I turned down car rental insurance at the counter. Bad idea?
I don’t rent cars often, but when I have, I’ve always responded “sign me up!” when the agent got to the part about insurance. But when I picked up my rental early this morning, I said, “Thanks, but I’ll pass.” The reason? My new credit card’s rental insurance protections.
My boyfriend and I are making a 500-mile round trip this weekend for a special event. When I think of taking my aging car, I immediately imagine us stranded on the roadside in our fancy clothes in 100 degree heat. My boyfriend’s car broke down a few days ago, so it’s not going anywhere. Therefore, we’re renting a car.
If you’ve rented a car, you know how it works: The rate quote you get online looks downright cheap — until you get to the counter. Suddenly, the agent is using scare tactics to get you to buy the rental company’s insurance. In our case, insurance ($20 per day) would have doubled the cost of renting the car.
My card’s coverage
I just got a credit card that has rental car protection. So I immediately took a look at my contract to see what it covered — and didn’t. The card I have offers what’s called secondary coverage. That means it kicks in after my regular car insurance pays out — and would pick up the $1,000 deductible I have for my collision and comprehensive coverage.
To be covered by my card, I had to waive the insurance offered by my rental car company and pay the entire cost of the rental with my card. I also can’t use my car to commit a crime, or take part in a riot or a street race — but I don’t think it’s going to be that kind of weekend anyway.
I called both my auto insurance company and my credit card provider to make sure I didn’t miss anything in the small print. To know what to ask, I used the list of coverage considerations in this blog on U.S. News & World Report from Gary Foreman, founder of TheDollarStretcher.com.
After talking with my insurance company and credit card provider, I discovered a few costs that neither will cover. Rental car companies tack on a slew of fees if you damage a car, as this post on the BudgetTravel blog points out, including:
- Loss-of-use fees: If the car you rent has to be repaired, the rental company will charge you to make up for the money it could have made by renting out the car while it’s in the shop.
- Towing: If the car needs to be towed, we’ll be footing the bill.
- “Administrative” fees: The rental company has carte blanche to tack on whatever it wants to when it comes to the car’s diminished value after the accident or the cost of processing your claims after an accident.
There’s one more detail hiding in the fine print: Additional drivers are only covered under my auto insurance protection and my card’s protections if I add them as approved drivers. I booked the car with my card, but my boyfriend will be sharing the drive — so we ate the $10-per-day fee to add him to the rental contract.
Keep in mind, there are a bunch of vehicle types excluded under most credit card rental insurance coverage — including trucks. We’re renting a compact car, so we’re definitely covered. But Michael Pruser, who wrote about his rental truck nightmare on the Dough Roller, wasn’t so lucky.
If you need help combing through your card’s coverage documents for gotchas, travel blog BoardingArea has a step-by-step guide — and some humorous, plain-English translations of contract jargon.
Although I won’t be covered for the fees listed above, I decided to waive the rental company’s coverage. The price they quoted for four days of insurance was twice what I already pay for my monthly car insurance premiums. The amount I’ve stashed away in my emergency fund was certainly another factor in my decision to risk the loss-of-use and other fees if I get into an accident.
Insurance matters are always a bit of a gamble. Making sure you’re covered for everything (including things that probably won’t happen) entails paying a lot of money. Yet if that thing that probably won’t happen does happen, and you’re not covered, you could pay much more.
Road warriors, what do you think? Did I make a mistake? Also, please share your car rental horror stories in the comments.
New to budgeting? 5 steps to follow
Do you budget? If not, you’re not alone: A June 2013 Gallup poll showed that only about one out of three Americans do.
Just under a third of those surveyed said they or their spouse or partner make a detailed monthly household budget that tracks income and expenses. That leaves two-thirds of Americans in the non-budgeter category.
I used to fall into that category of non-budgeters. Sure, I had good intentions and thought of a budget as something I should do — kind of like flossing, and about as much fun. It was easy to procrastinate.
What finally got me to start budgeting was the stress of checking my bank account online and panicking when I realized I had much less money than expected. There were even a few times where I dipped into the red and got hit with huge overdraft fees.
Worse, I found I spent money on things I didn’t care about that much — impulse purchases such as clothes or shoes — and didn’t have enough left over for the things I really wanted to buy or do, such as going out with friends or visiting family.
So, if you’re part of the almost 70 percent of consumers who don’t budget, what steps do you take to change that? These five tips will help you get started:
1) Calculate your income. If you have a regular job, this should be fairly easy. Check your bank account or pay stubs to calculate how much you bring home each payday. If you’re self-employed or have an irregular income for some other reason, Forbes.com recommends budgeting “backwards.” First calculate your baseline expenses — the essentials you need in order to live, such as basic groceries, housing and utilities. Then build in money for extras (such as transportation costs). Whatever money you make goes first to those things. For anything left over, create two savings accounts: one for emergencies and one for non-essentials, such as vacations and cute shoes.
