Take Advantage of Your Corporate Credit Card

When I first started working, my firm gave me a corporate credit card from Diners Club, to which I can charge business expenses, such as plane tickets, overtime meals, and taxi cabs.  Over the past the three years, however, my corporate credit card has been my primary credit card.  Here are the reasons why:

  • Two month grace period – For each billing cycle, I get a two month grace period to pay off the complete balance before the credit card starts charging me interest.  More times than not, expenses, especially those involving international travel, take more than a month to get reported to and approved by accounting, after which a check is cut to reimburse me.  The two-month grace period feature has helped me out on more than one occasion for such these reasons, but it also served as a safety net in case I ever find myself too cash-strapped to pay the full balance right away.
  • Rewards program – I have to pay a $75 annual fee to gain access to the rewards catalog, but it has been completely worth it.  After three years ($225 in annual fees), I was able to exchange my points for $425 in Amazon credits, $100 in statement credits, and a $20 gift card to California Pizza Kitchen.  This is more than a 200% return.
  • Customer service – The Diners Club has great customer service, in that I have never once spoken to a machine.  Further, when a hotel in Spain charged me for a night’s stay after claiming that I did not email to cancel my reservation, I was able to dispute the charge with Diners Club and they credited me the amount I was charged.  Considering that it was an international purchase, where euros had to be converted to dollars on my statement and there was a foreign exchange fee, I was grateful that Diners Club made the process so painless.
  • Credit report – Lastly, the Diners Club does not show up on my credit report.  So while I don’t get rewarded for paying my balance on time and in full, should I ever lose the credit card, I never have to worry about someone charging it and ruining my credit score.

If you are lucky enough to get a corporate credit card, whether Diners Club or the American Express Corporate Card, do a little investigating.  The best source of information will probably be your colleagues, so ask them about their experiences and see if using the corporate credit card as your primary credit card will be worth it for you as well.

Paying for Education, One Purchase at a Time

If you have student loans to repay to Sallie Mae or are trying to save for education through a 529 Plan, you may want to use Upromise to help you out.  Upromise is a service that gives you cash for certain purchases from grocery stores, restaurants, online retail sites etc., which can then be transferred to your student loan account or 529 Plan – essentially a cash back program under which the cash is redeemed for education expenses.

To be honest, the cash back rates for Upromise are generally lower than most other programs such as ShopDiscover.  However, Upromise covers a much larger number of merchants and combines different programs to generate even more potential rewards.  Discover’s 5% cash back at Target.com and the Apple Store, for example, beats Upromise’s 2% and 1% rates at these online sites, respectively.  Upromise, however, offers 2% cash back on eBay and 1% on several travel sites, such as Orbitz and Travelocity, while Discover has not partnered with those sites as of yet.  Furthermore, Upromise also gives up to 8% cash back on restaurants that belong to the Rewards Network (for a full list visit rewardsnetwork.com) and on in-store purchases at a few places such as Bed Bath & Beyond (1%) and the Sunglass Hut (6%).

Upromise also allows you to add your grocery cards to your account, so that you get cash back on Upromise for certain items on top of your grocery stores’ discounts and/or points.  Participating stores include Safeway, Harris Teeter, and CVS.

Now the best feature of Upromise I think is that it allows you to add friends and family to your network.  That is, if they create a Upromise account and add you as a beneficiary, they can use the cash back program to help you pay for your education.  Alternatively, for online shopping, you can simply send them a “guest shopping” link, so that they do not even have to sign up for Upromisem but you can still earn cash on the program whenever anyone shops through that link.  So if your mom usually does the groceries and uses store cards, you may want to have her sign up for Upromise and help you pay off your loans; and if your grandparents are coming to visit, you might to want to send them your Upromise “guest shopping” link so that their trip can help you get some money into your 529 Plan.

A Peek into My Wallet, Part II

Whether you are searching for a new credit card or re-evaluating the credit cards you already have, keep in mind that there are very few reasons to have more than 1-2 credit cards.  Having too many revolving lines of credit might lower your credit score and might increase the amount of time it takes to redeem any sort of meaningful reward.  Here are the credit cards I keep in my wallet:

Citi Forward Visa - As mentioned in a post a few weeks ago, I got this card to replace my corporate credit card, which I have been using as my primary credit card for the past three years (more on this in a later post).  There is no annual fee and you get rewards for being a responsible cardholder, such as 100 ThankYou points each month and a 0.25% APR reduction every 3 months for staying under your credit limit and paying on time (These are things I have always done, and yet have never been rewarded for them before.  But your APR can only be reduced by up to 2%.).   Further, I get 5 ThankYou points for each $1 spent on books, music, movies, and restaurants.  These purchases make up the bulk of my spending anyway!  For all other purchases, I get 1 point for each $1 spent.  Last, I love Citi’s ThankYou Network rewards program, as I have already discussed in a previous post.

