Money Crashers: Lending Circle – What It Is and How to Borrow From a Group Fund

In my latest piece for Money Crashers, I talk about an interesting way to borrow money: lending circles. These are informal groups in which members take turns pooling funds and giving all the cash to one person. For instance, ten people each put in $100 every month, and one person gets $1,000. Each person gets a turn to borrow, so everyone comes out even. And, since everyone is both a borrower and a lender, no one has to pay interest.

Now, if you're paying attention, you may have spotted a weakness in this plan. If you put in $100 every month, and once every ten months you collect $1,000, then you haven't really gained anything. You're no better off than if you had put that same $100 in the bank and withdrawn $1,000 after ten months. In fact, you're a little worse off, since banks pay at least a tiny amount of interest on your savings.

But the thing is, many people would have trouble saving up that $1,000 if it were just sitting there in the bank. They'd always be tempted to dip into it for emergencies, or to skip the $100 savings deposit some month when money was tight. But if they know the group is counting on them for that $100 payment, they'll do what it takes to make sure they have the money. It's the social pressure that forces them to save. And, since every payment is also an occasion for a social gathering, it's more fun.

Since I don't have trouble keeping my hands off my bank balance, a lending circle wouldn't be much good to me. But for those who do, it can make saving a little easier and more enjoyable.

Lending Circle – What It Is and How to Borrow From a Group Fund

Money Crashers: 2 new articles

Here's a quick update on my two latest articles for Money Crashers. The first is very much in an  ecofrugal vein: a list of ideas for eco-friendly small businesses. If you're thinking of starting a side business, making it a green business could help you stand out from the crowd. More than one-third of all consumers, especially younger ones, are willing to pay around 25% more for green products and services. So you can  both boost your profits and help the earth — a win-win.

20 Green Small Business Ideas for Eco-Friendly Entrepreneurs

The other is less ecofrugal, but still useful: a list of the most common credit card scams of 2022. To protect your money, learn to recognize these cons and stay one step ahead of the scammers.

9 Credit Card Scams and Frauds to Watch Out For

Money Crashers: 2 new posts

A quick update here to tell you about my two latest posts on Money Crashers. The first is about your credit score, and about how to get around the annoying fact that (1) it has a tremendous impact on your life, and (2) the credit bureaus have no obligation to tell you what it is. My article explains how to get around that problem and check it for yourself, either for a fee or, better yet, for nothing.

How to Check Your Credit Score – Subscription Services & Free Monitoring

The second is about my former favorite store, IKEA. Although I've become disillusioned with IKEA lately, we still have some IKEA pieces that have served us well for many years and that I wouldn't hesitate to recommend. So I'd say the key to shopping at IKEA is knowing which pieces are good values and which ones aren't — and that's what this article is all about. It looks at reviews and interviews with home professionals to identify the best items in every category, from furniture to textiles to lighting and beyond. as well as the ones best left on the shelf.

What To Buy And What Not To Buy At IKEA

Money Crashers: Debt Settlement Negotiation

Here's a new Money Crashers on a topic I hope most of you don't have to deal with: debt settlement.

I've written articles before about paying off debt, but this piece is for folks who don't see a way to do that — who can barely keep up with the monthly payments, let alone increase them. It's for people who have already missed multiple payments and are now dreading calls from debt collectors. People, in short, who are in a very bad situation.

One way out of this situation is debt settlement: persuading creditors to discharge your debt in exchange for a lump-sum payment that's less than you actually owe. This isn't a magic bullet, since you have to come up with that lump sum and persuade creditors to accept it, and the discharged debt will harm your credit rating. But it's easier to recover from than bankruptcy.

This article discusses the pros and cons of debt settlement, other alternatives to consider before trying to settle your debt, and strategies for negotiating with creditors. If you're lucky, you'll never need this information — but if you ever do, it's better to know your options ahead of time.

Debt Settlement Negotiation – Do-It-Yourself Guide to Beat the Creditors

Money Crashers: Four new articles

Four more of my articles have just popped up on Money Crashers. They're not particularly connected to ecofrugality, but they might have some interest to some of you.

The first piece is for you if you've never had a 401(k) plan — or if you have one but don't really understand how it works. It explains the tax benefits of a 401(k), its limitations, and the advantages and disadvantages of using it for your investments. (Spoiler: Yes, you should definitely invest some money in a 401(k) if you have one, and no, you definitely shouldn't do all your investing this way.)

What Is a 401(k) Plan and How Does It Work? – Limits, Rules & Benefits

The second piece is about something pretty much everyone has these days: a credit report. And if you have a credit report, you could have errors on it that you don't know about. In a In a 2012 study, about 1 out of 4 Americans found inaccuracies on their credit report that could affect their credit scores. Luckily, most of the affected consumers were able to correct the errors and improve their scores as a result. Here's what you need to know about how credit report errors occur, how they can hurt you, and how to fix them.

