Unfortunately for us, this isn’t foolproof. When we opened our monthly statement for February, we saw that we had been charged the $8.95 monthly maintenance fee. This was partially because we forgot to reset our automated transfer (our system makes us reset the transfer after so many months) and partially because the statement closed four days earlier than it did last month. We had another electronic transfer hit the account, but only after the statement for the month had closed.

Not ready to admit defeat, I call customer service to request a fee waiver. True to their usual level of no-service, the automated system said there was a long wait to speak to a rep and then uncerimoniously disconnected the call. So I then used the online chat to request the credit, and only after requesting a supervisor did I get the fee waived.

While I was waiting for the online customer service rep, I just happened to review what the fee structure was on my account if I were opening the account today. Guess what? If you open online, there is no monthly maintenance fee or direct deposit or minimum balance requirement. Armed with this I asked if I could have these terms applied to my current account I was told that was only for new accounts, and when I asked if I would have to close the old account and open a new account to avoid the monthly fee I was told that is what I would need to do. What a waste!

So here’s my dilemma: do I close this account (I am out of paper checks anyway, but I think 5+ years to use 50 checks is a decent run) and open a new Bank of America account to simply avoid the fee, or do I tell Bank of America to go screw and take my business elsewhere? I’ve been trying to simplify anyway, so I am thinking we should just use our credit union account for this type of stuff, but having so many BofA branches around is very convenient, especially when trying to spread around those dollar coin deposits. What to do?

But if you disagree with a company’s business practices, is a boycott the most effective means of jabbing a stick in their eye? I would submit to you that it isn’t. You may do the most damage to the offending company by being what Best Buy termed several years ago as a “devil customer”. Best Buy determined that some of their customers who bought high-priced items or overpriced accessories without a sale were “angel customers”, but there was a certain percentage that were unprofitable customers that were considered “devil customers”. Included in the behaviors of the devil customer were taking advantage of price-match policies and only buying loss leader items (items sold below cost to get you into the store with the hope you’ll buy other items at regular price). Best Buy CEO Brad Anderson was quoted as saying, “They can wreak enormous economic havoc.”

So how can this be applied to protest companies you don’t like? Simply be a devil! For retail stores don’t boycott the store, but go there and only buy obvious loss leaders. If it is a store like Walmart with a price-match policy, go and price-match other stores’ loss leaders. Buy nothing that will actually make money for the store - save those items for their competitors and let those stores reap the profit.

Taking this concept back to banks, do everything you can to make sure the bank doesn’t make money on you. Move your money elsewhere unless they are paying an extremely high promotional rate that they are likely losing money on. Take advantage of promotional offers to open checking accounts and credit cards for bonus money or other perks, then only use the account enough to qualify for the bonus and avoid services fees and as soon as you are allowed cancel the account. If you do the dollar coin hustle, use an account over there to dump off your coins and make them eat the expense of handling them. Basically do anything that will cost them money but where you won’t incur any fees.

Think of it this way: if you boycott a company, they just don’t make any money off of you. But if you are a devil customer to a company, not only do they not make money off of you but they actually lose money by your having a relationship with them.

Here’s her story: she had her wallet with her drivers license and debit card stolen in early November. Before she even realized it had happened, the fraudsters used the license and debit card to cash forged checks against her account. Note they didn’t forge checks drawn on her account, but they forged someone else’s checks and used her account to cash them against. She found out when she got an overdraft alert from her bank (Wells Fargo) and promptly contacted the bank to alert them to the scam and filed a police report. Wells Fargo ultimately opened them a new checking account  and closed the old account that had been compromised.

So that’s the end of the tale, right? Nope! Because the fraudsters are still running around with her ID and know she banks with Wells Fargo, they simply ran the scam again last week and cashed forged checks against the new account. Now she’s fighting with Wells Fargo again to get the mess straightened out and the funds returned. They are now talking about opening a third account with a teller alert attached to supposedly prevent this from happening yet again.

