Thursday, May 31, 2007

DAMMIT, NetBank got sold!

I'm finding this out quite late -- if they e-mailed anything to customers, I didn't see it, and since I don't read newspapers in Georgia (where NetBank is based), I didn't notice it in the news. But when I logged on today to check my paycheck deposit, I noticed a tiny note on's front page: "Great News! NetBank announces an agreement with EverBank. Learn more."

Nothing your bank considers "Great News!" is ever actually "Great News!" The "agreement" is "we've sold out, meet your new overlords!"

@%^@!$. I've been through this before. It sucks.

In 1996, I moved to New York for college and opened up an account with the Columbia University credit union. This was my first very-own bank account beyond the local one my parents opened for me in our hometown. In high school, I never had enough money to pay much attention to the details of my checking account; I basically dragged my paychecks over to the bank, cashed them, and rationed my cash. My Columbia account was the first I'd actually be using on a regular basis.

About two months in, I realised the university credit union wasn't going to work out for me. The union had very limited and sporadic hours. If I wanted details on what was happening in my account, I needed to find time to go over during their brief periods of availability and queue up for a printout. I suppose most people with more regular finances could have just eyed the mailed monthly statements, but I had a ) lots of deposits from casual jobs coming in, and b) a spend-it-down-to-the-last-nickel fiscal strategy, which could easily go awry if anything I didn't write down went into or out of my account. I was a broke student. Knowing exactly what was happening in my account, in real-time, was important.

So I began shopping for a new bank, one with online account access, a feature the credit union lacked. And I found Security First Network Bank, an Internet-banking pioneer.

SFNB had an office and actual branch location in Atlanta, but its primary existence was virtual. It had the features I was after: the online access (of course), and most importantly, checking accounts with no fees and no minimum-balance requirements. I signed up and transferred over my life savings (about $80, I think).

People I mentioned this to at the time seemed to find it dubious. "An Internet bank?" I was asked a lot. "Is that safe?" My take: It's FDIC-backed. I don't see why it's any less safe than any other bank.

And indeed, SFNB offered me a great banking experience. This was the first time I became an actual cheerleader for a financial-services provider. I loved my online access. I loved not being charged fees by my bank for using any ATM I wanted. I loved my free checking. And, after one particular incident, I really loved customer service.

I'd been with SFNB about two years -- sometime in my junior year of college -- when they sent out a notice about a change in their banking terms. Checking accounts would now no longer be wholly free for "casual" users: to keep free checking and avoid a monthly fee, you needed to either maintain a minimum daily average or have a paycheck direct deposit set up.

Hell. I was a student; I didn't have the money to meet minimums or a regular job offering direct deposit. My work-study and internship gigs all paid with checks. But I really didn't want to go hunting for a new bank again. So, I emailed SFNB customer service, politely complaining that they should offer a student account option with exceptions. 'Right now, I'm broke and don't have a job with direct-deposit options,' I argued. 'But in a few years, I'll graduate and be far less broke. Why not earn loyalty now by offering accounts with friendly terms for students, who will later grow up into nice lucrative customers for you?'

It worked. I got a personal email back (sadly, it's since been lost to the mists of time and email crashes) from a bank executive who said this was a good idea and they'd implement it right away. And they did! My account stayed free, and when I started working full-time, my direct-deposits went straight to my beloved SFNB account.

And then, in 2001 or so, I got a "Great News!" letter in the mail. SFNB was being sold off to Centura Bank. Then I got a big letter with Centura's banking terms. They were awful. Minimum balance requirements, heavy fees, and, stupidest of all, high fees for using non-Centura ATMs. Why stupid? Centura was a Southern bank, based somewhere in the Carolinas. It had no ATMs or branches anywhere within three states of me. What in the hell was I supposed to do, hop a plane to Raleigh every time I wanted to withdraw money? (I see I'm not the only customer who was pissed off about this. I just googled and came across an epinions rant.)

