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December 2008

On December 22, a representative for Visa wrote about that company’s protection for customers who use debit cards:

If your account is compromised, Visa is committed to setting things right without further aggravation or inconvenience to you. Visa’s cardholder protection policy requires all financial institutions issuing Visa products to extend provisional credit for losses from unauthorized card use within 5 business days of notification of the loss. Many institutions will provide replacement funds even faster, sometimes within 24 to 48 hours.

What if the network or the merchant experiences a “computer glitch?” That’s doesn’t necessarily mean the account is “compromised.” But this is exactly what happened recently, although the problem appears to be due to the merchant rather than the network.

On Saturday, December 20, one of the biggest shopping days of the year, stores in Macy’s Central and East divisions experienced a period of almost two hours during which customers who completed purchases using a debit card were charged twice.

As a result, their bank accounts were debited twice as much as they expected, and as a result of this, many people were slapped with overdraft fees by their banks.

A Highland Village woman said her son bought her a set of knives for Christmas at Macy’s at Vista Ridge Mall in Lewisville [Texas]. She said he spent $78 for the gift, then later discovered that another $78 had been debited from his checking account. He was eventually charged $50 in bounced-check fees, said the woman, who didn’t want to be identified.

computer glitchFollowing, there was aggravation and inconvenience. She, like everyone else who was unlucky enough to use a debit card in this situation, had to fax checking account statements. The store would take up to 10 days before refunding everyone’s overcharges.

Will the store pay everyone back for overdraft fees incurred due to duplicate charges? It’s not clear, but I wouldn’t count on it. This is a real life example of why you should avoid debit cards or any agreement where you authorize a merchant to automatically debit your checking account.

Use cash to ensure you always have the money available for your purchase. You’ll be sure the cashier won’t take your cash twice. Use a credit card to ensure you have protection for fraud and “computer glitches” and to put another layer between the merchant and your bank account. Monitor your accounts frequently to make sure you don’t see any unauthorized or suspicious activity.

Photo credit: akz*
Macy’s owns up to debit card glitch on Saturday before Christmas, Dallas News, December 30, 2008


The Carnival of Personal Finance has been running consecutively for 185 weeks. The latest edition is live at the Fraud Files blog, and every Monday this celebration of the week’s best in personal finance blogs is hosted at a new location.

For bloggers, hosting the Carnival of Personal Finance is a good way to increase your blog’s exposure in the personal finance community. The Carnival is currently seeking volunteers to host on Mondays in January, February, and March. Hosts will receive access to the week’s submissions and review the articles. Here is more information about hosting the Carnival of Personal Finance. If you’re ready to request a slot for hosting, fill out this quick form.

Besides the Editor’s Picks, here are some of the most interesting articles included in the 185th Carnival of Personal Finance.


In December 2007, I set a number of financial goals or targets to be accomplished by the end of this year. In some cases I was successful while in others I fell short. It’s important to keep things in perspective; when I set these goals, the economy was in a significantly different state. The goals reflected a positive economic outlook but a cautious approach to my income. Here is how I measure up.

Goals for 2008

Income:I don’t see much growth ahead in my salary, but I would say that if I continue to work hard on my side projects, one of which is this blog, $100,000 in additional income is not out of the question. The industry could change drastically, so one year from now, I could be looking back at these goals and laughing at the ridiculousness of that number. I’ll call $125,000 my stretch goal. If I am able to earn that much next year, it may be time to leave my day job and devote myself to my projects full-time.

Result: success. I’m on target for earning about $117,000 in additional income this year, between advertising, affiliates (percentage of product sales driven by my websites), and freelance writing. I feel like I don’t have much to show for it, however, and I am concerned about my upcoming tax bill.

Investing: I plan on contributing the full $15,5000 to 401(k) accounts. I also plan on contributing as much as possible to my 2008 SEP IRA account, but the amount I can invest depends on how much income I make from my side business.

Result: not success. According to my final pay statement of 2008, I contributed $14,142 to my 401(k), split between before-tax and Roth 401(k) after-tax contributions. I missed the target by not carefully planning the contributions. In February, I increased my 401(k) contribution rate from 25% to 33% of my salary. Later in the year, I bumped up my contributions again to 50% of my salary, the maximum allowed, to try to reach the $15,500 goal by the end of the year. It was too late, however, and I fell short.

I won’t fund my SEP IRA for 2008 until I file my tax return because the deductions I take will determine how much I am allowed to contribute.

Debt: I have about $13,000 left in student loans at an interest rate above 4%. This is the only debt I currently carry. It is reasonable for me to completely eliminate this debt by the end of the the year. I have the cash to do so now… Stretch goal: eliminate the $13,000 debt by the end of June 2008.

Result: success. Earlier this month, I sent the final check to my student loan servicing company and am now completely debt-free. It was an anticlimactic experience for me; I’ve had cash available to pay off the student loan for a long time, but I wanted to keep cash on my balance sheet for as long as possible. Still, by the end of the year, I was paying over $1,000 per month to eliminate the debt. It will be nice not to send those payments out the door.