2) Add up your expenses. Fixed expenses, such as rent or mortgage payments, are pretty easy. To calculate how much you spend on non-fixed expenses — such as groceries and restaurant meals — go back through the past few months of your online banking or credit card statements. Or, if you’re a cash-only person, you might have to track your expenses for the next month.
Tip: Getting on an even-payment system for utilities (if your utilities company allows you to do so). Throughout the year, you’ll pay a flat rate each month, based on your past usage, which will eliminate the sudden spikes in the summer and winter.
3) Use a free template, app or online tool. If you don’t know where to start, there are many free budget templates to use as cheat sheets. Personal finance blog BudgetsAreSexy has a list. This is the part where you crunch your numbers — and tweak them if necessary — to make sure your money fits.
Tip: Be realistic. If you love to go out to eat with friends, don’t make a budget with no restaurants category, or you will end up either feeling deprived or blowing your budget. Also, don’t forget savings — especially an emergency fund if you don’t have one.
4) Reward yourself by budgeting for fun. The blog Budgeting in the Fun Stuff has tons of great ideas on how to work your wants into your budget alongside your needs. For example, Crystal, who writes the blog, puts 5 percent of her income into a vacation fund and 5 percent into a “fun money” account, which she uses to buy Crocs or shirts with funny sayings. Planning for fun is great because it helps you get those “wants” that are most important to you — and keeps you motivated.
5) Plan for budget busters. Something always will happen to mess up a perfectly planned budget. Of course, true emergencies such as a flat tire or busted water pipe should be paid for out of your emergency fund, but what about something like getting invited to several weddings in one summer? The Budgeting Babe lists five things that have blown her budget — including underestimating the cost of a vacation. For me, it’s not having Sunday to plan meals on a weekend when I go out of town, then spending extra on restaurant meals and other convenience foods the following week. Knowing this ahead of time helps: I can make meals to freeze before I leave or build in time for a quick grocery run when I get home.
If you’re still not ready to take the plunge, check out this roundup of budgeting tips gathered by Budget Bloggess. My favorite: If you hate to budget, do it with a glass of wine in your hand.
My rewards card plan
As I mentioned last week, I applied for the Citi Platinum Select AAdvantage card. And I’m glad to report that I was accepted. The card is in my wallet, it’s linked to my AAdvantage rewards account, and I’m ready to start charging. I’ve got a sign-up bonus of 30,000 miles to earn and $1,000 to spend to get it.
Yet I’ve worked for CreditCardGuide.com long enough to know that credit cards can lead to overspending — especially rewards cards, as our blogger Allie Johnson discovered when she tried transferring all her spending to cards to earn rewards.
So these are the rules I’ve set for myself. By following them, I should get the sign-up bonus and not drain my bank account by chasing after miles.
1. Carefully plot the route to my sign-up bonus: My sign-up bonus requires me to spend $1,000 in three months. I can just see that turning into “I get to spend $1,000, and it’s totally worth it because I’m getting miles!”
The only responsible way to get a sign-up bonus is to spend money you would have spent anyway. This is how I plan to earn my bonus:
- Plane tickets home for Thanksgiving and Christmas. These tickets generally cost me at least $300 each, so if I buy them before November (which I certainly will), that’s $600 shaved off my spending requirement. I go home every year, so I’d be buying these tickets even if there weren’t 30,000 miles on the table.
- Early Christmas shopping. Boarding Area (an online community for frequent fliers who do this sort of thing all the time) recommends coordinating your sign-up bonus with holiday shopping. I’m a notoriously late holiday shopper, but I have until November to earn my bonus. I can knock off the “easy-to-shop-for-or-just-wants-a-gift-card” folks from my list in October. I estimate this will move me $100 closer to my goal.
- Food. I spend at least $100 a month on meals out and groceries. So that’s $300 right there. I do try to pay with cash as much as possible, but, for the next three months, everything is going on the card.
- Gift cards. If I’m still a bit short of my minimum spending requirement, I’ll follow Boarding Area’s advice and pick up a gift card, which I’ll then spend on necessary living expenses only.
Boarding Area also recommends paying utilities with your credit card, but my utility company charges a fee for that. If yours doesn’t, that’s a great way to make your living expenses work for you. My $110 electric bill for August would have made a nice dent in my spending requirement.
2. Do the math: After I’ve earned my sign-up bonus, my card will continue earning me miles with every purchase. Credit and personal finance blog DebtGuru points out a common trap — the thrill of earning miles and points might tempt you to throw extra items in your shopping cart. DebtGuru recommends running the numbers before charging something you don’t need. That $50 sweater might earn you 50 miles — but 50 miles are generally worth just about 50 cents toward a ticket.
3. Limit my card use to certain categories: I’m pretty responsible when it comes to grocery shopping. My boyfriend and I use an app that lets us keep a master list of things we need. I pull out my phone when I get to the store and check off those items as I put them in my cart. When the list is blank, I hit the register, and I almost never buy extra stuff. When I try a new recipe, I make a list before leaving home and stick to it.
