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Quick Tax Refunds Carry High Fees
Tweet Share on Facebook January 23, 2008 Comment (5)Tax season brings with it a variety of headaches, but there is one that can be especially costly for consumers: refund anticipation loans, or RALs.
These loans, typically used by low-income consumers who lack bank accounts, provide filers with quick money, taken out as an advance against their expected refund amount. They often carry annualized interest rates in excess of 30 percent, and sometimes as high as 500 percent. Many consumer advocates say they are so expensive that they should never be used.
"I absolutely think that they should be illegal," says Sally Greenberg, executive director of the National Consumers League. "Invariably, the interest charged is extreme, and it's yet another example of taking money out of poor people's pockets and robbing them of scarce funds."
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Tipping, Part 2: Answers for Readers
Tweet Share on Facebook January 22, 2008 Comment (10)My conversation on tipping with protocol consultant Judith Bowman generated so many questions from readers that I asked Bowman to tackle the subject again. Readers wanted to know what to do when they traveled, why they had to pay a 20 percent tip on meals that were already too expensive, and what to say when they weren't thanked properly for providing a tip. (Not surprisingly, the short answer to that last one is "nothing.")
I also received a plea from a reader who works in a large, family-owned restaurant in Delaware. She says most customers tip only 10 percent, which places a strain on the wait staff, who typically earn only around $2.35 an hour before tips, which are also shared with busboys. She wanted to remind others of the importance of tipping—and tipping well.
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Luxury Jewelry Market Feels Shoppers' Pain
Tweet Share on Facebook January 18, 2008 CommentIf the diamond ring you were lusting after didn't show up in your Christmas stocking, take comfort in the fact that you're not alone. In another indication of the slowing consumer economy, jewelry retailers reported disappointing sales for November and December, suggesting that shoppers resisted the temptation to load up on pricey gemstones.
Tiffany & Co. and Zale Corp. reported 2 and 9 percent declines, respectively, in comparable-store sales for November and December from the same period in 2006. Zale also announced this week that it will close 60 retail locations within the next 90 days. Jewelry retailer Finlay Enterprises similarly announced that comparable-store sales for November and December declined 5.9 percent, and at Signet Group, U.S. sales were down 8.1 percent for the period.
"Luxury is the first thing to go because it's totally discretionary," says Pam Danziger, president of Unity Marketing, a market research firm, and author of Let Them Eat Cake: Marketing Luxury to the Masses as Well as the Classes.
According to her research, spending on jewelry in the fourth quarter was down 23 percent to $2,655, compared with $3,468 in the fourth quarter of 2006. The percentage of wealthy households that purchased luxury jewelry was also down, to 13 percent in the fourth quarter of 2007 versus 25 percent during the same period in 2006.
There is one hot spot in the field of ice, however: Blue Nile. The online retailer, which prides itself on offering quality jewelry for good value, reported that fourth-quarter revenues increased 24 percent, largely because of strong holiday sales. If consumers were in the market for bling, it appears they wanted to comparison-shop online in an effort to get their money's worth.
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Resolving Credit Card Disputes
Tweet Share on Facebook January 17, 2008 Comment (9)Dear Alpha Consumer,
I was renting a storage room from a popular company. I set up automatic payments on my credit card to pay for it. After closing my account at the storage place and moving to another state, my card continued to get billed. I realized this about a month later and called to tell the storage company. The manager asked me to fax my paperwork showing I had closed the account. I did so several times, but the company continued to bill me for four months. I have tried calling the manager and filed a complaint with the Better Business Bureau. What are my options, besides just paying the bill?
The good news is that you paid with a credit card, which offers you extra protection. The bad news is that four months have lapsed, which might make it more difficult to get your money back.
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Recovering From Debt Overload
Tweet Share on Facebook January 16, 2008 Comment (9)Dear Alpha Consumer,
I was doing OK financially and paying off all my credit cards until I lost funding for my job retraining program. I've also recently had to pay for major vehicle repairs and my father-in-law passing away. Now, I'm carrying debt, and my husband works erratic hours and takes our only running vehicle. I'm trying to find a job online to help. We don't have any assets to sell.
Here is my question: With debt on multiple credit cards, all of which are at various interest rates, where should I put extra cash above and beyond the minimum payment? Should I pay down the card with the highest balance, which also carries the lowest interest rate? Or pay down the card with the highest interest rate and lower balance? Another option is paying down the cards that carry debt exceeding 70 percent of the credit limit.