How to Fix Errors on Your Credit Report for Free

Many families look to health care sharing ministries (HCSMs), such as Medi-Share, as an affordable alternative to traditional health insurance. HCSMs work on the same principle as insurance, collecting premiums ("shares") from all members and using the money to pay for the health care costs of those who need help. But make no mistake: HCSMs aren't insurance, and they don't offer the same benefits. This piece explores how HCSMs work, what they cost, how they differ from a regular insurance plan, their pros and cons, and when they can be worthwhile. (Spoiler alert: if there's any way at all you can afford a real insurance policy, choose that instead.)

Health Care Sharing Ministries: A Good Alternative to Health Insurance?

And now for something completely different: Academy Award parties. Many movie lovers delight in throwing Hollywood-style Oscar night parties, complete with real red carpets, signature cocktails, and lavish swag bags for guests. But what if you don't happen to have a Hollywood-style budget? No worries: just substitute planning and creativity for money. This article explains how to plan a truly fabulous Oscar extravaganza on a budget, including Oscar-worthy invitations, glam decorations, red-carpet attire, fabulous food and drink, award-related party games, and your own fabulous swag bags.

How to Throw an Oscar Viewing Party on a Budget  

Three new articles on MoneyCrashers

After a long dry spell, Money Crashers has just put up several of my articles at once. Here's a quick rundown of what you can learn about:

A Consumer Protection Law That May Hurt More Than It Helps

With interest rates for consumer loans climbing even as interest on savings plummets, some legislators think the solution is to bring back usury laws - this time on a nationwide scale. But the proposed Loan Shark Prevention Act could backfire. By ending high-interest loans, it could cut off all sources of credit for low-income borrowers - or drive them into the arms of genuine loan sharks who operate outside the law. Learn what this act does, how it could affect the lending sphere, and what other alternatives could do more to help low-income borrowers.

Loan Shark Prevention Act – What It Is and How It Would Affect You

A New Way for Scammers to Target You

Ever had some nice people from "the power company" knock on your door, eager to help you save money on your utility bill? Yeah, sorry to disappoint you, but that's a scam. And it's just one of several utility scams making the rounds now. Utility scammers woo you with the promise of lower bills on your water, gas, or electric service - or threaten you with having it cut off. Learn how to recognize these bogus promises and threats for what they are.

6 Home Utility Company Scams to Beware Of (Water, Electric & Gas)

The Best TV Shows About Money (Including YouTube)

Have you ever read a book or an article on personal finance and felt like you just weren't taking it in? Maybe the problem was the format. When your information comes with a healthy dose of entertainment, you're more likely to pay attention and remember it afterward. That's what makes videos (on TV or YouTube) a good way to learn about money. Whether you're interested in choosing investments, starting a business, or just managing your personal finances, there's a show that can help you and keep you entertained at the same time.

7 Best TV Shows to Watch to Learn About Money, Finance & Business

Money Crashers: How to Negotiate Financing on a Car Loan

Unlike most Americans, I've never actually had a car loan. I've bought two cars in my life, and I paid cash for both of them (though my parents loaned me some of the money for the first one). So I've never been personally subjected to the array of sneaky tricks the dealers use to maximize the total amount you pay them for the car, like focusing exclusively on the size of the monthly payment while stretching those payments out as long as they possibly can. And I'm very grateful to have been spared this experience, since just reading about it was enough to give me the heebie-jeebies.

If you'd like to escape this ordeal next time you buy a car, my newest Money Crashers article can help. It explains how you can save money on your car loan by shopping for the loan before, not after, you find the car, and offers specific tips for reducing the total amount you pay, such as:

• Shopping around for a loan
• Comparing lenders online
• Making sure your credit report is accurate
• Comparing loans by APR
• Choosing a shorter loan
• Making a bigger down payment
• Using online loan calculators
• Always reading the fine print

Get the details here: 6 Tips on How to Negotiate Financing on a Car Loan (Interest Rate)

Money Crashers: What Do Rising Interest Rates Mean for You?

Interest rates have been at near-zero levels for so long, everyone's kind of started to get used to it. Now that the Fed has finally started to slowly, slowly edge interest rates back up again, you keep seeing panicky stories about what the rising rates are going to do to the stock market and the economy as a whole.

So I thought maybe it wouldn't be a bad idea to write a nice, calm, thoughtful story about what rising rates actually mean for consumers—both good and bad. Because yes, there definitely is an upside, especially for frugal folks like me who have been frustrated over the past decade that all the money we're keeping in the bank hasn't even earned enough interest to keep pace with inflation.

My new Money Crashers piece explains how rising interest rates could affect:

• Borrowers, who will now pay more on credit cards and variable-rate loans (but not on fixed-rate loans, like student loans or most mortgages);
• Savers, who will once be rewarded for keeping money in the bank;
• Home buyers, who will probably pay a higher rate for a new mortgage, but will also probably pay less for the house itself;
• Investors, who will see better returns on bonds, but more volatility in the stock market (though probably not the long-term losses that panicky investors are expecting);
• The overall economy, which could see a drop in consumer spending in the short term, but—surprise!—is actually likely to grow in the long term;
• The national debt, which has reached ridiculous levels and will become more and more costly to service, eating up a bigger and bigger share of our federal budget until...well, no one really knows what, if anything, the federal government will actually do to fix the problem, but it's not likely to be any fun for anyone concerned.  

