Random Thoughts – Randocity!

Disney Vacation on a Limited Budget

Posted in disney, travel by commorancy on August 8, 2018

Is it possible to plan a budget vacation to a Disney theme park? That’s what this article intends to determine. Let’s explore.

Vacation Costs

Your primary costs for any Disney vacation include the following:

  1. Airfare
  2. Hotel
  3. Transportation
  4. Park Tickets
  5. Food
  6. Souvenirs
  7. Incidentals

Airfare, Hotel and Transportation

These costs can be negotiated at the time you book your vacation package. If you purchase these together as a bundle, you can save substantially booking them together. You can also get additional discounts if you utilize AAA or AARP at the time of your booking. You may see better discounts by booking off-season.

If you’re planning to rely on Disney transportation throughout the trip, ensure that your hotel is within walking distance of this transportation or that the hotel offers a shuttle to and from Disney. Any hotel near to Disney is likely to offer a shuttle, but be sure to call the hotel in advance to verify that they offer a shuttle and how often the shuttle runs. You should also confirm how long it will take to get from the hotel to Disney to plan timings. If your hotel is 30 or more minutes away from the Disney by driving, you may want to consider a somewhat closer hotel, but that may cost more money. I always recommend staying as close to the park as you can afford.

Don’t assume that using Disney’s vacation booking system will get you the best pricing. If you have AAA or AARP or Costco or Sam’s Club membership, you should try booking your vacation through their vacation site then compare it to Disney’s vacation booking system. Also compare it to other services like Expedia, Travelocity, Hotels.com,  Hotwire and Priceline. You may even be able to insert your AAA or AARP membership number into many of these sites to receive discounts. You should check all of these sites to see what your best cost is.

You can save on airfare if you drive and save on hotel and airfare if you drive a recreational vehicle (RV). See camping below.

Park Tickets

Tickets to any Disney park are a fixed cost. You’ll pay whatever Disney is currently charging for the calendar year you plan to attend. However, you may be eligible for discounts on tickets if you buy them in advance through vacation booking sites like AAA or AARP. Always plan to buy your park tickets in advance rather than at the gate. Purchasing tickets at the gate will cost the most money… so buy them in advance.

However, Disney is constantly changing its arrangements with these membership services. You should always check these membership services when you plan to book your vacation to determine if these sites still offer the most effective discount tickets.

With all of that said, if you have a family of four and you’re wanting to buy 5 days of park access, you should expect to spend over $1200 for four 5 day base passes. AAA typically offers up to a 10% discount which might save you up to $120 on that $1200. A base pass will allow you to enter one park per day. If you want to hop between parks during the same day, you will need to add the Park Hopper option to each ticket (about $100 additional per ticket on each 5 day pass at Disney World). Note, prices are somewhat cheaper for children under 10. To save money, you’ll want to skip the park hopper option and simply plan one park per day. This is the best option anyway because trying to move around between the parks in the same day consumes a lot of time that you could be using at a park.

The Park Hopper option only works between Disney parks including (Florida) Magic Kingdom, Epcot, Hollywood Studios and Animal Kingdom and (California) Disneyland and California Adventure. If you want to visit Universal Studios, Busch Gardens, Knott’s Berry Farm or any other non-Disney parks, you’ll need to pay for access to these separately. You’ll want to plan for access and transportation to any non-Disney parks as part of your budget planning.

Food

Save on food costs by stocking your hotel fridge with sandwich ingredients. You can then make sandwiches to bring with you to the park rather than spending for meals inside the park. A park meal might cost $10-15 where a sandwich and water might cost you $1-2. You can save a lot if you make your own food and bring it with you or leave the park for lunch at the hotel and come back later.

Souvenirs

If you want to buy souvenirs, then you’ll need to budget for them. T-shirts, for example, usually start around $20 and go up from there inside the park. Instead, I might suggest asking the concierge at your hotel if the hotel’s shuttle can drive you to local businesses in the area, like a close Target or Walmart. Because these shops are close to Disney, they likely have a better selection of Disney souvenir merchandise than stores outside the area. These stores know that Disney park stores are expensive and that shoppers will, instead, frequent the close proximity stores looking for better prices on souvenirs. Take advantage of these lower prices at places like Target and Walmart.

Visit these local stores outside the park to buy souvenirs. Sure, you didn’t get it in the park, but you did get it while you were on vacation. The souvenir still counts as a souvenir. There’s absolutely nothing wrong with budget shopping at local retail businesses near the park to save on souvenir costs.

Incidentals

Try to bring as many incidentals with you as you can to save money. These include items like:

  • SPF lotion
  • Hats
  • Coats
  • Batteries (bring rechargeables and charger)
  • Sunglasses
  • First Aid Kit
  • Camera
  • Medicine (i.e., Pain Reliever, Imodium, Antacid, Cough Medicine, Prescriptions, etc)
  • Chapstick
  • Phone charger and cable(s)
  • Computer power cable
  • Power bank for phone charging
  • Misting fans / cooling devices
  • Bug Repellant
  • Towels
  • Reading Glasses

If you have to locate any of these items inside or outside of the park, you’re likely to pay more than you expect and paying for these will kill your vacation budget in the process. Shove as many of these into your suitcase and bring them with you to the hotel and into the park as needed.

Choose your Park destination

You can save some pennies by choosing your Disney vacation destination wisely. Many people automatically assume Disney World for their Disney vacation. If you must visit Epcot or Animal Kingdom, then Florida is your only choice. However, Disneyland exists in Anaheim, California and it’s not as captive as Florida. It can also save you some pennies depending on where you live. Southern California offers many options which are as much fun as seeing Disney World. With Southern California, you also have the option of not only the Disney parks, but non-Disney parks, Hollywood tours and the local sights (i.e., Hollywood Walk of Fame).

Choosing Disneyland in addition to all of the parks that Disney offers (i.e., Downtown Disney and California Adventure), non-Disney parks include Knott’s Berry Farm, Universal Studios and if you’re willing to drive a bit, Great America and Six Flags Magic Mountain. Of course, Universal Studios also exists in Florida, but also requires driving. Tickets to Disneyland are a bit less expensive than Disney World because there are less available parks (Disneyland, Downtown Disney and California Adventure). You want to consider this option to reduce costs in your vacation planning.

Choose your hotel carefully

It’s very tempting to stay in the Disney resort hotels. However, these can be very pricey whether in Florida or California. Consider how much time you plan to spend in the hotel room and on the hotel property. If you plan to visit the park the majority of the time, then you’ll be out and away from the hotel property. The only thing the hotel is good for then is sleeping at the end of the day. Unless you plan to spend a day or more to take advantage of the resort amenities, staying at a resort hotel is an unnecessary extra expense. Instead, choose a less expensive standard hotel with fewer amenities. This can save you money that you can put towards food, souvenirs or transportation.

Plan out your park visit

If you plan your park schedule in advance, this can help minimize your expenses. For example, if you bring your own food to the park, you can eat that instead of spending for expensive in-park dining. If your hotel is close enough, you can always take a break, head back to the hotel and eat food there. Many hotels offer both fridges and microwaves (usually on request). You can head to a supermarket and stock the fridge with sandwich fixings for the duration of your stay. Making your own food in the hotel room is the least expensive way to eat food that’s healthier and reduce your expenses. If you visit one park per day, you can save on ticket costs and reduce transportation expenses.

