Credit Card Deals (U.S.)

Impossible To Get Rich On Salary Alone

There's a great article on Money Under 30 about how it is pretty much impossible to get rich on your salary.

I agree. You need side income, whether it be from investments, passive income streams (such as rental properties or a small business), etc.

For the vast majority of us, we will never get rich on our salaries alone. A salary is certainly useful, and should be looked at as a safety net. But it is not enough.

Even professionals, doctors and lawyers, may only bring home $150,000/year or so after taxes. This is a comfortable living, to be sure, but it is by no means "rich" -- especially when a decent studio in a good part of Los Angeles, Chicago, or New York may cost you around 4 times that amount.

So if your salary is not enough to become wealthy, and wealth building is a major priority for you... it's time to put on your entrepreneur thinking cap and get to work on something that will produce a secondary income stream. Ideally something that will only involve minimal amounts of time & energy, so you can continue at your primary job.

Cash Vs. Credit Cards Vs. Debit Cards (Which Is Better?)

My cash-only experiment recently ended. Now I use a rewards debit card for about 99% of all my purchases, using cash only when cards are not accepted at all (at certain restaurants and bars, for example).

I don't like using credit cards any more, because there is the possibility of spending more than you have in your bank account, and I hate the idea of owing money at interest.

I don't like using cash because change adds up fast. It is very inefficient. Plus, paper money is filthy and disorganized.

So my system works well for me. With a debit card, the money is debited from your checking account immediately, and you can see most transactions instantly by logging into your account online or from your mobile phone. This gives me the control I need, encourages responsible spending (since I can't spend more than I have), and doesn't involve any of the inefficiencies of carrying physical cash.

So: cash vs. credit cards... Cash wins, because you never become indebted to a sleazy credit card company.

Credit cards vs. debit cards... Debit wins, for the same reason.

Debit cards are the winners here, hands down. What do you think, though?

Outlaw

Do I Make Enough Money?

This is a weird question, but I get it a lot from readers: Do I make enough money?

Well, do you?

It's a weird question because wealth is almost always RELATIVE, and rarely absolute. Do you make enough money compared to Bill Gates or Warren Buffett? Probably not -- and I doubt they will invite you into their bridge club any time soon.

Do you make enough money compared to someone in India who subsists on $2 per day or less? Do you make enough money compared to someone who has lost everything they own in the Haiti earthquake?

Or how about this: is what you have more than the net assets of an old friend who has gotten himself hopelessly into debt?

Asking whether you have enough is sort of like asking whether you're tall enough, or whether your eyes are brown or blue enough.

Tall enough? Who cares. Maybe if you want to be in the NBA, or you want to be a runway fashion model, then height is a (moderate) concern. Otherwise, it's not, past a basic point of acceptability... Whether you're 5'10 or 6'1 or even 6'5 makes little difference in most career fields.

As long as your height isn't preventing you from functions you need or want to do, it probably isn't a big issue for you. The same with your current net worth.

If you're wealthy enough to do what you love, and to do it while remaining debt-free, you probably have enough money (for now). 

On the other hand: if you are working for money, rather than letting money work for you 24/7, you may not have enough.

In that case, the solution is simple, but not sexy: spend less, save more. Read personal finance blogs like this one so you'll know about good investment ideas and will be amongst a like-minded community of smart people interested in saving, building, and protecting their wealth.

Becoming wealthy isn't about "greed" or anything like that. It is about the desire to do what we want, and to have financial freedom at the end of the day -- to buy our friends and family good experiences, to buy the things we enjoy, and to have as much (or as little) free time as we want.

Outlaw

First Time Credit Card: Do It Right

You only get your first credit card once in life.

Here are a few tips on how to get the best first time credit card, without compromising or getting a subpar offer:

1. Go with a big, well-known credit card issuer. You may want to use a small community bank or local credit union later in life, but for your first credit card you want to build a relationship with a big bank -- it will make it easier to get a larger credit line, better credit card from this issuer down the road.

2. Go with a real, unsecured credit card. I wouldn't recommend starting with an American Express charge card, for example, since your credit limit is not reported to the bureaus. You want a credit card with a reported credit limit, not a charge card. Also avoid a secured credit card. You want "unsecured" credit for your first credit card account. 

3. Avoid annual fees. With so many good offers out there for first time credit card users, there is no reason to pay an annual fee. Consider the Chase Freedom card (no annual fee and $50 bonus after your first purchase) or the Citi Dividend Platinum Select MasterCard or Visa cards designed for college student first time cardholders. 

4. Learn how the game works. Always pay your balance in full each month. Never pay interest, and never pay late. Never charge more than you have in your bank account, so you can pay off the entire balance immediately if you want to. Always get a card that has good rewards (cash back, reward points, hotel points, or air miles). And read sites like Credit Card Outlaw and MSN Money so you will know about any new offers worth checking out.