Then I outline some steps ordinary consumers can take to adjust to the new normal (which is actually the same as the old normal, for those who are old enough to remember it), such as reducing debt, locking in interest rates on any new debts while they're still relatively low, shuffling investments, and building an emergency fund and plenty of insurance to get them through hard times if and when they hit.

Here's the whole, non-panicky story: What Do Rising Interest Rates Mean for You? – Effects & How to Prepare

Money Crashers: Should You Pay for a Credit Monitoring Service?

My latest piece to go live on Money Crashers is on a topic that's gotten a lot of search traffic since the  2017 Equifax hack: credit monitoring and ID theft services. These services promise to watch your credit report for signs of fraud, give you access to your credit score, insure you against identity theft, and sometimes even monitor the "dark web" to see if anyone is trying to sell your Social Security number. But these benefits come with a cost—typically between $10 and $30 per month.

So are they worth it? The answer depends on your personal situation. In the article, I outline the pros and cons of credit monitoring, the features of the top credit monitoring services, and some alternative ways to protect yourself for less—or even for free. Then I conclude with a list of three questions to ask yourself to decide whether paid credit monitoring is worth the money for you.

Read all about it here: Should You Pay for a Credit Monitoring Service? - Best Options

Please note that this article was written several months ago, and there's some info in it that's a little out of date. The article says that initial fraud alerts last for only 90 days and that freezing and unfreezing your credit report costs money in most states. However, a new law that took effect last month changes both these points. An initial fraud alert is now good for up to a year, and credit freezes are now free throughout the country. This info should be updated in the article shortly.

Money Crashers: How to Use 0% Balance Transfer Credit Cards Responsibly

My latest Money Crashers article covers something I've never actually tried myself: zero-interest balance transfers. Actually, I've never used any sort of credit card balance transfer, because I've never had a balance to transfer. I'm what the credit card companies call a "deadbeat"—someone who always pays off her balance in full every month. For me, credit cards aren't really a way to borrow money; they're just a more convenient way to use it.

However, if I did have a credit card balance, I would certainly be intrigued by the possibility of using a zero-interest balance transfer to pay it off. With these offers, you move debt from your current, high-interest card to a new card and pay no interest at all on it for up to a year and a half. This makes it easier to pay off the debt faster, ideally allowing you to eliminate it before your zero-interest period expires.

Of course, there's a catch—several, actually. My article examines these in detail and then explores ways to avoid the pitfalls and turn zero-interest balance transfers to your advantage. Read it here: How to Use 0% Balance Transfer Credit Cards Responsibly

Money Crashers: 17 Reasons Why You Should Get Out of Debt

The only debt Brian and I have ever had—not counting credit cards that get paid off every month—is our mortgage. And pretty much the whole time we had that, we were obsessed with paying it off. We made extra payments as often as possible, and I (in my usual hyper-organizational mode) entered all those payments on a spreadsheet to keep track of our remaining principal, our growing equity, and the time left until it was paid. We didn't have a "mortgage-burning party" to celebrate like some people do, but we certainly felt happier and freer without it.

Now, many financial advisors would say this wasn't really the best move on our part. After all, they'd argue, by throwing all our spare cash at our mortgage, we were only getting a 4.5% return on our investment (or 6% before we refinanced); most likely we could have done better than that by investing in stocks. Now, I would argue that a guaranteed 4.5% return is nothing to sneeze at, but even granted that we could have done better in the stock market, I think paying off the mortgage was still the right choice for us. We're both incredibly uncomfortable with the idea of being in debt, and we were never going to feel entirely secure until that debt was gone.

I realize, of course, that most people don't feel this way. But I'd like to argue that even for those who don't, devoting your extra money to paying off debt has more benefits than you may realize. Aside from the obvious financial perks—more cash to spend or invest, more security—it has documented benefits for your mental and even your physical health. And it has the potential to make your relationships with other people—especially people who share that debt—stronger as well.

Learn about the 17 reasons to get rid of debt in my latest Money Crashers article:

17 Reasons Why You Should Get Out of Debt – Benefits of Being Debt-Free

Money Crashers: Two new articles

Just a quick update here to let you know about my two latest articles on Money Crashers. Neither of them has a lot to do with ecofrugality, but they might be useful for some of you.

The first deals with the topic of online romance scams. Researching this article came as a shock to me: I knew there were some scummy guys out there (most of the criminals are guys) using dating sites to get money out of women (most of the victims are women), but I had no idea of the scope of the problem. There are guys in Nigeria who have dozens of women on the hook at once and live like kings on the money they squeeze out of them. In 2016, Americans lost over $230 million to these scams—and that's just the ones that were actually reported. A lot of victims are too embarrassed and emotionally devastated to report the crime.

