Wheaties for Your Wallet

A man in Washington state was busted for running a bank, with $28 million in deposits, out of his house:

A man operated a “warehouse bank” out of his suburban home, taking at least $28 million from people around the country who wanted a discrete [sic — I assume they mean discreet –MH] bank account, according to court documents.

An IRS investigator said Robert Arant had hundreds of customers, many of whom apparently used his bank, Olympic Business Systems LLC, to conceal assets for the purpose of evading taxes.

On his now-defunct Web site, Arant advertised his services to those “who would rather not deal directly with the banking system,” court records said.

Um, wow. Wesabe tip: don’t do this! Okay, you knew that. Tax evasions posing as shelters are incredibly dangerous for consumers. Remember the number one heuristic for evaluating offers like this: if it sounds too good to be true, it probably is. Don’t deposit your funds with an institution unless you’re sure they’re legitimate — for instance, you can identify a legitimate U.S. bank by searching for them on the FDIC web site.

Wesabe user ‘haberschmidt’ just posted a fantastic piece in the Wesabe Groups section, under the Smart Banking discussion about overdraft fee policies at the top U.S. banks. In the post, haberschmidt details how many different ways Wachovia has found to charge overdraft fees:

As the net effect, there should have been zero fees for overdrafts, but Wachovia ratcheted it up to 7 overdrafts for $245 in fees. I am absolutely appalled, and it has nothing to do with indignation over payment, since I ended up resolving the overdraft protection issue at the branch level and getting the fees removed. […]

Although the branch corrected the overdraft protection issue and reversed the fees, I am closing my accounts. I believe strongly in voting with my dollars and I don’t want to belong to a bank that takes advantage of its customers in this way. It strikes me as a predatory practice, and the kind of thing of which Congress should be aware when it reviews regulation on the credit card companies and other financial industry practices.

The entire post is well worth reading, since it applies to at least nine of the top ten banks in the U.S., and many others besides.

When we first launched Wesabe last November, we were not surprised to see that our #1 top merchant at that point was Amazon, and #2 was Netflix. That matched well with the stereotype of “early adopters.” What was surprising, though, was the merchant #20 was Overdraft Fee. If you think overdraft fees just hit people who are “bad with money,” they don’t — they hit a huge percentage of the population, and as Wesabe has grown, we’ve seen that more and more. Currently, our users have been charged roughly $200,000.00 in overdraft charges in just the past few months — an average of one overdraft charge for each and every person tracking their money on Wesabe. That’s a huge amount of money for consumers to lose, when it could instead be going to pay their bills or improve their lives. We’re out to help our members reduce that number to $0.

The good news is, we also see that almost 70 of those overdrafts, amounting to about $5,000.00 in fees, have been refunded by the banks — including, it sounds like, haberschmidt’s $245.00, and $216.00 in overdraft fees Washington Mutual tried to charge me a few months ago. That’s a good start, but we can get that down a lot from where it is now. In the past three months, I’ve spent a grand total of $1.50 on bank fees — down from $1,425.00 in the year I started working on Wesabe. (And I’m really mad about that $1.50!)

Whenever you see a fee on your bank account, ask the bank to refund it, and if they don’t, start looking for a bank that won’t charge you that fee. And check out haberschmidt’s post — it’s great for every consumer to read.

There’s a great article in today’s New York Times about a reporter discovering a $10 fee from a company she didn’t know in her bank statement, and tracking down to the source. It turns out her husband had signed up without realizing it, and she only found it by looking through their bank statement carefully:

The other day, as I was trying to avoid making eye contact with $168.09 (jeans and a T-shirt) and $40.24 (how can a tank of gas cost that much?), I happened to notice a mysterious $10 charge.

It was for WLI*RESERVATIONREWARDS.CO.

It didn’t ring a bell. Was Reservation Rewards a surcharge for a hotel room? A magazine subscription? Or a digital audio download?

I phoned the toll-free number. A customer service representative told me that my husband had enrolled in a subscription service that offered members discount coupons for travel and restaurants. The cost was $10 a month.

That didn’t sound like my husband.

“Maybe when he bought something else,” the customer service representative said. “Like on Fandango.”

