Elusive Wealth

I was reading a blog article on Free from Broke (http://freefrombroke.com/2009/05/receipts-prevent-credit-card-fraud.html) that identifies the importance of watching your credit card statements closely.

Credit cards can become a bit of a vicious cycle, not only from a debt perspective, but even from a tracking perspective. Just having a credit card makes it easier to spend, and makes it statistically more likely that a person will spend.  Spending and buying more results in potentially more debt, but it also makes it more difficult to track all of the spending and whether the amount is correct or not.

Our credit card was used for fradulent charges a couple of months ago. The charges occurred in Europe and they happened over a Friday / Saturday. Fortunately, Quicken pulls in recent charges from Capital One during the middle of the billing cycle, and I noticed two charges before any more could be made.

In our first call to Capital One, we apparently did not specify that we need to talk to the fraud department. We disputed the first charge, however instead of simply disputing we needed to inform the fraud department. After we saw the second charge, we made sure we were talking to the fraud department, asked that the card be frozen and received a new card about a week later.

Some important lessons from this include:

Check Charges On-Line, Often

The best bet is to check the credit card site directly, and check it every few days.  Even using Quicken I don’t receive the charges until a day or two after the charge. And at the end of the billing cycle, Capital One seems to shut down its feed to Quicken of my charges until the statement is ready.  So checking on the card issuer site directly provides the most up-to-date information.

Call Immediately if there is Fraud

Call the credit card immediately if you notice fraudulent charges, and make sure you are speaking to the fraud department (or make it clear that this is not just a charge dispute, but fraudulent charges). You will need to complete some paper work identifying the fraudulent charges and return it to the card issuer.

File a Police Report

Filing a police report may not be appropriate for all scenarios. For our situation we did not file one — the police in our city are not going to go after someone who made two illegal charges for purchasing train tickets and a bus tour in the U.K. But, if there are more than 4 charges, the amounts are significant (more than $1000) or you know the person who made the charges illegally, it is important to file the police report.

Keep Receipts

If you are concerned about modified charges as in the situation described on Free From Broke, keep your credit card receipts. Admittedly this is something I do not do but it is something to consider.

Debit Cards

With debit cards it is important to be even more diligent. Protections available with credit cards are not necessarily extended to debit cards, unless your bank chooses to provide those protections. If you do not notify your bank within 2 days of learning about the fraud, you will be liable for much more than the $50 liability limit that credit cards provide.  But aside from liability, with debit card fraud there is a good chance that you get overdrafted and are unable to make scheduled and regular payments from the account until the fraud is cleared up.

The bottom line is that you do need to keep a close eye on your accounts and identify suspicious charges or payments immediately.

I am a firm believer in voting with your money versus having Congress enact laws to protect us. I admit that voting with dollars is not always enough, but it can be very effective. For our own economic health as a country, I do believe that letting the market drive products is the way to go. More precisely, I believe that we as consumers should drive the market and drive the products that are available.

The recent implosion of our banking system and the bailouts are examples where this did not work. But there are things that we could have done and can do to help keep this happening in the future. And we can do this without enacting new laws. Here are some of the things that we all should consider as consumers:

Avoid Debt

Certainly avoiding debt is easier said than done. It is difficult to draw a line between “just enough debt” and “too much debt.”  But there is no risk in having no debt. Debt creates a constant revenue stream for banks and lenders, saying loudly “we want more of this.”  When consumers take more debt, it completes the cycle to get us where we are today.  Do lenders engage in predatory lending?  Yes they absolutely do, and a large part is because we let them.

We are in a position to reduce our debt, and it is our number one priority. Within 6 months J.P. Morgan Chase will no longer be receiving money from us.  I wish we had learned this one earlier.

