Tips About Tip Jars

    

Photo courtesy Bottoms Up Restaurant & Bar Supply - http://bottomsup.com

        On Saturday, we went into a restaurant. Someone put our order in. This person put napkins and flatware on our table. He brought our food and filled my glass with ice tea. He even made my payment at the register. So does the restaurant staff deserve a tip?

            No!

          Why? Let me reframe the way I presented the above story. Cheryl (The Consumer Gal) and I walked into a restaurant and approached the cashier. We perused the menu and made our dining selections. We told the cashier what we wanted, he  rang up the bill, and we paid him. He handed us our beverage tumblers and a pager. We went to the condiment/flatware station and loaded up on napkins, condiments and flatware. Then we headed for the beverage station and filled our tumblers with ice and drinks. When the pager went off, we headed to the pickup area and retrieved our tray full of food and carried it back to our table. When we wanted drink refills, we fetched them for ourselves. In other words, The Consumer Gal and I were the “someone” in the original version of this story.

            Now, here’s the question: Why is there a tip jar near the register? A tip jar! There are all kinds of stories about the derivation of the word “tip” or “tips,” but its purpose is clear. You reward an otherwise (usually) underpaid service provider for giving you good or better service. An earned tip, therefore, requires an essential element: personal service. Cashiers have never been part of the tip gestalt.

            Before I go into the second tip jar issue, I’ll create another scenario, one that most people have been through many times. You stand in line at a coffee establishment. You order your jumbo double-shot, cocoa-raspberry, Ethiopian, fair-trade espresso with whipped cream. While paying your $5.25, you notice the tip jar. “What the heck,” you think, “the person making my drink deserves some reward.” So you plop your 75 cents change into the jar. Ten minutes later you get your coffee, only to discover you are sipping a Sumatran, decaf, cinnamon macchiato. Damn! Back to the cashier. Re-order. Another 10 minutes lost and wishing you could fish that tip out of the jar.

            So what did you do wrong? You tipped for a service before you actually received it. Tips are for after service people have carried out their duties . . . and did a good job of it.

            Let’s sum this up with a few tips on tips. As savvy consumers we need to put a stop to this. First, no tipping for non-service. Cashiers do not get tips. If there’s a busboy, busgirl, or bus-hermaphrodite who cleans up and/or refills your water glass, leave a buck or two on the table.

            Second, never, ever, ever leave a tip in advance. If you are satisfied with your order and service, go back to the tip jar before you leave.

            Let’s not reinforce cheap employers or service people who have no incentive to earn that reward.

Will the new Federal Consumer Protection Agency be Protected?

Elizabeth Warren - photo courtesy Harvard School of Law

The first time I saw Elizabeth Warren being interviewed – by Jon Stewart on The Daily Show – I was stricken by her unique ability to combine a soft-spoken approach and a stereotypical schoolmarm appearance on the one hand, with a tough-as-nails, coherent delivery on the other.

President Obama has selected Warren as his special adviser to get the new CFPB, or Consumer Financial Protection Bureau (do government agencies get funding based on how many syllables they have in their names?). The bureau was established by the Dodd-Frank financial regulation legislation that became law at the end of last year, before so many Democratic representatives packed their bags.

In Warren’s January 26, 2010 Daily Show interview she described how there are seven different federal agencies that supervise consumer lending, as in credit cards, mortgages, consumer loans, and the like. It will be her agency’s job to coordinate those agencies, get the fine print out of the loan agreements, summarize almost everything a consumer needs to know on one page of the loan agreement, and, overall, protect consumers from nefarious practices on the part of the financial big boys.

Do you know why there is so little illegal graft in Congress? It’s because Congress legalized it. And who is “donating” to all those congressional election campaigns? You? I? Please! It’s he big corporations. Warren, a Harvard Law School professor and former chair of the Congressional Oversight Panel on TARP (the Troubled Asset Relief Program), is quick to remind banks, “What part of ‘we bailed you out’ do you not get?” as she so pithily remarked on that January 2010 show.  If you remember, mortgage backed securities are the mortgages that were sliced, diced, and minced twice mortgages that were divided up and distributed into various securities that were then sold and resold until no one could figure out who homeowners actually owned money to.

            The banks apparently don’t like Elizabeth Warren because she is on the side of consumers (you know, the people whose grandchildren will be carrying the burden of our national debt, including the money paid to the banks by TARP) who should never get screwed again if the economy tanks and foreclosers move in.

