As of right now we’re looking at about 30 hours before Hurricane Earl blows past our latitude.  It reminds me of something that happened during the aftermath of previous hurricanes:  price gouging.  Price gouging is a disparaging term given to the practice of hiking prices of demand items after some disruption has occurred that would normally clear out the existing supply.  Gasoline, food, water, ice, and toiletries are good examples of items vulnerable to price gouging.

There was a discussion over at GaryNorth.com about this topic.  In Gary’s response to the discussion, one sentence of his jumped out at me:  “Envious people hate the highest bidders.”

I’ll explain.  A few years ago I attended an estate auction.  There was a house full of very nice furniture.  I bid on one piece that would have gone very well with our decor at the time.  I was outbid.  The same gentleman who outbid me on that piece outbid everyone else for most of the rest of the furniture in that house.  I later found out that the furniture belonged to someone close to him and he was buying it back.  (He could, and he did.)  When I was talking with other people at the auction, some of them were incensed.  “He can’t do that!  The auctioneers should stop that kind of thing!  How is anyone else supposed to get any?”

Envious losing bidders hating the highest bidder.

I didn’t sympathize with the losing bidders at all.  That’s why it’s called an auction: highest bid wins.  But it’s this same kind of envy that brings about anti-gouging laws.

At the estate auction, anti gouging laws would have prevented the auctioneer from going any higher than a reasonable price for that used furniture.  If the rich guy didn’t get in the last bid, too bad!  Even if he were willing to pay more, too bad!  After a disaster zone is declared, in a majority of states it’s all of a sudden illegal to roll in with a semi full of 3,000 watt generators that would normally go for $500 and sell them for $1,500.  It’s all of a sudden illegal to charge $10 for a gallon of gas or $4 for a gallon of spring water.  Why?  Because the people who (a) didn’t prepare for the disaster until everything was gone and (b) can’t afford the items at anything except the pre-disaster price get ticked off at the people who can afford the high prices (the high bidders) and want to make sure that they can’t buy the stuff either.  They do this by punishing the people trying to sell the stuff.  The result?  Fewer people get the things that they want or need, and the sellers won’t try again the next time the disaster hits.

Doesn’t make a whole lot of sense, does it?  Gouging goes on in other contexts, though.  Airplane flights.  Amusement parks.  Ball games.  But somehow it’s OK to charge three bucks for a little bag of peanuts during a flight.

If I don’t have enough gas for my generator by the time the hurricane comes, that’s my own stupid fault.  But if the gas station around the corner were to hike their prices to $10 per gallon — high enough to keep the gas in the pumps long enough for me to get down there — I’d be more than happy to get gouged out the wazoo.  I’d much rather pay $50 more to keep my generator running than to lose everything in my basement because my sump pump wouldn’t work, and lose everything in my freezer because it thawed.

Gouge me until it hurts.  Let what’s left of the free market work to everyone’s benefit and let buyers and sellers meet at a price that’s beneficial for both.

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It’s a little embarrassing that I’ve seen so many advertisements and blogs for things related to “forex” and I never bothered to look up what the heck that meant.

Thankfully, it turned out that I had heard of what it means, just not by that word.  “Forex” is an abbreviation for the (huge) foreign exchange market, also known as the currency market.  It’s the place where you can take your United States dollars and buy Japanese yen, pounds Sterling, Euros, Canadian dollars, etc.  Or the other way around, of course.  The bid and ask prices for a currency pair (Euros to US Dollars, for example) determine the “exchange rate” that people pay when they travel abroad from one country to the other.

Of course, there are many more reasons to buy and sell currencies than just to get vacation spending money (or, on a larger scale, because you have employees in different countries that you need to pay).  All of these boil down to the following:

“I think Currency A is going to get stronger (or weaker) relative to Currency B because … “

Traders buy a currency that they think will appreciate relative to the other, so they can buy more of it back later.  There are lots and lots of people who think they know how to complete that sentence.  Many of them want to charge you to find out how they complete that sentence.

I don’t know a whole lot about currency trading beyond what I told you, except that some of the sharpest traders on the planet are currency traders.  (I can’t remember where I heard that.)  Given two different strategies, I couldn’t tell you which one is more sound.

