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5 clever ways to cut your holiday spending

Filed under: Budgeting on December 10, 2014 @ 10:40 am

If you didn’t save up for the holiday season, you might not be feeling very merry. Celebrating can be expensive, though there are ways to trim costs.

A Gallup survey taken in early December shows that the average American plans to spend $740 on Christmas gifts — $30 less than last year. Gallup calls this amount “modest.”

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How I still love to cook, but on half the budget

Filed under: Finances on December 4, 2014 @ 10:28 am

Confession: I love to cook. I follow a gazillion foodie blogs, bookmark tons of recipes and waste way too much time on Pinterest drooling on pretty food photos.

I used to spend at least an hour (if not two) on Sundays choosing recipes based on my whims, then I’d head to the grocery store, and possibly the health food store and a specialty store or second grocery store if I needed to hunt down an unusual ingredient.

Before I took a hard look at our grocery expenses, my husband and I had been budgeting $600 a month, which seems outrageous for two people. And sometimes we went over: Last April, we shelled out over $800 at the grocery store. I knew something had to change. So, I decided to rethink the way I plan our meals and shop for food.

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3 banking lessons I learned the hard way

Filed under: Banking on November 26, 2014 @ 10:47 am

Ever had a disappearing bank deposit? I did recently, and I was convinced my bank had lost my money. But the whole thing turned out to be my mistake.

The situation was embarrassing and stressful, but I did learn a few lessons. My problem started innocently enough. Back in mid-August, I deposited two big checks totaling a little over $5,000 at an ATM. Then, in September, I went over my online banking records, adding the transactions to the spreadsheet I use for my household budget. But I couldn’t find any record of those two deposits.

After searching through my online banking records for about an hour, I went into my bank and asked a manager if he could look at my account and find the deposits. He couldn’t. So, I had to request copies of the checks from the issuers, both of which had been cashed, and supply those and other documentation to the bank manager. He forwarded them to the bank research department.

After two weeks, the manager emailed to ask which debit card I had used to make the deposits. Looking back, I realized that my main debit card had been deactivated and replaced in mid-August, probably because I had swiped it at Home Depot during a data breach.

I remembered that, because my replacement card hadn’t yet arrived at that point, I had used a different debit card to make that mid-August deposit. That card was for a secondary account I rarely use, and that wasn’t tied to my online banking. I had a forehead-slapping moment, checked that account and found the money.

Then, I had to email to admit my mistake to the manager who had been helping me. I definitely felt silly. But, some good did come from the situation. Here are three lessons I learned:

1. Swipe your debit card sparingly to lessen the chance of fraud. As I’ve written before, having my debit card replaced twice in a year due to data breaches made me to rethink my swiping habits. Every time your card has to be replaced, it can cause financial hassles and mistakes, Consumer Reports points out. For example, if you have automatic billing set up with a creditor, you have to remember to call to give them your new card number. In my case, I didn’t have my regular debit card available to make my deposits the way I usually do, and that tripped me up.

2. Don’t make large deposits at the ATM. Even though my deposits didn’t get lost, I learned it does happen. As Money points out, depositing into an ATM usually is safe, but you should use a teller for big deposits: “You can find horror stories of deposits at ATMs that went horribly. Money vanishes, there’s no record of the deposit and so on.” I read a few such tales while doing some online research when I thought my money was missing. I also talked to the manager at my bank and learned that banks typically have a third-party company service their ATMs. That means a company removes the deposited checks and cash, and takes those to another location to reconcile everything. That can make tracking down missing money more complicated. But depositing directly with a teller ensures that your transaction will be part of the bank branch’s records for that day. (The manager at my bank swears by mobile deposits where you take a photo of your check and send it in, partly because the consumer keeps the original check in case of problems.)

3. Keep deposit receipts organized. When I’ve deposited checks into an ATM in the past, I always requested a receipt with the check image on it, just for clear proof that I made the deposit. But I’ve never had a system for organizing those receipts, and they often end up crumpled in my wallet or thrown out. During my bank debacle, the bank manager asked for my deposit receipts, but I didn’t have them. Personal finance expert Suze Orman recommends keeping ATM receipts for a month, until you’ve checked them against your monthly bank statement. I started a file folder to hold my deposit receipts so they don’t get lost or tossed.