She describes that a $10 rebate offer appeared as a pop-up ad, “Good for your next Fandango purchase!” and that all he had to do was enter his email address, since Fandango already had his credit card information. In the fine print, which he didn’t read, it said that by taking the offer he was signing up for Reservation Rewards monthly service. But the punchline came later:

The next day, it got worse. That was when my husband received an e-mail message telling him that he had been a Reservation Rewards member since November 2005.

He phoned from his office to read the message: “We have issued a refund of $160.”

“They charged us $160?” I asked. “You were a member for 16 months?”

“I’ll never buy tickets at Fandango again,” he said.

There’s more to the piece, including an interview with Reservation Rewards’ CEO, and a mention that they are currently subject of a class action lawsuit about their practices. (That link also includes a list of all the sites with which they’ve partnered — and it’s a long and familiar list.)

I think very poorly of these kinds of businesses. Consumers’ wallets are constantly taxed by monthly fees, charges, subscriptions, and penalties that offer them little or no benefit, and act as deadweight loss on their income. Here are a few tips for avoiding charges like these:

1. As the author of the article suggests, go over your bank and credit card statements carefully. Of course we hope this is one of the benefits of Wesabe, that you have better tools for going through just the new charges, and that you can research any merchant that shows up in your statement to find out what they do and whether they’re worth it for you. However you check your statements, though, be sure that you do.
2. Ask for refunds of charges you don’t recognize. Every time you see a fee or a charge you don’t recognize, ask what it is, and ask what you have to do to remove it and have it refunded. This works for all kinds of fees, from the subscription charges the author found, to account fees, overdraft fees, and others.
3. Block pop-up ads. We very strongly recommend the Firefox web browser, since it has pop-up blocking and other security and privacy features built-in. It also does a great job of letting you get to a pop-up window on those rare times when you want to see it. By default, though, you should never have to see those ads.

It turns out that 17 Wesabe users have charges from Reservation Rewards, totaling $397.00. Because of the way our privacy wall works, we have no way of knowing who those people are, but I’ve written a Wesabe tip pointing to the article, matched against “Reservation Rewards” as a merchant name. Now, whenever a Wesabe user gets one of those charges, this is what they’ll see in their accounts:

That tip link has pointers to the Times article, the class-action information, and the toll-free number you can call to ask for a refund. This is one of the big ideas behind Wesabe — one person does the research to root out this charge, and everyone on the site benefits. It’s easier to watch your statements closely when they’re telling you right there what to look for.

I’m glad this reporter tracked down the charge. Hopefully, having this practice highlighted in the New York Times will make it harder for them to continue doing business by taxing consumers with underhanded offers.

Before Jason and I started Wesabe, I talked for a while about starting a company called GripeJuice, which would be a “call-center tool for the other side of the phone” — that is, a tool you could use as a consumer to keep track of your interactions with customer service centers. Basically, it would be a web site where you could go and create a log of customer service calls you make, and record those calls so that you could play them back later. Whenever I’ve had a big dispute with a utility company like the phone company, I’ve always found that keeping a log makes it much easier to get a resolution. “I’ve called you six times and sat on the line for over two hours trying to get this resolved. Isn’t that costing you money?” When things get really bad, sending a log like this can add a lot of weight to a written complaint. I also thought that aggregating which customer service centers did the best for people would be great — if I could see that Sprint hangs up on its customers more than any other cell phone company, say, that would really matter in my decision to use them. (Yes, Sprint has hung up on me more than once, and refused to do jack about it when I’ve complained.)

I decided not to start GripeJuice because I was very excited about Wesabe, and because I thought there were some potential problems with the GripeJuice idea. (Now, I use that analysis as part of my talks for entrepreneurs, because it’s great to have a real decision to explain evaluating an idea.) Nonetheless, I thought there were a lot of great things about the idea, too, and have wished such a service existed.

Fortunately, three Stanford grads have come up with a very similar idea, and have implemented most of what I wanted to do, and things I never thought of. Their site is called 321-CALL-LOG (found via The Consumerist), and it looks like they’ve done a fantastic job making this a real service. Here’s their report on Sprint, for instance, which doesn’t yet show any data, but does show what they’re tracking: number of calls, length of calls, customer’s rating of the call, and how often Sprint disconnected the call. They also provide you with information about getting through the company’s phone tree (like gethuman.com), and a way to create email logs, too. They’ll notarize your logs, so if you’re in a legal dispute, you can have very authoritative records as evidence.

