How to mess up an Amex payment and destroy your finances

Lest my personal-finance blogging imply I have all of our financial matters nicely in hand, here's a fun cautionary tale about how I firebombed David's bank account.

Because David and I have separate checking accounts and budgets, we each pay in each month to pay off the charges we've run through our main credit card, my Amex. I use Amex's Pay Online option, which lets me directly debit money from linked bank accounts. Two weeks ago, I sat down to pay David's portion of this month's bill. I calculated what he owed, cleared the amount with him, typed in the amount, hit the "pay" button, and clicked on "confirm and pay."

As I whizzed past the confirm screen and said yes yes pay, I realised -- literally the second I was hitting the button -- that I'd put in an amount almost twice what I actually intended to put in. An amount substantially greater than what David actually had sitting in his bank account.

I caught the mistake the instant I hit the button -- but by then, it was too late. Amex's online payments are instantaneous. Once you've confirmed, you can't change or revoke the payment.

I got on the phone right away to Amex's customer service, which threw up its hands and said to call Citibank and arrange a stop-payment.

Citibank's customer service center is in India, and is impressive in its level of cluelessness. Dealing with them has rarely proved helpful, and this experience was no exception. The center put in a stop payment order. A week later, we learned -- painfully -- that Amex payments don't work like typical check or debit payments, and can't be halted with a stop payment.

This whole mess was compounded by David's lack of access to his account info. In a separate incident, he lost his debit Paypass keychain thingie right after my payment debacle and had to cancel his debit card and get it reissued. Doing that temporarily cut off his access to Citibank's online banking site -- meaning he couldn't check and see what happened with the Amex charge. It took more than a week for his replacement card to arrive.

When it did, Tuesday, David hit the ATM and found that his account appeared untouched: the Amex payment had apparently bounced or been stopped. Figuring we'd worked through the mess, I went in that night and put in another payment on Amex's website, for the amount I'd originally intended to pay.

Insert hollow, dark laughter. Yesterday morning, David found his account hugely overdraw. So, instead of dealing with the Indian call center, David went to a Citibank branch to ask: What happened?

The original Amex payment was never stopped. It can't be. Online payments of the sort I made are apparently handled as direct electronic transactions between financial institutions, routing through the Federal Reserve system. If a payment doesn't go through because of insufficient funds, it tries again. Three times.

So, we now have the original payment making its second or third attempt to go through, plus the second payment I made last night starting its attempts. We're even further into the hole than when we started. And presumably every time one of these payments fails, it will generate another bounced transaction fee, on both sides, from Amex and from Citbank. Amex already socked us with one $38 fee for the first bounce. I'm praying each subsequent bounce won't incur another.

The obvious way to solve this mess is to throw enough money into David's account to let all the Amex payments suck out the money they're trying to. But, er. We lack the cash. My clever plans to create an emergency fund haven't actually come to fruition yet, partially because taking just five credits this semester
(I'm almost finished, yay!) killed my ability to get loans and all my free cash is temporarily tied up paying for the credits my company will soon reimburse. So, for the moment, we're just kind of financially screwed.

I think we can dig mostly out of the hole with this Friday's paychecks. It'll be months before I crawl out of the guilt hole, though. I owe David lots of extra niceness in return for temporarily completely destroying his bank account :(

Have we scrapped the heath-care system yet? No? Damn.

Last Friday I made an appointment with a new doctor for my annual physical. I already knew this doctor, who came recommended, didn't take my insurance; I'd decided I'd rather pay out of pocket (well, out of my HSA) for a recommended physician than take a stab in the dark at my insurer's in-network directory. So it didn't surprise me when the doctor said she doesn't take my insurance (I already knew that from her website). What surprised me is when she said she could only fit me in because I'm not paying with any insurance.

"I just can't take any more in-network patients," she said in her email. (Doctor with email? I love her already!) I understand why. It's no secret that networks reimburse providers at a highly discounted rate, one that increases slightly more often than Halley's Comet appears, and make them slog through mountains of paperwork to get the meager checks.

Once again, the medical services David and I actually require are services our insurance won't pay for. The cover story in this week's New York magazine is about "generation uninsured.". That's a huge problem. At least half my friends don't have any kind of insurance and are basically crossing their fingers they won't have a financially devastating health emergency. But the other, less recognized side of the problem is that even those who do have insurance, who pay the ever-rising premiums for company plans or scrape up the psychotic sums demanded for solo insurance, are getting less and less for that not-inconsiderable monthly payment.

The only silver lining to all this is my firm belief that a system so catastrophically &!*@ed, one that even the business community is ready to scrap, can't last much longer.

Head go boom now -- FSA reimbursements

March 31 is the deadline for claiming money from your 2006 flexible spending account, and I'm still trying to dredge back the last $26.65 of mine that Wageworks is clinging to with a deathgrip.

When we last left the saga, Wageworks was declining to pay any of my "pay me back" submissions, instead using any receipts I sent for reimbursement to clear the backlog of charges I'd put on my FSA Visa debit card but had not sent verification receipts in to cover (because I didn't realise they wanted verification receipts.)