Centura pretty clearly had no interest in hanging onto SFNB customers outside its geographic zone, so I sadly went looking for a new bank. I went into branches of all the major NYC banks -- at the time, Banco Popular, Chase and Citibank -- to gather literature.

All the literature was depressing. I couldn't find a single local bank willing to offer me no-minimum-balance, no-fee checking.

So I once again turned to the Internet, and found NetBank. It met all my requirements: No minimums. Good online access tools. No fees for using third-party ATMs. I signed on.

And for six years, I've been a pretty happy customer. NetBank has lots of consumer-friendly frills, like no-fee overdraft protection. If I overdraft (which I've done once or twice by accident and several times when fraud wiped my account), I don't pay any bounce fees at all; I just pay interest on the loaned overdraft funds. (This has never added up to more than 50 cents). They've also been fairly good about dealing with my two cases of ATM hacking fraud; they refunded my money both times without any grousing about how if someone was using my PIN to withdraw cash I must have given them the number, which I've heard of other people getting grilled on by their bank.

So finding out that NetBank has been sold has me deeply, deeply cranky.

As with last time, it seems the acquiring bank has zero interest in replicating the terms that made their acquired bank so attractive to its customers. EverBank's big hook appears to be high interest rates -- but I don't care about interest on my checking account. I never keep money in there for long. I just care about free checking. And EverBank's "FreeNet" accounts? Not so much with the actually free thing. If you don't maintain a $1,500 average balance, Online Bill Pay costs $4.95 a month. There may be other fees; the website is very unclear. An "account fee schedule" section refers to a $7.95 monthly fee for accounts with an average balance below $800.

I admit I'm slightly irrational on this point. I *loathe* monthly-maintenance banking fees. $4.95 is not much. I'd spend it without thinking too hard for a snack or a magazine. I already spend more than that to bank each month, since I pay upfront ATM charges for using third-party ATMs (the fees charged by the ATMs' owners -- NetBank has no fees). But those surcharges feel slightly optional -- I'm the one choosing not to hunt down lower-fee ATMs. The idea of money being automatically sucked out of my account just because I'm not meeting balance minimums enrages me. And the principle of the thing matters enough to me to justify the pain of changing banks. (New checks, rerouting my direct deposits, changing all my stored account settings, no access to cash while the changes percolate .... arugh. I am pained just thinking about it.)

So. Hell. I need a new bank. Um, anyone like theirs? My absolute core requirements are "no minimum balance requirements to avoid monthly fees, good online account access, free online bill pay." I'd also strongly prefer a bank that doesn't charge for use of outside ATMs, and one that offers overdraft protection with no bounce fees. Beyond that, I'm flexible. And I really don't care in the slightest about interest rates. Zero percent is fine by me so long as my checking is free.

Sunday, May 27, 2007

The personal finance writer who irritates me the most

I grew up in Maryland reading the Washington Post, and it remains my favorite newspaper. I like the insider-baseball political coverage, the local tone (obsessive Butterstick coverage!), and the editorial choices it makes -- our Style section kicks NYT @#!, our fashion writer won the Pulitzer, and our advice columnist was named best in the country by Time magazine.

Which makes it particularly frustrating that the Post's personal-finance columnist annoys the hell out of me.

I keep trying. Today, I thought I'd take a look at "Color of Money" columnist Michelle Singletary's latest live chat transcript. Live chats are another thing I love about the Post, and I figured that I'd surely find a few things in Singletary's chat to admire or blog about.

Instead I found myself gritting my teeth. Constantly.

Singletary's basic financial philosophy seems sound: She loathes debt, and advises people to a) avoid it at all costs, and b) do whatever it takes to get out of debt, if you've succumbed and run it up. In our debt-laden culture, a stern taskmaster sounding dire warnings about debt isn't a bad thing -- most people (including me) could do with less yielding to temptation and more buckling down and saving money.

What frustrates me about Singletary's writing is her absolutism. She views debt as essentially a moral sin (direct quote: "Debt is evil. Credit is evil. You may decide it was necessary but it is evil nonetheless."), and counsels debt elimination as the absolute top financial priority for anyone in debt, No Matter What. And, further, counsels that people in debt should not spend one dollar on anything but basic food, basic shelter and life-sustaining necessities until every penny of debt is gone.

