'Don't Be Evil' investment strategies

It had to happen, I suppose. For years a handful of organizations have focused on advocating socially conscious investing, encouraging individuals and organizations to weed out of their investment portfolios those companies that perpetrate environmental, cultural and political ills. So what's a red-meat right-winger do to? Fight fire with fire (or money with money), of course, and launch a mutual fund pledged "to defend free enterprise from the Left’s use of capitalism against capitalism." Hence we have the Free Enterprise Action Fund, which Daniel Gross entertainingly smacks around in Slate today. It seems that fighting the Left's crimes against capitalism doesn't yet deliver better returns than the S&P 500.

Sort of in line with my last post: I've never been a fan of the line that a corporation's primary responsibility is to make money for its shareholders. There are things more important than absolute dollar returns, but it's become a business cliché for CEOs to spout off that their legal and fiduciary duty is to do whatever will make the most money for stockholders. Worse, this gets spun as some sort of democratic affirmation, because for public companies, anyone can be a shareholder and lots of everyday people are, thanks to mutual-fund-packed 401ks and pension plans. And, of course, we don't want to see bad things happen to corporate America and tank Grandma's pension, do we? Why, those nasty representatives in Congress considering an excess profits tax would just be snatching money from the millions of Americans with Exxon stock in their retirement plans!

Me to Congress: Please snatch money from my retirement plan. I have no idea what stocks are in the mutual-fund mix in my 401k, but personally, I'm perfectly ok with taking a hit there in return for tighter controls on the petroleum companies that are currently reporting annual profits surpassing the GDPs of most developing nations.

Someday soon I need to quit being lazy and explore options like Working Assets' range of financial products.

Why I'm not trying to maximize my money

Back from the road again -- travel and blogging just don't mix well for me. I see my post about keeping separate accounts with my spouse generated comments while I was gone. One point in particular caught my attention:

My wife and I used to operate the exact same system as you and I have to say the best financial decision I ever made was to change this round. ... Our savings rate has tripled since we started doing this and yet we haven't felt deprived. We have just stopped wasting money.

That makes sense to me. It also touches on one of the fundamental issues that got me started on thinking and blogging about personal finance: What do you prioritize over "more money"?

For me, it's a pretty long list. Heading it is "a lifestyle that means I can think about money as infrequently as possible." David and I would spend less if we had joint accounts and cleared purchases with each other. I'm absolutely certain of that. We would also spend more time wrangling with each other about finances. I'm willing to trade away a few hundred dollars a month in additional savings to spare us that stress. I'm also aware that the choice is a luxury I'm very fortunate to have.

Money, in the absolute sense, doesn't interest me. This is why I don't have any desire at all to be an "active" investor -- stocks, interest rates, esoteric investment vehicles and other moneymaking schemes don't seem like any fun to me. Paychecks from our day job are enough for me and David to live on and meet our (admittedly too minimal) savings goals; if I'm going to invest my free time in something, it had better entertain me, and monitoring investments would not.

I will be the token "I hate money" personal finance blogger :)

A very annoying form of rebate

David got a new cell phone and plan last month from Cingular which came with a $20 rebate. We did all the usual annoying rebate stuff, including waiting close to two months for the refund, which arrived Friday. But here's a twist: Instead of the check I expected, what arrived is a prepaid Visa card, preloaded with the $20 rebate.

I think that's pretty obnoxious, because it'll be hard to use all $20. The letter it came with suggests that if you want to use the card for a purchase of more than $20, you request that the merchant run the purchase twice, once for $20 and then once for the rest of the balance, paid with cash or another credit card/check. I've occasionally split bills in weird ways at restaurants, but I've never tried such a thing in retail shops, and I can't imagine it would get a terribly favorable response.

The poetically just thing to do, ofc, would be to use the prepaid card to pay $20 of David's next Cingular bill and force them to handle the split payment. We have the monthly bill set to automatically charge to our Amex. I wonder if it's worth wranging with Cingular customer service to skip the autobill next month and pay with the prepaid card.

Probably not.

Sigh.

What do you really need in your 'emergency' fund?

The question came up this week in a chat area I frequent: When do you declare your emergency fund full? Financial pundits like to throw around suggestions about 'have three/six/eight/a bazillion months of cash on hand,' but what are people really setting aside as a cushion?

Here's an article on the topic I like: The $0 emergency fund. The author's argument is that these days, with easy credit and all sorts of savings and investment options available to regular consumers, what you really need isn't cash but flexibility.

