Live Frugally or Die Broke

What Happened To Banking?

So I was flipping through a document I got from Wells Fargo this week. It appears that starting July 1, 2010 they will be introducing some new banking fees. This of course will be waived if you have more than $1000 parked in your account. That by the way would be one of the dumbest financial moves out there, considering it would yield about .0001% in interest. You might also have automatic transfers set up, in which case they will also waive the fee, however again you are getting about .003% in interest. The last item that will nullify the charge is if you are lucky enough to have direct deposit, which I don’t.

For everyone else, it will cost $10 per month minimum to have the privilege of banking with Wells Fargo. Where is Suze Orman now, toting her message of, “Keep your money in the bank” in those goofy FDIC commercials? The truth is there will be a massive shake out coming. Big banks are going to have to downsize and go back to the “classic” style of banking. You know, when they used to borrow money and loan it out (amazing concept huh?). What ever happened to those days?

Quoting Wells Fargo

Effective with your July 1, 2010, or later statement, the monthly service fee for your Custom Management Checking account will be $10 per month. You may continue to waive the monthly service fee if your package is complete and has one of the following:

A $1,000 minimum daily balance;

A qualifying Direct Deposit of $100 or more;

A recurring monthly automatic transfer of $25 or more per transfer from this account to your Wells Fargo savings account.

Closing Your Account

There is no talking your way out of this one kids. When those fees hit, it will be game over. You heard it here first. Run while you still can because with these new laws, banks are going to make their pillaging of your funds much more transparent. Their looting through overdraft fees and ATM charges are distant and painful memories. The easy money was made and the economic realities of today have finally caught up with them. In the coming fee hikes, you will see individuals go with smaller, more sane, financial institutions like credit unions and community banks.

When you close your account, you will undoubtedly be asked why. Feel free to let loose your frustration and tell them you are going with the small guys. You will be given a voucher for the remaining cash in your account. You can bring this to a teller window and turn it into currency. Do not call or email the bank to close your account. This will unleash a nightmare of miss communication and could lead to even more fees.

Clean Up Your Mess

I know that closing an account can be a nightmare. You are going to have to make sure that your bill payments aren’t drawn from your closed accounts. Don’t forget your E-Bay and Amazon accounts and switch them over to your new bank account/credit card. It wouldn’t hurt to inform the local IRS to have your property tax refunds rerouted to you, in form of a check, instead of a deposit to an account you no longer have.

An Intro To The Wonderful World of Investment Banking

I have absolutely no idea why anyone would need to take out a cash advance. Furthermore it goes against everything I have ever preached about frugal living, personal finance, and budgeting, so I am having a hard time writing about it. That being said, I’ve worked around the cash advance penalty a few times for liquidity. I was a big silver trader in early 2008. The price dipped down to almost $9 an ounce, when the financial system began collapsing.

I was angry at the banks and the federal reserve, for good reason. I had watched everything I had ever learned about in economics, come to a grinding halt. I was especially mad with banks gambling with my money and the incredible moral hazard the government had created.

Go Hard or Go Broke

So what did I do? I gambled their money and instantly created a scenario that duplicated their own. I was pretty angry and I felt like I could play their games too. I devised a plan that I had learned somewhere on the dark side of the internet. In fact I believe this was over at Credit Boards or Fat Wallet. I don’t know why I decided this was a good idea at the time. I went ahead and made a very big gamble, which was pretty bold of me, considering my raging frugality.

Economic theory has always taught people, the only way to wealth is through risk. Personally I think it’s bogus, but at 24 years old I was learning. I had a couple of credit cards at the time, with very high limits and 0% teaser rates. I hadn’t been using them nor had I done much with some savings I had. I do know that when stocks start to dive like they did, that somewhere in this world there was a way to make a lot of money.

Rewards, Liquidity, and Bonuses

So this silver that I was eyeballing was at the lowest price in years and unless the world was about to end (even then) I was going to be in decent shape if I had silver in my hand. The price of silver will never reach zero and has certainly risen up and down enormously over the past few decades. I had learned through E-Bay that they were running a promotion with Microsoft and awarding buyers with 25% cash back bonuses. This applied to commodities as well, which shocked me actually. I bet you can guess what happened next. I literally went all in with my credit. I purchased close to $4000 worth of silver bullion and maxed out my $500 cash back that E-Bay was offering. I also received insane bonus rewards on my credit card and had physical commodities in my hand in three days. Now I was sitting on it at zero percent interest but the clock was ticking.

Was this stupid? Yes. Was it corrupt? Oh yeah. However you have to remember. Bankers do this every single day with your money. Now had I gone broke and silver crashed to $2 an ounce. I would have been, I think the term goes, “squeezed.” Just as the banks realized the jig was up with real estate.

An Important Lesson

This is an extremely important story as it relates to personal finance. What I did here was create enormous amounts of risk by using “leverage.” If you’ve ever heard the term before, you know it is associated with borrowing to invest. The people who do this are usually the exact opposite of you and me. These types of people are the Dark side of the Force as it relates to frugality. The speculators who created the housing bubble fit right into this picture as well.

I’m not sure if banks realize people can do this or not. It took me around 72 hours to have the silver delivered to me. I could have gone into one of the local coin shops, if I wanted to convert the metal back to cash quickly. With E-Bay and most coin shops, no taxes or paperwork are involved. Essentially the IRS, bank, and government have no idea what you are doing. I was holding out until prices rose though, so this wasn’t about money laundering (a textbook example by the way). I started selling when the price went above $15 an ounce and continued doing so until the silver was all gone. I made back my original amount of money and then some. It was the first real “flip investment” I had ever made. I probably won’t do that again, unless we have another earthquake shake our economy. I learned a lot from this venture and thought I would share.