Mapgirl’s Fiscal Challenge

Wow. The economy must be doing some funky things because my credit card interest rates are going DOWN. Meanwhile, my limits are going UP.

I reported that I have 11.99% APR debt right now, but the statement came in the mail recently and it’s actually at 11.24% APR. I’m thinking I can call them up and try to leverage it down to single digits.

If you haven’t called your companies yet to lower your rate, you might want to do that now since rates are dropping.

Since the ceiling needs repair, I figure I should do the entire bathroom. I thought maybe it would cost $5K, but after talking with a few people, I need to budget closer to $7K. I suppose this is a very salient lesson that everyone needs an emergency fund. Say 3-6 months of take home pay, which of course would cover the repairs. Unfortunately, my emergency fund has only about $1.5K in it.

In desperation for cash, I looked at all my options here. I have credit available on my HELOC and on my credit cards. I have a few CD’s expiring, which I was going to liquidate anyway to pay down debt. But since there is an emergency here and now, I’m going to use them to fund the repair.

With construction, you usually have to pay a deposit of some sort to get the work started. In my case, the earliest construction can start is in another week. The work will take approximately 10 days, taking me to early May.

In looking at my cash flow and available credit, I decided, rather sadly that I cannot attend my friend’s wedding in Boston this month. There’s just no way I can find a hotel room under $200 a night anywhere near the festivities or near the hotel where my best friend and her husband are staying. I’m looking at $1000 for just hotel and rental car alone at a time where I need the $1000 for something else.

I have balance transfer checks coming to my house all the time for a promotional rate less than 2% APR. Unfortunately, these BT’s have a fee. A friend asked me if that fee was capped out but reading the fine print, I couldn’t find any mention of a cap. I called the customer service line and asked about a cap. However the representative said he couldn’t change the BT fee. Instead he offered to change the rate from 1.9% to 1% APR after looking at my sterling payment record. It’s the best he could do, but I’ll take it.

Now the trick here is that I’m sitting on $5K borrowed for 1% APR. Do I pay off my 11.99% APR credit card balance of $4K only to ring them up further as the construction work progresses, or do I hold onto this wad of cash and wait to pay it out to the contractor? (It’s going into an account that doesn’t bear interest so there’s no arbitrage going on here and there isn’t enough time to move it around and take advantage of that sort of thing unless I’m paying off the credit card.)

The last $2K I need, I figure can come from liquidating all of my savings accounts and my next two paychecks. The problem now is that I’ve shot my 2008 debt reduction goals to pieces.

I’ve been sighing a lot this week. Life. It’s what happens to you. Dealing with it can suck, but I look forward to having a shiny new bathroom with better lighting in the shower and for the mirror when I put on make up.

Luckily for you, this week, several PF bloggers have Emergency Fund posts.
Five Cent Nickel: On building an emergency fund
Get Rich Slowly: Learning to love his emergency fund
Plonkee: On why they’re no fun

I feel kind of bad. One of my friends is a mortgage broker and I told him I would give him a call after he got back from vacation about possibly refinancing.

That was a month ago. I feel like a jerk for dangling some business in front of him and then not calling.

But since that call I had dinner with another mortgage broker. We had a casual chat about refinancing and the current mortgage situation. Turns out this guy is doing about 1 mortgage or refi a month right now, whereas a year ago he was doing 5 or 6. Because of this, he’s going back into telecommunications on a short-term contract to bump up his income this year. I didn’t ask the other broker at dinner how he’s doing, but I am sure he’s also doing a lot less business as well this year.

I mentioned that I was going to call this friend of mine about a refinance, but the guy at dinner asked me about my current rates and stuff. He told me that my primary 7/1 ARM at 5.75% with a fixed 7.18% HELOC is still pretty good. He basically advised me that it’s not worth it to refi now since I would have appraisal, closing costs, and opportunity costs of my free time to do this. He told me to wait till rates fall another full percent before trying to refinance. Before I told him about how much equity I had, he told me the HELOC was quite high at current rates of 1% above prime. Then I told him I have less than 20% equity and he backed off that position.

Since I have 3 years left before my mortgage adjusts, I think I’ll just wait out the current situation. Per my earlier post about my goals and HELOC, while not upside down on my mortgage, I certainly do not have enough equity built up in this declining housing market to make up 20% equity in my condo. I’d still have to have a 2nd trust to avoid PMI. (And I’m one of the lucky ones. Because my condo shot up 25% at the peak of the Northern VA housing market, my valuation had room to fall. I’m still valued much higher than my purchase price.)

So for right now, unless Ben Bernanke makes a slew of cuts again with the FOMC in Q2 2008, I think I will hold steady and focus on paying back my credit cards for now.

Where I live, I can join the local county credit union. I don’t need to do anything but prove that I’m a resident.