The money isn't even the worst part; it's the emotional harm these scams do. When the victims finally learn that what they thought was true love was just a money-making scheme, their lives fall apart. Some of them refuse to believe the person they loved isn't real and start stalking the guys whose images were stolen for the profile. Others become depressed to the point of suicide. Some are so desperate to believe their love was real that they actually stay involved with the scammers, sometimes even aiding them in committing other crimes.

So basically, this is a big deal, and anyone who ever dates online needs to know about it. My article covers how online romance scams work, their many dangers, how to identify a scam, and what to do if you've been a victim.

How to Avoid and Protect Yourself From Online Dating & Romance Scams

My other new article is about personal loans. I've already written about payday loans and their dangers, but this is about longer-term personal loans you can get from a bank. I explain how personal loans differ from other forms of credit, discuss why you might use one and where to get one, outline their pros and cons, and discuss some alternatives for raising cash. Then I conclude by talking about how to get a good deal on a personal loan if you decide to use one.

What Is a Personal Loan – Pros & Cons of Getting One

Money Crashers: 6 Ways to Build Credit Without a Credit Card

When I first arrived at college, over (gosh) 25 years ago now, there were a lot of vendors offering products and services to the incoming students—including credit cards. I smugly bypassed those, telling myself that I was too smart to get lured into that trap. I assumed, probably correctly, that having a credit card when you don't have a steady source of income is a good way to get in over your head with spending and graduate with a lot of debt.

However, I also knew that I probably would eventually need a credit card after I graduated, and that I'd have to build up a credit rating somehow to get one. I'd heard that a good way to do this was to have a regular bill, such as a phone bill, and pay it on time every month. So, for the next four years, I made a point of getting the phone line in all the dorms where I lived set up in my name and paying the bill promptly and fully.

Imagine my surprise, then, when I applied for my first credit card after graduation and was told that I didn't qualify because I had no credit history. What I hadn't realized was that bills like a phone bill aren't always reported to the credit bureaus; you have to call up the providers specially and ask them to report the payments. All my careful planning had been wasted, and I had to ask my dad to co-sign for a credit card with me so I could start building some credit in my own name.

This story came back to mind recently when I read about how a majority of Millennials—about two out of three—are opting to go without credit cards completely. That's easier to do nowadays, since it's possible to pay for stuff with debit cards and payment apps instead—but it also means these cautious Millennials are in the same position I was after college. Since they've never used credit, they have no credit history, and when they finally need to borrow money—say, to buy a house—they'll have trouble doing it.

So my latest Money Crashers article is all about strategies for building credit without having a credit card. It covers the method I tried to use in college (and explains how to do it right), as well as newer methods like using an alternative credit service, reporting your rent, or paying off student loans (which all too many graduating students have).

Read it here: 6 Ways to Build Credit Without a Credit Card

Money Crashers: 8 Tips on How to Improve Your Credit Score Rating

About a year ago, I published an article on Money Crashers about how to check your credit score for free. In that article, I pointed out that your credit score can have a big impact on your life, even if you have no plans to borrow money in the near future. For instance, it can affect the rate you get charged for auto insurance, as well as your chances of landing a job or an apartment. And, of course, checking your credit score regularly can alert you to errors on your credit report that could be a sign of identity theft.

So all in all, I made a pretty good case that your credit score is important, and why it's worth knowing what yours is. But what I never explained is what to do about it once you find out. Learning that your score is low - perhaps low enough to be affecting your mortgage or insurance rates - isn't very helpful if you have no idea how to make it any higher.

My latest Money Crashers article remedies that. It outlines the various factors that affect your credit score - such as whether you pay bills on time, how far you stay below your credit limit, what kind of credit you use, and how long you've been using it - and then explains how you can tweak these factors to boost your score.

If your credit score is only so-so, this article can give you a couple of useful tips on how to bump it up into the very good or even excellent range. And if your score is already at or near the top of the scale, it can tell you how to make sure it stays there.

Check it out here: 8 Tips on How to Improve Your Credit Score Rating

Money Crashers: Payday Loans – Biggest Dangers & Better Alternatives

I got the idea for my latest Money Crashers piece after reading an article in The Atlantic about payday loans. This piece discussed the dangers of this type of loan, which hits people already in desperate financial straits with crippling interest, but also pointed out that people take out these disastrous loans for a reason: they need the money, and most mainstream banks aren't willing to give it to them on more reasonable terms. Bad as payday loans are, The Atlantic argues, there just aren't any better alternatives.

John Oliver, however, begs to differ. His marvelous segment about the evils of payday loans concludes with a mock public service announcement in which Sarah Silverman urges viewers to consider a "great alternative" called "AnythingElse." Unfortunately, the ideas she goes on to suggest—including selling sperm or blood, walking in front of a car in hopes of a generous settlement, and shoplifting—are generally impractical, unethical, or both.

So in my article, I've attempted to outline some realistic alternatives for people who need cash in a hurry. I take pains to point out that many of the alternatives I suggest—such as pawnshops, credit card cash advances, and hitting up family members for a loan—are terrible ideas under normal circumstances. But when compared to a payday loan at 400% interest, they're decidedly the lesser of two evils.