So what does this story illustrate? Two things:

1. When something like this happens, it is best just to move your primary account to another bank. In this instance changing the account number does no good because the fraudsters still have her picture ID and know she is a customer of the bank. Because it is typical for customers to not know their account number, it is common practice for bank tellers to use the picture ID to look up the account. That’s how this fraud was perpetrated a second time even though the old account was closed.
2. Any safeguard depending on the teller is of minimal effectiveness. I say this as a former bank teller. A teller alert or note on an account does little good if the teller never reads it. When the bank is busy and customers are lined up as far as the eye can see, most tellers will just press whatever button they need to clear the alert and complete the transaction. This is especially true of tellers working the drive-thru lanes. The limited visibility of the customer created by the way most drive-thru lanes are configured (especially when you are dealing with the farthest lanes and/or the passenger as the accountholder) and the desire to get customers in and out fast also limits the effectiveness of an ID check. If a bank manager tells you a teller alert will prevent fraudulent activity on your account, they are either lying or stupid because they should know better.

Although one of my resolutions is to eliminate unnecessary accounts, there is a lot of wisdom in having a secondary checking account that you can use in this type of situation and/or keeping most of your funds in an account other than your primary checking account. In any case if this happens to you, it is probably best to retreat to a different bank and hope the scammers don’t follow you there.

According to this article on Bloomberg, Fifth Third Bank has instituted a $19 charge for NOT using your card. Additionally, Citi is starting to charge some customers with low activity levels on their accounts higher interest rates. On top of that many issuers such as Bank of America are starting to experiment with charging annual fees on credit card accounts where there may not have been one before.

For those of us that have built up a pile of unused accounts over the years, this may be a good reminder to cancel many of those accounts we no longer use. It helps reduce the possibility of being blindsided by fees and reduces you risk of fraudulent activity as well. On top of that, it eliminates all those mailings from the credit card company and leaves you with fewer accounts to have to track.

Will there be a credit score hit? Perhaps, although it may be smaller than you would expect, especially if you have several other accounts that are open and active. Just remember that the length of your credit history and the percentage of your credit lines that are utilized are the main factors here, so it is better to keep older and larger accounts.  Two things to consider doing are to request changing your card to a different program instead of closing the account entirely and consolidating existing credit lines with the same issuer.

Since we have no plans to apply for credit in the near future, we made the decision that downsizing to only a handful of accounts is our best course of action. The extra peace and security that comes from having fewer accounts is worth the hit of a few credit score points in my opinion.

In my view the check is an outdated method of payment, only useful for paying the occasional bill, your taxes, and minor things that they don’t take credit cards for (lawn service, paying family members/friends, etc.). There is no advantage to using checks in a retail environment. How do I come to this conclusion? Glad you asked…

• Value: You are paying the same amount at the register regardless of payment method, so there is certainly no advantage to writing checks.
• Speed: Credit and debit cards are way quicker than checks, even if the cashier checks your ID to the cardholder name. Even cash transactions where change has to be made are quicker than the typical check transaction.
• Record keeping: Now matter how you pay, you should be able to get a receipt, which provides evidence of the transaction if you need it for taxes, expense reimbursement, etc. Debit and credit cards are even better since you also get the listing of transactions on your account statement.
• Privacy: Do you really want the kid down at the Wal-Mart having access to your personal information including account number? You do realize that is all the information they need to access the funds in your account, right?
• Liability: Related to the point above, what happens if someone gets your account information? If you used a credit card, you are technically only responsible for the first $50, and in most cases the credit card issuer won’t even make you pay that. You also have the luxury of not being out the money while the issue is being resolved. Debit cards and checks are a different story, where the bank can hold the funds in question while it completes its investigation, meaning you don’t have access to your money. And it is a lot harder to prove a transfer was unauthorized if they used you account number to access the funds directly.

