Thursday, May 4, 2006

Cingular Changing Name to Can-With-String

Author: Nick
Category: Money
Topics: ,

goodbye, cingular!

Even thought it cost AT&T about $68 trillion to integrate its wireless phone brand with its Cingular acquisition, AT&T announced this week that it’s pushing a big Undo button and changing its wireless brand’s name back once again to AT&T Wireless.

Some critics are saying it’s a bad move for the grandfather of telecommunications to slap its “dated” moniker on its wireless brand. Assuming the reliability and services remain the same, AT&T can call its wireless service whatever it likes for all I care. I’m just hoping they don’t get rid of that sexy lady voice I get when I pay my Cingular bill by phone.

“Thank you for paying me, Nick. I can’t wait until next month’s bill so I can talk to you again, big boy.”

Don’t worry, Cingy! I’ll never forget you!

Wednesday, March 15, 2006

Automatic Bill-Pay Saves You Time and Money… Until the Knife Slips

Author: Nick
Category: Money

Seeking assistant for world famous knife-throwing act. Earn big bucks for standing very, very still. Excellent benefits including health, dental, and 401(k). BYO life insurance.

Sign up for auto bill-pay today. We’ll credit you with $20 if you activate auto bill-pay on your account. We’ll automatically debit your checking account each month for the amount of your balance. Never worry about paying your bills again!

At first glance, these two advertisements seem to be completely different. At second and third glance, they still appear unrelated in any way. In fact, you could fill a room with Harvard PhDs and 500 gallons of Red Bull, and weeks could pass before anyone sees the connection between the two ads.

Fortunately for you, I have a PhD in awesomeness. It was granted to me by the University of Cool.

So what in the name of Benjamin Bernanke am I getting at? Quite simple: I might sooner try the knife-throwing job before signing up for auto bill-pay.

I’ve really gone off my rocker this time, haven’t I?! Here come the men in white coats to take me to a “special room.” But before you add the label “psychotic” to my RSS feed in your reader, hear me out! Allow me to explain why I equate automatic bill-pay to being at the pointy end of a knife-throwing act.

The Tragedy of Jill: The Woman Addicted to Auto Bill-Pay

Consider this hypothetical situation involving a young woman named Jill. Jill rents an apartment in the city and has a nice job. She used to pay her monthly bills the old-fashioned way–a check, an envelope, and a stamp. Then one day Al Gore invented the internet and she found that she could pay all her bills online. At first, Jill set up a manual bill-pay system with her bank so that she could input the values from her paper bills by hand each month and have her bank handle the payments. Then Jill got promoted at work and suddenly found herself short on time. Seeing an opportunity to save 30 minutes a month, Jill signed up for automatic bill-pay for all of her bills. Now everything would be automatically debited from her checking account. For the sake of simplicity, let’s say these are her accounts and that they’re all set to auto bill-pay somewhere near the end of each month…

Payee Monthly charge ($) Fee structure
Rent 1,500.00 Fixed
Car lease 400.00 Fixed
Home phone 40.00 Base + long distance minutes
Cell phone 50.00 Base + extra minutes
Gas ~150.00 Varies
Electricity ~150.00 Varies
Water ~20.00 Varies
Credit card #1 ??? Varies
Credit card #2 ??? Varies
Gym membership 30.00 Fixed

On an average month, Jill will have $2,340 plus her credit card balances automatically debited from her checking account. In a situation like this, unless Jill meticulously monitors her accounts (which she just doesn’t have the time to do), she stands to get burned in one of several ways.

Way Jill Loses #1: Keep the checking account loaded with money. Most people have low- or no-interest checking accounts for their everyday use. So if Jill puts $1,000 in a checking account that earns zero interest, it’s going to stay $1,000 unless Jill adds her own money or remove it. Any money Jill puts in such an account is really losing interest that it could be earning in a high-yield savings account (>4.00% APY). Jill can pretty much ensure her bills will be auto-paid with no problem by keeping, oh, $10,000 in her checking account at all times. While there are a few higher-yielding checking accounts out there, Jill probably doesn’t have one. So Jill probably misses out on $400 or more in interest each year when she keeps her checking account balance that high.