Take an example from this chat. A student about to graduate law school wrote in to say that she and her husband have saved like crazy to pay off their debts, and in three months they'll be in the clear for everything except her law-school loans. Now that they're reaching that milestone and she's about to start working and bringing in money, she realizes "we will be able to afford occasional new outfits or shoes, and other little luxuries." She wrote in to ask advice on how to wean off the austerity budget without going nuts: "how to enjoy little things while still staying on track with savings and keeping debt gone?"

Singletary's reply: forget about it. "I say you should stay on the crash diet until you pay off the student loan debt," she answered.

Another chat attendee wrote in to protest the harshness of that advice: "You cannot ask someone to never plan for a vacation, a new outfit, or a dinner out for the five to ten to twenty years it might take to pay off law school loans, (which run into six figures). She asked a reasonable question. Please give her a reasonable answer."

Singletary doesn't back off an inch in her reply. "Yes I can and have asked plenty of people to forget about vacations and eating out and whatever when they have six-figure consumer debt like student loans. It if takes years well so be it. You are not entitled to vacations, new outfits, dinner or whatever if you have massive consumer debt.." To top it off, she's snide: "Well, when you want to do my job apply to the Post."

If Singletary's absolutism were confined to debt reduction, I'd probably shrug it off as an overly aggressive response to a drastic problem. There's no question that too much debt is a dire and too-widespread problem, and I don't doubt most people are better served by erring on the side of austerity over indulgence. But her "my way is the only way" attitude carries over into territories where I see a lot more gray area -- most notably, the question of whether married/domestic couples should have joint bank accounts.

Some of her pieces on the subject are sensible and restrained. "Joined in Marriage and Finances" wisely observes that sharing finances doesn't mean you can't still each spend separately, and, a sentiment I particularly appreciate, "It's not true that a marriage has to always be a 50-50 partnership. Sometimes it's 80-20 or 10-90 or 0-100." I wholeheartedly agree with her advice to "accept that the day you get married is the day you stop being financially independent."

But I'm not convinced that joint accounts are the only acceptable financial arrangement for married couples -- and Singletary refuses to acknowledge that choices other than hers can ever be acceptable.

A particularly vivid example of this came in a chat in late 2005 on financial advice for engaged couples. Singletary opposes pre-nuptial agreements with the same vehemence she opposes separate bank accounts. A chatter wrote in to detail his financial situation and ask, "Are there other facts or legal issues regarding pre-nups we should consider?" Singletary ignored that part of the question and focused on her belief that pre-nups are a bad idea ("a prenup in my opinion is a plan to fail"). When called on that by another question-asker later in the chat ("Isn't this forum for information sharing regardless of what you personally believe?"), she blew up, and as she often does, got defensive and attacked: "I know the answer but you can't make me give the answer. And this is a forum for information AND my opinions. That's why they pay me to be a COLUMNIST. Look if you want information on a pre-nup you got to talk to an attorney and you know that. My tip is don't get one. And if you NEED one you don't need to be getting married."

The blinders of her own personal beliefs always circumscribe the advice she offers. In the recent chat, the one that had me gritting my teeth, an older chatter wrote to ask for resources to help sort through the financials of combining two finances later in life, when both partners in the marriage have substantial assets and kids from past relationships. 'Join everything' was, once again, her answer, with no recognition of the situation's nuances.

But where I really lost it -- and fired up this blog post -- was when I saw her response to someone looking for guidance on helping a niece about to gradate college make smart choices about the financial basics (car for transportation, work-appropriate wardrobe, security deposit and basic furnishings for an apartment, and so on). The questioner had advised the niece that if she really, really needed to put things on credit cards, she also needed to have a plan mapped out for paying off the charges, preferably within a year.

Singletary's advice was starker: "She can sleep on a bunch of blankets until she can afford furniture (and not on credit). I did."