I've long since lost receipts for most of the things I'd initially charged on the FSA card. However, Wageworks lets you file "substitute receipts" -- you submit one for any valid expense you haven't previously funneled through the FSA, and it swaps that over and clears the verification backlog. Fine. We had more than enough medical expenses last year for me to pull up documentation on a substitute expense.

So I had David procure a receipt for one of his medical visits and sent that off to Wageworks last month, with the verification form and the little "substitute receipt" tickybox all checked off. The total outstanding amount of charges needing verification (there are two or three) is $24.97. The amount left in my FSA is $26.65. So, total of $51.62. I sent a receipt for $80, figuring they would clear the backlog, refund me the balance of my account, and call it all done.

But lo, a month has ticked by, with no money flooding into my coffers and no logged activity on my online "track my account activity" dashboard. So, this afternoon, I summoned the willpower to call again and inquire.

It seems that the Bureaucratic Powers That Be do not automatically link charge verification paperwork and "pay me back" claims -- except when it works in their favor to do so.

A charge I filed for "pay me back" can be rerouted to clear a verification backlog, but a receipt submitted for verification won't automatically refund me for the additional amount beyond the backlog.

Not only that, but it won't trickle over to other charges awaiting verification. I only checked the little tickeybox on the card verification form once, next to one of the charges. Since the receipt covered an amount greater than all the charges, I assumed it would carry through and clear them all.

Nope. Resubmit with all the boxes checked, suggested the rep.

Arugh. But we had also just established that clearing the verification backlog wouldn't get me my refund ...

After 15 very convoluted minutes, we appear to have determined that resending my $80 receipt, this time with a Pay Me Back form, will clear the backlog and trigger my refund. Apparently. I have only the rep's assurances to go on that the receipt won't be kicked back entirely, since they've already seen it once.

Eleven days left to sort it out. At this point, it's the principle of the matter motivating me. I don't want this bureaucratic custer@%^! to keep my money!

And I am really glad I have a different FSA (well, HSA) provider this year. Let's see if Amex is less complication to work with than Wageworks.

Stalking the wild NetBank ATM

I'm traveling this week -- Seattle for fun, Santa Clara for work -- which means blogging will probably be light. But I just had a wacky personal-finance moment. I'm at the Santa Clara Convention Center (for EclipseCon) and stopped at one of the convention center ATMs to snag cash. While it was processing, it flashed a commercial. For NetBank. *Blink.* I'm used to thinking of my bank as this semi-obscure thing. My first thought was that running my NetBank card somehow triggered a NetBank ad, but then I noticed the ATM was NetBank-branded. I've never seen a NetBank ATM in the wild! As mentioned before, I'm used to sucking it up and paying ATM fees (on the front-end only, not the back) whenever I withdraw cash.

Yes yes, I realise this is a financially unwise move, but I really like my bank, and for a long stretch it just didn't have any in-network ATMs in NYC. It was "pay the fees or switch banks." Plus, I'm lazy, and relatively willing to pay the fees for the convenience of going to the very nearest ATM (rather than hunting for one associated with my bank) when I need cash. I think the fees should be a hell of a lot less, but that's a whole other blogpost.

But this NetBank ATM prompted me to go take a look and see where others might be hiding. It seems my little bank got big when I wasn't paying attention -- their website claims they operate the second-largest ATM network in the U.S. They even appear to have a few near-ish my office in Manhattan now! Who knew?

It was a slightly surreal feeling getting money out of the ATM ... and not paying a surcharge. ($2, on this ATM. Bad NetBank! Stop price gouging!) Now I want to go play with the free ATM again and again. It's like my own little slot machine.

Journalistic probings of the debt and heath care messes

Pulitzer Prize jurors will meet next week to mull over the best of this year's journalistic offerings, and one series getting notice is the Boston Globe's in-depth Debtor's Hell investigation. I've been reading through the pieces during my downtime; there's a lot of material, and it's excellent. The Globe documents both the skyrocketing growth of the problem -- between 2000 and 2005, the number of debt-collection lawsuits filed in Mass. averaged out to one for every five households -- and the catastrophic flaws of an overwhelmed regulatory system that lacks the resources and manpower to keep abuses in check.

I love rigorous work like this that shows off journalism at its best. When regulators, politicians, and the courts fail to protect citizens from predatory practices and ensure just outcomes, we need media attention to focus a spotlight on the problem. Accountability begins with awareness.

In the spirit of spotlighting, I also wanted to point attention to a fantastic piece from last spring in the New York Review of Books: "The Health Care Crisis and What to Do About It". Ostensibly a critical look at several recent books on the U.S. health-care system, the article is really a rigorous examination of what's going wrong, why, and what issues reform measures will need to address.

And if anyone needs another example of why the heath care status quo is not acceptable, just take a look at today's Washington Post: "For Want of a Dentist". The unwritten rest of that headline is "... a ten-year-old boy died from a toothache."