If you do decide to dine at a restaurant in Disney, expect to spend more than you might think. Disney’s dining experiences aren’t inexpensive affairs. You’ll also want to make sure to make reservations in advance. You don’t want to arrive at the restaurant and have to wait and hour or two just to get a table. Reservations save you a lot of time… time that you can better use in the park and get the most out of your tickets. To save the most on food expenses, head to a local grocery store and stock the fridge at your hotel and eat your meals there.

If your hotel offers free continental breakfast or a free breakfast buffet, take advantage of this food and eat breakfast there.

Breakfast with the Characters

If you want to spend a little money on food, this is one of the better ways to do it, particularly when you are with children. You can buy Breakfast in the Park with Minnie and friends. This breakfast experience, while tremendous fun for the kids, can cost between $20 to $40 per person. This breakfast experience alone does not allow you to take advantage of the 1 hour early park opening. You will have to buy the Magic Morning option separately. The Minnie and friends breakfast offers usually around 8 different characters who will interact with you while eating breakfast.

Extra Magic Hour / Magic Morning

One of the perks for staying at a Disney resort hotel is that you automatically get the Extra Magic Hour included with your stay. This means you can enter the park one hour early in the morning and take advantage of select stores and attractions. If you don’t stay at a Disney resort hotel, you can buy the Magic Morning option for each 3+ multi-day ticket. Magic Morning and Extra Magic Hour are available at both Disneyland and Disney World parks. You’ll need to consult the current schedule at the park to determine which parks open early on which days as the early openings change based on the day of the week. If you choose to stay in a Disney resort hotel to obtain the Extra Magic Hour benefit, you will want to call the hotel and confirm that your stay includes this option. Don’t just assume that it does.

When planning your visit in advance and you intend to take advantage of the early park opening, always confirm which park is open on what day so you can plan to visit that park on that day. This is especially important if you’re intending to visit one park per day to avoid the park hopper charge.

Take a Break

There’s always lots to see and do at any Disney park, but it gets tiring walking around the park and standing in lines. When it reaches the hottest part of the day, you’ll want to take a break and head back to the hotel for a few hours to cool off. If you’re at a resort hotel, you can use this time to take a swim, relax in the room or take advantage of other hotel amenities. This lets the heat pass and gives you time to energy up for the evening hours. It also gives you some time to catch late lunch or early dinner and avoid paying in-park food expenses. Taking a break is the best way to enjoy the park.

Carry a water bottle, bag and medicine

You’ll want to take a water bottle and a small bag with you into the park for keys, phone, medicine and flavoring powders. It’s easy to get ice and water from a restaurant to fill your bottle. Then, flavor the water with a flavoring packet you have with you. This saves on buying expensive sodas and drinks in the park. These flavoring powders are packed in small packets which are easily stored in a small bag. Because the packets are so small, you can carry a lot of them. You can sometimes find soda water and make your own soda with a flavoring packet.

You’ll also want to carry a small amount of medicine like Tylenol or other pain relievers, antacid and diarrhea medicine. If you realize you need these while in the park, you’re going to pay a lot to buy a tiny single dose container that may not be a brand you like or be effective. Instead, carry your favorite medicines with you in your luggage when you travel. If you buy your favorite brand medicine before you depart, you can be sure to get the best deals and use brands familiar to you. Having this medicine with you in the park, you’re prepared if your favorite ride jostles you around just a little too much or a food you consume doesn’t sit well. If you or your child has the possibility of anaphylactic allergies, be sure to carry at least one Epipen with you into the park. I’d also recommend avoiding eating foods made in the parks to avoid accidental exposure.

It’s always best to buy your medicines in advance of travel because it’s the least expensive way to get them. And, you may already have them in your cabinet at home which will save you money buying medicine in the park, at the hotel or at a local pharmacy.

Shop Around

Before buying souvenirs willy-nilly inside or outside of the park, shop the stores and see what you like. Visit as many stores as you can in the park, then outside of it. Compare prices and buy the souvenirs that fit within your budget. Keep in mind that the stores in the park carry items that you typically can’t find anywhere else. In fact, Disneyland has merchandise exclusives branded to Disneyland. Disney World has merchandise exclusive to Disney World. You won’t find any Disney World merchandise in Disneyland and vice versa. You’ll want to weigh this when you visit the stores and when planning your vacation. If you plan to buy in-park souvenirs, you’ll want to set a maximum limit to spend. Your souvenir budget is likely to stretch farther if you’re willing to buy items at discount stores outside of the park.

Keep a list or take pictures of merchandise+prices you might want. If you take pictures, you can remember both the style and price when you go looking for a similar item at Target or Walmart close to the park. For items like small pins or buttons, you likely won’t find these outside the park. You’ll want to buy them at the store in the park. For T-Shirts or other clothing items, these are usually cheaper outside the park.

Laundry Facilities

When you’re staying for 5 or more days, you’ll probably need to do laundry at some point. Many hotels offer full laundry service. You’ll want to ask the hotel if they have a self-service laundry room. This can save you money instead of using the hotel’s much more expensive full service laundry. If you can plan your hotel stay at a hotel with a self-service laundry room (call and ask before you make the reservation), you can save money by doing your own laundry. You’ll just need to pick up a small container of laundry soap or carry some with you in your luggage.

First Aid Kit

Bring a small first aid kit with you that contains adhesive bandages, antibiotic ointment and cleaning wipes at a minimum. It doesn’t have to be anything fancy. You can shove these into a small zipper lock bag which fits easily into luggage. If someone in your party is scraped or cut while in the park, you can visit the first aid center, but you’ll also want to take care of it when you get back to the hotel. I’d suggest carrying a few bandages and ointment to the bag you carry with you, but it’s not strictly necessary as the park’s first aid center can help you take care of it right away. It may take some walking to get to it. I can be faster to take care of if you have bandages and ointment with you. If you need to locate a first aid kit while on vacation, it will dig into your budget if you end up at the hotel’s gift shop or, worse, you end up at some all night drug store because nothing else is open.

SPF Lotion

Bring this with you in your luggage. Not only can it be difficult to locate a quality brand in the park, it’s likely to be very expensive for a tiny bottle. You’ll want to carry a small TSA authorized and sized container with you. This allows you to carry it into the park and also carry it on a plane. This likely means transferring some of the lotion from the original container to a TSA sized container. Be sure to label what it is. If you have to go shopping for this later, this will eat into your budget. SPF lotions are not always inexpensive even at the best of times. If you have sensitive skin and need a specific brand, be sure to carry this with you as you may not be able to find the brand you use at your vacation destination.

Hats and Sunglasses

This should go without saying, but bring your hats and sunglasses with you from home. This will save your vacation budget. Of course, if you’re looking for a souvenir hat, then fine. Sunglasses won’t be cheap inside the park. If you can get to a Target or Walmart, you can likely buy a cheap pair. Again, that eats into your vacation budget. Save this money by bringing these items with you from home.

You’ll also want to keep your sunglasses on a string or take them off and hold or secure them inside the bag when riding rides. Same for hats. Hats and sunglasses tend to sprout wings and fly on rollercoasters. Be sure to hold onto them well. This also includes cell phones. If you can rent a locker before heading onto a rollercoaster, you can lock these items up to avoid losing them while riding. Though, you should always hold your cell phone in your hand tightly while riding. You shouldn’t leave your phone in a locker.

Phone charger, cable and power bank

If you know that your phone is likely to run out of power quickly, you’ll want to carry a fully charged power bank and charge cable in your bag (and in your luggage on your trip). If you forget to bring these items with you, you’ll pay $30 to Disney to get a power bank and cable. That’s $30 you could have used to help pay for dinner or a souvenir. Of course, you might be able to run to Best Buy or Target and pick one up for slightly less, but that’s still an expense you can avoid by bringing one with you. It also means you have to leave the park and go run errands, wasting time.

