Rewards Credit Cards & A Rant

Let's Build Some Credit History

I signed up for my first credit card when I was 18 years old because I wanted to start building up my credit history. The plan was to use a credit card instead of my debit card for purchases, and then pay off the balance in full each month. 

1% Back

My first card worked out well enough for me until I realized that there were some wonderful rewards credit cards out there. One that has been popular for a long time is the Chase Freedom card, which I signed up for at the recommendation of some co-workers. This became my main method of payment for everything that I could pay for using a credit card. In return I racked up 1% of everything I spent. Woot! Even better was the fact that you could redeem $150 in rewards dollars for a $200 statement credit, all you had to do was wait until you'd accumulated that much. I wasn’t interested in gift cards or offers for useless items I didn’t really need. I became a huge fan of rewards credit cards by using this card. Plus, I liked the security that using a credit card offered me over using my debit card.

2% Back

Can anyone see where this story is going? A couple of years ago Schwab had a wonderful offer. A 2% cash back Visa (not AMEX or MasterCard!) that linked directly to a Schwab brokerage account. Each month your rewards are automatically deposited in your account, which can in turn be transferred directly into your checking account. I was sold! I stopped using my Chase Freedom and started using this card for everything I could.

Side Note: I realize that this method would be dangerous for certain people with certain spending habits, but I've never used a credit card to spend more money than I have. I only use a credit card to make purchases that I would otherwise be making.

My Schwab credit card is one that was highly rated by most personal finance websites, and was one that was only available for a limited time. For a long time there were many, many people who lamented over the fact that they'd missed out on getting the Schwab Visa. And I sat back and smiled while gladly using my card for everything I could. Today, two years later, this all came to a screeching halt. In the last month or so I’ve gotten some notices that my credit card was being sold to B of A and to expect the transition. At first this didn't bother me, since I've always used B of A for my banking. A letter reassured me that my rewards were not going away. A 2% rewards card that would show up on my B of A account, simplifying the number of online accounts I had? Awesome!

The Rant

And then today happened. Without getting a new card in the mail, last week my online Schwab credit card account ceased to exist. I figured it might take a day or two for my new account to show up at B of A, so I patiently waited. Finally, today (four days before I leave the country) I decided I couldn’t wait any longer to pay my bill and called them up. After 30 minutes of waiting on hold and talking to a representative, I was able to pay my bill over the phone, told that my current card would not longer work (turns out they were wrong, it worked this evening), that my new card was in the mail and would arrive within a week, and that the rewards program had changed. Say what?!? I initially freaked out because I thought all of my auto-pay bills that are setup to use my old card were going to end up bouncing while I would be unable to fix issues as they came up due to being out of the country. And the lack of warning was not cool. Luckily, the card still appears to be working, so I’ve been placated just a bit.

However, I've yet to figure out if using the new B of A credit card, with it's roughly 1% rewards, will be what I keep doing or not. I'm researching other options, we'll see if I can come up with something better.

FatWallet forum about this card in case anyone is really interested

Now What?

Completely unrelated to all of the above, I did recently sign up for another credit card due to the free flights that I would get from doing so. I might blog about that another time. For now, I have the new card as a backup (it gets 1% back) and my Chase Freedom is still an open account, if I can't find anything better. But I haven't been a huge fan of rewards credits cards and free money for all these years in order to sit back and take the average. I'll be trying to find another situation where I can get at least 2% consistently (I don't like "bonus categories").

Bottom line, having to deal with a very badly handled transition like the Schwab --> B of A one was poor planning on their parts, and I'm disappointed that two of my solid accounts would cause me the hassle. Boo. But the real bottom line, and the reason I’m blogging about this, is because if you're in a place where you're using credit cards responsibly, you should be using a rewards credit card! I've made more than $1,000 so far by using them (there were sign-up bonuses as well), not including the large rewards from the Southwest card I just signed up for. And with the exception of my 30 minute phone call today, by using the cards correctly I’ve earned that money by doing nothing other than what I would normally be doing with a debit card. It’s basically extra income without any added work.

This post gives you guys a glimpse of the personal finance loving side of me. After this my blog will probably be consumed with lots of Costa Rica posts for awhile, but hopefully this post is of interest to someone.

