Entries for December 2007

As the New Year begins, I asked some of my favorite personal finance bloggers to share their money-related goals for 2008. I was most inspired by the resolutions related to dreams—saving for a trip to Italy, quitting a day job to work on a passion, or sending a soon-to-be-born son to college. So much personal finance talk relates to problems, such as paying off debt or saving for an emergency fund. Sometimes stepping back and considering the big picture is a welcome break. Here's to a year of turning those dreams into reality.

Boomie at the Wastrel Show: My goal for 2008 is to save up enough money to visit my family in Italy once again. I met most of them for the first time last year and promised to return this year. Because of the falling dollar and rising euro, the same exact trip this year costs $3,500, compared to $2,500 last year. Since I live debt free and do not use credit, it will take me longer to save the money. My revised goal is to see them every 18 months.

If you find yourself drawn to membership-based stores such as Sam's Club or Costco, which charge customers a fee for the ability to shop there, because you believe they save you money, you are not alone. But you also may be wrong, at least some of the time.

According to new research from Harvard Business School, paying a fee to shop leads people to think they are saving money even when they aren't. The researchers acknowledge that membership stores do often sell products at a discount. By their calculation, one New England Costco was 9.5 percent cheaper than a nearby Wal-Mart.

Dear Alpha Consumer,

As the owner of a Chase credit card, I recently received the Chase Privacy Policy in the mail. I was surprised to read that even if I request that my personal information not be shared, Chase may share it anyway. Why does Chase ask me if I want to share my information if they are going to do so even if I tell them not to? Does asking them not to share my information mean anything? Is there anything I can do stop them from sharing my information?

After getting my hands on a copy of the Chase privacy policy, I asked the company to explain itself. After all, on the face of it, a policy informing you that you basically have no choice about where your information goes is a bit disconcerting. Does signing up for a Chase credit card mean you are doomed to receive dozens of advertisements from other companies that suddenly know your name and address and, possibly, your buying habits?

An E-mail with an intriguing subject line landed in my in box the other day: "Women must work harder, UVA sociology study says." If this were true, that women did, indeed, have to work harder than their male counterparts, then it would all but confirm the words of Canadian feminist Charlotte Whitton, printed on mugs and magnets around the country: "Whatever women do, they must do twice as well as men to be thought half as good. Luckily, this is not difficult."

As someone who grew up drinking tea out of a mug that said just that, I was eager to read this study. And after doing so, I'm not sure it does support the phrase.

If you're feeling overwhelmed by shopping this month, What Would Jesus Buy? is the movie for you. By equating elaborate gift giving with consumerism gone wild, it will help you justify the impulse to stop buying presents altogether.

Morgan Spurlock, who also brought us the documentary Super Size Me, produced the film that follows the character "Reverend Billy," the alter ego of consumer advocate Bill Talen, leader of the Stop Shopping Gospel Choir, across the United States in an attempt to get people to retire their plastic and, instead, simply enjoy each other's company over the holidays.

Dear Alpha Consumer,

I cosigned for student loans for my children, as they could not get financing on their own when they went to college. In addition, I have also taken out student loans for them in my name. We have found that the education loan companies work differently than most business creditors. They do not offer as long a grace period for your monthly payment and report you to credit bureaus very quickly. On a couple of occasions, my children have been late making a loan payment. These incidents were reported to the credit bureau, and my credit score has dropped as a result. We have tried to replace these loans but have been unable to find a lender willing to do so. I am sure I am not the only parent in this situation. Any advice you might have would be very much appreciated.

You did a nice thing for your children by letting them put your name on their loans. Unfortunately, they are doing a not-so-nice thing to you.

From the lenders' perspective, it doesn't matter that you seem to have an arrangement with your children that requires them to make the monthly payments, even though your name is on the loan. To the lenders, you took out the loan, so you are responsible. If your children are going to make late payments, then it will hurt your credit score, and the only way to get around it is to make the payments for them—something you probably don't want to do.

For this week's magazine, I wrote about retired parents who provide financial support to their adult children. It's a pretty common phenomenon, with about 4 in 10 adults age 60 or older giving money to their kids. In addition to assisting with cash, some parents let their grown children live with them or offer free baby-sitting. Many of the 20- and 30-something "children" I spoke with said they couldn't make ends meet without the help.

I know where they're coming from. After I finished graduate school, I moved back home with my parents for just over a year. I paid them $400 a month in rent, but it was nothing compared with what I was getting in return: a fridge filled with food, a warm house, plus parents who would hang out with me when I wanted. (By my mid-20s, I was old enough to appreciate their company again.) If I had had to get an apartment, it would have cost me at least $1,000 a month.

When my new Dell laptop arrived this fall, I couldn't wait to turn it on and start using it. But first I had to spend an hour on the phone with my Internet service provider because the new computer wasn't compatible with my wireless modem. Then I had to devote two Saturdays in a row on the phone with Dell customer service trying to figure out why the computer shut off and started beeping if I left it on longer than an hour when plugged in.

