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Verizon Wireless Plans Then Rescinds $2 Fee for Paying Your Bill

This article was written by in Consumer. 27 comments.

Update: Less than a day after a Verizon Wireless employee leaked a memo with this information, the company has announced that it will not be moving forward with the implementation of this $2 fee.

The sad fact is we now live in a world where many companies have left their customers behind in the search to squeeze every possible cent out of every transaction. I’ve long lamented the increasing incidental fees charged by airlines; you can’t eat, check a bag, or receive a seat assignment early without paying extra now, and soon you may not be able to sit or use the restroom in-flight without swiping a debit or credit card. Gas stations charge more for fuel if you want the convenience of using a credit card. Banks tested and for the most part ultimately backed away from monthly debit card fees.

Starting January 15, Verizon Wireless will charge its own customers $2 to pay their own mobile phone bills.

Verizon WirelessOnly certain payment methods will be subject to this fee, but the new policy leaves only a few opportunities to avoid this surcharge:

  • Enroll in auto-payment, so your bank account is debited or your credit card is charged the same day every month.
  • Mail a paper check as if you’re still living in the twentieth century.
  • Use your bank’s bill payment service.
  • Walk into a Verizon Wireless store and pay a bill in person (an option for everyone, but a popular for those without bank accounts).
  • Pay with a Verizon Wireless gift card.

If you use a credit or debit card to pay your bill via Verizon Wireless’s website or over the phone, the $2 fee will apply, but if you pay via check (electronic ACH or paper) via phone or online, there is no fee. It’s another case of payment type discrimination; it costs more to process credit and debit card transactions, and Verizon Wireless is passing that cost along to certain customers. The customers most affected are those who need to wait to the last minute to pay their bill — customers living paycheck-to-paycheck, many of whom don’t have bank accounts.

It doesn’t take much to avoid this fee, but it’s another hassle for many customers and an indication that the pattern of nickel-and-diming across a variety of industries will continue. And those most at risk are those who have the least power to do anything about it.

Photo: ColumbusCameraOp

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5 Saving Money Tips for Car Owners

This article was written by in Consumer, Featured. 4 comments.

This is a guest article by Emily Guy Birken, author of The SAHMambulust. In this article, she offers suggestions for cutting the costs associated with car ownership.

Owning a car is an expensive proposition, but most of us never stop to consider the cost of each trip. Unless you live in a city with great public transportation, you use a car for everything. We jump into our cars to commute, run errands, visit friends, go shopping or even just take in the fall foliage. Be proactive about your car to keep your ownership costs low.

Rusted CarHere are five ways to make sure that your car remains a manageable expense, rather than a financial black hole.

Don’t cheap out on a mechanic.

When you find a reputable mechanic whom you trust, don’t expect to see bargain basement bills. Mechanics not only have to stay on top of the ever-changing trends of car engines, but they also need to make sure their (very expensive) tools keep up with cars’ needs and are well maintained. A knowledgeable mechanic is worth the extra money. One who doesn’t know what he is doing but will save you a couple of bucks can often cause expensive harm to your car. This is not the place to try to save. You’ll spend less in the long run if you’re willing to pay a great mechanic.

Looking for the cheapest mechanic will cost you more money in future repairs, so don’t be penny wise, pound foolish. Think about the larger picture.

Make smart gas choices.

There may be a great deal of hype about premium fuel options, but most daily drivers are just fine with the lowest octane gas at the pump. If you’re not sure about your car’s gas needs, check your owner’s manual. Even if the recommendation is for the premium grade of fuel, chances are that you would only need to fork over for the high-grade stuff in warm weather, when hauling extra weight, or driving on extremely steep mountain roads. Any other times, save yourself the money. And if you’re still not sure what your car needs, talk to your mechanic or check the internet message boards devoted to your make and model—there are plenty of them!

Watch the advertised prices as the station. You may pay more for your gas if you use a credit card, because many stations now charge gas customers different prices depending on whether they use cash or a credit card. You may be able to make up some of the difference with a gas rewards credit card, but again, make sure the price you pay above the cash price is worth the benefits.

Provided you pay off your credit card each month, this could be a savvy way to reduce your fuel bill each month and keep you motoring for less, as long as you make smart choices.

Take good care of your tires.

Tires are one of the costliest items that you will have to replace during the life of the car. While they are not made to last forever, you can ensure you get your money’s worth out of each set by practicing good maintenance. Keeping the tires properly inflated will not only make sure they last but will also save you on fuel efficiency. Check your tires monthly for underinflation and wear.

