Money, Money, Money

Mail from Lending Club

2008-04-08T06:54:00.000-07:00

I got this in my inbox today:

Dear Judith,

Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.

The borrowing side of our site will remain generally unaffected by this registration process; borrowers can continue to apply for loans and new loans posted after April 7, 2008, will be funded and held only by Lending Club.

Until the registration process is completed, the company will undergo a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time.

Q&A:

Q1. What about money I have begun moving, but is still in transit to Lending Club?
A1.1. If you are in the process of verifying your bank account, you will be able to complete that verification but will not be able to add new funds
A1.2 If you have initiated a transfer, the funds will be displayed in your Lending Club account balance as soon as those funds are available.
A1.3 If you have uncommitted funds, you may request that Lending Club return those funds via the same method used to load the funds. For example,
• If you have initiated an ACH to add funds, these funds will be transferred into your Lending Club account but you will not be able to lend these funds out. You can go into your Lending Club account once the ACH transfer has been completed and withdraw funds back into your linked bank account..
• If you've wired funds into your Lending Club account and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to wire these funds back to you at no charge.
• If you've sent funds by check, and have not yet committed these funds into loans, you can send a request to support@lendingclub.com for us to send you a check by mail for the same amount at no charge.

Q2. What about referrals?
A2.1 The current referral program is terminated. If you have referred someone who has already signed up as a lender or a borrower, or if you have been referred by someone and have already signed up as a lender or a borrower, you will be receiving your referral payment within the next few days.

Sincerely,

Patrick Gannon
Senior Vice President
Lending Club
440 N Wolfe Road
Sunnyvale CA 94085
www.lendingclub.com

What this means is that uncommitted money I have in my account can't go to work there. I have to take it out to get it working, for an unspecified amount of time. What it means is no more referrals. And all this is out of the blue. I'm not impressed. But I've got his address. And so do you.

Credit unions: why I am considering a move

2008-03-28T07:32:00.000-07:00

The other day I received a notice from my bank - Washington Mutual - that five debits had not cleared my account and therefore I was charged $30 per transaction for the overdraw - a total of $150. I discovered the problem when I was glancing at my accounts for another reason, before I got a notice from the bank.

I made a mistake. I have two checking accounts there and each has a debit card. Somehow the card I normally use had gotten shoved down in my wallet and the other one, which I normally do not use, was staring out at me. I used the wrong card for those transactions and therefore overdrew that account.

I wrote to the bank to ask

1) why don't they let me know the day the overdraw occurs, and
2) how about reversing some of those charges.

They wrote back. Sorry can't reverse the charges. For my convenience they did overdraw the account rather than bounce the checks.

I wrote back. What about my first question? And why are your fees so ridiculously high?

The answer: WaMu does offer the option of sending alerts. The message went on to describe how to set it up to get alerts. Fees are always being reviewed to be competitive with the industry.

Of course I already get alerts. Just not in time. And fees being set to be competitive? How about setting them to draw customers or keep the ones you have? The messages clearly were standardized. I guess the person answering picks out a couple of key words and sends the appropriate response.

In other words, I got no satisfaction. My daughter Elaine mentioned that she is looking into getting a credit union account instead because of the ridiculous fees and the delays in clearing checks whenever she and her husband deposit a large check.

I am now in the midst of choosing a credit union myself. What I hope to find is one that offers the options I find most valuable - free billpay, for example - as well as better rates for savings and lower fees for everything. My first step was to go to bankrate.com.

Bankrate.com offers a page: Six ways to find a credit union. For me, the big find on this page was CUNA: The Credit Union National Association.

On this site I found a page that helps one find a credit union. Because I am not employed right now and do not belong to any organizations (other than animal rights and eco types) or to any church, I simply entered my city, county, and state. Five matches turned up. I am now set to evaluate those matches.

Freakonomics, by Steven Levitt and Stephen Dubner

2008-03-22T18:16:00.000-07:00

Levitt and Dubner repeatedly say that this book does not have a "theme". And in the sense that Blink or The Tipping Point have themes, they are right. But it does have a fundamental focus: on "conventional wisdom".

Levitt, as an economist, has made his name by asking different questions - like "do teachers cheat?" - and by finding ways to sort data to get the answers he is looking for. Dubner interviewed Levitt for a NYT article a while back and soon a collaboration was born - the collaboration that yielded this book. Both Levitt and Dubner appear to be good writers, as evidenced by the Freakonomics blog at http://freakonomics.blogs.nytimes.com/, where both post individual as well as joint articles. I sense that the overall style of the book is more Dubner than Levitt, based on my seeing Dubner speak at Prosper Days (see my articles on Prosper Days at http://fightdebt.blogspot.com/search/label/Prosper%20Days).

In this book we find answers to a wide range of questions that few people would think to ask, about topics from sumo wrestlers to parenting. What does it have to do with economics? Simply that it has to do with how people get what they want - and how people can be encouraged to do the right thing and avoid doing the wrong thing. The outline of the entire book can be found in Dubner's original article, which is included as part of the additional material in this book, along with selected blog posts and heavy-duty footnotes.

I for one really did want a bit more of a theme than this non-theme, but I do think the basic premise is sound and a good reason for people to read the book - it is important to question conventional wisdom. For example, at one point another economist read Levitt's original article on the relationship between abortion and the drop in crime, and he said (I'm paraphrasing), "I have read this over and over and I can't find anything wrong with it, but I still don't believe it.". This is how most of us are: we can be faced with incontrovertible evidence but we find it difficult to let go of what we have believed for so long.

