Firms taking advantage of customers through such tactics, whether deliberate or unintentional, trigger a backlash: consumers retaliate — with lawsuits, mass defections, and company-specific "hate sites."

I would add that in addition to providing a bad product or service, a company is hated by the consumers when consumers don't have a better choice. If you look at the Worst Companies in America 2009 list at Consumerist, you will see many companies on the list are near monopolies in their market segment. By popular votes, the four Worst Companies in America 2009 were:

• AIG
• Comcast
• Bank of America
• Ticketmaster

AT&T, formerly Cingular, got on my hated companies list recently. It looks to me everyone and their brothers have their cool iPhone. Everybody knows that in order to use an iPhone, you must have AT&T wireless. That's fine, I already use AT&T. I use their prepaid service.

Can I buy an iPhone on eBay and add a data plan to my prepaid service? No. You have to have a voice plan, which starts at $40/month, plus tax and fees. I pay $8 a month for my prepaid service right now. To get the iPhone experience, even if I pay the full $599 unsubsidized price for the phone, I still have to pay extra $32/month for voice service I don't need. That's extracting value.

Isn't bundling iPhone and data service with voice service illegal tying, like the famous Microsoft Internet Explorer case? If it's not, it should be. I see that question has been asked ever since iPhone first came out two years ago.

Does Apple's Tightly Controlled Ecosystem Strategy Constitute an Illegal Tying Arrangement?

[Update] I also read this headline from Financial Times yesterday: Department of Justice launches review of handset arrangements.

Somebody gave me a used BlackBerry. Can I add a data plan to my AT&T prepaid service and use the BlackBerry? No. AT&T used to offer a prepaid data plan for $20/month, until they killed it in December 2008.

Can I get a data-only plan on the BlackBerry? Yes, AT&T has one for $35 a month, but I can't get the BlackBerry to synchronize with my work e-mails, calendar, and address book. AT&T's $35-a-month data plan is called BlackBerry Personal, which only gives you access to personal e-mails and web browsing. To use it with corporate e-mails and calendar, you have to buy AT&T's BlackBerry Enterprise service, which is $50 a month. Come on, data is data. I also don't want to carry two phones.

I signed up with T-Mobile. They offer a data plan for $40 a month, with voice minutes billed à la carte at $0.20 a minute. T-Mobile does not charge extra for connecting to a BlackBerry Enterprise Server (BES). That's fair, except I don't get signal from T-Mobile in my office. It works fine at home, just not in my office. I had to cancel after a few days.

I end up not using the BlackBerry I got. And I hate AT&T. Which companies do you hate and why?

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I spent more than 15 minutes and I saved more than 15% on my auto and homeowners insurance. For the same coverage, I saved 25% on my auto insurance and I saved 38% on my homeowners insurance.

A typical "how to save money on insurance" article will tell you to drop collision and comprehensive coverage on older cars, get your good driver, good student, and alumni association discounts, increase your deductibles, insure your car and home with the same company for the multi-policy discount, etc. etc.

I'm not going to repeat those. I assume you already know what coverage you want and what deductibles you are comfortable with, and you already pursued all the discounts. If not, you can search for those articles on the Internet. There are a ton of them.

This post focuses on shopping for a lower rate for the same coverage. Those other articles usually leave you with "shop around" or "get 3 quotes." But whom do you get quotes from?

There are perhaps more than 30 insurance companies in each market. If you get quotes from 3 expensive companies, that won't help you because you don't even know lower rates exist. On the other hand, unless you don't have better things to do, it's impractical to get quotes from all companies. You have to narrow down your target list to the companies that can potentially save you money.

When you shop for term life insurance, you can go to a single web site and get the premiums from practically all the companies. When you shop for auto and homeowners insurance, there isn't a central place to go. Although there are a few web sites that let you obtain quotes from multiple companies, they only include the companies that pay them for the lead.

I tested several of those sites with fictitious personal info. After I filled out lengthy forms, instead of giving me quotes, some of them just say the companies will contact me. Well, if they can't beat what I already have, I don't want a bunch of sales calls!

There are also independent insurance agents. These agents also only work with insurance companies that pay them. They are not able to give you quotes from companies who sell only through their own ("captive") agents, like State Farm, Allstate, or Farmers, or those who only sell directly to consumers, like GEICO, Amica, or Esurance.