Under normal circumstances, I happily live below our means, and we were doing so until several major blows, some of which I mentioned, hit our family. If you have any advice, barring winning the lottery, anything illegal, or filing for bankruptcy, I would most appreciate it.
I'm sorry to hear about your series of hardships, which sound as if they have placed a huge financial burden on your shoulders. Although climbing out of debt, especially while still looking for a job, is never easy, there are some smart ways to do it.
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Behind the Scenes at Apple, Gap, and Starbucks
Tweet Share on Facebook January 15, 2008 Comment (10)In Punching In: The Unauthorized Adventures of a Front-Line Employee, Alex Frankel works as a salesman at an Apple store, a Gap sales associate, and a Starbucks barista, among other positions at popular companies. While most of us interact with these companies only as consumers, Frankel explores what they look like from the other side of the counter. As someone who is always wondering what store employees are really thinking as they gather piles of clothes left in dressing rooms or froth our nonfat milk foam, I was eager to ask him about his experiences.
As an employee, what customer habits did you find most annoying? Have you changed any of your own behavior as a result?
There were certainly a few customers here and there who were clueless and demanding, but by and large, as a worker on the front lines at a handful of front-line retailers, I found customers to be surprisingly unobtrusive and generally patient. I was impressed by those customers who, when they felt they were right, argued calmly and clearly for what they felt they deserved (as opposed to those few who became angry and loud). The way in which my behavior has largely changed has been that now I understand that each company or store I frequent has a number of systems by which it operates.Now that I know more about these systems, I can be a better consumer. For example, I now understand how the UPS routing system works, so I know when I can expect my driver to show up at my door. And I know how to make his job a bit easier by doing things like ordering in bulk instead of many packages, getting to the door as quickly as possible, and telling him my name when I sign for a package. At Enterprise [Rent-a-Car], I know how the employee will try to sell me insurance, so I beat them to the punch by initialing the lines on the contract that signal I will decline it. I typically decline most insurance if I know that I am covered by my regular car insurance policy or my credit card, two ways many people are in fact covered for renting cars.
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Nonprofit Employees Boost Their Retirement Savings
Tweet Share on Facebook January 14, 2008 Comment (1)It's a question that often comes up when I get together with friends who work for nonprofits: Do they sacrifice money for their idealism? Most nonprofits are dedicated to improving the world in some way, but many people who work for them say they could earn more if they defected to the for-profit world. So how much, if anything, are they sacrificing for their career choice?
A new study from Fidelity Investments answers part of that question: At least in the ways they save for retirement, nonprofit workers seem a bit more conservative than their for-profit counterparts—but may have less money to work with. "They tend to put away, in terms of deferral rates, a little bit more than corporate employees. However, their average balance is less than on the corporate side," says John Begley, executive vice president of Fidelity Investments.
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Weak Holiday Shopping Adds to Economic Fears
Tweet Share on Facebook January 11, 2008 CommentWith the recent reports of weak retail sales, here's an argument for why December may not be as important as you think.
Were holiday sales weak this year?
For the most part, yes. According to TNS Retail Forward, the December same-store sales growth of about 50 retailers weakened to 0.2 percent, down from 3.2 percent growth in December 2006. The research group found that while the same percentage of people bought presents, shoppers spent $635 on average, down $75 from last year.To some extent, the soft sales were predicted: Way back in November, the Consumer Federation of America and the Credit Union National Association said that 1 in 5 shoppers planned to spend less than in the previous year, largely because of concern over growing energy costs.
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Shopping Leads to More Shopping
Tweet Share on Facebook January 10, 2008 Comment (1)If you've ever impulsively bought a muffin to go with your coffee, or surprised yourself by buying a whole new outfit when you meant to get only a shirt, then you will relate to the findings of a new study: Shopping, it turns out, leads to more shopping.
Before you beat yourself up for this kind of splurging spiral, know this: Researchers say that the forces at work are, in fact, psychological in nature and beyond our control. (Warning: That line may not work on spouses.)
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Paying for Free Money
Tweet Share on Facebook January 8, 2008 Comment (20)Updated on 1/9/08
My husband received a letter in the mail yesterday with a $300 debit card enclosed. "Congratulations," it read. "You have been pre-selected by NCLI to receive $300.00 at NO COST TO YOU."
It was sent from the marketing department of the National Collegiate Lending Institute. To qualify, he simply had to take advantage of NCLI's "free service" and provide a "brief testimonial" about his experience. The letter promised it would take less than 10 minutes and the money would be processed the following business day.