For the record, it annoys me even more when people wait until the cashier has completely finished ringing the transaction to search for the checkbook and beginning writing the check, as if it is a surprise that you actually have to pay for your purchases! But of course my ire in this instance isn’t limited to check writers, but any idiot who waits that long to begin fumbling through their purse/wallet/pockets for their method of payment. All of them should be taken into the parking lot and beaten with their purchases.  

So am I missing something here about the virtues of checks? Do I just need to be more patient with the old people and the stupid when they whip out the checkbook?

“We live in a free-market economy” – Do we really? The role of government keeps expanding, and the taxes to pay for that expansion are almost inevitable.

“Stocks may be volitale in the short-term, but in the long-term the market always goes up” – This “wisdom” is built on the assumption that we are basically a free-market economy and that the private sector will be relatively unencumbered to operate and create wealth. If the events that are unfolding in the political realm are indeed a fundamental shift in the role of government in our economy, I’m not sure we can consider this to be a certainty.

“It is best to put aside some money for a rainy day” – While I don’t think we should live paycheck-to-paycheck, I am beginning to question whether having excess cash in the bank is a good idea. As our official national debt is already over $10 trillion (and under GAAP would be $65 trillion), it is a very real possibility that the government could “monetize the debt” in an attempt to cover its debt obligations. That basically means that they will just print more money to pay off the debt, which would increase the supply of dollars in the economy leading to runaway inflation, eroding the purchasing power of your savings.

“If you’re money is FDIC insured, you have nothing to worry about” – Considering the recent news that the FDIC is funded at the lowest level in nearly a quarter-century, I don’t think we can take FDIC coverage as a certainty. Especially when they say that they have set aside $22bn to cover expected 2009 bank failures and have an additional $19bn left over. So at this point the FDIC holds $41bn to cover all of the insured deposits in the US? That’s a drop in the bucket! Considering that Bank of America alone had nearly $883 billion in deposits as of year-end and you can see how insignificant the insurance fund amount really is.

“If I invest in a Roth IRA or 401(k), I won’t have to pay taxes on the earnings since I put in after-tax dollars” – OK, I’ve actually questioned this one for a while (see my original post on this subject from July 2007), and my point is still the same: why are we so certain that just because the government currently allows tax-free withdrawals from these accounts in retirement that this will continue to be the case in the future? As the government grows more hungry for tax dollars, the money in Roth accounts represents an easy and ample target.

There are many other pieces of “convention wisdom” that are now called into question, but these are the biggest in my mind. This doesn’t mean that I am cutting myself off from the financial system and buying gold with all my excess cash, but I am looking to hedge my bets. My thought process is that whether my gut is completely right or completely wrong, I want my family to be in as good of shape as possible.

So going forward you will see fewer posts on investing and financial planning topics on this blog, as most of those post would be based on this same conventional wisdom that I am now questioning. Likewise, I would encourage anyone reading this blog and prior posts on these topics to read with a critical and slightly distrustful eye. Future posts will likely focus more on making your money go farther and things that can help you in the short-term.

This idea of counterparty risk should be a concern to you as an individual as well. Why? Well, besides the worry about your bank deposits being at risk (which is a lot smaller issue than many think due to FDIC insurance coverage), you have to worry about the rewards points you’ve earned on your credit cards. Rewards programs have always had the risk of program changes and points devaluation, however now you have the risks of the bank that issued your card either ceasing to exist or being nationalized. If your bank ceases to exist and the account is assumed by another bank, it is almost certain that your rewards program will be converted to one offered by the assuming bank, which could be very different than what you currently have. A bank being nationalized is more of a wild card, as theoritically the bank will be under the same management, but with added pressure from the government to pursue policy objectives rather than profit objectives. It is anyone’s guess what that would mean for credit card rewards programs, but it is very possible high cost rewards programs could be scrapped to free up more funds for programs deemed to be in the “public interest”.