Yes, the TSA allows you to carry a power bank in your suitcase or carry on bag so long as it is inside of a bag that prevents accidental discharge. Purchasing a power bank or cable is one expense you’ll want to avoid.

You may be able to find power outlets inside of Disney to plug in your charger, but that means you’ll be sitting around waiting. If you have a power bank battery in your bag, you can charge your phone while you’re walking around the park. Be sure to remember to charge the power bank each night at the hotel. You’ll also want to have a battery that can charge your phone at least twice or carry two batteries.

Strollers

If you’re traveling with children who need a stroller, you are permitted to bring your own stroller as long as the stroller is less than 36″ x 52″ in size and is not a wagon. Wagons are not permitted. You can rent a stroller at the park, but these obviously cost money. If you’re trying to save on costs, plan to bring your own stroller with you. This means checking the stroller as checked baggage at the airport.

However, many airlines today are now charging for checked bags with fees up to $50. If the checked stroller cost ends up higher than the cost to rent a stroller, renting a stroller may be worth the expense at the park. For example, if you plan a 5 day trip to the park, your rental costs will be $65-75 depending on discounts. This is higher than $50 to check a bag. In this case, it’s worth it to bring your own from home. If your trip is 3 days in the park, then it might be less expensive to rent a stroller in the park.

If you simply don’t want the hassle of carrying a bulky stroller with you while traveling, then renting a stroller is your only option.

Fireworks Show

This tip isn’t really a money saver, but it does let you take better advantage of the money you spent on your tickets. Always take advantage of the fireworks display and other large crowd attention gathering shows (i.e., parades). You’ll want to watch the fireworks show once while you’re at the park. Skip the fireworks shows on the rest of the days. Instead, use this time to ride the long wait time rides.

Because the fireworks show is a huge crowd draw, many people leave the rides to go watch the show. This gives at least 30 minutes to make haste and ride some of the more popular rides like Space Mountain or Big Thunder Mountain. These line wait times can drop precipitously during the fireworks show. Take advantage of this. You can sometimes  ride these popular rides more than once in that 30 minute period. You’ll want to find which rides have the longest wait times, then plan to visit these rides during the fireworks show each successive night.

Because this window of opportunity is 30 minutes with the fireworks, you’ll need to plan which rides in advance. For example, riding Space Mountain, then traversing half the park to ride a different ride could lose you 10-15 minutes in walking time. Try to keep your rides close together to maximize this 30 minutes of short lines.

Note that this window of opportunity isn’t always a sure thing. It all depends on how many people realize this drop in wait times and take advantage of it. If you’re in the park on Halloween or Christmas, for example, these are times when the park is excessively crowded. Waiting for fireworks on these nights may not reduce the wait times simply because the crowds are already excessive.

Also note that as soon as the fireworks end, the lines go right back to the length they were before it started.

FastPass

If visiting Disney World, Take advantage of FastPass to reserve times in advance on popular rides. Note that you don’t necessarily have to reserve times the day before. If you’re diligent enough on the phone app, you can sometimes find cancelled reservations that you can immediately take advantage of (within 15-45 minutes). You just need to keep polling the FastPass app looking for cancelations.

Unfortunately, FastPass requires adding the MaxPass option to your tickets which is at least $50 extra per ticket. FastPass is worth it if you intend to ride the most popular rides in the park. Otherwise, you can find yourself standing in line for several hours to ride… or you’ll have to wait for the fireworks show later in the evening and hope the wait times temporarily subside.

Note that FastPass works somewhat differently at Disneyland than at Disney World. You’ll need to download the app on your phone for Disneyland to use FastPass.

Costs

For any Disney vacation, you’ll have to expect to spend around $1200-$1500 for a family of 4 just on tickets. This is pretty much the same cost at Disneyland vs Disney World. Depending on your distance from California or Florida, your airfare may vary. If you live in California and travel to Disneyland, it will be less expensive than traveling from New York City to California. The hotel and airfare might knock you back an additional $1400 to $2500 depending on hotel, airline and time of year.

You’ll still need to plan for food, souvenirs and incidentals. This will probably be another $1000. Overall, expect to spend $2500-$5000 for a family of four not including food or incidentals for a 5 day vacation. Disney World will be slightly more costly than Disneyland. By slightly, I mean several hundred dollars more costly as Disney World ticket prices are higher and hotel costs seem a slightly higher in Florida than in California.

Can you visit a Disney park with less money? If you drive, you can save on airfare. If you have an RV, you can live in that and save on hotel costs. Driving an RV, you can save on both airfare and hotel fees, but you’ll need to pay for RV rental space. Having an RV can substantially reduce your travel and stay costs, but this also means having access to an RV. If you have to rent an RV, per day rental fees can be very similar to hotel room rates and an RV is much more cramped. You may not save much money by renting an RV. You also likely won’t want to use the RV around town, so you’ll need to rent a car when you get there adding to the costs of the vacation.

Camping

If you’re willing to rough it a bit when at Disney World, you can camp at Disney’s Fort Wilderness. You can check this page to determine the going campsite rates. The cheapest rate I’ve seen is $55 a night before tax. There may less expensive non-Disney RV parking and campsites available (i.e., state and national parks). Check Google for details. Parking off of Disney’s grounds means you’ll need to find your own transportation to and from the parks.

Camping near Disneyland is limited considering it’s in the middle of Anaheim, CA. There are several RV parks not far from Disneyland, but you’ll need to find your own transportation to and from the RV park and Disneyland.

RV Parking at the Parks

If you intend to also use your RV as your vehicle, RV parking is permitted at the all Disney World parking areas for a fee. This fee is higher than for a car. RV Parking is only permitted in the Toy Story parking area at Disneyland also at a higher fee. You’ll need to plan for this daily fee in your vacation budget if you want to use your RV to transport you to the park(s) each day.

Tips and Traps

This section is both about saving money and about not losing your money to scams. It’s pretty much common sense, but these are always worth saying.

Avoid Ticket Scams

Don’t buy your park tickets through eBay, Craigslist or other similar classified sites or sellers. Always use reputable sites authorized to sell tickets on behalf of the Disney parks. A few of these reputable sites include:

You may find some people claiming to sell partially used tickets. DO NOT buy these! Tickets, once used, are tied to an individual’s fingerprint and cannot be transferred. There’s no way for you to make use of a anyone else’s used ticket. Also, once a multi-day ticket is used, the clock is ticking. Multi-day tickets also expire 13 days after first use. Used ticket sales are always a scam. Don’t even consider this as an option.

However, if a ticket has never been used, these are valid tickets. The problem is, if you’re not buying the ticket from an authorized channel or from someone you absolutely trust, it’s very likely a scam. It’s easy to counterfeit e-tickets and paper tickets to look legitimate. You don’t want to get to the front gate and find out what you bought was counterfeit, then be stuck paying full price at the gate. Always buy through reputable booking services. Don’t get scammed by buying tickets from a classified ad or an individual.

Use your own camera

When in the park, take photos with your own camera. Don’t fall for Disney’s photographic services. Disney will always try to entice you into using their services to take pictures of you with the characters. This is a costly service. Simply ask a cast member to take the picture with your camera or phone.