By learning from my mistake, I’m hoping that if I do ever have a deposit that actually goes missing due to a bank error, I’ll be able to get it resolved quickly and easily.

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How do you know if that insurance call is legitimate?

Filed under: Fraud and Privacy Issues on November 21, 2014 @ 1:25 pm

An email appeared in my inbox recently with the subject line: “Protect yourself from insurance fraud.” It was from my health insurance company.

Insurance fraud has been on my mind in recent months after I had emergency surgery over the summer. I was bombarded with bills, and it made me more aware of how vulnerable our medical information is.

Insurance and Medicare fraud is a many-headed monster. The insurance companies get billed for unnecessary or fake services and equipment, which drives costs up. But the issue that affects consumers directly is medical identity theft, which is when fraudulent charges and incorrect information can end up on your medical records. In addition to posing health risks as a result of erroneous information, it can also harm your credit score if bogus, unpaid charges make it onto your credit reports.

So, when the email landed in my inbox, I immediately took a look.

Apparently, scammers are calling people and trying to get personal information by identifying themselves as employees of my insurance company.

I was hoping for hard advice on how to weed the scammers from the legitimate calls. I was sadly disappointed.

The email began by detailing what legitimate insurance representatives will say when they call a member (pretty helpful). It noted specifically how the company would be identified (very helpful). Then, it said what information insurance reps may ask for (not at all helpful). It turns out I might be asked for my birthdate, address, information on my ID card, even information about my plan and medical history. Remember, this is when the insurance company calls me.

Wow. Really? This is supposed to help me weed the bad guys from the good guys?

That raised the question: How in fact do I know that a call is legitimate?

I turned to the FBI, hoping for a little clarity. There was some good advice about avoiding “rolling lab” schemes at health clubs, retirement homes or shopping malls, which perform unnecessary or fake tests, then bill your insurance company or Medicare. When you use these labs, you also run the risk of inadvertently giving personal information that can be used to steal your medical identity.

The FBI also warns against doing business with phone or door-to-door medical salespeople who say their services are free. But that was the extent of their advice about phone calls.

Then, I looked at the Federal Trade Commission’s website about medical identity theft. It went into a bit more detail:

  • Be wary if a caller says he has free health services or products, but he needs your health plan ID number.
  • Don’t share medical or insurance information with anyone unless you initiated contact. (I’ll add that if someone claiming to be with your insurance company or Medicare calls, get his name, employee ID number and the reason for the call.  Then, call back using the number on your card.)
  • Be mindful that a scammer may claim to be with your doctor or pharmacy and probe for personal information.

The Office of Inspector General at the U.S. Health and Human Services Department warns of a couple of current phone fraud scams:

  • Phone scammers are claiming to be conducting a health survey, then asking for your Medicare number.
  • Telephone marketers are pretending to be with Medicare or Social Security and asking for payment over the phone or Internet.

AARP reported in the summer that there were robocalls offering a free medical alert device, with some callers claiming to be from AARP itself. During the call, would-be victims were instructed to press1 to get their device and 5 to refuse.

So when you get one of these calls, what do you do? Two things: Let them do the talking, and if you don’t like what you hear, hang up.

It helps to stay up on the latest scams, because it keeps you mentally prepared, but it really comes down to not being afraid to be rude.

We were taught not to hang up on people. But this is guerrilla warfare — the best way to protect your medical identity and your health is to hang up when the call gets weird.

It’s really that simple.

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Just how much do data brokers know about you?

Filed under: Fraud and Privacy Issues on November 20, 2014 @ 1:39 pm

Purchases can reveal a lot about you — whether you have kids, your vices, your clothing size, your hobbies and even health problems.

That’s why big data is big business. A 2013 Direct Marketing Association study found that in 2012, $156 billion was spent on marketing services that used the collection of individual online shopping habits. And the association says data marketing fueled 676,000 jobs.

But what really gets me? Data brokers can collect details on what we buy with debit or credit cards, and they don’t have to tell us.

A May 2013 report from the Federal Trade Commission revealed that data brokers buy detailed, specific information about consumer purchases from retailers and catalog companies.