Clothes shopping, on the other hand, is a problem for me. A new shirt is often a gateway purchase to things that go with said shirt. If I’m earning miles for those things, I can see myself getting into trouble.
That’s why personal finance blog Seeking Alpha recommends assigning your card to certain “safe” categories. For me, that’s groceries. If I have trouble sticking to that, I might follow advice blog Lifehacker’s advice and tape a note to my card that reads “DO NOT BUY CLOTHES.” Sometimes a visual queue is all that’s needed to snap you back to reality. If I’m still having trouble, I might follow this more extreme advice from personal finance blog Trees Full of Money: Keeping the card at home if I’m doing anything but grocery shopping.
Finally, I’m going to avoid my credit card’s autopay option for now. I’ve found automatic payments can be a financial snooze button that lets me forget how much I’m spending. Logging in every week or so, reviewing my purchases and paying the bill in full each month, I hope, will help me notice if my spending is going off the rails — and keep me from hurting my finances with my brand new, potentially dangerous, financial tool.
How to make room in your budget for healthy food
I love fruits and veggies, and they’re the centerpiece of my diet – so they often also make up the bulk of my grocery bill.
And lately, because I’m trying to lose a few pounds, I’ve been relying on produce even more. Smoothies, salads and vegetable soups are low in calories and high in fiber, so they keep me full without pushing me over my daily calorie limit.
As I’ve searched for meal ideas that will keep both my weight and my budget in check, I’ve noticed that cheap meal ideas and tips posted by frugality bloggers often focus on high-calorie convenience foods, such as pasta, as well as dairy and meat purchased on sale. For example, this list of dirt-cheap meals published by The Simple Dollar features items like PB&J, spaghetti with marinara and eggs with black beans and tortillas.
In fact, many consumers say eating healthy costs too much. But is it really more expensive to eat lots of fruits and veggies?
That depends on how you measure the price, according to a 2012 study by the United States Department of Agriculture’s Economic Research Service. Researchers checked the price of more than 4,400 grocery items by calorie, weight and average portion. It was only when measuring by the calorie that many healthy foods actually cost more than unhealthy items.
“Foods low in calories for a given weight appear to have a higher price when the price is measured per calorie,” the report states, noting that convenience foods high in saturated fat and added sugar tend to be high-calorie, and thus have a lower price per calorie. That makes sense: You’d have to buy almost four heads of Romaine lettuce and spend maybe $4 to get as many calories as are in one 30 cent package of Ramen noodles.
But if, like me, you’re trying to cut calories, you might consider that a plus. Use these seven tips to eat more healthy foods without breaking the bank:
1) Put fruits and vegetables first. According to the USDA, the average family of four spends about $185 a week on food, including meals out, but fruits and veggies get squeezed out of the budget. The average American consumes 1.47 cups of vegetables a day, which is less than 60 percent of the recommended amount, and 0.84 cups of fruit, which is 42 percent of what they should be consuming. The Produce Marketing Association calculates that Americans could meet USDA guidelines, eating about 4.5 cups of fruits and veggies a day, for a little over $2 a person — or less than $60 a week for a family of four. That should leave plenty of room to buy other foods to round out the diet.
2) Stick to the basics. If you load your cart with organic arugula, kumquats and purple potatoes, you could spend a fortune. I’ve found it’s better to rely on less exotic produce for the bulk of my meals, buying fancy items sparingly to add occasional variety. According to the USDA, the least expensive veggies are potatoes, lettuce, eggplant, greens, summer squash, carrots and – this is interesting — tomatillos. And the cheapest fruits are watermelon, bananas, apples, pears, pineapples and peaches.
3) Keep it simple. If you make a simple meal, using just a few ingredients, you will spend far less than if you cook from a complicated recipe. One of my favorite recipes for summer, a cold pea and spinach soup, costs less than $5 to make and provides about four meals total.
4) Cook extra and freeze some. You get more bang for your buck, and keep produce from going bad, by doubling or tripling recipes and freezing the leftovers. This works especially well with soup. I usually buy a head of cabbage and use the whole thing to make a big pot of veggie soup.
5) Consider frozen or canned. According to the USDA, it can sometimes be cheaper to eat frozen or canned vegetables instead of fresh ones. These also can be a time saver since they’re ready to eat. I use frozen fruits in smoothies and frozen veggies in soups and stews.
6) Join a CSA. We joined a CSA (community-supported agriculture) last summer. CSAs allow several people to pay membership fees to farmers in exchange for a share of the crop — usually a box of produce. It wasn’t exactly cheap. However, we found that volunteers got to take home the produce left by members who didn’t show up to get their shares. One day, we went home loaded down with pears, elephant garlic, onions and peppers. It took us weeks to use all of it. It’s definitely worth asking if you can trade labor for leftovers.
How I picked the rewards card that (I think) is right for me
I’ve been in the market for a new credit card for a while. My credit history suggests I can probably get a pretty good card, so I’ve been scoping out rewards cards for the past few months.
