Search Results for: Safe Banks

Prosper.com Person-to-Person Lending Review, Part 1: First Looks

Posted on March 2, 2007 // 53 Comments

Prosper.com is a person-to-person lending service where you can lend out money to complete strangers. My first and only post about Prosper was back on February 13, 2006, when it was first released to the public. Since then, I haven’t written a peep about them. An online service that offers high interest rates for my cash? Why haven’t I written about them? The simplest answer is that I’ve been waiting for more information to review.

Here is a first look at Prosper from a potential lender perspective.

This is not a short-term, safe investment.

You may have seen this ad, it says something to the effect of “Why settle for 5% APY from banks? Get 15%+ interest from Prosper”. Comparing itself to an online savings account is misleading for a couple of reasons:

Your money is not 100% liquid. The loan term is three years. All loans on Prosper are lent for 3 years. In a bank account, I can just walk over and take my money out. You will gradually get your principal back and might have some pre-payments, but your money is pretty much locked up for the short term.

Your money is now unsecured debt, which carries the possibility of loss of principal. Bank accounts are FDIC-insured. Your Prosper loan is not backed up by anything except for the word of the borrower. The only thing keeping them paying is either a sense of personal responsibility, or the threat of a black mark on their credit report. What happens when their credit is already bad? Will they view Prosper as a serious lender on par with credit card companies? What happens if Prosper goes out of business?

There are a variety of ways you can get higher interest for extra risk. Look at some Canadian Oil Trusts like PGH (15% yield), or high-yielding REIT stocks like LUM (13% yield). I don’t recommend these either, but my point is that you should compare apples to apples.

Prosper is an intermediate-term investment opportunity with lots of inherent risk. In addition, not everyone will get the same results. While one person may get 16% annual return, another person with a similar loan portfolio may have low or even negative returns.

What am I basing my decisions on?

Let’s look at the three major pieces of information you get when you are deciding on which loan to fund:

The Story. This is coming from the cynic inside me, but how accurate are these? I do believe most of them to be truthful, perhaps with a little positive glow on things. But how do I know if it’s not? Do I really need to read “I am very dependable and promise to pay you back”? Some group leaders will vouch for borrowers, but in the end, I put very little weight on this area.

Besides, which is better? The business start-up loan? The “fresh start” loan? The credit card consolidation loan? The I-want-a-new-Lexus loan? Here we might also be mixing emotion and business, which is fine if you want, but I’d personally rather not be emotionally invested in my lending.

Credit Profile. This is actually very useful. In addition to the credit grade which essentially gives you a range for their credit score, you can find out some details on the credit report. These include the number of delinquent accounts, how much was delinquent, negative public records, and their current revolving credit balance. More information here.

Employment Data. This includes both whether they are employed or not, how long they’ve been employed, and their income. This gives you their current debt-to-income ratio. Again, this is all self-reported by the borrower. I believe it would be far too costly for Prosper to actually verify this data, but it would be nice.

Of course, Prosper says that it is a crime to lie on a lending application, but my question is how many people have they caught and prosecuted for this crime? My guess is zero. In June 2006, in response to this criticism they started performing spot-checks for the “identity, address and income of a select number of borrowers.” They do not release the frequency or passing rate of these checks. Therefore, I also put relatively little weight on this area. I treat it like a very rough estimate.

In the end, all I am comfortable relying upon is the credit report, just like the credit card companies. I think the card companies are pretty good at what they do, so the only way us individuals are going to make money is to be satisfied with thinner margins than them (lend at cheaper rates), while at the same time trying to achieve close the same level of diversification.

Is this possible? Is it worth the effort needed? Check out Part 2, where I dig into the numbers.

Filed Under: Investing //

January 2007 Financial Status / Net Worth Update

Posted on January 8, 2007 // 12 Comments
Net Worth Chart January 2007

About My Credit Card Debt
Newer readers may be alarmed by my high levels of credit card debt. In short, I’m borrowing money for free and keeping it in safe investments while earning me interest. Along with other things, this helps me earn extra side income of thousands of dollars a year. Recently I put up a detailed series of posts on this 0% game. Please check it out first if you are curious!