Portfolios: Prosper vs Lending Club

2008-03-22T07:09:00.000-07:00

*edited 3/26/08
I recently joined Lending Club and added $500 to my account. I received an incentive deposit of $50 - I think because I joined through someone else's link. (You too can get an incentive when you join - click on the link to the right.)

Today I created a portfolio on Lending Club. I have six portfolios on Prosper. Here is a quick comparison of the two:

Lending Club:

There are actually two types of portfolios on Lending Club. The notes below apply to the automatic portfolio, known as LendingMatch. The other type is formed when you choose individual loans.

$500 minimum for each portfolio
Choice of "risk levels" from low to high but no other options
$25 bids on each loan are automatically set - that is, the portfolio automatically bids $25 on each loan that fits the criteria. You can change the amount of each bid when you "review" the portfolio.

Prosper:

No minimum for each portfolio
Wide range of options in addition to risk levels. Can choose to exclude "auto funding", can set no. of delinquencies that are acceptable, can choose to include only those loans that friends of the borrower have bid on, for example.
You choose the minimum bid ($50 or more).

What then?

On Prosper, it takes several minutes before a portfolio chooses loans that meet the criteria. On Lendingclub a list of loans is chosen immediately and you can select some from the list to delete if you like. (On Prosper you can't withdraw from a bid that is placed automatically by your portfolio.)

It takes less time, then, to set up a Lending Club portfolio and you get immediate results. On Prosper, though, you can add more criteria to tailor the loans you make. What works best for you obviously depends on your goals and preferences.

Lending Club

2008-03-07T08:23:00.000-08:00

At Prosper Days I learned of a couple of other new "peer-to-peer" lending companies. One is loanio, which has not yet gone live. Another is Lending Club. I just joined Lending Club, in part as a diversification strategy and in part to find out what it's like.

Lending Club is similar to Prosper in its overall makeup: people lend to other people. Specifically, Lending Club makes loans and sells them to individual lenders, just like Prosper. There are, of course, differences. Lending Club only accepts borrowers with credit scores of 640 or higher, and may reject those if their credit balances are too high.

Acceptance as a lender is also similar to Prosper, except that instead of a checking account a lender can wire money to Lending Club. There aren't other options, like credit cards, yet.

Borrowers and lenders pay fees to Lending Club, based on the value of the loan. My quick glance tells me the percentages are higher than Prosper's.

Lending Club offers portfolios too, although some of the criteria differ from Prosper's.

I will offer more details in future posts.

Stephen Dubner: Unexpected consequences

2008-03-02T16:30:00.000-08:00

The keynote speaker on the second day of Prosper Days was Stephen Dubner, co-author (with Steven Leavitt) of Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, author of Turbulent Souls: A Catholic Son's Return to His Jewish Family, Confessions of a Hero-Worshipper, and a children's book. Obviously it was Freakonomics that brought Dubner into the Prosper fold. Or at least to the podium. He connected his work to Prosper members by describing research on altruism, picking up on the "people helping people" theme.

Dubner is a likeable, funny guy, and an excellent speaker. He's clearly been at this for some time. In his presentation for Prosper Days he focused on the same general topic, the overarching topic, of Freakonomics: the study of incentives, but zeroed in particularly on the quality of research and how that quality reflects (poorly or well) real life.

Scrutiny tweaks the outcome. For example, there is a difference between "stated preferences" and "revealed preferences". If the people in a room are asked to raise their hands if they wash their hands after using a public toilet close to 100% will raise their hands. If, instead, researchers slyly count the number of persons washing their hands after using a public toilet they find that about 30% do not. This difference obviously comes from a factor known as "scrutiny".

What are the rewards, Dubner asks, for truthfulness? What is the cost of dishonesty? These are the questions that bring us a true understanding of incentives.

Gaming the Altruists . Dubner applauded the Prosper crowd for its apparent altruism. He then launched into the research on altruism in humans, taking us from "conventional wisdom" that says humans are innately altruistic (I am not sure how conventional that wisdom is, myself; I do not think humans are innately altruistic and don't know that I ever have) through the "Dictator Game" and beyond, to conclusions that, surprise surprise, vary with the rules of the game - the way the research is designed.

Who done it. The results of a research project are also affected by the person(s) doing the research. That is, the persons who interact with the research subjects. It turns out that no matter how well-designed the project is, the greatest cooperation will be obtained when requested by blonde women. I guess we all knew that already, though, didn't we?

Unassuming. Dubner kept coming back to the questions we ask and those we don't. Sometimes we have to ask questions in different ways at different times to separate ourselves from our own assumptions. Sometimes we don't think to ask the simple questions.

All of these elements affect the value of research. It's a mistake to rely upon research until you have reviewed how it was done and by whom.

Dubner's speech drew upon elements of the next book he and Leavitt plan to publish in about a year. Throughout his talk he referred to works by others, notably Predictably Irrational: The Hidden Forces that Shape Our Decisions, by Dan Ariely. Dubner's message, overall, was to question not only authority but also conventional wisdom when trying to predict the behavior of others or, for that matter, ourselves. We don't always or even often behave rationally. Perhaps by knowing some of the motives behind our own behavior we can prevent ourselves from making serious mistakes.

Prosper transparency

2008-03-01T06:41:00.000-08:00

Another apparent theme at the Prosper Days conference was "transparency" - the term that has come to mean a willingness to share the guts of an operation openly. Prosper's most obvious claim to transparency is the availability of its programming and data. By making this resource available to third parties, Prosper expands its own visibility. Several developers have taken advantage and are offering different ways of viewing and using the data.