You know what, Singletary? That's a reasonable option to suggest, but it's not the only option. Thriftiness is a valuable character trait, but it can cross over into miserliness. Money isn't a valuable thing in and of itself; the only reason any of us need to care about it is because of what it can provide to enhance our quality of life. Taking care of the necessities and laying down a decent savings cushion needs to be a priority, but I don't think anyone is best-served by making it their sole, relentless focus. The about-to-graduate law student isn't "entitled" to an occasional dinner out or vacation, but she's not asking anyone to magically provide them; she's asking about balancing priorities so that she can enjoy a few indulgences while building a firm financial infrastructure.

Life is unpredictable, and there's no guarantees about later. Selling out your future to indulge now is a bad idea, but putting all your eggs in the "later" basket strikes me as an equally risky choice. What happens if the law student continues living in austerity, eating ramen noodles and passing on investing money in experiences she'd enjoy like a bit of travel or fine dining, only to get hit by a car the year before that student debt is paid down? Financial decisions are balancing acts. Balancing acts are, pretty much by definition, tricky and fraught. An absolutist stance makes decisions easier, but it doesn't guarantee an optimal outcome.

I believe the role of an advisor -- whether that's a newspaper columnist, a paid professional, or a friend offering a sympathetic ear -- is to help the questioner more clearly understand their options and the consequences of each potential choice. Once the issue is framed and discussed, the advisor should step back and let the questioner make their own choice. Personal experience and views can be helpful in the discussion ("here's what I did/would do"), but insisting that everyone make the same choices you have or would isn't advising. It's bullying.

Tuesday, May 22, 2007

Food spending, from $21 a week on up

One of my friends asked recently about food budgets: How much do you spend in an average week?

We're not frugal about food. I buy breakfast (yogurt, hummus, bagels, things along those lines) and lunch at the office most days, partially because going out to get food dislodges me from my desk. It'd be cheaper to bring food, but I'd miss the chance to munch at local places and get outdoors. I tend to actually eat at my desk, save the occasional sit-down lunch or voyage to the park. Lunchtime is good blogging time!

Anyway, buying food at the office tends to eat $40 or so a week (Manhattan pricing), and I'll usually spend another $120 or so each week on takeout or dinner out. Even cooking rarely "saves" me much; if I cook fish, I can easily drop $20 on it. For me, though, it's something I've consciously decided to spend a big chunk of my budget on. (I suspect I spend way less than most people in other areas, like on clothes -- most years, my clothing expenditure is probably in the three-digit range, an expense easily eclipsed by what I spend on food, books and travel.)

There are certainly ways to spend a lot less on food. There were times when we had to. When David first moved to the States, we spent a month or two with only my just-out-of-college salary. With a monthly take-home income of $1,652 (the number is seared in my brain), we had to cover $950 in monthly rent (a steal in Manhattan, but still daunting on an entry-level income) and several hundred more each month on bills and debt payments. It was one of the only times in my life I really had to confront issues of "we have $10 and three days till payday; what can we afford to eat?" (In college, where I had even less money, you could always reliably scrounge meals somewhere.) Hint: Rice with soy sauce and honey is cheap and filling!

This bubbled up to top of mind for me today because I came across a story about the Congressional "Food Stamp Challenge": Four Representatives agreed to try to live for the week with a $21 food budget, the amount the average food stamp recipient receives.

Now, $21 is probably less than most actual food-stamp recipients spend; my impression is that the program is designed to be an assist, not a sole nutritional support. I see debunkers have already blasted away at the $21 constraint as an artificially low one.

Still, this exercise is a great way to draw attention to the bind those with low wages often find themselves in, as they try to stretch paltry paychecks in impossible ways to cover the costs of modern necessities. Sure, it's a stunt, but I think politicians can use more exposure to the realities their constituents live with. If trying to live on a low budget drives the difficulty home in a way stacks of policy briefing books can't, I'm for it.

So how has life on a shoestring been treating the Representatives?