Jonathan Clements of The Wall Street Journal drew a lot of heat a few years ago when he confessed to keeping only a month's worth of expenses in his emergency fund. He wanted his money working for him in the markets, not disappearing inch by inch as taxes and inflation took their toll.

But Clements' view is shared by many financially sophisticated folks who would rather take more risk -- in stocks, in real estate, in their own businesses -- to get better returns. And that approach can be perfectly legitimate, as long as you can quickly get your hands on enough money when you need it.

This makes a lot of sense to me. A 'real' emergency -- a job loss, a medical crisis, draconian rent hikes, etc -- is something that throws your usual life into chaos. You can't effectively plan for such things. What you can do is give yourself as much flexibility as possible. Having lots of savings is a great cushion for all sorts of unexpected life events, but you don't really need all that much sitting in a basic checking account or stuffed under the mattress in $20 bills.

There are a number of savings/investment options that give you near-immediate accessibility to your money, like money-market accounts or straight stock-trading accounts. A level up, there are vehicles like short-term CDs. I just checked my bank's rates, and the rate difference between a 1-year CD and a 5-year CD is less than 0.10%. With so little incremental difference, there's no reason not to opt for the shorter duration and have your money more liquid.

The real decision point comes when you're considering tying up your funds in something difficult to quickly liquidate -- like real estate or a business venture. There, I think the 'flexibility' comes into play. The investment may eat up an uncomfortable share of your 'cash' savings, but: do you have other ways of tapping cash if you need to, like lots of available credit, a home-equity line, a 401k loan, and so on? So long as you *can* get three/six/eight/a bazillion months of available money if you need -- and everyone will have to come up with their own comfort-level number to fill in that blank -- it doesn't seem essential that the money actually be cash.

So what's my own emergency-fund strategy? I'm trying to save up about $5,000 to put in a money-market account, where I can grab it instantly if needed. I have a significant chunk of available credit -- enough to pay most of my living expenses for about six months, I think. And I have about an equal amount available for borrowing against on my 401k.

My next 'major' cash-immobilizing purchase will likely be a primary residence. If we eventually get there, I expect the down payment to devour any 'emergency fund' savings we've accrued, but I won't fret too much about it as long as we have credit levers we can pull if needed.

Our best marriage decision: not pooling accounts

The best thing David and I ever did for our marriage is maintain separate financial accounts.

Decisions like keeping your own name when you marry (I did that too) are very common, but I have no idea what percentage of couples don't merge their checking accounts. For us, it was an easy decision. We each make very similar salaries. We're also both alike in our habits: we fritter away a lot of money on perks like books, travel and dining out, but we're also reliable about not spending money we'll need for rent and bills and such.

We're also both prone to spending on things the other would consider stupid. David recently dropped something in the high-two, possibly three, figures for his 25th "Dark Side of the Moon" copy. (He insists this one is somehow different and special. The distinction escapes me.) I recently spent three figures on a handbag, for the first time. (David doesn't understand why I didn't spend $20 and buy one off the street. The distinction escapes him.) If such purchases were coming out of our money stash, we'd be at eachother's throats about them. But because his personal spending comes out of his account, it doesn't faze me, and vice versa.

We could accomplish something similar by pooling all our money and giving ourselves allowances, as the Make Love Not Debt pair recently discussed. For us, though, there's no pressing reason to go that route. We don't have any big savings targets we're trying to hit right now. (We probably should, like saving for an apartment downpayment, but we're not there yet.) We don't have any joint debt. We're pretty good at shifting our resources around as is sensible. When I was trying to pay off my credit-card debt, David carried my student-loan payments for years. On a day-to-day basis, whoever feels like they can spare the cash for groceries, dinner out, etc., is the one to pick up the check. For major expenses, like a vacation or a sudden cat trip to the vet, we generally charge it to the Amex (our closest thing to a shared account -- I'm the primary cardholder, but David is an authorized user and has his own card) and split it up at bill-paying time. For us, it's a surprisingly stress-free system.

None of our financial information is secret from each other, and when it comes to big savings pools, I think we both consider them 'ours' -- I may be the only one funding my 401k, but I fully expect it to be used on us both, and I regard it as a shared asset. But I like the independence of each of us having our own accounts, and being able to indulge our own spending idiosyncrasies. Having kids is the one thing I can think of that would derail this independent-finances approach. There, the expenses are so big and so shared it would be hard not to have a joint pool to draw from. But for us, I think not going the typical joint-checking route has spared us a lot of marital discord.

