The Discretionary Dollar

Paper litters nearly every aspect of our life. Not only is paper a nuisance, but for every piece of paper you decide to keep, you have to organize, store and manage it. What a waste of time and resources.

Is your desk covered with neat (or messy) stacks of paper? Do you find it frustrating to find documents in a file cabinet? Tired of having stacks of mail and paper clutter your life? Are you interested in simplifying your life and spending more time doing the things you love?

Here are just a few reasons to work towards eliminating the endless stream of paper.

Paperless is Safer
I have heard the argument that things online are unsafe. But we easily forget how unsafe a typical mailbox is. Which is easier to gain access to: a large national bank’s system or a typical mailbox in front of your home? Even a locked mailbox is easy to pick an offers little or no protection.

With paperless statements you won’t have files cabinets full of account numbers and other documents in your home for someone to rifle through. If you choose to save documents locally on your computer, look into password protection or other security in case your computer is compromised.

Paperless is Backup-able
If you are storing your bank statements and other paper mail in a file cabinet and your home robbed, burned or you simply misplace them, you are usually out of luck. However, with paperless documents you can easily setup a system for automatically archiving and backing up your important documents. Dropbox.com is my favorite backup and online storage service. (It’s free under 2gigs)

Paperless is Cheaper
You will spend less on storing and organizing all your paper statements and mail. You will also spend less on stamps mailing back all your payments. You won’t have to worry about running out of desk drawers or room in your office with electronic files either. If your office is paperless, you can even lease less space, or fit more desks furthering the savings.

Paperless Produces Less Waste
Take a close look at all the paper you toss after opening your mail next time. Inserts, junk mail and return envelops are all just extra wasted paper in most cases. If you are paying your bills the easy way, you won’t be sending in a good’ol check anyway.

Paperless Saves Time
I dread opening mail because I know that opening it is only the beginning. After I open it, I will need to file it, respond to it, and review it. If you are getting a lot of mail, you know how fast it can pile up. Try coming back from a vacation to a huge pile of mail. Now imagine coming back from a vacation with no mail at all to open! You may not realize how much time you spend processing mail, unnecessarily.

In addition, you won’t have to walk or drive to your mailbox daily (maybe once a week at the most).  You also won’t have to spend time sorting through old statements to locate one. A quick search on your computer, or online document site and you can find your document quickly.

Paperless is Faster
You get online statements immediately. You don’t have to wait for the post office, and online statements can come 24/7 rather than being restricted to the US Mail hours, holidays and routes. You have the ability to check your statements the day they are created.

Paperless is Mobile
Not only are you not tied to a physical location, you can check your online statements on the go. If you travel for any reason, you know how nice it can be to get some of the day-to-day busy work out of the way as you wait in an airport or hotel room. Use this time to review your statements etc.

Now that we understand the benefits of eliminating paper mail, how do we do it? Please check back for:

1. Paperless: Reducing the Stream
2. Paperless: Getting Started
3. Paperless: Managing the Digital Files
4. Paperless: Organizing/Backup/Sync
5. Paperless: Other Creative Ideas

Do you wonder where your hard earned dollars get spent? Here are some ways to track your expenses in just a few minutes per week.

1. Use Online banking

Some smaller banks are still catching up but the larger banks have done a great job of giving you all the tools you need online. If you aren’t using online banking then tracking your expenses will be much more difficult and may require far too much time and effort.

2. Use Plastic Exclusivly (or as often as you can)

Using your checkcard/credit card is the easiest way to make your purchases trackable. Everytime you pull money out of an ATM or you use cash to purchase something, you lose the ablity to track and account for that money or item. The same generally goes for checks also. There are other ways to keep track of your expenditures but none of them rival plastic. By using plastic you set yourself up for automatic tracking of expenses. Plus there are other benefits of using plastic.

3. Use an Online Account Aggregator

Now that you have all your transactions trackable via online banking, you are ready to process and categorize them. Find a service that will use your online banking credentials to process and cateogorize your transactions automatically. Here are a few:

• Mint.com (Personal Favorite) | Free. Custom Budgeting for all accounts including investment, brokerage and mortgage. Also has Cyberhomes.com integration for real estate valuation. It will give you a pretty accurate net worth in addition to very flexible and easy to use budgeting tools.
• Wells Fargo Spending Report | Free (with certain Wells Fargo accounts). No Hassle Budgeting and Categorization of expenses. Only limited to Wells Fargo accounts, and has no custom bugeting feature. From a trusted source, no other party has your login credentials.
• MoneyStrands.com | Free. Claims to have similar features to Mint.com. I have not used this but it appears to have some neat features.

4. Classify and Demystify

The above sites may not perfectly classify your spending types and accounts. The first few months it may be nesscary to audit your budgeting tools just to make sure Mint.com didn’t classify a few transactions incorrectly. For example your Safeway Gas purchase may default to the groceries category. Make sure to set it up so that future transactions are classified correctly so you won’t have to manually correct any classification more than once.

Mint.com will suggest a few budgets automatically but you will most likly want to tweak them to fit your needs. Check back weekly or as often as you need. You can even setup alerts that warn you as you get close to your budget. You now have a fully automatic way of tracking nearly every expense and income source.

Talking Point: What is your favorite feature of your online bank or budgeting tools?

The biggest drawback to going cashless is the problem of uninformed merchants charging minimums or transaction fees. So are you tired of getting nickel and dimed as you go to use your credit or check cards?

