How New Swipe Fees Will Effect PerkStreet
Yesterday the Federal Reserve reduced the cap on swipe fees from the 44 cent average currently charged down to a maximum of 21 cents. Swipe fees are the fees that merchants pay every time you use your credit card, regardless of the size of the transaction. That's why many businesses dislike or forbid you from buying a pack of bum using your card. The new fees go into effect on October 1, 2011.
So how might these new fees effect our friends over at PerkStreet? My guess is that it won't have much impact. Here's why:
- In order for PerkStreet users to get rewards, they have to treat their debit card like a credit card. That is, they choose credit at the check-out and sign for the transaction. With the vast majority of their customers heavily incentivized to swipe like a credit card, the actual number of debit card swipes for PerkStreet is probably really low. Thus, impact will likely be minimal.
- On page 38 of the Federal Reserve document I linked, there were certain exclusions to the rule: "The final rule exempts from the interchange fee standard issuers that, together with affiliates, have assets less than $10 billion, debit cards issued pursuant to certain government administered programs, and certain reloadable general-use prepaid cards." I'm not sure what the current asset holdings of PerkStreet are, but they could be completely exempt on this reasoning alone. However, if MasterCard is considered their "affiliate", then that thinking doesn't hold. UPDATE (7/5/11): PerkStreet has confirmed via email that "our banking partner, The Bancorp bank, holds under $10 billion in assets." Thus, they will not be held to these new rules.
Either way, it's unlikely that the new debit card interchange fees will have a meaningful impact on PerkStreet or the rewards they offer. As a reminder, if you prefer debit cards over credit cards, the PerkStreet Financial Debit MasterCard® is the only card I recommend.
Best Relationship Article Ever
I know. I know. You don't come here for relationship advice. You come here to get a greater understanding of personal finance, and I try very hard to play only in that niche. Today is different because one of the best relationship articles I've ever read was posted in the NY Times, and it prominently features one of the relationship columnists I most admire, Dan Savage. So, whether you are single, married, partnered, widowed, divorced, gay, straight, bi, or some other identification, this article holds something for you. It is LONG, but it is well worth the read. Most of the knee jerk comments that follow it are not. Alas it is true that some ideas are ahead of their time, but in most cases I find there are just a lot people that are behind the times.
Here's the article. ENJOY!
PS I am planning a follow-up article on how the principles of good, giving, and game apply to personal finance.
PayPal Money Market Fund Closing
I received the email this morning. This was only a matter of time I suppose. I remember when PayPal rates were competitive with ING. According to a SmartMoney article:
“Due to market conditions, financial advantages of the money market fund have diminished for our customers,” said a PayPal spokeswoman. Advantages for the company have diminished, too. Although the fund’s 0.04% return placed it among the top retail money funds, according to iMoneyNet, PayPal was running the fund at a loss to maintain positive returns for its investors. (While the fund shows a 0.22% expense ratio, its expense ratio before the waivers was actually 0.87% last year.) It’s a problem plaguing the entire money market industry amid low interest rates that rarely eclipse fees, and declining assets as consumers move money out of such funds and into FDIC-insured accounts.
So, it's time to take your PayPal balances down to nil or alternatively I've heard there is a feature called Auto Sweep where PayPal will automatically transfer the balance out to an external checking account each night. Apparently you must contact PayPal directly to enable it. For me, I always pay by credit card through PayPal for the rewards. Suit yourself, but don't put a lot of $ there when it can't be working for you.
Maximizing What’s in Your Wallet Q3 2011
Welcome to the Q3 edition of Maximizing What's in Your Wallet! The big news is that I have a new grocery card that I can't wait to tell you about.
As a reminder, this post is for all the credit card deadbeats out there looking to maximize cashback rewards. So, if you never carry a balance on your credit cards, have them set to auto-pay in full every month, and want to make the most of Q3 2011, then read on.
Here's how you should allocate your spending:
Gas - This is a no-brainer. It's the same card year round. It is the PenFed VISA Platinum Gas / Cash Rewards Card. You'll get 5% back all the time on gas purchases. Just make sure you pay at the pump. I used to use this card for a lot more, but the rewards have been really scaled back such that only the 5% gas reward makes sense. However, as a gas card, it's a great choice. You could also use your Discover® More Card! or Chase Freedom as both are offering 5% during this period.
Groceries - Normally, I would be looking for a rotating rewards card to pay me 5% back for the quarter and buying lots of grocery gift cards at the 5% level to carry me through some of the dry quarters. No more. Say hello to my new American Express Blue Cash Preferred Card which pays me 6% back on all grocery purchases. It also pays 3% on gas and 1% on everything else, but I'll only be using it at the grocery store. The downside to the card is the card carries a $75 annual fee. Normally, I would never accept that kind of fee since American Express has other cash back cards that don't have an annual fee, but when you do the math, it turns out to be the best option. I spend at least $7,200/yr at the grocery store. 6% of that is $432 cashback–> $432-$75 annual fee= $357 –> $357/$7,200 = 4.96% year round cashback. Oh, and my sign-up bonus if I spend $500 on the card in the first 60 days is $100. That's 20% + my 6% = 26% off of a month's worth of groceries! So I signed up. Props to the folks at Bogleheads for pointing it out to me.
Restaurants - I've got nothing. Cook at home!
Home Improvement, Department Stores, and Clothing Stores - I've got nothing. You don't need new clothes anyway!
Hotels and Airlines – Either use your Discover® More Card! or Chase Freedom as both are offering 5% during this period.
Movies - Discover® More Card! has the market cornered this quarter as the only card offering 5% back.
Gifts - For gifts I use the Amazon VISA year round. When you buy through Amazon with the Amazon VISA you get 3% back and the first time you sign up, they give you $40 off your purchase. It's well worth the sign up. I am tempted to use my new American Express Blue Cash Preferred Card to buy Amazon gift cards at a grocery store for the 6% cashback. If I can be more planful about such purchases, I will probably do this.
Everything Else - Frequent readers know I love my 2% cashback Charles Schwab Invest First VISA card. It is my catch-all card for any expense that takes a credit card and does not fall in the preceding categories. The card is no longer offered to new customers, but you can get a roughly equivalent card in the Fidelity Retirement Rewards AMEX.
Two final thoughts: Please remember to sign up at Chase and Discover to be eligible for their 5% rewards, and remember this advice is ONLY for people who don't carry a balance…EVER.
FICO Develops Drug Adherence Score
As if keeping up with your credit score wasn't enough, I read in today's NY Times that FICO has now developed a methodology for predicting your likely adherence with taking prescription medication. For those wondering what I mean by medical adherence, it's basically the combination of compliance (the extent to which a patient acts in accordance with the prescribed interval and dose of a dosing regimen) and persistency (the duration of time from initiation to discontinuation of therapy).
So how did FICO develop an adherence score on you? Well they purchased data on about 600,000 Americans showing their prescription drug habits (refill rates, time between refills, etc…) across a multitude of conditions, and then looked at the available demographic data on those same people (age, marital status, job stability, etc…). They used this data to create a projection methodology that they could then apply to all of us.
Why bother? Who cares if you're adherent you might ask. Um, lots of people that represent major industries. Think pharmaceutical and insurance companies. Big pharma wants to know your current score and anything they can to improve your score because the more drugs you take, the more $ they make. The insurance companies want to know your current score so they can adjust your insurance rates accordingly. Nothing like a little more Big Brother in your life.
My personal take is that this methodology is highly imperfect, but given that it's the best available data, it will probably be widely adopted by industry.
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