Category Archives: Finance

Need to Send Money to a Foreign Bank Account? Try TransferWise

I’m currently planning a trip to Malaysia this summer. One of the primary purposes of this trip is to spend a couple of days on a durian farm where I’ll just gorge myself on durian. I’m excited. (I’ve also got flights booked on Qatar’s and Etihad’s A380s in first class, so those reviews will eventually appear on this blog).

But to confirm my stay at the durian farm, I needed to transfer money to the durian farm’s bank account. It’s just a guy and his family running this place, so they don’t have any infrastructure to take credit cards or do online payments.

At first, I was at a bit of a loss about how to accomplish this. I initially thought of wiring money, but wiring money is generally pretty pricy, much less wiring money internationally. I use a credit union for my primary banking purposes, and they charge $35 for an international wire. I looked into money transfer services like Western Union, but they too were not cheap.

And then I came across TransferWise (warning: that’s my referral link). TransferWise is a relatively new company that gets around some of the traditional fees associated with sending money across borders by making it so that no money actually crosses borders. If you want to send money from bank account A in the US to bank account B in Malaysia (as was my case), rather than directly sending money from bank account A to bank account B, they find other people who want to transfer money in the opposite direction (i.e. from Malaysia to the US) and just transfer the money within each country individually to settle everyone up. Pretty ingenious, if you ask me.

Because the money doesn’t actually cross borders, they can offer much lower rates, and I was able to send my money at the prevailing exchange rates for a fee of only $3. Pretty good if you ask me! The fact that you get the actual exchange rate is a big deal, as many money transfer services advertise low fees but gouge you on the exchange rate.

Anyway, if you find yourself needing to move money across borders, you might want to consider TransferWise. If you sign up with my link, you get your first transfer for free (up to $750).

Why You Should Follow The Money

Whenever I’m trying to understand why things are the way they are, I often find it useful to try to follow the money, so to speak. By following where money goes and to whom, it often becomes clear why people/companies act the way they do.

A prime example in the points/miles blogosphere is why there are so many posts talking about certain credit cards on a subset of the blogs. The answer? Because these bloggers get paid money when people click on their links and apply for the credit cards that they advertise. Money is flowing from the credit card issuers to the bloggers. Thus, when evaluating the content of said blogs, it is often useful to ask yourself whether or not these bloggers have your best interests at heart, given that they make money when you apply for credit cards using their links.

On the flip side, most of the points/miles blogs out there don’t make money from credit card affiliate links, largely because they don’t drive enough traffic/applications to them. Does this make those blogs inherently more trustworthy? No, not necessarily, but I think sometimes people unfairly attack these blogs under the pretense that they’re making money via credit card links when they’re actually not.

Another example: a couple of years back (in 2010/2011), there was a company called Envaulted that offered 1% cash back if you gave them access to your credit card purchasing history (by providing your credit card website login credentials). This was in addition to whatever rewards your credit card already gave you. Supposedly, they were going to use that information to then sell to advertisers which advertisers would pay premium dollars for since they would be super targeted since they knew what you already spent money on.

A lot of people were skeptical, but I milked as much as I could out of it at the time because the flow of money was venture capitalists to Envaulted straight into the pockets of customers. I also knew that this business model wasn’t sustainable, so the company probably wouldn’t last in its original incarnation (they did pivot to other sorts of offers for a while, but then they shut down their website abruptly while lots of people had large balances of unredeemed cash back). Essentially, they ran out of funding and weren’t able to prove out their business model, so they had to call it quits.

Compare this to Amazon Payments. Amazon Payments was the goose that kept laying golden eggs, and people were quick to blame bloggers when it finally died. Honestly, bloggers weren’t the problem. The consumer product of Amazon Payments was a money loser for Amazon for years, but they didn’t really care because they’re Amazon. The money flowed from Amazon’s coffers straight to people like us, but 1) the losses were relatively constrained because of the $1,000 per month per person limitation and 2) Amazon is such a behemoth and they’re notorious for losing tons of money on new products that even a “big” blogger posting about Amazon Payments and getting lots of people to sign up isn’t enough to materially make Amazon change its strategy. In fact, I’m pretty sure that a large part of the reason why Amazon Payments was shut down was because it wasn’t popular enough, so it didn’t make sense for Amazon to keep losing money on a product that wasn’t reaching the kind of adoption that they wanted.