            In an interview with Kiplinger’s Personal Finance magazine (January 2011), Warren gives an example of how her agency, which will not officially open for business until next July 21st, is already operating. Two years ago Congress passed the Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 (another example of a long title just so they can come up with a clever acronym) that eliminated some bad practices aimed at milking as much moolah out of unwary consumers as possible. The industry has modified its practices in order to comply, but sometimes in order to evade the spirit of the CARD Act. “What usually happens . . . is the industry then shifts slightly and the agency is called upon to write a new round of regulations. Thus grows a regulatory thicket that couldn’t be penetrated with a howitzer.”*

Warren’s agency has contacted the Federal Reserve, which currently has jurisdiction over credit card issuers, to seek redress. The Fed, in turn, added some rules under its powers to correct the shortfalls in the CARD Act.

            The CARD Act bans or curtails certain bad practices. But if you have ever read your credit card agreement – and it amazes me how many cardholders are clueless – you know it can be difficult to decipher their complexities. That’s where CFPB has a mission to boil it down to plain English that can be read in a few minutes.

            Warren wants to boil down the actual price of the card, usually buried in the fine print, to a list or table showing the interest rate, penalties and explanation of any bonuses that would enable the consumer to compare offers simply.

            As for mortgages, CFPB is aiming to condense the information borrowers need early in the process – not just before closing – to one page in order to understand the costs and the risks, and to make comparisons. It also aims to get rid of some of the documents now required by law. The one-page sheet would include the down payment, monthly payments, closing costs, cash at payment and length of the loan.

            Warren says she is hearing from people in both the credit card and mortgage industries that they are willing to try the reforms.

            She sees a day in the near future when technology will allow consumers to report things that need fixing a sort of rapid-response policing – and to give input for ideas on reform.

Her best advice to credit consumers? Pay off your credit cards. If you are carrying a balance month to month, you are in financial trouble.

I’m a big fan of Elizabeth Warren. I suspect anyone in Congress who is hostile to her goals is a fear-big-government or a “free market must prevail” hypocrite. While it’s okay to fear big government, we must also fear unrestrained corporate power. Three years of America on its financial knees is enough. To reiterate to the banks, whose officers are raking in obscene bonuses, , “What part of ‘we bailed you out’ do you not get?”

Please visit the CFPB web site at www.consumerfinance.gov. They’d love your input.


* Kiplinger’s Personal Finance, p.62, January 2011

Ohm my Gosh: The Shocking Hidden Costs of Electric Vehicles

Hybrid Car

2011 Honda Insight hybrid

For most consumers, the idea of a vehicle that uses only, or mostly, electricity seems like a good way to save money in this time of high gas prices. But if you live in a state with high electricity rates, as I do, all-electric vehicles like the Nissan Leaf, or mostly-electric vehicles like the Chevrolet Volt, may cost you more than driving a hybrid like the Toyota Prius or Honda Insight. And maybe even more than an economical traditional small car.

 Here in California we pay about 35 percent more than the national average for electricity. We also use a multi-tiered system that charges households higher rates each for using more power.

 A Purdue University study released in January shows that the energy consumed by rechargeable vehicles is likely to mean that households that have these cars could be in for a shock, and I’m not referring to electrons. Where I live, in San Jose, we pay Pacific Gas and Electric12 cents per kilowatt hour, or Kwh (that’s equal to burning one watt for a thousand hours or a thousand watts for one hour) for the first 294 Kwh each month. Additional watts, up to 382 Kwh each month, are charged at the Tier 2 rate of 14 cents, . If a customer moves into Tier 3 pricing, the rate goes up to a whopping 29 cents. Yikes! That’s 2 ½ times the Tier1 rate. The idea is to discourage households from wasting all that energy, and PG&E isn’t grousing about the windfall either.

 That’s where the problem with rechargeable vehicles comes in. At Tier 3 and higher rates in the summer, it could cost customers in my area as much as 40 cents per Kwh to charge their cars. And even with rate plans that charge less for nighttime usage, it can be expensive to charge your car.

 California’s idea is to get folks to use less power in order to save on the state’s energy demands may backfire when it comes to inducing consumers to move to low-polluting electric cars. According to the Purdue study the plug-in Chevy Volt would increase average Americans’ electrical usage by 60 percent.

 In California, once you figure in the high sticker prices of electric vehicles – even after the income tax breaks that currently come with them – you would save money by instead buying a Prius, Insight, Honda Civic Hybrid, or even a regular high-mileage subcompact.

On the other hand, if gasoline prices rise to astronomical levels based on crude oil prices of over $170 per barrel, the picture will change in favor of all-electrics. In the meanwhile, Indiana, where households pay a flat eight cents per Kwh, might be the best example of places where electric vehicles make the most sense and the most cents.