Mandy and Personal Finance

As most of you already know, I’m somewhat of a nerd. I get excited over things that would make other people cringe. I’m also a detail person, which is why things like making a budget are exciting to me. When I was nineteen I took a college course on personal finance and loved it. If I’d taken it earlier in college (I was one semester away from graduating at the time) I might have considered adding a second major. I’ve contemplated getting a Master’s degree in something finance related. I’ve since decided not to go that route for numerous reasons, but my love of all things personal finance still remains.

I'll be the first to admit that I haven’t always handled money as well as I should, and I probably still spend money too easily. However, over the last couple of years I’ve spent a lot of time analyzing how I spend my money and researching things relating to personal finance. I’ve also spent time figuring out what the Bible says about how we handle money. I’m by no means an expert, but this is my blog so I figure I’ll pass along some of my thoughts on how to handle money.

A starting point...
The starting point for myself, like most people, was deciding what tool to use to handle my money. If you aren’t using a money management tool of some sort, you’re probably not going to be very successful in your attempts to manage your money. Some people find an Excel spreadsheet will do the trick for them (I’m not a fan of this method). Others prefer to use software packages. A few I hear a lot about are:
Mint
Mvelopes
You Need A Budget

Which do I use?
I use Mint, which is a web-based software package now owned by Quicken. There are probably hundreds of reviews online telling you why Mint is awesome so I'm not going to bother outlining every feature or telling you why you should use it. Feel free to look up the more recent reviews of Mint if you're interested. But I would like to share some of the reasons why I love it and how it suits my purposes well.

For me, the most notable things about Mint are:

1. It's free (woohoo!) 
2. It's web based
3. It's got a slick interface (the software engineer side of me is happy)

I'm a big fan of web based apps because I spend half of my day at a work computer and half of my day at my personal computer. I also have two laptops at home and sometimes have to switch between the two of them, so a desktop app would not suite my purposes very well.

Envelopes?
A lot of people are fans of "envelope" type systems, particularly Christian finance advisers (Dave Ramsey, anyone?). While I see the value of that, I originally wasn't interested in budgeting my money up front. I was more concerned with figuring out where my money was going each month. And in reality, before you can start budgeting you need to quantify your spending, so it turned out to be a good first step.
 
Mint makes it really easy to categorize every transaction (from all of my accounts, in one place, with almost zero work on my part) and then provides me with great ways to work with my data. The pie chart showing where all my money goes on the “Trends” tab is my favorite feature of Mint. The pie chart also helps me break down and sort out my transactions at the end of each month if I haven't already done so or if something gets categorized incorrectly.

(not my account, just a sample)

 
Once I had a good grasp of where my money was going (which took a couple of months) I got a lot more interested in tightening up my budget in certain areas. I use Mint’s “Budgets” to create an envelope system of sorts. I’m not a hardcore envelope budgeter though, so if you are, you might find other tools to be more to your liking. Mint is a great starting point if you're not sure what method of budgeting you prefer. It's worth your time to use Mint just to figure out how you're spending money even if you use it for nothing else.

For me, I’m sticking with Mint because it’s web based and because it helps me keep track of what I’m spending where. And I just plain like it.  In the end, it doesn’t really matter which app a person uses, as long as they’re using something and it works for them.

More on my actual budget later...

The 2011 Tax Cut – Have You Even Noticed It?

I’m not the type of person who pays a lot of attention to politics and trending topics. When ObamaCare was the huge topic of the day I knew essentially nothing about it. When I heard that Obama had issued 2011 tax cuts I didn’t even stop to read about what they were. I just assumed they didn’t impact someone like me.

Well… as it turns out… they do. Obama decreased Social Security from 6.2% to 4.2% thus increasing my take home pay each month. The sad thing is that I didn’t know anything about this until I noticed that my first paycheck in January was larger than normal. 

The cool thing about all of this? I have more money! My first thought was to just not even think about it and pretend it wasn’t there. Then I realized that was a bad idea because one thing I’ve learned since graduating from college is that money finds ways to disappear and also that you adjust your lifestyle to fit whatever amount of money you make. If you start to make more money, you adjust your lifestyle up to fit the new budget. As much as you say you won’t, you do anyway. And I do realize that the amount of money we’re talking about is somewhat minor but it is still extra income nonetheless.