Fortunately there is a great resource from a place you least expect: your state government. Insurance is regulated by the states. All insurance companies selling in a state must file their rates with the Department of Insurance in that state. Using those rate filings, some state Departments of Insurance publish a premium comparison survey or guide that shows the rates by company and by geographical area.

Because people drive different cars and have different driving records, or have different homes, these surveys typically use a few driver/homeowner profiles and show the insurance premium from each company for these profiles. You have to pick a profile that's most similar to you.

It's far from perfect. The rates used can be a year old. But it's still very useful for weeding out the expensive companies and narrowing down the list of companies that can potentially offer a premium lower than what you have now. For example I noticed a company offering good rates called Wawanesa. I bet not many people have ever heard of Wawanesa and most would never think of getting a quote from them.

It's a shame that these premium comparison surveys or guides are not advertised well. You never hear about them on TV, on radio or online. On some state Department of Insurance web sites, these surveys are buried deeply in the end of a "Consumer's Guide to Auto Insurance" publication with otherwise generic information on coverage and insurance terms.

The cynics will say it's intentional. The insurance companies don't want you to compare rates so easily. They learned the lessons from airlines. When people can go to one web site and see all the fares, the airlines are forced to compete on price. Imagine how much more people will pay if they have to call each and every airline for fares. That's the world we are in for insurance quotes.

Using the premium comparison survey for my state, I called a company that I would otherwise never call for my homeowners insurance. Although this company is well known nationally, it doesn't give homeowners insurance quotes online. The savings are huge. I saved a whopping 38% on my homeowners insurance.

For my auto insurance, I contacted three companies that had lower rates on the premium comparison survey than the company I had before. They all gave me a lower rate. I saved 25% on my auto insurance for the same coverage. The premium comparison survey was spot on, not in the premium amount, because that depends on the actual coverage, but on how the companies rank relatively.

I went through the trouble of visiting the Department of Insurance web site for each and every state plus Washington DC. I gathered all the links to auto and homeowners insurance premium comparison surveys in the table below. You can imagine how long that took me.

I couldn't find the surveys for some states. Maybe they don't publish one. Maybe I missed them because they buried them so deeply. If you find the missing links, let me know so I can add to the table. If some links become broken because they moved things around, you will have to find the surveys on your own. This map of State Department of Insurance web sites will help.

Let me know how much you are able to save on your auto and homeowners insurance with these premium comparison surveys. If you are able to save money, may I suggest that you give me 10% of your savings in the first year as a tip?

State Department of Insurance Premium Comparison Surveys

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I did the refi through National Mortgage Alliance (NMA), which is a division of a bank Georgia Banking Company (GBC). The name on my loan paperwork was "Georgia Banking Company dba National Mortgage Alliance." Officially, I borrowed money from GBC. But at the time I locked my rate in April, six weeks before the refi was closed, I already knew that my loan would be sold to another bank right after it closed. Let's call this other bank Bank B. When I locked my rate with NMA, NMA also paired my loan with Bank B. The money, for all practical purpose, really came from Bank B. It was only routed through GBC/NMA temporarily. NMA earned the difference between what Bank B offered and what it offered to me. This business model is actually very similar to that of a mortgage broker, with the exception that NMA's name showed up on my loan paperwork, whereas a loan through a mortgage broker would have Bank B's name on the loan paperwork.

I learned that this business model is called correspondent lending. The bank that deals with the borrowers on the front line is called a correspondent lender. They sometimes advertise themselves as a direct lender although they only make a loan if someone else buys it. A bank that provides short-term financing to the correspondent lender is called a warehouse lender. The short-term financing given to the correspondent lender is called a warehouse line. The bank that ultimately takes over the loan is called an investor.

This 30-minute video by Morgan at Blown Mortgage blog explains thoroughly what happens behind the scenes in correspondent lending:

Understanding Flow-based Correspondent Lending

It matched my experience perfectly. If you don't have 30 minutes, here's the presentation in PDF. Morgan also wrote an excellent post The Mortgage Broker vs. Mortgage Banker Argument which clears up many myths about mortgage brokers versus direct lenders.

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Mail a check. This is the old fashioned way. We all know how it works. The stamps are not free, but pretty close. As the recipient, I have to make a trip to the bank or I put the check in a postage-paid envelope provided by Fidelity mySmart Cash account.