 A bright note: California utilities are experimenting with programs that would charge – and, uh, bill, electric vehicles at a different rate from the rest of household use. This would encourage consumers to buy low-polluting vehicles and might even lower demand to the point where gasoline prices would moderate a bit.

PlayStation or PlagueStation? Another Lesson to be Learned About Internet Privacy

PlayStation equipment bundle

There’s a lesson to be learned from the Sony PlayStation Network debacle. When a high-tech company like Sony can’t keep subscribers’ personal information confidential, how can we trust relatively small businesses to do so? Sony announced, after keeping its corporate mouth shut for a week, that someone hacked into its data base and gained access to, oh, just about 77 million personal files that include names, addresses, phone numbers, birth dates, passwords, login IDs, and may have also have grabbed credit card numbers and expiration dates. In other words, their PlayStations may turn into “PlagueStations”.

In a moment I’ll offer some advice to PlayStation Network users. But first let’s talk about what kind of information people should be sharing with commercial companies.

            In 1998 or thereabouts, when I was the consumer reporter for a TV station here in the Bay Area, I received a call from a distraught viewer who, while passing a dumpster, noticed that the bin was overflowing with bundles of what appeared to be application forms. It turned out they were forms for consumers who wanted to rent tapes from Blockbuster Video. Each form contained the customer’s name, address and credit card number. The forms also asked for driver’s license and Social Security numbers. Remarkably, most of the applicants had filled in those spaces as well, although doing so was optional.  Anyone passing that dumpster could have obtained personal information on thousands of people and gone to town exploiting this vital info. Many of these applications had been completed by educated and professional people.

            Fortunately, as soon as we aired the report “live,” both Blockbuster’s regional manager and the Campbell, California police force showed up to secure the site. The upshot is this: your information is never secure. So the more of it you share, the more likely you’ll have your identity stolen and by nefarious nabobs of negativism (shout out to the late Spiro Agnew). Why would Sony need a person’s date of birth or phone number?

            This is the advice, in part, that Sony is giving its customers:

“At no charge, U.S. residents can have . . .  credit bureaus place a “fraud alert” on your file that alerts creditors to take additional steps to verify your identity prior to granting credit in your name. This service can make it more difficult for someone to get credit in your name. Note, however, that because it tells creditors to follow certain procedures to protect you, it also may delay your ability to obtain credit while the agency verifies your identity. As soon as one credit bureau confirms your fraud alert, the others are notified to place fraud alerts on your file.”

Users are advised not to respond to emails and phone calls that ask for personal information and that they carefully monitor their credit card statements for irregularities; unfamiliar charges in particular.

Last week, I wrote that OSH (Orchard Supply Hardware) stores in California now require that customers allow OSH personnel to run consumers’ driver’s licenses or military ID or passport through a card reader when returning purchases. When challenged, OSH says its database is secure. Evidently, OSH is doing this in order to track customers who return a lot of purchases. After all, it could be tempting for someone with compromised ethics to “borrow” tools or pieces of furniture and return them after briefly using them. But why does a retailer need my name, license number, address, birth date, hair and eye color, and weight in order to credit a purchase back to the same card I used to begin with?

And how trustworthy is OSH’s security? The Pentagon has suffered several cyber breaches of security during the last four years. Four years In December of 2007, a hacker gained access to the personal information of 800,000 UCLA students, staff and alumni. I guess OSH knows something about security that Sony, the Pentagon and UCLA have been unable to master.

My advice is not to give out more personal information than is necessary. I’m not sure why Sony would need anyone’s date of birth or address, for instance. Social Security numbers should rarely be required, usually only where and when required by law, as with financial records.

As for OSH’s driver’s license requirement for returns, it’s goodbye OSH, hello Ace Hardware.

Are you Willing to Swap Convenience for Privacy?

 

Orchard Supply Hardware

An OSH Store

I am downright paranoid about privacy. Getting my Social Security number from me is less likely than a cow jumping over the moon. It amazes me how easily, even in this day of rampant identity theft, consumers are willing to turn over their personal information to any web site or merchant who asks for it.

Orchard Supply Hardware, commonly known as OSH, has 85-plus retail outlets in California. Their stores are smaller than big box stores like Lowe’s but considerably larger than the typical Ace or True Value location. Some years ago OSH became a subsidiary of Sears.

There is an OSH just three blocks from my house and I have often joked that if I had an employer I would ask for direct deposit, not to my credit union, but to OSH. I have bought everything from power tools to screws to plants at that store.

I recently returned a 2 ½ gallon jug of driveway cleaner to the store and was asked for my driver’s license. I showed the license, still in my wallet, to the staffer. “I’ll need you to take it out of the wallet,” she remarked.