I’m an extreme comparison shopper at heart, and found myself oscillating between cash-back cards and travel rewards cards. On one hand, I like the idea of getting money back on each purchase. On the other, I’d love to snag a free flight.
Ultimately, I decided on an AAdvantage rewards card from Citi. To make my choice, I performed the following steps:
Step 1: Looking at the pros and cons
The first step of my research involved taking a look at the overall advantages and drawbacks of the two major types of rewards cards.
The case for cash-back cards: On CreditCardGuide, we’ve dubbed cash-back cards the most low-maintenance rewards cards out there. Swipe your card and get a small kick-back automatically. Then redeem that cash for a statement credit, a gift card or a deposit into your checking account.
The case against cash-back cards: Rotating rewards categories can make these cards tricky. One month, you’re earning up to 5 percent back at hardware stores. The next month, you’re … wait … you better check your card’s website to find that out.
Travel rewards cards
The case for travel rewards cards: Your everyday spending turns into miles, which you can redeem for a free flight. You can declare your loyalty to a particular airline with a co-branded card that gets you extra perks (such as free checked bags and priority boarding) in exchange for your fidelity. Or, you can get a general purpose travel rewards card that gives you miles that can be cashed in with any airline.
The case against travel rewards cards: Travel rewards are often accused of giving cardholders “funny money” — murky miles that greatly fluctuate in value, based on when you fly. As personal finance blog Seeking Alpha points out, cash-back cards generally give you a pretty consistent 1 percent (a cent for every dollar spent) back. Rewards miles, on the other hand, can be worth less on popular routes during busy travel times.
Rewards site FrequentFlier.com, meanwhile, points out that the glamorous extras touted by airline cards are generally only accessible to elite fliers — not steerage passengers (like me). The BudgetTravel blog, meanwhile, warns that airline cards promise free flights but often nickel-and-dime cardholders for upgrades.
Perhaps the most scathing review of airline cards, however, comes from travel blogger and consumer advocate Christopher Elliott. In USA Today, he criticizes airline cards for trapping loyal fliers with bait-and-switch tactics. The airlines constantly reduce the perks and rewards frequent fliers have grown accustomed to, forcing them to either abandon their hard-earned miles to fly with another airline, or keep crawling back to the airline that takes them for granted.
Step 2: Analyzing my circumstances
So, given the arguments against airline cards, why did I decide to apply for one anyway?? Well, it’s not the cushy perk that attract me, but the free flight, plain and simple. So I chose the AAdvantage card for two reasons:
1. My flight patterns
My airline loyalty over the past several years is split between Southwest, Delta and American. I cashed in a bunch of my Southwest miles recently, so my balance is almost at zero. I have just 5,000 rewards miles with Delta, which isn’t much. Meanwhile, I have 20,000 miles sitting in my AAdvantage account. That’s not enough to get even the cheapest round-trip ticket anywhere. Yet, with the 30,000-mile sign-up bonus the Citi Platinum Select AAdvantage card is currently offering, I’d be looking at a free ticket nearly anywhere in the U.S.
Admittedly, getting a rewards ticket just because I can doesn’t count as saving money. However, I fly to my hometown for Thanksgiving and Christmas. It’s a regular expense I build into my budget. The Midwestern airport I fly into is tiny, and American is one of the few airlines that flies there. Plus, the city I fly out of is an American hub. So If I want to get home, I’m pretty much stuck with American. If I can get just one of those flights for free in 2014, that’s several hundred dollars saved.
2. The numbers added up
Wouldn’t I be better off getting a cash-back card and using the cash toward a flight? That only works out if a cash-back card earns me more money than the airline card. In my case, for the first year of card ownership, it wouldn’t.
Here’s how I ran the numbers:
Cash back: I had my eye on the Capital One Quicksilver card. It offers a constant 1.5 percent cash back on all purchases. Because I don’t spend much on groceries (I don’t have a family) and gas (I live 10 minutes from work), cards offering extra for grocery and gas purchases in exchange for a lower regular rate wouldn’t do much for me. The card also offers a $100 bonus for spending $500 in the first three months and has no annual fee.
Thanks to the spending data I’ve been collecting and the personal finance apps I use, pulling up the average amount I spend each month was relatively easy. Paying rent with a credit card isn’t possible (unless you get creative), so I subtracted that out of my monthly spending. That left me with about $1,000 in spending per month on average.
Assuming I use my credit card for all of that (and get the sign-up bonus), in the first year of card ownership, I would earn:
$180 in cash back + $100 bonus =
$280 in cash back
Not too shabby.
Airline card: Again, because of my flying patterns, I had my eye on the Citi Platinum Select AAdvantage card. It offers 1 mile per dollar spent on regular purchase and 2 miles for American Airlines purchases. It also offers a 30,000-mile bonus if I spend $1,000 in the first three months (I plan to make that spending requirement by charging my tickets home for Thanksgiving and Christmas 2013 by November). The card has a $95 annual fee, waived the first year.