Software engineer Eric Petroelje

Eric was tapped as panel leader or member more than once at Prosper Days. His expertise in software development allowed him to take advantage of the Prosper API (application programming interface) to indulge his other passion: investing in stock and real estate as well as Prosper lending. Eric created ericscc.com (Eric's Credit Community), a source of market information and lending statistics for lenders, and fantasy prosper, a market simulation tool for lenders. Tools like Eric's give investors additional information on how Prosper is doing in general as well as information on individual lenders and borrowers (not by real name but by Prosper member name). I was able to look up the difference between the number of bids I make and the number I win, for example. I just noticed that Eric has posted a list of the 25 borrowers with the greatest number of endorsements. It might be a good idea for me to use this list for bidding.

Carnegie Mellon Professor Doctor Robert Hampshire

Dr. Hampshire offered a glimpse of the academic uses of Prosper data. He is leading a team, including a doctoral candidate we met the first day, in developing statistics on Prosper lenders. He offered some glimpses at the results so far, in the form of charts.

This chart shows the "tipping point" when a loan is expected to "go all the way". When bids on loans are tracked through time, those that reach 40% of funding tend to go all the way to 100%. In other words, when lenders see that a loan is 40% funded they are likely to bid on that loan and bring it all the way up.

Chief technology Officer and Co-Founder John Witchel and Chief Financial Officer Kirk Inglis

At most or all of the sessions, Prosper executives hung out at the rear of the room. They spoke up if someone on a panel gave out the wrong information and they readily answered questions. Prosper members are not a lightweight group - I don't think most of us would do this sort of thing if we didn't have the guts to take a chance on an idea - and often members would ask pointed questions that revealed more about the company than the presentations did. I was pleased to see how easily and openly Prosper executives fielded the questions. I think the reason they did not have to hesitate or obfuscate is that they rely on member experiences, questions, and recommendations to improve the way Prosper works.

I have attended many conferences for many different reasons over the years. The transparency of this company really stood out in my mind.

The Group Phenomenon

2008-02-29T11:52:00.000-08:00

One of the central ideas behind Prosper is groups. Whoever heard of a borrowing group? Or a lending group? Especially a group of middle-Americans, not high-flying Wall Street investors?

The initial idea was, as I understand it, to encourage the formation of groups of borrowers and lenders that would support each other. A borrower who belongs to a group could gain some additional credibility from that group as well as assistance in requesting a loan. Groups can be formed on just about any basis - people who ride bicycles, for example.

In addition to the groups, Prosper created open forums. Members can ask questions, offer advice to others, get to know other members here.

Both of these elements contribute to the "web 2.0" slant of the company.

Now that Prosper has been around an amazing two years, it's possible to find out how the group thing is working. It turns out that the larger groups offer no real benefit to members while the smaller groups offer significant advantages. It makes sense intuitively. It also turns out that many people do not join groups, being perhaps of an obstinate loner nature like me. Some aspects of groups have changed along the way, including the provision of incentives for group leaders (group leaders have gotten tiny percentages from loans in the past but this incentive may not be retained).

One way that groups can be especially helpful to borrowers is in the provision of endorsements and particularly endorsements with bids. When group members provide endorsements of borrowers and also bid on their loans, they are showing confidence in that borrower. Of course a borrower can get endorsements from any other Prosper member, not just group members, but chances are probably better if the borrower is a member of a group.

My own experience with groups is small. I joined Prosper initially as a borrower. I requested a loan and the request failed (no bids. none.). During the time my listing was active and after it closed I received many messages from group leaders. They offered suggestions to improve my listing and invited me to join their groups. I didn't find a compelling reason to join so I didn't and therefore cannot comment on what it's like to be in one. I do believe, though, that this concept is unusual - unique, probably - in the lending industry. It will be interesting to track it over a longer time period.

Term of the Days: Social Capital

2008-02-28T21:18:00.000-08:00

If there was a theme to the Prosper Days conference, it was "social capital".

The opening page of the prosper website currently says "Get great rates and help fellow Americans". Prosper CEO Chris Larsen described different types of investors in his keynote address as "George Baileys" (from A Wonderful Life) and "Gordon Geckos" (from Wall Street). Bailey is the bleeding heart who wants to lend to deserving people while Gecko looks to line his pockets with the hard-earned money of those same deserving people ("Greed, for lack of a better word, is good"). Larsen, co-founder of Prosper, said Prosper tries to serve both types. When it comes down to it, it doesn't matter to Prosper what people's reasons are for investing. Nevertheless, the company has from the beginning promoted community involvement; people helping people. And some of the recent changes to Prosper have again brought "social capital" to the forefront.

Prosper CEO Chris Larsen

Portfolio plans. Lenders can create portfolio plans that target specific types of loans - conservative or aggressive, with interest rates over a certain number, for example. Once the plan is created, the plan will automatically seek out loans that meet the lender's criteria, and bid on them. The lender doesn't even have to be there.

Larsen highlighted changes in the portfolio plan options. Lenders can now choose from several "social criteria" as well: whether the borrower has endorsements from friends; whether those friends are "verified" (proven to be separate people from the borrower), whether any of those endorsers have bid on the loan. Statistically, borrowers who obtain endorsements from verified Prosper members who then actually bid on the borrower's loan do stand a better chance of being funded - and those borrowers are more likely to honor their commitment to repay the loan than those in similar circumstances who do not have endorsements by bidders.