            “Why?” I responded, as if I didn’t suspect what was coming, much to my chagrin (I brought my chagrin along on this trip as I always do. My chagrin hates to be left alone at home).

            “I need to run it.”

            “Gee,” I thought, “She’ll definitely win that race. My license has no legs.” But what I said out loud was, “No.”

            “Excuse me?” she interrogated.

            “If I let you enter the information on my driver’s license into your computer, it will go into a data base. There, anyone who works for your company can access all my personal information. And if a hacker gets into your system they (Ed. note: yeah, I know, bad grammar) can steal my identity.”

            “We use a company to maintain the database and it’s secure,” she politely retorted.

            “If the Pentagon can’t keep its data bases secure, and UCLA had 300,000 personal records hacked, I somehow believe that OSH’s database can be hacked into as well,” I rejoined, not that I ever joined anything to begin with.

            Here’s the Reader’s Digest version of this rest of this epic tale. Store policy: no refunds without driver’s license.

            “But California requires that all such restrictions be conspicuously posted near the cash register.”

            “But the new policy is on the back of the receipt.”

            “Did anyone point it out when I made the purchase?”

            Here comes the store manager.

            I explain my concerns, i.e., giving OSH my name, address, date of birth, driver’s license number, hair color, eye color, etc. And since you did not make me aware of the return conditions, you have to pay up.

            “May we at least copy down your license number?”

           “OK.”   Here’s the upshot. Most people I know say they would never hand over this info, but they don’t have the cojones to stick to their guns. Because I stick to my guns, I often complicate my life, like when my new dermatologist’s staff said they could not process my insurance claim without my SSN, even though my health insurer does not even want to know my SSN. So I had to seek reimbursement through a claim to my insurer, which claim they lost, then forgot to act on the second submission, then had to reimburse me through payment back to the doctor. And it took seven freakin’ months!           

         So I called OSH headquarters. Mind you, this is a company that was started in 1931 as an orchard farmers’ cooperative in the town of San Jose. San Jose is now America’s tenth largest city. Company headquarters is just a few miles from my home. I want to support a business that employs local people. And I expressed this desire to Barbara, the company customer service gal. Why, I wondered out loud, do I not need show my driver’s license when I use my credit card before walking out of the store with $200 worth of stuff, but I do need to have my personal information recorded when I ask that the return be credited back to the very same card?

            Barbara was flummoxed, if that means what I think it means. And when I told her that although I had shopped at this OSH hundreds, if not thousands, of times, I would not be likely to shop there again, until they dropped the driver’s license requirement. She said she would pass my concerns onto management. I’ll be writing more about that type of process in large corporations in an upcoming blog.

            So here I am, about to leave for The Home Depot to pick up a dishwasher discharge hose, lamenting my trial separation from OSH, the local company swallowed up by the big-name retailer; the company that was once my local hardware store and is now just hard.

            But I rest assured that my ID will not be stolen, at least not because of OSH’s unreasonable demands.

  • P.S.  – I am a commissioner on the all-volunteer Santa Clara County Advisory Commission on Consumer Affairs. I have just requested that this issue be placed on our next meeting agenda and that we ask the county board of supervisors to recommend to the state legislature (after all, what else does the State of California have to worry about?) that they outlaw this type of invasive refund requirement. So there.

YOU CAN BANK ON BANKS BANKING ON YOUR FEES – or, how to get more bank for your buck

 

           Until a few years ago I was a Washington Mutual Bank customer. The branch was close to my house and there were no fees for the services I used, with the exception of a safe deposit box. (No, it’s not a “safety” deposit box. It’s a box in a safe.) When the banking scandal hit in 2008 Wamu went bye-bye. Seems it was in the illegitimate mortgage business that eventually bit it on the ass.

            That’s when JP Morgan Chase got into the picture and picked up Wamu’s business for a song (I think the song was George Harrison’s “Here Comes the Sun”). So my Wamu branch became a Chase branch.

            Then three things happened. I became uncomfortable with all the money Chase got as part of the federal bailout. Then Chase had a few more scandals. And as I waivered as to whether I should take my money and run because of ethical considerations, Chase announced its new fee schedule.

            Hasta la vista baby. I moved my money, primarily deposited in a checking account, across the mall parking lot to a credit union. And I’m glad I did. As if the big banks aren’t making enough, they’ve come up with some pretty sneaky fees. According to USPIRG and California PIRG (PIRG is the acronym for Public Interest Research Group) here are some fees and how you can avoid them.

            Some banks will allow you to withdraw more money from your automatic teller machine (ATM – that’s why it’s bad English to say “ATM machine”; “machine” is already in there; if you say “ATM machine,” I will report you to the FBI of investigation) than you have in your account. Then you get hit with an overdraft fee.