Eventually, I gave up and returned the computer. That required several more phone calls and standing in a long post office line to ship it back. Now, after speaking with retail experts, I realize that I made several mistakes, including waiting too long to ask for a supervisor and not being clear enough in my requests, that made the process even more painful than it had to be. Luckily, there are strategies that can prevent shoppers—one third of whom will be returning gifts they receive over the holidays, according to the National Retail Federation—from wasting as much time as I did.

Gift cards, once disdained as a last-resort present, are now almost as ubiquitous this season as the scent of scotch pine. Shoppers are expected to spend $35 billion on gift cards over the holidays, a 25 percent increase over last year and a doubling since 2004, according to Archstone Consulting.

The jump is partly because retailers have all but eliminated many of the former drawbacks of the cards, such as expiration dates, declining values, and fraud. Dave Sievers, consumer practice leader at Archstone, says most stores now use technology that adds the cash value of the card at the register. That prevents shoppers from coming home only to find that the value of their gift cards had already been used up by fraudsters.

My friend Nader Iskandar, co-owner of the Book Cellar & Café bookstore in Plymouth, Mich., was recently complaining to me about the customers who browse his shelves, especially the political section, which he spends hours arranging, only to leave the store without buying anything. They often write down titles as they walk around, and Iskandar assumes that they go home and order the books off the Internet.

To him, this behavior is unfair and takes advantage of him and his hardworking staff. I have to admit that I have been guilty of doing it in the past and never gave it a second thought. After all, I want to buy what I need at the cheapest price possible, and if that means browsing in person only to buy online, why not? But speaking with Iskandar made me question the ethics of that approach. I asked him more about his views and would love to hear your own take on the subject as well. Is it wrong to glean information from local stores and then buy online? Please post your comments below.

Dear Alpha Consumer,

I recently ordered a $1,300, 42-inch LCD television from Costco.com. To my surprise, FedEx dropped it off outside my door, where anyone could have taken it. Is this a normal practice, and would either company have reimbursed me if it had been stolen?

The only way to really know if a company would reimburse you for merchandise stolen off your front porch would be to have that happen, because most retailers shy away from making public promises about what they would do. It's understandable; if consumers were guaranteed a new product when the first one was stolen, that could easily lead to fraudulent reports of thefts. (I don't think I'm being overly pessimistic about shoppers' ethics. The National Retail Federation found that almost 9 percent of holiday returns are fraudulent, costing retailers about $3.7 billion over the holiday season.)

When you sprint to an airport gate to make a connection after a delayed flight, only to find that the plane hasn't waited for you, do you want a) the gate agent to offer a sincere apology, b) the airline to admit it made a mistake and provide you alternative ways to reach your destination, or c) a $200 travel voucher for your trouble?

Customers typically fall into these three general categories (dubbed relational, oppositional, and utilitarian). And companies may want to start thinking of them that way, according to a new paper published in the Journal of Marketing. Customers tend to have different reactions to negative experiences, the researchers say, so that treating them as homogenous is probably not the way to win them over.

This morning, the Consumer Federation of America and Wachovia released a joint survey on saving. They report that just over half of Americans say they are not saving enough. That's no big surprise—Americans are known for our spend-happy ways.

The good news, though, is that over half of respondents said they could cover unexpected expenses like car repairs or emergency dental work. Among those who said they were not saving enough, over one third said impulse buys and credit cards were at least partly to blame. And young people between the ages of 18 and 24 were most likely to say they should be saving more.

I recently discovered the website Feed the Pig, which is sponsored by the American Institute of Certified Public Accountants and the Advertising Council. It's dedicated to helping Americans between the ages of 25 to 34 take control of their finances. Since I fit into that age group, I decided to see what it could do for me.

Calculators on the website helped me figure out that if I bring lunch to work every day instead of eating out, then I'll save around $5,500 after three years. (That's assuming lunch costs around $10 and bringing it from home costs around $3.)

On Wednesday, Facebook Chief Executive Mark Zuckerberg apologized for the social networking site's program, known as Beacon, that alerts users to one another's recent purchases.

"We simply did a bad job with this release, and I apologize for it," he wrote.

Complaints about Beacon started soon after it began: People felt as though their privacy was being invaded, and because the program launch coincided with the holiday shopping season, many said their surprise presents were ruined. Some users swore off Facebook altogether.

Over the past week, I've attended two heated discussions on the future of the credit card industry. The first, last Friday, was hosted by the Consumer Federation of America, and the second, Tuesday, was a Senate hearing on credit card interest rates.

The arguments are basically over whether credit card companies treat their customers fairly. Consumer rights groups and certain members of Congress, such as Sens. Carl Levin and Claire McCaskill, Democrats from Michigan and Missouri respectively, think credit card companies are unfair in the aggressive way they solicit customers and then raise interest rates when customers start to struggle with their debt.

Dear Alpha Consumer,

My husband, who is retired, has dementia. He responds to credit card offers in the mail and charges things to them, even though he shouldn't, because he is on limited Social Security disability income. He knows better, but his mind is weak. He always says he won't use the cards, but he still does. Even if I cut the cards in half, more come in the mail. We are now in $15,000 of debt, and it continues to rise. How can I get him to stop making charges? Will I be responsible for the debt, even if he passes away before I do?