So, what did I decide to do with my extra money? I setup an automatic transfer of the extra amount to my mortgage (as an extra principal payment) each month. Doing a rough calculation it looks like that small amount each month will add up to an extra mortgage payment or two by the end of 2011. Why did I choose to do this with the money? Is it the best return on my investment? Actually, no, I don’t think it will be. While an automatic transfer to somewhere is better than just leaving it in my bank account I actually think that investing this money in a nice index fund would serve me better than putting it towards my mortgage. However, given what the bible has to say about debt, I have a large desire to be rid of my mortgage in a much shorter span of time than the thirty years given to me and as such hope to continue to pay it down at an accelerated pace. I don’t trust myself to earmark an index fund for the mortgage so I’m going to make the money a straight payment towards my mortgage.

While I’ll never scoff at free money it does kind of make me cringe thinking about what the first paycheck of 2012 will be like. It’ll be like the opposite of getting a raise. I’m guessing that there will be a lot of people who don’t understand where the extra money is coming from or where it went when it goes away. The great thing about automatic transfers is that it only takes the click of a button to cancel them at the end of 2011.

Did you notice the tax cut?

Here’s a New York Times article about this subject:

http://www.nytimes.com/2010/12/25/your-money/25money.html

And a calculator to use to calculate how much your paycheck should have increased:

http://www.kiplinger.com/tools/2011_Social_Security_payroll_tax_cut_calculator/

Note: I guess companies have until March to get all of this straightened out and for some people their paychecks won't stabilize until then.

Passion vs Money

I read a statistic the other day that 75% of college students change their major in college at least once and on average students change their major 3-4 times. I know people who changed their major 7 or 8 times.
I've never been able to relate to that. I was twelve or so when I decided I wanted to pursue programming because I loved doing it. I'm not even sure I ever had a talent for it but it was what I wanted to pursue. When I was sixteen and filling out college applications I declared my major as "Computer Science" on every application and didn't doubt my decision.

I read this blog post today. The author talks about how many times she changed her major. That's not really what stuck out to me though. What stuck out was how she recommends choosing a career that would give you the best possible lifestyle. I bristled up reading this. I know this author isn't writing from a Christian perspective so I can understand a basic difference in outlooks. If I weren't a christian I'd probably hold the same viewpoint. Her viewpoint does go against another common viewpoint of "Do what you love". I tend to disagree with both viewpoints.

The "Do what you love" viewpoint holds some water for me because if you're miserable at work it's going to impact other aspects of your life. If you're at a job that you hate it might not be a bad idea to look for something else. I certainly wouldn't want to discourage that. However, I don't think "Am I happy here?" is the right question to ask.

The viewpoint of picking a career that will net you the most cash is the option that appeals the most to a personal finance lover like myself. I'm not going to lie... watching the numbers in my bank account increase is indubitably something that I enjoy. Is it wrong to pursue a career because it's a good paying one? I don't think so but I also don't think that "Which job pays the most?" is the right question to ask either.

What about a balance between the two? "What job would I enjoy doing that also pays a reasonable amount?". Once again, I'm not sure in and of itself that this is a bad question. In fact, I think it is one that most people should ask themselves sooner rather than later, particularly the guys. And they need to be realistic about it. The most important question in my eyes isn't about WHICH career but instead "How am I going to serve God in whatever career I pursue?". All career paths short of something immoral or illegal can be done while serving God. I think if more people stopped asking "What do I want to do?" and started asking "What can I do to serve God right here and right now and how can I make my life something of worth?" we'd see a huge impact in the world as we know it. If we spent more time focusing on how to serve God and less on what we do or don't enjoy about our job I think we'd all be better off. And maybe, just maybe, the choice to make a career shift isn't really about getting a special signal from God. Maybe it's about making a wise decision and always continuing to ask "How am I going to serve God NOW?".

While people still need to make decisions about what to do with their lives I think the questions relating to those decisions should be minor in comparison to the bigger question of how they can serve God. Does God really care whether you're a pilot or a teacher as long as you're serving Him to your fullest? No, I don't really think He does.

One side note that I'll throw out there. I do think that there are some careers that are better left alone if they require excessive amounts of time away from family. A Dad who has to work 70 hours a week is going to be slacking off on the home front and I DO think that God cares about that. There are problem other considerations like that to think about.