Discover More Credit Card - I also use this as my secondary credit card for the reasons mentioned in Part I.  Another reason I love this credit card is  the fact that I can order multiple cards for the same account, including one that can be put in my keyring.  Discover offers a variety of card designs, so you can choose the one (or several) to reflect your personality and to put them in different wallets.  Plus, the Discover card is the only card for which I have gotten compliments from waitresses and cashiers.  I can also purchase from retailers through ShopDiscover and get 5% cash back that way.

Let us know which credit cards are in your wallet and how they have worked for you.

A Peek into My Wallet, Part I

There is no right credit card for everyone – the best credit card for you will depend on how much you generally spend each month, the type of purchases you make, and what benefits are most relevant to you.  While you should definitely review other credit cards if you are looking for a new one (I found Ask Mr CreditCard to be a great place to start), here are the ones I have and why they work for me:

United Mileage Plus Student Visa – This was my first credit card.  I got it in college, and apparently it is not offered anymore.  There is no annual fee, but it only gives me one mile for every $2, half of what is given by most standard airline credit cards.  Because it is my oldest credit card, though, I still keep it to maintain my credit score, and have a monthly automatic payment for my cable bill set to it so that there is always activity on it and Chase does not close my account.

Citi Gold/ AAdvantage World MasterCard – I got this card to replace the United Visa as my primary credit card.  There is a $50 annual fee, but it gives me 1 mile per $1 I spend, so as long as I spend at least $5,000 per year, the annual fee is justified.  (The math: Considering the general standard conversion of 1 mile to 2 cents, I need to earn at least an extra 2,500 miles on this credit card every year to recuperate the $50 cost over the alternative, my United Visa card.  And if I spend $5,000 per year, I will earn 5,000 miles on American, or 2,500 more than I would have earned on United if I used my Visa card.)  And as a cardholder, I can also redeem miles at lower rates for certain domestic flights – 20,000 miles instead of the normal 25,000.

If you are interested in this card, or any other airline card, I suggest you sign up for the airline program first and wait for credit card offers to come in the mail (or at least that was the case during the better economic times).  Once I decided to get this credit card, I started checking my mail for better deals, and after 2 months I got one – it had the same terms and conditions as the offer available online, including the annual fee waiver for the first year, but with a bonus 25,000 miles for signing up (versus the 15,000 offer online)!

Discover More Credit Card – This Discover card is a really good deal as a secondary credit card.  It gives only up to 1% cash back on regular purchases – less than my Citi/American Airlines card, which, given the conversion rate, effectively gives me 2% – and is not accepted in all places, making it not-so-great to have as your sole/ primary credit card.  But every quarter it offers 5% cash back bonuses for certain purchase categories, and every so often there might be other bonuses too.  In the quarter ending this month, for example, this Discover card was giving a 5% cash back bonus on home improvement stores, department stores, and clothing stores, not to mention the bonus for restaurants in June I wrote about a few weeks ago.  And July to September, you can get a 5% cash back bonus on purchases (up to $300) at gas stations, hotels, theme parks, zoos, and bookstores.  That’s an extra $15 – not that much, but much better than the $3 you would get for spending $300 on a 1% cash back card.

5% cash back is probably one of the best deals on credit cards out there.  Having this Discover card as your secondary card, you should always remember to use it for purchases eligible for bonuses (remembering to check them every quarter), but go ahead and use your primary card for everything else (provided it gives you 1% or more in cash back).

You Can’t Afford Not to Match

By “match,” I am not talking about your work outfit (although that goes without saying). I am talking about your employer’s matching contributions to your 401K.  401K  (so-called because of the section of the Internal Revenue Code that governs such plans) is a type of retirement plan that allows individuals to contribute pre-tax dollars to a fund and have the savings grow tax-deferred until withdrawn at retirement.  Most recent graduates do not get paid enough as it is, so I am always quite surprised to hear about people who did not even bother to find out if their employers offer matching contributions. Hello? It is free money!

Leaving aside the arguments that recent graduates are too young or too poor to save for retirement, let’s talk numbers. For example, let’s say you make $35,000 a year and your employer offers a matching contribution to your 401K at a rate of 50 cents for every dollar you contribute, up to 6% of your salary. This means if you put in $1,000 for your 401K ( less than $20 each week), your employer will just give you another $500. If you make the maximum contribution of $2,100, your employer will give you more than $1,000 in free money. Some companies match at a higher rate and/or set even higher matching ceilings. So while it may be hard, you should really figure out a way to put aside enough money to maximize your matched contribution. In the end, you will be receiving free money from your employer and it will all be growing exponentially in an account somewhere.