Solution: Check your balance to make sure you are not withdrawing more money than you have in the account.

            Many financial institutions are now charging several bucks for non-customers to use the banks’ ATMs to make withdrawals from the user’s bank. On top of that, the user’s bank may charge a fee as well. You could end up paying five dollars or more in fees for a 20-buck withdrawal.

Solution: Use only your own bank’s ATMs or become a credit union customer and use an ATM that’s a member of its affiliated network. Some groceries will allow you debit additional cash as well, when you make a purchase .

            Here’s a swift one, and to me it’s just a rip-off. Let’s say you inadvertently write several checks in a short period for which you have inadequate funds in your checking account. What many banks do is deduct the largest check amounts first from your account. This causes the most checks possible to bounce. At the usual $29 to $39 returned check fees, plus the potential penalties levied by the offended merchants, you are getting – as they say in the financial industry – screwed big time.

Solution: Keep track of how much money is in your account. That’s why there’s a register in your checkbook. And don’t forget debit card expenditures. If you’re not sure of how much is in there, check with your bank. It’s a good idea to use a check book that makes carbon copies of checks as you write them. I wonder if that’s last situation left where we make carbon copies.

Some banks are now even charging five to 10 smackers if you deposit a check you received from someone else and that check bounces.

Solution: Don’t accept checks from someone you don’t know to be trustworthy.

            There are banks and credit unions that charge fees for not having a set minimum in your account unless you use direct deposit from your employer. Others charge dormancy fees for not actively using your account

Solution: Find a financial institution (I think that term is so pompous; institution?) that doesn’t levy those fees.

Here’s a cynical one. Fortunately for Californians, it’s a no-no in that state: You buy a gift card at a bank. After a set minimum period the bank charges non-use fees of two to three dollars a month.

Solution: Move to California. Or, if that’s too drastic, buy gift cards from retailers that don’t attach such fees to their cards.

            If your bank charges a fee for your talking to a teller or a telephone representative (or even an automated telephone system!), ask yourself: “Why am I doing business with people who charge me to check on the money I am, in essence, lending to them?”

Solution: If this situation isn’t enough to motivate you to look elsewhere for a bank, at least ask the leaches how many free teller visits or calls you are allowed each month. If you call or visit to correct a bank error, be sure that you are not charged a fee.

            Since I don’t use – or even have – a debit card, I was not aware of this one. If you choose to use your personal identification number (PIN – see grammar lesson for ATM at the top of this article) instead of signing for a debit card transaction at a merchant,, your bank may charge 25¢ to $1.50 for each transaction. Really?

Solution: If your bank imposes such a fee, use your credit card instead of a debit card, providing, that is, you’re not carrying a balance on your credit card account. You don’t want to add to the balance for which you are already paying interest. Otherwise pay cash or by check. Or find another bank that appreciates your business. By the way, I don’t carry a debit card because a debit card is like cash. If you lose your wallet or purse, you could be in for a heap of hurt.

            In conclusion: Know your bank’s policies and fees. When you get those occasional notices that describe changes in bank policy, take a few minutes to read them. They may be significant enough to prompt you to change financial institutions. And keep in mind, the big bank bailout that cost the American taxpayer so much did not involve credit unions.

Are you an Environmentally Conscious Consumer?

(The first in a recurring series on consumers’ impact of on the environment)

Going to a coffee place? Bring your own mug. Photo courtesy www.GreenEarthBamboo.com

We hear it time and again. Americans make up less than five percent of the Earth’s population and we consume approximately 25 percent of the world’s goods. Why and how? In a word: money. We have lots of it. And even when we may not have quite enough moolah to satiate our families’ desires for material goods, there seem to be few limits on how much we’re willing to borrow in order to satisfy our collective hunger. Credit cards, home equity loans and refinanced mortgages fuel our materialistic society.

And with those financial resources, we indulge ourselves in all sorts of stuff that strains our ecosystems, the air we breathe and our very lives. How many times have we seen so-called soccer moms driving around town alone, after they’ve dropped the kids off at . . . fill in the blank: school, soccer practice, dance lessons, Little League, etc. – in their Chevy Yukons or Ford Excursions? And as they go about their shopping chores they’re guzzling down (or is it “up”?) a gallon of gasoline every ten miles, give or take.

The law of supply and demand is going to change all that and more quickly than most of us think. Petroleum and natural gas are not renewable sources of energy. And prices at the gas pump are just beginning to show that. As countries like India and China (accounting for almost one half of the world’s population) modernize, the demand for fossil fuels, lumber and water is skyrocketing. One projection sees the price of gasoline in the U.S. to ratcheting up to eight dollars per gallon in the next ten years. And that’s in 2005 currency, not adjusted for inflation.

