The American Credit Debt Dream

My mother always warned by about the dangers of credit cards…high interest rates, spending money you don’t really have with out realizing it, racking up $35 dollar late and over charge fees for a $2 pack of gum, and destroying your credit score before it had the chance to mature.  

But she never warned me about reward points.  

Gone are the days of credit cards with low interest rates, no annual fees and forgiven late payments.  Now is the time for reward credit cards with the simple promise of:  “Spend money, earn points and redeem for cash and cool stuff.”  Reward points are the new quasi face-lift for credit cards to keep consumers charging and spending in hard economic times.

Because, who doesn’t like free stuff?  Especially free stuff just for spending money?

So it was no surprise that recently I, like many consumers, was also roped into signing up for one of these reward credit cards gimmicks.  A reward credit card from Chase named the Chase Freedom card. 

Ah! Freedom, the American dream!

A card complete with the promise to earn one reward point for every $1 spent, an extra ten rewards point for every purchase and the chance to earn more reward points on monthly designated expenses such as gas or plane tickets.

So with the urging of my friendly Chase banker, I started charging away on my new Chase Freedom card.  In two weeks I made six purchases totaling $263, and according to my calculations I should have earned a whopping 323 points.

Wow! What am I going to do with all these points?

Reality check: as I eagerly signed in online to peruse my potential loot I was astounded to learn that my 323 points would earn me…nothing!

In fact my banked reward points totaled zero!  What?  Maybe you only earn points as you pay your bill?  Not that the 323 points I thought I deserved would help me out.

A Kitchen Aid mixer, worth $286 retail, would cost 36,000 points!  A $50 cash-back reward needs 5,000 points and the paperback novel Water for Elephants, retail $7 on Amazon.com, costs 1,400 points!

Need more points?  Don’t worry there is a fix for that!

Extra points can be earned by shopping online at designated stores.  Earn three points for every dollar spent online at Home Depot and 16 points for every dollar spent at Pro Flowers.  If the consumer doesn’t have a desire to shop online at the featured stores then 1,000 points can be easily purchased for $25.

The Federal Reserve Bank reported that 60 percent of US consumers have a rewards credit card, and that the consumer reward points offered is the second most important reason for having a particular credit card.

According to the Consumer Payment Choice’s 2010 survey, over 609.8 million credit cards are held by consumers in the United States, that’s an average of 3.5 credit cards per consumer, and each household has an average of over $15,000 in credit card debt.

College students are no exception to the American Credit Debt Dream, Sallie Mae estimates that college undergraduates have an average $3,173 in credit card debt, and by the time they graduate the college seniors will have each racked up nearly $20,000 in credit card debt.

So where does this leave me with my 3.5 credit cards and empty reward points?  Running for the scissors!  Goodbye Chase Freedom Card!

The Frugal Traveler

Seth Kugel has, hands down, the best job in journalism. 

Kugel is a travel writer for The New York Times and for the last 13 weeks has blogged about his travels adventures from São Paulo, Brazil to New York City in his new blog the Frugal Traveler.

As the Fugal Traveler, Kugel’s challenge is to traverse across South and Central America on less than $500 a week, or $71 per day, for food, transportation, entertainment, and travel expenses. The New York Times describes the travel blog as “first-class living at steerage prices.”

Kugel traveled through Brazil, Bolivia, Nicaragua, Peru, Colombia, Barbados, Guatemala, and Mexico before crossing the border back into the Southern United States.  His main modes of transportation are public buses, taxis, trains, rental cars, boats, and occasionally planes.

I was initially drawn to Kugel’s blog because I love to travel and he recently traveled through Barbados and Colombia, two countries that I visited last year.  His blog recollections and pictures brought back memories of the good times and adventures that I experienced on my travels.

The Frugal Traveler is updated weekly with long detailed reports of his experiences in each country since his departure from Brazil in June.  Kugel also adds a small 100 word blog nearly each week about an interesting fact about the area he is visiting, such as Bermuda shorts, interesting indigenous foods, local signs, and native customs.

My favorite blog of Kugel’s travels was, Frugal Summer: Highs and Lows, a final blog about everything he loved and didn’t love so much about his travels during the 13 weeks.  The pictures in this blog were amazing with vibrant colors and beautiful scenery.  The stories were humorous recounting his worst border crossing experience, his favorite snack and the best place to spend eternity.