I’m really happy to see the service appear. They’re currently in beta, but I’d love to hear from anyone who has given it a try. I’ll probably use it the next time I have to deal with a call center. If you do, remember to start off the call by telling the call center employee, “For quality customer service, this call may be recorded.”

It’s getting towards tax time (here in the U.S.). Great news, huh? Not so much.

Getting organized for tax time can be a huge pain, so we’ve done what we can to make it easier. If you use an accountant, you can already export your Wesabe data in Excel format (using our CSV export under “Manage your Account”). Every accountant I’ve met supports Excel import. But what if you use a tax preparation program, like Intuit’s TurboTax or H & R Block’s TaxCut?

Both of those programs support an import format called TXF, or Tax Exchange Format. We’ve added a TXF export tool to Wesabe, so that you can export your tax-related tags into either program (or any other tax program that supports TXF). We’ve done this by allowing you to assign each tag you want to export to the IRS Form and Schedule where you want it to appear. In either program, you’ll be prompted to import your data as you go through the interview process. You can find the tax export feature by going to the Accounts tab and clicking on “Tax Export” in the left-hand column.

Please let us know how this works for you — after launching it, we came up with a bunch of ideas for improving it in tax years to come, but we want to hear from you. Each year, we’ll make taxes as easy as possible — and if we could get rid of them altogether for you, we’d do that, too.

Since we’ve gotten a bunch of questions about USAA, particularly about eligibility and its Deposit@Home service, I got in touch with one of the people from USAA who’d commented on an earlier post. Katie Spring is the VP, Public Communications for USAA, and she was kind enough to write up some answers to questions I’ve heard abut USAA. You’ll see that not all of the answers are complete, nor will they satisfy all the people who have asked me about the bank, but I thought they would still be well worth posting. USAA continues to win awards for customer service, and that’s worth paying some attention to. I’ll list my questions with Katie’s answers.

Who is eligible for USAA banking? Did the requirements for USAA Federal Savings Bank recently change, and if so, what is behind the change? What does USAA recommend for people who are not eligible to join? Do you plan to make banking available to more people over time?

“USAA is committed to providing financial security to members of the military and their families. We offer financial planning, insurance, banking, investments, and life insurance. We strive to offer the most competitive prices and the best service — period. Regarding membership in USAA…as you know, we serve a niche market – members of the military and their families. By focusing on this group we can provide the very best service and offerings. If you or your parents served in the military, you’re likely eligible for USAA. And since membership is passed through generations, if your parents had USAA, you’re eligible, too (even if they – or you – didn’t serve). Readers can take less than a minute to check out if they’re eligible to join USAA by visiting usaa.com – it’s very quick and easy.”

What’s driving Deposit@Home, the UPS Store deal, and so on? Are these services primarily used by members stationed overseas, or are they used extensively within the US as well? What has been the reaction to the Deposit@Home service?

“You asked about Deposit@Home. Have you ever had a paper check and thought it was inconvenient to deposit? Well, now USAA members can take those checks, go to usaa.com, scan the check, and your account will be credited in about one minute. Yes, one minute. Try it. Just void the check when you’re done – you don’t need to send it to us – since you’re our member, we trust you!”

It seems like remote accounts (where the account holder does not have a local branch office) are going to become a lot easier to use because of Internet banking — are there other things we can expect to see to make remote banking more convenient? (For instance, one question I get is how to deal with cash deposits for USAA accounts. Have you thought about partnering with Western Union or a similar service to accept cash deposits remotely?)

[No direct answer on this one, but later in the email she mentioned one thing worth noting:]

“Later this year, we’ll roll out our mobile banking program, which will allow members to access accounts from their cell phones and elect to receive cell phone alerts regarding the status of their accounts.”

Was the UPS Store service not used, or was it removed for other reasons? (Assuming I have it right that the service is no longer offered.)

“Regarding QuickPost – the service that allowed members to make deposits at UPS stores – that’s been discontinued and replaced with this even more convenient Deposit@Home.”

What about USAA’s business makes it different than other banks? Do you believe that it’s simply a matter of investing more in better customer service representatives, or does your membership structure enable you to offer a level of service that would be impractical otherwise?