Unfortunately, in this economy, many employers are scaling back their costs by cutting out the matching contribution benefit, in which case you should no longer contribute to your firm’s 401K but set up a Roth IRA (more in the next post).

The other major component of matching contributions is how long it will take for them to be 100% vested – meaning they belong to you completely even when you quit. Some firms, such as mine, are 100% vested when they are matched; others require that you work for a few years with them. If you are not sure how long you will stay at your current company, then you should also consider opening your retirement account elsewhere.

Bottom line – this is a HUGE benefit that your employer is providing and you would be crazy not to cash in on it.

Countdown to Lower Student Loan Interest Rates

Last week came with really good news on student loans – the WSJ and USA TODAY both published changes to student loans, including lower interest rates, effective July 1st.  The bulk of these changes are part of the phased-in plan of the College Cost Reduction Act of 2007, which stipulated increases in Pell Grant maxima, lower disbursement fees, and decreases in interest rates on Stafford loans each year until July 1, 2013 to make college more affordable (for the full text of the Act, click here).

Probably of most interest to readers regarding the Act, interest rates on Stafford loans (both subsidized and unsubsidized) will decrease by disbursement year.  Loans disbursed between July 1, 2006 and July 1, 2008 will retain the current 6.8% interest rate and for future disbursements, rates will be as follows:

July 1, 2008 – June 30, 2009: 6.12%

July 1, 2009 – June 30, 2010: 5.44%

July 1, 2010 – June 30, 2011: 4.76%

July 1, 2011 – June 30, 2012: 4.08%

July 1, 2012 – June 30, 2013: 3.40%

But while you may not benefit from this Act because you have a loan issued after July 1, 1998 but before July 1, 2006, the financial crisis is acting in your favor, at least with regards to federal student loans.  These loans issued between 1998 and 2006 have variable interest rates, which are determined by the 91-day May T-Bill rate (T-Bill rate + 1.70% during in-school, grace, and deferment; and T-Bill rate + 2.30% during repayment) and change every year.  This year the T-Bill rate is at a historic low, 0.18%, and the variable interest rate on student loans will fall accordingly to 1.88% during in-school, grace, and deferment period and 2.48% during repayment (currently, 4.21%)!

And what about people who got loans between July 1, 2006 and June 30, 2008, when rates were at their highest?  Before you kick yourself for having locked in that 6.8%, you may want to look into consolidation if you haven’t yet (loans can only be consolidated once in their lifespan).  While most student loan providers do not offer consolidations anymore, you can still consolidate through the Federal Direct Loan Program of the Department of Education and get a fixed 2.48% interest rate for the remainder of your repayment period starting July 1st.  For more information on eligibility and to get an application, visit the Federal Direct Consolidation Loans’ website.

Check out the WSJ and USA TODAY articles to learn more about the changes, and get ready to celebrate your independence (from high student loan interest rates) day on July 1st!

Guard Your Miles

A while back, I received a piece of mail from US Airways regarding my Dividend Miles.  It looked official enough, complete with a message from the Director of Marketing Programs, and warned that my Dividend Miles will expire in a month, lest I redeem them for some magazine subscriptions!  It immediately aroused my suspicions – I have to redeem my miles but my only options are magazine subscriptions?  I called US Airways, where the representative on the phone assured me that my miles are in no danger of expiring for another 17 months and that the letter must be a mistake.

Mistake or a scam?  Know the truth and the truth shall set you free.  Both oneworld and Star Alliance only require activity (i.e., earning or redeeming your miles) every 18 months in order for your miles to remain active; SkyTeam 12 months.  In any event, remember that you are an educated college grad, not some average Joe,  and I would hate to know that you could be fooled by something like this.

No Show? You Might Be Banned Forever

OpenTable.com offers a great service by allowing people to make their reservations online.  Reservations are often hard to make, but easy to break.  OpenTable discourages this kind of behavior, however, by automatically deactivating accounts that have more than four no-shows within a 12-month period.  Restaurants can assign you a no-show if you (1) arrived late (usually more than 15 minutes without giving the restaurant a call), (2) failed to honor or cancel the reservation, or (3) called to cancel but not within the cancellation policy (usually 24 or 48 hours prior to reservation time).