Group leader Marilyn Paguirigan

And then there was Marilyn. Marilyn Paguirigan spoke at at least four Prosper sessions. She is the leader of Malana Ohana, a Prosper borrower-and-lender group, based in Hawaii, that has unique characteristics. Primarily of interest is that its leader knows all of the members personally. It is essentially family-and-friends who support each other. Marilyn's group exemplifies the community aspect of Prosper and she spoke highly and often of the benefits of social capital. Her group has a high rating (four out of five stars), indicating its borrowers rarely default. The success of the group indicates that community support and associated social pressure has value.

The "people helping people" aspect of Prosper is attractive to a great many people. Many of us feel good when we can actually see (and sometimes even know) who is getting the money we lend, and we feel even better that we are keeping the loans out of the hands of the greedy lender industry. Prosper funds, however, are housed in Wells Fargo Bank, which tells us that the industry is still getting its cut.

Prosper People

2008-02-25T17:40:00.001-08:00

Last Monday and Tuesday my daughter Elaine and I attended the Prosper Days conference. It was enlightening in a number of ways. One of the surprises for me was the people we met.

The conference was on the fourth floor of the Parc55 hotel in San Franciso, a rather ugly newer hotel that provides all the amenities for such conferences. Spread around the open area were circular tables and chairs, where we sat between sessions and when we ate breakfast and lunch. This arrangement encouraged the meeting of others, and Elaine and I did meet new people each time we sat at one of these tables. People came to the conference for different reasons and brought with them very different experiences and intentions.

We met Sam at the breakfast on Monday. Stan is a doctoral candidate at Carnegie-Mellon University in Pittsburgh. He is doing research on Prosper lender patterns - what types of loans lenders prefer, when they bid, a number of other quantifiable patterns. He asked me my preferences and how I went about lending on Prosper and my answers were very much in line with "typical" lenders. To do this research he and his advisors are using Prosper-provided data that is freely available on the Prosper website. Prosper provides open access to its programming and data (not including, of course, actual Prosper member identification by name), known as its API (application programming interface). One of Stan's advisors was on a panel on API usage, illustrating the academic purposes for which this resource can be used.

We met Stanley a number of times during our time there. He is a gregarious, friendly guy who is disenchanted with his retirement plan. He is looking to find other ways to invest that provide a better return. After attending the Prosper keynote session he realized another way he could use Prosper: to lend money to his sons. They can register as borrowers, asking a ridiculously low interest rate, and he could be the only bidder. Keeping it all in the family. This way there would be clear records of his loans to his sons and if they pay them back on time they will establish credit for themselves. Win-win all around.

The Scotts were also interested in finding better ways to invest their money. Michael already had an account with Prosper and was knowledgable about the company and the experiences of others. His wife came along for the ride, essentially, and is considering investing some money of her own but wants her capital to be more liquid. She doesn't want to wait for the loans to be paid off to be able to use the money again. At this conference she learned that the loans are paid back month by month and many people pay off their loans early so she is looking at it more seriously.

We met other couples similar to the Scotts, where one was already a member of Prosper who wanted to introduce the concept to the other. One man we met is actually in the lending business and has taken an interest in bringing it home. When I commented on the outrageous interest rates banks and credit card companies charge he was ominously quiet.

The friendly and open nature of the other conference attendees we met turned out to be indicative of the group as a whole and of the company as well. And no, I wasn't paid to say this - although I freely admit that my attendance at the conference was free, because I registered as a blogger.

Off to Prosper Days

2008-02-24T05:59:00.000-08:00

I am leaving for San Francisco this morning. I want to be in my hotel in the afternoon, able to scope out the route to Prosper Days by cable car or trolley.

So far my investments in Prosper borrowers have made over 16% interest. That's not the long-term average for loans, mainly because once in a while a borrower defaults, so I don't expect to maintain it. But by making small ($50 each) loans I have indeed diversified so if one defaults it isn't going to be a biggie. I also don't have a huge investment in Prosper overall, so I am not getting rich.

I will be reporting on what I learn here.

portfolios on prosper

2008-01-10T11:52:00.000-08:00

With the extra money I received in December, I did several things: I put a substantial amount onto my house loan, I put some into a college savings account for my grandson, I bought some camera equipment to replace what was stolen last June, I paid off all my credit cards, I set aside enough money in savings to pay off my car.

I also transferred a smallish amount to prosper (see link on right) so I could do more lending and earn decent interest. Prosper now offers "portfolio plans". A member can create up to four portfolio plans, choosing to make loans to persons with credit records that range from conservative to somewhat risky. I put different amounts of money into each risk portfolio and chose $50 as the loan amount for each.

The way it works is that whenever I have sufficient funds in my account bids are placed automatically, according to the maximums in each portfolio, until the portfolio is full. As loans are paid off and more money accumulates in my account the portfolios automatically refill themselves. At least that's the way I like to put it.

By doing this I am able to keep bidding on loans even when I am not anywhere near a computer. And my portfolio has a mix of risks in it. Obviously, the higher-risk loans bring higher interest, so I have put a fair amount of my money in the top two levels. I figure if one defaults, that is $50 at most that I am out - and probably less, because a collection agency steps in and part of the loan may have already been repaid. It isn't likely many will default - even though the default history of high-risk borrowers is higher than that of lower-risk borrowers it is still rather low as a percentage of loans.

Credit score: How to bite it in one stroke

2007-12-11T11:16:00.000-08:00

My credit score was rising steadily. It inched into the 700s and was looking good. Then I got a call. I had not paid a credit card for over 90 days. It was a card that I thought was paid off and for which I did not receive paper bills. Apparently I had signed up for online bills only but I forgot that and did not even know I had registered that account. It did not show up when I went to that bank site and logged on.

