Beating Broke

Saving Money with PaperBackSwap

April 11, 2011 By Shane Ede 6 Comments

I like to read. A lot. Not as much as some people, but I still manage to read somewhere between 30 and 40 books a year. As you can imagine, that gets a little bit expensive if you’re paying full price for all of them. Swapping and borrowing books only gets you so far if you limit it to the people you know directly. But, that’s where a fun site called PaperBackSwap comes into play.

Here’s how it works. You post the books that you want to trade away. Other users request those books and you ship them off. You can either print the postage directly through the site, or buy it anyway you like. Personally, I use paypal shipping because it’s slightly cheaper, and, I already have the account at paypal to do that. Once you’ve shipped the book, or books, off, you merely wait for them to be received. Once received, the person you sent them to marks them as received and you get a credit.

With your credits, you can then request books from other members. (note: the first person from your household to sign up for PaperBackSwap gets two free credits when they list 10 books) Then, it’s just the same process, but with you being the receiver rather than the sender.

I’ve been a member since 2009. I’ve sent 71 books out, and I’ve received 59 books. I’ve only had one of the books that I sent disappear in postage, and one other that was damaged in postage. Every other book I’ve sent has safely gotten where it was going and was accepted by the receiver. The same is true of receiving books. I’ve never had one get lost, and only had one that was damaged. It’s a great community of readers, and a great source of books.

The selection of books is usually pretty good. As you would expect, most of the newer books are a bit hard to get, but you can throw them on your wish list and the system will email you when one becomes available. If one on your wish list becomes available, you’ve got two options. The default is that PBS will put it on a 48 hour hold while it waits for you to either request it or decline it, or you can put it on auto-request which will automatically request it from the other member as soon as they list it.

If you’re an avid reader (or, really, even a more casual reader) you really should check out PaperBackSwap. It’s great, frugal, way to get books to read, and a great way to share great books with others too!

How Banks Make Their Money

April 4, 2011 By Shane Ede 5 Comments

There’s been a lot of talk about the recent legislation that affects the interchange rate, and how that will affect the fees and rewards that we currently get from banks. So, I thought it would be fun to take a look at how banks and credit unions make their money. What exactly is it that gives them the revenue to pay the bills. It’s one word. One that many of you who are investors will recognize. Margin.

Specifically, rate margin. A quick definition for those that aren’t up on their financial jargon. Margin is the difference between two things. The space (difference) between the print on the newspaper and the edge of the page? Margin (or gutter depending on your profession). So, when I talk about rate margin, I mean the difference in rates. Clear as mud? Ok, some more detail then.

In order to lend money out to consumers, a financial institution must first have money. They get that money by taking in deposits and by borrowing money from other institutions. In most cases, they have to pay some sort of interest to either the depositor or the other institution. They then take that capital, and lend it out to consumers at a higher rate. The difference is their margin. Let’s look at an easy example. A bank has a simple savings account that is paying 0.25%. They have 1,000,000 in deposits at that rate. They then lend that money out to consumers at an average rate of 5.25%. They have a margin of 5%. They’ll pay $2500 in interest to the depositors and receive $52,500 in interest from the borrowers for a revenue of 50,000.

Obviously, that’s a small example. Many banks and credit unions operate at a much higher level. Wells Fargo, for instance, had $93,240,000,000 in gross revenue in 2010. Not all of that is from lending interest, but a majority of it likely is.

In truth, the revenue from interchange rates is rather small as a percentage of overall revenue. And changing it directly isn’t going to bankrupt any of the institutions. However, there is some truth in the claims that it will likely mean the end of the rewards and cash back cards as well as some of the other perks like free checking. Many of the institutions use that interchange revenue to pay for the rewards and cash back and to cover some of the costs of other perks. Reducing the interchange amount means that the institution will have to drain money from other revenue streams to continue the programs, or shut those programs down.

This is where banks and credit unions will become differentiated over the next years. Banks operate as for profit entities. They have shareholders and owners who they must perform for and who expect them to make and increase profits each year. They’ll be much more hesitant to drain from other sources to pay for those programs. Credit Unions, on the other hand, are a not-for-profit entity. They aren’t designed to make a profit. While some may cut back on those programs, many will simply continue them. Because they don’t have shareholders and owners that are demanding profit, they can cater to the owners of the Credit Unions, their members.

What it also may mean, is that we will have to be extra vigilant in watching our accounts for missing rewards, and for extra fees. If pressure to keep the programs is significant enough, some of the institutions might reduce savings rates further, or increase loan rates to try and increase their margin and help pay for the continuing programs.

photo credit: MyTudut

Top 5 Tips for Staying Safe at the ATM

March 21, 2011 By Shane Ede 7 Comments

We spend a lot of time talking about how to insure that our money is safely in a FDIC or NCUA insured bank or credit union. We talk about finding the best ways to squeeze those last few pennies of interest out of our savings accounts and reduce the interest on our loans. But, one thing we often overlook is our physical safety when it comes to money.

First, and foremost, I would like to inform you that having a swimming pool of gold coins ala McDuck is a really cool idea, but is somewhat hazardous to your health if you plan on diving into and swimming through said coins. For those of us that can’t fill a pool full of coins (even pennies), the largest place that we need to ensure our physical and fiscal safety is while using an ATM. Here are 5 tips to help you use the ATM as safely as possible, and protect yourself from ID theft (and physical harm).

Choose a well lit ATM. Just because that ATM that’s hidden away in a dark alley is one of your in-network free ATMs, doesn’t mean you should put yourself at risk to use it. Always choose an ATM in a well lit area. The usage fee is worth your safety.
Check for skimmers. The #1 most popular way of harming you at an ATM is the use of a skimmer. A skimmer is a small device made to look exactly like the card reader that fits over the card reader. As you insert your card into the reader to use the ATM, the skimmer reads the data on the card and stores it for the crooks to retrieve at a later date. Some estimates say that these crooks have spent $250,000 on one of these devices, so they are very hard to spot. Take a close look at the reader before you use it. If you have any suspicions at all, report them to the staff at the institution that runs the ATM and then look for a new ATM to use temporarily.
Check for cameras. Again, the crooks like to see what you’re doing when you enter your PIN. So, they install tiny pinhole cameras that record you as you enter in your PIN and other information. Also check for security cameras. There’s usually one in the ATM housing itself, but having one or two in the vicinity is also a good sign. Popular places for crooks to place pinhole cameras include the skimmer that they install, behind mirror housings, and as external stickies right out in the open. Whatever it takes for them to be able to try and capture your PIN. Which brings us to the next tip.
Cover your PIN. When you go to enter your PIN, use your other hand or anything on hand (purse, hat, etc) to cover the PIN pad and your hand as you enter your PIN. This little bit of caution can save you a lot of headache.
Watch your back. One of the other popular ways for crooks to get your PIN is to do what is called “shoulder surf”. Basically, as you walk up to the ATM, one of the crooks will walk up behind you and merely watch over your shoulder as you enter in you PIN. If they can get the card, and the PIN, they can basically write their own checks from your account. A quick glance over your shoulder or into the mirror on the ATM is usually enough to ensure someone isn’t taking a peek at your PIN

ATMs have become such a common thing in many of our everyday lives that we give very little thought to our own security while using them. More often than not, ATMs are just as safe as going in to a branch and talking with a teller, and banks and credit unions do their best to make them ATMs as safe as possible. Despite all of that, credit card fraud is a $1+ Billion dollar industry. Observing these 5 tips will help you avoid the risks that can sometimes occur and help you conduct your banking safely.

photo credit: ⓆiaoⒹaⓎe錫濛譙大爺