So what are you willing to do in order to contribute your fair share to – if not turn things around – at least slow the pace of consumption and the strain on Mother Earth? After all, at two-and-a-half bucks a gallon, a 40-gallon SUV gas tank now costs 100 bucks to refill.

There are waiting lists for 50 mpg Prius and Civic Hybrids now. When the cost of refilling large SUVS goes to over 300 dollars, where will you be? And a 20-mpg minivan is no bargain either.

Lumber and paper prices are rising as well. Virgin (i.e. not recycled) paper may soon be at a premium. That would be especially true if the current American administration runs into roadblocks from so-called tree huggers, a phrase loosely used these days as a term of derision for anyone who wants to place a priority on environmental protection over unfettered materialism and corporate profit.

What I’m driving at here is this. We can each play a part in reducing the stress on our planet and on each other. Let’s start with a few examples. You know all that paper that comes spewing out of your printer at home (and at work too, for that matter)? Do you toss it after you no longer need what you printed? It seems that most of what we print is stuff we really don’t need anyway. How about saving paper whose reverse side is blank and using it to print out the other stuff that doesn’t require pristine paper, like first drafts, email jokes and Web site purchase receipts? Using this simple method I’ve cut my paper use almost in half. If we all did this we could save gazillions of trees – give or take a zillion – each year. And are you meticulous about recycling paper? Come on! Big deal! For a provocative article on effects on the environment of Starbuck’s coffee cups, check out http://blog.greenearthbamboo.com/20100823/green-is-grand/the-starbucks-dilemma-continues-recycling-rewards-and-the-consumer/.

If you’re driving a gas guzzler, think about a different choice next time. After all, what is an SUV? A sport car? Ha! Most of them are jacked-up, modified station wagons that car manufacturers equip with big tires and call sport utility vehicles. Can you say, “marketing to the gullible”? How many people ever take them off-roading? So where does the “sport” come in? For most folks a car with similar interior room will do just fine.

In the months ahead I will from time to time share more specific ideas on this topic. For now, please ponder the issue of an indulgent consumerist society for a few minutes before you kick back and crank up your DVD player or TiVo or VCR.

Earn Money by NOT Buying Extended Warranties

Which auto accessory would you guess makes the most profit for car dealers? MP3 player? GPS system? 6-way electric seats? How about the accessory most car buyers hope they’ll never actually use . . . and seldom do? Extended service contracts are the bread and butter for many dealers. Recently, Christina, a friend of The Consumer Gal (i.e., my wife) purchased a Honda SUV. She paid an additional 14 hundred bucks for a warranty that extended coverage to 7 years or 70,000 miles, whichever comes first.

Hondas are among the most reliable vehicles on the planet. And Honda’s frequency of producing lemons is close to nil. I suggested to Christina that she return to the dealer and cancel the extended warranty. She followed my advice and used the 14-hundred-dollar refund to reduce the principle on her car loan. Smart move. I have been told – but I don’t have the stats to back it up – that economy car dealers often make more profit from extended service warranties than from selling the cars themselves.

Let me introduce a concept I call "Self-Warrantying". Then I’ll explain when, where, and how to use it. When you buy a car, a refrigerator, a TV set, a camera, or any other device that involves technology – the salesperson will likely ask if you would like to purchase an extended service contract. Ask how much the extended protection costs and if there is a deductible (or copayment) for service. Then politely decline the offer. With automobile salespeople, you may have to go beyond being polite. They can be tenacious.

When you get home, take the purchase amount of the contract you declined – and the amount of one copayment – and put it into an investment account. I would suggest a conservative no-load index mutual fund. Each and every time to make such a purchase, follow the same procedure, adding to the account as you go. Watch your savings grow and, if an item should need a repair during the period of time covered by the extended warranty you turned down, take the money out of your investment account and pay for it. If you make it a habit to purchase reliable brands to begin with, you will watch your money grow steadily.

How does this work? Let’s use Christina’s new SUV as an example. The vehicle came with a standard 3-year, 36,000-mile warranty. The 14 hundred dollar extended contract covers only those repairs the vehicle would require after 36 months or 36,000 miles and before the odometer hits 70 thousand miles (or 7 years). Christina thought that was a good deal because her brakes were sure to wear out and need replacement during that period. Ah-ah. Extended warranties rarely, if ever, cover so-called wear-and-tear items. Not brakes, not tires and not items you damage. The odds that her car would need a covered repair during the term of the contract are slim. And even if it needed repairs, what are the chances that the cost of repairs would exceed 14 hundred bucks? Lower still.

