Friday, April 9, 2010

Financial tuneup

This week, I came across a page on the New York Times website that lists "31 Steps to a Financial Tuneup." Many of the steps (such as "Increase your student loan payment") don't apply to us, and there are others (such as "Check your credit reports for free") that we've already taken. However, after reading through the whole list, I picked out three steps that I thought might actually work for us. My results, as you'll see, were mixed.

1. Find a better bank. Ron Lieber, the Times' financial guru, points out that most customers no longer really need a brick-and-mortar bank with a branch in their neighborhood. With direct deposits, online banking, and waived ATM fees, online-only banks can offer the same level of service as local branches, and their lower overhead translates into higher interest rates on savings and checking accounts. After considering the question from several angles, I concluded that moving all our accounts to an online bank wouldn't work well in our case. For one thing, as a freelance writer, I get paychecks from different clients at different times, so I can't simply set up a direct deposit. Also, our mortgage is at our local branch, and having an account there is very convenient when we want to make an extra mortgage payment—we can just transfer money from one account to the other. However, I did notice that the amount in our account at the local bank was well above the minimum balance we needed to maintain in order to earn interest. So I took the bulk of the extra money—leaving just a slight cushion—and transferred it to the account we already have at the online-only bank ING. There, it will earn 1.1 percent interest instead of 0.4 percent—not a huge difference, to be sure, but every little bit helps.

2. Find a better-earning rewards card. When we first signed up for our rewards MasterCard a few years ago, it was offering a deal that looked pretty sweet: 1 percent cash back on all purchases, and as much as 5 percent on purchases at gas stations, grocery stores, and drugstores. Since those three categories account for at least half of our transactions in any given month, this was great for us. However, it turned out to be just a "teaser" deal that expired after a few months, and the bonus rate for gas, groceries, and drugs dropped to 2 percent cash back. Still, this was better than any other card I knew about, so I figured I had no cause to complain. However, when I took Lieber's advice and reviewed my credit card terms—something I hadn't done in a while—I discovered that the issuer had apparently dropped our cash-back rates still more (without bothering to notify us of the fact). We were now earning less than 1 percent on most purchases, and only slightly more than 1 percent in those three special categories. Hmm, not as sweet as I thought. A quick search on the financial site Mint.com (which Lieber also touts on his page) led me to the "Chase Freedom" card, which offers 1 percent cash back on all purchases, and 5 percent cash back in various categories (such as groceries, air travel, and home improvement) that rotate on a quarterly basis. It took me just a few minutes to submit an application online, and my new card is now on its way.

3. Ask your cable company for a better deal. We don't have cable TV service, but we do have a cable modem, and I thought I might be able to negotiate a better deal on our service. A recent article about haggling in the Washington Post notes that companies may be more willing to deal if they fear losing your business to a competitor, so I called up our cable company and pointed out that, if I were to switch to DSL, I could pay $30 less per month. Of course, I hastened to add, I'd rather not have to switch, but gee, that sure is a big price difference, isn't it? So is there any way you could offer me a better deal? The answer: Nope. I persisted: What about the introductory offer you have on your website, $30 a month for the first year? Could we get that as existing customers? Still nope. Well, I said, playing my trump card, could I talk to someone else, a supervisor, who might have the authority to negotiate? The operator was happy to transfer me, but the supervisor I got on the line was no more open to negotiation. The only deal she could offer me, she said, was their "triple play," which bundles TV, phone, and Internet together for $90 a month, but since we don't currently have TV service, this would actually cost us more than we're paying now. "But you'd have a new service," she pointed out. Yes, but it's a service I don't need. "Well, I'm afraid that's all we have." So I politely signed off, with a veiled threat about "looking into my other options."

So, after investing a bit less than an hour of work, I was able to make two minor tweaks to our finances that may put a hundred or two extra dollars in our pockets each year—but I struck out on the third one, which actually offered the biggest potential savings. Oh well...two out of three, as they say, ain't bad.
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