AskDong

As some of my readers know, I’m a big fan of my Citibank account.  I like the following features:

1. Free Bill Bay
2. Worldwide ATM Branches
3. Line of Credit Overdraft protection
4. Competitive Interest Rate on Savings

On that last part, Citibank has gone a little crazy with different offerings.  They now offer to the best of my awareness 5 different savings/money market accounts:

1. day-to-day-savings: .7%
2. insured money market: N/A
3. e-Savings: 4.5%
4. Ultimate Savings Account: 4.65%
5. Ultimate Money Market Account: 5.0%*

*The Ultimate Money Market Account requires that you make two bill pays a month or the rate drops to lower 4.5% rate.

I started off with the basic EZ Checking account with the day to day savings.  Later I added the insured money market account.  After that I added the e-savings which at the time was yielding a 5% introductory rate.  I just added the Ultimate Savings account today and will probably add the Ulimate Money Market account later.  I would gripe more about all different accounts if Citibank didn’t make it so easy for existing customers to sign up.  Pretty much -  you login, and click through a couple screens and the new account shows up.  Doesn’t get much easier than that.  If you’re not currenty a citibank deposit account holder, you’re also eligble for $50 sign up promotion on the Ultimate Money Market, and $100 on the Ultimate Savings.  Bankdeals.com is also posting that Citibank is offering $200 promotion for signing up for the EZ Checking account.  There’s only a promotion code for that, so read through Bankdeals’ post on the matter if you’re interested in signing up.  Again I think if you’re looking for a primary bank account, Citibank offers a good product.

I for for one think Citibank should take a page out of the Steve Jobs’ book, and simplify.  Even though I have zero balances in most of the saving flavors, I don’t like looking at them on my account screen.

This is part 4 of my 5 part series on earning money. Dividend investing is by far the “easiest” way to earn money. To earn money, you don’t have to do anything, but hold quality dividend paying stocks. Of course, nothing is truly that easy. You need to have a fair amount of capital to make enough of an investment to achieve asizeable dividend payout.

But let’s get back to basics. What are dividends and why do companies pay them? Dividends are simply payments made to shareholders. They are usually paid from the profits, but it’s not uncommon for a company that is temporarily (hopefully) unprofitable to continue paying out dividends. Look at Ford. It continues to pay out dividends despite losing billions of dollars. Stopping dividend payments once they’ve started is generally considered a vote of no-confidence. The investment world does not look kindly upon such moves. Dividends should represent excess profits that need not be reinvested in the business. Owners, i.e. shareholders, are entitled to those profits. Small, fast growing companies do not pay dividends because everything is plowed back into the business. This makes sense, as a small company under good management should have a clear growth plan that requires capital.  A mature business is less likely to have obvious areas to grow, and therefore is morelikely to pay out excess in the form of dividends.

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I went to wedding this weekend in upstate New York about 350 miles away from home or so. Since I hardly drive, I had quite a bit of sticker shock as payed to fill my tank. I have 14 gallon tank or there abouts. At $3.10 a gallon that works out to be about $43.40 a tank! Pretty much it was 1 tank of gas each way as I drive a relatively efficient if old 4 cylinder. Most of the time since I take public transportation to work, and play, I hardly think about the price of gas. Most Americans are not lucky enough to be in a position to only think about gas sparingly. Gas is a basic item of consumption without which most Americans could not function. We are wedded to our cars. If going forward we expect gas prices to be as high as they are now if not higher what can we do about it? FinancialZen has some suggestions for things we do lower our overall oil footprint.

Personally my gripe is with urban design, I think we need to go back to the drawing table when it comes how we think about laying out cities and town. Most American cities that have flourished in the last century are the epitome of urban sprawl. Urban sprawl contributes not only to gas consumption, but longer commutes in traffic, and nobody likes traffic. However there are still a few cities in the country that you can live by public transportation: New York, Washington D.C., Boston, Chicago, Portland, San Francisco are on my personal list. EnergyBulletin.com publishes a list of the top 10 cities best prepared for an oil crisis. While in the long term cities and town will adapt, absent that we can always move to a transportation friendly city.

When we accept a a job, we ponder the salary, and weigh the benefits, but we almost never think about what the job costs us personally. Commuting costs is the most direct cost of being employed. According to an ABC poll, the average commute in the US is 16 miles. That’s 32 miles round trip 5 days a week, 48 weeks a year or 7680 miles a year. At $3 a gallon that’s $921.60 year for gas alone. My monthly T-Pass for the subway and buses in Boston costs $59/month for unlimited rides. That works out to a $708 a year. In New York where a ride on the subway is $2 a pop that’s $960 a year. The more significant saving is not gas consumption, but the cost of auto ownership which can be easily over 2-3k a year. However most Americans outside of NYC even if they commute to work via public transportation or by foot or pedal still often choose to own a car (myself included). Though families and couples are often able to own only one car when otherwise they might need two.