This tactic of following the money is often useful in our hobby because our hobby is now so dominated by credit cards and financial institutions, but it’s also a good tactic for understanding things like politics. But beware that you shouldn’t believe everything that you read on the internet, so even if people are writing about money flows and it seems reasonable, it’s entirely possible that they got everything wrong (like my examples in this post could be completely false, but obviously I don’t think they are).

No More MoneyPak Cards from Green Dot

As per this NYTimes article, Green Dot will stop selling MoneyPak reload cards, and the cards are expected to be out of stores by the end of March. While these cards haven’t often been used in MS schemes given the stringent cash-only requirements for loading, I think this is a good reminder that there are many forces beyond miles/points enthusiasts that lead to product shutdowns.

The article discusses the use of MoneyPak cards in scams–for example, Green Dot MoneyPaks (and bitcoin) are often the preferred sources of payment to ransomware–given that the cards are anonymous and allow for quick transfer of funds. This is one of the cited reasons why Green Dot is discontinuing the cards.

As much as people like to blame bloggers for revealing secrets, here’s an example of a product that is in many ways similar to Vanilla Reloads and is also being shut down, in spite of having no real value to MS. Fraud and money laundering are much bigger concerns for these products than people trying to get points (albeit some aspects of MS can look like money laundering, but using credit cards is not particularly useful for introducing dirty money into the financial system).

2016 Changes (Devaluations) to Chase Freedom Rewards with Chase Checking Account

This morning, I got an email detailing changes coming to Ultimate Rewards for people with Chase Checking and Chase Freedom accounts. I have both: the Chase Freedom was my second rewards credit card ever, and I got a Chase checking account last year to get a sign-up bonus.

Essentially, there will no longer be a benefit to having a Chase checking account in addition to a Chase Freedom. No more extra 10% per $1 spent, and no more 10 bonus points for every purchase.

Screenshot of the email that I got this morning

Screenshot of the email that I got this morning

I’m not sure how decreasing points earning meets my evolving needs as a customer, particularly as my need for points increases over time, but at least they’re giving a very lengthy advanced notice of the changes.

This doesn’t materially change much for me, except for the fact that I’ll now definitely be canceling my Chase checking account since I currently have to keep a $1500 minimum balance to avoid monthly fees (seriously, who pays checking fees nowadays?). The 10% bonus was nice but not that meaningful, although it did mean that the Chase Freedom was a better card for earning on unbonused spend than the Chase Sapphire Preferred.

The extra 10 points per transaction, however, was/is awesome and potentially very lucrative, although there are reports of people getting shut down for abusing it. But as an example, you can buy an Amazon gift card for a minimum value of 50 cents. At a conservative valuation of 1.25 cents per point, that’s like getting 25% back on Amazon transactions. Or if you prefer cash back and don’t spend much on Amazon (like me), you can pay 3 cents to charge $1 through a certain mobile reader and earn roughly 9 cents per swipe. Not that I’m necessarily recommending either of these avenues.

How to Choose a Bank

Here’s another post based on reader request. I’ll be upfront and say that I don’t know nearly as much about banks as I do about credit cards, but I figure that it might be useful to start with what I have for myself.

I currently have three bank accounts: one credit union, one online bank, and one major national chain. I use the credit union for most all everyday banking activities, I use the online bank for free ATM withdrawals, and I don’t do anything with the national chain except accrue rewards.

My credit union is Boeing Employees Credit Union (BECU). I highly recommend credit unions because they often have lower to non-existent fees (e.g. there’s no monthly fee or minimum required balance to have no monthly fee), they can give better (if only marginally better) interest rates, and they’re not some impersonal behemoth that’s trying to squeeze fees out of you. You’re a part owner with a credit union, there are no external stockholders to appease, and I generally feel good about supporting a credit union.

I can do almost everything I need to do with my credit union (which is mostly just online banking, online bill payment, and paying other people), but credit unions often don’t have as many physical branches or a huge network of ATMs, which can be problematic when you’re traveling or if you need access to cash frequently. But most credit unions have reciprocal agreements with other credit unions, so you can use the branches or ATMs of other credit unions without fees. This benefit is great for me since I currently live in SF but BECU is based in Washington.