This is a great example of something I shouldn’t try for the simple reason that I don’t understand it. This is probably the clearest, and best, rule of investing.  If you don’t understand an investment vehicle, it’s too easy to be sold on it.  To add insult to injury, the person selling you on it (or some service related to it) makes money regardless of whether you do or not.

This isn’t to say I’ll never invest in foreign currencies, but I shouldn’t now.  I barely understood the lingo!

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(This is a guest post from ThinkingMoney.org.  If you like what you’ve read, consider subscribing to their feed.)

When going on holiday one of the biggest worries is money. Having a budget and overspending is done far too often as we get carried away.

Traveling abroad has special challenges.  It doesn’t help that for some bizarre reason we seem to think that we are not spending as much if the note is not in the currency we are used to.  (I’ve often referred to Euros as a form of Monopoly money!)

Unfortunately, these notes are what make the world go round. Without them, the closest we’d get to our dream locations is through travel brochures. Thankfully, finance companies understand this need and see the opportunity to make some money as well.  The result?  Travel related credit cards.

If you’re anything like most people, you’re going to be so excited about a holiday, getting currency or sorting out your finances will be one of the last things you’ll do. You may even end up paying exorbitant rates at the airport, or if you’re like me, not bother with currency and just take your credit card with you.  However, I must stress how important it is to research the various credit cards available before you fly.

Here’s a case in point.  One my first holiday I decided to do this without researching and was effectively slapped in the face when my card was declined trying to pay for my dinner that night.  (Surely there was some mistake?  So I tried it again. Declined.)  Embarrassment aside, I had no cash, and no way to pay for the rest of my time on holiday.

Thankfully I was with friends who loaned me money for the rest of the holiday.  Once I returned home I immediately inquired about my card declining, only to find it was the card itself that wasn’t compatible to be used abroad for purchases, but I could have used it at an ATM. As I did not know this I ended up borrowing money from friends and feeling guilty all holiday.

So I decided to tell my story and make sure others don’t have the same issue I faced.  Here are a few tips and points regarding travel credit cards:

• Apply for a travel credit card which earns points the more you travel. For example, one of the best value I’ve found is the BMI American Express Card, which gives you 20,000 bonus destinations miles. Pay for your holiday with this card, use this card whilst on your holiday too, soon enough you will have enough points to go on another holiday for free!
• Make sure you read the small print on every card you think about getting. You may think you know the withdrawal fees to use the card abroad, but there are certain companies that charge different fees depending on the country. If you’re unsure in any way, be sure to call them.  A little tip: record the call.  Make sure you tell them you are at the start and then record.  (MBH note:  Check to see if you actually need to inform them if you’re in the US.  In many states only one party needs to know that the call is being recorded.) This way if they charge you when they said they wouldn’t, you have proof, and they don’t have a leg to stand on!
• Find out whether you can load money onto a travel card at a fixed exchange rate. Major travel companies like Thomas Cook offer these types of cards, and if the rate offered is good enough, you’re laughing, however if you use all the money on there and try and reload, you may find the rate is substantially higher. This is why I’ve found credit cards to be a better option.
• It’s always a good idea to take a backup source of funds with you. Keep one card on you, and the other card back at the hotel in a safe place.
• Let your card provider know that you are going on holiday. You may think why should they know? However the more you think about it, the more you may think that it makes sense for them to know. If unusual activities (transactions from another country) start occurring on your card, they will block the card, unless there is a note on the system advising them it is okay, they may even call you to verify but make sure you call them back instead of giving personal details over the phone to someone who has called you!

Then it’s just a case of enjoying a stress free holiday, leaving all the worry for when you return!

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CLEARANCE is the word that will give you 80% off of your Restaurant.com dining certificates!

For those of you who aren’t familiar with Restaurant.com, here’s a quick rundown.  Restaurant.com sells dining certificates for thousands of restaurants across the US.  A $25 dining certificate gives you $25 off of qualifying expenses at that restaurant.  Normally, a $25 dining certificate costs $10, so if you buy one and use it, you just netted $15 off of your meal.  Nice, right?

Through August 31st, 2010, it’s even better:  using the coupon code CLEARANCE at checkout will give you 80% off of your order.  That’s 80% off of the cost of the certificates, not the face value — so that same $25 dining certificate goes for just two bucks with this coupon code!

