Today’s topic is….free money.
Yup. The banks are literally giving it away these days. Not to mention the credit card companies. Don’t feel bad about helping yourself. These are the same banks that are gouging their credit card customers at rates now approaching 30%. Time to dose them back with their own medicine.
Before getting into specifics, let’s talk about the topic of money consciousness. Here are two quick tests to measure your level of money consciousness.
Test Your Money Consciousness
- First, see if you can tell me right now, without looking, exactly how much currency is in your billfold or purse.
- Second test. You are walking to your car, and notice a coin in the street. One penny. Do you pick it up?… or walk on by, since it is, after all, virtually worthless.
If you know at all times how much currency your carry, and if you gladly scoop up the free penny, you are fully money conscious. I’m not suggesting that you emulate Scrooge McDuck as money miser, but I’ve noticed that the wealthy never pass up a bargain. Take a look at the cars parked at your local Costco outlet….the same cars you will find at the country club.
Free Miles = Free Money
Looking back over the past year, we were solicited by several credit card companies offering 15,000 to 20,000 free miles, with the annual fee waived for the first year. This is a reward for having good credit, especially when you are a small business owner. We just cashed in a 25,000 mile award for an impulse travel purchase last month. The Continental website indicated that the same itinerary would have cost us nearly $900 if purchased directly.
The point is, your mileage award can be quite valuable if you’re smart about when and how to redeem your miles.
When the anniversary rolls around, we have a very simple exchange with the credit card issuer. We tell them we would be happy to renew the card, but that we will not pay the annual fee. They have no leverage with us at all, since we never carry monthly balances. Their choice is to either waive the fee, or cancel the card. In any event, the miles are ours to spend at our convenience.
If we had fallen into the trap of carrying a balance, which is of course the bank’s goal in flooding the market with new cards, there is no bargaining leverage whatsoever.
Quick aside: do you know what the lenders call those who use their credit cards for convenience only, paying the monthly balance in full? In the industry, these diligent families are known as “deadbeats”. Seriously. Who writes their dialog anyway….George Orwell?
I’ve noticed that these mileage solicitations are winding down now, as the banking industry’s focus has shifted to gathering deposits in the wake of the credit implosion that began last summer.
Checking Account Bonuses = Free Money
Our latest solicitation is from Chase Bank, which offers a $200 bonus for opening a free checking account. They have only two requirements. The first is that you use $100 from another bank to open the account (to avoid cannibalizing their existing accounts), and that you use direct deposit at least monthly to fund the new account for a minimum of six months.
What happens after six months? Depends on whatever deals are out there. For us, we will simply money-link the new Chase account to our core concentration money market account, draining it to zero every month. We will incur no costs, so it’s all upside.
Money for nothing.
A smart consumer could easily consolidate direct financial benefits in the low four figures each year by reading all their junk mail sent by banks and credit card issuers. This will not make your rich. But it will sharpen and increase your money consciousness, and that, after all, is the whole point of the exercise.
Never leave anything on the table.