The nitty numerical details of being a full-time writer

At the risk of looking like a big shill for John Scalzi's Whatever blog, I'm going to cite it in two consecutive entries. Lots of people fantasize about becoming a full-time writer. Some who try it then write whiney articles about how badly it pays. The harsh reality is that midlist authors don't generate enough ancillary economic activity to make being a midlist author a particularly lucrative career path.

But what are the actual numbers involved? Scalzi, a veteran freelance writer and semi-fledgling science-fiction writer, breaks them out in two blog entries: one tallying what he made from his fiction writing in 2006 and an earlier one approximating all of his writing/editing income in 2005. If you're an aspiring writer, or simply someone curious about the economics of the field, check them out.

On my end, the figures had a few surprises. Scalzi has been pretty successful marketing his work and building a following (a 500-copy run of a small press book published this week sold out before it shipped), and he gets pretty strong critical reviews; I would have expected his take from the fiction to be a bit higher, though I follow his explanations of why it wasn't. If you're making your money off royalties, rather than big advances, it's going to take a long time to actually land in your bank account.

On the flip side, I'm surprised he's doing so well off the freelance journalism and corporate work. Finding steady, lucrative clients who cough up paychecks when they're due is the real skill of freelance writing -- the actual journalism is the easy part. Obviously, Scalzi has got the business end of things well in hand.

The one caveat I'd throw in is that Scalzi has an unusual asset working in his favor: He is insanely prolific. In an average year, he writes multiple novels. If you're going to rely on fiction for a substantial portion of your income, being quick helps; your editor doesn't care how many years you slaved over a book. Your advance depends solely on the book's marketability, not the time that went into its creation.

Similarly, if you're relying on journalism and freelance work, churning articles quickly is going to have a direct, positive effect on your bottom line. Scalzi estimates that he writes 20,000 to 30,000 words in a typical week. I don't think I know of any other writers keeping that pace. In my staff job, I'd estimate that I publish 5,000 to 7,000 words in an average week; my most prolific peers probably do 10,000 to 15,000.

I understand why people are loathe to reveal specific details of their own financial situations, but I'm all in favor of this kind of information being more widely spread. The first step in making any choice is having the information you need for an informed decision.

Birds & Bills redesign!

If you usually read Birds & Bills on a feed, surf on over to the site today -- it features a massive overhaul. The best new element is a gorgeous new logo, designed by artist Renee Thompson. Lacking any design skills myself, I'd been hunting around for an artist to commission a design from. When I found her work on deviantART, I promptly fell in love. And, she specializes in birds! Such a perfect fit! I was really delighted she took the commission, and I'm blissed to be ditching my old off-the-shelf template for a lovely custom design. If you like Renee's work, you can find more in her Etsy store.

The new design also features long-overdue tags functionality. I've added a list of the tags I use to the blog sidebar. That should make it easier if you're hunting for posts on a specific topic, like retirement planning or credit cards.

What other features should I incorporate? Speak up, if there's some site-navigation element you find lacking. For instance, should I compile a "table of contents" with links to significant posts (like the one on 401k strategy, or the article about How FICO scores are calculated)? Does anyone need/want a search box?

While I'm in a bit of a relaunch phase, this seems a good time to mention Birds & Bills' editorial policies. Flipping through pfblogs.org (a great blog aggregator) a few weeks ago, I was surprised to find a handful of posts tagged [PayPerPost]. I've heard about this insidious little outlet before, but I hadn't previously run across it in the wild.

I don't consider blog ethics completely interchangable with my day-job, beat journalism ethical practices. (To earn my paychecks, I write about software over at CRN.) I'm a lot more opinionated here about issues and financial services vendors and than I would be about companies/topics on my beat. However, I do consider blog ethics akin to the responsibilities of a columnist: someone whose job is to provide opinionated, personal, but independent views. "Transparency above all" is my policy. If I try out a service I've been given free access to, or review a book from a publisher that has sent a free copy, I'll mention the freebie. If I don't add that kind of disclaimer, you can assume I'm paying the going rate for any goods or services I comment on.

When it comes to advertising, my views nicely coincide with what John Scalzi wrote in the Whatever a few weeks ago: I get approached every so often about running ads here, and I don't take up the offers because, "One, I don't wanna. Two, I don't wanna. Three, I don't wanna." I'm not opposed to ad-subsidized media. Advertising underwrites my paychecks and keeps the magazine I write for in business. But I don't have a pressing need to run it here, and I don't like the cluttered look it gives so many blogs. I've run the math; putting AdSense or whatever on Birds & Bills wouldn't generate enough income for me to consider it worth the visual clutter. So, now and for the forseeable future, no ads.

Finally, while I'm rambling on blogging topics, thanks for reading along over here. Birds & Bills recently had its one-year anniversary. I don't have a good stats tracker (the kludgy one I used broke in today's redesign), so I have no idea how many people are out there, but I'm happy a few people are following along as I thrash out financial matters.