Online Bill Pay. They can set me up as a payee in their bank's online bill payment system. Their bank will send me a check. I deposit the check. For a one-off, it's an overkill. If it's recurring, it's easier for the sender than to remember to write and mail that check every month.

Is there a way to do it electronically? Because mailing a check and online bill pay are free to close to being free, paying electronically between friends and family also has to be free, or else it doesn't make much sense to do it.

If I were selling something to a stranger, it makes sense to use a third party and pay fees because that stranger wants to use a credit card and earn rewards. I will just factor the expected fees into my price. Between friends and family though, it's hard to imagine anyone is interested in paying fees. This article only covers options that are free.

Based on comments from indexfundfan and my own research online, I see four ways right now:

1. Intra-bank Transfer. Some banks allow their customers to transfer money to other customers of the same bank. It usually falls under the Transfer function in online banking.

Four of the top 10 banks in the U.S., Bank of America, Wells Fargo, Citibank and Regions, offer this service. As far as I can tell, they don't charge any fee to either the sender or the recipient.

Figure 1: Intra-bank transfer at Wells Fargo

2. ING Electric Orange. ING Electric Orange is a checking account by online bank ING Direct. If the sender uses ING Electric Orange, he/she can pay the recipient with an Electric Check. See Electric Check demo.

The recipient does not have to use ING. The recipient just needs to give the sender his/her bank account number and the routing number. I don't see an option to schedule the payment in advance or make it automatic. The recipient has to trust the sender enough to give the sender his/her bank account information.

3. PayPal. If the two options above don't work, the sender and the recipient can both join PayPal and link their bank account to their respective PayPal accounts. The sender only needs to know the recipient's e-mail address used with PayPal.

There is no fee to either party as long as (a) the sender uses existing balance in PayPal or a bank account as the source for the payment, and (b) the sender selects "Personal" not "Purchase" as the reason for the payment.

The sender cannot schedule the payment in advance or make it happen automatically every month. The recipient also has to manually transfer the received money from the PayPal account back to the linked bank account.

Figure 2: Send Money in PayPal 4. Revolution MoneyExchange. Revolution MoneyExchange (RME) works similarly to PayPal. Both the sender and the recipient must join RME and link their bank account to their RME account.

I don't have a RME account, but from what RME describes on its website, it looks like the sender must log in to RME twice: first add money from the bank account to the RME account; log in again after the transfer clears, and then pay the recipient using the money in the RME account. If that's the case, this two-step process is more cumbersome than PayPal's one-step process.

I don't see any scheduling or automatic options in the RME write-up either. The recipient also has to manually transfer the money back to the linked bank account.

Summary

The requirement for both parties using the same bank makes intra-bank transfer not widely applicable. The ING Electric Orange's Electric Check feature looks great, but signing up with ING Electric Orange just for the sake of paying another person electronically is unrealistic. Requiring that the recipient trusts the sender with the bank account info can also be problematic. We are left with either online bill payment with paper checks or PayPal.

Isn't it amazing it's so difficult to pay another person electronically in the 21st century?

I speculated that the regulations on Know Your Customer (KYC) and Anti-Money Laundering (AML) are a contributing factor. Also, because the service has to compete with mailing paper checks, which is close to being free, the fact that banks can't make much money from the service is probably another reason.

A financial service software vendor CashEdge recently announced a new service called POPMoney, which enables electronic payments to another person inside online banking. It still has to be offered through the banks, because CashEdge does not deal with consumers directly.

It remains to be seen which banks will offer the POPMoney service and how much the banks will charge for it. If the service receives wide adoption by the banks and most banks don't charge for it, we will finally have a service that I think should've been available a long time ago. But there is no guarantee that it will be free. For example Bank of America already charges $3 today for each outgoing ACH transfer initiated from BofA. So does Chase (fee schedule, p. 2).

For more information about POPMoney, please read Money In The Bank? A look at CashEdge's POPmoney at Payments Views by Carol Coye Benson of Glenbrook Partners.

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The word "mortgage" is probably one of those most widely misused words that eventually the misnomer will trump its true definition. When people say they are applying for a mortgage, paying a mortgage, refinancing a mortgage, they really mean they are applying for, paying, or refinancing a home loan.