At least it's less painful than having my debit card hacked

Some researcher, somewhere, must have calculated the odds of having your credit-card information intercepted and used fraudulently. In the typical consumer lifespan, how many times is one statistically likely to hit the problem, on average?

I'm now on go-round #3.

Both times before, it's been my Netbank Visa/check card that got nailed. The first (I can't remember exactly when -- perhaps three years ago?) was the ugliest: someone got hold of both my card number and PIN, and made a dummy card that was used to withdraw about $1,200 from an ATM in Queens, the entirety of what was in my account. No one has my PIN, and I had my card on me the whole time this was going on. What probably happened was that my card got hit in an ATM skimming scam. I'm not completely oblivious and would likely have spotted a suspicious device, but a hot new trend in fraud is internally rigged ATMs -- and I do pretty regularly use the kind of non-bank ATMs in convenience stores and whatnot that are most susceptible to this. (Well, I did. I *try* to stick with bank ATMs now ... but I fall off the wagon a lot ...)

Clearing that up entailed filing a police report, along with all the fraud paperwork at my bank, and waiting several weeks for my money to be credited back. To NetBank's credit, they didn't hassle me too much about "they used your PIN, you must have given it out!" or anything.

About a year ago, my NetBank account got cleaned out again, though this time it was a case of more "classic" credit card fraud. One morning a blizzard of charges appeared for expensive, out-of-town purchases at stores like Staples and Foot Locker. Call NetBank, file fraud paperwork, replace card, wait several weeks for a refund, lather, rinse ...

Neither incident ended up costing me money that wasn't refunded (although I did probably spend $10 or so tracking down and faxing police forms to my bank and getting things notarized, the first time). The most painful part each time was waiting the week or so it took for my new bank card to arrive, during which stretch I had no access to cash. Ug.

So this Tuesday, I stagger home at 9:30pm from a long day spent mostly at a hospital ... and find 10 messages on the answering machine. Nine were from merchants or Amex calling to say "Hi! We want to verify this large, suspicious charge on your card!"

ARUGH.

I managed to ring back and connect to Amex's charge-verification unit about five minutes before it closed for the day. To Amex's credit, it seems like this is going to go about as smoothly as it can. They caught this early (a $500 online order from Nordstrom's was the first to set off their red-flags radar), proactively notified me, and it sounds like I don't have to file a pile of paperwork on this. They're taking care of contesting all the charges that came through on Tuesday from outside NYC, and of taking off the one suspicious charge I spotted that had already gone through. (Last Thursday, my Philly scamster apparently took the card for a trial run with a Domino's pizza order.) They also overnighted me a new card for free -- yay! It arrived Thursday.

(I initially thought that a particularly nice customer-service touch, that Amex was overnighting my card. If only my bank had done that ..., I thought. But then, on Thursday, I unexpectedly ended up putting several hundred dollars on my card -- and, lacking my Amex, I charged it to my backup Providian Visa. At which point it occurred to me that Amex has a strong self interest in getting me a new card as fast as physically possible. All those precious merchant transaction fees! Lost to a rival! Quelle horror!)

This time, the most painful part is going to be tracking down and changing all the things I have autobilling to my card. Grr.

So, three fraud-hacks in ... counts on fingers ... say about 10 years so far of active credit-using consumer life. Am I above average yet?

401ks, 529s .... when bad investment choices defeat the whole point

I'm in the process of setting up my 401k with my new job, which is going slowly since my new employer is also in the midst of moving its 401k services to a new vendor. I'm not sure yet what the new-new vendor's investment options will be like, but when I set up my fleeting enrollment in the new employer's old vendor's system, I was surprised to find few attractive options. The choices were limited to less than a dozen funds, many with high fees. Ug.

I'll post in more detail about 401k stuff when I finally get registered and settled with the new-new vendor, but the problem of limited choices reminded me of one of the most troubling aspects of the (thankfully, now apparently dead) privatize-Social-Security scheme: if mutual funds were used as a key savings vehicle for the plan, it would force a huge amount of money into a savings system that isn't particularly efficient or advantageous for investors.