Keep your car clean.

If you live in an area with long, cold winters, you’re probably surrounded by cars that are rusting away. Cars that are exposed to salt will succumb to rust, which can shorten the lifespan of the vehicle. Especially in winter, you want to make sure that your car is regularly cleaned and waxed to keep the metal safe from the eroding properties of salt.

Similarly, if you notice a chip of paint missing from your body, touch it up! That spot is open to the elements and salt and will eventually rust over.

Don’t ignore little problems.

A friend’s car was revving but not catching when he turned the ignition. When he tried again, the car started and he went along his way. The problem? He was short on transmission fluid. Had he not topped off that fluid, he could have destroyed his transmission and been looking at a multi-thousand dollar repair bill, plus an out-of-commission car. Because he took care of the problem quickly, he paid just a few dollars for transmission fluid instead of using his maintenance budget for the year in one shot. We can become so used to the idea that we just jump in the car that we can sometimes end up ignoring small warning signs. If your car is behaving oddly, get it to a trusted mechanic quickly. Always pay attention to small issues.

Maintaining your car is an investment that will keep you motoring for years after your less-savvy neighbors and friends have had to replace their vehicles and spent unnecessary costs.

Photo: sridgway

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How to Hedge Against Gasoline Price Increases

This article was written by in Consumer, Investing. 10 comments.

When gasoline prices at the pump increased to the point where the cost was a major news item engendering backlash among the public, oil companies were sporting big profits. Consumers reacted by buying more fuel-efficient cars and traveling less, but there is another approach for investors — an approach that mimics what commodities and hedge fund traders do. There are a few suggested approaches, but some work better than others.

One approach is to simply buy stock in the companies that are increasing prices to hedge against cost increases. The theory is that if prices of consumable goods increase to drive profits for the company, owning part of the company will turn those higher expenses to investment returns.

A quick check of gas price data and Exxon Mobil’s performance shoes that stock prices don’t always correlate with an increase in gas prices, but Exxon Mobil did provide dividends to investors during the last major period of gas price increases, from December 2008 to now. Investors during this time would have received $5 per share in dividends. If you estimate you’ve paid $5,000 more in total gasoline costs since December 2008 than you would have if gas had remained at $1.70 per gallon — and this is an assumption I’ll continue to use here — it would have taken 1,000 shares of XOM to earn that back in dividends. Those 1,000 shares would have cost a total of $80,000 in December 2008 and they’d be worth only $72,000 today.

Gas Pump Fuel | crowt59This strategy would not have been very efficient. What about industry ETFs? The United States oil ETF, USO, would have seen performance not quite as bad as XOM over this period, but there would be no dividends. Investing directly in companies that profit from higher prices does not seem to be a winning strategy.

A bunch better choice would be an ETF that tracks gas prices closely, regardless of the stock performance of the companies involved with delivering gas to the consumer. Over this time period from December 2008 to today, UGA, an ETF that takes this approached, has increased 130%. Gas prices increased from about $1.70 to about $3.60 per gallon, or an increase of 111%. This seems to be the better approach for hedging against gasoline price increases. From an absolute dollar perspective, earning back the $5,000 in additional gasoline expense over this period would have required an initial investment of $3,850, a more reasonable down payment.

There are other ways to hedge gas prices, like selling put options on UGA. If you’re willing to gamble that UGA will trade at a certain minimum price on a certain day in the future, you can take a profit to help offset your gasoline expenses. If you take that bet and UGA is not trading at that price, you could lose money on the trade, but you’d be paying less at the pump, so you’ve saved money anyway. I think buying the ETF is a better idea for most investors than dealing with options.

Another option, in combination with investing, is to ensure you’re getting the best prices for the gasoline you buy. It doesn’t make too much sense to drive out of your way to get to the isolated station with the lowest price, but be aware of your options. Find the best gas credit card for you and use it to earn cash back, but be wary of stations that charge different prices depending on whether you use cash or credit.

If you are planning to buy a new car, consider cars rated with high gas mileage. The effects of these ratings aren’t linear; a 5 MPG upgrade from a 15 MPG vehicle to a 20 MPG vehicle has more of an effect on your finances than a 5 MPG upgrade from a 35 MPG vehicle to a 40 MPG vehicle, but it’s clear that a 40 MPG vehicle, while slightly better than 35 MPG, is a significant improvement over 15 MPG. Efficiency has its own environmental benefits beyond the cost of fuel, so some people may feel it’s worthwhile to buy fuel-efficient cars even if the higher prices make overall cost savings (including car price and gas) harder to achieve.