Every once in a while, I think about joining a credit union. I started a new job with a large company and I checked out my credit union options. Honestly, there weren’t very many through my company. The strange irony being, that there are about 30 credit unions across the nation that were founded by company employees back in the day. But none of the existing ones are convenient to me.

While perusing the Arlington VA Credit Union website, I see they have 12 month CD’s still paying out 4% APY, with an option to bump up. I’m thinking about it since ING Direct is only paying 3.4%. I still keep about $1200 in CD’s at ING at 5.0% APY or slightly better, but those are about to expire in the next few months without a great rate available. These CD’s form the core of my emergency fund, which I’ve let dwindle and haven’t built back up.

I know I should be constantly building back my savings. But right now the plan is to save by spending. I’m tossing lots of money at my credit cards since the interest rate is much higher than any savings rate I can find. But that doesn’t mean I shouldn’t shop around for these small CD’s I have since I have no intention of cashing them out to leave myself with nothing to fall back upon.

FWIW, let me lead off by saying my cousin works at PayPal. As far as I know, I don’t know anyone at Prosper.

Those things said, PayPal was one of the few things I adopted early. They gave me $5 bucks! What’s not to like?

The thing is, I don’t really like PayPal anymore. I thought it was great for moving money around amongst friends, but the fees went really high once I tried doing eBay. I used to always wait the 3-4 days for free transfers in and out of my bank account but once I did eBay, my account was “upgraded” against my will and the transaction fees are killing me. I sold two pairs of hockey tickets and a pair of tickets to the King Tut show in Philly this year. All told, it was about $130 worth of transactions and I paid out $4.67 in fees. Because I usually use my PayPal account to send money to friends in CA for things like group birthday presents, I have only earned 76 cents in interest this year. But I note, PayPal is paying me 4.7% in their money market account, which is slightly better than ING Direct.

I’ve concluded that instead of holding $48.16 in the account, I’m going to move $40 of it over to Prosper so I can add it to my $19.xx balance and then make a $50 loan to someone. I will have a better return on my money and I won’t be tempted to spend it.

I realize that Prosper is essentially a $50 3-year CD, but so far, I’ve done ok in picking my loans. My first loan is a year old now. I have three others I made this year and all four loans are current, none of which were ever late or wonky in any way. My estimated ROI is well over 14%. Way better than the S&P this year. (YTD Up 3.2% on the adjusted close reported by Yahoo for Dec 4th when I drafted this)

Just thinking out loud right now. I have a lot of stuff on my mind.

How long is your commute?
Do you sit in traffic for long periods of time?
Does it bug you that you’re idling away all that gas and therefore money?

Well if it does, try this trick to save some money.

1. When you’re stopped, wiggle your wallet out of your pocket when it’s safe to do so.
2. Pull out your highest rate credit card and call your credit card company with your hands free cellphone.
3. Ask them to lower your rate!

Commenter Dean did this while driving home yesterday. He talked to one agent and asked about lowering his rate. They transferred him to a second agent who asked him what other card companies were offering him. He told them 2% lower APR. The second agent said they could do better and beat it by another 2% so in about 5 minutes he reduced his APR by 4%!

Give it a try! I might have to do this with my 15% APR card even though I don’t carry a balance on that one. Why not make all my rates as low as I can?

Who else can you call in 5 minutes to TCB? My sibling calls me while driving home all the time. Due to the 3 hour time difference, it works for us because I’m usually safely at home and they’re on Hwy 101 looking at pretty, pretty brake lights.

Endless Gibberish on how much does it take to earn 1 cent in interest each month. He looks at ING Direct and HSBC.

A very interesting breakdown. As you can see, it’s not much money. You probably have three times that amount sitting in a coin jar somewhere.

Now the question is, will you deposit it for interest?

As of last week, I am $10.00 richer because my current boyfriend asked me for an ING Direct referral. Of course, I was glad to give him one. That’s my second for the year. If anyone else out there STILL doesn’t have a high-yield online savings account, please email me. I’ll be happy to assist you. My email address is mapgirlsfiscalchallenge at Google’s mail service.

Fascinating brief history of usury and lending. It’s offered up by the Americans For Fairness In Lending. It’s an advocacy organization with some well known names like Consumer Reports.

Like any transaction, “Let the buyer beware!”

Payday Loan Math from JLP at All Financial Matters.

Divorce2FinancialFreedom has a great companion story about Payday Loans and what you really ought to do to before you get one.

I wholeheartedly agree with D aka LaundryQueen that if you’re desperate enough for a payday loan, then you’re better off swallowing your pride and asking someone else for a loan. A) It’s not for some exorbitant sum. It’s one paycheck. B) The loan rate you pay your friend could be nothing. Or surely a LOT less than you’d pay at a payday loan place. C) It might be hard to find a way to pay it back, but if like the person in LaundryQueen’s story, you may be able to get an advance from work and have an amount taken out every check to pay it back.