“What makes USAA different from other banks? For starters – it’s more than just a bank. USAA is the only financial partner that’s a true one-stop-shop, where we look at you and your family’s WHOLE financial picture and give you free, objective advice about everything from budgeting to planning for your retirement. While some folks remember us as an auto insurer, today we are much, much more.”

I very much appreciate Katie’s answers — while I didn’t get every question answered, I’m glad to have something definitive on some of these points at least. Since cash deposits remain the most frequent question I get, hopefully my Western Union suggestion will make it to the product developers!

I’ve had a number of people tell me they’re not interested in using Wesabe, but do I know of a tool that….? And I say, yes, Wesabe does that. They think of Wesabe as the web site we provide, when we think of Wesabe as anything we do to help people take control of their money. Seems like it would be worth getting a few of these capabilities into the Brain of Google here on a Sunday night.

1. You can use Wesabe to convert QIF, OFC, OFX, or QFX (all of which are data formats which your bank or credit card might provide for download) to XML, CSV, or Excel format. First, import your data into Wesabe, then click on your username at the top of any page, then click “Manage your Account.” You’ll see links to download your data in the format you want. (As I’ve said before, we’re going to keep expanding this part of Wesabe until we import and export every format we can.)
2. You can use Wesabe to convert your bank’s MC/NOT VRY HELPFL 0028472-39 (er, “not very helpful”) names for your expenses to names you can clearly read and use. Some people prefer to track their expenses in Excel or Google Spreadsheet, rather than in a personal finance tool or site. By cleaning the data with Wesabe’s community editing — where any user who edits a merchant name helps every Wesabe user who shops at the same merchant — you can remove a lot of the work you’d have to do cleaning that data by hand in a spreadsheet. (The steps for doing this are the same as converting file formats in #1 above.)
3. You can use Wesabe to find out how much you can expect to spend at a business. For instance, if you want to try out a new auto shop, you can look up the average amount Wesabe users spend at that shop, and compare it to the average price at other auto shops in your area. You can even use this to build a budget, when you’re estimating new expenses. You can find a Wesabe report on a business by typing the business name into the search box at the top of any page, and hitting the search “Wesabe” button. Note that you don’t need to upload your own data in order to use our search engine. (This capability just got a lot better, since Coda spent several weeks improving our search engine recently.)

We love it when you use the Wesabe site. But we think we’ll do much better giving you whatever tools you need to manage and control your money than we would by trying to lock you into any particular program, interface, approach, or philosophy. Feel free to let us know what more we can do — even if all you want is a way to clean up your data or research businesses or tips. Come on in; we want to help.

The ever-useful Red Tape Chronicles on MSNBC.com has a great story on trying to track down the “Service Fees” that show up on bank statements everywhere, every month:

The other day, colleague Andy Gallagher showed me his fee-laden Wachovia checking account statement, his blood boiling from unintelligible fees. But it was the “more info” thing that really stuck in his craw. You can see why by looking at the graphic below.

“What’s this for? I have no idea,” he said, pointing to the $3 fee on the screen. Seeing the swelling veins in his neck, I set out to find “more info.”

Bank fees are a powerful source of revenue for America’s financial institutions, and one of consumers’ top headaches. If it feels like the bank fee noose has closed tighter around your neck in recent years, it has. The Federal Deposit Insurance Corp. says the nation’s largest banks now generate 44 percent of their revenues from fees. Estimates of how much that amounts to vary between $30 billion and $50 billion a year, but it’s clear banks are rolling in money they take from customers, often without explaining themselves very well.

This is absolutely a huge problem for every consumer. The idea of banks charging fees where they won’t even tell you what they mean is, as far as I’m concerned, reason enough to leave that bank. Of course, they will tell you what it means — they just won’t make it easy for you to know:

Andy had the same question so many other American consumers find themselves asking every day: What the #%$& is this fee for? The Wachovia Web site provided no answer. Despite its lofty promise, there was no “more info.”

But Jim Baum, a Wachovia spokesman, did find “more info” for me. The service fee represents a recurring fee Andy is charged every month for the type of account he has, called a “simplified checking account.” Baum recommended that Andy upgrade to another, free account. I said that wasn’t the point.