Data brokers, for the most part, are very secretive about how they operate and what data they collect. Unlike consumer reporting agencies, such as the big three credit bureaus, data brokers are not required by law to show consumers their files or correct inaccurate information, according to the nonprofit Privacy Rights Clearinghouse.

But one big broker, Acxiom, created to let consumers take a look at some of the information that’s been collected about them.

Consumers shouldn’t expect too much from this small move toward transparency, though. According to the Electronic Frontier Foundation, a nonprofit that promotes privacy in the digital age, consumers who check are not getting a complete picture.

Acxiom collects about 1,500 pieces of data per consumer, and has information on more than 700 million consumers, according to the foundation. However, on, Acxiom shows you only some of the data they have on you, according to the foundation.

I decided to check my Acxiom report to see what it reveals and whether the information is correct. To register, I had to provide my birth date, address and the last four digits of my Social Security number.

I then got to see my report, or at least the part Acxiom was willing to share with me, which was divided into six categories:

  • Characteristic data
  • Home Data
  • Household vehicle data
  • Household economic data
  • Household purchase data
  • Household interests data

Only two categories contained data. Under characteristics, Acxiom correctly listed my birth date, household size (two), education level (college), the fact that I vote and my political party (Democrat).

But the household economic data section listed my estimated household income range as under $10,000. I have no idea where they got this information, as my husband has a good job as a college professor, and I’ve been successfully self-employed for 10 years. We’re a solidly middle-class couple.

I’m not the only consumer about whom Acxiom’s got it wrong. wrote about a married Harvard professor with a doctorate who was listed as a single guy with only a high school education. Forbes also mentioned a woman who steers clear of firearms and was described as an avid hunter, while a childless woman who buys a lot of gifts for nieces and nephews was listed as a mom.

I have no idea how my incorrect information might be affecting me, or whether I should bother to change it. I really don’t want to give this shadowy company any correct information about myself. In fact, Forbes quoted a data security and privacy professor as saying might be “bait” to get consumers to correct bad information about themselves.

I contacted Acxiom to get their take on, but through a public relations representative, they refused to talk.

So, when I click on Household Purchase Data and see that Acxiom has no “no data available” about me for that category, does that mean they really have no data about the many purchases I’ve made on my debit and credit cards? Or does it mean they’re just not letting me see the information they have?

The Federal Trade Commission recommends that Congress enact laws to force data brokers to be more transparent and accountable. I hope the day will come soon.

In the meantime, checking your Acxiom report is a simple way to get a glimpse of some of the information data brokers have gathered about you — even if it’s totally wrong.

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How I clear $800 a year with my rewards card without trying

Filed under: Rewards on November 14, 2014 @ 11:07 am

Since 1984, when I was a college student, I have had a credit card. I still have my first card, which originally had a limit of $300 and was issued by my hometown bank.

Well, that bank was bought, and then it was bought again. My little hometown card today is a BankAmericard Cash Rewards card, and the limit has increased into five digits.

That card has been my good friend. As my family has grown, this card has been there with me. I bought our first car seat with it. I used it to pay for art supplies so my then-toddlers could paint on the kitchen floor (newspaper was taped to the floor). As the kids grew, we used the card to buy them computers that they could use for their school work. Meanwhile, I have built exemplary credit by having a card for three decades.

My loyalty to my card has paid off. Now, without even making an effort, I am clearing about $800 a year just for using the card.

That’s right. I make $800 a year, and nothing is cutting into that sum. That’s the power of rewards cards.

Here’s how I’m doing it:

  1. I don’t pay an annual fee. Annual fees cut into how much you profit from rewards plans, and you need to account for them when deciding on the best card for you. Because I have no annual fee, my cash back is pure profit.
  2. I don’t carry over a balance. This means I’m not paying interest, which would further dig into my rewards. That’s something chief Ben Woolsey advises that you do if you are going to use a rewards card.

“If you carry balances on a regular basis, it’s best to avoid a reward card altogether,” says Ben. So, because I pay my card bill in full and on time each month, I’m further benefiting from this card’s rewards.

