Picking Up Discounts in the Produce Section: the Benefits of Grocery and Pharmacy Cards

Sign up for the free loyalty cards from your local grocery stores and pharmacies if they offer them.  They cost you nothing (I don’t even get junk mail from them!) and give you exclusive discounts and/or cash back.  Those offers marked by signs hanging under products throughout the store (clearance items, discounts, two-for-one deals, BOGOs, etc.) are usually only available when you use the store card.

I, for example, have a Safeway and a CVS card for these purposes.  One cool feature of the Safeway Club Card is that when you use it, the receipt tells you how much you saved in your purchase through their deals and other coupons.  I saved 25% on my last purchase!  Of course, Safeway cashiers are usually nice enough to ring up a default Safeway card for you if you don’t have/forgot your own.  But (1) you can’t count on them to do that every time and (2) that will keep you from stocking up on points from affiliated programs such as United Mileage Plus or UPromise cash for college (more on that in a future post).

CVS’s ExtraCare card, on the other hand, gives “Extra Bucks” that may be used for any purchase at CVS.  Every 3 months you get Extra Bucks equivalent to 2% of your purchases in the previous quarter, and the weekly specials usually feature several products that also come with Extra Bucks (if you buy the product, you get Extra Bucks that can be used on your next CVS purchase).  A few weeks back, for instance, I bought three boxes of Cinnamon Toast Crunch for $10 and got $5 Extra Bucks.   I used that on my next purchase.  I don’t buy my prescriptions at CVS, but its website also says that you can get 1 Extra Buck for every 2 prescriptions purchased in-store.

The main caveat of CVS’s Extra Bucks is that you really have to remember to use them if you want to transform your everyday purchases into good deals, as they tend to expire after 2 or 3 weeks.  Also, you need to present your ExtraCare card in order to use the Extra Bucks, but that should not be a problem since you should have it on you anyway (i.e., on your keychain) for accumulating all those Extra Bucks.

You probably shop at groceries and pharmacies more frequently than at most other types of stores, and most likely have your local favorite.  If it’s offered, make sure you get and use their loyalty card – claim the chance to be rewarded for helping them stay in business!

Get the Check and 5% Back

If you have a Discover More card, make sure to sign up for the 5% Cashback Bonus on restaurants going on throughout June.  Discover had a similar bonus event in March (offering 2% cashback), but this time around I did not receive any notifications in the mail or through e-mail and found out only when I logged in to make a payment.

5% cashback is a great deal and can’t easily be found in other credit cards without annual fees (though the Citi Forward gets close for some purchases).  Unfortunately, this deal is limited to a total of $200 spent in restaurants during the month of June, or $10 in cashback.  But if you are dining out (hopefully after making a reservation through OpenTable) or ordering in (don’t forget that delivery food comes from restaurants too!) at any point during the month anyway, be sure to use your Discover Card and get as much of those 10 dollars as you can.

Discouraged by student loan payments? Rent’s too high? How about taking a trip to the Caribbean?

There is no reason for not having a frequent flier account and accumulating miles for practically every trip you take.  Frequent flier accounts cost absolutely nothing and may eventually earn you a free trip, even if it takes you a few years.

Airlines offer frequent flier programs with the idea that they can keep you loyal – if you have an American Airlines account, when you have to travel you will choose to fly with AA or one of its partners to accumulate miles, regardless of whether there are cheaper options out there (or at least if the difference in price between the cheapest alternative and your AA flight isn’t that big).  I challenge that concept.  Rather, loyalty programs should not factor into your decision of flight which to take, because you should have frequent flier accounts with more than one airline, making sure every flight you take will be covered by at least one of your accounts.

To set this up, here are some facts you should know:

  1. You can accumulate miles by flying with the airlines with which you have a frequent flier account, with their airline partners, as well as with their other partners including hotels, car rentals, and online retail sites.
  2. You can redeem miles for flights with the airlines with which you have a frequent flier account and with their partners, as well as for other things such as magazine subscriptions.  Redeeming for international flights tends to the best deal. 
  3. There are three main airline groups that share mileage accumulation benefits and redemption options (US-based airlines in group): oneworld (American Airlines), SkyTeam (Continental, Delta, and Northwest), and Star Alliance (United and US Airways).  [A full list of the member airlines can be found in the respective group websites.]