This is the same problem that seems to be a very nasty catch in the well-intentioned 529 college savings plans, designed to let parents set aside tax-deferred dollars to educate their sprogs. The plans are set up state-by-state and vary widely. However, they've increasingly come under fire for carrying indefensibly high fees and being touted with insufficient disclosure. In some states, the ones with the poorest 529 plan investment selections and highest fees, the plans probably aren't worth using despite the tax advantages.

So, since this is an area I have no personal stake in whatsoever (the cats need no higher education to fulfill their duties, being cute and catching bugs around the apartment) and therefore know little about: Any parents out there want to recommend useful college-savings mechanisms? Upromise has made it through the dot-com meltdown and seems to get reasonable reviews ... anyone have a vote on whether it's useful or a gimmick?

More on when bad debt goes, well, bad

A few good points came up in response to my debt-expiration-dates post, and I've done some more research to expand on it a bit.

-The FTC allows negative information to linger in your credit report for up to seven years. After seven years, you can request its removal. From an FTC FAQ on how the seven years is calculated: "Generally, the period runs from the date that the event took place." So, seven years after a debt was due, creditors generally lose the ability to put a black mark about it in your credit report. They may or may not also lose the right to sue you, depending on the nature of the debt and your state's statute of limitations. The credit-reporting statutes and the lawsuit statutes are completely separate.

-There's a big neon-flashing caveat to the limitations -- it dates to the period of "last activity" on your debt account. Making a payment, or agreeing in writing to do so, can reset the clock by moving your account back to active status. Tread carefully before paying or agreeing to pay anything on old debt. (Of course, you may still have a moral obligation to pay off an old debt. These policies only cover your legal obligations.)

-Some types of debt have no statute of limitations and never expire. Among them are student loans, past-due child support in most (possibly all) states, and most taxes.

-The Fair Debt Collection Practices Act is actually pretty strict in regulating how collection agencies can approach consumers. For example, they're barred from calling outside "reasonable" hours, defined as 8am to 9pm. You can also force them to quit communication. If you notify a collector in writing that you want them to stop contacting you, they have to, except to notify you of specific remedies they're invoking. Forcing communication to stop does not mean they have to end efforts to collect the debt, but it does mean they can't keep up a barrage of calls and can only contact you further if they're filing a lawsuit or taking other remedy measures.

Our descent into the stock-market inferno

David recently called me with terrifying news: "I'm going to exercise my stock options!" My response -- you have stock options!?!

Turns out his company, A Giant Madison Avenue Ad Conglomerate, chucked a handful of options at staffers about five years ago. They've recently vested. Although Giant Conglomerate's shares are trading dead flat to where they were five years ago, David's options carry a strike price of about half the current value -- so, if he exercises the options and cashes out, he'll see a profit. (A fairly tiny profit. Like, a rounding-error-on-Google-shares size profit.

Since neither of us has ever mucked around with the tax implications of anything related to stocks, I promptly wigged out. "Exercising stock options" is irrevocably linked in my mind to complicated tax situations and debacles with the AMT. "Whatever you do, do not exercise and hold the options!" I fretted at David.

I don't pretend to have looked in any detail at the minutia of how it works, but my understanding is that when you exercise options, you're taxed on the 'profit' of the difference between your strike price and the market price -- even if you end up holding onto the shares and not realizing any actual-cash profit. If, as happened to so many during the dot-com smashup, the shares you own then tank, you still owe on what they were 'worth' on your exercise date. So why would anyone exercise shares and not immediately sell them? If your options are expiring but you want to gamble on the shares going higher, you can buy and hold. It can also result in a lower total tax burden if you hold the shares for more than a year, shifting the gains into the capital-gains category (which can come with a lower tax rate than you pay on your regular income).

But I have no interest in gambling on Giant Conglomerate's shares climbing, and given the tiny sums at stake here, trying to game the tax rates would save us about enough to buy an extra box of cat food. So my vote was firmly cast in the "exercise and dump" category.

My next fret was about the logistics of that -- would we need a brokerage account? An accountant? I just write about stocks, I've never tried to do anything so silly as selling them ...

Fortunately, David's company is apparently prepared for having a workforce with no clue about these things, and has an arrangement struck with the financial institution handling the stock-option deal. Employees can arrange for their options to be exercised and sold simultaneously, with the tax withheld. We'll just get a check for the net amount, and presumably some paperwork for the IRS next year around tax time.

