USAA Career Starter Loan Paid Off 2 Years Early!

usaa-cadet-loan-payoff

We have reached another milestone in our journey to financial independence.

After 2 years, 5 months, and 26 days of repayments, I made the final payment on my USAA Career Starter Loan! When I started repaying the loan, it had grown to over $26,000. With payments of $471 over the next 5 years, I was looking at nearly $2300 worth of interest.

Just six months ago the loan was still around $10,000. At the time, I predicted we’d have the loan paid off by Dec 1, 2013. We beat that goal by over half a year and saved over $1000 in interest payments. How did we pay if off 6 months earlier than our already ambitious goal?

How We Paid Off $26,000 in Less Than 2.5 Years

  1. Made extra payments towards our highest interest rate loan every month
  2. We didn’t accumulate any new “stupid debt” (we did buy a house though)
  3. We increased our income

By saving money on deployment, never paying for cable TVincreasing our income with AirBnB, and decreasing our monthly expenses by over 25%, we were able to make the final push and pay off the loan over half a year early.

We were already paying almost 75% more per month than the minimum. Every month, on top of the $471 minimum payment, we’d make an additional $304 payment. This debt avalanche saved us about $1000 in interest and cut 2 whole years off of the life of the loan. With the final epic $5000 payoff, we were able to slay the evil beat once and for all!

The most exciting thing about paying off this loan is it freed up $775 of cash flow every month. Because I’m about to hit a time in grade promotion mark this month and we’re about to finish paying off our PCS advance in July, we’ll see our income rise while our expenses are falling! This is the perfect time to begin maxing out our Roth TSP and Roth IRA.

While I still have $29,000 in student loans from Sallie Mae, the interest rate on these loans is ridiculously low (1.75% and 2.75%). As long as the rates stay below 3%, we’re not going to prioritize paying off these loans. By paying off the USAA loan, our minimum monthly payment for student loans dropped from $696 to $225. This means we can live safely with a smaller emergency fund and start prioritizing our investments.

We’re very excited to see the student loan payoff chart take a big dip this month. We’re even more excited to have the opportunity to begin contributing to our gap fund and retirement accounts in a meaningful way now, rather than later.

Posted in Case Studies, Debt, Military Life, Student Loans, USAA | Tagged | Leave a comment

Should I Get the AAFES Military Star Rewards MasterCard?

military-aafes-military-star-credit-card-rewardsThe AAFES Military Star Card (login required) is offered through the Exchange Credit Program, part of the Exchange, NEX, MCX, and Coast Guard Exchange brand of services offered on most military installations.

The Military Star Card has two main products: the Military Star Rewards MasterCard, offered by Chase Bank, and the regular Military Star Card.

Military Star Rewards MasterCard Military Star Card
military-aafes-military-star-credit-card-rewards military-star-card
Accepted Millions of MasterCard Locations Only at on base and online Exchanges
Reward Points 2 points on base 1 point off base none
Annual Fees $0 $0
Foreign Transaction Fees 0% Not accepted outside of Exchange
First Day Bonus 10% off everything you buy in the Exchange 10% off everything you buy in the Exchange
APR Who Cares? Who Cares?

As you can see, the Military Star Rewards MasterCard (MSRM) is a traditional credit card while the Military Star Card is more like a line of credit within the military Exchange system.

Based on the two offering, the Rewards MasterCard is definitely the superior product. It’s accepted more places and has a decent rewards program as well.

Both cards should show up on your credit report and factor into your credit score. By using these cards smartly, you could build an excellent credit history early on in your military career which could pay nice dividends later in life. For instance, with a excellent credit score you could have access to better rewards credit cards, churning opportunities, and lower mortgage rates some day.

Military Star Rewards MasterCard Rewards Point Program

The Rewards Program for the MSRM is not the greatest, but certainly not the worst either. One point is issued for every dollar spent, except at Exchange locations (including gas pumps), where 2 points per dollar is given.

These points can then be cashed out for a variety of rewards including:

  • Cash back (100 points = $1)
  • Exchange Rewards
  • Gift Cards
  • Airfare
  • Hotels

Not as good a program as Chase Ultimate Rewards (especially if you have the Chase Sapphire Preferred), but not bad either. If you do a lot of your shopping on base, this could be a good option for you, when used responsibly (I.E., paying in full every month).

