Entries for June 2008

At a hearing on credit card practices affecting college students, Democratic Rep. Carolyn Maloney of New York, chair of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, last week asked Benjamin Lawsky, special assistant to New York State Attorney General Andrew Cuomo, to tell what his office's investigations had uncovered.

Lawsky began by warning the committee that he could not disclose much. While Cuomo's investigations had found "highly lucrative" and "somewhat secret" agreements between credit card companies and colleges that allowed the companies to market on their campuses, the bulk of the investigation would need to remain secret until an unspecified future date.

Dear Alpha Consumer,

I lost a very good job with benefits and everything. I lost it. Then I got into an accident requiring $40,000 surgery, and I started a business that failed.

Not a good trifecta. I went from a 700 credit score and money to spare to having $100,000 debt, little to no income, and Chapter 7 bankruptcy.

I am very upset. I feel like I threw my life away. I basically lost everything—my home, my fiancé—and now I'm in school and living at my parents'. (I'm over age 30.)

I don't want to sound like a baby. I know it's not the end of the world, but I would love if you could tell me why it isn't.

What an experience you've been through. In retrospect, maintaining health insurance through your former employer's COBRA plan might have helped avert some of the debt pile-up, but there's no point in looking back now. It's time to start over.

My colleague Kim Clark reported in our On Education blog that the Federal Trade Commission has some new tips on avoiding loan fraud:

Just in time for the college loan shopping season, which starts July 1, the Federal Trade Commission has posted a guide to avoid rip-offs.

One of the most important tips is to be very skeptical of any solicitation that looks like it is coming from the federal government. The U.S. Department of Education "does not send advertisements or mailers, or otherwise solicit consumers to borrow money. If you receive a student loan solicitation, it is not from ED," the FTC warns. U.S. News documented some misleading loan ads here and, in partnership with Simple Tuition, offers a tool to help you compare student loan prices.

Dear Alpha Consumer,

I have a $10,000 bank certificate of deposit that matures in a month. I don't expect to need this money anytime soon, and CD rates have dropped so much that they're not attractive. Would it make more sense for me to use the money to pay down the principal on my 5.75 percent fixed-rate mortgage? My concern is that doing so would lower the mortgage-interest deduction on my income taxes. Any ideas?

Since there's never one right answer to this kind of question, I asked several financial experts to weigh in on what they would do. It turns out they all agreed that investing it—and not paying off mortgage debt—was the best approach. Here's what they had to say:

It's the final call for questions for Rob Walker, author of Buying In, the first selection for the Alpha Consumer Book Club. (It's also the last chance to win a free copy of his book, which will be given to a randomly selected questioner.) Either post your question below, E-mail me at alphaconsumer@usnews.com, or join the book club on Facebook. Rob Walker suggests this site for readers looking for an overview of the book.

Are you settling in for a summer of nesting? There's been a lot of buzz about people opting to stay home instead of traveling to exotic locations because of high gas prices. According to one Kmart television ad, "This summer, there's no place like home," and the company's website is promoting patio furniture and camping equipment. I recently received an E-mail offering an interview with a Comcast executive to discuss the cable company's growing entertainment options, including over 10,000 on-demand programs and thousands of movies a month, designed to cater to consumers who are planning to spend a lot of time on the couch.

Many of us seem to be embracing that idea: In May, Merrill Lynch reports, the share of consumers who said they would buy a new television in the next six months shot up to just over 12 percent. And a survey by Better Homes and Gardens found that 80 percent of respondents liked the idea of a "staycation," or spending more vacation time close to home.

I know that I'm looking forward to exploring several local water holes this summer, as well as making healthy use of my Netflix subscription. What about you? Are the gas prices keeping you home? If so, what activities are you looking forward to?

I recently spoke with Felicia Taylor at Retirement Living TV on how to make a personal budget. One tip: Think long term, in terms of the year instead of the month or the week, to make it easier to anticipate costs that come up less frequently.

This guest post comes from Kyle James of Rather-Be-Shopping.com:

I live up in the northern part of the Sacramento Valley in Redding, Calif., where it gets hot! By hot, I mean I sweat just going out to get the mail. Come mid-July, 110-degree days are fairly common. The weather currently is starting to warm up, and thoughts of scorching days are rattling around in my head like a bad dream. Fortunately, the rattling has stopped long enough for me to think of some frugal and easy ways to lower your cooling bill this summer. Here are some tips that I use with great success.

Over the weekend, I chatted with WTOP on how parents can teach their kids about money. Listen now, download in iTunes, or subscribe to the RSS feed.

The New York Consumer Protection Board is collecting all kinds of tips from consumers about how to save money. So far, the board has released lists of ideas for saving on groceries, gas, and household costs. Among the suggestions: Buy in-season fruits and vegetables, avoiding filling up the tank before a holiday or weekend when prices are higher, and unplug appliances not in use. The board is still accepting ideas, so submit away!

Everyone knows times are tight. But do you know just how tight? Take this Alpha Consumer Quiz to test yourself on how the economic slowdown is changing consumers' daily lives.

Comedian George Carlin, who died Sunday, may be best known for his monologue "Seven Words You Can Never Say on Television," but he also had some memorable lines about consumerism:

Consumption—it's the new national pastime... The only true lasting American value that's left—buying things... People spending money they don't have on things they don't need...so they can max out their credit cards and spend the rest of their lives paying 18 percent interest on something that cost $12.50. And they didn't like it when they got home anyway.