For safety reasons, only ever ask a cast member with a name badge to take a photo with your camera. Never ask another guest whom you don’t know to handle your property. They can easily run off with your camera or phone and you’ll never see it again. In a place the size of Disney’s parks, you can’t trust anyone to hold your property. The only people in the Disney parks that you can trust to hold your property are cast members. Better, bring along a telescopic selfie stick and hold the camera yourself.

Carry only what you need

This goes back to carrying a small bag with you. If you carry a small zippered bag, you can contain everything you’ll need for a day at the park and not have to carry it in your hands. Because Disney crowds can be varied and large, avoid flashing money if you don’t have to. Also, a small bag allows you to stow your camera, hat and sunglasses when you ride rides. Be sure to secure your bag when you take it onto a ride or use a locker.

Go Cashless

If you have a MagicBand wristband (not available at Disneyland) or room card and you’re staying in a Disney resort hotel, you can charge purchases to your room. I’m not a big fan of doing this because you end up with a whopping bill to pay at the end of your stay. There’s also nothing available to allow you to budget your spending. However, you can go this route if you like. I already don’t trust hotels to tally up the correct amount when the bill is due. Why convolute the bill further by charging in-park items to the hotel room?

You can still go cashless. Because Apple Pay is available within the Disney parks, this means you’ll have flexibility in using your Apple watch or phone device to pay for items within the park. Of course, you can also use a credit or debit card. This avoids cash transactions and it avoids pulling out your wallet for all to see. Unfortunately, it seems that Samsung Pay is not available at Disney. Google Wallet may only be available for use at Disney World. Apple Pay seems to be the best choice for either Disney World or Disneyland. Unfortunately, these cashless options don’t allow for easy budgeting.

Even though Apple Pay is accepted at Disney parks, it may not be accepted at stores outside of Disney. Always carry an alternative payment method when your preferred method is unavailable. For example, Target and Walmart don’t accept Apple Pay. Also, some smaller food carts in the park may be cash only.

Gift Cards and Budgets

If you want to stick to a strict budget while at Disney, buy and fill a Disney Gift card. If you have a $100 a day budget, then add $100 to a Disney gift card. You can use this card when purchasing anything at any Disneyland park, Disney World park or even at a Disney store. Using a gift card avoids overspending in the park and allows you to stick to your daily budget. Buying and using a Disney Gift card is the best budgeting choice at Disney. Note that you can only refill the cards at a location that sells them. There are refill and purchase locations in the park. Online refills are not available. This means you’ll need to buy the card(s) at a Disney Store before you travel or buy them in the park when you get there. You’ll need to allot time to refill the card each morning or before you leave the park each night. Disney gift cards have no fees. Even though the gift cards never expire, you’ll want to use up any remaining balance before you leave the park on your final day.

Protect your gift card like you would any other credit card. However, if it’s lost or stolen, you will need a copy of the original purchase receipt to freeze the account and transfer the remaining balance to a new card. Call 1-877-650-4327 to report a lost or stolen card. You will need to provide the first 12 digits of the Disney Gift Card account number to the agent to freeze the account. You can then visit a gift card location and they will transfer the remaining balance to a new card. Be sure to take a picture of the card number on your phone or write it down and take a picture of the receipt so you always have a copy of both the card number and the receipt on your phone. It’s also a good idea to back up these photos to Google Drive or iCloud just in case you lose access to your phone.

Non-Disney Parks and Cards

If your vacation plans include visits to non-Disney parks, then a prepaid Visa or MasterCard is the more flexible option even though they have fees. With a prepaid Visa or MasterCard, you will need to keep close track of the balance available on the card. Unlike gift cards that let you use every last penny on a transaction seamlessly, prepaid Visa and MasterCards don’t work like this. If you have a balance of $1.22 on the card and you attempt to spend $1.25, the payment will decline. It doesn’t automatically give you the option of spending $1.22 and then making up the difference in cash like a gift card. You’ll need to continually check the balance of the Visa or MasterCard so you know exactly how much you have left.

To work a payment similarly to a gift card, you’ll need to ask the cashier to ring exactly $1.22 onto the card which will succeed, then pay the difference with cash or another payment method. The merchant has no way to tell you how much balance remains on a prepaid card. You’ll have to check the balance online through your phone or computer. However, unlike Disney gift cards, you can refill your prepaid Visa and MasterCard cards online.

Lost or stolen Visa or MasterCard prepaid cards are more complicated. You will need to write down the phone and card numbers listed on the back of your cards or take a photo of the front and back of the card so you have it on your phone. You can then call the number on the back of the card from the photo if your card is missing. Getting a replacement card is not nearly as fast as a replacement Disney gift card. Be prepared to wait for a replacement. You might be able to request Visa or MasterCard to provide emergency cash that you can pick up somewhere close to your location until your replacement card arrives.

Stick to known payment methods

Avoid using odd payment cards like AmericanExpress gift cards, Visa gift cards, MasterCard gift cards, Visa TravelMoney (traveler’s check cards), Traveler’s Cheques (they’re old and antiquated) and other oddball payment methods. These payment methods are not always accepted everywhere and may cause you no end of trouble. The last thing you want is a bunch of vacation frustration because you chose a payment method or card that few places accept. Undoing a mistake like this can be costly and time consuming when you should be enjoying your vacation.

Stick to mainstream, well known and accepted payment methods for your vacation. If you’re unsure about a payment method, call the places you intend to visit while on your vacation and ask if they accept a specific payment method. Keep in mind that not all employees are well versed in what their employer accepts and may tell you, “Yes” just to get you off of the phone. Always ask to speak to a manager to confirm the accepted payment methods. To avoid this possible source of stress, stick to well known, modern and accepted payment methods.

Emergency Cash On-Hand

Always carry emergency cash on your person for obvious reasons. If you need a cab or similar to get out of the park, having cash will get you out of there faster.

Overall

Can you spend less money on a Disney vacation? To a degree, yes. It also depends on you. If your family is up for roughing it outside in a tent, you can save money by staying at a campground rather than at an expensive hotel. You can also save money on airfare by driving to the resort.

If you set a strict budget on your in-park spending, you can reduce your incidental and food expenses.

With that said, if you intend to fly and stay at a hotel along with visiting the park for several days, expect to spend about $300-$400 per person for 3-5 days just on tickets to get into the park. On top of that, add your airfare, hotel and food and incidental costs.

For example, to plan a Walt Disney world vacation stay in Orlando, expect to spend around $3000-$5000 for four people over 5 in-park days. You can reduce this some by reducing the number of days you stay. You may be able to get a discount if you use AAA to book your airfare and hotel rooms. Your costs may be $200-800 lower if you choose to visit Disneyland in California because hotels are somewhat less expensive and the tickets to enter the park are also somewhat less expensive. Airfare is whatever it costs to get your family from your current location to any of the parks. Note that you can have just as much fun at Disneyland as you can at Disney World. It’s just that there’s a bit more to see at Disney World because there are more parks to see.

If you choose to add on Universal Studios or other parks, the costs go up… but you can sometimes get additional park bundles that offer discounts. You’ll need to shop around and compare to get your best deals.

You may be able to get better deals on lower attendance days. You can view the expected Disney park attendance by visiting the Attendance Calendar at Undercover Tourist. Off-peak season begins when the kids have gone back to school and right after the holidays are over. While you may not be able to take your children out of school to go during off-peak, this is the best time to visit Disneyland or Disney World. If you book your trip on lower attendance days, you may also see better deals and discounts. The worst time to book a vacation is within a few weeks of when you want to go, during peak season (June and July) and during the Halloween and Christmas holidays. You’ll get the least discounts booking during peak season.