The reason it did not show up is that it is a business account and my other account was personal and the two automatically are on different pages. But I did not know that.

The upshot is that I was not paying this card, which had a low balance, because I didn't know I owed anything. As soon as I learned that I was behind I got caught up. Nothing overdue. But the damage was done. My credit score plunged about 300 points!

There was one other contributor: my high debt level. But that wasn't particularly new. The overdue bill was the biggie. So now my credit grade is "HR" - high risk!

Here's what's irritating about that: If you look at my credit history you will see nothing but green for miles. Bills paid on time, usually ahead, and more than the minimum, for many many months. Then this one bill is overdue. One out of fifteen cards. Anyone looking at that might ask me what happened and I have a reasonable explanation. But what happens is that the lenders look only at the score and they have no idea why it is so low. They think I must be a high risk. But I am not.

It's a dirty business, to be sure. Ugly. Fortunately, I don't need any more credit right now.

Getting into Prosper

2007-12-11T11:13:00.000-08:00

I am in a Prosper "webinar" right now. These seminars are conducted through gotomeeting.com, and I just discovered that you have to call in to get the audio. I hate that so I'm not calling, just watching the stuff I can see. And what I see is basic. These seminars appear to be for beginners. Yes, I am a beginner, but I have figured most of this out already. It is helpful, though, to see the choices available to me on Prosper, as a lender. It's also possible to ask questions using a separate chat-type box, so I did that. Then I answered my own question.

Big money

2007-11-13T17:22:00.000-08:00

I will be receiving an unexpected windfall in December. A nice sum of money. Ever since I learned of it I have been trying to work out how to make good use of it, how to stretch it yet have fun with it. My main goal is to reduce the payments I make every month, and I will be able to pay off all of my credit cards and set aside the money for my car loan (the interest rate on the car loan is so low it actually makes sense to put that money into a savings account and pay the loan off from there rather than pay the car loan off immediately), which will cut my expenses by about $800 per month.

I am relieved, of course, to have this piece of luck on my side. I didn't do anything to earn it. At the same time I fear myself. My daughter suggested that I set aside a specific amount to blow on fun stuff, and I love that idea. I can put that amount in a separate account and keep track that way and then I am less likely to go through the money without realizing it.

In addition to the fun money, I will take out some for putting down a chunk on my house loan, giving a bunch to various charities, and finding some ways to keep the rest earning money. I will also purchase items I want: energy-efficient, more effective appliances and some camera lenses and other equipment. Items that will make my life more pleasant and that will save some energy, too.

What has been funny is that knowing about this money has not made me deliriously happy. It has given me headaches.

Calling the credit card companies

2007-10-27T12:24:00.000-07:00

It's no secret that the way to get the interest on a credit card reduced is to ask. The companies won't do it out of their sense of good will or from any sense of right and wrong. Would they be in the business of charging over 30% per year if they were?

So I finally got up the stuff to start making calls.

First I called the Bank of America. This card, incidentally, started out as a Wachovia card and had excellent interest rates. Then it was sold to another bank, and then to Bank of America. Now the interest is somewhere around 27%. My payments are always on time and always more than the minimum. I did nothing to "deserve" this ridiculous interest rate.

I tried one customer service line and got voice mail options that did not include any for changing interest rate and did not include ever speaking to a real person. I tried several of the options and just went endlessly into voice mail options, none useful for my purposes. So I hung up. I found another number for them and called that. Got exactly the same thing. So I went online and sent them a message through their message form. The information on the website said they would respond within 12 hours. That was two days ago. And of course I have gotten no response. So I am nowhere with that card, yet.

Then I called citiCards. I spoke to a real person. He talked fast and with an accent I did not recognize (not Indian). He reduced my rate by ten percent, from 23.74 to 13.74%. That's a victory. At the same time I somehow signed up for credit protection that I do not want. I can't cancel it until I actually see it on a bill, and you can be sure I will cancel it then. I wish that I had a tape of that phone call because I had so much trouble understanding what was happening that I kept asking him to repeat and repeat. Ultimately I couldn't take it any more so I did not try to cancel that credit protection thing on the phone. A victory, nonetheless. A reduced rate.

I called Chase. I have two cards, one personal, one business, with Chase - both Amazon cards. For some reason I have not been getting my business statements and I had charged something a while back on it and thought that I had paid it off. Just a few days ago I learned, from a phone call, that in fact I still owed something and that it had not been paid in over 90 days. Well, that sucks. I made a payment then but of course that 90 days is bad. I also made one late payment on the personal card, a few days late, this month. My head was just not on straight and I got it done late. Because of the 90 day thing I understood that the interest rate on that card could not be reduced. But I was really irritated to learn that the personal one could not be changed either because of one payment a few days late. After years of paying on time and more than the minimum. The guy said I could try again in a couple of months. I said "sure" in a sarcastic tone and hung up. So no victory there.

I will call about my paypal card today. I forget what bank has it now - like the others, it has changed several times. I have a couple of cards that I have not used at all - Ikea and Dillards - and maybe I can get those rates reduced, but I suspect not. They probably like to see some activity first.

So far, then, one for three. I have an idea about Bank of America. These systems all seem to work the same, and most of them say you can talk to a real person by pressing zero. Even though the BofA operator does not say this I suspect it's true. So I am going to try that.