It is for this reason I have all but completely cashed out my rewards on my Citibank accounts. I had about $85 in rewards on my Citi Dividend card I withdrew last week, and I called today to cash out most of my Thank You points for a mortgage payment reward. That brought my Thank You point balance down from around 96,000 to about 2,000, which is a tolerable risk for me.

On a related note, you should also consider gift cards in the idea of counterparty risk as well. If the retailer you have a gift card for goes out of business (i.e., Circuit City, Linens-N-Things, Sharper Image), your gift card becomes worthless. That is the reason I used the Thank You points for the mortgage payment reward instead of for gift cards: of the retailers offering gift cards with a traditional 1 point=$0.01 redemption rate, none of them were stores I felt comfortable that I could spend the full amount in a reasonable period of time with my normal shopping habits (mostly department stores like Macy’s and Dillard’s). The stores I would actually use (Walmart, Target, Home Depot) only offered cards at the $50 level at a rate of 1 point=$0.00833, which isn’t that much better than the mortgage payment reward (1 point=$0.007987 at the $750 level), and considering the additional credit card rewards I would earn using my credit card instead of a gift card the two are nearly identical. Additional pluses for the mortgage payment reward are the elimination of counterparty risk (no chance of a retailer going out of business as I spend the balance of the gift cards) and fewer gift cards to keep up with.   

In the latest fee rolled out by a bank, JPMorgan Chase, the nation’s largest card issuer, has begun charging hundreds of thousands of borrowers a $10-a-month, or $120-a-year, fee. Industry watchers say the fee is unusual because of its size but also because Chase is adding it to borrowers’ monthly balances, where it accrues interest. The bank is also raising the same consumers’ minimum payments to 5% from 2%.

The change affects consumers with low promotional rates who have carried a large balance for more than two years and made little progress paying it off, says Chase spokeswoman Stephanie Jacobson.

So let me get this straight: customers who took advantage of a promotion offered by Chase and are in every way abiding by the terms and conditions set forth by Chase and making the required payments on time are going to now be charged an additional fee simply for carrying a balance? This is absolutely outrageous! Consumers shouldn’t suffer just because they took advantage of a promotion that didn’t go as Chase thought it would.

This month’s referral links are brought to you by my beautiful baby girl, who we have dubbed “Happy Sunshine Angel Baby”. Each time someone uses one of these links to open an account at ING as a new customer with at least $250, ING will deposit a $10 bonus to her account. Here is a little message from her, translated from baby talk of course:

Hi! I’m the one they call Happy Sunshine Angel Baby! That isn’t my real name (we aren’t hippies are anything like that), but my daddy says there are too many crazy people out there to be giving out my real name. I am now almost 5 months old and I want to be a financial power when I grow up, or at least have enough money to buy a pony. Daddy started my savings account with money I got from my great-grandmother and great aunts, and Daddy kicked in some more since I’m so cute, but I want more! So open an account with my links this month so I can get my pony!

http://www.chase.com/ccp/index.jsp?pg_name=ccpmapp/smallbusiness/shared/page/business_checking_offer3

To make the deal juicer, while you are there you can open a free personal checking account with $100 minimum and direct deposit for a $125.00 bonus. The coupon for the $125.00 bonus can be found in the new mover/change of address packet at the post office.

But wait – there’s more! The word is that there are $50 business referral coupons out there that can be combined with the business checking offer. Some are also reporting that they have been offered a $50 bonus for opening a business savings account, but it seems this was a targeted promotion, so YMMV on that one.

Additionally, there are $25 referral coupons for the personal checking account. Add together all the referral coupons and account opening bonuses and you can get $400 (maybe $450) for opening a few bank accounts.

If you need referral coupons, I would suggest posting in the relevant threads on SlickDeals and FatWallet. I believe the referrer gets a bonus if the coupon is used, so there is incentive for people to share the coupons.