Consumer Reports magazine has a feature I love. It shows the frequency-of-repair records for items it evaluates. They include appliances, electronics, and automobiles and light trucks. The annual April issue is dedicated to new and used vehicles. Look for the most reliable brands when you shop. I always pay with a credit card, except for cars. Why a credit card? Free extended coverage, that’s why. It amazes me how many consumers don’t realize all the free benefits that come with gold or platinum Visa and Master Card credit cards as well as American Express and Discover cards. They almost always double the manufacturers’ warranties that come with any item you buy using the card – up to one additional year (caution: read the card agreement for details and restrictions). They do not, however, cover motor vehicles. I have actually taken advantage of that benefit three or four times over the last couple of decades and it was a snap each time.

Some families purchase new vehicles every few years. And even if you purchase a used car, you can shop smart and get a reliable vehicle or a manufacturer-certified used vehicle that will allow you to skip extended service contracts as well. Think of the amount of money you will save over the years!

When I purchased a minivan in 1996, I resisted the salesperson’s extended warranty pressure and put $675 into an index fund. By the time the five-year contract would have been up, the mutual fund’s value was almost 14 hundred dollars. All the repairs it did require surfaced during the original manufacturer’s warranty period.

Here is the exception to the advice above. If you don’t pay off your credit cards in full each month, I don’t want you adding to your debt. And credit card debt is among the worst (as in most expensive) of all. I used to be okay with extended service plans for computers because they so frequently require tech support or repairs. But what I have discovered is that , if you buy a reliable brand (check out Consumer Reports reliability rankings in their most recent article on computers), the odds of needing a repair  are fairly low and the cost for tech support — typically 40 bucks a pop for each instance, or problem — the odds are you will spend more for the extended warranty than for a la carte support. And if you can find a computer at Costco that meets your needs, they throw in tech support for as long as you own your computer.

Consumer Guy Tip: Pay off your credit card debt first. Avoid new purchases as much as possible until you’re out of debt. Transfer all your debt to one card that has the lowest interest rate. If your cards are maxed out, pay off the ones with the highest interest first, paying the minimum on the rest. Close the accounts as you pay them off until you have just one or two accounts. Then follow the above advice to extend the warranties on new purchases. Buy cars that are reliable and skip the extended service contracts.

Money Saving Tips – and What to do With That Tax Refund

 

Looking for ways to spend that tax refund? Whoa! Not so fast.

If you’re not saving money each month, here are some things to consider in order to stash some cash..

1. If you carry a balance on your credit card accounts, use that 600 or 1200 bucks to get rid of it. The monthly interest – and any late fees – is costing you a fortune. You’re giving your money away!

2. Cut back on air conditioning. First thing in the morning, open up your doors and windows and turn on a fan. Cool the house down then close it up, including shades and blinds. Let nature cool the place for free. A whole house fan can cool your home at night or in the morning in just 15 to 20 minutes.

Restaurants

3. Brown-bag it to lunch. A piece of fresh fruit makes a healthful dessert.

4. If you must eat out, get the larger sandwich at places like Subway. Have half the sandwich today and half tomorrow. For an extra buck and a half you get two lunches.

5. You’ll be paying at least three times as much for a restaurant meal as for one made at home. But if you must eat out, try these money savers:

A. If dining as a couple, order one appetizer and an entrée and split them.

B. Restaurants make their biggest profits on drinks and desserts. Order tap water (or iced tea if you must – it’s usually refillable, but ask first). Why order a $6 or $9 glass of wine? At Trader Joe’s I can get three bottles of decent wine for 9 bucks.

C. Stop at the market on the way home and get a half-gallon of ice cream or frozen yogurt for less than the price of dessert at most restaurants.

D. Before you order a “special” that’s not on the menu, ask the price.

6. Don’t be embarrassed about looking cheap in front of your friends. Affirm that you are a cheapskate and let them be envious of your self-confidence.

Discount and big box stores
7. Buy vitamins and minerals at places like Trader Joe’s or Costco. You’ll save a bundle buying store brands or specials.

8. If big box stores sell in quantities that are too large for you, ask your neighbors if they would like split a case of mangos and a twin pack of dishwasher detergent with you.

Entertainment

9. If you must have cable TV, drop the premium packages that cost so much extra. If you can’t be entertained with a mere 100 channels, you’re watching too much TV.

10. Shop around for lower cost TV/Internet/and-maybe-phone packages. But be careful about packages that save money for a limited time only.

11. Shop around for insurance. This can save hundreds a year. Comparison shop on Internet sites and find out what’s available, especially if you combine auto and home insurance.