But how do I use my card? Actually, I don’t use the favorite tricks of rewards card experts. I don’t put my utilities on it, for example. And I don’t shop at specific stores to max out my points. However, if we have a big purchase, for example, holiday shopping or a new computer, the Bank of America card is my card of choice.

As a result, I accumulate about $200 in cash back every three months. I credit my card account with the cash, and put it toward the next month’s bill.

There are other things I can do to maximize my rewards.

For example, by shopping online on my card’s WorldPoints Mall, I found one retailer that gives you 17 points back for every dollar you spend. Four points for every dollar spent is typical on this site, and the 400 retailers include major merchants such as Macy’s, the Apple Store, Staples and The Home Depot.

The card is very versatile, with the option to get gift cards or travel rewards instead of cash.

But I don’t plan to change my shopping habits — nor should you. You shouldn’t have to adjust your life to benefit from a rewards card. Instead, shop for the one that fits your needs.

When you are shopping for a rewards card, go through this checklist:

  • Does the card have an annual fee? And if so, will you spend enough to recoup the annual fee? (See the chart below to use for cashback plans.)

Annual Fee Chart

  • Will you be able to pay the card in full and on time each month? Otherwise, you are just wasting your money.
  • Does the card fit your current lifestyle? For example, will you primarily use the card for groceries and gas? Then, you want a card that pays $2 or more for every dollar you spend on those items.
  • Part 2 of fitting your lifestyle: Make sure your favorite stores fall under the merchant category codes that the card rewards. For example, see Visa’s code list.
  • Travel a lot? Look at travel cards that reward you for using your favorite hotels and airlines. (My husband and I made the mistake of upgrading his American Express Delta card. We pay $195 a year, get lots of travel benefits and have 59,000 Delta points, but we don’t use them because we no longer travel on Delta. So we are wasting money on a rewards card that we aren’t taking full advantage of. Why? Because it doesn’t fit our lifestyle.)

I’ve found that by having a card that fits my lifestyle, that doesn’t have an annual fee, and by paying in full and on time, I not only maintain a high credit score, I actually make money by using the Bank of America card. Not bad for a little hometown card that started with a $300 limit.

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I saved hundreds of dollars by challenging overdraft fees

Filed under: Banking on November 12, 2014 @ 11:41 am

Are you sure you’ve not opted in to overdraft protection? I knew I wasn’t, but my bank recently tried to charge me hefty fees. I saved almost $300 by knowing the rules.

It’s been over four years since Federal Reserve rules went into effect in 2010 to help protect consumers from nasty overdraft surprises.

The rules state that banks cannot charge consumers overdraft fees for debit card purchases or ATM transactions unless the consumer receives information on the bank’s overdraft protection service and opts in to overdraft protection.

When I opened my current bank account, I knew about the rules and chose not to opt in. I tend to make a lot of debit card purchases, and I definitely didn’t want to get hit with multiple $35 overdraft fees if I made a mistake and let my balance get too low. I’d much rather have my card declined and suffer a tiny bit of embarrassment.

This fall, I messed up. I had a busy few weeks and forgot to transfer money from another account to cover a household repair I’d paid for from our main account. Our balance got low, and my husband and I each made several small debit card purchases in one day.

When I logged into online banking a few days later, I was shocked to see $280 in overdraft fees. I immediately called customer service and eventually got all of the fees reversed.

So, how can you avoid being in the situation I was in? The federal Consumer Financial Protection Bureau recommends that you know your opt-in status.

If you haven’t opted in, I’d recommend getting proof in writing and keeping it on file. After my incident, the bank customer service rep I spoke with sent me a letter stating that I have not opted into overdraft protection. I stuck it in a file folder with my other banking information.

If you do end up in a situation like mine, here’s how to handle it:

1. Call the bank right away. Explain that you chose not to opt in to overdraft protection and were charged overdraft fees by mistake. Ask to be credited back the full amount you were charged. Be friendly and calm, recommends in its guide to talking your way out of bank fees.