Saving: My primary saving goal is for future real estate, so I want to have $40,000 earmarked for a down payment (plus closing costs) either by the end of the year or by the time I sign on the dotted line. I may not use all of that cash depending on how it would affect my liquidity at the time. I’d also like to double my emergency fund so I could last four months without significantly reducing my expenses and without tapping credit. Stretch goal: accomplish these goals by the end of June 2008.

Result: not success. According to a preview of my year-end balance sheet, I have over $70,000 in savings accounts spread across a number of banks, plus about $10,000 in money market mutual funds at Vanguard. I need to consolidate these accounts and properly organize the funds. I should be able to find $40,000 to earmark for a down payment. My emergency fund, or the cash I have in an ING Direct account labeled “Emergency Fund,” has increased this year from about $8,000 to about $13,000. Like the down payment earmark, it’s a question of moving money from one account to another, but the cash is there.

Charity: Last month, I established a charitable gift fund in my name. In lieu of creating my own foundation, an expensive and overly administrative process, this is going to allow me to direct my contributions to non-profit organizations at any time easily. My goals for this year are to choose two or three organizations to support, grant at least $5,000 to the organizations, and contribute an additional $10,000 over the course of the year to the fund.

Result: not success. With the stock market experiencing a major dip this past year, I was reluctant to distribute funds from the charitable gift fund. I added to the fund this year, and rather than investing it all, I left half in a money market fund and invested the rest in a stock market index fund. With this strategy, I can grant half of my contribution in 2009 and allow the remainder to grow. The goal is to grow the fund to a level at which the grants can come from the interest and gains alone, with the principal left to sustain giving every year. In 2008, my charitable giving was funded outside of the charitable giving account.

Net worth: I am ending the year with a modified net worth of about $120,000. I’ll have a more concrete total when I post my full financial reports in the next few days. This number will likely be about twice the amount of my net worth at the end of 2006. I’d like to continue this trend by doubling my net worth by the end of 2008, but that may not be realistic. Let’s call this goal $210,000 by December 31, and the stretch goal will be $240,000.

Result: not success. I did end 2007 with a modified net worth of $123,000, a little less than twice my net worth at the end of 2006 ($69,000). Doubling my net worth would be a great trend, but the stock market ensured that this would not be a possibility in 2008. Despite investing throughout 2008, my investments have only increased $5,000, including my contributions. That’s a negative rate of return. My modified net worth at the end of 2008 is heading towards $180,000, significantly short of my goal. I would likely have exceeded the goal if the stock market increased at a rate closer to average.

Some of the goals could have been reached by rearranging or reorganizing my accounts. I should have considered the effect that a down stock market could have on my finances when I initially determined my goals of 2008. In the next few days, I’ll set my goals for 2009, a year that will present a lot of questions for me.


As I’ve mentioned before, one of my long-term goals is to run a foundation to support arts education, specifically music education. To do this effectively, I would require a significant amount of start-up capital, and I’m not quite there yet. I’m not quite sure that I will ever have the opportunity to succeed, but if I do, it’s likely to take decades to approach that point.

In the mean time, I’m doing what I can to have a smaller effect on some organizations whose missions are important to me. While I didn’t reach my admittedly aggressive goal for charitable giving this year — the lagging economy has convinced me to hold onto more than I would have otherwise — I increased my charity this year over last year. I have given over 10% of my salary this year, some of which was eligible for matching contributions from my employer.

For privacy reasons, I won’t release all of the names of the organizations that I contributed to this year, but they include a health-related organization, a collegiate music program, a performing arts organization, and a public radio station. The performing arts organization is the same group with which I previously severed ties, but I’ve gotten over those issues to concentrate on the people who will benefit from the contribution.

I also added funds to my charitable gift fund, a “donor-advised fund.” The fund allows me to provide money to be held in an account and invested while I recommend grants to be distributed from the fund as I see fit. The main benefit is the donor receives a tax deduction up front while the money theoretically grows. In the best case scenario, the money in the account earns returns from interest or appreciation and the grants can come from this income. Unfortunately, contributions to a donor-advised fund are not eligible for matching contributions from my employer.

Last year, I made the mistake of choosing to invest the entire amount in a total stock market index fund. The quick downturn of the market after the investment convinced me not to touch the money in this account. Rather than assign grants this year, I donated from my own cash. This month, when funding the charitable gift fund, I chose to invest half in a money market fund and the other half in the total stock market index. This way, I can tap the money in the money market fund without concern about the stock market while allowing the rest of the investment to grow for long-term charitable giving.

When the economy is ailing, charitable organizations struggle as people like me are more protective of their earnings, at least in the short-term. As I usually do, I also donated my time by volunteering with organizations this year. I’ve worked for a non-profit, and I know first-hand that the time contributed by those who believe in the mission is often appreciated beyond financial contributions. Did you contribute less money to charitable causes than you planned this year? It’s okay if you did.


