Carnival of Personal Finance #217: The French Money Quotes Edition

The latest Carnival of Personal Finance is up. Carnival of Personal Finance #217: The French Money Quotes Edition The theme for this week's carnival is French quotes about money and the carnival is hosted by Almost Frugal.

My article You Probably Won’t get Paid $100,000 to do that is included in the carnival.

A couple other articles I found interesting :

Darwin at Darwin's Finance got an editors pick for : Are you Efficient? Save Time by Applying Lean Thinking to Everyday Life

Affine Financial Services points out something I wasn't aware of about Mutual fund performance charts from Yahoo & Google with Benchmarks behaving badly.

Is the Southwest Rapid Rewards Visa card a Good Deal?

I've had an airline rewards credit card in the past. They have pros and cons and generally I think that the cash value rewards cards are going to be a better value over all. But there are situations where an airline miles card is a good deal. So I've decided to evaluate a few airline miles cards and see if any would be a good deal for me. I'll start with the Southwest Airlines Rapid Rewards Visa card.

I've flown Southwest Airlines a number of times and they often have the cheapest fares. I usually only fly it to locations around the West coast. (that means going to Vegas) My wife has a friend on the East coast but unfortunately Southwest doesn't go to her city. Generally with Southwest I'd be expecting a fare in the $200-$300 range.

The Southwest Airlines Rapid Rewards Visa card works like this:
When you sign up you get 8 Rapid Rewards credits.
You can also get up to 8 more credits for balance transfers (1 credit per $1200 transferred)
You get 1 point per $1 spent.
1200 points equals 1 Rapid Rewards Credit
There is a $59 annual fee
You get 2 bonus Rapid Rewards credits per year.

Those are the basic elements of the card.

Note that I'm not looking at the % finance rate since I don't think you should be carrying a balance and if you have credit card debt then you should focus on paying it off. A rewards card should be used only if you're paying off the balance monthly. I'm also not sure about the quality of the bank that offers the card nor am I going to consider whether Southwest is a 'good' airline or not. If you don't like Southwest or the bank that handles their credit card then don't get the card.

What constitutes a Good Deal?

To evaluate if the Southwest card is a "good deal" or not you have to figure out what % return you are getting on the money you charge. Normal cash back rewards cards will get you 1-2% return. So for every $100 you charge, you will get $1-2 back in cash. If the Southwest card has a better % return on your use then its a "good deal". But if the Southwest card is 1% or less then its not a very good deal since you can find better deals with cash back rewards cards and not be locked into spending money at Southwest.

There are 2 key variables you'd have to figure : your annual spending and the dollar value of an airline ticket.

What is your annual spending?
This is the amount of charges that you put on your credit card per year. If you spend $1000 on most months then your annual spending would be $12,000

What is the expected dollar value cost of a trip on Southwest for you?
If your trips usually run $200 then the value of airline rewards are much less than if your trips cost you $500. So its important to know what your ticket costs would realistically be. This is how much it would cost you to buy a ticket on Southwest for a flight you would expect to take. This amount can be used to figure the dollar value equivalent of the Rapid Rewards. So for example if you'd only take Southwest to Vegas and those tickets run you $250 then thats your expected value. But if you routinely take Southwest form Arizona to New York then your tickets might run $450.

Value of rewards you would get in a year would equate to the points you'd get from expenditures / 16 * the value of a ticket. You get 2 free Rewards per year so you'd want to add those into the equation. You'd also want to reduce your cash value by the $59 annual fee. To find the annual % return on your spending you'd figure the cash value of the annual rewards and then divide by your total spending.

The full equation would look like this:

% return = (Ticket Cost * (((Spending / 1200 ) + 2 ) / 16 ) - $59 ) / Spending

Lets look at a couple examples.