2. Don’t accept less than you’re owed. It’s often possible to get one or two overdraft fees waived by asking and being persistent, according to the personal finance blog I Will Teach You To Be Rich. This is sometimes referred to as a one-time “courtesy refund.” In my case, the bank rep first offered to refund me $140, or half of the total amount I was charged. However, if you have not opted in to overdraft protection, you should not have to pay any overdraft fees for debit card transactions. (The opt-in rules don’t apply to checks or direct debits such as recurring bill pay, though.) So, be politely persistent.

3. Show that you know the law. Let the bank know that you know your rights. Here’s what I said: “I know federal rules prohibit banks from charging overdraft fees for debit card transactions unless the consumer has opted in to overdraft protection. I’m 100 percent sure I did not opt in. So, could you please reverse all of the overdraft fees I was charged?”

4. Ask for written proof you opted in. If the bank rep still doesn’t agree, you can say: “Are you saying that I am opted in to overdraft protection? If so, can you please provide me with written proof with my signature on it showing I opted in?” That’s the magic line that got the bank representative to check for a record of my opting in. When she got back on the line, she confirmed that she could not find anything showing I had opted in, and she agreed to immediately reverse all $280 worth of charges. I Will Teach You To Be Rich recommends you keep records of all of your customer service calls to make sure the bank keeps its end of the bargain. In my case, the rep followed through with her promise.

So, if you know the bank was wrong to charge you an overdraft fee, keep at it. You should win — eventually.

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Free ID monitoring services leave a lot to be desired

Filed under: Fraud and Privacy Issues on November 5, 2014 @ 1:42 pm

The past year has been a big one for data breaches at retail giants, with Kmart joining the list this month. And in the wake of these security breaches, retailers often try to mitigate the damage to customers by offering free identity theft monitoring.

That makes sense: The 2014 Identity Fraud Study by Javelin Strategy & Research found that data breaches are the biggest risk factor for identity fraud, and that one in three consumers who got a data breach notification in 2013 became a fraud victim.

Now, Home Depot is offering 12 months of protection from AllClearID to anyone who believes they used a payment card at the home improvement store any time after April 1, 2014. And Kmart is offering credit monitoring from Experian’s ProtectMyID for customers who made card purchases at the discount chain between Sept. 1 and Oct. 9, 2014.

Consumer Reports, which has criticized ID theft monitoring products in the past, now tells consumers there’s no reason to turn down free ID theft protection, provided you understand its limitations. I agree, simply because monitoring does alert you to any new activity on your credit report.

That’s why, back in February, I signed up for the free ID theft monitoring from ProtectMyID, offered by Target after its massive data breach, which was revealed last December.

The product is customized for each retailer that offers it, so the features on the product I got are slightly different from the ProtectMyID product offered to consumers who pay for the service, says Becky Frost, senior manager of public relations and consumer education for Experian Consumer Services.

Now that I’ve been using it for the better part of a year, I’m not too impressed. But it is free, and I’m considering signing up for the Home Depot ID theft protection, since I swiped my card there to buy some painting supplies over the summer.

With ProtectMyID, I get an email “surveillance alert” whenever there’s activity on my credit report. The first few times this happened, I freaked out. The alerts begin with this nerve-wracking warning: “ProtectMyID has detected signs that your identity could be at risk.” And it urges you to log in right away to view your alert.

In my case, the “signs” turned out to be simple inquiries generated by my application to refinance my mortgage.

But I do wonder if stoking the worries of already edgy consumers might make them more likely to go for an upsell — one of the beefs Consumer Reports has with many ID theft monitoring services.

For example, with ProtectMyID, each “alert” offers a brief description of the activity on the credit report and also includes a link offering your three credit bureau reports and scores. When you click on it, you see the price: $31.95. No, thanks. (You can get your credit reports for free once a year at

“As a convenience, the product provides a way for members to order credit reports from all three agencies in one location and reflects the charges that are incurred by providing reports from the three different credit reporting agencies,” Frost says.

But through ProtectMyID, I can’t even look at my current Experian report without paying $9.95. When I click on the “reports and scores” tab on my ProtectMyID dashboard, I get a message saying I don’t have a current report on file and an ad offering me the chance to buy my Experian report and score or my three-bureau report and score.

ProtectMyID provides one Experian report to members when they enroll, Frost says. “Because credit reports are updated frequently with information provided by lenders, the report is available for 30 days after the initial pull,” she says, adding that members are notified of changes through alerts.