Like I commented at Get Rich Slowly, I recently noticed that these places are in the suburbs and they are no longer the ghetto phenomenon I used to think they were. Urban poverty is turning into suburban poverty. That’s pretty scary. They say that most of the people going to food banks are middle class people who are too busy keeping up appearances when their financial lives are going to hell in a handbasket.

As Boston Gal says, “Today is a great day to start saving!”

Usury is unChristian. It used to be a sin. In our current economic state of affairs, is it still a sin or a necessary evil?

I avoid religion in my blog, and that’s as far as I’ll go. Think of it as a philosophical question instead of theological and continue forth with the rest of the questions I am going to pose.

Boston Gal points us to an article about ‘auto title loans’. I’ve never heard of such a thing. But whatever it is, it can’t be good since it’s aimed at keeping poor people poor.

The first thing that came to mind while reading BostonGal’s pull quote is just what is the interest rate being charged? Looks like 200+% in some places!!! Three digit interest rates? Surely you are joking!
Shopping for credit is just like comaparison shopping for clothes or shoes, the products are the same thing, but embellished differently enough to charge you crazy rates across the spectrum. (I want to know who the heck gets 1.9% APR financing for car? NOBODY. That’s who.)

I shop for credit, and just like shopping for anything else, I say to myself, ‘I’m not going to spend more than X for it.’ For credit, X is your interest rate. (Formally, this is what’s called your reservation price.)

When I shopped for a mortgage 3 years ago, I knew I didn’t want to pay anything more than 6% for my primary loan. I had looked around at various places for interest rates in my area and got a feel of what I should be able to get and what was too high. I didn’t really know what I qualified for, and I played it pretty conservatively. I did ok with that. But the HELOC on the house climbed to 10+% before I figured out how to convert it to a lower fixed rate loan without penalty. Yeah, I didn’t think I should pay 10% APR for a home loan. Not at all.

Recently, I looked into refinancing so I could consolidate into one single payment per month. (Drives me nuts to track a second account for a single thing.) But my reservation price tells me it’s not worth it at today’s credit rates, high 6’s and low 7’s.

Lately I don’t like to pay more than 15% APR for a credit card. I know I’m borrowing money for a shade more than that, like 15.9%, but as soon as it hits 16%, I give those guys a call and ask them to lower the rate. I’ll call every 6 months if I have to.

I don’t think there is any reason in life to pay more than 20% interest on anything. No payday loan, no direct deposit advance, NOTHING. Even when my credit card rates were high about 5 years ago, I got that stuff consolidated down from 17-21% to 15%.

Ask for a Truth-In-Lending sheet from the loan provider. I got one when my mortgage papers were sent to me. I didn’t understand it, but none of the interest looking numbers said over 6%, so I was happy. TILA also covers credit card companies as well, so read your fine print. Even if your rate is variable, it should give you an example of the current rate and even sometimes how to find the rate in the Wall Street Journal.

I gotta learn to make a poll. What is the highest interest rate you will tolerate for a credit card? What about a mortgage?

Sidenote: OMG!!! I just figured out how to cut my posts with a MORE tag. No more lengthy posts! I have sneakily figured out how to make you suckers click more for greater page views. MUHAHAHA!

Earlier today I posted about a CNNMoney article. I followed the suggested strategy of locking down my variable rate HELOC to a fixed rate. I called my current mortgage banker armed with the knowledge that Millennium Bank has HELOC’s for Prime minus 1%. As some readers know, I opened a CD with Millennium a few weeks ago and found they had a nice rate.

Well, lazy me didn’t strike while the iron was hot. I probably could have fixed my rate for something like 6.75% with Millennium, but I would have had closing costs and another appraisal with it, stuff I’d rather not do at the moment with my crazy schedule. So I took the advice in the article and I called my current bank. They were able to offer me a fixed 7.18% APR over the phone.

The kicker of the entire conversation was not me telling the CSR that I’m a personal finance blogger, but hearing from her that a lot of people got HELOC’s and were not well-informed by the mortgage loan officer that these variable rate HELOC’s have a provision to convert to fixed. You can only do it once. But geez! Had I known that, I would have called them last year and fixed the rate to something closer to 6%. I’m a tad cheesed off at my banker right now for not telling me this.

So if anyone is getting a 2nd trust/HELOC during their home purchase right now, please ask your banker if there is this fixed rate conversion provision. If so, you might want to take advantage of it right away before rates go up again.

At any rate (pun intended), I went from a variable 9.8% APR to 7.18% APR for about a 30 minute wait on hold and another 15 minutes on the phone with a rep. Very worthwhile! Maptastic!