I like to think of it as similar to what banks do. For example, Capital One 360 is paying people 0.75% interest to hold their cash, and then going out and lending that cash as mortgages to other people at 6-8%. My rate spread is even a bit better than Capital One 360, although they do have a slight edge in volume… a mere $50 Billion or so 😉

Thoughts
[Read more…]

Filed Under: Goals //

Application Tips and Getting Cash From 0% Balance Transfers

Posted on August 10, 2006 // 88 Comments

[This is Part 3 of an ongoing series about how to make money from 0% APR balance transfers.]

Before I start, someone said that it’s too easy with Citibank, and can I do an example with another issuer. Sure. Let’s run through it with the Discover More Card this time.

First, you do all the scouting and find the following:

Annual Fee: NONE

Balance Transfers APR: 0% until the last day of the billing period ending during May 2009*, then the standard APR for purchases

Annual Percentage Rate (“APR”) for Purchases: 0.0% until the last day of the billing period ending during November 2008;* then the standard APR, a rate between 10.99% and 18.99%**

BALANCE TRANSFER FEE: 3.0% for each balance transfer made under this offer, with a minimum of $10 and a maximum of $75.

Ok, no annual fee, 0% APR until May 2009 (as of this most recent update, perhaps even longer than 12 months) on balance transfers (note the specific wording though, also the exact date may be different depending on how long ago I updated this post). The balance transfer fee is 3% capped at $75.

This means if you transfer $7,500, then $75 is only 1% of that balance. Transfer $15,000, and that’s only a 0.50% fee, and so on. You can still make this up and create profit.

Application Process
Credit card applications are pretty much the same all around, but there are some things to note.

Housing Information
They always seem to ask if you rent or own, your housing payment, and how long you’ve stay at your address. Part of this is probably identity verification, and part of it is screening on their end. So I wouldn’t lie here because you think owning is better. Any mortgage should show on your credit report anyways. I both rent and move a lot, and I haven’t had any problems getting cards.

Employment Information
Same deal, tell the truth. I’m not sure about all companies, but often if you are a full-time student, credit card companies will be more lax with you and still give you a card even with low income.

Household Financial Information
This is important. And vague: Household Annual Income. This number is important. For one, most low-interest cards like this that target people with good credit have a minimum income requirement. It may not be that high but it’s there.

Second of all, it helps determine your credit limit. For the purposes of this activity, you want the highest credit limit you can get. In a way, I think it’s intentionally vague so they can offer you more credit (and earn more potential interest). So you want to say your household annual income is as big as possible. Include everything – your parents income, your roommate’s income, interest income, dividend income, money from grandma. If you can get into that next bracket, all the better.

In this case, Discover is upfront about it:

Except for full-time students, you must have a minimum annual household income of $15,000 to be considered for any Discover Card account. For highest credit line, please include all sources of annual household income.

There are two screens and 7 steps where you enter your information. Click on ‘Submit Application’ (don’t worry, it’s not the last page), and the next screen will ask you for balance transfer information.

Getting Your Money

As part of the application, they will ask you if you want to make a balance transfer, how much you want, and where you want it to go. They want your balances!

How much you want?
When requesting a balance transfer amount, I recommend for reaching for the sky. Ask for double or triple what your current limits are, or even higher. They won’t reject you for asking for too much, in the end they get to decide what kind of credit limit you can get. For example, if you just ask for $5,000, maybe they’ll just give you $5,000 or $7,000. But if you ask for $10,000, they may just give it to you as that means more guaranteed business for them.

When I applied for the Discover Miles Card, I asked for a $15,000 in balance transfers and got an $11,000 limit. I only had one Discover card a few years before this one, so I was pretty happy.

While you may want to ask for the balance transfer with the application to haggle a higher credit limit, other times you may want to put it off. This is so you can transfer some of the credit limits on your other cards within the same issuer in order to get a much higher limit. For example, if you got a $10,000 limit on your new AT&T/Citibank card and already had $10,000 on another Citi card, you could make it so that you had $19,000 on the new card and leave $1,000 on the old card.

Getting the Money Directly
Some card issuers may allow you to issue yourself a check for the balance transfer amount, or even deposit it electronically into your bank account with bank account and routing number. The latter is preferred since you’ll be losing potential interest while the check is in the mail and waits to clear. Two banks I have gotten direct checks are AT&T/Citibank and Chase, but this may vary. This is by far the easiest way to get your money.

Citibank is the easiest to get a check from. Click here for a step-by-step guide on how to request a balance transfer check online after you get the card.

