Charles Schwab 2% Credit Card, An Update and NEW ETF's!

Back in April, I reviewed the Charles Schwab Invest First VISA Credit Card. I've been using the card for 6 months now as my primary card (except for gas (PFCU) and hotels (Marriott)), and I have to say it has met all expectations. The account is everything I currently could ask for:

• 2% back on all purchases - a very solid reward
• no foreign transaction fees - Spain, no problem; London, no problem
• automatic payment so I don't have to worry about manual payments
• excellent customer service

The one area I wasn't as keen on was that all of my rewards were required to go into a Schwab brokerage account paying .01% on the balance and charging $12.95 commissions. This would mean the money would just sit unused and not gaining meaningful interest unless I transferred it out. And, sit it did...........until today.

Today I read online in the NY Times that Schwab was introducing its own ETF's. Normally I wouldn't care because I have plenty of access to great ETF's through Ameritrade, but I read on anyway and found out that if you purchase a Schwab ETF through your Schwab account, there is no brokerage commission. That's a pretty good deal I thought, but probably Schwab will just put their expense ratios higher than average to make up the difference. Wrong. The Schwab ETF's expense ratios were lower than the ones for the comparable Vanguard funds. To top it off, when you make your order at Schwab, there is a simple click box to reinvest your dividends.

Sold. So, today I'm investing all my free money into free ETF's (75% SCHF, 25% SCHB) with free dividend reinvestment. All in all, a pretty good deal.

Money Laundering for the US Government

Okay, my headline is a bit sensationalistic, but it's not far from the truth in my latest profitable personal finance adventure. You see the US Mint has a problem. It wants to replace the paper version of the US dollar with the coin version because the paper version wears out much more quickly and increases costs for the US Mint to replace the currency whereas the coins obviously degrade far more slowly. The only way to take paper money out is to increase the circulation of the coins. This is where I come in. You see you can buy these coins at the US Mint website. Why help the government with this task you ask? Because you can make $ on it. Here's my process from a recent transaction:

1) 9/5/09 My billing period closes on my Schwab Invest First credit card. Why is this the starting place? Because I'm buying the money with my credit card that pays me 2% on any purchase (including the purchase of coins at the US Mint). And, I want to buy as close as I can to the new billing cycle in order to maximize the amount of time the value of the coins will be deposited in my bank account before I have to pay the credit card bill.

2) 9/9/09 I initiate my purchase at the US Mint website. I buy 2 $500 presidential sets. It's easy and painless. Note that when you go through the purchasing process, it appears like you have to pay the shipping and handling until the very last page. The shipping is actually FREE, and that's clear at the end.

3) 9/15/09 I had heard that delays in the initiation of shipment were common. My coins shipped 6 days after my purchase initiation. A UPS tracking number was provided at the website.

4) 9/16/09 Surprisingly, the coins arrived the next day. You must sign for them. I took the coins to the bank at lunchtime still wrapped in their wrappers and encountered no issues with the deposit. It was a completely normal and standard transaction except that I had 1000 $1 coins in my possession.

5) ~11/7/09 This is the likely future date where my Schwab Invest First credit card will autopay for this purchase from my account. That means I'm gaining 2% interest on $1000 for about 50 days in my NC State Employees money market account. I'm estimating the approximate value of this to be $2.75.

$2.75 isn't much, but let's not forget the $20 I'll be getting as cashback bonus on my purchase from Schwab.

So, to summarize, I make $22.75 by initiating a web purchase, taking delivery from the UPS person, and depositing the money in the bank I drive by virtually everyday. If you do this at the beginning of each billing cycle as a routine and you pocket an extra $273 per year. Probably not as profitable as real money laundering, but this one is legal.

As always, feel free to ask questions in the comment section.