Our New Bank

Switch Banks

This is one may be simpler for some than avoiding debt, but it is still not always easy. Automatic debit and deposit make switching active accounts difficult.  However, switching away from the monolithic banks can result in better service, better interest rates, and a vote with your dollars.  For example, although it is not a community bank, ING Direct has a very good service record. The interest rates at ING (1.5% APY at the time of writing) are down right now like they are everywhere, but doing business with ING Direct has been a very positive experience for us. So we are moving more of our business to ING’s Checking and Savings accounts.

Another challenge to this approach is that often smaller banks get purchased by one of the monoliths. So this strategy might have to be employed more than once if a bank gets purchased by a monolithic bank where service suffers, or if the bank begins practices that you do not approve of.

We are currently looking for a local community bank or more likely a credit union where we will do most of our non-Internet banking with.

Avoid Fees

If you do stick with a monolithic bank – avoid fees at all costs. Getting caught with overdraft fees, ATM fees, and other fees helps to legitimize them. This might not be easy to do if your situation is paycheck to paycheck. But if you have the means to make sure that the account does not get overdrafted, then do everything possible to avoid the overdraft. If ATMs are not in the right vicinity and you pay a lot of ATM charges, consider finding another bank to pull ATM withdrawals from.

We got caught with an overdraft charge a few months ago that was completely avoidable. I did not pay enough attention to the timing of some of our automatic withdrawals. We have a larger cushion in our accounts now, and I do a better job of budgeting and anticipating automatic bill payments.

Why “Vote with your Dollars?”

So are we making these types of changes, and why should you consider it?  First, I am confident that you realize that these all have positive influences on our own finances. Second, we want to send a message that we don’t approve of some of the practices of the monolithic banks, such as:

1. Engaging in risk subprime mortgage loans
2. Using life insurance policies on employees to fund executive pentions (http://online.wsj.com/article/SB124277653430137033.html)
3. Changing interest rates on “fixed” terms for existing balances while not providing the option of closing the account under the old terms

I am sure there are more, but these are enough for me.

What concerns me the most is that we may legislate the competitors out of the market, to the point where we can no longer vote with our dollars. I don’t think we are there yet, but the massive bailouts and new legislation certainly favor the big players rather than the smaller community banks and the credit unions. But while there is still an opportunity, we are doing everything we can to send less money to the monolithic banks.

First of all, thank you for visiting this site!  Things are just getting started here, but I hope to provide regular commentary, stories, and discussion on personal finance and consumer related topics.

The downturn in the economy has certainly spurred a lot of interest in personal finance.  Not long before the downturn, my family became focused on our goals and began making changes that hopefully provide us stability in the short term and eventually financial freedom. I want to share some of the good, and the bad, steps that we have taken.

So what is this blog about?  Here are some of the areas I plan to cover:

• Ideas on saving money and spending wisely
• Opinions and reviews on items and services that may be valuable
• Stories and opinions from my family’s situation that may benefit readers
• Thoughts / opinions on the economy, politics, and other topics related to money

Equally important, here are some things that this blog is not:

• A professional advice column - I don’t have a degree in anything related to finance so I am not a professional and I am not giving professional advice.
• A major source of income – well, that is unless it becomes a major source of income   If it can pay for its hosting, I am happy.

I want to provide some context for this blog by telling you a little about myself and my family — then hopefully after that I can get onto some content you might actually care about!  My wife and I are fortunate enough to have a great income.  This may come across in some of my posts, especially if I talk about saving money on things that many others don’t have the same opportunity.  Living in the United States itself provides a level of freedom of opportunity that many don’t share.  My ultimate wish is that everyone have that opportunity, but I realize that is not the current reality.

My wife and I are also fortunate to have to two wonderful children.  Our second child was born prematurely at 24 weeks, and this has become a big source of inspiration and direction in our life. Even with our solid income, after he was born debt and spending began to feel constricting and frivolous. Then it became essential for us to have a plan, get out of debt, and begin living for freedom instead of living for others. We are on our way, and discussing the good and the bad of the journey is what this blog is about.

I hope that you gain some motivation and even some entertainment from this blog.  Thank you for visiting.