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Bitcoin: Scam or Currency?

Posted in banking, botch, business by commorancy on January 12, 2013

Note, if you’re not really into philosophical discussions about economics, money and technology, this is probably not the post you’re looking for.  Also, if you’re looking for technical details on exactly how Bitcoin is implemented, I suggest you seek your research elsewhere.

[Update for 3/1/2014] — Mt. Gox files for Bankruptcy

Mt. Gox, a bitcoin exchange located in Japan, has filed for bankruptcy stating the loss of around 744,000 bitcoins from its exchange wallet. More info in this Reuters article. How this loss occurred is up for speculation. Mt. Gox claims its loss stems from a known flaw in the Bitcoin protocol. Bitcoin protocol advocates claim the wallet that Mt. Gox used was designed so that it exacerbated the known but usually rarely occurring flaw, which ultimately led to the massive loss of the Bitcoin from Mt. Gox exchange. Because of the massive amount of debt incurred as a result of its loss (among other debts), the exchange has ceased operations and anyone who had Bitcoin (or any other currency) deposited there may be out of luck.

What this says is that is several things. The Achilles heel of Bitcoin is its decentralization and the lack of properly protected wallet systems. The fact that there is no authority to advocate for depositors when companies like Mt. Gox go bankrupt leaves Bitcoin in a majorly problematic state. This situation also advocates for using personal wallets stored locally over using third party companies where situations like Mt. Gox can arise.

Because of the decentralized currency, there is no one to turn to when your Bitcoin goes missing from a large privately run exchange. Situations like Mt. Gox are exactly the type of setbacks that prevent Bitcoin from really becoming a solid workable useful currency.

If you had Bitcoin deposited in Mt. Gox, I’d like to hear your experience. Please leave a comment below describing your experiences with Mt. Gox or any other exchanges.

Disclaimer

This article is written with the sole intent to discuss whether Bitcoin can succeed as a currency at all or whether it’s a scam.  This article is not here to discuss the technical merits of Bitcoin, how a Bitcoin is specifically implemented technically or whether those technical details are a valid.  Once again, this article is here to discuss if a Bitcoin has any value in the marketplace or is merely a scam.

If you really want to know how Bitcoin is implemented, there are many many technical white papers that discuss this in great detail and that are available from the below mentioned Wikipedia article and through Google searching.  This article’s author leaves it up to the reader to do the technical research on the Bitcoin implementation details if you are interested.  If you’re looking for that level of detail, you’re not going to find it here.

What is Bitcoin?

Bitcoin alleges itself to be a, more or less, a digital / electronic currency that uses decentralized electronic ‘banking’ techniques involving digital signatures to validate each coin and approve transactions (to validate authenticity of said coin).  As Wikipedia states about Bitcoin,

Bitcoin (abbrvBTC) is a decentralized digital currency based on the open source protocol created by a pseudonymous developer named Satoshi Nakamoto.[1] It is subdivided into 100-million smaller units called satoshis.

This technical implementation was designed to solve the problem of exact digital copies when in the digital form. Therefore, the way each Bitcoin is created means that it is unique, individual and can’t be double spent by the same person.  So, when you own a Bitcoin, only you owns that unique coin and no one else (until you spend it).

Want more details? Follow the Wikipedia link on Bitcoin or search Google.

What is a currency?

Bear with me as some of this may seem very simplistic, but we need to start simple and at the beginning to understand the issues involving Bitcoin. Currency is, simply, any object or thing that takes on a given value.  More specifically, it becomes a currency when many of these objects are mass produced that all look and feel identical.  For most currencies, we equate the value with these tangible objects by ‘size’ or ‘denomination’ of the object.  Most of the currencies in play today work with two types of duplicated objects: paper ‘bills’ and flat metal cylinders called ‘coins’.  These are tangible physical duplicated but unique objects. The denomination is then a specifier of that specific duplicated object.  In the US, the currency is named ‘dollar’.  But, it could be just as easily named ‘fred’ or ‘mxyzptlk’ (except that that word is probably trademarked by DC comics).  So, as in the US Dollar, it’s a piece of paper marked with the number 1 and the words ‘one dollar’ or a coin struck and marked with the words ‘one dollar’.   These unique objects are then the basis of a piece of currency or ‘money’. So, while these are the fundamentals to begin a currency, it doesn’t establish it as valid currency until other criteria have been met.

Simply striking out objects labeled with this information doesn’t make it become currency.  For example, you can mint any coin you like, but the simple act of minting a coin doesn’t make it worth money.  After all, you can go buy child’s play money or grab some of Hasbro’s Monopoly game ‘money’, but these are mere pieces of paper with ink and hold no value in a currency market.  For casinos, they have chips and metal coins, but again these hold no value until exchanged within the casino back to US Dollars (or whatever currency that that casino provides).  For example, while a casino will accept their own tokens and coins to play their games, these tokens and coins hold no value outside of the casino (except in the case as a collectible or because of they contain rare earth metals as discussed below).

So, what makes a currency become legitimate legal tender? 

Basically, it requires an ‘authority’ to decree that the currency exists, issue the currency and usually a government to back the currency.  By ‘backing’, I don’t mean that there’s something tangible backing up the currency (like gold or land), I mean that the government has a gun-wielding military force at its disposal.  Having such force at someone’s disposal gives that someone power.  With power comes the ability to enforce rules.  And then, rules establish policy, policy establishes currency, currency establishes an economy along with such things as capitalism and that establishes the ability to buy and sell things.  Keep in mind that buying and selling will happen with or without currency.  It’s just that currency makes it easier and more standardized.  So, instead of having to hand over a  bushel of apples in trade for a bail of hay for your horse (i.e., random bartering), you can hand over 25 dollars instead.  And because many people have all handed over around 25 dollars for a bail of hay, that establishes that a bail of hay is ‘worth’ around 25 dollars.  That also establishes at once, the value of 25 dollars and the value of a bail of hay.  It doesn’t necessarily establish the value of a bushel of apples until the apples are ‘sold’ multiple times at or close to a certain price.

That means people have to ‘buy into’ that that piece of currency paper (or coin) has a ‘value’ and that that ‘value’ is established by the words printed on it, along with the issuing body’s ability to enforce that this piece of paper is now considered ‘legal tender’.   That value is then further established by how much it can buy.  Remember that policy establishes what is ‘legal’ and the power to enforce that policy is what puts the power behind that piece of paper which is then considered ‘legal tender’.  The government and the issuing body (not necessarily the same thing) lend legitimacy to the currency by power, policy and the ability to enforce policy.  Note that tangible currency created by decree and enforced by power is called ‘fiat currency’.

Of course, ‘the people’ have to allow that government to wield the power.  The reason the people give the government power is in exchange for protections. So, in exchange for allowing the government to remain in power, the government will provide protections for the people in the form of such things as a police force, a fire department, a military and some types of health services.  Of course, these protections aren’t without costs (i.e., read taxes or payments using, of course, the decreed currency).  But, the protections are established by the government.

One additional thing is that not only does the government and the issuing body have to recognize the currency as valid, but so do other worldly governmental bodies.  So, a currency must be recognized as valid by other governments to be useful in those other locales. It’s not an absolute requirement, but unless other governmental bodies recognize the currency as valid, it cannot be used in exchange for other currencies.  Without being recognized by other countries, this then makes it hard to, for example, buy things from other countries with our currency. Once recognized, however, the currency can then be exchanged to other forms of currency around the world and purchases can be made.  And with that, foreign currency exchange is born, which is a much more lengthy discussion than is required here.