During my first year, I would earn:
$12,000 in earned miles + 30,000 bonus miles =
But that’s not all. Some of that spending will earn me double miles, assuming I buy at least one American ticket in the next year (which I almost definitely will). Plus, I’ll be earning the AAdvantage miles I’d otherwise earn on any American Airlines flights I take. Finally, I’ll finally be able to use those 20,000 miles rotting away in my account.
With all those extras, at the end of next year, I’ll be looking at a balance of about
My tickets home for Thanksgiving are generally pricey: around 50,000 miles, for a ticket worth anywhere between $350 and $500 dollars.
I’d be getting that ticket with my miles, so that’s at least:
$350 saved, if not more.
…That beats my projected cash-back earnings.
The AAdvantage card has a $95 annual fee, waived the first year. So, I’ll either have to cancel the card within a year, or negotiate to have the fee waived another year. My co-worker successfully managed to have her annual fee reimbursed by threatening to cancel, so I’m willing to give that a try myself.
Even if I do keep the card, it’s the sign-up bonus and my current miles balance that really make the AAdvantage card worthwhile. A year from now, I’ll consider getting a no-annual-fee cash-back card and keeping it for the long term.
If there are any rewards aficionados reading, I’d love to hear from you. Is there anything I’m not taking into account? Experiences (good and bad) with your rewards cards you’d like to share? Tell me about it in the comments.
Don’t give up when trying to get a refund
Are you losing hundreds or even thousands of dollars by forgetting to return unsuitable items, just throwing away defective products or failing to contact the company if you’re not happy with a product or service?
Personal finance blogger Collin at Hip2Save recently wrote about accidentally purchasing expired grocery items and the fact that some consumers waste money by simply tossing the food. He printed a letter from a reader who asked, “Why would anyone ‘waste’ their money? Why wouldn’t they just return the bad or expired product for a good product?”
I agree: I’ve probably saved — or at least not wasted — more than $1,000 in the past few years just by returning items, asking for refunds or letting a company know when something went wrong. For example, in the past few months I’ve gotten refunds or exchanges for flowers my husband sent that arrived wilted, a manicure that started peeling after less than a day, and some Tidy Cat I ordered online that was damaged during delivery in the pouring rain, which split open the cardboard boxes and made a mess all over my porch. Those items alone add up to more than $200.
But returning purchases or complaining to a company can be a hassle, a time suck or just plain intimidating. I know some people — my husband, for example — who’d rather lose $100 than contact customer service. A December 2012 survey by RetailMeNot.com showed that only 31 percent of consumers would consider returning an unwanted gift. If you dread trying to get your money back, these eight tips will help you stay focused when pursuing refunds or exchanges:
1. Handle it right away. It’s important to return an item or contact the store as soon as possible, according to the Federal Trade Commission’s consumer information on merchandise returns. Return policies vary by company, but returns typically go much more smoothly and quickly when your return falls within the time frame outlined in the store’s written policy. If you’ve waited too long, though, contact the store anyway. I recently was able to return a quilt I never put on my bed (I didn’t like the colors) about eight months after I bought it from an online store.
2. Know what you want. Before you take any action, decide what the company could do that would resolve the situation to your satisfaction. Do you want to exchange a defective item? Do you want a refund so you can go purchase another item from a different seller? Do you want a discount coupon to partially make up for a bad experience?
3. Gather your documentation. When you try to get a refund, have the date of purchase or service, a brief description of what went wrong, your receipt or order number and any other available information on hand. In some situations, consider taking a photo. To get a coupon for a redo of my bad manicure, I snapped a picture of my raggedy, peeling nails the morning after the service and emailed it to the salon.
4. Be calm and professional. Yes, dealing with companies when something goes wrong can be frustrating: Who doesn’t have a horror story about being routed to call centers all over the world but getting nowhere in resolving an issue? But getting rude won’t help at all. It’s important to be polite, remain calm and professional and keep the focus where it belongs: On the problem with the product or service.
5. Be persistent. In some cases, you won’t get what you want on the first try. Don’t give up. You might need to repeat your request a few times. I’ve found that if you happen to get a customer service representative who insists the problem can’t be solved, isn’t knowledgeable or is just plain grumpy, you might have to say “goodbye,” call back and get a more helpful representative.
6. Go up the chain. If you get nowhere with customer service reps, ask to talk to a supervisor, the FTC recommends. I’ve had a lot of luck with this tactic. At times, if a supervisor has been unhelpful, I’ve even asked to talk to their supervisor. I’ve found that the higher you go up the chain of command, chances are good that you’ll eventually get someone with the power and willingness to help you.
7. Consider using social media. I’ve never used this strategy, but the FTC recommends trying social media if other avenues fail. Social media guru Chris Pirillo suggests using Twitter or Gripe, an online service dedicated to getting consumer complaints resolved, if speaking to a supervisor doesn’t work.
8. Turn to your credit card company. If you have no luck trying to resolve the issue with the merchant, you have a few options. If you purchased the item with a card that has a benefit called purchase protection (which may reimburse for damaged goods within a certain time frame after the purchase), you might be able to get a refund or replacement by filing a claim, depending on the item and the situation. Or, you can file a dispute with your credit card company and see if it will take up your cause.