Way Jill REALLY Loses #2: Ballpark the checking account balance each month. Remember that Jill needs an average of $2,340 each month to pay her non-credit card bills. Perhaps Jill pays slightly more attention to her spending and adjusts her monthly checking account balance accordingly. If Jill estimates she put $1,500 on her credit cards this month, she might transfer only enough to her checking account to bring the balance to about $4,000. That should be enough to cover all of her bills.

But what if Jill’s math is a little off? What if there’s a particularly cold month that doubles her average gas bill, and she goes on a short trip and greatly exceeds her cell phone minute allotment, and her rent goes up $100 but she forgot it started this month, and she forgot about that $250 charge to her credit card she made on her trip? Jill ballparks her checking account balance based on the previous month but underestimates by, say, $300. Depending on the order in which her bills are debited, she faces at least a couple of overdraft fees from her bank that will set her back $10-30 each. And if Jill doesn’t have overdraft protection, she instead faces eviction, repossession, utility disconnection, dings on her credit report, and flabby arms due to a cancelled gym membership.

Chances are that situations #1 and #2 can be avoided by taking the middle road. If $4,000 would just barely pay the bills and $10,000 would always cover them, Jill could simply keep her balance at $7,000 or so and both her her risk of running the checking account dry and her missed interest earnings drop.

Way Jill REALLY REALLY Loses #3: Auto bill-pay is always on time, even if you’re not. Jill only half-learned her lesson from situations #1 and #2. She now keeps her checking account balance around $5,500 a month just in case. Sadly, Jill doesn’t bother to reactivate her gym membership, and she quickly becomes out of shape. She puts on 100 pounds and one day gets hit by a bus that she just couldn’t outrun. She makes it through okay, but she’s stuck in the hospital for about five weeks. Her family flies out to visit her, but nobody thinks about her finances since she’ll only be away from them for a little over a month. “She has auto bill-pay,” Jill’s mother comments. “Everything’ll be just fine!”

Jill leaves the hospital and returns home only to find her car gone, all of her utilities off, and Fair Isaac himself standing in her doorway with a baseball bat ready to bust her credit score down to 400. As it turns out, she was in the hospital for two cycles of auto bill-pay. The first went through just fine, but only the rent got paid at the end of month two. Or maybe Jill set up overdraft protection, and while everything was paid, she now has $300 in overdraft fees.

Way Jill Loses For All of Eternity #4: Getting your bills paid until the end of time. Flash forward 30 years. Jill retires with a comfortable nest egg, and with the advent of the super-duper-internet, Jill’s bills will never go unpaid because the auto bill-pay finds her money no matter where it is. On her 148th birthday, Jill dies unexpectedly… but nobody notices. You see, all of Jill’s friends and family are already in cryogenic freezing, so when she passes away in the quiet of her apartment, there’s nobody around to miss her. Not even her auto bill-pay misses her as it effortlessly continues to draw money from her bank account to cover her rent and other bills month after month, year after year. It’s not until her bank accounts hit zero 43 years later that anyone bothers to come looking for Jill. She’s buried on the moon where her gravestone reads, “Jill, 1975-20??, FICO 250.”

And if you think something like situation #4 can’t happen, think again.

Is Auto Bill-Pay Right For Me?

To me, auto bill-pay doesn’t seem to be worth the seconds or minutes one might save. What if, for example, you ran across some fraudulent charges on your credit card or calls you didn’t make on your cell phone bill? You might be expecting your auto bill-pay to take $30 out of your checking account, but a few fraudulent charges and you could end up with a bill many times larger than normal. If you’re using a manual bill-pay system, you’ll have a chance to go “Wait, why is my phone bill $1,300?” before you actually pay that amount. With auto bill-pay, unless there is some sort of control system in place that alerts you to larger-than-usual bills, you’ll have to deal with the company to get your money back after they already have it.

Let’s go back to the knife-throwing assistant metaphor. Just like many knife-throwing assistants who last their whole career without a single split hair, you might go your entire life on auto bill-pay without experiencing any of Jill’s troubles. Or you might have a small auto bill-pay mishap here and there that won’t affect you too much, much like the retired knife-throwing assistants out there who continue to lead normal, fulfilling, eight-fingered lives. But why risk a slip of the knife–a $1,300 auto-paid cell phone bill that could cause bounced checks, missed payments, and credit nightmares?