EDIT: October 28, 2007

I called the BofA number again. This time I pressed 0, even though this was not an option offered to me. And it worked. I got a real person. I told him what I wanted to do, to lower the interest rate. He said that the people to call for that are not working today, and he gave me the number to call tomorrow. In the meantime he tried to talk me into opening a line of credit at a lower interest rate so I could move all of my credit card debt there. I wasn't going to apply for that without thinking about it, so I said no thank you.

EDIT: October 30, 2007

I called the new number for BofA. I spoke to a person who was actually personable, like a real person. For those of your with B of A cards who want to try this, call 1-800-718-6135.

She reduced my percentage rate to just under 25% from just under 29%. Not much of a drop. She also suggested that I apply for a "Gold Option Line of Credit", which I did (she transferred me to someone else). The line of credit was denied. It sounds like a better option than a credit card for those who qualify: unsecured, up to $50,000, no annual fees, no prepayment penalty. It is for a set term, like a mortgage.

Prosper Days

2007-10-24T10:15:00.000-07:00

I will be going to the Prosper Days with a press pass. So I will be recording my experiences and what I learn from it here.

That will be February 25 and 26, 2008. You can read about it here.

A prosperous trip?

2007-10-24T06:32:00.000-07:00

I just read of "Prosper Days" on the prosper website. Prosper is the place where real people, like me, can loan money to real people, like you. Or get a loan. I have made three small loans so far and am happy with the regular little payments coming in. A lender can do much better here than with a savings account, if she manages loans to minimize risk. The basic rule there is to look at the credit rating and make small loans. I am guessing that at Prosper Days there is a lot more information that can help me make the most of what I can lend.

For the buyer there is certainly a plus, too. You can ask for a loan at a much lower rate of interest than you are already paying on credit cards and other loans. And it's nice knowing that average joes like me are getting the money instead of money-grubbing institutions.

So I am considering attending this conference. It's in San Francisco and is just a day and a half. That would mean two nights' lodging there, not so bad, and registration.

Tough going

2007-10-24T06:24:00.000-07:00

I worried that when I had to start making house payments I would find it to be quite a struggle. That is, in fact, the case. I don't yet know if I can manage it on my present income with my present expenses, because there have been extraordinary expenses, mostly related to the move. It all needs to shake down so I can see what's what more clearly.

On the plus side, I am eating out a lot less often than I was before. This because I have a nice new kitchen that is easy to use, has plenty of space, and has appliances that work. I am especially delighted to have a working oven. Oh, the cooking that goes on! I am quite savvy about making meals cheaply, too.

I just requested a change to my house loan. When approved I will be making two payments a month instead of one. And thereby I will shave two years off the loan and save about $12,000 in interest. This won't help me on a daily basis but it's no harder than paying once a month so it's clearly the right thing to do.

costs

2007-09-17T14:29:00.000-07:00

For my foodstamp challenge I am accumulating some approximate prices. Using receipts from various stores I can approximate:
(prices are not necessarily the cheapest possible)
5 # white bread flour: $3.50
2# bag white rice: $2
1# bag beans:
red: 1.05
white: 1.05
lima: 1.80
kidney: 1.35
great northern: 1

1# bag lentils: 1.05
1# bag split peas: .85
3-pk, 19 oz ea, tofu (Costco): 3.15
12-pk stewed tomatoes (Costco): 7.50
10# large yellow onions (Costco): 3.30
lge bag broccoli (Costco): 3.80
large box mushrooms (Costco): 4.50

As I get more prices I will enter them into this post, to keep them together and make this whole thing less boring to read.

The recipes for the food stamp challenge

2007-09-14T15:47:00.000-07:00

I have developed a list of dinner menus in a general form:

Red beans and rice (one batch = 4 meals)
Noodles & stirfry vegs(2 meals)
Lentil soup & bread (3 meals)
Pizza & salad (2)
Ratatoulle (3)
Stuffed bell peppers & salad (2)
Black beans and rice (4)
Potato soup & bread (3)
Garbanzo beans & bread (3)
Split pea soup $ bread (3)
Chili & salad & bread (3)

That's 32 meals. The number of meals is, of course, approximate.

Lunches

Red pepper grilled sandwich (1)
Vegetable soup & bread (2)
Pizza (2)
Tofu stir fry w/rice (2)
Split pea soup (3)
Rice mix (jambalaya?) (2)
Chili & crackers (3)
Stuffed cabbage (2)
(need more)

Breakfast items:

Potatoes
Oatmeal
Pancakes
Toast & cashew butter

The Foodstamp Challenge

2007-09-14T15:36:00.000-07:00

I am getting ready to try the foodstamp challenge. What this means:

I will attempt to feed myself on approximately three dollars a day, the average amount that food stamps pay for an average recipient. I recognize that:

1. Foodstamp recipients often have other ways to obtain food. It's likely that most of them do not rely solely on food stamps.
2. I am educated, have lots of free time, and I not only know how to cook but I like to cook. I suspect that most foodstamp recipients do not have my depth of knowledge of nutrition and of cooking, and that most do not have ample free time and energy to devote to providing food. Therefore I do not count myself as an example that actual food stamp recipients can easily follow - although I do hope that some would be able to.
3. The challenge, then, for me, is to find out if I can live on much less than I do now, and do so healthily.

The rules for my particular challenge:

1. I will spend $100 for one month's worth of food. I decided on a month because I am only one person and it is more difficult to purchase food in small quantities at a good price than in larger quantities. A month also allows me to make the same dish once for several meals. I will eat one meal and freeze the others.

2. I won't purchase staples such as herbs as part of the $100. This type cost would be spread out over many months as this type product lasts a long time.

