Beating Broke

Return of the Rewards Cards

April 20, 2012 By Shane Ede 6 Comments

It wasn’t that long ago, as the economy was crashing down around us, that people started noticing a drop in the number of credit cards that were offering the 0% transfer rates, and a drop in the number/quality of the rewards associated with rewards cards. Higher default rates and changing regulations seem to have been the culprits, making it harder for credit card companies to offer the great rates and rewards while still maintaining their (already bloated) margins.

But, as the economy levels off (if not starts a recovery), there have been an increase in cards offering the great transfer rates, and now, there’s been an increase in rewards cards too.

Just the other day, Chase announced the British Airways card, with a pretty good rewards system. Then, today, I got an email announcing the Hyatt card. It too, has some pretty good rewards.

The thing I don’t really like about cards like these is that you get locked into an airline or hotel chain. Also, they both charge an annual fee. I think in a pinch, you might be able to call Chase and be able to get that fee waived once or twice, or at least get your value out of it in flights and stays. Aside from that, the rewards are pretty good. The British Airways card has a potential for 100,000 Avios (BA’s points) which should be able to get you a couple of trips overseas or quite a few domestic trips on their partner airlines. The Hyatt, with it’s 2 night free stay bonus, is pretty good as well. And in both cases, the points accumulate at a good rate.

As always, responsible credit card use is a must. You’ll pay way more than what the rewards are if you don’t pay the balance off, and lose money on the whole deal. It’s just not worth it. If you do pay your balance off, however, it’s something to look at.

I might even have to think about that Hyatt card, as the Financial Bloggers Conference this year is at the Denver Hyatt, and while the even rate is pretty good, it’s not as good as two nights free!

Editors Note: As with any financial offer, credit card or otherwise, YOU are responsible for reading the full terms and disclosures in order to understand what it is that you’re applying for. Don’t read them, don’t come crying to me.

Lending Club Returns 1Q2012 Update

April 18, 2012 By Shane Ede 15 Comments

If you’ve been following along, you know that I’ve been performing a bit of an experiment. I’ve been taking 10% of my earnings from this and other online ventures and splitting it evenly between Lending Club and Sharebuilder accounts. The idea was to see what kind of returns I could get from the two, and to test for stability. I’ve been running the experiment for a little over 6 months now, and I’m calling it done. The difference has been so drastic, that I don’t think there’s any point in running it any longer.

In short, Lending Club is kicking Sharebuilder’s butt. Really, the only thing that the Sharebuilder account has going for it is that the chance of default on any of the investments is extremely low. So, I suppose that it is possible that in 5 or so years, the gains on the Sharebuilder account could potentially be better. However, as I’m about to show you, the short term results are strongly in Lending Club’s favor.

My Lending Club Returns

As of today, Lending Club is telling me that I’m seeing a return of 13.15% on my account. My Sharebuilder account is currently reporting a return of -16.42%. It doesn’t take a math major to come to the conclusion that Lending Club is performing far better. To date, with a bit over 2 years of total history, I haven’t had a default in my Lending Club account. I’m pretty sure that has more to do with just getting lucky, than with any effort of my own. Some other interesting numbers, besides the return: The portfolio has grown enough that it brings in enough in principle + interest payments to reinvest monthly now. The monthly interest gains, as of the end of March, have now exceeded $4 monthly. It’s not much, but it’s been fun watching that number grow.

My Lending Club Portfolio

When I first started out investing in my LC account, I was investing in mostly A, B, and C investments. I’ve recently shifted that to be mostly C and D investments. Why? Well, as I mentioned in my post on selecting Lending Club investments, I have to purchase my investments through their trading platform rather than directly invest in the loans. What that means is that in most cases, I have to absorb a small percentage of profit to the original investor. So, a loan that has an actual interest rate of 14% might only return 11% to me because I bought it at a higher price than what it was worth in principle at the time. Because of that, I have to invest in the higher grade loans in order to maintain a higher return rate. But, I’m OK with that. Even the worst graded loans that LC has are still well above what a traditional bank or credit union would lend to. And, at less than $25 per investment, I can afford to take the risk. I’ve diversified the account so that one or two defaults isn’t going to destroy the account. Sidenote: If you can buy your LC loans directly, I suggest you check out Peter at SocialLending.net’s post on how he’s investing in 2012. He’s got several filters and some interesting insight into how he’s set up his investing that are worth the read. They’re somewhat useless to me because of the way I have to invest, but will be useful to someone who can invest directly.

Lending Club, Going Forward

With the end of the “experiment”, I’m now putting the full 10% that I had been splitting into my Lending Club account. The overall total for the account is still at less than 3% of my overall investment portfolio (including retirement investments), but it is growing. At some point, I’ll have to decide if I want to continue to add to the account or not, but with the returns that I’m getting, and the luck I’ve had in the default area, I can’t see wanting to stop investing in the account.

Have you given Lending Club a try yet? How have your returns been? What’s your default rate?

Win the Lottery? Stay Anonymous, or No?

April 13, 2012 By Shane Ede 9 Comments

With the big lottery drawing over, and the winners slowly being announced, there’s some talk about some of the winners remaining anonymous. Apparently, it’s only an option in certain states, so some have no choice. But, if you won a major lottery, would you remain anonymous if you had the option?

Lottery Winners Barbara and Michael Ayres © by Montage Communications

In some ways, at least locally, I would think it would be nearly impossible to truly remain anonymous. There are certain services, like financial planners, investment advisers, and even bank tellers that you’d need the use of. And, despite the fact that most of them have some ethical requirement to keep your information confidential, it seems like word always leaks out in some way. Eventually, anyways. On a more national and global level, it might be a bit easier to maintain your anonymity.

I think I’d like to attempt to remain anonymous should I win a lottery. Publicly announcing it is sure to bring an onslaught of people, businesses, and organizations to your door (figuratively and literally) looking for funds. There’s even a chance, albeit small, that you could end up with threats of injury should you say no to a handout. Obviously, friends and family are going to find out, and some will likely ask for money, but I’d rather deal with just a few people asking rather than half the country.

Of course, making the announcement that you’ve hit it big has it’s upsides too. You’d be an instant celebrity of sorts. Depending on the size of the winnings, locally for sure. If you’d have won the Mega Millions lottery and not had to share it, you’d have likely made it onto several lists of the richest people. Done properly, the money could be used for lots of good, and that usually draws publicity too.

What would you do? Anonymous or not?