The bottom line is that ‘the people’ give their trust to the government to both decree and ‘back’ the currency as valid.  So then we all have to agree that the ‘dollar’ has value, what that value is and how much it will ‘buy’.

Digital vs Real World currency

Bitcoin does not have a governmental power behind it.  It does not have a governmental sanctioned entity issuing the currency.  It is not recognized by any governmental force as a legitimate or legal currency.  It was developed by a technical engineer with an open standard protocol and is backed by nothing other than a relatively strong encryption algorithm and a set of established exchanges (where to buy Bitcoin).  So, as long as the encryption algorithm cannot be cracked, each issued Bitcoin is a unique and individual entity.  If it ever is cracked, the whole Bitcoin system falls apart.

Let’s compare the difference between a tangible ‘dollar’ and a Bitcoin.  A tangible dollar is a physical unique piece of fiat currency.  That is, it’s a tangible thing you can put in your pocket, it has a unique serial number (at least the bills have these) and are so stamped by the issuing authority. Ignoring for the moment that these tangible ‘dollars’ can be reproduced (read counterfeit) by unauthorized entities, each ‘dollar’ is its own unique entity.  Counterfeit bills are usually identifiable because the ‘original’ issuer uses anti-counterfeit techniques that establish parts of the bill which cannot be duplicate easily.  However, counterfeiting is a problem with any currency.  Or, at least, in real world currency.  That’s why bills and coins are redesigned periodically.

So, when you have ten tangible dollars, they are real physical bills.  In a digital world, these rules can’t apply.  In a digital world, it’s all 1’s and 0’s.  These can be duplicated infinitely and freely without knowing that that digital file was ever duplicated.  So, for example, attaching and emailing a photo of your dog to your friend makes a copy of that photo.  And that photo is the exact same as the photo on your computer and the exact same as the one you posted on Flickr.

With a digital currency, this is a problem.  Enter Bitcoin.

Why Bitcoin?

Bitcoin creates each coin uniquely through a computer algorithm that generates guaranteed unique coin entities and to prevent counterfeiting.  So, each Bitcoin represents one unique digital coin that stands on its own.  Each coin was created by an issuing authority using that algorithm and each coin is then registered in a decentralized database of outstanding coins.  So, whenever you spend that unique Bitcoin, the decentralized database will log that coin’s ‘transaction’.  However, like any currency, the transaction does not need to be recorded. In reality, to verify the legitimacy of any digital Bitcoin(s) when spent, it should be cleared with one of the transaction databases.  Otherwise, you risk that it may be counterfeit or double spent.  Because the coin was created using a basically un-crackable bitsize combined with each being unique and because each coin is officially registered with the decentralized transaction registry, that coin in theory can only be spent once per transaction.  So, even if you manage to copy the coin and attempt to give it away to someone else, it’s still only one coin no matter who owns or spends it.  In other words, duplicating the coin file into multiple files still only yields one coin to spend.  So, duplicating the coin’s file does not duplicate the number of coins that it is.  It’s still only one coin and is valued at whatever one coin is worth.  If you give away a copy of the coin to someone else, you’ve effectively just given them one Bitcoin and you’ve lost it.  Or, you will have lost it if they spend it first.  Again, if you want exacting details on how all of this is implemented technically, please read the Bitcoin Whitepaper.

Suffice it to say that the coins are allegedly unique and the transaction service prevents double spending.  So, it effectively makes it useable currency in the sense that each coin is unique like paper money.  Which, of course, is the sole goal of the whole technical implementation.. to mimick real world money in a digital way.

Before I get into the spending of Bitcoins, let’s step back and ask, “What legitimizes this currency?”  The answer is, not much.  The ‘currency’ is not yet recognized by any governments that I know of.  Therefore, it is not listed on exchanges with the dollar.  In other words, to exchange any other currency, such as the dollar for Bitcoin, you have to go to a Bitcoin exchange.  Bitcoins are not openly exchanged at regular exchanges.  So, you’re handing over dollars (or other legal tender) to a Bitcoin controlled exchange in trade for Bitcoins.

Think of this like going to a casino.  To get a chip to use in the casino, you have to go to that casino’s cashier and exchange your dollars for casino chips.  Therefore, you’re at the mercy of that casino to 1) remain in business while you play and 2) to retain the value of the chips while you’re playing.  So, if the casino goes out of business and kicks you out of the casino with chips in hand, those chips are worthless.  If the casino refuses to exchange the chips back to dollars, again, they are worthless.  If the casino decides that a ‘one dollar’ chip is now worth ‘one cent’, again, you’re at the mercy of the casino.  This is effectively Bitcoin.

Scam? You decide!

So, this is the place where some people see Bitcoins as a scam.  If you don’t personally recognize the currency as legitimate yourself, then you will only ever see it as a scam.  The fact that you have to go to a Bitcoin controlled exchange (regardless of being ‘decentralized’, read peer-to-peer) to change dollars (or any other currency) to Bitcoins is suspect.  Let’s get to the heart of the matter.  Exchanging real money for Bitcoin may simply make the originators of Bitcoin rich with ‘legal tender’ at the expense of people buying into the ‘Bitcoin’ idea as currency, but in reality is destined to fail and become worthless digital files. Where do those dollars go when handed over to that exchange?  How is the exchange rate determined?  These are all questions not easily answered.  Oh, I’m sure the people running the Bitcoin exchange will come up with some colorful answers, but the reality is that who really knows?  Unless Bitcoins become traded at a national exchange level and through exchanges not controlled by Bitcoin exclusive exchanges, then we really don’t fully know where the dollars or euros or whatever went after becoming Bitcoins.  Of course, the flip side of this is that you effectively ‘bought’ Bitcoins with your ‘real’ currency.  By purchasing a Bitcoin, that comes to another issue regarding collectibility, but that’s discussed below.

So, on the one hand you have legal tender which is established, recognized and sanctioned that you can really spend for real world items. You are taking that money and exchanging it for Bitcoin which has extremely limited uses cases, limited spend venues, questionable exchange rates, limited denominations coupled with low supply, no governmental backing, not being recognized by governments and other authorities and the high probability that it will be used for less than legitimate purposes, and this is presently what Bitcoin is.  Looking at all of this coupled with giving some random entity real money in exchange for ‘Bitcoin’ can be easily seen as a highly speculative scam.  It has a high probability to be or become a scam and, at the same time, make someone (or a few someones) very rich with real legal tender in the process… possibly your supplied legal tender funding violence or other unsavory uses.

On the other hand, you have a possible new digital currency that could succeed if it gains enough traction in various marketplaces.  However, the risk vs reward for Bitcoin is clearly too high for real currency use.  So, that leaves speculation and collectability almost the entire reason to buy into the idea of Bitcoin, if that’s a reason at all.

Ignoring the fact that each coin is unique and can’t be easily counterfeit, you have to consider what things you can currently buy with Bitcoins.  Since it’s not recognized as legal tender or even valid currency other than in very limited uses and by limited ‘businesses’, this currency is ripe for scam artists.  That means, legitimate businesses (especially banking) shy away from things that are not considered ‘legal’ or that reside in the fringe of ‘legality’. Any such legitimate businesses will opt for ‘legal tender’, such as the US Dollar.  So, adoption by legitimate business is a huge hurdle for Bitcoin.  Especially in the banking sector.