How Payday Loans Work – Biggest Dangers & 14 Better Alternatives

Money Crashers: How to Check Your Credit Score for Free

If you're a financially savvy kind of individual (and you must be if you're here, right?), you no doubt already know the importance of checking your credit report every year. Getting a credit report from each of the three credit bureaus (Equifax, Experian, and TransUnion) allows you to spot and correct errors that could affect your credit rating or, more dangerously still, be a sign of identity theft. So the sooner you can find these and nip them in the bud, the better. That's why the federal government now requires the credit bureaus to provide you with a copy of your credit report once a year at no charge. The easiest way to get them is through the site AnnualCredit.Report.com. (Accept no substitutes; sites with similar URLs, like FreeCreditReport.com, are fakes that either phish for your personal information or try to get you on the hook for a paid service.)

However, while the credit bureaus now have to give you free access to your credit report, they're still allowed to charge you to view your actual credit score. I've always found that rather annoying, since it's your credit score that really affects your life the most. It determines the interest you pay on your credit cards, your chances of qualifying for a mortgage, your auto insurance rates, and even, in some cases, your ability to get a job. It seems like something you should be able to check on without having to shell out twenty bucks for it.

So in my latest piece for Money Crashers, I've compiled a list of tricks for getting a look at your credit score—or at least an estimate of it—without having to pay. Actually, I say it's my latest piece, but it's only the latest one to be published; it's actually the very first article I wrote when I started working for Money Crashers about a year ago. I'm not sure why they chose to sit on it for a year, or  why the final version ended up with a bunch of editing changes that I never saw when they originally reviewed it—but the information is all there, and I guess that's what matters.

How to Check Your Credit Score – Subscription Services & Free Monitoring

Money Crashers: Advantages & Disadvantages of Credit Cards

My latest post on Money Crashers was more or less inspired by an argument I got into last summer—rather foolishly, I suppose—with one of the Credit Haters.

If you regularly visit any sort of blog or forum dealing with personal finance, you're probably familiar with these folks. They're the ones who, every time the word "credit" comes up in any article, post a hundred or so comments to the effect that using credit in any form is bad, bad, bad, bad, bad. Dave Ramsay very prominently—and vehemently—subscribes to this view, and so do his legions of loyal disciples.

Anyway, another financial guru of the Dave Ramsay school is Dr. (he's very particular about the "Dr.") Jason Cabler, who has a blog on the Dollar Stretcher website. Last August, he put up a post about the "21 Things You Can Do Today to Set Up Your Finances for Massive Success." Item #1 on that list was "Go Naked With Credit," meaning get rid of all your credit cards right now, this instant, because "You spend more overall when you use them, and carrying a balance (like the majority of card holders do) incurs interest and fees that increase your cost of living."

Now, I happen to disagree with this, because first of all, I never ever EVER carry a balance, and second, I am seriously skeptical about the claims that simply paying with plastic causes me to spend more. In my experience, I don't usually decide how I'm going to pay for my purchases until after I get to the checkout, so I don't see how using the card could be influencing the amount I spend before I've even decided to do it. (It's all very well to point to studies that show "most people" spend more when they use credit cards, but what really matters to me is whether I do, personally.)

But I probably wouldn't have bothered to argue the point with him if it hadn't been for item #15 on the same list: "Own a Home." I pointed out in a comment that there was a bit of a contradiction between those two pieces of advice, because unless you can manage to save up (or otherwise come by) several hundred thousand dollars in a lump sum, you aren't going to be able to get a house without a mortgage, and you aren't going to be able to get a mortgage without a credit rating, and you aren't going to be able to get a credit rating by refusing to use credit for anything ever. And while I was at it, I also ventured to remark that I didn't quite get why, if he thinks you automatically pay more with plastic, he considered debit cards acceptable.

The good "doctor" responded, "Actually, I don't have a huge problem with taking out a SENSIBLE mortgage," and went on to argue that (a) it's perfectly possible to do this without a credit rating, and (b) people do so spend more with credit cards than they do with debit cards. My rebuttal to that comment was so long that I had to break it up into three separate comments to get around the character limit the forum imposes, and somewhere in the middle of the third comment I started thinking, "Maybe I really need to do a whole post on this."

So here that post is: a comprehensive examination of all the arguments people make both for and against credit card use. I've done my best to include the other side's rebuttals to those arguments when possible, and also the rebuttals to those rebuttals, if they exist. I doubt Dr. Cabler will ever read it, but at least I've said my piece.

Here's the full article: Advantages & Disadvantages of Credit Cards – Do They Help or Hurt You?