You can watch the whole profanity-laden performance here. After riffing against capitalism and Wall Street, he ends with a classic one-liner: "It's called the American Dream because you have to be asleep to believe it."

Here are my favorite stories from around the blogosphere this week:

• From Get Rich Slowly: Be a Tourist in Your Own Hometown. You can save money and avoid long airport lines.

• From the Money & Fitness Blog: Being Efficient and Frugal in Your Basement. Tips on what to look for in a washer and dryer, and in lighting.

• From Money Under Thirty: Should You Take Financial Help From Your Parents? This blogger makes a persuasive argument for why 20-somethings should not accept money from Mom and Dad.

Also, remember that to join the Alpha Consumer Book Club, you just have to check out the book, Buying In, and send me your comments and questions for the author, Rob Walker. (Either post them below, E-mail me at alphaconsumer@usnews.com, or join the book club on Facebook.) Rob Walker suggests this site for readers looking for an overview of the book.

For more tips on saving at the grocery store, you can watch this video that I made for WTOP.com:

After posting my item about dealing with debt collectors yesterday, I heard from another reader, Melissa from Alexandria, Va., with the same problem. A debt collector called and said she owed money to a health clinic. But the collector had the wrong person, albeit with the same, relatively common name. When Melissa explained that she wasn't the person who owed the money, she says the collector didn't believe her at first and was rude to boot.

Eventually, after multiple phone calls to the clinic, collectors, and her insurance company, she got the situation straightened out. Says Melissa: "The rudeness I encountered trying to simply get an explanation and an apology points out that there's something wrong with this industry."

Has anyone else encountered this kind of trouble?

Curtis Arnold, author of How You Can Profit From Credit Cards and founder of CardRatings.com, recently joined me on the Alpha Consumer Podcast to talk about how to make your credit cards work for you. Arnold knows what he's talking about—at one point, he had $45,000 in credit card debt, but he has since learned to be much savvier with his plastic, even using it to cleverly fund his wedding and car purchase. You can also pick up the Alpha Consumer Tip of the Week on setting financial goals. Listen now or download iTunes and RSS.

A debt collection company has left automated messages on my answering machine almost every day for the past six months. Erasing them within a few minutes of getting home from work has become part of my daily routine.

At first, I assumed they were telemarketing calls and that the company would eventually give up, but after realizing I had erased approximately 100 messages, I decided it was finally time to call and ask what they wanted and if they could please, please stop calling me. The messages were starting to drive me crazy.

Congratulations to Cathy from the Chief Family Officer blog for winning the second edition of the Alpha Consumer Challenge! She offered her best money-saving tip, which she calls the "drugstore game." She heads to the drugstore armed with coupons and store circulars and estimates she saves hundreds or even thousands of dollars a year.

Cathy will receive a copy of Rob Walker's Buying In: The Secret Dialogue Between What We Buy and Who We Are, which is also the first selection for the Alpha Consumer Book Club. To join the book club, all you have to do is read the book (or, for those who prefer Cliffs Notes, just read about the book). Post any questions you have for the author, or send them to me at alphaconsumer@usnews.com. You can also join the discussion on Facebook by becoming part of the Alpha Consumer Book Club there. From those who post or send me questions, I will randomly select a winner to receive a free copy of the book. Then, Rob Walker will answer the questions on this blog.

I recently spoke with Lisa Philp, head of philanthropic services at JPMorgan Private Bank, who told me she has noticed an interesting gender shift in her clients over the past year or so. She used to work primarily with men, but now two thirds of her clients are women.

She attributes the shift to the growth in the number of women in leadership roles in business, as well as the fact that women tend to take the reins of family foundations. There's also a broader movement in the world of philanthropy to involve and encourage women through groups such as Women Moving Millions and the Women's Funding Network. "The women's funding movement has grown by leaps and bounds," Philp says.

MP Dunleavey's book Money Can Buy Happiness jumped out at me because instead of dwelling on the stressful side of money, it focuses on how to use it to get the life you want. Dunleavey, a columnist for The New York Times and MSN Money, advocates investing in activities that really matter, like family time, instead of the ones that might cost more but leave you feeling empty, like unnecessary shopping. I recently E-mailed Dunleavey to ask her about the changes she's made to her own money habits and to get her best advice.

As a personal finance writer, how did you get the idea to write a book that focuses so much on being happier?
One of the first things you notice as a personal finance writer is that money pretty much makes people miserable and stressed out—no matter how much or how little they have.

This week, Flexo at Consumerism Commentary published the third anniversary edition of the Carnival of Personal Finance. It's filled with tips on assessing your financial IQ, a review of the presidential candidates' policies that would affect consumers, and ideas for affordable romantic getaways.

Two readers, both dissatisfied with their credit card companies but for different reasons, recently wrote to me. Here's the first problem:

I just received a notice from Capital One that my credit limit is being cut from $17,000 to $9,100 because I 'have not taken full advantage of [my] credit line.' I pay my account in full each month, though in the past couple years I have floated some bigger ticket items like new carpeting and living room furniture. Why did they do this, and will it negatively affect my credit score?