Lets say you charge about $550 a month to your credit card and your typical fight on Southwest will run you $300. Then the formula would be :
% return = (Ticket Cost * (((Spending / 1200 ) + 2 ) / 16 ) - $59 ) / Spending
= ($300 * ((($6600/ 1200) +2)/16)-$59 ) / $6600
= ($300 * ((5.5+2 ) / 16) - $59) / $6600
= (300 * 0.46875 ) - $59 ) / $6600
= $140.625 - $59 / $6600
= $81.625 / $6600
= 0.01236
= 1.236%

Example #2.
Lets assume you spend abut $2000 monthly on your card and your trips usually run $400. This time I'll skip the full math. Then the equation would be:
% return = (Ticket Cost * (((Spending / 1200 ) + 2 ) / 16 ) - $59 ) / Spending
= ($400 * ((($24000/1200)+2)/16) - $59) / $24000
= 2.04% << == good deal

But on the other hand if your tickets run only $250 a trip then you'd get:
= ($250 * ((($24000/1200)+2)/16) - $59) / $24000
= 1.18% <<>

But if you only charge $300 a month then you'd get:
= ($250 * ((($3600/1200)+2)/16) - $59) / $3600
= 0.5% <<>

Roughly speaking if your typical ticket on Southwest is in the $250 range or less and your spending is over $9,000 then you're return on the rewards return on your spending is going to be around 1% range. To hit over 2% return on the Rapid Rewards card you'd have to be getting tickets than cost $400 or more. The exact answer will depend on the combination of your spending and the ticket costs.

If you would expect to fly on Southwest with a fare that is around $400 or more than a Southwest Rapid Rewards Visa is a good deal. But if your ticket costs are lower then there are better rewards credit cards.

Apparently It Takes Verizon 3 months (or more) to fix Their Billing Error

Over a month a go our internet modem broke and I had to call Verizon to get a new one. They shipped out a replacement in a couple days and it worked fine. They didn't ask about the old modem and so I assumed they didn't want it back since it was 3-4 years old and broken. But sure enough on the next bill there is a $100 charge on our bill for "unreturned equipment" that they didn't ask us to return and couldn't possibly make any use of. SO I called them up and asked about it and the guy said they'd fix it and credit my account. OK good. But not so fast.. I get the next bill and there is still no credit. I call them up and ask about it and I'm told that it was processed wrong after the first call and they'll have to do it again. But then they tell me that it could take a month or two to get fixed. The original bill was July. Now they are still not fixed as of August. It might take 2 more months so that could be October.

How could it possibly take up to 3 months to process a $100 customer refund? The first month was apparently due to an error. Well ok fine, so they should be able to fix that but they're saying it could take 2 more months. I'm not thrilled about this as you might imagine so I tell the customer service guy that he ought to let his supervisor or whoever know that I wasn't thrilled about this taking them so long. I understand its just their internal bureaucracy that caused this so I'm not blaming the customer rep. He starts to go into explanation about why it would take them so long about having to go to another department or whatever. I'm not really concerned with the details of exactly why they can't do a simple thing in a reasonable timeframe. But I also point out to him that their competitor Comcast is mailing me stuff every other day (it seems like) to get me to sign up with them at discount rates. To which he replies something along the lines of "but you won't get the same excellent service from them as you do from us" kind of claim. I was a little shocked that he tried to make that argument at this point in the discussion. I'm very amused by it in hindsight. Granted, Comcast isn't the best service in the world and I've seen many people who outright hate them. But the customer rep who just told me that Verizion can't commit to fixing their own simple billing error within a month then has the audacity to brag about their excellent service? Someone wasn't paying attention and it wasn't me.

Verizon has had 3 individual customer service people in a row now do a poor job in my mind. The first person incorrectly billed me for the old broken modem. The second rep. incorrectly refunded the $100 charge. The third rep. decided to stick to their sales script in response to mention of Comcast and claim Verizon's support is better after witnessing their support fail miserably. As a company Verizon has failed since it is unable to refund me within 3 months which is a failure of their processes.

This is an example of how poor service can drive someone away. I'm very seriously considering switching to Comcast at this point. In fact I can't really give a good reason for why I haven't called Comcast already.

If you're going to run a business then make sure your customer service keeps people happy. If it doesn't then its guaranteed that you'll lose customers.

Best of blog posts for week of August 7th

My Money Blog has some Costco Membership Certificates w/ $50 in Free Costco Coupons the coupons let you get some free stuff from Costco if you sign up for a membership.

FMF discusses a A College Debt Nightmare

Wise Bread features Top 5 Economy Based Board Games that Make You Think