Here’s what I recommend you do if this sounds cool to you:

1. Head over to Restaurant.com and enter your ZIP code.
2. Look at the participating restaurants nearby.  See ones that you like?  If yes, go on to the next step.
3. Check out the restrictions on redeeming the certificates at a particular restaurant.  They’re directly below where you add the certificates to your cart.  The certificates aren’t exactly like cash, so just check first.
4. After you’re done, go to checkout, and be sure to enter CLEARANCE in the coupon section to get your 80% off!

Enjoy the sweet rewards of CLEARANCE price meals at Restaurant.com!

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Fresh after posting on whether small credit card charges are shameful or otherwise to be avoided, I got a comment on that post.  “Paul” asks:

“Wasn’t a provision of the financial reform bill that passed this July that store owners are now legally allowed to not accept a credit card charge for less than $10? I’m almost sure it was.”

I hadn’t gotten wind of this at all, but I dug around to try to verify Paul’s claim.

Sure enough, Paul got it.  Payment card networks are no longer allowed to demand that merchants accept all payments, regardless of total amount.  They can only demand that merchants accept all payments not less than $10.

The bill Paul was referring to is  HR 4173:  Dodd-Frank Wall Street Reform and Consumer Protection Act, and was put into law on July 21st, 2010.  Section 1075 of this law (beginning on page 693 of this printing of the new law) amends the Electronic Fund Transfer Act of 1978.  The part that restricts payment networks as to the minimum charge they can force merchants to accept (which, up until about a month ago, was $0.01) is detailed in Section 920(b)(3)(A)(i)(II) of the amended EFT Act.  Beginning with the amended section 920(b)(3) (page 698 of the new law, for those of you who are following along):

(3) LIMITATION ON RESTRICTIONS ON SETTING TRANSACTION MINIMUMS OR MAXIMUMS.  (A) IN GENERAL.—A payment card network shall not,
directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability (i) of any person to set a minimum dollar value for the acceptance by that person of credit cards, to the extent that (I) such minimum dollar value does not differentiate between issuers or between payment card networks; and (II) such minimum dollar value does not exceed $10.00 …

That is how the law is now.  In the amended section 920(b)(3)(B), it further goes on to say that this amount may be increased under certain process.  Meaning: There are avenues for making the allowed minimum greater, so down the road merchants could require $20, $30, or more before I can pull out my credit card.

If that was a bit hard to follow, I don’t blame you.  Here’s a simpler way of expressing the impact of this.

Let’s say a merchant has a sign next to the cash register that says “Minimum Credit Card Charge $10.”  Prior to July 21st, 2010, he would be violating both Visa’s and MasterCard’s merchant agreement, and could face heavy fines from the issuers if he refused to accept a smaller payment, and the customer reported it.  After July 21st, 2010, the merchant doesn’t have to worry about a customer ratting them out, because the issuers can’t demand it.

This is a game-changer, and not a good one, I’m afraid:

• It’s not at all a win for consumers, even though the law is advertised in part as “consumer protection.”  Ten dollars is not a particularly small amount.  I can easily get lunch out for less than $10.  It ultimately places restrictions on credit card use.  It forces consumers to carry debit cards, or cash, for some small purchases.  Payments may become more inconvenient.  Do you pay $10 at the pump for the $8 worth of gas you use to fill your motorcycle, simply because the merchant isn’t obligated to accept your $8 credit charge?  Or do you have to walk in to pay cash?  It’s more costly, less convenient, or both.
• It might be a small win for businesses that are not payment networks, as they have protection against merchant account agreements that demand that the merchant accept payments so small that they are a net loss for the business.  But if the merchant opts to avoid these kinds of transactions to the full extent of the law, then they could be turning away more profits than what they’re saving in losses by avoiding the small credit transactions.
• It’s a clear loss for payment processors. Their total transaction volume will go down, and along with it their fees.

This regulation hasn’t hit the stores a whole lot yet, but it will.  The law is barely a month old.  As a former eBay seller, I know how much these fees can run, and it’s likely not much different for brick-and-mortar stores.  I’m sure store owners will take secret pleasure (and relief) in being able to turn away customers that have been abusive with small credit card transactions.

The only advice I can give is to carry around more cash for the little things so you’re not caught by a nasty surprise when a store won’t accept your credit card.  Sorry!