Indirectly
If they don’t, then you’ll have to do it indirectly. This will require another credit card, and it doesn’t even have to have a balance. Let’s say you request a $10,000 transfer from Card A to Card B. Once approved, it will show up on Card B as a $10,000 payment, and you will now have a negative (credit) balance on card B. If you make a lot of purchases you could just use it up that way, but most people will have to ask for a credit balance refund in the form of a check.

It matters what card issuer you use for Card B. AT&T/Citibank is the easiest to transfer TO as well, in the fact that you can request it online directly and without even human interaction. Here is a screenshot of the menu option you should look for:

AT&T Citibank Screenshot

I’ve gotten negative balances even greater than my credit limit with Citi (ex. credit limit $5,000 and then goes to -$10,000 with a received transfer), with zero problems.

I have also done this with American Express by calling in. Sometimes they will make you wait for a few days to make sure the payment clears before issuing the check. Now, if you send a big fat payment to a card that you never use, they might become suspicious. I have sent it to my American Express Starwood card which I already use regularly as a rewards card, and they’ve never given me a hard time.

Do not send it to MBNA, they may reject the transfer. I have also reported some success with Discover in the past, but I am not so sure about Chase, Advanta, and others. If you do try one of these, it’s better to use a card that already has a balance on it to fly “under the radar”. Honestly, I almost always just use AT&T/Citibank, switching to a different Citi card sometimes if I do more than one a month. Last time I used American Express was mainly an experiment to make sure they still did it.

With my Discover Miles card, I sent $7,000 to Citibank and $7,000 American Express. American Express sent me a check for the overpayment after verifying the balance transfer with Discover, which ended up making their check arrive about 4 days later than Citibank’s.

Either directly or indirectly, you should have money now in the form of a check or online transfer.

Where do you put the money?
If you already have higher-interest loans, like a home equity line of credit or other credit card debt, you could just move it there.

Otherwise, I recommend putting the money into an FDIC-insured or similarly safe checking or savings account that is relatively liquid. Here are some online savings account options, and this is my current setup to maximize interest. One reason why is that you must still make the minimum payments on the card, with are usually about 2% of the principal. So on $10,000 that would about $200 a month, decreasing each subsequent month as you pay it down. The second reason is more practical – if somehow you make a late payment, you can minimize the damage by simply paying the entire balance off immediately. Even at 20% APR, if you can pay it off in a few days the damage won’t be devastating.

Of course, some people may place it into bonds, dividend-yielding stocks, or other investments. To each their own, but I would not take that kind of risk for short-term loaned money.

Next up: Setup and management of the balance transfer. How do you manage the payments and due dates?

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Skip To Another Part
I. Introduction and Warnings About 0% Balance Transfer Offers
II. Scouting For 0% Balance Transfer Offers
III. Application Tips and Getting Cash From 0% Balance Transfers
IV. Setup And Management of 0% APR Balance Transfers
V. Best Pre-Screened No Fee 0% APR Balance Transfer Offers

Filed Under: Credit Cards //

Why I Use Yodlee Account Aggregation

Posted on August 3, 2006 // 53 Comments

Yodlee LogoAs I’ve mentioned before, I use Yodlee, an account aggregation service, to track all my numerous accounts on a daily basis. You give them all the logins and passwords of your individual financial accounts, and it logs into all the sites for you. In the end you have a real-time view of all your balances and recent transactions, all neatly on one page.

Of course, many people are rightfully afraid that this leads to one point of access. If somehow Yodlee is hacked, they get all your information instead of just that of one bank. This is true, but I look at it a little differently because I have a lot of accounts.
[Read more…]

Filed Under: Tools & Calculators //

Other Places To Stash Your Cash

Posted on May 6, 2006 // 25 Comments

piggy bankBeing my money blog and all, I inherently have a biased focus on the best places to keep own my money based on my own personal tax situation, time horizons, and existing accounts. So far I’ve mostly talked about the banks in my online savings accounts comparison, savings bonds, and Treasury bills. However, I do feel like I should point out that there are definitely some alternative options to safely ‘stash your cash’ that also offer good if not better interest rates depending on your own preferences. They include other online banks, bank CDs, brokerage taxable and tax-exempt money market funds:
[Read more…]

Filed Under: Banking //

Online Bank Comparison: Capital One 360, VirtualBank, Emigrant Direct, and HSBC Direct

Posted on December 31, 2005 // 92 Comments
Update: This post is no longer updated. Please see my new online bank comparison, which includes current high-yield savings accounts from a variety of FDIC-insured banks.