A sample 'cease communications' letter to debt collectors

My posts about debt expiration and statutes of limitation weren't wholly theoretical. I've been dodging calls for the last few months from a collector trying to shake out money for a debt from 2000 that I don't consider valid. (It's a long story, as these things generally are.) Instead of running through hoops trying to track down all the paperwork to prove that the debt is well and truly not legitimate, I opted to wait out the clock till 2007, at which point it became an indisputably expired debt.

This collector is fairly low pressure; their main tactic seems to be leaving automated messages on my answering machine every few weeks. Still, the calls stress David out and I'd also like them to stop, so I figured it's time to formally issue a "cease communications" request, as allowed by the Fair Debt Collection Practices Act. Under that law, you can at any time tell a collector to stop contacting you, and they have to oblige. Once you've made the request, the only communications they're legally allowed to send is a notice of specific actions, like filing a lawsuit.

In case anyone else can use it, I'm posting the letter I'm sending. I'm citing the New York state law that sets the statute of limitations on debts; if you'd like to find a local law to cite, the Fair Debt Collection website has good pointers to state laws.


[Date]

[Your Address]

Dear [Collector]:

I am writing regarding your attempts to collect a debt of $XXX for XXXX (account #XXX). I do not acknowledge the validity of this debt, which, in any case, is beyond the six-year statute of limitations for collection in New York, as laid out in the New York State Consolidated Law & Rules (chapter 8, article 2).

In accordance with the Fair Debt Collection Practices Act, Sec. 805(c), I am requesting that you cease any further communication with me on this matter and discontinue phone calls. If I receive any further communication -- other than a written notice that further collection efforts are being terminated -- I will submit a complaint about your organization to the Federal Trade Commission and the New York Better Business Bureau.

Sincerely,


[Your Name]

The trail even Sacagawea couldn't blaze

Think the third time will be the charm for the dollar coin in the U.S.? Refusing to concede defeat after the chilly reception to the Susan B. Anthony and the only slightly more enthusiastic uptake of the Sacagawea dollar, the mint is debuting yet another dollar coin today: the Presidential coin. Among the lures the Mint is dangling are "larger, more dramatic artwork" and edge inscriptions of "E Pluribus Unum" and "In God We Trust."

The New York Times has a detailed look at the dollar coin's advantages and travails. Personally, I like 'em. New Yorkers probably deal with more Sacagaweas than most Americas, since the subway machines give them as change. When I've gone and visited Australia (where David hails from), I've always adapted pretty quickly to the coins-only system for $1s and $2s. Although, their $1 coins have kangaroos. I bet $1 coins would be way more popular here if we put kangaroos on them.

TurboTax Rip-Off On Amex Discount

The reason I decided to try TurboTax this year was the 25% discount on the federal return cost. In actual practise, this translated to about $5 off, but by the time that sunk in I was committed.

Having just filed, I feel even more ripped off by my inability to actual get my damn $5. The offer didn't come with a promotion code; to use it, you're supposed to access TurboTax through a special page on OfficialPayments.com. (This special page: https://www.officialpayments.com/promotions/turbotax/amex/index.html) When I started my return, I initiated it at that site. When I went back to finish it today, I want straight to TurboTax. Come checkout time, no discount. So I went back to the original site and saw the note that you need to "Remember to access and complete your return through the TurboTax links on the American Express Web site." Being a dutiful little discount hunter, I clicked the link, re-stepped through TurboTax to the checkout ... and again saw no discount. GRRR.

At this point, I decided further chasing was not worth the $5 and surrendered. But if anyone does manage to use an OfficialPayments discount: What's the trick? Do you also need to open an account there and log in through that? (Something NOT MENTIONED BY AMEX AT ANY POINT ...)

Shock of the day: I itemize

When I get swamped, "tomorrow" tends to get interpreted loosely. Anyway, back into the tax trenches!

Although I finished doing my taxes, I haven't filed them yet: I'm one of the people affected by late tax-law changes that the IRS needed extra time to handle. People claiming the deduction for college tuition expenses were affected by the changes, which the IRS estimated would apply to about 1 million of the 136 million tax returns the IRS expects to process this season. Although, clicking over to that press release, I see a note that "As of 2/3/07, the IRS is Processing Extender Claims" ... so it looks like I can go file as soon as I finish blogging.

Others might also get tripped up trying to file early, though. Various news outlets are reporting rising corrections rates in the 1099s sent to investors with dividends and other investment income. Thanks to tax-law tangles, the error rate on those forms has climbed as high as 14 percent -- meaning that people who file early could face the frustration of finding corrected forms in their mailboxes a few months after they've finished their returns. (You can amend, though it's optional if the error was in the IRS's favor. Even if it's not, unless the error is huge, I imagine few people bother to make the correction. The odds of getting audited remain small and dwindling.)

The last few years I've been stumbling over discoveries of things I can still deduct even though I don't itemize. Last year, it was my tuition deduction: Even though I don't qualify for any of the educational credits (which give you $1 off your taxes for each credit dollar you qualify for), I did max out the $4,000 allowable deduction. Using that cut about $1,000 off my tax bill (or, in my case, added $1,000 to my refund). Sweet.