Savings Challenge, Week 24: Pay Your Credit Card Bill Every Week

I'm still working my way through a small backlog of Bankrate Savings Challenges. Last week's is "Pay your credit card bill every week," and if you don't particularly see the point of that, well, I didn't either. Reporter Jeanine Skowronski, however, swears it has several benefits:

1. It "helps me stay on budget" and "ensure I don't rack up an uncontrollable balance." The idea is that, when she pays her bill weekly, she sees how much money she's already spent and how much she has left in the bank. That way she can avoid making any purchase that she doesn't have the money to cover. Which is a good thing, I guess, if you're in the habit of buying things without thinking about whether you can really afford them. But I don't spend carelessly, so I'm not in any danger of going overboard with frivolous purchases...and for necessary but unexpected expenses, I have a healthy cash cushion in the bank. So this particular benefit is of no benefit to me.
2. It lets her keep an eye on her statements and spot inaccurate or fraudulent charges. She points, for example, to a $40 purchase she made which was double-billed, which would have cost her $40 if she hadn't noticed the error. Which is, again, a good thing...but is she implying that she wouldn't have spotted this error if she had waited until the end of the month to pay her bill? Because I always make a point of going over my bills before I pay them each month (which, as I've noted, is the reason I don't use automatic bill payment), and that works fine for me. 
3. It helps her credit rating. This is the first benefit she's mentioned that actually applies to me as well. As she explains it, your credit rating is based on your "most recent statement balance" for each debt you owe—so if you happen to rack up a particularly high bill one month, even if you pay it off immediately, as far as the record is concerned, you're still carrying around a couple thousand dollars in debt. So it's true that paying off my credit card weekly instead of monthly might nudge my credit rating up a bit. But that's not a particularly strong argument with me, for two reasons: first, if your credit score is already in the "excellent" range (750 and up), then a few extra points don't really make any practical difference; and second, the only thing you really need a good credit score for is to borrow more money, which isn't something we expect to have any need to do in the foreseeable future. Skowronski claims that excellent credit can also help you qualify for better rates on cellphone or insurance plans, but I've never been offered any such deal.
4. Skowronski's final argument is that, if you carry a balance on your credit card bill, then you'll pay it off faster if you pay weekly, because interest won't accumulate as fast. Once again, a valid point, but one that doesn't apply at all to me, or to Skowronski herself.

So the bottom line here appears to be that, if you're a person who has had any problems with credit in the past—problems that have left you with a balance to pay off, or a habit of careless spending that you're still trying to kick, or  a less-than-stellar credit rating that you want to rebuild—then paying your bill monthly, instead of weekly, is a relatively easy way to deal with these problems. But if you're already in fine shape, thank you, then all this tip will do for you is create more paperwork, because you'll have four monthly payments to enter in your checkbook instead of one.

The rewards credit card shuffle

Last week, I came across an article at Money Talks News with the somewhat cumbersome title, "No Rewards Credit Card in Your Wallet? You're Likely Missing Out Big Time." I clicked on it mostly out of idle curiosity, not expecting to learn anything from it that I didn't already know. After all, I currently have two rewards credit cards in my wallet—one Citi Dividends and one Chase Freedom—both of which pay me 1 percent cash back on all my purchases, plus an additional 4 percent on specific categories that change quarterly. To make sure I get the most out of my rewards, I jot down these categories on a crib sheet in my wallet, so I can always use the card that pays the highest bonus at any given location. And, of course, I always pay off the balance on all my cards in full, so the 5 percent cash back is really 5 percent and not just a discount on an interest rate of 15 percent. So all in all, I thought I was doing a pretty good job gaming the system.

However, my confidence started to falter when I got to this sentence: "The real trick here is to find a rewards credit card that pays a bonus in categories in which you spend the most money each month." This, I had to admit, was a weak point of both my rewards cards. Because the categories that pay bonus points keep changing, we don't consistently earn the best rewards on our biggest-ticket categories. Some quarters, to be sure, one of the cards will pay a bonus on gas or groceries (two categories in which we're guaranteed to spend at least some money every month). At other times, one will pay a bonus in areas where we spend money at least fairly often, such as restaurants or home improvement stores. But there are also times when the bonus categories are all but useless to us. Right now, for instance, my Citi card is paying bonus rewards on hotels, car rentals, movies, and theme parks—four categories in which we haven't spent a single penny in years.

I did some rough calculations and found that over the past three months, we've earned 1.2 and 1.4 percent respectively with our Citi and Chase cards. That was a bit of a disappointment, because I knew for a fact that we could do better than that. I've recently seen several ads on Hulu featuring Samuel L. Jackson touting the Capital One Quicksilver Cash Rewards card, which pays 1.5 percent cash back on everything—no limitations, no exceptions. However, the Money Talks News article mentioned another card that might be still better for us: the Blue Cash Everyday Card from American Express, which pays 3 percent at supermarkets, 2 percent at gas stations, and 1 percent on everything else. Both of these cards are free of annual fees, which is a bottom-line requirement for me, and their interest rates are comparable to those on our current cards—though that doesn't really matter, since we never carry a balance anyway.