“I Can’t Believe I Charged That:” Our contest winners
Last week marked the end of our “I Can’t Believe I Charged That” Facebook essay contest. We asked contestants to share their story of an unbelievable credit card purchase — and we’re thrilled to announce our Top 3 winners and honorable mentions.
Thanks so much to all who entered. Our panel had fun reading (and learning from) your stories about spending sprees, gifts for loved ones, vacations and, of course, mistakes. All winners have now been contacted by email.
First place: “Belize” by Stan Hajost
Editor’s note: This story had all the makings of an “unbelievable purchase” tale: spontaneity, a broken heart and the catharsis only a credit card-funded trip to the beach can bring.
About two years ago, I was going through a difficult time because of a breakup. Coincidentally, I had a trip planned to New York to visit my buddy Rick. He was doing his best to cheer me up, but I wasn’t feeling much like going. Shortly before my trip, I talked to Rick on the phone, and our conversation went something like this:
Rick: So I figure on Saturday night we would go to this birthday party.
Me: Birthday party?
Rick: Oh man you’ll love it. It’s for a great friend of mine. I’ll know a lot of people there. I can introduce you to tons of single guys!
Me: Heh … well… listen dude, I’m not so sure I’m in the mood to mingle…
Rick: C’mon man! You’re single, good looking and an all-around nice guy! You’ll be a big hit! They will love you!
Blah. My stomach sank. I didn’t want to deal with the people, traffic, noise and bustle of Manhattan. Furthermore, I shuddered to think of being tossed like a steak into a den of lions. Then it hit me. Where do YOU really want to go? Instantly, the thought of a warm beach surfaced. Within seconds, I Googled “kickass beaches” (that’s how I roll). There it was: The first entry was Belize. Within minutes, I made my most spontaneous travel decision. I canceled all my NYC travel reservations and booked Belize. Canceling and making new reservations on a two-day notice was a financial blood bath (haha). Not only was it the first time that I traveled alone, it was one of the most memorable trips. It was expensive but no regrets!
Second place: “Anything to make her smile” by Sean Shearon
Editor’s note: This sweet story made us smile and then made us a bit sad with its bittersweet ending. While we don’t believe that money (or credit) can actually buy love, we can all understand the desire to buy a thoughtful gift for someone you really care about.
My fiance is my everything. We just had our baby, and we are about to celebrate two years. This woman does everything for everyone! I wanted to show her that she was appreciated for all she does. I looked everywhere until I finally found this diamond necklace. It was a small one, but the first one she ever had, and it was all I could afford. She wore it for a few months, but then it just disappeared. She asked me if I took it, and I didn’t. I just can’t believe I bought that, and someone just takes it! We searched many times for it and still do.
Third place: “My whole life insurance policy” Ailena DiBenedetto
Editor’s note: We love stories that we can learn from, and this one definitely falls into the “cautionary tale” category. Credit cards can be a great tool, and whole life insurance can be a great investment. Combined, however, they create a money sinkhole.
I can’t believe I charged my annual whole life insurance premiums to my credit card! I’m still paying them off, and at this rate, it could take me my “whole life” to be done! The worst part is that I let the policy lapse and no longer have the life insurance! On the bright side, at least it didn’t take my “whole life” to figure out that this was a poor choice!
Even though we had only three prizes to reward, we enjoyed many of the stories we received. These two stories just missed the cut. One’s from a budding entrepreneur, and the other is from someone whose story just made us laugh.
Honorable mention No.1: “Makeup obsession” by Huyen Tang
Pretty recently, my parents entrusted me with my own credit card. It was my 18th birthday and I couldn’t have been more excited. I am a part-time makeup artist that works on friends, family, local parties, dance groups, etc., so makeup is essential. I usually make the low-end products work just as well as high-end ones, but the urge to splurge was far too strong once I got a credit card.
So, I drove to Ulta, a local beauty store, and went shopping. I mean, I truly shopped my heart out. I grabbed a mascara here, a palette there, threw in some false lashes and added a sprinkle of eye glitter. I finally could afford the nice makeup I’ve always wanted!
Unfortunately, I was obviously a little too overzealous. I didn’t stop to think about how much I would be spending until it was too late. The bill came and I was slapped with a $250 debt. I only baby-sit and do makeup for money, so I never really know when my money supply would replenish. Of course, now I have to go to college, making it all the more difficult to pay off. Luckily, I am able to pay small increments at a time and I definitely don’t regret my purchases; my clients have been loving the makeup quality and staying power of the products.
Honorable mention No. 2: “I paid twice for a dead lizard” by Arlee Colman
My husband and I had just rented a car. Not two miles from the parking lot, my chauffer looked like he was going to toss his cookies.
“What’s wrong?” I asked.
“I can’t take the smell!”
“I don’t smell anything.”
