This Week In Your Wallet: Negative Interest Rates 101
“We’re taking a look at them,” said Janet Yellen, Chair of the Federal Reserve, speaking last week before Congress. The them in question? Negative interest rates. Although Yellen did clarify that she doesn’t believe rates will be moving down anytime soon, it seems like a good time to take a look at what negative interest rates (already in place in Denmark, Sweden, Switzerland, the Eurozone and Japan) would mean here.
- What’s the motivation? To encourage banks to lend more money, consumers to borrow more money and consumers to spend more money, explains Jack Ablin of BMO Private Bank. “The quantitative easing money that went into the system really got stuck on bank balance sheets, that’s the reason we don’t have inflation. They’ve created the money, but it hasn’t circulated, there’s no velocity,” Ablin said. (Ahh, velocity. I remember you from Econ 1B.)
- How would it work? Banks would likely have to pay the Federal Reserve interest to house their excess reserves. Of course, those costs would be passed onto consumers – but probably not via a direct charge says Ken Tumin, founder and editor of DepositAccounts.com. In the other countries that have dipped into negative territory, Tumin says three things have happened: Deposit rates have gone to zero, even on Internet savings accounts; it has become harder for consumers to open savings accounts; and monthly fees have become more common and more difficult to avoid.
All of which, as I said, is not likely – at least right now. But you’ll no doubt continue to see them in the headlines. And now for the other news of the week.
I Just Called To Say “I’d Love A Better Deal On My Cable Bill”
When was the last time you called your cable company (or cell phone company or other monthly biller) to ask for a better deal? It’s probably been a while. BillFixers.com, recently profiled in the New York Times, is in the business of taking on this onerous task for consumers. (It boasts a 94.9% success rate.) You could sign on with the company – and pay 50% of your first year’s savings – to have them do it for you. Or you could use their strategies to DIY. Start by directing your call to the “cancel my service” option on the phone. Be very friendly (I can attest to the fact that this works particularly well with harried airline phone reps).
And perhaps most importantly, come prepared with other offers and prices you’ve researched online. Some companies are also prepared to throw in faster Internet speeds, temporarily free premium television channels and other upgrades so you’ll stay with them. Other tips include telling the customer service representative you have plenty of time once they ask to put you on hold, so they feel free to spend more time figuring out a deal. And once you do have an offer, keep track of the details, call back and get another rep to repeat it so everything’s set in stone.
In The “Counting Your Chickens Before They’re Hatched” Department
“Never spend your money before you have it,” Thomas Jefferson famously said. But planning what to do with your money before you have it? That, I believe, is a smart move – particularly where tax refunds are concerned. This year’s average tax refund is approaching $3,000. If you’re a frequent reader of this newsletter, then you know you’ll get a (guaranteed) return on your money by using it to grab matching funds in your work-based retirement plan, or paying down high interest rate credit card debt.
But if you’ve already been there, done that, then Kiplinger outlines 18 ways to spend and invest $1,000. Among them? Have some fun and save vacation money by booking a “repositioning” cruise (i.e. a ship heading to another location between cruise seasons), make your home smarter with devices like learning thermostats (which use wireless sensors to make decisions based on temperature and the number of occupants of a room) and retro-fit your current bike to make it electric (far cheaper than the $2,000 you’d pay to buy a new electric one).
The Dating (and Numbers) Game
I hope your Valentines Day was everything you hoped it would be (which does not – by the way – mean that you had to spend it snuggled up with your one and only. Our reporter, Kelly Hultgren, went with her BFFs to see “How To Be Single” and pronounced the outing “perfect,” despite the questionable reviews the movie received.) That said, if you were hoping for more in the romance department, take a look at my interview with Jon Birger, author of “Date-onomics: How Dating Became a Lopsided Numbers Game.”
Birger says, without a doubt, there’s a supply and demand issue in the dating pool. And the statistics aren’t in favor of women, especially if they want to marry a college-educated man. Among millennials, the ratio is essentially four women to every three men. In your 30s and 40s, and the numbers are even worse: five to three. That leads to other problems: “When women are in ‘over-supply,’ so to speak, men are more likely to play the field,” he explains. “The whole dating culture becomes more sexualized, marriage rates decline, divorce rates go up… it’s both economics and psychology.” Still, there are ways to level the playing field. Among them: where you live, the college you choose to attend and what you decide to study.
Have a great week,
Jean