You only need to open a frequent flier account with one airline in each of the three groups, since having an account with any airline in a group lets you earn and redeem flights within the entire group.  In fact, having more than one account within each group would only spread your miles thin, since miles from different programs within the group cannot be easily combined.

For SkyTeam and Star Alliance, you should generally choose to be a frequent flier with the airline that you fly the most, because several of them offer bonuses for online check-in and other activities to their members only (not partners’ members). 

If you fly internationally enough, you may want to consider having a frequent flier account with a non-US-based airline from one of those groups.  The main problem I have found with some of those programs, however, is that the miles tend to expire more easily, so be careful and read the fine print before you decide to go that route.  For example, I used to have an account with Japan Airlines, but the miles expired 2-3 years after they were accumulated, regardless of activity.  In contrast to most US-based airline programs, where miles do not expire as long as there has been any activity (accumulation or redemption) in the account in the last 18 months.

Regardless of your home airport and the frequency of your travel, this post should have given you a basic understanding of how frequent flier programs work.  Next week I will post some tips for accumulating miles and getting that trip to Aruba faster – and a week should be enough time for you to sign up for your frequent flier accounts.

Hands Off the Retirement Fund

Our blog hasn’t talked about retirement yet, but expect several posts on it soon enough. For now, let me start with a short introduction, particularly useful for those of you who are interested in setting up a retirment account but do not know where to start (or even what all the codes mean) and those who might already have a retirement account but want to explore other options.  Despite the fact that most of us are more than 40 years away from retiring (but maybe some of us will retire early!), it is never too early or too late to start planning.

I would categorize retirement funds into two major categories: pre-tax and post-tax accounts.

Pre-tax accounts: As the name suggests, these are IRA or 401K accounts (401K are so-called for the section of the Internal Revenue Code that governs such plans) that use pre-tax dollars.
Pro: You get to sock away money for your retirement before Uncle Sam gets his cut and your account grows tax-deferred.
Con: Uncle Sam gets his cut eventually, such as when you start withdrawing money for retirement.

Post-tax accounts: Also known as Roth, these are IRAs or 401K accounts that use post-tax dollars.
Pro: Your earnings grow tax-free, and because you have already paid taxes on the money you put in, you can also withdraw the money before your retirement age without penalty (just the amount you contributed though, not the money the account has earned).
Con: You don’t get the tax break in the beginning.

Within these two broad rubrics, your choices of investment run the gamut from CDs to mutual funds to stocks, which we will discuss at a later time.

The most important tip to keep in mind, though, is NEVER dip your hands into your retirement fund until you actually retire. Obviously, there are exceptions, such as medical emergencies and home foreclosure, but these should be few and far in between. Try to internalize this way of thinking about your retirement account. And should you find yourself in the unfortunate situation of needing to access that money, WSJ’s has a good recent article going through the rules and accompanying taxes and penalties for early withdrawal.

How to Earn a 50,000% Return

As I was deciding which law school to attend last month, I did something I never thought of doing when I was applying for college – I negotiated my financial aid package. My second choice school had offered me $10,000 more in scholarship, so with two weeks before the first deposit deadline, I wrote the dean of my first choice school a letter asking her to match my financial aid award and sent it via US Next Day Priority. Her office responded back within a week. Not only did they match the $10,000, they threw in another grand. I sent my deposit the next day.

The $19 postage I paid was one of the smartest investments I ever made. Honestly, even if my first choice school did not match the scholarship I received from the other school, I might still have gone. But the point is that there is no harm in trying; the worst thing that can happen is that my request is denied, in which case I am simply back where I started. And remember, the financial aid award is supposed to be similar for all three years of law school, so I really gained $33,000.

Here is a sample of my negotiation letter:

Dear Dean [ ],
 
I am writing to request consideration for merit aid from [School A]. I have been accepted at [School B] as well and they have offered me a [ ] scholarship, renewable during my second and third years.

I understand that there are limited funds and I am grateful for any consideration that [School A] can give to my request. [List the reasons why you would like to attend School A.] Unfortunately, both [School A] and [School B] are my top two choices and my decision will be greatly influenced by total cost of attendance.

Thank you for your time and consideration, and please let me know if I can be of any assistance.