These rules may sound harsh, but OpenTable is meant to reward patrons who regularly honor their reservations or cancel them on time.  Despite this, OpenTable is also quite amenable to hearing you out if you feel a no-show has been assigned in error.  Take for example our weekly lunch last week, when there was obviously a miscommunication between OpenTable and the restaurant.  We had made a reservation through OpenTable, but the restaurant was not able to find us in their system.  When we checked our balance afterward, it turned out we had been assigned a no-show.  A simple email to OpenTable explaining the events, however, quickly rectified the situation and we were awarded our points.

All this to say, you should try your best to honor your reservations or at least be considerate enough to cancel in a timely manner so others may take your timeslot.  Otherwise, you might be making your last reservation on OpenTable.com.  Another lesson here is to keep track of your points to make sure you haven’t been inadvertently assigned a no-show.  Bon appetite!

Get a Break on Education

I am young and do not yet plan on having children anytime soon (much less am I thinking about how to pay for their college education).  Nonetheless, I am already setting up a 529 Plan.  But the plan is for me, as I intend on going to graduate school in the near- to medium-term future and figured I could use a tax break.

A 529 Plan (legally, a “qualified tuition plan”) works similarly to a Roth IRA account, but for education purposes rather than retirement.  You contribute post-tax dollars into the account, but then its earnings are not subject to federal, and often state, taxes.  But of course, if you do not use the 529 to cover eligible educational expenses (generally, tuition, room, board, and books), there is a penalty, which includes having to pay income tax plus a 10% federal tax on the earnings.  529 Plans can be used to pay for any college, university, vocational school, or other postsecondary educational institution, and can be transferred to family members if you do not use all of it or decide not to pursue further education (for more information and a list of eligible family members, visit the IRS website).

Most states have their own 529 Plans and you can enroll in any of them even if you are not a resident.  But make sure to weigh the benefits carefully, as some states also allow residents to deduct contributions when filing income tax returns, but only when they are made to its own 529 Plan.  DC taxpayers, for example, can get a deduction of up to $4,000 ($8,000 for couples filing jointly when both have 529 account and made contributions) on their contribution to a DC 529 Plan when filing state taxes.  There is no income limit, but no deductions are allowed for investment in   other states’ 529 Plans.  In contrast, since 2006, Pennsylvania taxpayers have been allowed a deduction of up to $12,000 in contributions (per taxpayer, per beneficiary) to 529 Plans from any state.  For a current list on the benefits offered in each state, click here.

While now may not be the best time to aggressively invest your money, most 529 Plans offer an investment option that protects your principal (just like a Roth IRA, which you could technically put in a money market savings or CD account).  The potential returns on your investment will probably be lower, but since the lifespan of a 529 Plan will likely be much shorter than a retirement account (i.e., it will be left to grow for fewer years) and you may not have enough time to regain any losses, you should see a 529 as way to get a tax break on your savings for education rather than as an investment device.  If you are single and have a taxable income between $8,350 and $33,950 in 2009, for instance, and set aside $3,000 this year for education, you will have save $450 in federal taxes (plus taxes on the interest earned) if you put it in a 529 rather than in a regular savings account.  With a taxable income between $33,950 and $82,250, you potential tax savings are $750!  And if you have to pay state taxes, you can save even more provided you invest in a 529 Plan for which contributions can be deducted.

Summer Training: Deals on Amtrak

The bus is undoubtedly the cheapest way to travel in the Northeast corridor, but the train has its convenience, too – namely, not getting stuck in weekend traffic.  And as an added upside, Amtrak is offering a 25% discount on the lowest available fares on the Northeast Regional throughout the summer.  Here are some of the new rates under this promotion:

Boston – New York                                         $49

New York – Philadelphia                               $34

New York – Washington, DC                        $49

Philadelphia – Washington, DC                  $33

For more routes visit the Amtrak website.  This sale is going on until September 3rd and requires purchasing 14 days in advance.  For the rest of the year, there is actually another deal with similar prices and also requiring advance booking, but is only for Saturday and Sunday travel, with a maximum one night stay.

Last week, I also mentioned Amtrak’s frequent traveler program, Guest Rewards, which is similar to airline programs but awards points per dollar spent rather than distance traveled.  If you have a Guest Rewards account, using the deals above does not have to mean losing out on points – until August 31st, Amtrak is also giving 100 bonus points for travel on Coach class, 200 for Business, and 400 for First Class on all trains in all routes.  Just make sure to log into your Guest Rewards account and register for the offer (I try to do this as soon as I find out about it, so that I can forget about it and not have to worry about finding the link again when I decide to travel).  Better than these discounts and bonus points is only when Amtrak finally makes wireless available on its trains!

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