I haven't seen any of the paperwork on this -- David and his company are handling it. It still feels rather nebulous; I'm viewing the whole thing as a rather novel experiment. Now if only my company would start talking about spin-offs and IPOs, it'd really feel like 2000 all over again. Maybe I too will eventually get some of these newfangled stock option things.

Seeking those low balance transfer offers

When I've taken advantage of offers like Providian's 'low lifetime APR on transferred balances,' they've all been offers that sought me out rather than the other way around -- those 'you've prequalified!' flyers that arrive by the pound in my mailbox. The rates on those offers seem to be better than those dangled for fresh prospects hitting various card-lenders' websites. But if you're not getting sacks of decent offers in the mail, is there any way to seek out good rates? I'm throwing this out to the floor -- I don't know the answer.

Bankrate maintains a chart of low-rate cards, but none are particularly fantastic rates. Google Ads, of course, is all too happy to kick up hits for 0% APR offers, but I rather worry about the idea of picking a lender based on "L0W R@T3!!!!!!!" ads.

Two caveats to watch if you're going to transfer a balance to save on the APR. 1) Most lenders charge a transfer fee. The standard seems to be 3% of the balance, with a $5 minimum and $75 max. That can still be a good deal if you're transferring a large sum you'll be paying off over time, but it's good to know in advance if you'll get hit with the fee. 2) Think carefully about time-limited offers. Right now, when I log into my Providian account, it's dangling a 2% APR till next October on transferred balances. But come November 1, the rate shoots up to Prime + nearly 10% -- making it currently a 17% APR. Ow. It's tempting to say 'oh, I know I'll have the balance paid before the rate goes variable,' but I found that my timetable for that sort of thing slipped a lot. I vastly prefer paying slightly higher APRs for a life-of-the-balance offer.

Actually, two more caveats: 3) If you transfer a chunk of money to a card with a low-rate offer, don't use the card for anything else. Your monthly payments go first to paying off the low-rate principal -- while that $100 you charged for the new purchases racks up a sky-high new APR rate. Another lesson I learned the expensive way. I was paying nearly as much in finance charges each month for a $200 purchase as I was for a transferred balance about twenty times that. And 4) try not to make the mistake I did of missing a payment and watching your rate skyrocket. Sigh.

Debt expiration dates

Many years ago, I made the brief mistake of subscribing to the Science Fiction Book Club to score some free books. This quickly got annoying, as they would send me their monthly selection every few weeks unless I remembered to send in an "aiee, no, don't send!" slip. I would then have to return the shipped book. Not infrequently, they would fail to log my return. I cancelled my subscription as quickly as I could.

My final return never got logged, and about a year after I ended my subscription I got my first collection letter. In classic collection agency-letter form, this was followed by a barrage of increasingly nastier missives, vaguely suggesting dire consequences if I didn't make right my debt. Said debt was around $18. I figured they would eventually go away, and they did, but it was a few years before the letters dried up entirely.

Cleaning out some old mail a few weeks ago turned up one of those letters, which got me wondering: What's the statute of limitations on debt? Surely, at some point, creditors lose the right to come after you with sharp, pointy lawsuits and credit-record nastygrams.

And lo and behold, they do, thanks to the Fair Debt Collection Practices Act. The law mandates how collection agencies can contact alleged debtors, and also forbids chasing debt that's beyond the statute of limitations. Those vary by state, but Bankrate has a nifty chart that offers a good starting point.

The surprising key to credit-card satisfaction

Sorry for the unexpected hiatus. I am the world's worst business traveler -- it always takes me days to recover afterward, and I get incredibly unproductive until the post-travel/jet-lag-blah passes. I have no idea how salespeople and whatnot stand doing it constantly.

Anyway, I return with a rant. When choosing credit cards, I typically look at the fine print about rates, terms, grace periods, etc. Something it never occurred to me to investigate: how annoying is the lender?

My Amex In NYC card has been my main pay-off-each-month card for about 18 months. For several years, I've also had a Providian Visa, which I got to take advantage of the 4% lifetime ARP on transferred balances. I transferred over my credit card debt, paid off a chunk each month, stuck the card in a drawer, and ignored it.