It looked like either of these two cards would be better than the two we have now. To really maximize our benefits, of course, the best thing to do would be to get both of them, and then use the Blue Cash Everyday card exclusively for supermarkets and gas stations (which would be easy to remember without the need for a crib sheet) and the Capital One Quicksilver card for everything else. However, I was reluctant to apply for both cards at once, since having too many inquiries on your credit report is likely to ding your credit score, which could reduce our chances of actually getting either card. (Also, both cards offer a bonus of $100 if you spend a certain amount in the first three months, which is easier to do if you can concentrate your spending on one card at a time.) So which of the two would be more useful to get into my wallet first?

To find the answer, I figured, I'd need to go back and look at our credit card statements for the past 12 months. For each card, I could add up the amounts that we spent each month on groceries, gas, and other stuff and get a total for each category for the year. Then I'd multiply each category by its appropriate percentage—3, 2, and 1 respectively for the Blue card, 1.5 across the board for the Quicksilver card—and see which gave me a higher total. I assumed the easiest way to do this would be to set up a little spreadsheet on Excel. However, as I was perusing the details of the two credit card offers at Credit Karma, I noticed that the site was providing an "estimated savings" figure for each card, with a note saying that I could get a more accurate estimate by logging into my account. Credit Karma, for those not familiar with the site, is a website that will, with your permission, pull up your credit report and show you your credit score for free (though, as this article points out, the score they show you isn't identical to the FICO score used by most lenders). The way they can afford to do this for free is that once they know your financial situation, they can start trying to sell you financial products you might have a need for, like insurance or bank accounts. Of course, you can just ignore these offers, and most of the time, I do. However, in this case, they were offering me information about a product I actually did have a use for: a better rewards card. Why not let them do the math and tell me which card would be the best deal for me?

So I logged into my account, and bam, up popped a total of my monthly credit card spending, neatly sorted into categories. Based on these numbers, I could search their database of credit card offers to see which one had the best payoff for me. I had to do a little fiddling with the search feature to find the most useful offers, weeding out the cards with travel rewards (which are about as useful for me as a set of matched luggage for a tortoise) and the ones that charge an annual fee. Once I'd narrowed down the list, I could sort it based on criteria such as average user rating, average percentage cash back, or total payout over one, two, or three years. The Capital One Quicksilver card turned out to be the best deal over the long term: Credit Karma estimated it would pay me $308 a year, plus a one-time bonus of $100 if I spent $500 on it in the first three months, which would add up to $1,025 over three years. The Blue Cash Everyday card came in second, at $837 over three years, and my existing Chase Freedom card was a close third at $828.

These findings should have been conclusive, but something about them gave me pause. I noticed that the listing for the Chase card showed its "average rewards rate" as only 1.2 percent, and I had already determined that over the past three months it had been closer to 1.4 percent. Looking more carefully at the spending breakdown the site was using, it appeared that it was based solely on my most recent bill for each card, rather than on an average over the entire year. So it was likely that their estimates of the rewards we'd earn with each card were skewed by what we'd happened to buy in the last month.

To double-check their figures I went ahead and punched in the numbers into Excel just as I'd originally planned. Once I did this, I discovered that the savings estimates were actually significantly lower than the ones I'd gotten from Credit Karma. The Quicksilver card was still ahead, but it would only have earned us about $175 over the past year—and that's if we'd shelved all our other cards and made all our purchases on the Quicksilver card exclusively. Even with the $100 bonus, our three-year savings would be only $624. The Blue Cash card, under the same terms, would give us $157 a year, or $571 in three years with the bonus. Our current Citi Dividends and Chase Freedom cards, by contrast, are earning us a total of $144 a year. So switching the bulk of our purchases to a new card could put a little more money in our pockets each year, but not that much: only $13 for Blue or $31 for Quicksilver. It's still probably worth applying for the Quicksilver card, but it's certainly not going to be a game-changer.

It's a little disappointing that we won't be able to get that big a reward from a new rewards card, but I guess it's not that surprising. After all, the rewards you earn are based on what you spend, so the only way to rack up really huge bonuses is to spend a whole lot of money—which doesn't leave you ahead in the long run. It's the same sort of problem I've noted before with articles about saving money or cutting your energy use: you can't eliminate very much waste if your life wasn't that wasteful to start with. So I guess I should find it comforting that we can't earn really massive rewards with a credit card; it just goes to show that our credit card bills themselves are nice and lean.

Two more pointless challenges

Last month, you may recall, I posted about the "Food Stamp Challenge," which is to feed yourself for one week on a strict $30-per-person budget. I concluded that for us, taking this challenge would be pointless—even counterproductive—because the constraints of the challenge itself would force us to spend more for that one week than we normally spend, on average, for seven days' worth of food. Then last week, the mail brought me not one but two more examples of money-saving challenges that struck me as singularly unhelpful. The first one, "The February Freeze," appeared in the latest issue of the Dollar Stretcher newsletter. The goal of this challenge, according to the article, is to have "no discretionary spending at all" for the month of February. You still pay your rent and any bills that come due during the month, and you're allowed to refill your gas tank and buy essential perishable groceries like milk and fresh fruit, but aside from that, you don't buy anything. You stock your pantry ahead of time and eat only what you have on hand; if "a pipe clogs or your water heater goes out," you're supposed to fix it yourself, or get a friend to do it, or find a way to pay for it through barter. (And if none of these strategies works, well, I guess you're just supposed to manage without running water until March.)