(Just FYI, I know I haven't addressed my career and how I ended up where I am in this post. I have more thoughts on my career and why I am where I am so I think I'll save that for another day.)

20 Financial Milestones For Your 20s

There's an article going around that a lot of personal finance bloggers are writing about on their blogs. I figured I'd do so as well since I enjoy all this personal finance stuff.

20 Financial Milestones For Your 20s

# 1 – Finance a dream vacation…in cash – NOT REALLY
Considering I’m not even sure what my dream vacation is, this is a no for now. Maybe a honeymoon someday? I did pay for a cruise back in 2008 (2009?) and of course it was in cash, so I suppose that somewhat counts. That was not a dream vacation though. I don't see myself ever taking a really elaborate trip but we'll see how this one turns out.

# 2 – Pay off your student loans - CHECK
Never had any to begin with. I was pretty anti-student loans and was lucky enough to never have to use them.

# 3 – Automate paying your credit card bill in full – N/A
This is a no because I want to force myself to review the bill every month when I get it. If I automate it I’d stop checking it.

# 4 – Get rid of all bad debt – CHECK
My only debt is my mortgage and it’s not considered "bad" debt in the personal finance world.

# 5 – Build an adequate emergency fund - CHECK
This was the first thing I did after graduating from college. I probably need to re-asses how much money I want in there and see if I need to beef it up now that I’m a homeowner though.

# 6 – Make your first, and last, investment mistake - NO
Well, I opened a Roth IRA in 2008 and it promptly lost 50% of its value when the market crashed. It’s now about back to where it began. I suppose that wasn’t a mistake so I guess I still need to try real investing before I’ll make my first mistake.


# 7 – Develop a statement of cash flows - CHECK
I use Mint.com. Best financial tool I’ve ever used.

# 8 & 9 Max out a Roth & Contribute to your 401(k) – NO (Not Doing)
I haven’t been contributing to a Roth since I left my last job that had a Roth 401k. I’m also not going to be maxing out my traditional 401K this year but I am contributing 10% and that’s enough for me. I don’t need to be rich in retirement and there are better things I can be doing with that money now.

# 10 – Get a degree or certification that increases your earning power – NO (Not Doing)
Considering that I want to be a stay at home mom I don’t really see the point of getting another degree at this point. Sometimes I think about the fact that I could get my work to pay for  a Masters and I consider it but then I think about all the other things (ministries I’m involved in) that I’d have to give up to make that happen and that’s not worth it to me.

# 11 – Take a career risk - NO
Probably never will.

# 12 – Negotiate something - CHECK
I negotiated the price of my Elantra when I bought it in 2007. I had just turned 20 so it counts for this decade of my life.

# 13 – Earn your first side grand – NO (Not Doing)
Unless I get into a major blogging spree and try to advertise my blog I don’t see myself making any side income. I could easy do side jobs using my programming skills but I program enough at work and as side projects for ministries, I don’t want to program even more. Plus I just don’t care about making extra money.


# 14 – Start a sub-savings account for an upcoming financial goal - YES
I did this when I bought my house. I also realized that I really hate it when I zero out an account, even if it’s for a good thing.

# 15 – Set a target retirement date – NO (Not Doing)
I have no idea what God is going to do with my life. I’m not going to try to plan something that is potentially 40 years down the road.


# 16 – Monitor your credit - YES
I get my credit report every 4 months exactly on schedule. I haven’t gotten my credit score since I bought my house in 2009. But since nothing is showing up on my report and I’m not interested in taking out a loan or anything that would require my score, I’m not concerned about it right now.

# 17 – Say no to a financial salesman - NOPE
Does throwing away credit card offers count? I get about two of those a day.

# 18 – Give just enough to make it hurt – COULD DO BETTER
I definitely give. And I tithe the classic 10% like a good Christian. But I want to make sure that I take the blessing that God gives me and use it to bless ministries.

2 Milestones for the Over Achiever

# 19 – Invest $1 for every $1 you spend - NOPE

Definitely not doing this, although that would be pretty awesome.

# 20 – Start a 529 College Savings Plan – NO (Not Doing)

I have no plans of setting up saving plans for kids that don’t even exist. And even if I had kids, I’m not sure I’m going to pay for college for them. We'll see when the time comes I guess. I think I’m better off having been forced to take that responsibility on myself.