Everything went smoothly until last September, when I was distracted (it was another damn business trip, naturally) and forgot to make a payment. Whoops. I remembered about a week after the due date and promptly sent it off, but by then, the damage was done. Providian whacked me with a $40 late fee. I called, complained, and got it removed, but the really nasty part was that the late payment triggered an APR jump. My 4% rate shot to 20% -- with no formal notice. I found out about the penalty when I saw the sky-high charges on my next statement. I called again to complain, this time about the lack of notice that I'd triggered a rate increase. I also politely threatened to yank my balance off the card if they didn't put my rate back down. They refused, and I went shopping for another transfer offer. Crankily. My balance was low enough that the higher APR wasn't actually costing me that much; I was more annoyed by the shoddy customer service and the principle of the thing.

So, for once, I took an interest in the credit-card offers jamming my mailbox. Chase sent one offering a 0% balance transfer through 2007. I took it, and transferred my Providian balance. (I decided not to cancel the Providian card, though, to keep the free FICO score access.)

The problems with Chase started with my very first statement. I had scoured the fine print of their card offer for catches, but managed to miss the big one: they offer a 0% APR, but charge a transfer fee on balances moved over. I maxed it out and got hit with a $75 charge. Grrrrrrrr. Also, the dangled 'no APR till 2007' promise didn't pan out -- they instead only set my 0% APR period for about three months. Another little fine-print catch: they can change the terms of their offer at any time. Grrr again.

When we got our tax refund, I paid off my credit-card debt and left my Chase and Providian cards with $0 balances. I haven't yet cancelled the Chase card, but I'm highly tempted. My old cards spoiled me. I was unprepared for Chase's constant hard-selling tactics.

The first call was the one that caught me most unaware. A Chase agent rang to 'confirm some information about your account.' It was a few weeks after I'd opened the account, so I figured I'd go along with it. 'Is this your address?' Yes. 'Is this your correct phone number?' Yes. 'OK, Ms. Cowley, I'm enrolling you in the credit-protection plan ...' Wait -- what? I had never agreed at any point in the call to any new 'services' -- I thought I was just confirming information for their records. I emphatically said no, no new services, do not enroll me in anything, and hung up. The agent had a thick Indian accent, and seemed not to follow when I said I hadn't agreed to anything like that. I got the impression he was following a script, and had either missed a step or been instructed that if you get a few minutes into the call, just keep barreling along.

Since then, at least once a week I get a phone call from Chase agents (always from offshore call centers) trying to talk to me about my account. Now, if I'm unluckly enough to answer the phone, I immediately say I don't want any new services and hang up.

Chase also blankets me with mailed offers, of the particularly insidious 'cash this courtesy check to start your new services' variety. One recent one included a $10 check, which would sign me up for a $120/year plan offering 'discounts' at Disney World. I can think of few things more insanely priced and useless.

Luckily, I'm not at all tempted by $10 checks, but such marketing tactics seem deeply deceptive and unethical (though probably legal). Had I known Chase pulled this crap, I would never have gotten their card in the first place. I never expected credit-card companies to be warm and fuzzy corporate Samaritans, but this is skeezier than anything I've experienced with other companies.

So, for any considering Chase cards, be warned!

Rebuff the upselling, score perks anyway

I'm in Vegas this week for a software conference, and my company kindly shelled out for me to stay in style at the conference hotel, the
Venetian. (Motto: "More gilt per inch than Trump's most lurid imagined fantasyland!") When I checked in, the clerk promptly asked if I'd like to upgrade to a larger room. Larger!? Ha ha, no. The basic room is already bigger than my first NYC apartment. Next question: Would I like to upgrade to a room with a view of the Strip? Again, no.

Turns out the only rooms available at the moment all had Strip views -- so I got for free the "upgrade" I'd just declined to pay for. Rental car companies pull this scam all the time. I always book economy cars. (I'm short; I don't need legroom.) Inevitably, the first thing I'm asked when I arrive is "would you like to upgrade to a full-size?" Trick is, many car companies don't even bother actually stocking economy cars any more. More than half the time, when I turn down the full-size upgrade, I get a full-size car anyway for the economy price.

Insurance is another area where rental-car companies famously try to slip in lucrative, unnecessary add-ons. If you have your own auto insurance, you're generally covered for anything that happens with a rental car. If you don't have personal insurance, you still likely have some coverage on your credit card -- many offer policies that cover loss and damage, as my Amex does.

But here's something particularly insidious I hadn't known about before. Two weeks ago, I rented a car from Hertz for a quick day trip to Long Island. While filling out the forms, I noticed a small sign on the counter (very small) mentioning something legalistic about Hertz's optional CDW (collision damage waiver) covering damage beyond the insurance level mandated in NY. Googling turns up the info that New York requires rental car companies to cover collision damage on all rentals -- making Hertz's add-on CDW coverage in NYC even more ridiculous than usual.