My one advice is that you must negotiate in good faith. I sent the dean a copy of my financial aid letter from the other school and made good on my word of attending the school once they matched the difference. This advice also applies to salary negotiations for those of you in the job market. In this downturn economy, it still makes sense to negotiate your salary if you received a higher offer elsewhere. Even if your dream school/job cannot match the scholarship/salary, you are still in control of the decision as to where to go. The old adage “your future is in your hands” is certainly true here.

Update on the Credit Card Legislation: Paying in Full Does Not Make You a Free Rider; It Makes You Profitable

Last Thursday we wrote about two possible and essentially opposing ways that credit card companies could respond to the new legislation and affect users who always pay their monthly credit card bills in full and on time: increasing annual fees and limiting rewards programs or buffing up rewards programs to encourage those consumers to use their credit cards more. In our view, the former would be a pity while the latter would benefit both credit card companies and us.

I thus find Sunday’s article in Michelle Singletary’s personal finance column in The Washington Post highly disturbing. On credit card companies’ threats to raise annual fees in response to the new credit card legislation, Singletary preaches,

I know many of you feel entitled to use a credit card without any cost because you diligently and responsibly pay off the bill before the due date. But did you ever stop to think what that is?

You probably never considered that the credit pushers made your access to “free” money possible by gouging the less fortunate with hideous penalty fees and wicked double-digit interest rates. Effectively, the most financially vulnerable consumers have subsidized the low interest rates and rewards programs that the more financially secure enjoy. . . .

That is how capitalism works. And at times it’s a selfish system.

This statement ignores an important system credit cards use to make money: interchange fees. These fees are charged by credit card companies to stores whenever a customer pays for a purchase by card. The interchange fee is usually made up of a flat fee plus a certain percentage of the purchase value, which varies according to the card company, the type of card (personal or business), the rewards program associated with the card, as well as the store, and generally ranges from 1 to 4%. In 2007, credit card companies earned $48 billion in interchange fees.

Credit card companies seek out lower risk customers (i.e., those who are most likely to pay their credit card bills in full and on time) not because high risk customers make it possible to include them, but because they are responsible for a big chunk of credit card profits. We pay our bills on time (i.e., credit card companies feel comfortable that they will get all of their money back, and know exactly when to expect it), and by paying off our monthly balance, we have the potential to earn credit cards companies 1-4% of our credit limit in interchange fees every month. Interest payments do not earn interchange fees. With this in mind, I really don’t think credit card issuers would want to lose low risk customers by raising annual fees and slimming down rewards programs. And if they do, I certainly will not celebrate that move as a victory over capitalism – it will only mark the day in which I (and many others) go back to shopping around for better credit card deals, as the new legislation does not stop the competition between credit cards, and compete they will.

A Getaway for the Price of a Commute

The long weekend kicks off at 5 PM today or earlier for those of you who are trying to beat traffic as you make it to your travel destinaton.  If you are one of the thousands of people trying to move through the NY-DC corridor, you must’ve come across various options – the train, the shuttle, and the bus.  Considering that the train is expensive (though cheaper if you book in advance) and the shuttle drops you off in the inconvenient La Guardia, the bus is the way to go.  Bus companies, such as Megabus, Bolt, and Vamoose, allow you to take a weekend trip for about $25 each way.  This is an awesome deal, since these buses are clean and have wi-fi, and you don’t have to pay for gas or tolls.  An average trip lasts 4.5 hours, which is equivalent to going by air once you factor in the time to travel to and from airports and through security checkpoints.  Bolt offers tons of leg room; Vamoose is always on time as their drivers re-route to avoid traffic.

Another major money-saver that my friend taught me is to book your trip months ahead of time with Megabus or Bolt when fares start at $1.  She selects random weekends and buys the tickets for $1 each (it’s really $1.50 if you include the booking fee).  If she decides not to use the ticket, she’ll only lose a buck.  I also suggested that she can sell the ticket to a friend or colleague for $5-10 about a week before the travel date, since by then the same ticket would cost anywhere from $20 to $25 on the website.  Even if she reserves 15 tickets (a total cost of $22.50) and only uses one of them, it would still be cheaper than buying the ticket a week or two in advance and paying the full $25.

But don’t ignore Vamoose.  Although Vamoose offers only $25 fares,  you get a free ticket for every four that you buy, so make sure to save the ticket stubs they give back.