If you are still unclear on the different types of debit/check cards, be sure to read Credit or Debit? Plastic Explained first.

The Problem
Merchants see credit transactions as an additional cost. In general store owners pay between 1-3% per transaction to process your card. They also have a fixed transaction cost ranging from .15 cents to .45 cents. Different accounts have their own prices, but that’s generally the structure.

A cost conscious owner decides they would prefer customers to use cash (after all there is no fee for cash right?). So the next day they craft a small homemade sign and tape it to the cash register with their new policy. $10 minimum purchase for all credit cards! Problem solved! Now customers will use cash, or purchase enough merchandise to cover any costs they have incurred by accepting plastic payment.

The General Rule – Fees Are Not Allowed on Credit Transactions
In most cases it is against any merchant’s VISA/MasterCard agreement to charge a minimum, an extra fee, or in any way discriminate against those using plastic means of payment (with the exception of some schools and government offices). The other exception is debit transactions. Debit transactions may involve cash back and generally allow for the merchant to charge the card holder a fee.

In no way are merchants allowed to require a minimum purchase (amount or quantity) or any extra fee for VISA/MasterCard transactions. Sometimes you will get punished twice and a merchant will try to charge you .75 cents for any purchase under $5.00. That is breaking one policy twice!

$10 Ice Cream Scoop Problem
Several years ago I took my wife to ice cream at a local ice cream shop. They arguably make the best ice cream in town. The door states that they except VISA/MasterCard. When I handed the clerk my check card for our $4 worth of ice cream (that we were already eating), she apologized and informed me they require a $10 minimum for all credit card purchases. Remember this is an ice cream shop! $10 worth of ice cream is a lot of something that is going to melt quickly! What would you do? Hand back the cone? Let’s just say it didn’t end pretty.

What You Can Do
Until several months ago, all I could do is complain to the clerk (with no decision making authority) that their store’s policy was in violation of standard credit card terms/conditions and that if they charged me an extra .75 cents, I’d report them, which may lead to a fine or suspension. Many times their response was an unsympathetic, “sorry sir, I don’t make the rules.”

Now I simply let them know to charge me according to their policy. I don’t put up a stink. You can even be kind and inform them that their policy is in violation of VISA/MasterCard terms and you will be reporting them. I do this knowing I have the final say and will get any fees reimbursed.

Getting Your Money Back!
To dispute such a charge log into your online banking, send an email to your bank about the issue. Many times you can click right on the charge and dispute it right from your bank’s site. Sample email:

“This merchant charged an additional fee for using my check card/credit card. The charge should have been $3.15, they charged an additional $.75 for paying with a visa/mastercard. Please adjust this transactions to reflect the correct $3.15 charge. I understand it is not allowed for a merchant to charge such fees.”

In many cases the very next day you will see a credit in your account for the disputed fee. The merchant will get a letter informing them of the viloation of service and they may get a fine if they have been warned before.

At last justice.  Anyone for ice cream?

Talking Point: What similar enforced policies have you seen or been frustrated with?

You might have a good idea about how your cards work, but it seems there is still a whole lot of confusion on what types of plastics are out there. Your bank sends you a card, but what does it really do?

Credit Card - Most Widely Understood.
This is not your money. You simply sign and present this card when you purchase something. You can use it interest free for about 30 days, then you must pay it off, or make minimum payments plus interest.

Check Card – My Personal Favorite.
This is your money. Any purchase with this card comes straight from your checking account. You simply sign and present this card when you purchase something (just like a credit card).  This card also has all the funcationaitly of a debit card defined below.

Debit Card/ATM Card - Practically Extinct.
This is your money. This card only allows you to access funds via an ATM with use of your PIN or with merchants that accept debit/ATM cards. Merchants can charge a fee for this service, since you can ask for cash back. Generally the only reason to use this type of payment is when you need cash back, or when the merchant doesn’t accept credit cards.

* Note: Dependent on your credit card company. You must also have a pin (sent to you when you first get the card many times.)
** Note: Many banks have varing polices on over-drafted transactions. They can even be different for a Debit vs. Credit transaction. It is possible to overdraft your account with either, but generally, it is easier to do it with a credit transaction (compared to debit). Debit transactions check your account in real time, where as credit simply looks for an approval (there can be floating transactions, and unsettled transactions).

Allowable Fees
You will see all sorts of fees and minimums as you use your plastic around town. Most of which most likely are in violation of VISA/MasterCard policies. Generally the only type of transaction that permits a fee (charged by your merchant to you) is an ATM/Debit transaction. But wait? Why all the minimums and fees for using the other types of cards? The answer, for the most part is ignorance. You can dispute these fees also.

So What Should I Use?
Well that depends on your personal situation, but in most cases a check card will be the best type of card for the majority of your purchases. For example my wife and I have a limit, for example let’s stay it’s $20. Anything over $20 we use a credit card, anything below we use a check card. There are a number of reasons we do this but the main reason is simplicity. We don’t have to worry about overdrawing our checking account since the credit card is used for all larger purchases. We get more reward points if we use a credit card (we still earn points on check card purchases but its a smaller point system). You can find your own system.

And if you are a person that still uses cash, you can use this same check card at most ATMs. Just remember only to use your PIN when you have to. Running a transaction as a credit (rather than a debit) not only can earn you reward points, but gives you more protection (like a credit card) and doesn’t permit the merchant to charge extra for it. In addition, using your checkcard makes it easy to track your expenses.

Talking Point: What is your favorite card to use and why?