Is Chase Bank Good? (Answer: Yes, Jamie Dimon Is There)

Wondering if Chase is good? Much of this site's traffic growth over the past week has been coming from the post where I reviewed Chase's new checking account offer. 

Is Chase a good bank? Many of you have wondered that... 

Well, it's important not to group all huge financial institutions together (as our President makes the mistake of doing at times).

Just as you wouldn't group all large retailers together (your experience at a Wal-Mart is decidedly different from the experience at Nordstrom or Bergdorf Goodman), you shouldn't make the dumbass mistake of treating all banks equally.

They aren't all bad.

Bank of America = big and incompetent.

Chase = big and competent.

Bank of America's recent advertising blitz has mostly involved feel-good corporate background music, wrapping itself in the flag, and pretending it is doing ALL IT CAN to promote an American middle class recovery (when nothing could be further from the truth).

Chase's advertising has been... oh wait, Chase isn't slamming you with feel-good commercials every minute of the day. That's because people actually like them, and trust them. (Sure, Chase advertises the hell out of its Sapphire line of high-end cards, but that's because they are going for an affluent niche, and TV buys on networks like CNBC is a good way to get rich old dudes to sign up for that card. Chase isn't really advertising itself or trying to make Americans trust it again. It never lost our trust to begin with.)

Whereas Bank of America's new CEO is someone most people outside of finance have never heard of (and never really see), JPMorgan Chase's CEO has his personal image very tied to the company.

He's down to earth, intelligent, and stands behind his bank. Watch this interview of him from 2008, when we were in the midst of the crisis... It's nearly an hour long, but it's worth watching. That's how an American CEO should act.

And yet some bank CEOs act like anonymous spineless snails, slow to react to bad news and with a golden parachute strapped to their backs.

One last word about Chase. Dimon posted a video right on the homepage of JPMorgan Chase's corporate site assuring customers that his bank is "rock solid."

You won't see Bank of America doing that anytime soon. So yes, this is a part of the reason I have moved my money from BofA to Chase. Corporate culture matters. BofA has about as much culture as an empty Wal-Mart parking lot.

Outlaw

Disclosure: Opinions expressed here are those of the author alone, and not necessarily of his employer, partners, or other contributors on Credit Card Outlaw.

Should I Contribute to 401k in 2010?

From a reader...

Should I continue contributing the maximum to my 401k plan this year, or should I work to strengthen my emergency fund and max out my Roth IRA (well, already almost done) instead?

The recent market instability has made me less thrilled about continuing contributions to my 401k plan, where I am mostly invested in large cap equities through an index fund. When I contribute to my 401k, it makes me feel like I'm doing the responsible and right thing, but I don't want to catch a falling knife.

--

So what should she do? Should she continue to contribute to her 401k in 2010, or is it time to ease back and put any excess money in a more stable place, like an FDIC-insured savings account at ING or something like that? Give your suggestions in the comments.

Check Card Rewards Add Up!

I'm still pleased with my Chase United MileagePlus check card rewards. It's 1 United Mile for every $2 spent using this check card.

Check card rewards are typically not as lucrative as credit card rewards, but there are some distinct advantages. You don't go into debt, you don't pay interest since the money comes immediately from your checking account, there's still $0 liability if you are using a Visa check card rewards program, and you spend less -- psychologically you realize the money is coming from your account, and every purchase you make reduces the pile of cash you have left in your account. This is the opposite from credit card psychology, where we assume we can safely spend until we hit our credit limit, even if that limit is $10,000 or $20,000 more than we have saved up total!

What are some check card rewards worth getting? Aside from United air miles, you can get a check card with Continental air miles or Chase rewards or even ThankYou Network reward points (if you get Citi's check card). 

I used to be a big time credit card guy, but now I use this site to advocate responsible winding down of credit cards and, instead, turning to a rewards check card of some kind for the vast majority of your daily purchases.

You will enjoy the same level of convenience as your old credit cards, but won't find yourself in debt.

You will spend less.

You will enjoy life more, only buying what you truly need to sustain you, and slowly growing out of the illusion that you need to spend money to be content or happy. It's a lot more enjoyable to get your kicks from free stuff -- a night of reading a book borrowed from a friend, a date (at a very cheap restaurant, of course), a free flight somewhere cool since you've been racking up points using a check card rewards program of some kind (I'm very close to getting one), or simply a brisk jog in the park.

Outlaw

Savings Account Online Interest Rates (High Yield Options)

Savings account online options: which are the best online-only savings account providers with the highest interest rates?

You're making the right choice by choosing an online high yield savings account as opposed to a low yield savings account with a terribly low interest rate at your local bank branch.

I still have one such account open (I need to close it soon!) and the interest rate is 0.01% APY. Atrocious.

As long as a savings account, online or offline, is FDIC insured (look for the FDIC logo on their site)... your money is safe. So just go for the highest interest rate. Don't necessarily go for the bank with the best designed web site or slickest ad campaign.