A home loan is a loan. It has its terms: principal, interest rate, number of months to pay, etc. etc. The home loan is evidenced by a Promissory Note. The Note is secured by the borrower's home. The security document that pledges the home in exchange for the loan is called the mortgage in some states.

The mortgage is given by the borrower to the lender. The borrower doesn't have a mortgage. The lender has it. The party giving the mortgage, the borrower, is called the mortgagor. The party receiving the mortgage, the lender, is called the mortgagee. The mortgagee (lender) has the mortgage from the mortgagor (borrower). If the borrower defaults on the loan, the mortgagee goes to a court and asks a judge to foreclose the borrower's home. This is called a judicial foreclosure.

That's how it works in some states. In other states, the borrower does not give a mortgage to the lender. The borrower signs a Deed of Trust. That makes the borrower the grantor of the trust, and the lender the beneficiary of the trust. There's a 3rd party trustee for the Deed of Trust. The trustee listens to whoever ends up owning the Note. If the loan servicer tells the trustee to sell the home, the trustee will sell the home. With a Deed of Trust, the trustee doesn't even have to go to a court to get a judge to approve the foreclosure. They do it by themselves. It's called a non-judicial foreclosure.

My state uses a Deed of Trust. I'm the grantor. MERS is the beneficiary. Some articles on the web say 34 states in the U.S. use a Deed of Trust either exclusively or primarily, although I count only 21 states in this Mortgage and Deed of Trust State Matrix published by a loan document production company Document Systems, Inc.

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A personal line of credit and a credit card are both unsecured open-end ("revolving") credit products. In a nutshell, a personal line of credit is like a credit card without a grace period or rewards, but with better cash advance features. Lines of credit are very common for businesses whereas credit cards are more common for individuals (there are also business credit cards). Based on my own personal line of credit with Wells Fargo and my three credit cards from American Express, Chase, and FIA Card Services (Bank of America), I summarize the differences in the table below. Red indicates inferior product features.

Generally speaking, a credit card is better for purchases. A personal line of credit is better for cash advance. Banks don't advertise personal lines of credit as much as they do for credit cards. Perhaps that's why more people don't know about it.

Because I, like half of all credit card users, and I hope 100% of my readers, don't carry a balance on my credit cards, I never paid attention to the APRs on my cards. Now that I think about it, I wonder why credit card companies are so much against cash advance. First they give you only 20% of the purchase credit limit for cash advance. Then they charge you 3% cash advance fee plus a much higher interest rate, with no grace period. They obviously see cash advance as more risky than purchases. Right now you can charge almost everything on a credit card. What can you do with a cash advance but you can't charge as a purchase? I can think of paying rent, paying other loans, and paying taxes, although it is possible to pay mortgage with a credit card for free. What else?

Not all banks offer personal lines of credit (at least they don't advertise it online). Almost every bank offers Home Equity Loan, Home Equity Line of Credit (HELOC), auto loans, and loans for motorcycle, RV or boat. These are all secured loans. For personal, unsecured revolving loans, some banks basically just push the credit cards. Using my Top 10 Banks list, here's what I found from each one.

Four of the top 10 banks don't offer unsecured personal line of credit or at least they don't advertise it on their web site. Note the top two banks, Bank of America and Chase, are also the biggest credit card issuers. I also checked a few credit unions around me. They all offer the personal line of credit product. Large, popular credit unions like PenFed, Navy Fed, and Alliant CU have it too. I guess by tradition personal line of credit is more common in credit unions than in banks.

Elsewhere on the web:

• Bankrate.com: Borrowing with personal lines of credit

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Luckily I have their Weekend Business podcast in my open-source Juice podcast receiver from some time ago. New York Times must have published the plain podcast RSS links back then. I don't know why they only give iTues links now. Is Apple paying NY Times for only showing iTunes links? It will not surprise me if that's the case. All monopolies behave the same way: Microsoft, Apple, Google, in their respective world. They want to make it difficult to use anything except their product.

Using the Weekend Business link, and some trial-and-error in guessing the file names for the other podcasts, I got the plain podcast RSS links for these NY Times podcasts.

Free content should be free to everybody, not just iTunes users.

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[1] B of A does not give a point estimate. The mid-point between low and high in its estimated range is used.