This year, I discovered that I do itemize. I always assumed we wouldn't have any reason to until we had a mortgage. But there are a handful of other scenarios that can make itemizing the cost-effective thing, and it turns out that the amount we pay in state and local taxes exceeds the standard deduction. (Ah, NYC. Did I mention how depressing it was to go through the TurboTax Local portion and have it wrack up a whopping refund -- until I ticked the 'I live in NYC box'? It actually had a little animation of my refund dollars spinning away as it wheeled its refund-calculation line backwards. When I winged at David about this, he responded, "Your taxes buy subways. It's worth it.")

The practical upshot of this is that for the first time, I'm deducting charitable donations. The downside is that because I always went along assuming "I don't itemize and get no deduction," I never kept the paperwork on our donations. Oops. Guess this is the year I start!

The TurboTax vs TaxACT decision

Our last W-2 finally arrived yesterday, so I plunged right into doing the taxes. Much banging around online turned up no good reviews of the online tax software, grrr. I didn't even find many current reviews of the boxed versions, which surprised me. Isn't this a gimmie for every personal-finance beat writer at any publication of size? PC magazine had one of the only comprehensive bake-offs I could find.

I usually go with TaxACT, but I swore to look elsewhere after running into some minor hassles last year. One look at the prices of "elsewhere" nearly sent me running back. My Amex offered me a 25% discount on the federal-return cost with TurboTax ... but the savings that translates to is actually pretty small, especially since the more-expensive state return isn't discounted. Even with the discount, the total cost for TurboTax online for me will be about $48 -- versus $16 for TaxACT. Ow.

Still .... TaxACT was annoying me, and I'd never tried anything else. The reviewers all swear by TurboTax. Solely for the experience of taking the Cadillac out for a test drive, I decided to shell out and try it. (And hey, blog fodder.)

The interface was indeed a little smoother -- but I'm not sure the end result was any different. I didn't turn up any exciting new deductions I wouldn't have otherwise known about. Plus, TurboTax still had one of the more annoying features that irked me with TaxACT: if you need to go back and revisit something out of order, it's easy to get lost. While working on my state return, I clicked back to the federal return to check out a previously entered amount. That lost my place in the state return workflow, and I couldn't get back -- I had to click through all the fields I'd already entered, costing me an extra 20 minutes of work. Grr.

So, next year, I'll probably save the money and return to TaxACT.

For those allergic to paying full price for tax software, various deals abound. TurboTax has a 15% off deal to anyone paying with a Visa, Amex, MasterCard or Discover. Your financial services providers may have their own deals. My friend Fahmi reports that Fidelity offers TurboTax free to its customers, and PC World is making TaxACT free to subscribers. State Farm also offers TurboTax free for customers.

Meanwhile, if you have an adjusted gross income of $52,000 or less, you qualify for FreeFile -- a program 70 percent of taxpayers are supposedly eligible for. FreeFile deals have all kinds of odd qualification standards, but the IRS helpfully offers a wizard to guide you to an eligible program.

More from the tax trenches tomorrow ....

More taxing tidbits

Following up on yesterday's tax theme, I figured I would dust off a link to one of last year's most vital tax-tip posts: Don't forget about "adjustment to income" deductions available even to those who don't itemize. There are a handful of items you can get credits or deductions for even if you claim a standard deduction, such as tuition and student loan interest payments, moving expenses if you relocated for work, children, and adoption costs. One interesting credit is available for those who make $25,000 or less and contributed to a retirement plan like a 401(k) or IRA.

Bankrate has a helpful rundown on such tax breaks. I suspect a number of B&B readers are students or are paying off student loans; don't forget to use that to your advantage on your taxes.

Tax round-ups and refunds

We're still waiting on W2s from my new company and David's company, so no tax filing yet for me. Still, since I imagine other people might be doing theirs already, I'll start dusting off the tax posts ...

I haven't figured out whether I'm sticking with TaxACT this year or switching to something that will annoy me less, but Consumer Search has a "review of reviews" with guides to the various programs. One thing that piques me: Reviewers continue to focus on the sold-in-stores CD versions of the various programs. I always use the Web versions. Do they offer the same features? The same pricing? Reviews don't say. GRR. Anyone know of a rundown that evaluates the online versions?

This year most people will be getting an extra $30 or more back on their taxes, thanks to the telephone tax refund. The government apparently got smacked down in some court rulings over long-distance taxes and told to pay them back, to the tune of $10 billion in refunds. (I was going to look up the rulings and give more details, but a quick troll of Google News turned up nothing -- and if the beat reporters are going to be lazy about this, I am too, unless anyone is really interested.) If you had long-distance services on a cell, VoIP or land line between Feb. 28, 2003, and Aug 1., 2006, you're eligible to collect. The IRS page has the formula; I imagine all the tax-prep programs are worded up about the rebate.

