe it, they asked me if I would like to be referred to Wells Fargo Financial, their subprime unit. Me? Subprime? No, thank you.
The underwriter said the reason for the decline was that the size of the credit line I asked for was too high for my income. Fine, tell me what you can give me. No, they just flat out declined me. It's been widely reported that credit card companies are cutting people's credit limits. They have spared me so far. Ah, the credit crunch finally hit me.
Credit Scores After Canceling Oldest Credit Card
My mortgage lender sent me my credit scores. That's the only time I look at them. Otherwise I don't bother. I compared the latest scores with what I got from my last refi in February 2008.
| Credit Bureau | Model | Feb. 2008 | April 2009 | Change |
| Equifax | FACTA Beacon 5.0 | 803 | 794 | -9 |
| Experian | Fair Isaac (Ver. 2) | 780 | 796 | +16 |
| TransUnion | FICO Classic (04) | 797 | 784 | -13 |
| Average | 793 | 791 | -2 |
Two years after I canceled oldest credit card and lowered my total available credit limit by about 25%, my credit scores are still going strong. They changed very little since I looked at them a year ago.
Standardize Credit Card Contracts
I heard law Professor Adam Levitin of Georgetown University on NPR's Fresh Air program last week. Professor Levitin is one of the contributing authors on the blog Credit Slips, which I read regularly. I also linked to and quoted Professor Levitin's posts several times in the past. In his interview (listen online, download mp3), Professor Levitin talked about the recently enacted credit card law — Credit Card Accountability Responsibility and Disclosure Act of 2009 (aka Credit CARD Act, clever, huh?) — which placed limits on certain credit card practices like retroactive interest rate increases and marketing to consumers under age 21.
Professor Levitin said the legislation's approach is wrong. He said if you ban A, B, and C, they will come up with D, E, and F. He suggested instead of banning specific practices, we should standardize most part of the credit card contract. Credit card companies can still price their products however they want. They just fill in the blanks in the standard contract with their numbers. That way consumers can compare the contracts and decide which product is best for them.
I relate to my recent experience in refinancing my mortgage. Much more is at stake with a mortgage than with a credit card. Yet when I signed the long promissory note, I only focused my attention on a few places: principal, interest rate, term of the loan, interest rate fixed or variable (fixed), prepayment penalty (none), due date (1st day of every month), grace period (15 days), and late fee (5%). The rest was pretty much standard. I agree with Professor Levitin when he said credit cards are much more complex with many more prices than a straight-up loan. For people who carry a balance, it's very difficult to compare and understand all the different prices.
IRS Taxing Employer Provided BlackBerry or Cell Phone
Does your employer provide you a BlackBerry or cell phone or pay for your wireless service? Do you use that device for personal purpose too? The IRS is considering three ways to tax you for that.
Certain employee benefits, like health care, are not taxable. Personal use of an employer provided BlackBerry or cell phone is not one of them. The IRS published Notice 2009-46 on June 8. It's on pages 13-15 in Internal Revenue Bulletin 2009-23. They are asking for public comments about the three methods it's considering.
1. Minimal Personal Use Method. There are two proposals under this method. Under the first proposal, if the employee can show to the employer that he/she carries another personal cell phone and uses that phone for personal matters, then the employee won't have to pay taxes on the company provided BlackBerry or cell phone. Under the second proposal, there would be a threshold of say X minutes. If the employee can show he/she used the BlackBerry or cell phone for personal purpose for no more than X minutes or he/she used it only for certain exempted types of calls (emergency for example), the employee won't have to pay taxes for such personal use.
Emergency-Proof Your Emergency Fund
Everybody knows they should have an emergency fund. There are many articles and discussions about how much one should have in the emergency fund and where to keep the emergency fund in order to earn the most interest. This post is not about either of those topics. Having an emergency fund is one thing. Having access to your emergency fund when you have an emergency is quite another. When an emergency strikes, is your emergency fund able to deliver?
Money market funds and online high yield checking or savings accounts are popular choices for where people keep their emergency fund. I keep mine in a money market fund in Fidelity mySmart Cash account. My two recent episodes of emergency showed that my emergency fund was inadequately prepared for real emergencies (see previous posts BBG Communications: $27 for a 1-Minute Phone Call and Credit Card Cash Advance Saved the Day). When I needed money, I couldn't get hold of it easily. I must find a better way to emergency-proof my emergency fund. How fast can you get money from your emergency fund when you have an emergency?
ACH transfer. When you have your emergency fund in a money market fund or in an online high yield checking or savings account, you access your emergency fund primarily through ACH transfer. On average, ACH transfers take two business days. Some institutions take longer. Some like Fidelity can do it in one business day. There's usually a cutoff time for the transfer request. Request submitted after the cutoff time is processed on the next business day. If your emergency can wait two business days, you can use ACH. If you think you can deal with all your emergencies that way, you can skip the rest of this long post. What if you need money sooner than that? An emergency that can wait two business days isn't so much an emergency.
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