Would I recommend either of these cards?

No, unless you have never had a credit card before. Because these are available exclusively to those with Exchange access, you shouldn’t have much of a problem being approved for this card with a poor or nonexistent credit history.

If you have a good to excellent credit score, there are much better options available to you, such as the Chase Sapphire PreferredChase Freedom, or any American Express cards that offer massive sign up bonuses and much better rewards programs.

Military Star Card as a First Credit Card

If you have no credit history, the MSRM could be an excellent first card to begin building your credit history. With no annual fees, a decent points program (100 points = $1), MasterCard global acceptance, and no foreign transaction fees, you could certainly do a lot worse for a credit card. If you’re deciding between the MSRM and a secured card that has an annual fee, definitely go with the MSRM.

The Rewards MasterCard version of the Military Star Card would make a great first credit card. You could use it just to make gas purchases, wait for your statement to post, and then pay the statement in full. Do this for a few months and you’ll rapidly see an increasing credit score (which you can check for free on CreditKarma).

Just remember these cardinal rules of credit cards:

  1. Pay your statement balance in full every time you receive a statement
  2. Never charge more than you have in your accounts
  3. Consider setting up a “bills account” so you’re not surprised when the credit card bill comes in

After 6-12 months, you’ll probably be eligible for much better credit cards. Since the Military Star Card has no annual fee, it’s an excellent card to cut up or throw into a drawer and never use again. That way your average age of accounts will continue to increase and you’ll keep your oldest line of credit almost forever.

You’ll probably have to use it once every 5 years or so to keep it active.

Posted in Credit Cards, Credit Score, Military Life | Tagged | Leave a comment

125,000 Delta SkyMiles Without Leaving the Ground

american-express-delta-skymiles

119,000 Skymiles

I’ve been playing the credit card bonus game for a few years now. I’m not alone. Some people make thousands a year doing it. However, I don’t enjoy keeping track of multiple credit cards. I usually cancel the cards that aren’t meeting my needs or carry an annual fee.

I’m also wary about offers that would take me out of my normal monthly credit card spending (around $1000/month). To keep it simple and not waste my time, I wait for the big bonuses. If they’re offering only $100 to open the account or if it’s just points offered without an easy way to extract them (easiest way: a check – next easiest: airline mileage program), I don’t bother. Usually if I have to spend more than $2000 to activate the bonus or the bonus is under $300 cash value (airline points or a check), I don’t bother. Some AMEX Business cards have $10,000 minimum spending in 3 months to activate the bonus! Too much commitment to spending for too little gained.

My most recent “churn” was two American Express offers:

american-express-amex-business-gold-rewards-50000

75,000 points for $2000

AMEX Delta Skymiles

50,000 Skymiles for $1000

I Saved 98% on Round Trip Tickets to Miami

AMEX sent me two offers that would require $3000 worth of spending. The bonus? 125,000 Delta Skymiles points. Worth it?

I cashed in 80,000 points (plus $20 in fees) for two tickets to Miami for this summer. I checked the price just before I booked. If I had booked them and paid cash, they would have come out to $1,467.20.

(1467-20)/(1467) = .986…

that’s over 98% savings.

Another way to look at it is: 80,000 points for $1,467.20 = 1 points = $0.018. Almost 2 cents per point. Considering most credit card companies only offer a penny a point if you take cash back, this is quite a good deal. Granted, I wouldn’t book these tickets at that price. I would definitely seach on Kayak.com or some other site to find a better deal.

Cashing in 80,000 points left us with 39,000 from the signup bonuses, almost enough for another round-trip ticket. With another $1000 of spending on the AMEX Delta Skymiles card, we can get another free ticket.

How I Churned my American Express Cards for Skymiles

The two pre-selected credit card offers arrived in February from American Express. One was for an American Express Business Gold Card. The other was for a American Express Delta Gold Card. The Business required $2000 of spending for a 75,000 bonus reward points which could be transferred to Delta Skymiles program for free.