I have redone my old Online Bank Comparison to drop Presidential Premier Savings and add HSBC Direct instead. This way, all four accounts compared have no minimum balance requirements, no monthly fees, and no other strings attached. That way, one can always move money away without issues. There may be other banks with higher rates, but also higher balance requirements to get those rates. The best value for each feature is bolded:

[Read more…]

Filed Under: Banking //

Laddering Bank CD’s: Is It Worth It?

Posted on October 30, 2005 // 8 Comments

I have most of my cash in a high-yield savings account making 4.12% APY. However, in previous days when the yield curve wasn’t so flat, a technique called laddering along with certificates of deposit (CDs) was pretty popular.

For example, let’s say you had an emergency fund of $5,000. You want to keep that pretty liquid and safe, but you also don’t want it sitting there getting eaten up by inflation. So, you put $1,000 in a savings account, $1000 in a 1-Yr CD, $1000 in a 2-Yr CD, $1,000 in a 3-yr CD, and $1,000 in a 4-Yr CD. You would end up with better overall interest rate, and take an interest hit if you needed to take out more than $1,000 in a year by breaking the older CDs. Now, when the 1-Yr CD matures, you go out and buy another 4-Yr CD, keeping the ‘ladder’ intact (The old 4-Yr CD now has 3 years to go, etc). For a while, the increase in interest by doing this was not worth the loss in liquidity. Let’s check again:

I’ll use INGDirect as an example since they are OK in the interest rate department, and their CDs are very flexible since you can open them with any amount. You could make a small $600 CD ladder with their savings account and 1,2,3,4, and 5 year CD in $100 increments. There are definitely many banks with higher rates out there.

So, if you kept $5,000 in their Orange Savings Account (OSA), you’d currently get 3.40% APY, or $170 in a year.

Let’s look at if you make the following ladder with the current rates:

$1,000 OSA at 3.4% APY
$1,000 1-Yr CD at 4.2%
$1,000 2-Yr CD at 4.5%
$1,000 3-Yr CD at 4.65%
$1,000 4-Yr CD at 4.7%
—————————
$5,000 Ladder earning 4.29% APY

That’s an increase of 0.89% annual interest. Equivalently, you’d get $214.50 in a year, an increase of $44.50 or 26%. Not bad if you do have money at ING.

Remember that you are giving up liquidity by doing this. ING charges a penalty of 6 months interest for breaked a CD with a term longer than 1 year. Be aware that if you break in less than 6 months, you’ll actually be losing money! But, it may be worth it. Now I need to see if I can find a bank with consistently high rates to open a up a ladder with better rates. It would have to be all at one bank, otherwise it’d be a pain to keep track of.

You can do alot of different things with laddering – make the time increments longer, shorter, wider apart, closer apart, and so on. Many people also use this technique with marketable bonds and savings bonds.

Filed Under: Banking //

Presidential Premier Savings Account Information Sheet and Opinions

Posted on August 17, 2005 // 2 Comments

Direct Link: http://www.presidential.com
Current APR: 4.75% APY
Interest Compounding: Compounded and credited on a monthly basis.
Minimum to open: $5,000
Minimum to avoid monthly service charge: $5,000
Other fees of note: None
Download formats available: .ofx/.qif/.csv files*
Number of external bank account links allowed: None
Routing Number: 255073345
Opening Bonuses: None
[Read more…]

Filed Under: Banking //

Emigrant Direct American Dream Savings Account Information Sheet and Opinions

Posted on August 17, 2005 // 24 Comments

Website: EmigrantDirect.com
Current APR: 5.05% APY
Interest Compounding: Compounded daily and credited monthly.
Minimum to open: $1
Minimum to avoid monthly service charge: None
Other fees of note: None
Download formats available: .ofx/.qfx/.csv files*
Number of external bank account links allowed: 4
Routing Number: 226070319
Opening Bonuses: $10-20
[Read more…]