I was really trying to, but I didn’t smell a thing. I had to take mercy on him, though. He was really suffering and gagging.
“Well turn around, we’ll have to get a different car.”
He whipped the car around and couldn’t get back fast enough. I went inside to arrange the transfer while my husband opened all the windows. I convinced the counter person that there was definitely something wrong with the first car and they relented and gave me a second. When I returned to the parking lot, I saw that my husband had all the doors and the trunk lid open. He was standing back from the car like it was on fire.
“OK, I got us a replacement,” I said.
I turned to get my luggage from the shunned vehicle.
“Hey, look at this,” my husband said.
I turned and David was holding up his arm to show me that a lizard had been wrapped up in the laundry and died with his jaw clamped just below David’s arm pit. I took a step closer. It was a little lizard, not really anything you would ever notice, but this lizard had not been dead long. He was still decomposing.
“Do you think this is what you were smelling?” I asked.
Of course it was! The tiny lizard was under his left arm, away from the passenger seat and the air vent was blowing that decaying scent right up his nose!
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Shopping to cure loneliness? It may actually work
Ever turned to retail therapy to cure a bout of loneliness? If you fit the right personality profile, it may be a pretty effective cure, new research says.
The most expensive article of clothing in my closet was purchased right after I moved to a new city. With no local friends yet and a week left until I started school and a part-time job, I was lonely.
While browsing Facebook, I saw an ad featuring a pretty dress. Its bright colors cheered me up, and I bought it. It was almost $200.
It was probably not the most financially healthy thing I’ve ever done. But did this sudden burst of materialism send me spiraling into more loneliness and more loneliness-fueled purchases? Nah. It was a pretty dress, I like shopping for clothes and I enjoyed wearing the dress (and still do).
This memory resurfaced while I was reading an interesting new study on the relationship between loneliness and shopping, featured in the Journal of Consumer Research. The author, Rik Pieters of Tilburg University in the Netherlands, studied 2,500 consumers for six years. Traditional wisdom shared by experts and the general public alike, he writes in the report, says that shopping to soothe your loneliness will only make you lonelier — and then fuel more shopping. Yet, the research found that this wasn’t always the case.
Those who described themselves as missing company or feeling socially excluded (lonely) were indeed more likely to pursue material possessions (aka shop). Yet whether their lonely shopping sprees begat more loneliness depended on one crucial factor: Their attitudes toward shopping. Those who viewed possessions as status symbols got lonelier after making purchases. Yet those who simply enjoyed shopping got less lonely.
In other words, sometimes a new outfit can be just the temporary fix you need to feel less alone. You just have to know enough about your shopping mindset going in. Men need to be a bit more careful, the study found, as they’re more likely to attach more status to their belongings. Women, on the other hand, are more likely to simply view new possessions as “material mirth.” This study isn’t the first piece of research that’s shown that spending money, under certain circumstances, can up your happiness. In a June 2013 interview for Scientific American, Michael Norton and Elizabeth Dunn (co-authors) of “Happy Money: The Science of Smarter Spending,” discuss how buying experiences (cooking lessons, vacations and nights out) can boost your mood.
These findings have some interesting implications for personal finance advice. As Pieters points out in the report, many experts recommend “dematerializing” as a way reset your emotions and prevent a spending spree — banishing glossy fashion magazines, unplugging the television and staying away from the mall. But this research suggests that these diversions can be a relatively harmless pick-me-up for many. Or, as Sigmund Freud might have said, sometimes a dress is just a dress.
How to Leverage Remodeling Costs into Credit Card Rewards
Soon, my husband and I will start a big house remodeling project. We are going to turn the cramped kitchenette in our little Victorian house/former bed and breakfast into a real kitchen. So, I’ve been doing some research on how to leverage our spending to earn maximum airline miles.
Listening to hammering and sawing (and dealing with freaked-out dogs) for a month will wear on our nerves, so I’m hoping to rack up enough miles to allow us to fly off on a relaxing weekend trip after the dust settles.
We recently made a decision to stop using our rewards card for all of our regular expenses because we found that we were spending more than when we used cash or debit — but we made an exception for big purchases such as this remodel. For one thing, we want the consumer protections that come with using a credit card. Also, we already have a set budget and money in the bank, so we’re less worried about overspending. And it is appealing to get a prize back for shelling out that much money.
A remodel is a great opportunity to earn rewards, but it can present some challenges. If you’re also planning a home renovation or project, here are five tips to help you maximize the miles or points you earn:
1. Ask if your contractor takes credit cards. If your contractor takes credit cards and doesn’t charge you extra to pay with plastic, you’re in luck. In our case, our contractor doesn’t take cards but the plumber and electrician — whom we’ll pay directly — do. We can use credit cards to pay them without incurring a “convenience fee” that would cancel out our rewards. Although we were out of luck with our contractor, more of them are accepting credit cards than in the past, according to consumer review service Angie’s List.