The AMEX Delta required only $1000 of spending for 50,000 points. We received our bonus points within 2 weeks of receiving the card. Very easy. This card was purely Amazon Payments transactions (see below for details). It required no additional spending on our part. The Skymiles posted with 24 hours of me paying off the charges.

For the AMEX Business Gold, I applied as a sole proprietor and used my Social Security number rather than a business tax ID number. This is completely legal and almost all “business” credit cards can be obtained by individuals. For this card, we put one month of our expenses on the card, a couch we’ve been saving to buy, and a $500 Amazon Payments transfer. We met the spending requirement in 6 weeks and as soon as the second month’s statement posted, the Membership Rewards points were credited to our account.

The Membership Rewards points waited until the statement closing date to post to my account. These weren’t Skymiles yet, but AMEX offers you the option of transferring your points to several air carriers. I already had several thousand Delta Skymiles, so I decided to get my free ticket through Delta.

Once I had the 76,542 Rewards points in there, I went to the Membership Rewards center and transferred the points to my Skymiles account. There was an “excise tax” charge of $40 or 8000 points. I chose to pay in points, which is why I’m a few thousand short of my 125,000 promised in my Skymiles account.

The Membership Rewards points posted to my Delta account in less than 5 minutes. I booked two round trip tickets to Miami that would have cost me over $1400 for only 80,000 points and $20 in fees moments later. Not bad for just using a different credit card for 6 weeks. 98% savings. Thanks, Delta and AMEX!

Both cards carry an annual fee, which is waived for the first year on both cards. $175 per year for the AMEX Business Gold and $95 for the AMEX Delta Gold. There may be a way for American Express to waive the annual fees for military members under the provisions of the Servicemembers Civil Relief Act (SCRA). I’m researching this at the moment, check back for updates.

How I Met the Credit Card Bonus Spending Requirement

amazon-payments-credit-card-churnTo make meeting the spending limit easier, I recently started using Amazon Payments, a PayPal competitor. The fee structure is much easier to understand and you can send $1000 a month via credit card to anyone else using their email address, with no fees.

This feature makes it even easier now to meet minimum spending requirements for credit card signup bonuses. I’m not the first to use the service. 2millionblog wrote about using it in 2011. It still works. I sent $1000 to my wife and she sent $1000 to me through Amazon Payments. We deposited the money into our Bills account and paid off the cards within a week. Bonus activated!

Effect on Credit Score Churning American Express

I check my score about once a quarter for free from Credit Karma. It’s actually free, unlike the scam sites like freecreditreport.com. I’ll post the graph of my score before and after churning these cards once the credit reporting bureaus pick them up. Check back soon!

Posted in Case Studies, Churning, Credit Cards, Money Hacks | Tagged | Leave a comment

We are a Proud “Zero TV” Household!

zero-tv-householdThe AP is reporting that broadcasters are beginning to worry about “Zero TV” households, a demographic that has risen by 3 million to 5 million households since 2007. Not surprisingly  Netflix started offering unlimited streaming in 2008, and there was the Great Recession, which has caused people everywhere to get creative in their cost cutting measures. Granted, this is still a small population when you consider that there are 100 million TV owning homes in the US.

Nielsen, a company that measures viewership and ad performance on all forms of media, has created a new category called “Zero TV” households because:

they fall outside the traditional definition of a TV home.

What is a Zero TV Household?

You actually can have a TV and still be in the group. 75% of ZTV households still have a television. However, none of them subscribe to traditional cable or satellite programming. Basically, cable/satellite companies don’t have you padding their bank accounts with your money every month and that scares them. According to Nielsen, only 18% of ZTV households even want to add satellite/cable subscriptions. Most ZTV households are happy to get over the air programming, use online streaming, or just forego the TV and network media all together.

This is not good news for an industry that barely expanded last year. Even though nearly 1 million new households were created last year, only a net of 50,000 customers were added to cable and satellite subscription plans. On 100,000,000 TV households, that’s only a .005% growth. Not good for any market.

ZTV households tend to be young, single, and without children, according to the Nielsen study. Basically, the people still having fun in life. (I joke…but seriously…)

The new buzz word that describes my particular demographic is “cord-nevers:”

  • Never had a landline phone connection
  • Never had a TV subscription

I didn’t realize I was so cutting edge! Growing up, my parents always had a TV, but we usually never had more than a dozen channels. I went to college without a TV, found one for free in a dumpster (move out day was awesome for this), and when I reported for my first active duty assignment after college graduation I didn’t bring a TV.