Right now, gas prices may not be the biggest financial concern for a family. The public now expects high prices despite not too long ago bemoaning when prices climbed above $1 per gallon. Transportation can be a significant expense for a family, though, particularly in locations where the career economy is based mostly on commutation, like New Jersey and California.

Photo: crowt59
Gasbuddy

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Rewards Cards Cost Mom and Pop Stores More

This article was written by in Credit. 20 comments.

I’ve been using rewards credit cards for many years now. I initially used cash back credit cards to turn what was mostly necessary spending or purchases I would have made with cash or a debit card anyway into hundreds of dollars back in my hands — or by bank account — each year. Now I travel more, so I switched to the Continental Airlines OnePass card for most of my personal spending. Rewards credit cards, whether they focus on cash back, travel, or some other feature, are associated with fees, but not just for the card users.

When any merchant accepts a credit card, the business must pay a fee to the networks that allow that transaction to be processed successfully. For example, let’s say you pay for a $40 meal at your favorite local restaurant with your Visa card. If the card is a typical Visa card, without any rewards such as cash back or travel associated, the restaurant must pay Visa $0.72. If the Visa card offers rewards, the restaurant must pay $0.88. There are more tiers of Visa cards. Beyond the traditional rewards cards is the Visa Signature designation. If you pay for a $40 meal with a Visa Signature card, the restaurant owes Visa $1.02 for that transaction. A transaction with a Visa Signature Preferred card runs up the restaurant’s bill for that meal to $1.06.

These rates are as of the fee schedule published April 2011 pdf).

These fees may seem small, but considering the number of customers who can come through a restaurant, they add up quickly. Merchants blame these swipe fees, merchant fees, or interchange fees for making businesses difficult. Small businesses have a harder time with these fees because the retailers don’t have the bargaining leverage to force Visa and MasterCard to reduce them. I believe even larger retailers have little leverage to negotiate because refusing to accept either Visa or MasterCard would alienate half of their customers.

As a result of the higher swipe fees for certain cards, businesses often create policies that seem unfriendly to customers.

  • Gas stations circumvented the “no discounts for cash purchases allowed” stipulation of their merchant agreements by offering different prices per gallon depending on whether a customer uses a credit card or cash.
  • Although it may transgress their merchant agreements, some retailers have a minimum charge amount. If the purchase isn’t over $10 or $20, the retailer won’t accept a credit card.
  • Some business are resorting to displaying signs that discourage customers from using rewards credit cards, which are often more expensive to process than standard credit cards.

It doesn’t cost the transaction networks more to process a rewards credit card payment than a standard credit card payment, but the cost of the rewards add up. Fees and interest charges aren’t enough to cover the cost of running a major financial corporation like Visa or MasterCard, nor do they cover the costs of the rewards they provide to their customers.

Knowing that rewards cards hurt smaller retailers financially — more than standard credit cards hurt them — would you forfeit your potential rewards by using another payment method in smaller establishments?

CNN Money

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Premium Gasoline Possibly Switched With Ethanol E-85

by Flexo

When I drive up to a gas station, I have a number of expectations. First, if I see a price advertised for regular-grade gasoline, that’s the price I expect to pay for regular-grade gasoline. That wasn’t the case a few years ago when my local gas station decided to implement price discrimination for customers who ... Continue reading this article…

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Credit Card Use Increases Prices for Everyone

by Flexo

I use a total of three credit cards. The first is a card issued by Citibank that offers a rounded set of cash back rewards, my alternate is a Bank of America Visa Signature card, and for business expenses I use an American Express Blue Cash for Business card. But I don’t pay interest fees ... Continue reading this article…

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Gas Stations Charging Credit Users More Than Cash Users

by Flexo

Clark Schinger owns a gas station. Like an increasing number of gas station owners, he is charging his customers who use credit cards a surcharge for every gas purchase. Effectively, there are two tiers of prices: one for customers who use credit cards and one for those who use cash. This is apparently not against ... Continue reading this article…

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Where Did You Come From, Where Did You Go (June 2008)

by Flexo

As June comes to a close, I’d like to thank visitors, readers, and commenters who enjoyed or contributed to Consumerism Commentary over the past month. I particularly like to mention the blogs and related websites that helped sustain Consumerism Commentary by linking here and providing paths for visitors to arrive. Here are the websites, not ... Continue reading this article…

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