Erosion of the PerkStreet Model
I know it may not seem like it from the title, but I actually am a fan of PerkStreet (a sponsor on this site). It is by far the best debit rewards card program out there offering 2% back on all purchase with various rotating rewards in the 5% range. If debit rewards are your game, this is the card for you. I also think their marketing and customer service are tremendous. When readers have shown up in the comments section of my reviews (PerkStreet Review Part 1, PerkStreet Review Part 2, and PerkStreet Review Part 3 – Management Speaks), PerkStreet employees actually respond and try to resolve the issues. So, why this title? Because of my $5,000.
One of the primary issues I've talked about before is how PerkStreet requires you to have $5,000 sitting in your checking account paying you 0% interest in order for you to get the 2% back on your debit card purchases. For the time being users of PerkStreet have few other viable options to gain interest on this money that they obviously want to remain liquid (else why put it in a checking account?). However, at some point Ben Bernanke will stop being PerkStreet's best friend and will stop artificially keeping down interest rates. When he does that, banks EVENTUALLY will start raising their deposit rates. Checking accounts will begin actually paying interest again, and the PerkStreet rewards model will begin to look less attractive to consumers who will want to take their $5,000 and start chasing the better rates again. With less $ in their PerkStreet account, consumers by definition will be forced to spend less (since it's a debit card we're talking about). Additionally the incentive to spend drops by 50% because with less than $5,000, you only get a 1% reward on your purchases. This less cumulative spending means fewer purchases which means fewer merchant fees/card swipes for PerkStreet which has to be where they're getting the bulk of their profits (aside from the fees) since PerkStreet doesn't make loans. I'm not sure how PerkStreet will handle this situation, but they're smart guys, and I'll be curious to see how they respond.
What do you guys think? Am I missing something here?
Escape from Prosper
I joined Prosper.com (a sponsor of this site) in May, 2006. This was about a week before I became a parent and about the same time Osama was moving into his new home. I say this because I would love to blame my joining on pregnancy brain or some terrorist plot. However, as in so many cases, I have only myself to blame. I have to admit I was really excited about Prosper when I first started. It gave me as an individual the opportunity to bid on all sorts of personal loans based on the touching stories detailing their reasoning behind their loan needs as well as what appeared to be reasonable pieces of financial history and credit worthiness vetted by the professionals over at Prosper headquarters. How beautiful! I get to help those less fortunate while earning an excellent return! How naive…
NC SECU Bridge Account: Abandoning Ship
I think it's time to move your money out of the NC State Employees Credit Union bridge account for the remainder of the quarter. If you don't know what I'm talking about or want to know more about a risk-free investment that could earn you 3% per quarter, go back and read this post.
Here's my investment thesis. It's not very complicated. On April 1, 2011 the S&P 500 ended the day at 1332.41. Today it's trading around 1274.55. To get back to breakeven, the S&P 500 would need to move up 4.5% over the next 14 trading days, and given the economic situation currently, I don't think it's going to happen. I certainly don't think it's going to offer a return beyond this.
Thus, I'm recommending transferring the bulk of your funds out of the account until June 30. Just set a calendar reminder to move it back on July 1 (always nice to start from a small base!). You'll reap a small benefit for the rest of the quarter (21 days/ 365 days * 1.25% * $2,750 = $1.98). That's a rough estimate and may not be worth your time. However, if that price of a cup of coffee matters to you, you're much more likely to achieve that in the money market account than the bridge account this quarter.
Paying My US Bank Mortgage by Credit Card (FAIL)
I consider being able to pay one's mortgage by credit card to be one of the holy grails for a credit card rewards maximizer like myself. It's also next to impossible to achieve, especially in today's economic environment where default is a massive concern among the banks. Thus, I was incredibly excited when I thought I was going to achieve this feat.
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Quest for a Million – Net Worth – 6/2011
It's been a very busy month from the perspective of my real job so unfortunately my blog has gotten shortshrift. I apologize for the dearth of posts, but hopefully we'll get back on track with this net worth posting. There were no major financial events that took place in May so basically we're just seeing some of the painful pieces of April that I charged to my credit card finally come due.
Unfortunately, this past month has also been a rough one in the stock market with multiple weeks of losses for the long-term investors. The good thing is I am unconcerned with weeks. I'm actually unconcerned with months and quarters. Even years. Because I am investing for the long-term and I'm not only in stocks – I also have bonds and cash accounts. For me these blips and dips are buying opportunities which is just what I've been doing, adding a little more VBK to my Roth accounts. So, relax and remember that investments take time to pay back.
Given what I just said, it should not come as a surprise to know that this month's numbers are not great. In fact, if we ignore the Zillow housing factor, net worth is actually DOWN this month by 1.1%. However, I knowing I'm taking the right steps that will pay off in the long term.
Net Worth June 2011
| ASSETS | This Year | vs. Last Month | ||
|---|---|---|---|---|
| Real Estate | ||||
| My Home (Zillow) | $357,000 | -7% | 3% | |
| Savings | ||||
| All Accounts | $32,043 | -17% | 1% | |
| Retirement | ||||
| All Accounts | $225,680 | 11% | -1% | |
| Investments | ||||
| 529 Plan | $12,356 | 25% | -1% | |
| Brokerage | $5,093 | 3% | -4% | |
| Prosper | Finally escaped! | |||
| Total Assets | $632,172 | 0% | 1% | |
| LIABILITIES | ||||
| Credit Cards* | ||||
| All Accounts | $7,474 | |||
| Student Loans | ||||
| All Accounts (1.5% and 2.5%) | $66,014 | -5% | -1% | |
| Mortgage Loans | ||||
| My Home (4.3875%; 30 yr fixed) | $298,967 | -1% | 0% | |
| Total Liabilities | $372,455 | -2% | 0% | |
| NET WORTH | $259,717 | 2.7% | 3% |
There's not much to say. It's just one of those months where we're thankful for our ability to keep paying the bills, put food on the table, and have a roof over out heads. The next few months should be interesting as my son moves to public school (Yay no more preschool tuition!) and my wife continues her plan to return to work. Additionally, it was reported today that another company is in takeover talks with my employer. Interesting times indeed.
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