“Why isn’t there ‘more info’ where the site promises ‘more info?’” I asked. […]

In the meantime, another Wachovia spokesman, Matt Wadley, pointed out, correctly, that the bank does have a 24-hour hot line customers can call with questions like mine.

Mr. Wadley is correct that you can call your bank to ask about a fee. When I recently called Washington Mutual about a fee listed on my bank account after an ATM transaction, though, they told me that they had no way of knowing the cause of the fee, and that I’d have to go to the branch where the transaction took place. When I did, that branch told me I’d have to go to the branch where my account was housed. So the process I had to take to track down a fee was:

1. Go to WaMu.com and see that the fee had happened.
2. Call WaMu’s 800 number and ask about the fee.
3. Go to the branch where the ATM was and ask about the fee.
4. Go to the branch where my account was opened and ask about the fee.

(I’ll talk more about this experience next week — it was, to say the least, instructive.) Why do they make it so difficult to track down these fees? The answer is breakage — the more steps they put in your path to request a fee reversal, the less likely you are to follow through. They don’t want to make it impossible, since that would be bad press; they just want to make it onerous, as onerous as needed to maximize fee revenue.

Every time you are told you need to make another call or complete another step, you should think, “This is designed to create breakage. They’re trying to get me to give up.” Then, don’t give up. Banks put this many steps in front of you specifically when it’s worth your while. When you give up, their revenue increases.

I’m glad the Red Tape Chronicles dug into these fees. As you saw, when they dug in, there was a free account alternative available. Look for these small monthly charges, call your bank, and say, “I don’t want to pay this fee. How do I do that?” If the answer is that the fee is required, change banks. (See also “A TOTALLY AWESOME economics paper” for more on this.)

Via Consumerist, here’s a great list of 35 most outrageous fees (and how to avoid them) from Money Magazine. Definitely worth checking out. If you haven’t already read it, be sure to check out our two-step primer on taking advantage of companies that charge these fees. “Fee Free” is a Wesabe rallying call…

The big news in gifts over the past few years has been gift cards, credit card-like gift certificates, often tied to a particular retailer. One survey, via Payments News, has it that gift cards have passed traditional gifts in the preferences of U.S. consumers:

Picking out just the right gift for oneself proved an important feature of gift cards among consumers according to the Blackhawk Network survey, with 88 percent of respondents stating “I can get what I want” as the number one reason they like receiving gift cards.

Similarly, 73 percent of gift givers stated their primary reason for purchasing gift cards as “I want the person receiving the gift to get what he or she wants.”

Other reasons consumers choose gift cards include eliminating worry about getting the wrong item (52 percent), the convenience of not having to find a specific gift (40 percent) and sticking to a budget (26 percent), according to the survey.

That all sounds great, right? There’s a little hitch, though: according to this Associated Press article (via kottke), consumers will buy but not use $4.8 billion dollars’ worth of gift cards this year:

Shoppers across America have millions of gift cards tucked away in envelopes, drawers and wallets. And some of the nation’s largest retailers are profiting as a result. […]

About 6 percent, or $4.8 billion, of this year’s gift cards will go unused, estimated Laura Lane, vice president of unclaimed property services for Keane Co., a compliance and risk management consulting firm.

Consumer Reports put the figure even higher, estimating that 19 percent of those who received cards last year had not used them because the cards were lost or expired.

“It can add up to significant dollars,” Lane said. “I think the message to consumers is: use it or regift it.”

Even if you do use the cards eventually, they can carry (that’s right, our old friend) hidden fees and penalties, especially if you don’t use them within the first year. This earlier AP article has a decent summary of things to look out for; and Mouse Print (via Consumerist) has a great roundup on fees for Wells Fargo-issued gift cards.

This New York Times article from last year offers another solution: it lists ways to trade in gift cards for cash. Some of the sites mentioned in the Times article:

• Cardavenue
• Swapagift.com
• Gift Cards Again
• CertificateSwap

Don’t let that money go to waste! Focus on buying people things they actually want. If you decide you want to get a gift card, maybe one from a bank or credit card company would be a better choice, since then at least it’s not tied to a specific store, and can be used anywhere they would normally use a credit card. Better yet, if you’re not sure what to get someone, donate that money to a charity on their behalf, rather than donating it to a retailer in the form of a gift card they may not use.