2. If your contractor doesn’t take plastic, look for a workaround. As a workaround, we’re considering getting an American Express Bluebird card to pay our primary contractor. The card is reloadable and can function like a checking account, recommended by ThePointsGuy.com. That way, we would be able to use our rewards card to buy Vanilla Reloads (to load money onto the card) and then write a check from the account to the contractor. As travel rewards site TravelSort.com points out, using AmEx Bluebird checks works well not just for paying your rent or utilities, but also to pay your contractor for a house remodel. Just keep in mind that some retailers no longer accept credit cards (or limit the amount you can reload with a credit card) for Vanilla reloads.
3. Buy your own supplies. Don’t let your contractor buy pricey supplies and invoice you. Instead, arrange to purchase your kitchen cabinets, countertops, drywall and other items with a rewards card. That way, you can hunt for the best deal and choose purchases that will get you the most points or miles. The blogger Frugal Babe saved $200 by opening a Home Depot store card and getting 10 percent off of the first $2,000 of her initial purchase. We plan to look into that option, as well as the possibility of getting a Home Depot coupon that can be used toward our purchase of cabinets and other materials.
4. Consider gift cards. Blogger Jenny Lang of FrugalGuruGuide.com used discount gift cards to make her remodel pay off. She has a Discover card that pays 1 percent cash back on every purchase, and she can redeem it as cash or as a Lowe’s gift card. A $50 card cost her only $45 through the Discover redemption program.
5. Pay attention to categories. It might make sense to consider the timing of your remodel if you have a card that gives higher rewards percentages in ever-changing categories. In fact, FrugalGuruGuide.com points out that Discover and other cards sometimes offer 5 percent cash back for home improvement spending. Just beware of spending caps: Discover offers this percentage only on the first $1,500 spent.
6. Save wherever you can. Remember, look for discounts and deals wherever you can find them to cut the overall cost of your remodel, and be just as frugal as if you were spending cash. Spending more just to get points is always a bad idea because you earn only a tiny fraction of that money back. If you save that money and bank it instead, you’ll have more spending money for your free trip.
How to Keep Track of Multiple Credit Cards
If you’re juggling multiple credit cards (and using some of them for different purposes), it can be tricky to keep track of your spending, bill due dates and rewards.
When my husband and I were putting all of our expenses on just one rewards card, the ease of spending with plastic lulled us into being a little less diligent with our finances. As I’ve also learned in the past, using multiple cards can increase your odds of getting mixed up with your finances.
Use these six tips to help you stick to your budget, make payments on time and get the most of your perks while using more than one card:
1. Budget before you spend. It’s easy to pull out the plastic now and worry about crunching numbers later. But when you use credit cards, it’s crucial to plan before you spend a cent. As the blog You Need a Budget points out, it doesn’t matter how you paid your $100 grocery bill. That amount should be recorded in the food category on your budget and considered spent, even if you haven’t yet paid your credit card bill. Using multiple cards can make things even more confusing, but adhering to a budget can help keep you organized.
2. Keep your cards straight. It’s hard enough to keep track of a slew of cards, but what about when some of your cards — the Discover It card, for example — have regularly changing rewards categories? That can make it hard to know which card to use when. Self-improvement website Always Improve Me has a simple solution: Put a piece of scotch tape on the front of each card and jot the categories on the tape with a marker. That way, you can be sure you’re pulling out the right card at the right time to maximize your rewards.
3. Record your purchases. The more credit cards you’re using, the more complicated it will be to keep track of them. So, it’s a good idea to come up with the tracking method that works for you and to use it to record your spending regularly — if not every day, then every few days or at least every week. Some personal finance experts recommend saving your receipts and recording those purchases in one place when you get home. Others recommend jotting down all purchases in a notebook. Whatever you do, don’t count on the credit card company to keep track of your purchases for you.
4. Keep running tallies. Once you have your individual purchases recorded, you need to regularly transfer them to your spreadsheet, online program, app or wherever you keep track of your budget. You’ll need to keep a running tally of the total amount you’ve spent across all of your cards that month and the total for each budget category. For example, if you charged a $30 oil change on one of your cards, you’ll record that amount in the car maintenance category of your budget and also add it to your running total credit card balance. You might have to make adjustments, just like you would if you were spending cash. For example, if you go over the amount you budgeted for dining out, could you cut back in the lawn care or gifts category to make up for it?
5. Set up payment alerts. If you’re juggling multiple cards, you might be juggling several payment due dates, too. The Frugal Travel Guy recommends setting up text or email alerts or other reminders for your bill due dates, using whatever system works for you. If you use online banking through your credit card company, you can also set up alerts to notify you when a charge over a certain amount is spent on your card. These alerts can serve as nudges to check in with your finances and record your purchases on your budget tracker.
6. Keep track of your rewards. The effort of juggling multiple rewards cards will come to nothing if you’re not careful about tracking, maximizing and redeeming your rewards. Many consumers aren’t: An April 2013 survey by ThePointsGuy.com found 73 percent of consumers don’t know their rewards balance. So use a tool like AwardWallet.com to track your rewards earnings.