So, since 2010 I’ve lived without a TV and a cable or satellite subscription. How much have I saved? I would probably never buy the premium channels anyways so let’s figure $50 a month for a basic package, plus $1000 for a nice HDTV:

$50 * 12 * 3 = $1800 + $1000 HDTV = $2800

Nearly $3000 over 3 years. That’s almost the price of the used car I bought. That’s enough money for an amazing vacation almost anywhere in the world, airfare included. That’s a lot of beer.

Even more importantly than the money I’ve saved is the time I’ve had to spend on other activities. The average American over 2 watches 4.8 hours of TV per day. After sleeping, eating, and work or school, that doesn’t leave much time for meaningful and productive activities!

I’m not saying all TV watching is bad. Heck, I watch a ton of movies and TV, and probably spend a lot more than 4.8 hours a day on the Internet. The point is I’ve thought about how I spend my time and money.

I like blogging, I like learning about new forms of investment, and I like reading. I like watching the entire season of TV shows at a time rather than waiting like a dog for the network to hand me my treat once a week in the form of a new episode. Because of this, I’ve decided cable isn’t the best way to spend my hard earned dollars and my limited time on this Earth.

Have you ever thought about how much time you spend watching TV? Is it something you very much enjoy? Is there anything else you’d rather do with your day? Remember, just because you cancel your subscription doesn’t mean you can’t still watch your favorite shows. Online streaming from the network sites, Amazon Prime, Netflix, over the air programming: these are all legal, legitimate, and cost and time efficient ways of getting your dose of Game of Thrones or Madmen.

Why Are Media Companies Worried About ZTV Households?

Media companies are worried about ZTV households because under current contracts they only receive payment for TV viewers, not online or other media.

This is obviously an archaic method of compensation. The companies will have to adapt fast or be overtaken by newcomers in the media market, like Amazon (with it’s Amazon Prime service for $79/year) or Netflix ($7.99/month).

Cord-nevers and Cord-cutters

Frankly, I’ve never understood forking over $100 per month for a million channels, none of which have anything good on.

If you’ve tasted the forbidden fruit by signing up for a cable/satellite subscription, it’s not too late to come back to the good life. You could become a cord-cutter, someone who once had a subscription, but has since seen the light. You too can cut out the biggest waste of time in your day and potentially the most expensive entertainment you can pay for. Plus, you just might be saving your life by cancelling cable.

So what are you waiting for? Start living the good life today. Cut the crap, save for what matters to you. If you don’t want to cancel your subscription, at least call to get a lower rate on your cable bill.

Are you a Zero TV household? If you’re not, should you be?

Posted in Case Studies, Saving Money, Saving Time | Tagged | 6 Comments

Best Lending Club Reviews From Around the Web

lending-club-logo

Lending Club continues to grow month after month, with over $1.5 billion in originated loans since 2007. Here’s the 6 best Lending Club reviews I’ve found from around the web:

  • How I am Investing in Lending Club in 2013 - Peter at Lend Academy talks about his investment strategy for 2013, which is a good introduction to expanding beyond the built in filters in Lending Club. Peter has been investing in Lending Club since 2008 and I would consider his returns and experience to be the most authoritative on this list.
  • The Economist on Lending Club – the stalwart British publication The Economist examines the growth of peer to peer lending in the US and Europe.
  • The Lending Club Experiment – Mr. Money Mustache is a relative newcomer to the peer to peer lending game, opening his LC account in September of 2012.
  • Beat the Market Experiment – Jonathan at My Money Blog invested $10,000 in Lending Club and is tracking his performance every month, comparing it to investing in Prosper (another P2P lending site) and the stock market

I’ve found these six reviews to be the most authentic and genuine.

Take the returns people are posting with a grain of salt, as most defaults/charge offs don’t happen until after the first year of investing. This will drop the 16-19% returns some bloggers are reporting back to the average 6-9% returns most Lending Club users report.

Posted in Investing, Lending Club, Links | Tagged | 6 Comments