Filed Under: Banking //

VirtualBank eMoney Market Saving Account Information Sheet and Opinions

Posted on August 17, 2005 // 5 Comments

Direct Link: http://www.virtualbank.com/bc_esav_virtual.asp
Current APR: 4.60% APY
Interest Compounding: Compounded daily and credited monthly.
Minimum to open: $100
Minimum to avoid monthly service charge: None.
Other fees of note: Close-out in first 90 days fee of $50.00 (No min, so just leave open for 90 days)
Download formats available: .ofx/.qif/.csv files2
Number of external bank account links allowed: 4
Routing Number: 067092200
Opening Bonuses: $20 referral bonus
[Read more…]

Filed Under: Banking //

Capital One 360 Savings Account Information Sheet and Opinions

Posted on August 17, 2005 // 55 Comments

With all of these different online banks around, it’s hard to keep clear which banks do what when comparing with new banks or answering people’s questions. I don’t know how many times I’ve searched the bank websites for the same info that I just searched for a week ago. So I’ve decided to make an information post for each of the banks that offer a good savings rate and that I have an account with. First up, Capital One 360.

Home Page: INGDirect.com
Current APR: 1.25% APY
Interest Compounding: Compounded and credited on a monthly basis.
Minimum to open: $1
Minimum to avoid monthly service charge: None.
Other fees of note: None
Download formats available: .ofx, .qfx files*
Number of external bank account links allowed: 3
Routing Number: 031176110
Opening Bonuses: $25 referral bonus

Deposit Hold Times: (from their site) Generally, you can’t withdraw a deposit for 5 business days. However, when you first open your account, you won’t be able to withdraw any money for the first 10 business days. As with all non-cash deposits, interest will begin to accrue no later than 2 business days after the banking day on which the funds were deposited. (Here’s an example – if you make a deposit on a Sunday, we will process it on Monday, and interest will begin to accrue no later than Wednesday.)

Safety of Deposits: Capital One 360 Bank, fsb is FDIC insured up to $100,000. Still, this does not mean all banks are the same. BankRate.com’s Safe & Sound Rating assesses banks’ relative financial conditions. Capital One 360 has a rating of 3 out of 5 stars.

How to add external link:
– Send them a personal check (for at least $1.00) made out to yourself, and drawn against the account you want linked.
– Include the word “Link”, followed by your Capital One 360 Customer Number in the memo field of the check, make sure you sign it, and send it to the address below.

Contact Information:
Email: sales@ingdirect.com
Mail:
Capital One 360
P.O. Box 60
St. Cloud, MN 56302-0060

Phone:
– For new customers, call 1-800-
– For existing customers, call 1-888-
– To access your account through our Interactive Phone Service call 1-888-

Customer Service Opinion: I actually don’t remember ever having to call or e-mail them, which is interesting since this is the account I have had the longest. I guess it could also be considered a testament to how user-friendly their website is, how their bonuses and interest post promptly, and how simple their structure is. Anecdotally, I’ve heard positive things about their customer service.

User interface Opinion:I think it’s sparse and utilitarian. It works, and I’m happy with it. Here is a screenshot of what you’d see if you had an account:

Other things to note: One cool thing with them is that you can open multiple sub-accounts and label them “Vacation Fund” or “Car Maintenance Fund” and have nice little organized baskets of money. You can also set up automatic transfers to these sub-accounts. To open one, just click on “Open an Account” after you’ve logged in.

* .ofx is Microsoft Money’s current format, .qfx is Quicken 2005+ format, .qif is Quicken 2004 and older and also older MS Money format, .csv is Comma Separated Values which is a more generic spreadsheet format.

[Rates updated as of 1/13/10]

Filed Under: Banking //

4.16% APY 7-month CD at World Savings Bank

Posted on June 19, 2005 // Leave a Comment

A reader (Thanks Johns) just pointed out that World Savings Bank is offering a promotional 4.16% APY 7-month CD, with a minimum opening balance of $10,000 (max $100,000) [more discussion here]. Offer ends July 9th. This is a great rate, and I really doubt any online savings account such as ING (now 3%)or Emigrant-Direct (review) (now 3.25%) will be able to beat it over a 7 month period even with future rate hikes.

World Savings is a pretty good-sized bank, I’ve walked past their branches, but they are not everywhere (branch locator). However, there are no residency requirements to open an account. You can open an account right online. The 4.16% CD is the very first option to open. They have a 3-star “Performing” Safe & Sound Rating from BankRate.com.
[Read more…]

Filed Under: Banking //
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