"No organic foods, no fresh vegetables, we were looking for the cheapest of everything," [Jim] McGovern [a Democrat from Massachusetts] said. "We got spaghetti and hamburger meat that was high in fat -- the fattiest meat on the shelf. I have high cholesterol and always try to get the leanest, but it's expensive. It's almost impossible to make healthy choices on a food stamp diet."

Tim Ryan, a Democrat from Ohio, aborted the challenge a day early and four pounds lighter.

Last Friday night, in New Hampshire to deliver a commencement speech, Ryan succumbed to a pork chop in the hotel restaurant because he feared he would otherwise be too weak to give the address.

Several participants blogged about their experiences. As Jim McGovern's wife Lisa posted:

For years before I had kids and especially when I was pregnant, people told me how hard it is and how tired you are. Everyone sort of says that and "knows" that -- it's just a no-brainier -- conventional wisdom -- common sense. And I thought I understood that too. Having kids is hard and tiring. Then I had kids. And those first few months gave me a whole new understanding of those words I had heard so many times. None of those words had adequately described it. And I don't have the words still. (Of course there is also the flip-side of love and joy which was unlike anything I had experienced either.) My point is, I learn things by experiencing them in a whole different way than I do by reading about or hearing them.

Friday, May 18, 2007

What do you 'owe' your parents?

Here's a fascinating kettle of worms: How much do your parents' financial lives affect your own, once you're an adult?

One half of the Make Love Not Debt blog team raised this issue in a post on Asian culture and finances. I'm as 'white middle-class suburban American' as you can get, with the usual financial dynamics attached to that -- money flows from the parents to the kids, until the kids are out of the nest and sometimes longer. There's no expectation or likelihood it will ever flow the other way, at least in my particular case, barring some kind of financial miracle or catastrophe. If I won the lottery, then sure, I'd kick back a fair chunk into sharing the wealth. If my dad (a single parent for the past decade) suddenly fell into disaster, I'd jump in and try to help.

But in the routine course of things, our financial lives are almost completely independent. When I budget out future priorities, I only have to worry about me and David; we don't need to account for supporting our parents, either wholly or in part. It's only in recent years, as my social circle broadened beyond the suburban-middle-class peers I grew up with, that I've realised how unusual that it.

More than half my friends expect to have significant financial obligations to their parents. In some cases, culture is the driver; the Asian cultural expectations MLND describes are ones I've seen at play in some of my friends' families. In college, several friends grumbled that the only "acceptable" choices for them were to be economics majors or pre-med. Their parents were willing to work themselves to the bone to send their kids to top schools; in return, they expected the children to pursue lucrative careers (medicine, law, or investment banking -- maybe computer programming, though that was definitely on the fringe), so that both they and their children could reap the financial and social rewards of that professional success.

In other cases, the obligation comes from class issues. Most of my friends are in a similar socioeconomic band to me: We have careers that pay way more than the average U.S. salary. (Although in NYC, "way more than U.S. average" can still mean living paycheck-to-paycheck. Journalism is not the career for those who dream of rolling in moneypiles.) For me, that keeps me pretty level with my parents' socioeconomic band. But for some of my friends, professional-middle-class is a step up. One very close friend quips about how she grew up in a trailer and was raised by a trucker. Her dad works way, way harder than I ever have -- but his financial situation is also more precarious than mine has ever been, or than his daughter's now is. Her parents don't have that nice retirement pension my Dad does. Which means the kids are going to inherit some of the responsibility for their parents' financial security as they age. Because what are the other options? It's not like her parents made bad decisions or gambled or drank away their financial stability. They poured what money they had into raising their kids.

You hear a lot of talk about financial planning for babies, and for the costs of raising kids. There's less talk about the complex calculus of how much you "owe" to your parents, and what a giant difference those obligations can make in financial lifecycle planning.

(Did I just write "lifecycle"? I've spent too much time in the jargon trenches this week.)