In addition, because Bitcoins are now being considered as the standard for online gambling uses (to thwart restrictions on the US dollar in online gambling), this further reduces the legitimacy of this ‘currency’.  That is, you can’t run to your local supermarket and buy a loaf of bread with a Bitcoin, but you can place an online poker bet with it.  You can’t run to your local car dealership and buy a new car with Bitcoin, but you likely can buy some drugs with it.  You can’t buy school supplies with your Bitcoin, but you probably can buy a handgun with it in an underground market.  This doesn’t spell good things for Bitcoin’s success or legitimacy as a currency. Because online gambling is one of the biggest scams out there right now, this use case doesn’t make Bitcoin look better.  Considering that most of the online casinos reside outside the US, US laws don’t apply to wagers made at those casinos.  So, even if you win big, there’s no protection from simply losing all of your Bitcoin when they choose not to give you your winnings (the most likely outcome) or the exchange rate has changed so much as to have lost any gains you may have won.  When you invest in Bitcoin to use at a casino, you’re effectively gambling twice: Once at the casino with your wager and again when you go to exchange your Bitcoin back to legal tender.

The fact that you were using Bitcoin, which have few protections anyway and which is then used to place a bet at an online casino leaves you ripe for losing everything you’ve given to the casino.  Meaning, you’ve lost your dollars to the exchange and you’ve lost your Bitcoins to the scam casino who’s just bilked you.  If you do manage to get anything out of the casino, you have to try your luck at the exchange and hope you can get legal tender back out at any kind of a decent rate.

Is Bitcoin Legitimate Currency?

None of these uses cases, no matter how technically well designed that this currency is, validates or legitimizes Bitcoin as a useful or legal currency.  Sure, it might be able to protect you from counterfeiting, but it will never protect you from being scammed.  And, if you are scammed, there is no one you can turn to to get your Bitcoin back, let alone get your US dollars back.  With the US Dollar, you can turn to your bank or your police both.  If you know who the other party is, you can sue.  With Bitcoin, all that is likely off the table.  In the  digital wild west, there’s no Sheriff in town here.  So, you lose your Bitcoins and they’re gone.  Neither the cops, nor the feds nor the banks will help as Bitcoin is not recognized as legal tender.  And, this is one of many hurdles involving the use of Bitcoin.

Of course, you might be able to sue the exchange where you gave your dollars for Bitcoin, but if there is a transaction record that can be produced that proves you were handed Bitcoin, then any lawsuits will be fruitless.  If you exchange money for any other good or service (digital or otherwise) and delivery can be proven through a transaction record, there is really nothing that can be done there legally.  That you gambled with your Bitcoin and lost is your problem.

Worse, what of the exchanges?  How are they managed or audited?  Who runs them?  Are they even audited?  In this case, who watches the watcher?  I’ve read a rather disturbing blog article at Nerdr.com about how at least one of the Bitcoin exchanges is manually altering the Bitcoin price to their own whim.  So, what does that say of the other exchanges?

Collectible Commodity vs Currency

Bitcoin faces another serious adoption problem: supply.  Built into the algorithm at the decentralized exchange is managing how much Bitcoin is in circulation at any one time.  So, if you want to obtain Bitcoins, you probably can’t get them from an Exchange until they are issuing new Bitcoin.  And since new Bitcoin isn’t issue often, that leaves you to find someone with Bitcoin willing to sell it to you outside of the exchange and likely at collectible prices (which brings up collectibility of Bitcoin). If you do manage to get it, you’re likely to pay the ‘collectible’ price for the Bitcoin.  Basically, as of this writing, $10-15 might get you one Bitcoin assuming you can even find someone willing to sell you coin.  And, that’s the problem, supply.

For a currency to succeed, it has to remain liquid.  That is, there has to be enough currency in circulation all of the time that people can get it when they need it.  If it cannot be obtained, it cannot be used as a currency.  Which then comes to the difference between Bitcoin being a collectible commodity and being currency.  Clearly, even the US Dollar has numismatists (or currency collectors).  And, here’s the problem.  Collectible value markets operate outside of the currency market.  So, for example, the face value of a one dollar bill is one dollar.  But, to a collector looking for specific markers, that ‘one dollar’ bill might be worth 1000 dollars as a collectible.  As collectors pull money out of circulation marked as a collectible commodity, it removes that liquid currency from the market and, thus, it cannot be spent as its face value.  This means that the issuing body has to make up for the currency pulled out of circulation as a collectible and replace that currency with new liquid currency.

Bitcoin faces this exact problem.  Speculation collectors are holding onto their Bitcoin as a collectible, not as currency.  They are speculating that the collectible value of the currency will rise and they will be able to sell it to another collector at a much higher value than the monetary face value of the Bitcoin.  Worse, because Bitcoin doesn’t have stamped monetary denominations, it makes it all the worse at determining the face value of a single Bitcoin, let alone the collectible value of it.

Basically, the speculative collectors are hording the Bitcoin as a commodity and preventing it from becoming and remaining liquid currency.  So, each time an exchange releases more Bitcoin into the wild, it’s immediately snapped up by collectors rather than going into liquid motion to be spent.  Speculative collectors are the biggest problem that Bitcoin faces today.  As there’s so little currency in motion, it really cannot be used as a currency.  So, it’s really become a collectible item for people to hold onto and not spend.  In fact, there’s so much more incentive to hold onto Bitcoin than spend it, it’s basically paralyzed as a currency.

Bitcoin’s future

The Bitcoin designer was so focused on making sure that Bitcoin was secure and, at the same time, scarce that he/she probably didn’t realize it would become paralyzed by speculative collectors.  The reality of low supply of anything only breeds one thing, collectors.  Collectors do not spend or trade.  They collect and hold with the intention of selling at a much much higher price much later.  The only way out of this paralysis is to release so much more Bitcoin into the wild that the collectors have no incentive to hold it any longer.  And this is exactly what Bitcoin must do to succeed as a currency.  This is also exactly what the US Treasury does to avoid the same paralysis of money movement with the dollar.  Note that the release of new Bitcoin has to be so much that it’s impossible for any one collector to afford to horde.  While it may ruin the market for collectibility of Bitcoin (and also kill any paper profits that collectors may perceive they have) and also lower the value of Bitcoin, it will force Bitcoin to become liquid again.  Until this happens, Bitcoin will never become a liquid currency that can be used for anything more than speculation and the occasional wager, assuming you can even find Bitcoin to buy or spend.

Personally, I wouldn’t invest in Bitcoin other than as a collectible at this point and even that is questionable due to the volatility of that market. Bitcoin has no real uses as a currency, other than perhaps at offshore casinos and other mostly unsavory purposes.  Even then, it may not protect you from the IRS or US authorities (if in the US) when you win at a casino.  Right now, it’s more or less a novelty investment and even then there are better investment vehicles that offer safer and higher returns.

Demise of the Bitcoin?

There is one other thing that could potentially destroy Bitcoin.  If the US Government (or any government) were to take the idea of Bitcoin and implement something similar (and easier) as a national digital currency sanctioned and issued by the Treasury department, this would likely destroy Bitcoin’s main objective, to become the defacto digital currency.  The one thing that a US digital coin cannot destroy in Bitcoin, however, is the anonymous nature of the currency, that Bitcoin is not issued by a government (it is outside of government control) and the peer-to-peer decentralized nature of it.  In the end, those pieces probably don’t really matter.  That the new digital currency works, that it is usable, that it can buy milk and eggs and pay rent, that’s what’s important.  Were the US to legitimize its own digital currency, businesses would adopt this en-masse and people and businesses wouldn’t look twice at Bitcoin thereafter.  A US digital coin would become the defacto standard for digital currency, at least in the US.  Bitcoin would then, as it is now, be relegated to a digital underground currency used for purchases where government sanctioned money cannot be used without penalties.