Still, I can see the appeal in not having to deal with bills each month. I know some people who take an entire day each month just to handle their finances, and bill paying can easily take up half that time. In theory, auto bill-pay should be okay for strictly fixed charges–rent, mortgages, and anything else where the price won’t fluctuate due to extra usage.

Just make sure to have a friend check up on you every so often.

Wednesday, March 8, 2006

Verizon Is One Sneaky Telecommunications Corporation!

Author: Nick
Category: Money
Topics: , ,

Why, in this era of supercomputers and flying cars, do I still have a landline phone installed in my home? Is it because I feel more secure knowing I have a phone that connects to a wall that connects to all the other phones in the world with wires? Do I have some sort of illicit passion for phone jacks and RJ-11 hinged locking tabs? Or are landlines such a great bargain that I’d be stupid not to fork over the cash each month to have one?

I can assure you that the correct answer is none of the above. Instead, the absolute only reason there is still a telephone plugged into our home’s wall is because of Comcast. You see, my wife and I aren’t big television watchers. In a given week, we’ll spend a combined total of maybe six hours viewing regular television programming. Our TV gets far more use in conjunction with its attached peripherals–the Gamecube, the PlayStation 2, and the DVD player. As such, we don’t have cable or satellite or any other paid service that would give us access to additional programming channels. And since we don’t have cable, we also don’t have access to the high-speed internet services provided by our local cable company, Comcast. In order to purchase Comcast’s internet services without also buying into its cable service, I would need to give them one of my kidneys wrapped in an enormous ball of cash.

While we can live without 430 channels of HBO, my plot to take over the world work and hobbies (like this one!) require some sort of non-dial-up connection to the internet. Verizon to the rescue! We’re signed up for their $15/month 768/128kbps DSL service. For the less technically inclined people out there, those numbers mean that I can download the entire internet in approximately seven seconds. Of course, with cable internet, that time would drop to three seconds, but I’m not in that big of a hurry.

So what does all this have to do with my having a landline phone? Well, it’s because Verizon has this one little caveat to its $15 DSL service–I need to have some sort of landline phone service with them, and not even my cash-wrapped kidney can change that. So instead of paying $40 + $40 + taxes each month for cable and cable internet, we pay $35 + $15 + taxes for a landline telephone with unlimited local and regional calling and DSL internet. Having the landline phone service also allows me to keep my cell phone rate very low since I typically only use it for long-distance calls.

In a few areas, Verizon is starting to roll out its sexy “naked” DSL service. For just an extra $5 a month, this plan would allow you to get Verizon’s DSL internet without any sort of landline service… in theory. In reality, you still need a landline; it just doesn’t need to be with Verizon. Still, if true naked DSL ever appeared in my neck of the woods, we’d just drop the landline and beef up our cell phone service.

So as the situation stands, Verizon takes our $35 each month and gives us all the calls we want in this general area along with common extras like Caller ID, Call Waiting, and unlimited calls to Mars (though that last one has yet to be useful). But with our latest bill came a tiny flyer that I almost threw away without reading. It advertised Verizon’s Freedom package (unlimited calls to anywhere in the U.S.) for just $35 a month. “Why am I paying the same price for a plan with no long distance service?” I thought. So I decided to switch my service to this new plan at my earliest convenience.

Fortunately for me, my earliest convenience was after I had a chance to discuss the plan with some wonderful folks on the internet. They kindly pointed out that the $35 version of Verizon’s Freedom plan included absolutely no extra features. No Caller ID. No Call Waiting. And zero minutes for me to talk to my future Martian friends! I priced all those options individually and found out that the ones I use the most would add an extra $10-15 to my monthly bill. For that price, I may as well have gotten the full-featured Freedom package. And even with the unlimited long distance, I’d still have to hang on to my cell phone at its current rate for the occasional use I make of it away from home.

Nice try, Verizon, but you’re not getting a penny extra from me. And as soon as I finish wiring my massive can-and-string network across Maryland, I’m ditching you altogether!