Wednesday, May 16, 2007

Equipping your kitchen from scratch for $200

I rarely go in for frugality on this blog or in daily life, but I had to link to a nifty article in this week's New York Times: "A No-Frills Kitchen Still Cooks" (found via Matthew's always entertaining and prolific food blog Roots & Grubs). I could quibble with some of Bittman's recommendations (no baking pan? I use my 8x8" one often for casseroles; the list seems geared toward someone who cooks on the stovetop but not in the oven), as I'm sure every reader can, but I really like the basic premise of 'practical ways to frugally equip a new household.'

I remember the sticker shock I felt when I left college for my first apartment in the late '90s. Not just for things like furniture, which you expect to spend up on, but for all the basic things we take for granted -- Windex, olive oil (I don't recommend using them in combination), bathroom towels, scissors, storage boxes and so on. I felt like I was running to the supermarket every hour to fling money at them for household essentials. So for new grads and others setting up house for the first time, tips like Bittman's seem essential. It's good graduation-season reading.

And on that note, off I go to my college commencement! YAAY no more classes! Now to spend the next three lifetimes working off my loans.

Monday, May 07, 2007

Resetting myths about resetting debt statutes of limitations

I've been a very remiss blogger lately, and the culprit is, as usual, travel. San Francisco this week, Vegas last, and a crunching work deadline on a feature piece in the midst -- I'm behind on everything, oy. But! The end of the insanity is in sight! And I have lots of financial thoughts scampering around in my head.

Starting with an update on the "repairing your financial sins" series about rebuilding damaged credit. The common word of caution to people thinking of repaying or resuming communication about old debts is "proceed with caution," because doing so can reportedly "reset" and restart the clock on the statute of limitations. Regular reader Karawynn linked in comments to a Consumerist article saying that's a myth, and that the statute of limitations runs from the date payment initially became delinquent, no matter what happens later. Their sources: a nonbinding opinion from the FTC ("because the commencement of the seven year period is now described with some precision by the statute, it is our opinion that none of the subsequent events you listed -- sale of the charged off account by the creditor, or a payment on or dispute about the account by the consumer -- changes the allowable period for a [credit reporting agency] to report a chargeoff") and a direct comment from a TransUnion spokesman, who said (paraphrased) 'paying the account after a delinquency has been reported by a credit grantor will not have the impact of "resetting" the item.'

However -- these comments relate only to what can legally happen on your credit report, not a) what can actually happen (in practice, unscrupulous debt collectors have been caught running all kinds of skeevy stuff up the flagpole to see what flies) and b) what payments do to reset the debt legally. By reinitiating activity on an old debt, you may bump it back into the active column and restart the statue of limitations for the debt's legal expiration (the point at which the creditor no longer has any legal right to pursue you for payment).

The key point to bear in mind is that a credit report is different from a legal accounting of your debts. Some creditors never report debts to credit agencies; that doesn't mean you don't legally owe the debt. Some statutes-of-limitations expire before the seven-year window used for tracking credit-report items; that doesn't mean those old delinquent debts can't continue to haunt your credit rating, even after you no longer legally owe anything on them.

It also explains why paying a delinquent debt doesn't remove it from your credit report, and may not do anything useful for you at all, from a credit-rating standpoint. (It can certainly be useful if it clears a debt you're still within the statute of limitations on and legally liable for.) Remember, the purpose of a credit report is to help credit-granting agencies judge how easy it will be to get money back from you. If you let a debt go delinquent, that makes you a pain for the creditors to deal with -- and even if you later get everything together and clear those delinquencies, there's still a legitimate red flag, since you did incur the delinquency in the first place.

On the other hand, credit reports and credit ratings do take recent history into account. A two-year-old delinquency will hurt you far less than a two-month-old one. As the problem ages, it becomes less harmful. And if you have recent problems, the best thing you can do is reach some sort of arrangement with your creditors before the account is charged off. (When that happens varies, but it's almost never less than 90 days or more than 365 days after the debt became delinquent.) Charge-offs are the really black smirches you want to avoid, and they're often preventable -- creditors will be pretty flexible about payment arrangements so long as you're active about negotiating with them.