My favorite online savings account providers as of right now are:

ING Direct - Great, easy to use web site, fairly fast (and free) transfers in and out of your savings account online at ING. Plus, a fat $25 bonus for eligible new account holders. Click here to find out how to get the bonus when you sign up. Great interest rate for a savings account.

HSBC Direct - The online savings account offering from multinational banking giant HSBC. Great web site, also easy to use, very similar to ING in most respects. Check the current interest rates; it may not be quite as high yield as ING's offering.

FNBO Direct - Another good online savings account with direct access via the Web, an awesome 1.40% APY (at time of publication; rates may change), and other options such as high yield certificate of deposit accounts. 

Dollar Savings Direct - Online-only savings account, simple no-frills web site, and an awesome high yield of 1.50% APY (at time of publication; rates may change). There are supposedly no B.S. fees, but there is a $1,000 account balance minimum for this one. 

Don't let your money sit and rot in a traditional savings account at your bank. If you haven't switched to a high yield online savings account yet, you are way behind the curve... Many of us went "online only" back in 2007 -- that's when I switched most of my savings account money to ING. Do it today. And watch your money grow a bit faster.

Outlaw

Finally, Some Better Credit Card Promotions

UPDATE 10/2/2010: Finally, here's a credit card promotion that's actually worth your time. Check out our full review of the Chase Sapphire $100 Cash Back Bonus offer, and use the promotional link located right here to sign up -- you'll get 10,000 Bonus Points credited to your account for free after meeting their spending requirement. Not sure how much longer Chase will keep this promotion active, so you may want to jump on it fairly soon.

Original article from earlier this year: Don't count on it. While it's possible we may see better credit card promotions after the CARD Act takes effect next month, in all likelihood the opposite will occur.

Greater restrictions placed on credit card issuers means the end of awesome credit card promotions for those who pay their balances on time and "milk the system" for free cash back rebates, reward points, or air miles.

The money train has come to a stop. And if the American economy sees a double-dip this year, dipping back into the depths of recession (actually possible after Obama's chilling speech which, well, chilled the stock market this week)... credit card promotions will be the least of our concerns.

Easy credit abounds in good times, and becomes harder to get in bad times. It's simple supply and demand: now people need credit just to get by, to pay the bills and feed their kids, so credit card companies don't have to entice you with awesome promotions or 100 gazillion air miles or a long 0% intro APR promotional period. You're lucky to get accepted for a card at all in this climate.

Sad, but true. And many of the large issuing banks are more concerned with closing out "risky" credit card accounts and recouping most of their money than they are with securing new credit customers.

But there's a silver lining in all this: first off, there are still some good credit card promotions. The Chase Freedom card comes to mind. You get 50 bucks after your first purchase using the card, plus 1% cash back on all regular purchases. Good, but not anywhere near the free cash bonanza of the pre-recession card promotions. Do you remember those?

My God, those were awesome. Anyway. There is also a second silver lining here: more people are turning to rewards checking accounts and reward debit cards, both of which I am a huge fan of... you spend less money when you use a debit card or cash. You save more.

Credit makes it too easy to spend out of control and beyond your means. With a debit card, you can only spend what you actually have in the bank. So maybe it's not 100% bad that the good credit card promotions have all dried up. At least you're living within your means and not taking on any new, unnecessary debt.

Outlaw

File Taxes For Free In 2010

Don't waste your money with expensive tax preparation: in many cases, you can e-file or regular file taxes for free in 2010.

If the amount you earned in 2009 was less than $57,000, you are typically eligible for Free File. Go on the IRS web site and click their "Free File" logo on the right side to view a list of tax preparation companies and web sites that are participating in the free tax filing program this year.

This is the first year I've filed taxes for free. In previous years, I was a moron and went with overpriced software or face-to-face filing at a local tax prep center. 

I ended up going with H&R Block for my free file -- they were on the IRS list of recommended free file services along with some lesser known brands. H&R Block, at least, has a good looking web site. If I had to review H&R Block, I would give them a 10 out of 10.

The federal file was truly free, with no BS or pressure to "upgrade" to a paid plan. Additionally, they took care of my state file for just $9.95.

Plus, their service helped me find a tax credit I didn't know I qualified for. The amount that this credit boosted my refund definitely outweighs the $9.95 I paid! And filling out the complex IRS forms by hand would have taken much longer, and been more difficult. I probably would have missed this particular tax credit altogether had I filed by hand. It also made it easy to enter my bank account information -- I selected the direct deposit option for both my federal and state refunds. (It should supposedly arrive in 8-15 days, as opposed to 3-4 weeks or longer with a regular mailed check.)

So I recommend H&R Block fully and suggest you guys check them out. And no, I have not been paid in any way by them for this endorsement.

Have another free tax service you recommend to fellow Credit Card Outlaw readers? Post about it in the comments, below.

Disclaimer: I am not a tax expert. Consult one before filing your taxes.