You can opt for either the IRS standard rebate or you can calculate what you actually paid for the tax, and take the higher amount. I took a brief stab at calculating and gave up after finding that a) my phone bill doesn't really break out this charge; it just lists "federal taxes" on the long-distance, and b) the entire monthly "federal taxes" bill on my long distance looks to be about 65 cents -- so I'm probably better off taking the flat refund.

Be warned, if you try to claim thousands of dollars on this refund, the IRS is probably going to get cranky. They've apparently already fielded a few cases where people have claimed they paid phone taxes that would correspond to phone bills larger than their actual income.

The dangers of online account statements

In the interests of saving postage, most of my financial-services providers (and everyone else's, I imagine) have taken to sending me statements by e-mail. In the interests of avoiding boring things, I have taken to almost never looking at the statements. If I want to check balances and make sure things are running smoothly, I log in to the provider's site to check my account history, but I rarely review the detailed transaction statements I'm emailed.

I recently submitted a claim on my 2006 FSA, to try to zero out $26.65 or so I have lingering on it. Usually, I use my FSA Visa card to pay for things, but the last health-care purchase I made was for $35, and it bounced. I paid for the prescriptions in cash and filed a pay-me-back claim, figuring that would dislodge my last $26.65 and all would be good.

Except WageWorks, my FSA provider, bounced my claim in bizarre fashion. The statement it sent seemed to indicate it processed the claim for the full $35 the prescription cost, then "clawed back" earlier transactions to bring my balance right back to where it started, at $26.65.

It looked weird, but my guess was that WageWorks' system got confused trying to pay $35 in credits on an account with only $26.65 left in it, and hadn't been sufficiently clever to pay out a fractional claim. So I rang customer service, expecting a quick resolution.

Instead, I got a whole new trail of paperwork to chase down.

When you use your FSA credit card, you're supposed to keep receipts for your purchases, in case you get audited -- you're supposed to be able to prove that the $20 you spent at the drug store was for drugs, not magazines. It's a sensible restriction, and I tried to be good and squirrel away receipts. I think I have at least one or two of them in the filing cabinet. But somewhere along the line, I stopped socking away the receipts. My transactions seemed to be going through with no problems, and keeping little paper bits is a pain.

It turns out, though, that WageWorks really does want you to mail or fax them receipts for some of your card purchases. Three of mine over the past year were apparently flagged for verification. I never had any idea about this, though, because the company never sends any kind of alerts or puts any flags on your account for you to see when you log in. Instead, it puts a claim verification form in your monthly account statement, which are only available online. (I do at least open and flip through account statements that arrive the old-fashioned way, by snail mail.)

The account statements I never looked at, because I never had any idea they contained anything more than the transaction history I could check every time I logged in to the site. Grrr. When I got the monthly "your account statement is ready, click here to see it" email, I'd been deleting it.

I suppose I should have actually looked at the statements, but it also seems lame for WageWorks to not flag this verification thing in any more visible way. I just did a quick poll of friends with FSA credit cards; none of them recall ever getting verification requests.

So now I get to see if I can excavate receipts to appease WageWorks so it will release the $26.65 it's holding hostage. Remind me again how online statements and automatic payment systems are supposed to make our lives easier?

Using tax-cut apples to solve health-care crisis oranges

In honor of last night's State of the Union, it's time for another heath-care-and-taxes rant.

I'd seen articles suggesting that a health-care proposal would figure into the speech, and looking at a transcript, I see that Bush acknowledged we have a problem: "Many Americans cannot afford a health insurance policy." (Bush also said that the government has an obligation to care for "the elderly, the disabled, and poor children," and that private insurance is the best way to cover everyone else. I disagree and think we should have universal, government-based health care, but it seems like we're still a few years away from the current system collapsing into such a rubble that universal-care proposals become tenable.)

I am left genuinely confused about how the proposal is supposed to address the problem. Once again, this seems like an outright tax break camouflaged as a health-care-reform measure.

Bush's proposal is to create a new, additional standard deduction (available even if you don't itemize your return) for people who purchase health insurance. If you buy it, you'll be able to deduct $7,500 (for individuals) or $15,000 (if you have family insurance) from your taxable income. The idea seems to be that this reduced tax burden will free up money that currently uninsured people will use to purchase insurance.

The flaw in that logic? If you can't afford the premiums for a health-care plan, it's unlikely that a tax incentive will change your mind. CNN's detailed analysis includes White House estimates that this tax break would motivate 3 million to 5 million currently uninsured people to get coverage. With an estimated 46 million Americans uninsured, that's a barely noticeable dent.

This proposal would make insurance more affordable for self-employed people who don't currently get any tax write-offs for buying health care, as people with employer-sponsored plans already do. (All of my health-care premium payments are already tax-free.) That's a great thing, and I'd be happy to see tax breaks targeted at that specific issue. But this plan would also hand money back to scads of people who already have insurance and don't need this incentive. (Like me. Since the proposed $7,500 deduction is far more than amount I currently deduct to cover my premiums, this plan would effectively shelter an additional $6,000 or so of my income.) If Bush wants to increase standard deductions, fine, but, doing so under cover of "addressing the health care problems" is duplicitous.