It’s just a matter of time before the US Treasury department wakes up.  As the saying goes, “Fight fire with fire”.  Creating a national digital currency solves a lot of problems.  It reduces the amount of paper and metal that it must mint saving money buying the supplies for the production of tangible money, it ushers in an even more solid digital economy and it gets rid of Bitcoin all at the same time.

America’s Recession: loans and scams

Posted in economy, fraud, scams by commorancy on December 16, 2008

Economic Downturn & The Fed

Unless you’ve been hiding in a cave, you’re probably aware that we’re going through a fairly deep recession. Recessions are cyclical, but in this case it probably could have been either avoided or lessened IF the banks and lenders had not been offering creative financing techniques. It also could likely have been avoided if our current pro-business govt. administration hadn’t chosen to look the other way while bad mortgages were being doled out. The problem with all of the creative financing is that it tended to lead some people into believing they could afford a mortgage they could not afford. When the loan reset after the promotional period, the realization quickly set in. Worse, the situation was compounded by property investors who sank huge amounts of loaned money into properties that would eventually become valued less than the loan.

It’s not as if the handwriting wasn’t on the wall several years ago when the fed dropped the rate to 1 percent. Now, we are back in this exact situation again with the fed dropping the rate to an unprecedented 1/2 percent. The feds are, again, trying to spur the economy like they did 2-3 years ago. But, this time, the banks don’t have money to lend. So, the 1/2 percent may not trickle down into the mortgage market like it did several years ago.

But, our economy is still likely being set up for yet another financial failure. The banks that do have money to lend are still advertising on the radio claiming extremely low interest rates.  The problem isn’t the rate, but the loan you’ll be getting. If it’s a standard fixed rate loan, that’s fine. But, it’s the fine print you need to read. Don’t get locked into an adjustable rate mortgage or a limited time interest only loan. Once these creative loans reset in a couple of years, you may end up deep under water.

The Fed, therefore, needs to be extra careful when cutting the rates this low again to avoid the same mortgage problems all over again.

Scams in a down economy

With the economy being so depressed, it’s also a good idea to watch your money closely. As money gets tighter and tighter, the scammers will come out of the woodwork (and they already are). I’ve already noticed a drastic increase in spam and phishing emails since the economy has taken a turn. It’s going to get worse before it gets better.

There are many scams out there from the Nigerian 419 scam that claims to give you a ton of money only to rip you off of thousands of dollars before you realize it, to sending you what look like official invoices that only turn out to be scams in themselves. Don’t fall for them. The easiest way to avoid scams is to not give out any personal information to anyone who approaches you claiming to be from a legit company. This means, if you receive a call asking you to make a payment and they request for you to give a credit card over the phone, don’t. Make sure you know who this company is first and make sure you are a customer. Then, tell the company that you will call them back through their official channels and make a payment that way. As long as you are the person making the call to the official number, you should be safe. With incoming calls, you have no idea who is really calling you no matter what the CallerID says. Always, always call companies back from official numbers located on a trusted bill or from the back of your credit card.

TV advertisements that offer products or services usually employ people who are not paid very well. So, be wary when you give your credit card number out to TV commercial based purchases. Not only are some of these companies impossible to get refunds, your card number could be enrolled in a club or, worse, stolen by one of the telephone operators in an independent scam. You should always Google the product you are thinking of purchasing to 1) find out if you can find it cheaper online and 2) find out if people have had issues with either the product or the companies refund polices.

Get rich schemes are basically another form of scam. Yes, they do make someone rich… the person who created the scheme, but not you. Get rich schemes are usually designed to part you from your money. So, in a down economy, you should avoid get rich schemes (placing classified ads, setting up ecommerce sites that sell Amway products, or Multi Level Marketing – MLM schemes). Note that MLMs only make the top most people money. If you’re anywhere near the bottom, you will be parted from your money.

Craigslist and even eBay are a haven for scammers. Be careful when you work with people selling or renting things. Never buy or rent anything sight unseen and never give money out as a ‘deposit’ or to ‘hold’ something unless you truly trust the individual. Chances are, if the person you are thinking of doing business is presently outside of the US, you should immediately stop the transaction unless you know for sure that what they are selling/renting is legit.

If you are selling a car or renting out an apartment, watch out for scams here too. There are some people who are outside of the US who will claim to give you an excessive sum of money in the form of a check. They may even send you what looks like an official check.. the problem is that it will bounce causing you fees and other associated problems (and may let them get access to your account number). Don’t cash any checks like this.

The bottom line is that in this weak economy, you should be extra careful with your money as there are lots of desperate unemployed people willing to do anything to make a buck (or a thousand). Always make sure to do your homework before buying anything or giving out personal information to someone you don’t know. If you suspect a scam, you should alert your bank or credit card company immediately.

Ponzi Schemes and Wall Street

Posted in corruption, ponzi schemes by commorancy on December 13, 2008

I hope that everyone who invests money knows that entrusting your money to someone else is risky.  It doesn’t matter if the yield is 0%, 2% or 5%.  The act of handing your money to someone else involves risk.  So, is it then no surprise when someone like Bernard Madoff, who once the chairman of the Nasdaq Stock Market, is arrested for an alleged ponzi scheme that bilked people out of billions?

Hello, no!  Wake up people.  When times are good, no one delves into such corrupt Wall Street vehicles because they are self-sustaining.  It’s only when times become bad that these schemes fall apart.  The way a ponzi scheme works is by paying old investors out with new investor money.  The fund itself is not self-sustaining (and probably was never intended to be).  So, as new investors dry up, the older investers can no longer be paid.  The whole thing then falls apart.

But, the question isn’t so much that this one person did this.  It’s the loss of trust and of faith in the system.  It’s the question of how many more people are doing it?  When respected people of the invesment community end up operating such scam vehicles, what does that say of Wall Street as a whole?  Clearly, this is not and will not be the only ponzi scheme to turn up.  It’s the first major case of it recently, but it certainly won’t be the last.

Is investing a bad idea?  Not necessarily.  But, it is risky.   This is why diversification is part of the answer.  Do not put your money into one fund or even two or three funds.  Spread the money out into many funds.  Granted, it’s harder to keep track of, but the chances that every single investment fund being corrupt is unlikely.  However, we all know that money corrupts.  So, you have to take the good with the bad when you give someone your cash to manage.

These are the kinds of problems that shake the foundations of investing to the core.  These are the kinds of trust issues that the investment community needs to avoid like the plague.  Yet, here we are.  These are also the kinds of problems that America itself has been fostering for the last 10-15 years.  Why is greed, power and corruption such a big part of the American dream today?  Only a historian will be able to look back and fully answer this question.  Today, these problems appear to be unrelated.  But, is this problem systemic?  Is it only likely to get worse?  When well respected Wall Street investment professionals, such as Madoff, can bilk so many out of their money, this is much more than isolated and, indeed, does appear to be systemic and a symptom of a much bigger issue.

At this point, America needs an overhaul and perhaps this downturn and the financial sector upheaval  is the beginning of that overhaul.  The corporate and financial system on which this country is based is near completely broken.  When 20 year veterans of Wall Street can turn to Ponzi schemes to keep their lifestyle afloat, anything can happen.  So, watch your money closely when you invest.  But, even doing so is no guarantee that you aren’t investing in a sham.  One quote is more salient now than ever… “Caveat Emptor”  (Buyer Beware).

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