Because we really needed another Byzantine credit scoring system

I'd been out of the loop. "No post on the new VantageScore yet?" my sister asked. Er, VantageWTF? Thank god for Google News.

Apparently the Credit Data Triumvirate -- Experian, TransUnion and Equifax -- banded together to unveil VantageScore yesterday, a new credit-scoring model to compete with FICO. VantageScores will range from 501-990 (higher is better), versus the 300-850 scale FICO uses.

What else is different? No one can tell. The Triumvirate is being even less forthcoming than FICO creator Fair Isaac about how their scores are calculated. The promotional propaganda says VantageScore was created "to address the market need for a common sense approach to credit scoring." Like hell. VantageScore was created to address the Triumvirate's crankiness about all the money Fair Isaac collects for holding the keys to the FICO kingdom.

A Fair Isaac spokesman told the LA Times that the Triumvirate "have all had their own credit scores that they have tried to sell against us, and they've been wildly unsuccessful. This is them trying to take another crack at our fortress." Investors suspect it will be a successful crack. Fair Isaac's stock dropped 7 percent yesterday.

So what does this mean for consumers? In the short term, not much. FICO is entrenched in the credit-granting process. The Triumvirate plans to market VantageScore to mortgage firms, credit-card companies and other lenders, and they'll need to individually persuade FICO users to switch. That certainly won't happen swiftly. If VantageScore does catch on, it's likely to exist in parallel with FICO for a long while, with lenders scrutinizing any cases that kick up wildly different results from the two models. VantageScore's backers claim their algorithms (the details of which I have not seen any public comment about) will better predict the credit habits of "thin-file consumers," those with a scant paper trail (like young adults). It's possible they've built a better mousetrap, but the idea of one black-box credit scoring model replacing another black-box model does not fill my consumerist heart with joy.

Consumers won't be able to get their hands on their VantageScores for at least another few weeks, says the Washington Post.

I'm curious if consumers will be required to pay for access to their scores, as they are with FICO. I just rang the Equifax media contact listed for VantageScore queries to ask; I'll report back when my call gets returned.

More financial paperwork: your social security statement

I'm part of the generation that considers Social Security something mysterious and mythic -- I gather it's supporting a large chunk of the population in their old age and infirmity, but it's nothing I'm banking on in my own retirement planning. Still, it's interesting to have some idea of how it works and where you stand on earning benefits. That's where your annual Social Security statement comes in.

The full story of Social Security's intricacies would require a thesis to explain, but the quick gist is that to earn retirement or disability benefits, you need to accrue "credits" for working. For 2006, you earn one credit for each $970 of wages or self-employment income. You can earn a maximum of four credits per year, so it takes at least 10 years of work to accrue enough credits for retirement payments. Those years don't need to be contiguous, though -- you can earn a few credits, have no income for few years, and pick up again with no problem.

Your annual statement shows how many credits the SSA has on record for you, which is useful to check against your own work records. It also estimates your expected benefits for retirement or disability, and the survivors' benefits that would be available to your family if you die. A sample statement, with explanations, is available at the SSA website.

The SSA automatically sends out statements annually three months before your birthday. If you feel the need to see one sooner, you can also request it online, although the statement will still come to you via snail mail. David's turned up recently, and we realised we haven't seen one for me in a long time. Because we bounce around a lot, I rang the SSA to ask about changing my address in their files. It turns out they pull address information from annual tax filings to the IRS -- so, if you're filing taxes, the SSA should find you and get your statement mailed out properly.

Also, like many government agencies, the Social Security Administration is in charge of all sorts of bizarre, semi-random tasks. Such as compiling lists of the most popular baby names each year. (2004 winners: Jacob and Emily. The records go back to 1880, when the top names were John and Mary. Stacy has been plunging like a stone since its popularity peak in 1973.)

A very elaborate way to scam credit card companies

A number of personal-finance bloggers like to play arbitrage with
zero-percent balance transfer offers from credit-card companies. The basic idea: Credit card lenders are strafing people with offers for limited-time 0% APRs on balance transfers. You accept, take out the biggest balance transfer you can get (generally something in the $5,000-$20,000) range, and tell the lender to transfer the balance from another card where you're not actually carrying a balance. That creates a massive credit on the second card. You call that second lender, tell them to cut you a check for the refund, and take that money and park it in a high-interest savings or money-market account like ING Direct's (current promotional rate: 4.75% APY). You set up automatic payments to zap over monthly minimums to the card with the massive balance. When the 0% APR expires, you pay it off. Meanwhile, you've gained several hundred dollars risk free from the interest you've earned.