I do remember looking at my report when I signed up, but didn’t realize it was a one-shot deal and I’d have to pay to look again later.

However, AllClear ID, the service Home Depot is using, claims it doesn’t upsell to data breach victims.

I did just get a notice that three new features had been added to my ProtectYourID  account. They are:

  • Lost wallet protection, in which customer service reps will help you make calls to cancel and replace your cards if your wallet is lost or stolen. That sounds OK, but I’d probably just make my own calls.
  • National change of address monitoring, to thwart ID thieves who might try to reroute your mail.
  • And Internet monitoring, which checks online black markets where stolen information is traded and sold. To me, that sounds like a valuable addition to the service.

If you do sign up for a free ID theft monitoring service, remember, as the nonprofit consumer protection group Privacy Rights Clearinghouse points out, there are types of fraud the services can’t protect you against. For example, they don’t alert you to fraud in which a legitimate account is used — such as when a crook uses your credit card number to make a purchase.

So, it’s important to monitor your existing accounts, including your checking accounts and credit cards, for suspicious purchases.

And for retailers and ID theft monitoring providers, here’s an idea: How about offering data breach victims a free service that includes ongoing access to our credit reports and scores from all three bureaus without upselling?

That would offer real value and create some goodwill with customers who are getting awfully tired of hearing news of yet another data breach.

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4 tricks to selling old items in rural areas

Filed under: Debt Tips on October 29, 2014 @ 12:32 pm

Live in a big city with an active Craigslist? If so, you have a major advantage when it comes to selling stuff to pay down debt. But, even if you don’t, you still have options.

When I lived in Kansas City, which has a bustling Craigslist community, I could quickly turn unwanted items into cash.

My husband was in grad school during the recession, and I used Craigslist selling to supplement our income. Most of our budget was dedicated to paying bills, including our mortgage and my student loan debt.

If we were short on grocery money or just wishing for a date night with cheap wine and snacks from Aldi supermarket, I’d find something to hock on Craigslist. It helped us not feel too deprived during those lean times.

In Kansas City, I could post certain types of items online and almost be guaranteed to get multiple responses and make a sale within days. A bike would be claimed within five or 10 minutes — really. Nice wood furniture was popular. So was anything cool, unusual or vintage.

Here are just a few of the things I easily sold back in those days:

  • Vintage ads from Kansas City businesses that had been used to line the floor of our attic and were still in good shape.
  • A hideous wood bookshelf I had painted maroon and decoupaged with Frida Kahlo pictures in a moment of bad taste. I listed it for $100 and sold it to a young woman who loved it.
  • Antique medicine cabinets ripped out of a neighboring house and left on the curb as trash. I sold them for $100 each.
  • Vintage cabinets and a vintage sink. I had bought a group of items, which included the cabinets and two sinks, to get one of the sinks for my house. I bought the lot of items for $75, then I flipped the rest of the items on Craigslist and made about $250. I got my sink “free.”

After I moved to a smaller town in the South three years ago, I expected to be able to use Craigslist again when we were trying to pay off my husband’s student loan and other debt. But I got an unwelcome surprise.

Online selling is much less popular here, and the only things that sell quickly are practical items such as appliances and tools. I sold a chest freezer, my old bike and some pedestal sinks taken out of our house during a remodel. But it took weeks.

And usefulness is no guarantee that an item will go: We’ve listed a lightly used mini-fridge multiple times with no luck. And the antique items that were so popular in Kansas City are almost unsellable here. For example, we had a beautiful tiger oak pedestal table that we’d bought at an antique store in Kansas City. It didn’t fit in our house here, so I put in on Craigslist. After listing it multiple times for months, I sold it, in desperation, to a guy who talked me down to $30.