Whether you take the bus or not, in this economy, “recessionizing” your travels is the way to go.

Use the Grace You’ve Got

So you’ve just graduated and the last thing you want to hear about is the debt you’ve accumulated over the last 4 years.  Luckily for you, you likely won’t have to deal with your federal student loans for at least another 5 months or so.  Stafford Loans – subsidized or unsubsidized – give you a 6-month grace period after you graduate, leave school, or drop to less than half-time enrollment before you have to start paying them off, and Perkins Loans have a 9-month grace period.  You might not be so lucky if you went to graduate school and used the GradPLUS loans, however, and neither are your parents if they took out PLUS loans your behalf: the repayment period for PLUS loans starts immediately after you graduate.  In that case, you have probably already received several notifications in the mail.

But even if you don’t have to start paying your student loans for another 6 months or so, you should be thinking about your repayment strategy.  We will break down the pros and cons of different repayment options for you in a future post, but while you are in your grace period, here are three pieces of advice you should consider. 

  1. Subsidized loans.  There is no reason to pay off your subsidized loans right now.  Their interest is subsidized throughout the grace period, up until repayment kicks in.  So, if you have the money  to pay them off and have already decided to do so,  keep it in a savings account earning interest for the next 5 months and only pay off the loans towards the very end of your grace period.
  2. During your grace period.  Do not touch your loans while they are in the grace period (besides paying off unsubsidized loans if you want to, even though you are not required).  You can change your repayment options at any time and you will probably have a better sense of what you can afford and whether you might need to extend your repayment timeline or lower your payments towards the end of the grace period, once you have bought most of your furniture and have worked for a few months.  Also, if you consolidate loans that are still in their grace period with loans that are not, you will actually lose that grace period. 
  3. At end of your grace period.  When your grace period is running out, do not dump all of your savings into your federal student loans.  While you may choose to pay more than the minimum monthly payment, their rates aren’t high enough to warrant emptying your bank accounts.  You need a cushion, including for making future repayments.  Paying a little more in interest is always better than becoming delinquent.  

The bottom line: use the grace period you’ve been given.  If you have a 6 month period until you have to repay your student loans, use it.  And use some of money you make during that period to create a cushion for yourself – it may come in handy.

New Legislation That Will Affect Your Wallet

I’ll be honest. I hadn’t been paying much attention to the new credit card legislation. I figured it wouldn’t actually affect me that much, since I always pay my credit card bill on time and in full (which everyone should do in the first place as paying 18% interest on credit card debt really is not the best use of your money).

The big piece of good news is that credit card companies are required to inform me of any major changes in my rewards programs. Besides that, what this new legislation means to us, never-late-full-balance-payers, is still unclear. The WSJ reasoned, along the lines of the threats coming from the credit card companies themselves, that rewards programs will have to be trimmed down to compensate for the loss in revenue due to the new legislation. Personally, I recently noticed that Discover raised the minimum amount of accumulated cash back that I can redeem for a check or credit from $20 to $50 (that is, my accumulated cash back will sit with them for longer until I can actually get a hold of it).

According to NY Times, however, the new bill might also lead credit card companies to focus more on their rewards programs to get people to spend more money. This also makes perfect business sense, since I am the best kind of customer. I help them collect revenue from vendors by spending money on my card and I am never behind in my monthly payments. Hopefully, they’ll keep that in mind when they think about their rewawrds program. The legislation will not kill competition between cards, and if my card’s rewards program goes dry, I could always take my spending elsewhere.

Get More Greens When You Eat Out

Tuesday night is our dining out night. While eating out does not have to be a weekly event for you, if you are going to pick a day, Tuesday should be the day. Fresh fish usually comes in on Tuesdays and Fridays, and a new batch of prepared food is typically made on Tuesdays (see Anthony Bourdain’s article in the New Yorker here).

Regardless of whether you are a foodie, you should always try to make your reservation through OpenTable.com. Sign up for free and for each reservation you make (and actually show up) OpenTable awards you 100 points. Once you accumulate 2000 points, you receive a $20 check from OpenTable, which you can use at any participating restaurant. That works out to getting $1 back each time you have dinner – not much, but wouldn’t it be great to get $20 off a meal every once in a while?

Note: Some restaurants offer 1000 points for tables booked at odd hours, which is like giving you $10 off your meal.

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