Because this tax plan does nothing to address the real source of skyrocketing health-care expenses: a massively inefficient system. Getting more people insured does little good if insurance plans continue cutting back on what they cover and hiking premiums, while the system's worst problems, including its inscrutable and inflated cost structure, continue unchecked. For a very good (and very long) examination of what's going wrong and why, check out "The Health Care Crisis and What to Do About It."

Bush's State of the Union proposal is, of course, simply a proposal. Any actual legislation along the lines he suggestions would take months to pass and years to enact, and is unlikely to get through the current Congress, anyway. (Right now, it seems unlikely Bush could get a resolution praising fluffy kittens through Congress without vicious opposition.) But the administration's drastic misdiagnosis of the problem bodes ill for the chances of any significant reform proposals to address the urgent-and-growing problems with our health-care system.

Opting out of credit offers

Today, a quickie while I catch up on a workpile: Dislike having your mailbox cluttered with credit-card offers? Opt out.

That site, OptOutPrescreen.com, is the official opt-out registry used by the credit-reporting agencies. Adding your name to the registry means the agencies will no longer put your name on the prospecting lists they sell to people hawking credit cards, auto loans, and other such products. You can use an online form to opt out for five years; opting out permanently requires you to sign and snail-mail a firm.

While I was quick to sign up for the Do Not Call registry in an attempt to shoo away telemarketers, I'm not adding my name to this one. Why? Because those snail-mailed "you're preapproved!" credit offers are often the most competitive deals lenders offer. I've always found better rates and terms in those mailers than I have by looking online at the lenders' websites. Right now, I'm not in the market for any new credit cards, so I toss those offers out. But you never know what the future will bring ... if there's any chance you might be looking for a balance transfer deal, a new card with a low APR, or any other such offers, it can be worth keeping your name on the mailing lists. When I needed to transfer a balance off my Providian card last year, I took up a mailed Chase offer and opened a new card. (Of course, Chase then immediately annoyed the hell out of me. Caveat emptor.)

By the way, there's no impact one way or the other on your credit report from opting out of prescreened offers. While one of the factors in FICO scoring is "number of credit-report inquiries," it only counts inquiries you initiate, generally by applying for new credit lines. Inquires from marketers trolling for targets are listed on your report, but have no effect whatsoever on your FICO score or other evaluations of your creditworthiness.

Thanks to Mark for the opt-out tipoff!

Security whinging: You want to know my hobby?

Kind of a follow on to Thursday's post: I've recently noticed a number of my financial-services providers implementing a new security scheme, under which I have to provide answers for a flurry of personal-info questions. These go beyond the standard "mother's maiden name." Citibank wanted to know my hobby, my favorite movie, my favorite artist, the name of the first street I lived on ... the idea is that when I sign on to access my accounts, the company will "occasionally" ask me to answer a security question first.

Apparently, the idea is that these questions will thwart phising schemes. Some fraudster may get your log-in password, but will they be able to answer a question about your favorite food?

If only one company did this, I would raise an eyebrow but otherwise not really notice. However, a bunch of the ones I interact with did it all at once. NetBank and Citibank have; I think there's at least one other. So it seems to be on its way toward becoming an industry standard.

I have mixed views on it. On the one hand, if it really does prevent attacks, that's great. On the other hand, this is yet more bits of login info I need to keep stored into my sieve-like brain. Remembering my mother's maiden name is one thing; it's a fixed, unchanging fact. But -- my favorite movie? Er, I dunno, could be any one of five or six? Favorite artist? Same deal. My hobby? I have several. In the few weeks since these schemes went live in Citibank and Netbank, I've had a small moment of panic every time a question pops up. I have to wrack my brain to remember which hobby, which "favorite singer," which "favorite animal" I listed.

So far, I've managed to guess or remember the right answers, and haven't flunked a challenge. We'll see how long that lasts ...

The risks of digital 401(k) looting

Here's a very worrying new wrinkle in the identify theft/financial fraud: Are 401(k) accounts underprotected?

Most financial accounts held by banks are impressively impregnable. Yes, they can be hacked into -- as I keep discovering over and over -- but consumers are shielded from the crime's effects. If your credit, debit or ATM card is used fraudulently, your liability is capped by federal law at $50. (If you still physically have the card, and the thief obtained only the numbers, your liability is nothing. The bank/credit provider can't pass on any of the costs.) Meanwhile, if your whole bank goes wobbly, the FDIC (Federal Deposit Insurance Corporation) protects CDs and checking, savings and money-market accounts at up to $100,000 per depositor. With all the various regulations in place, if something nasty happens to your traditional bank account, you're in for a lot of hassle but don't have much risk of serious financial losses.

But 401(k) accounts are investment accounts. They're not subject to the liability caps attached to credit and debit cards. MSNBC had a recent article about a 401(k) theft: A hacker got access to the victim's $179,000 J.P. Morgan account and drained it.