I think it's a silly game to play. There are practical considerations. StopBuyingCrap.com tracked what doing this did to his FICO score over the course of a year -- since you're running up huge liabilities, FICO freaks out. (His score bounced around between a 612 and a 751). If you're late with a payment, your 0% APR disappears. If you use the card with the balance for anything else, you start owing finance charges: When you have a low-rate balance transfer on a card, and then use it for a new purchase, that new purchase becomes the very last thing that your repayment dollars are applied to.

Still, in the right circumstances, you can pull this trick off and make money with it. I still think it's pretty silly. PRBlog.com likes to muck around with this. In "The Value of A Great Balance Transfer Deal," he breaks down the math behind one of them: an $11,000 balance transfer from Citibank at 1.9% APR will net him $600 after tax over three years. This game strikes me as a hell of a lot of work for $200 a year. The only reason I can see for doing that is that you're a finance geek and enjoy the work. Which is a perfectly fine hobby, but there must be more lucrative investment schemes out there, if you're willing to devote that kind of time and attention to detail ...

For those who do want to fuss with extracting the very best possible rates on money socked away in savings, though, my friend Stephen pointed out an excellent resource: a Bank Deals blog. The site tracks and compares rates on money-market, CD and savings accounts ... for fun. Yow. Still, yay for financial geeks!

Minimum Visa/Mastercard charge requirements not allowed

NYC is home of the small grocery shopping trip. I don't have a car and am limited to the groceries I can carry on my own. That, combined with my own scheduling scatteredness, means I do near-daily grocery runs for whatever items I need for that night's dinner. Which means I make a number of grocery trips where I'm buying just one or two things and spending something like $6. No problem if I have cash; big pain if I haven't hit the ATM recently, since nearly every small deli/bodega I shop at has those "sorry, $10 minimum on credit card charges" signs.

Turns out minimums are a violation of Visa and MasterCard's merchant agreements. If you want to charge your 75-cent candy bar, you're technically entitled to. MSNBC covers this in a recent "Ask the Consumer Man" column. Some Googling turned up further confirmation, including an NY Better Business Bureau page on the issue.

In actual practise, I don't know that I'll challenge the policy at places I shop regularly. Kicking up a stink may or may not work, and is unlikely to endear me to the shop owners. But the pharmacy I hate, but occasionally stop in at anyway because it's close, which claims a $25 minimum on credit-card purchases? There, I may make a scene next time I'm caught short-cashed.

Because the best price point is free

Another in my very infrequent frugality series: Microsoft is giving away completely free USB thumb drives. (Offer good in the U.S. only. Sorry, international readers!) Loaded with Microsoft propaganda, of course. Since they can be pretty useful devices, I figured I'd pass it along. My sister was quite astounded this weekend when I introduced her to her first flash drive, which we used to transfer MP3s between computers. (I was impressed -- her circa-1999 iMac had no problem with the drive and required no drivers.) Thumb drives seem to be the tech tchotchke of choice these days; I tend to get piles of them in press kits. Still, it's nice to have an alternative to small-capacity-and-breakable floppy disks!

(The answers to Microsoft's questions are '2' and true to all the rest.)

Colour-shifting ink, watermarks, and a really obscured motto

New $10 bills are rolling out today, featuring more colour and the catchy slogan "We T[splot]N People."



Now if only they would start making the bills out of plastic instead of paper, David could stop griping out how our colourless paper money doesn't feel like real currency. Whereas when we go to Australia, I feel like I'm playing with Fisher Price My First Money(tm).

Frozen assets

Over the weekend, my sister and I were talking about financial matters. She said she'd come up with a way to control credit-card impulse spending: she froze her card.

I assumed she meant she'd had the issuer halt new purchases. No. She literally froze the card.



"When I want to buy something, I have to spend a few hours thawing the card," she said happily. "And then I usually decide it isn't worth it."

I think we should pass a bill requiring Congress to give this a try, as a deficit-reduction measure. And then pass another bill authorizing the construction of a really, really big freezer. I'm thinking we could repurpose West Virgina for the cause.