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Visa and MasterCard have very clear rules with regard to requiring a certain minimum amount before accepting credit card as payment.  They can’t. MasterCard will fine the merchant up to $20,000 for the first offense of this type.  They take it seriously.  (Side tip:  If a merchant is obstinate about enforcing a minimum charge, the proper question to ask them is “Do you know you’re violating your merchant account agreement?”  If they don’t care, then the number you need to call is right on the back of the card that was just refused.  If you’re using a MasterCard, you already know the dollar amount of the fine, and can convey that to them.)

Update:  The “no minimums allowed” rule is no longer legal in the US. Here’s what went down.

It’s clear that the TJ Maxx where J. Money charged $0.10 to his card understood this.  They certainly lost money on that little transaction; the fixed fee per transaction is almost certainly double that.  But setting aside the risk of huge fines for not accepting it, the store gains in the long run, as credit card purchases are typically 12% to 18% higher than cash purchases at a given merchant.

But what struck me more was seeing the kinder, more sensitive side of J. Money.  He was “not proud” of doing that. He took it as a bit of unpreparedness that he didn’t have enough cash to cover the purchase.  And that’s all well and good, because I’m not about to deny him his moment of self-loathing.

But seriously, though in my meaner years I would have enjoyed making a sport out of that.  Now that I understand the costs of running a business, and in particular the cost of accepting credit cards, I try not to charge less than a dollar unless I absolutely have to, especially at places where I go often.  It isn’t worth being put on an unofficial black-list of evil below-zeros (customers that cost the business rather than bring money into it).

So what do you think?  Is charging a 50-cent candy bar good or bad cardsmanship?

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(This information is given courtesy of Accrued Interest.  Be sure to check them out, and if you like what you’ve read, subscribe to their feed!)

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If keeping your day job is the cake, then investing in yourself outside of your day job is at least the icing, or maybe even another four or five cakes’ worth.

But if that sounds like way too much work, there’s always the chance you can hit the jackpot by suing the entity that consumed most of your time for an obscene amount of money.  That’s what Craig Smallwood is doing to NCSoft, creator of Lineage II, a 3-D massively multi-player online role-playing game.  Allegedly Mr. Smallwood spent 20,000 hours playing the game from 2004 to 2009, and is now suing NCSoft for damages under the guise that he wouldn’t have started playing the game had he known that he would have become addicted to it.

First, let’s break this down a little bit.  How much time is twenty thousand hours?  If we take the time span (generously) to be six full years (January 1st, 2004, to December 31st, 2009), 20,000 hours is over nine hours per day, seven days a week, 365 or 366 days per year, for six full years.

That’s mind boggling, but not nearly as mind boggling as (a) his allegations that this stupendous waste of time wasn’t his fault, (b) the fact that this lawsuit wasn’t thrown out immediately, and, most importantly, (c) how far ahead he’d be now if he even played that game just five hours a day and invested the difference in himself. Five hours a day is still way too much time, but there’s a whole lot someone can learn in about 9,000 hours.  It’s enough time to not only become proficient at, but completely master a skill, or maybe two skills!

What’s the alternative to hoping for a misguided jackpot judgment like this guy is?

I’ll let you in on a little secret.  I have a very addictive personality.  I’ve spent more than my fair share playing mindless games and surfing sites that I really shouldn’t be surfing.  The only thing that’s really helped me battle the game sites and other junk was installing a content filter and having my wife be the only one who has the password to change the permissions and delete the surfing logs.  Before, I could pretend like I wasn’t spending all of this time, but now I can’t.

What’s even better is that the best one I’ve found is free:  Blue Coat K9 Web Protection.  In addition to categories aimed at protecting children from content related to violence, drugs, hate, adult content, etc., and categories that should be limited or controlled (chat sites, social networking, peer-to-peer, etc.), it also can filter a whole bunch of (potentially costly and/or damaging) time-waster categories:  gambling, shopping, and games.  In addition to the bad sites, I block the game sites.  I know that how I spend my time is my own responsibility, and that I have to ask for help if I can’t use it productively.  Suing MiniClip.com for my lost productivity makes about as much sense as suing McDonald’s for not telling me that I could burn my legs if I spilled their coffee on them while I was driving.