For my home, Cyberhomes matched the appraisal most closely. Its estimate also happened to be the lowest. It's possible I just got a low-ball appraisal. The recently published Home Valuation Code of Conduct (HVCC) made it more difficult for the lenders and brokers to influence the appraisal. It also created an extra layer of review by an appraisal management company. The appraisal report did list five comparables with adjustments for various things. If you use these home valuation web sites for an estimate of your home's value in your net worth tracking, it's probably prudent to take the lowest estimate, rather than the average from all these sites. Zillow in particular is way off to the high side for my home.

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I submitted the application online. The questions were as expected: name, address, Social Security Number, employment information, income, size of the credit line requested, and the purpose of borrowing. They said a decision typically takes two business hours. I waited all day but I didn't hear anything. I finally called and they said my application was declined! If you can believe it, they asked me if I would like to be referred to Wells Fargo Financial, their subprime unit. Me? Subprime? No, thank you.

The underwriter said the reason for the decline was that the size of the credit line I asked for was too high for my income. Fine, tell me what you can give me. No, they just flat out declined me. It's been widely reported that credit card companies are cutting people's credit limits. They have spared me so far. Ah, the credit crunch finally hit me.

Because having a line of credit linked to a checking account is part of my carefully designed strategy for emergency-proofing my emergency fund, I swallowed my ego and pride and had a phone rep appeal my case with the underwriter. After a few rounds of phone calls, I finally got it approved with the lowest credit line they can give to anybody for that product. It's an acceptable starting point. I can have them raise the credit limit later after the credit crunch passes.

The phone rep told me the underwriter couldn't give me a higher credit line because I already have plenty of credit available to me from my three credit cards. The underwriter said if I were to max out on all my credit cards, the required payments would be too high for my income. That actually makes sense, although the credit limits on my three cards are quite modest compared to what others said they had. Perhaps that's the reason none of the credit card companies cut the credit limit on my cards. I see fellow blogger Sun has over $200,000 combined credit limits from 9 credit cards. When I asked How Long Can You Live On Your Credit Cards? last January, a reader said he or she could live six years just on credit cards. I can live only six months on my credit cards. Those credit card companies are much more trusting than my Wells Fargo underwriter. Maybe the conservative nature of Wells Fargo is a reason why Wells Fargo is a relatively strong bank.

Everybody says you should have your credit limits as high as possible to keep your utilization ratio low and your credit score high. This experience shows that having high credit limits can prevent you from getting new credit elsewhere. Because I just refinanced my mortgage, I saw my credit scores (790). I know they declined me initially not because of my credit scores. It's an issue of maximum potential debt to income ratio.

For my low credit line, I also had to fax in a bunch of documents: W-2, paystubs, and utility bill. I never had to do it before for any credit card application. It's a small inconvenience for me to gather the documents and fax them, but I think all credit applications should be done this way. Applying for credit is a serious business. We shouldn't make it too easy. I do wonder why a personal line of credit is so much more difficult to get than a credit card. A personal line of credit is treated as a real loan and looked at by a real person. Credit card applications are typically decided by automated systems with instant approval. Professor Adam Levitin of Georgetown University wrote in his blog post Credit Card Defaults–Piggybacked Underwriting:

"There is virtually no income verification in the [credit] card industry–all loans are stated income loans (a/k/a liar loans), and we know how well that worked for mortgages (and there's more temptation to lie about a card as a default won't cost you the house)."

I don't know why they do full doc loans for a personal line of credit while they do stated income loans for credit cards. I'm guessing it's because with a credit card they can price for risk and adjust rates more easily down the road. If any banker reads this, please chime in.

After all these run-ins with the bank, I'm thinking what it takes to establish a relationship with a personal banker at a branch. Instead of calling different departments at different 800 numbers, getting a different phone rep every time I call, and repeating what I said each time, I could let the banker at the branch make the calls for me. I heard that's how banking was done in the old days. A local banker knew you and served you. Now everybody self-serves online or calls the call center a thousand miles away or across the globe. I know Wells Fargo is known in the industry for relationship banking. Getting help from a banker for a single point of contact will probably make things easier for me. I will inquire when I go into a branch next time.

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Two years after I canceled oldest credit card and lowered my total available credit limit by about 25%, my credit scores are still going strong. They changed very little since I looked at them a year ago.

The lender also sent me a combined credit report from all three credit bureaus. All the open accounts are reported correctly. There are no suspicious entries. The report also shows many more closed accounts. They are all marked as "account closed at consumer's request."

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