What I did not like about the Frugal Traveler blog was Kugel’s video blog entries.  Kugle is quite monotone throughout the narration, and his humor does not come through the boring recounts.  The videos would be much better if he conducted more interviews with locals and fellow travelers while showing footage of the scenery.

Kugel is a veteran journalist to The New York Times, initially starting with the newspaper in 1999 as a free lance writer.  Kugel was hired full time to The New York Times in 2001 and covered the Bronx and North Manhattan beat as well as the continuing to freelance for the Metro, Travel, Styles and Escapes sections.

Originally from Newton, Mass., Kugel graduated from Yale University with a B.A. in Political Science.  Kugel then went on to teach third-grade bilingual education in the Bronx with Teach for America, a program to reduce education inequality among public education in low-income communities.  Kugel is fluent in Spanish, Portuguese and French.

After his extensive time working in the Bronx, Kugel co-authored a book in 2006: Nueva York: The Complete Guide to Latino Life in the Five Boroughs.  From 2006 to 2008 The New York Times offered Kugel a weekly column in the travel section writing Weekend in New York.  Kugel moved to Brazil in 2008 and wrote travel columns and reviews on hotels, restaurants and shopping in Brazil while working as a correspondent in Brazil for The Global Post.

Throughout Kugel’s journalist career he has freelanced for O: the Oprah Magazine, Everyday with Rachel Ray, ARTnews, Playboy, Conde Nast Traveler and Food & Wine.

If It Ain’t Broke…Smash It!

The immense faux-cherry-wood executive desk is no match for the John Deere All Terrain forklift, and the wood-veneer splinters effortlessly under the forklift tine’s descending 10,000 lbs ft lbs of hydraulic force.

The debris of the once-gently used office furniture litters the driveway as yet another desk and chair set are brought to the chopping block.  Within 30 minutes the full set of office furnishings are reduced to toothpicks.

As an Airman in the Air Force I witnessed the annual office massacre take place every September, the end of the federal fiscal year, as a military budget balancing act.

Our troops were sent to fight a war with outdated Kevlar flak vests and chemical suits, transported with inadequately armored vehicles and loaded onto 50 year old cargo planes bound for the hot-spots of Iraq and Afghanistan.

But our offices sure looked nice!

The military, like many federal and state run systems, operate on a “use or lose” budget;   meaning that if a budget is not completely exhausted by the end of the fiscal year then the remainder is lost and will be deducted from the next years budget.

With that “use or lose” mentality, there is always a frantic scramble for each squadron to spend $30,000 to $60,000 of “left-over” money in the last two weeks of the fiscal year.  As a result, whether it is needed or not, new furniture is bought and the old is smashed to justify the purchase.

Let me put the amount of money into perspective for you:  If each squadron is a $30,000 under budget, there are on average 5 squadrons to a group, 4 groups in a wing, and 2 wings to a base.  That is a rough average of $1.2 million dollars being thrown away annually on each military base.

Are you mad yet?  You should be!

As yet another year of financial budget crisis emerges for many state and federal governments, some divisions of government are turning to privatizing sections as a way to cut costs.

According to Wikipedia:

Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector (the state or government) to the private sector (businesses that operate for a private profit) or to private non-profit organizations.

The trend to privatize government is not new and has in fact been slowly evolving since the late 1980s and early 90s with the privatizing of social services and welfare.  Currently several aspects of the Department of Defense are privatized with civil servants and private security services such as Xe.  Other failing government services such as the library system and prison management are turning towards privatization to continue business and save money.

The privatization of some aspects of government, such as the library, Caltrans, and Waste Management, can reform services and lowers costs by operating within the free market competition of a capitalist society.  This competitive market increases output, increases efficiency while lowering costs and offers the ability to reward performance and punish those who don’t perform.

Privatization reduces bureaucratic motivation by holding the private business accountable for profits as well as losses.  The chances of corruption are lower in a competitive market than with a politically encouraged government monopoly.

While not all facets of government neither can nor should privatize, having a mix of privatized services while reforming federal and state government to operate on a supply and demand budget can greatly reduce the budget deficit while saving social services.

There is no reason why the government and the American tax payers should be, literally, throwing away billions of dollars in unnecessary “use or lose” spending.