So, the main point is this:  If something is eating up a lot of your time and affecting your finances and even your life, don’t blame or sue someone else.  Own up and get it out of your life.  Get help if you can’t do it yourself.  Those who depend on you and love you will thank you.

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Nine years ago when I got a 30-year mortgage for my first house, people said that I got a really good rate:  5.875%.

Now, if I still had that mortgage, it would almost be a no-brainer for me to refinance to a 15-year mortgage.  I saw that rates were 3.875% for a fixed 15-year mortgage!  Refinancing my 30-year mortgage with the principal balance at what it would have been at the beginning of year 10, to a 3.875% 15-year mortgage, would have been only $35 more per month!  It would knock six years’ worth of payments off just like that.  That’s telling, because I didn’t have a bad rate to begin with.

You may have seen advertisements in the past for similar low rates (in the low 4% range or even less) but those loans were likely adjustable-rate mortgages.  The advertised rate was a teaser rate, and it was subject to change after a certain number of years.  People with these kinds of mortgage were shouldering interest-rate risk.

The low-4%, even below-4% mortgages available now are extraordinary because they’re fixed-rate.  The difference between fixed-rate and adjustable-rate mortgages is just that:  fixed-rate mortgages cannot vary over the life of the loan!  There is no tease in that rate.  It is the rate!  Fixed-rate mortgages haven’t been this cheap in my lifetime, and I was born in the early 1970s.

Now, this shouldn’t be an excuse to run out to get a house as fast as you can if you aren’t in the market.  But if you are in the market, or if you’re in the market for a refinance, comparing mortgage rates now will likely be very pleasant.  It’s a fixed-rate gift from the cheap money fairy, if you will.

Smithee, a staff writer over at Consumerism Commentary, gave his opinions on the positive opt-in that’s now necessary for banks and credit unions to enroll customers in overdraft privilege services.  In a previous life as a Bank of America customer service representative, he had to tell customers that they couldn’t opt out of the overdraft service privilege — a fee-based service that amounts to providing a short-term loan to cover an overdrawn account.

Smithee was celebrating this law.  Part of his celebration revolves around perceived greater consumer choice:

From what I could tell, there should’ve been a third option between paying overdraft fees several times a year and carrying some kind of man-purse [to carry around a check register and receipts]. That third option is now here: you can turn off overdraft protection. Even better, it’s being turned off for everybody unless they turn it back on. All the law does is give consumers more options.

Our credit union has had a similar overdraft privilege for a while.  I was opted in automatically, but I had the ability to opt out at any time should I not want it.  It wasn’t mandatory like Bank of America’s.

So, in a way, Smithee’s cause for celebration is a bit off.  The consumer choice was always there — just not necessarily at every financial institution.  If my credit union allowed customers to opt out, then I’m sure others did as well.  If a customer really had no use for overdraft privilege, then they could simply part ways with Bank of America to choicier pastures.  Banks can’t be all things to all customers.  So what?

Now, though, banks and credit unions aren’t free to enroll their customers automatically into overdraft privilege.  They must get positive opt-in.  It’s a business restriction.  It gives banks and credit unions fewer options for offering service to their customers.  Because banks and credit unions must get permission from each and every customer — even current ones — it will affect banks’ bottom lines negatively.  It has to.  Having overdraft privilege service arrangements with only a quarter of your customers can’t be as profitable as having that arrangement with all of your customers (or most of them, if they were allowed to opt out).  (Hat tip to Sun’s Financial Diary for the Huffington Post link.)

Every bank and credit union is taking it on the chin, and that means that it will be bad news for all banking customers.  The frequent fliers — the users of overdraft privilege services who are most profitable to the bank — may or may not opt in, and that revenue will be gone, which in turn will affect the level of service that it gives to all of its customers.  Fees go up, customer service wait times go up, ATM fees go up, credit card rewards go down, minimum balances for interest-bearing checking go up, etc., etc.  Everyone loses, because every financial institution is less able to treat its customers like the adults that they are:  free to choose how they manage their money, and responsible for the consequences of how they manage their money.

Mandatory overdraft privilege, may you rest in peace. You weren’t for everyone, but people didn’t have to run too far to get away from you.  You were a fixture of a freer, less regulated time.  What you stood for will be missed.

With your passing, a little bit of the free market died.

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