From my other posts, it’s clear that I use credit cards as much as possible, but for the times when I need cash, particularly when traveling, I use my Charles Schwab High Yield Investor Checking Account. I feel a little bit guilty every time I use this card at an ATM since they reimburse all ATM fees, and I know they can’t be making money on the paltry amount of money I keep sitting in that account. As far as I know, this is one of the best bank accounts for frequent travelers given that they reimburse all ATM fees, so I never have to worry about using airport ATMs that charge ridiculous fees.

Finally, I have a checking account with Chase that I don’t use. I opened it because they offered me $200 to do so. But as soon as I’ve met the 6-month requirement of keeping the account open, I’m going to close said account since I don’t think I have any real reason to keep the account open.

Thus, my recommendation would likely be to find a credit union that you like for your normal banking needs and to open a Charles Schwab account if you travel. Please let me know in the comments if you think I’ve overlooked something!

How to Choose a Credit Card

Here are the top three things to consider when choosing a credit card:

  1. Do you pay off your credit card bill in full every month?
  2. What do you want to redeem for? Specifically, do you value aspirational travel?
  3. How much do you want to think about credit cards?

If your answer to question 1 is “No”, then stop reading and devote your time to figuring out your finances rather than choosing credit cards. The interest you’ll pay on carrying a balance on your credit card will far outweigh any rewards that you could earn from optimizing the credit card that you choose. Playing the points game only makes sense if your finances are in order and you have a high credit score.

Assuming that you pay off your credit card bill in full every month, then you can start thinking about what you want to redeem your rewards for. Do you like cash that you can spend on anything? Do you want free (or nearly free) flights and hotels? Do you value international first class flights and 5-star hotels?

The reason why many people are addicted to points and miles is because the cash cost of many “aspirational” travel products is prohibitive, but the miles or points cost is not. For example, yesterday, I booked a flight from JFK to SFO in American Airlines first class, a long stopover in SFO, and then SFO to HKG to BKK in Cathay Pacific first class for 67,500 AA miles. The cash price of this itinerary is over $9000. Would I ever pay $9k for this? Definitely not. But I was able to get most of the miles to pay for this flight through a single credit card sign up bonus.

But even if you want to redeem for travel, not everyone values international premium products sufficiently to make those redemptions rational. For example, for the same 67,500 miles, I could have redeemed for 5 domestic coach one-ways on American, or I could have gotten a roundtrip coach ticket to Europe with miles left to spare.

If you don’t want to think at all about credit cards and you just want cash back, then I recommend choosing a solid cash back card. Some candidates could be any of the ones that I myself own, the Priceline Visa (which is effectively a 2% cash back card), the Capital One Venture card (if you spend more than $6000 a year on your credit card, then it probably makes sense to get the annual fee version where you get 2 points per dollar rather than just 1), or a Fidelity Rewards Amex. These cards give you more flexibility with how you spend your rewards since they essentially all give you cash back, and 2% is a pretty solid baseline that most people won’t exceed without serious thought.

If you just want to redeem for basic travel and you’re not loyal to a single airline, I’d probably recommend the above route as well, since you’re probably not going to get more value than 2 cents per point out of an airline card. My other suggestion would be to get a credit card that earns bank points which can be transferred to a variety of travel partners. Again, either of the bank points cards that I have are good recommendations, although I’d probably recommend the Amex Premier Rewards Gold card over the Amex Platinum for most people since it earns triple points on airfare and double points on gas stations and grocery stores. For both Chase Ultimate Rewards and Amex Membership Rewards, the points can be redeemed for at least 1 cent per point, so that’s the minimum value you can get out of your points, but when transferred to airline or hotel partners, the value can potentially get much, much higher.

If you’re willing to think more about credit cards, then I definitely think it’s worth it to get a couple of credit cards to cover your bases for spend categories. For example, you could sign up for both the Chase Freedom card and the Discover It card that I’ve mentioned in previous posts. Since these are no annual fee cards, it doesn’t really hurt to keep them around, and you can potentially get a lot more cash back if you keep track of the 5% rotating categories. Or if you know that you spend a lot at restaurants or you travel a lot internationally, a card like the Chase Sapphire Preferred is solid since you get double points back at restaurants and there’s no foreign transaction fee.

Finally, if you’re willing to think a lot about credit cards or you want to redeem for aspirational travel products, then there’s not enough I can write in a single blog post to help you get there, and recommendations should be personalized given how much you spend and where exactly you want to go. Feel free to shoot me an email at efficientasianman (at) gmail (dot) com if you’re looking for specific advice.