The true benefit of living in a city or in manner that decouples your job from a car commute is flexibility. While I’m in general a fan of higher gas prices as it sends the right signal to consumers, I’m also disheartened by the regressive nature of higher gas prices. Consumer gas consumption is relatively inelastic meaning consumption does not substantively go down with higher prices. Consumers cannot choose in general to go to work or not, or to buy groceries. As a result higher prices hurt those who can least afford it the most. As consumer, I want the flexibility to choose which products I consume. If gas prices are high, I want to be able to consume less of it. If gas consumption is tied to getting to work, I can’t do that. One of my principles of budgeting is minimizing recurring mandatory costs such as commuting costs.

I didn’t really fight the law, but I did try filing another abatement on my taxes.  This time on my car excise tax.  Earlier in the year, I sold my car, and transferred my plates to my new used car (I took my parent’s old car as they got a new car).

So I filled out the abatement form, and stapled my new registration as I thought was required, and went over to the Tax “Assitance” office at City Hall.   I was quickly turned away.  Apparently I need the bill of sale as well.  The text in the Abatement from reads as follows:

Bill of Sale and Plate Return Receipt or New Registration From if plate is transferred

I read that to mean: (Bill of Sale and Plate Return Receipt) or New Registration From if plate is transferred but apparently it really was Bill of Sale and (Plate Return Receipt or New Registration From if plate is transferred).   I’m not sure what the rules of precendence are for “OR” and “AND”.   Either way, I need to go back to the office with the Bill of Sale.   I had orginially intended to include the Bill of Sale just in case, but left it at home.  

All in all I wasted 30 minutes going down to City Hall, and will have to waste another 30 minutes next week, and for what?  $38.75.  I didn’t have nice car, and I actually still don’t.  I like to think my time and aggravation is worth more than this, but I’m unwilling to let this go.  I pick certain battles, and this is one of them.   I’m ok with missing few deductions on Tax Return for convenience sake.  I’m alright with not getting absolutely the best savings account rate.  I’m also ok paying for plumber on something that I might be able to do myself for convenience sake.  However, if I ever feel like I’m being unjustly charged, I will fight tooth and nail for every last cent as a matter of principal. 

American Express has recently partnered with American Home Mortgage to allow mortgage holders to pay their mortgage by Credit Card.  Most mortgage companies do not allow this for very good reasons. 1) The transaction charge which are usually between 1-3% that credit card companies apply takes a significant bite out profits 2) making it easier for mortgage holders to incur even more debt is a risky proposition.

For many people who play the credit card rewards game being able to pay the mortgage by credit card has always been the holy grail of reward points.  I’ve personally always wanted to this, and will definitely look into the offer if my lender ever becomes a partner in the program.  The one caveat is that enrolling in the program costs $395 which would take a big cut out of any potential profits in the first year.  For example, Amex Blue Cash pays back .5% for the first 6500, and 1.5% for every dollar thereafter.  Assuming a flow-through of 25,000 which I would think would be pretty typical for someone paying his or her mortgage that’s $310 in profit.   In the 1st year the enrollment fee takes everything and then some.

According to American Express, they will carefully screen potential applicants to make sure they are suitable for the program.  They don’t want to be saddled by deadbeats who want to avoid defaulting on their mortgage by defaulting on their credit card.  At the same time AHM ideally wants to transfer this type of risk to American Express, so I’m curious how they’ve decided the terms.  Given that AHM is likely to take a hit on the transaction charge, it’s unclear what incentive they have other than guaranteeing payment on borrowers who would otherwise might miss payments? For AHM it looks like a good marketing move, but little else.  Given that American Express is planning on partnering with other lenders, it remains to be seen how effective this marketing will be in the long run.  Full disclosure: I own shares of AHM in my IRA Accounts.

Given the high enrollment fee, the profits from the transaction charges, and the ability to screen risk, American Express should make out pretty well in this.  And really the enrollment fee is the kicker given that with every new mortgage you would have to enroll again.  It’s my opinion that people always underestimate how often they move and/or refinance. However if you’re smart consumer who really understands your mortgage, this could be a great opportunity to earn some mondo rewards.