I will begin when I have developed a list of recipes and a shopping list that is reasonably accurate in terms of quantities and costs.

Up again

2007-08-13T07:14:00.000-07:00

What's a story without a little drama? We get to ask ourselves, will she make it? At this point the answer is still out there.

My debt has increased in the last month or so. I was on the road from June 10 until about July 20, which created quite a strain on my financial resources. Then I moved into my new place, assumed a huge debt, and went out to buy new stuff.

Oddly, I don't feel awful about it. I don't expect to be buying stuff for the house constantly. I still am going out there to fill in some gaps (yesterday a new hose and hand-held vacuum) but the spending has slowed and I expect it to get down to a trickle. More importantly, I am okay.

I was determined, when I moved to my new house, to make a fresh start. This meant not taking old furniture with me, not even taking old plates and glasses. I did bring a lot of stuff with me (there is still a storage building waiting to be emptied) but most of the furniture is new.

My vision was that I would accumulate enough savings to be able to furnish the house without taking on further debt. That didn't happen. But neither have I been recklessly extravagant. At this point I have enough to live. I am no longer feeling pressure to run out for sheets or towels or cleaning supplies. So I can take breaths and look for what I want in a more leisurely fashion and even buy some things from thrift shops. I'm looking for mirrors.

down more

2007-06-08T07:47:00.000-07:00

My credit card debt is now about $8100, down from over $11,000 in January. At times I feel like I'm getting nowhere so it is good that I'm keeping these records. I can see the progress, even though from time to time I have an expense for which I do not have cash and I put it on a card. I try to get that paid off as soon as possible, that extra expense, so I can be back on track.

Even better, with some of the cards paid off there are fewer payments so it is easier to deal with what's left and to continue to make bigger payments on the higher-interest cards.

I am still worried about how I will pay for everything when I have my new home but I suspect that with some judicious cutting here and there I will do all right, although I will certainly notice.

worries

2007-05-23T19:24:00.000-07:00

I do not have a good handle on my money yet. This week I have had to shell out several hundred dollars for veterinary care and I didn't have the reserves. I need to have the reserves.

I worry about my new house and how much it will cost every month. I think I may become a serious recluse, only leaving the house once or twice a week, once I have that house, so I can cook all my meals and not pay much for vehicle use.

My new home

2007-05-16T08:45:00.000-07:00

My new mobile home has been ordered. I am worried about making the payment every month. I've been worried about this since I first started on this trail. My life is likely to change significantly unless I find another source of income.

Prosper loan request number 1...

2007-05-09T18:42:00.000-07:00

My first effort to get a loan through prosper.com failed. That is, nobody bid on it. A number of members wrote to me, saying the trick is to set a higher max interest rate up front. After a few days, people will start bidding lower rates and I should get the rate i want, or close to it. Others sugggested that I join a group, that I would be more likely to be funded. Of course it was group leaders who suggested this.

I haven't made up my mind about groups yet. It turns out that my credit score is "C", and with that score the averages show that I would do better in a group, a hair better. If my score goes up to B it may be less certain. And I am very close to B.

So I went through a simple process to become a lender in the meantime! And I bid on another loan. Bid $100 at 15% on a loan request with a max interest rate of 20%. I figure I might as well see about making some money while I make up my mind about the next request for a loan.

That request may happen soon, though. I got the estimate for the landscaping and replacement of my driveway (asphalt dug up, concrete poured) for my new home and it was a lot higher than I expected. I may need to get a loan to pay for it. I spent the last couple of days getting past the pain of this new debt. I have been working very hard to reduce my debt and it looks like I'll be kicking it up quite a bit very soon.

Prosper part 2

2007-04-30T13:37:00.000-07:00

I made my request for a loan through Prosper. I have gotten no bids yet but have gotten messages from four different groups on there, all offering to take me into their folds. The groups form to create lending and borrowing power. I am frankly at a loss to figure out which group I should join. It appears that going it alone is a lot more difficult. People want more of an assurance that the loan will be paid back and when one is part of a group that assurance is there. Rather like group insurance.

So this will be the next challenge: to figure out which group.

Prosper.com

2007-04-25T09:36:00.000-07:00

From some other personal debt sites on the web I just learned about prosper.com. This site gathers people who need money and people who have money to lend and puts them together. The borrower asks for a specific amount of money and gives a max interest rate. The lenders bid on the loan. Prosper puts together the "winning" bids for the final interest rate and the borrower makes one loan payment per month, deducted from her bank account. Loans are spread over a three-year period, which is, interestingly, the length of time Pay it Down (see book at right) says we should strive for to reach debt-free status.

Prosper gets a fee for putting the pieces together. I just asked for a $3000 loan at 12% interest max. For this loan, Prosper will take a $30 fee, if it is funded.

New credit card

2007-04-25T08:31:00.000-07:00

Over the past year my credit score has gone from about 590 to 690. So now I get many offers for cards in the mail. After checking bankrate.com (I love that site) for what's available, I settled on one that had come in the mail, and yesterday I went online to accept the offer. I got the 8.99% interest rate that the letter had offered (with an asterisk - depends on credit) and I noticed that they charge a fee of 3% for balance transfers. I figure that still is going to put me way ahead if I transfer a balance from an account with an interest rate of almost 33%. Which, I might add, should be illegal.

I therefore also requested a transfer from that high-interest account. I will find out in about three weeks if that has gone through. I don't see that there will be any problem. And I am proud of myself for doing this. I have other high balances on other high-interest cards that I need to deal with too, but I will be happy for this moment.