My New Credit Card: Not for Credit

by Smithee

Every Tuesday, Smithee presents an article about his own experiences with credit cards and observations about the credit card industry. Two weeks ago I introduced you to a new credit card that offers 2 percent cash back that is deposited into a brokerage account. Then, a few hours later, I applied for the thing. In my ... Continue reading this article…

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Is Your Special Investment a Ponzi Scheme?

by Luke Landes

Here is how a Ponzi scheme works. The individual running the scheme promises abnormally high returns over a short period of time to the initial investors. These investors provide the start-up capital, and the schemer will do whatever he likes with that money, either invest it, spend it, or let it sit in a bank. ... Continue reading this article…

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Visa’s Take on Debit Cards

by Luke Landes

A representative from Visa offered to answer a few questions for Consumerism Commentary readers about debit cards. I’ve written previously about five reasons to avoid debit cards, preferring credit cards for plastic payment. Here are three questions I asked Visa and the company’s responses. I have three more questions to post in the future as ... Continue reading this article…

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9 Tips for Choosing and Achieving a Purpose in Life

by Luke Landes

Recently, I mentioned that setting goals is an important part of taking control of your personal finances, focusing on the idea that the best approach is to determine your major, non-financial life goals first. This is a difficult process for many people, and many people go through life without determining a direction. There’s nothing wrong ... Continue reading this article…

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Getting Paid Back for a College Education: 15 Top Schools

by Luke Landes

If the only value of higher education is the money you earn throughout your lifetime with your college degree, then SmartMoney’s recent study might help you decide where to matriculate. Ivy League schools don’t pay off as much as one might expect. The magazine surveyed the annual salaries earned by graduates of 50 of the ... Continue reading this article…

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ING Direct Electric Orange Interest Rate Drops to 0.5% APY!

by Luke Landes

For those who have enjoyed high-yield savings and checking accounts, get ready for a difficult time keeping up with inflation. ING Direct announced just minutes ago that the bank is dropping the interest rate on the first $50,000 per person deposited in their Electric Orange checking account to 0.5 percent APY. The interest rate is based ... Continue reading this article…

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Upcoming Vote on Credit Card Reforms

by Smithee

Every Tuesday, Smithee presents an article about his own experiences credit cards with and observations about the credit card industry. The U.S. Federal Reserve is set to vote on Thursday (Dec. 18) on a set of rules which could change credit policy affecting all Americans. The full set of proposals is more than a thousand ... Continue reading this article…

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I am Debt Free as of Today!

by Luke Landes

For several years, interest rates on high-yield savings accounts were high enough to justify choosing to leave extra money in savings accounts rather than using that money to pay off certain debts faster. I was paying only the minimum payment on my consolidated student loan. The loan’s interest rate was 4.25 percent and I had been ... Continue reading this article…

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Take Control of Your Finances Part 8: Set Savings Targets

by Luke Landes

Last week, I wrote about the importance of setting real life goals in order to take and maintain control of one’s own financial condition. It’s important to break past the idea that a life goal is based on money. For example, entering retirement with $4,000,000 is a good target, but it’s not a major goal. ... Continue reading this article…

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Coworkers Excited About Investing

by Luke Landes

In the sea of cubicles in my office, two of my coworkers were talking yesterday about their investments. As stocks — primarily our company stock — have increased a little from their recent lows, they seem to believe that this might be a good time to increase 401(k) contributions and enroll in the company stock ... Continue reading this article…

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Take Control of Your Finances Part 7: Set Goals

by Luke Landes

Last month, I began writing about the process of taking control of one’s own financial condition. It’s common to outline any process by describing a series of steps, and that is the form I have chosen for writing about this particular process. The steps I’ve described roughly follow my experience as I learned to take ... Continue reading this article…

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Most Popular on Consumerism Commentary: November 2008

by Luke Landes

One of the best methods of reading Consumerism Commentary and staying up-to-date with the latest articles and posts is through RSS subscription. By subscribing to the Consumerism Commentary RSS feed with feed-reading software such as Google Reader or aggregators such as My Yahoo, you’ll always be aware of new content here. If you prefer to ... Continue reading this article…

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Personal Income Statement, November 2008 (Net Income: $22,787)

by Luke Landes

Along with the monthly personal balance sheet, which I use to track my net worth from month to month, I publish a report that outlines my income and expenses. The two reports together help me focus on the total picture. My “extracurricular” income — money I’m earning outside of my day job through writing for ... Continue reading this article…

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Personal Balance Sheet, November 2008 ($180,926, +6.5%)

by Luke Landes

It doesn’t look like I’m going to meet the goal I set for myself last year. A net worth of $210,000 is out of the question unless the stock market experiences a miraculous recovery. All things considered, my finances are still in good shape. Every month, I review my account balances and income vs. expenses ... Continue reading this article…

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November Cash Experiment: Successful, Perhaps

by Luke Landes

Early last month, I decided to leave my credit card in my wallet throughout November. Over the last few years, I’ve been using a rewards credit card to pay almost all of my day-to-day expenses. I never pay interest charges because I always pay my credit card in full before the due date. I buy ... Continue reading this article…

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