12. Raise the deductibles on your insurance. You don’t need to insure for small damage claims. Insurers could raise your rates if you make such claim.

13. If you go to the movies a lot, how about waiting six months longer for those new blockbusters and renting from Netflix or Blockbuster.com? You can get four movies a month for less than 10 bucks.

14. Get DVDs from the library.

Auto Savings

13. Drive slower. You’ll use more time but less gas. And cut your engine when waiting at a light during the daytime, if you're expecting to idle for more than a minute.

14. Unless you do a lot of desert driving, you don’t need to change your oil and filter every 3,000 miles. Check your owner’s manual.

15. If your car uses premium gasoline, try switching down a grade. If it doesn’t ping, you’re good. And you’ll save 10 cents per gallon.

16. If you need a new car, think twice. A two-year-old car under warranty can save you a bundle. Just be sure you have it checked out before you buy. Check Carfax.com and take it to a reputable diagnostic repair place.

17. If you don't need your cell phone except for urgent situations, switch to a pay-as-you-go service like T-Mobile To Go. I spend about 8 dollars a month on cellular service.

18. Use a discount long distance service such as ECG for your home phone. You can pay less than 3 cents per minute for interstate calls and 4 cents in-state.

Ellis Levinson has made a career of helping consumers with their complaints against businesses that don't meet customers' expectations. Your business might be employing money-saving strategies in the short run while alienating customers day after day.

Some Privacy Is Better Than None

With all the recent tribulations in the wacky world of California – skyrocketing fuel costs, high unemployment, and the budget crisis from hell – it’s easy to forget some of the trendsetting legislation that has emerged from the Golden State. After four years of attempting to get a wide-ranging consumer privacy bill passed, the legislature in Sacramento rose to the fore a few years ago.


The conflict hinged on so-called "opt-in" and "opt-out" issues. Most consumers have received notices from financial institutions with which we do business, giving us the option to opt out of permitting these businesses to share our personal information. These options are required by the federal Fair Credit Reporting Act (FCRA). 


In essence, FCRA provisions permit customers to opt out of allowing their banks, insurance companies, credit card issuers, mortgage lenders and the like to notify the respective companies that their customers don’t want their information shared with other companies. The idea behind the legislation is that our private information is among our most precious possessions. When it proliferates, our liabilities increase.


Recent statistics indicate that more than one out of every ten Americans have been the victims of identity theft. It is now the most common form of felony theft in America. When our Social Security, driver license and credit card numbers, along with our birth dates, spread from data base to data base, we open ourselves to unwanted solicitations from businesses and unfettered access from all types of nefarious individuals.


The problem with the FCRA is that, while it requires businesses to send their customers notices of their right to privacy along with opt-out forms, it requires each individual to opt out of information sharing. In other words, it requires the individual to take action. What members of the California legislature – led by Senator Jackie Speier – attempted with the California privacy legislation, was to shut down unrestricted information sharing by forbidding it outright. In other words, businesses would have to get specific permission from consumers in order to share credit information.


Financial institutions in California, just as in Washington, hold considerable sway (read, "money talks when it comes to lawmaking"). For four years big business was able to stymie any efforts to get real reform passed. But once it looked as though a referendum threatened for March of 2004 would lead to the toughest privacy legislation in the history of the universe, things began to change. The proposed California initiative would make financial institutions wish they didn’t have to get out of their greenback-stuffed mattresses in the morning. Suddenly the financial guys decided to reach a compromise in Sacramento.


Under the terms of the legislation businesses may share credit information with their affiliated companies that do the same type of business (e.g. an auto insurance company can share info with its home insurance business) without requesting their customers to opt-in. In order for businesses to share information with affiliated, but unlike, organizations they must send their customers a simple opt-out form with a prepaid return envelope. To share data with an outside company, they must request their customers to opt-in. The latter means non-sharing is the default status.
 

The Con$umer Guy’s tip:

 

There’s very little consumers gain from being barraged with mail and phone calls. There’s even less we gain from having our personal information accessed by who-knows-whom. Opt out whenever you can unless there’s a particular company from whose affiliates you really want to hear. Guard your personal information. Tell your legislative representatives –both state and federal – that you want your personal information protected. You don’t want unknown employees at businesses that have your credit information sharing those data with other parties unknown. Never share your social security number, driver license number or date of birth unless you absolutely must. Just because an application or information form requests particular information, doesn’t mean you must provide it.

 


Ellis Levinson has made a career of helping consumers with their complaints against businesses that don't meet customers' expectations. Your business might be employing money-saving strategies in the short run
while alienating customers day after day.