The second challenge is along the same lines, but not quite as strict. It's a plan developed by Michelle Singletary, a financial columnist for the Washington Post, called the "21-Day Financial Fast." During this 3-week period, you are allowed to spend money—but only in cash, and only on "true necessities like food and medicine." Singletary says the point of this challenge is to break "spending habits that have become automatic," like buying a latte every morning or indulging in "retail therapy." But even if you don't have any careless spending habits, Singletary insists that the fast is still for you. "Even the most frugally and financially responsible person," she says, "can find something more they can do"—like giving more to charity, or increasing retirement savings, or helping friends in need. (Apparently it doesn't matter if you already give to charity, help friends, and fund your IRA to the max; as far as she's concerned, you, yes, you, NEED to engage in this fast, and that's all there is to it.)

Here's what particularly annoys me about both of these challenges: like the Food Stamp Challenge, they impose a set of arbitrary rules that could actually end up costing you money in the long run. Under the rules of the February Freeze, for instance, if a sale flier arrived at your door during the month of February advertising an unbeatable price on several staple foods at your local grocery store, you wouldn't be allowed to go stock up on these items, because the rules say you have to eat only from your pantry. So instead of buying potatoes for 20 cents a pound and cheese for $2 a pound during February, you'd have to wait until March to replenish your supplies at the regular price, which could be two to three times as high. During the 21-Day Financial Fast, you would still be allowed to stock up at the grocery store, since groceries count as a "true necessity"—but you wouldn't be allowed to take advantage of a sale on anything you didn't have an immediate need for, no matter how long you'd been looking for it or how good the price was. Say you've been shopping around some time for a slow cooker, which costs about $35 new. Then you come across the exact model you want at a yard sale for $5. It doesn't matter that this is the best deal you're ever likely to find; it doesn't matter that the amount of money it could save you on food would more than make up for the purchase price. The point is, you can live without it, and therefore you can't buy it. End of story.

Another thing that bugs me about the 21-Day Financial Fast is the insistence that even if you're buying necessities, you mustn't pay for them with plastic. The rationale for this is that credit cards make it "too easy" to acquire things you don't really need. Singletary cites a study done at Britain's Warwick University that found "customers using credit cards spend more than those paying with cash or checks in purchasing situations that are otherwise identical." I couldn't find information about this study, but I do know from personal experience that I tend to put larger purchases on credit cards and pay cash for smaller ones—but the use of the credit card is the effect of the size of the purchase, not the cause. That is, I don't go into the store thinking, "Okay, I'm putting this on plastic, so I can buy whatever I want"; instead I buy whatever's on my list, take it up to the checkout, and only after I see the total do I decide whether to whip out a twenty or my Visa card. And to me, that's the problem with most studies that profess to prove that credit cards increase spending (like this one from the Journal of Applied Psychology); it's never really obvious to me whether the credit card use is really producing the higher spending or is caused by it. (And at least one controlled experiment, done at Carnegie-Mellon in 2009, found that deciding ahead of time to pay with credit rather than cash made no appreciable difference in how much people spent on their lunch.) Moreover, in my case, if I can get 1 percent cash back by using my credit card, then every time I pay for a purchase with cash, I'm actually losing money. So that's yet another way in which this Financial Fast, rather than saving me money, would mean less money in my wallet when the three weeks were up.

Now, some of you may be thinking, "The lady doth protest too much, methinks." It may sound like I'm just rationalizing, insisting that these challenges aren't helpful because I'm not willing to confront my own irresponsible spending habits. Well, it's possible, I suppose, but I really don't think so. I know myself pretty well, and I know that I'm very, very careful with money. In fact, over the past year or so, I've begun to think that my biggest financial weakness may lie in the other direction: I'm not willing enough to spend money, even on things that I can easily afford. Sometimes I have to remind myself that the whole point of saving money is so that you have it to spend on the things you really want, the things that will really make you happy. And while having my mortgage paid off early will certainly make me happy, that's a goal I can easily meet and still treat myself to a new handbag. (Especially if it's a handbag with a lifetime guarantee—so if all goes well, it'll be the last one I ever have to buy.)

I'm not trying to suggest that the February Freeze and the Financial Fast can't be helpful for anyone. I can definitely see how, for people who really do have mindless spending habits that they are trying to break, they could both be useful exercises. And for those who have a lot of fat to trim in their budgets, the unnecessary expenses they'd avoid over the course of three or four weeks would certainly offset the short-term costs of the bargains they'd miss out on. The only thing that really bothers me about them—especially about the Financial Fast—is the insistence that they're important for everyone, no matter what their actual habits or financial situation may be. I don't deny that these challenges could be helpful for a lot of people, but with respect, I have to insist that I know better than Michelle Singletary does what will or won't be helpful for me.