So, what can you do if you also find yourself in a small town or rural area where selling on your local Craigslist isn’t a snap? Here are a few ideas:

  • Sell to a store or dealer. We took out some walls during a remodel, leaving us with six beautiful antique doors that did not sell online. I emailed an architectural salvage store owner and he snapped the doors up for $200. In retrospect, I should have called local antique shops about my oak table. And for items such as clothes, jewelry and bags, consignment shops can be a good option.
  • List on a larger city’s Craigslist. If you live within a few hours of a large city and are planning a trip there soon, consider listing your item on that Craigslist. This is only worth it if your item is worth a substantial amount — for me, that would be $100 or more, since you’ll likely have to drive out of your way to meet the buyer, and some buyers can be flaky.
  • Scout out the best place to sell online.’s Frugal Living guide recommends selling books online, noting that you can check to find the online book seller that will give you the most bucks for your books. recommends selling clothes on eBay and listing vintage items on
  • Sell through an app. suggests using apps such as DeCluttr. You can scan the bar code of your old CDs, DVDs and video games and find out how much DeCluttr will give you. You then download and print a label and ship for free. Another app, Poshmark, lets you create a ‘virtual closet’ and sell clothes to buyers all over the country.

While I still lament my loss of Kansas City’s Craigslist, I am excited about exploring some new options — especially apps — to help us pay off our current credit card debt.

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My low debt tolerance at odds with common sense

Filed under: Finances on October 22, 2014 @ 9:30 am

How’s your debt tolerance? After some trial and error, I’ve discovered mine is close to zero.

That is, I don’t feel comfortable being in credit card debt, even when I get a great zero-percent deal — something my husband and I did during our remodel this year.

It was a hard decision to go into card debt because we’d just gotten out of debt the year before, with the exception of our mortgage. But we did put some appliances and remodeling supplies on credit back in January, and I truly felt OK with it at the time. It was a relief to be able to finish our kitchen and get cooking again.

However, as the months have gone by, carrying a balance, even at zero percent, has made me feel anxious and bogged down. In contrast, when we were debt free (except for our mortgage), I felt much more financially secure, happy and free.Debt tolerance

I’m not alone. A July 2014 survey by market research firm Mintel found that, right now, many consumers are cautious about taking on new debt. And, according to Mintel Vice President of Research Marla Commons, consumers are “particularly reluctant to borrow on their credit cards or against the equity in their homes to finance spending.”

Not all consumers despise debt, though.

My husband, Joe, falls into this camp. He’s apparently got a higher debt tolerance and isn’t bothered at all by our balance. In fact, he says he’d rather rack up more debt to pay painters to paint the exterior of our house than do the job ourselves.

Sure, I’d rather spend these beautiful Georgia autumn Saturdays riding my bike. But rolling up my sleeves and getting some paint spatter on me sounds a lot more appealing than pulling out the credit card.

Carrying a balance can have major downsides: It might mean you’re paying hundreds of dollars in interest, and it also can affect your credit score by changing your credit utilization ratio — the amount of your total credit limit that you’re using, points out.

But my dislike for debt is more emotional than rational.

I discovered the pain that debt can bring when I was first learning how to manage my finances. I’d racked up a credit card balance by just spending a tiny bit more than I earned. This left me feeling panicked, like I always was playing catch-up. I found that dialing my spending back just a little and making sure I had the money before I spent it made me feel much more in control. That lesson has always stuck with me.

I asked consumer psychologist Kit Yarrow, a professor at Golden Gate University in San Francisco, for her take on debt tolerance.

“People who are more security oriented will have a tougher time with debt,” she says. That trait can come from uncertainty in childhood — economic, or other factors, such as an illness or loss, she says.

That makes sense: My family didn’t have much money when I was very small. However, I’d say my bad experience with mismanaging my own finances right after college played a big role in my current attitude, too.

“Debt phobes like you and me are more common than you might imagine,” says Yarrow, who says she refuses to carry credit card debt and also is married to a spouse who’s less debt averse.

She says there’s “irrational thinking” at both ends of the spectrum — both the debt haters and those who see no problem at all with being deep in debt. For example, she says it can make sense to go into debt in certain scenarios, especially with a low- or no-interest deal.

And some types of debt can be good: We have a mortgage, which allows us to build equity in a home, provides us some income tax breaks, and helps keep our credit strong when we pay on time, which we always do.

But I’m going to embrace my inner “debt phobe” and use my uncomfortable feelings about owing money as a motivator to get back out of credit card debt once and for all. From experience, I know I’ll feel better when our balance hits zero.

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