This isn't the first time such a case has hit the headlines. Business Week wrote last year about a looted E*Trade account. This is the bit that really jumped out at me, from the Nov. 2005 article: "In the latest, most pernicious twist yet on Internet securities fraud, online brokerage accounts are being looted by hackers who exploit the weaknesses of investors' computers rather than the firms' systems. ... Six months ago, Securities & Exchange Commission investigators say, such schemes weren't even on their radar screen; now, the agency is knee-deep in them."

The frustrating part is that what happens next seems to vary by firm. The companies don't have a legal obligation to cover the stolen funds. Obviously, "Hack Attack Financially Ruins Customer" is a headline every PR person has nightmares about; the financial-services companies are going to do everything in their power to resolve the situation in a customer-pleasing way. But if they're on the hook for hundreds of thousands -- or millions -- of dollars? At what point do the hard financial costs outweigh the customer-service benefits of sheltering the theft victim?

J.P. Morgan is my 401(k) provider. After I first saw that MSNBC piece, I made a mental note to ask our HR person about fraud protections on our accounts. As often happens with my mental notes, this one disappeared into the clutter. But yesterday, my company sent out an email from J.P. Morgan, prompted by "an online article [highlighting] one particular case." (The actual article isn't linked or specifically cited. Very oblique.) The email talked about J.P. Morgan's efforts, in conjunction with law-enforcement agencies and investigators, to recover the money (apparently, they were successful), and about its "extensive precautions and controls" to protect accounts.

However, the email was noticeably lacking any assurances about what guarantees J.P. Morgan provides. It also shifted a big chunk of responsibility for protecting account information onto its customers' shoulders: "We recommend all clients, including individual participants, avoid making financial transactions on public computers or via wireless networks [emphasis mine] and that they keep their personal computers up to date with firewall and anti-virus software."

I'm down education campaigns to help people avoid phishing scams and protect their electronic information, but telling people not to do anything sensitive over wireless networks seems impractical and extreme. I also question how much responsibility consumers should bear, when the information-stealing scams are becoming ever more sophisticated.

This seems like a technical arms race between digital thieves and financial institutions, with increasingly higher stakes. Electronic credit-card and ATM card theft can net thieves hundreds or thousands of dollars per victim. Hacking investment or retirement accounts could yield hundreds of thousands of dollars -- or even millions. Unless there's a security breakthrough, digital theft could snowball into an economic disaster.

Online credit increases -- instant gratification

All this credit-report research this week got me in the mood to go check my own reports. I'm pulling them through annualcreditreport.com, the official, free, government sanctioned way to get your reports. You get one free report each year from each of the three credit-reporting agencies. You can pull all three at once or space them out, as you like. Forcing the creation of this site, and requiring the credit-reporting agencies to release one free annual report, was an excellent move on Congress's part. It's one of the most consumer-friendly pieces of legislation in years. Go politicians!

Seriously, if you're in the demographic I imagine most Birds & Bills readers are (your twenties, with all the student-debt and entry-level-salary joys that come with the age), if you do nothing else to organize your financials for the entire decade, do these two things:

-Start a 401(k), and put in whatever your employer will match. It doesn't matter if you have piles of other debt. A 401(k) match is free money, and because it comes out of your paycheck pre-tax, the bite is smaller than you'd expect. You will be intensely glad later if you do this.

-Pull your credit reports every so often and get a feel for what's on them. Ideally, pull them once a year, but doing it annually is less important than simply doing it.

I'll do a longer post later on my findings from my credit-report-pulling adventures, but one immediate one was that my FICO score is getting dinged for having overly high balances on my revolving accounts. My first reaction: er, what? I have one credit card, my Amex, that I try to concentrate my credit-card spending on. It has piles of spare credit. So why is my score getting dinged?

Then I went and checked my Amex, and realised that my utilization had crept higher than I thought. Various large items are sitting on the Amex temporarily (it's spring semester payment time, whee), and my balance had crept up to almost half my available credit. Arugh. While I still have what seems to me a pretty large amount available before hitting my credit limit, the pattern was obviously Displeasing To The FICO Gods.

Well, I thought, I can solve this problem in one of two ways ...

The balance isn't going to be fully paid down for a bit longer. Various machinations have to process behind the scenes. So, the other way to decrease my utilization percentage ...

Amex lets you request increases online. I did a back-of-the-envelope calculation of what I think is the highest balance I could ever need to carry on the card, if I'm carrying, say, big travel expenses or some such. Then I calculated the credit limit I'd need for that amount to be 1/3 my available credit limit. (Utilization below 1/3 is apparently the percentage that appeases The FICO Gods.)

That amount was about a $7,000 jump over my existing credit limit. Ow.

What the hell, I thought. Might as well go for broke ...

It went through. Instantly.

Yow.

I now have a credit limit that strikes me as borderline insane, but at least utilization percentage problems should be a thing of the past.