The tax money

2007-04-15T09:58:00.000-07:00

I got my refunds and I have spent almost all of them. I put $1000 into an account for future new furnishings (I am trying to replace my home with another home). I paid a lot on several credit card accounts. I have made several small purchases as well. I am sure some of them, maybe all, were unnecessary, but I am getting pleasure from them so I don't regret it.

My credit card debt is now under $9,000. That's a lot but I'm encouraged.

Sunk Costs and Regret

2007-04-15T09:56:00.000-07:00

The book, The Paradox of Choice: Why More Is Less, has invaded my brain. In a good way. The discussion of regret and of "sunk costs" in particular are concepts that are well worth thinking about.

"Sunk costs" are those costs you have already paid for an item or service. People in this country have a tendency to pay too much attention to sunk costs as a determinant for future actions. For example, if you bought a ticket to a concert you will likely feel compelled to go to the concert because you paid for it. The better way is to make the decision to go or not go based on what you actually want to do. The money is gone either way.

Yesterday I paid for new lenses for my current eyeglass frames. I paid a lot for these lenses and as soon as I left the store I started to regret it. But it is done. Regret serves no purpose, unless it is to use it to decide how I will approach such purchases in the future.

I have a rule about not buying an item from someone over the phone or at the door the first time that person calls or comes by. That rule has served me well. It gets me out of having to make a decision until I have given it more thought. I simply tell the person, "I have a rule...". That person usually says, "Yes, but if you buy now you'll get this deal. If you put it off you lose the deal." I shrug and say, "Well, that's too bad but that's my rule."

I can now make a rule about such things as these glasses that when the purchase is some amount over what I expect that I will delay the purchase. I may still buy them, but I'll feel better about it. As for this time, I refuse to dwell now on the negative aspects. I have simply created a new rule that will help me in the future and I will enjoy those new lenses.

Being responsible

2007-03-22T19:25:00.000-07:00

I'm not well-organized, I procrastinate, I'm lazy. But sometimes in spite of all that I get something done.

I finished my taxes two days ago, sent them in electronically, and they were accepted. I still need to file a return for Michigan because of some income I get that is made there (partnership). Irritating. I figure I will do that one by hand. Get the Michigan forms and go for it.

I have also got an excellent start on a living trust. I have written the trust and gotten my signature notarized, which makes it legal. I have transferred those items that do not have "titles" to it. Like my grand piano. I am slowly working on transferring those things that do have title to it. I sent out a request to transfer partnership shares to the trust yesterday. I still have to do that for another partnership, related, but that one requires that I find my copy of the certificate showing my ownership. I may have to claim I lost it and get on with it another way.

Oh, the taxes. I am getting refunds! That's why this is about money. Some of that money is going toward paying off those damned credit card debts. Other parts will go into savings. And some will go for stuff I want.

Credit card work

2007-02-02T15:46:00.000-08:00

Well, here's the deal. I have been paying more than the minimum on all of my credit cards. But Pay It Down! (see book list, right side of this page) says put all that extra money on the card with the highest interest. It makes sense if you think about it.

The first step in reducing credit card debt is to see if you can get the card company to lower the interest. The book includes a script I can use when talking to the representative. It says, though, to have another card offer in front of me (because the script starts by saying X company is offering me Y interest...). If I get an offer for a card in the mail I check out the terms and if they are favorable (in comparison to the high-interest card) I can use that as the alternative card. If not, I can go to BankRate.com (one of my fave places) to hunt down another card that's good for balance transfers.

I don't have an offer in front of me. I've been too quick to shred those. So I went to BankRate.com and used their program for finding the best card for a balance transfer. I got three results. My next step is to apply for one of these three. That's today's goal, folks.

Not very organized

2007-02-01T16:58:00.000-08:00

What did I do today to further my goal to be debt-free? That is, to be free of credit card debt. Not a lot. I paid an overdue car insurance premium plus made a couple of credit card payments. One of which is my highest-interest card.

I already developed a list of all of my credit cards with their balances, monthly payments, and interest rates, so I know which card has the highest rate of interest. I have, in fact, been working to cut that baby back, over several months. What this program says to do, though, is to take the ten bucks a day that I find by cutting expenses here and there (the book - see Pay It Down! - on the right - offers many ways to go at this) and put it right into that one credit card account, on top of the minimum payment. I recklessly did just that, before I have sifted through and found the cuts I need to make to pay for it.

Below my list of credit cards, on the same Excel sheet, I listed other regular payments. Yesterday I also went back to Quicken, downloaded transactions from my primary bank account, and started in categorizing each transaction. I've got a way to go, but it feels good because I know that if I stick to this, and go back to writing down every cash expenditure and entering those as well, I will really know where it is ALL going. There's just no substitute for knowing.

A Way Out?

2007-01-31T14:44:00.000-08:00

Like most of the middle class in the U.S., I am in debt. I have a credit card debt of over $11,000, and a car loan that is about the same. And yet I am in the midst of trying to get a loan to replace my mobile home (with another one on the same space), and when I get that loan (I feel fairly sure I will) I will have a huge new payment to make each month. Can I do it? I am sure the lender wonders the same thing, and is perusing how I spend my money and pay my bills.

I created this blog to track my progress, and offer suggestions to others in the same boat, in getting off that debt horse. My first plan is to follow Jean Chatzky's Pay it Down! program (see link at right). It is likely that this little book is really all I will need to get on track, because it not only offers a detailed program for getting out of debt but also offers a lot of help for those times when we face really bad financial times. But I expect to draw upon a ton of other resources along the way. Many of these are in the book. Others I will no doubt discover.