In addition to being frugal-minded, I’m also an unabashed foodie. When I was lucky enough to have three friends nearby who also liked to cook, I enjoyed a sort of cross between a potluck and a dinner party that we called a ‘supper club.’ It involves a lot less ‘luck’ and allows for more coordinated and ambitious meals, but maintains a similar thriftiness and community spirit. Here’s how it worked:

The four of us agreed to meet on the same night each week for dinner. But unlike a dinner party, where the host does all the cooking solo and in advance, for the supper club everyone arrives prior to the start of preparation, and the cooking itself is a social event.

There are two rotating positions: ‘chef’ and ‘sous chef’. The chef hosts the dinner, plans the menu (often around a particular cuisine), and purchases all ingredients in advance. The sous chef is on call in the kitchen for whatever needs doing at the chef’s instruction — ‘chop these’ or ‘stir that’.

So two people chat over food prep in the kitchen, while the other two relax with a drink in the living room — or converse with the chef as a group if space and attention allows. (Some people can carry on unrelated conversations while cooking; others can’t. Me, it depends upon how many things I have going at once.) After dinner, the chef and sous chef relax and talk while the others clear up the dishes.

The supper club works best, I think, with four, five, or six people. More than six and it starts to get unwieldy; fewer than four and the ratio of exertion to relaxation climbs too high. One tip: if couples are involved, be sure to mix it up — don’t let your spouse sous-chef for you in your own kitchen.

And of course this is really an idea for the foodie set — if you’re wanting to include people who don’t know how to make toast, then a potluck provides more diverse options. But if you have a few friends who love to go out for expensive restaurant meals, this might be a great alternative: you can do ‘Thai night’ or ‘steak night’ or whatever, and have a restaurant-quality meal at home. You never have to cook alone — you have a guaranteed helper and as much conversation as you want. And someone else always cleans up!

Now that I’ve been reminded of this, I’m thinking about whether I know people now who would enjoy this. Because it was great, and I’d love to start one up again. Hmmm …

(Photo by Zeetz Jones.)

It’s always pained my frugal soul that a certain amount of every storebought loaf is wasted; the younger kidlet balks at crusts, and nobody likes the heels, me included. I tried saving them for breadcrumbs but … I just don’t usually cook things that require breadcrumbs.

Until I got the brilliant idea a couple months ago to try them in bread pudding. Now, I can’t be the first person to have thought of this, but it was quite a leap for me, as I only ate bread pudding for the first time a year or two ago, and had never tried cooking it. (For those of you who, like me, are new to the idea: it’s not actually pudding, but more of a custard. The bread gets very soaked and … un-breadlike in the process.)

I wanted to share my bread pudding technique. I can’t call it a recipe; I tend not to follow recipes unless I’m baking (and sometimes not even then), and I rely more on looks and taste than measurements. Bread pudding is perfect for this, as it’s one of the most forgiving dishes ever.

Bread pudding recipes call for white bread, preferably French, which we don’t eat. But whole wheat and multigrain crusts and heels work quite well. (Not rye though — flavor’s all wrong.) We go through bread quickly enough that I can usually keep the crusts in the fridge, but if you’re worried about mold just keep a container in the freezer and thaw when you’re ready to make the bread pudding.

Never one to pass up an opportunity to get extra vegetables into my family, I went for a pumpkin variation. (I always have canned pumpkin around — I pick up extra when it goes on sale around Thanksgiving and Christmas.)

Pumpkin Bread Pudding Ingredients:

• bread crusts and heels, torn into small-bite pieces
• dried cranberries or raisins (optional)
• butter
• canned pumpkin
• eggs
• cream, half-and-half, or milk
• sugar, brown sugar, or Splenda
• spices: any of vanilla, cinnamon, nutmeg, ginger, and/or allspice

I’m not including quantities here because you’ve got a huge amount of leeway in the proportions. If you have fewer eggs, or less milk, or only a partial can of pumpkin, no worries! It’s almost impossible to mess this up.

This latest time I had about ten cups of bread crust bits, which completely filled a 9″x13″ baking dish, so all my listed amounts are relative to that. You could go with as few as four cups of bread or maybe even three, in a smaller dish.

With the ten cups of bread I used an entire 29-ounce can of pumpkin (more vitamin A!), but a 15-ounce can would have worked fine too, or anything in-between. I used four eggs, but you’re safe with anything from two to five. I used two cups of half-and-half, then (because I had so much pumpkin) thinned the mixture with a little extra skim milk. If you’re worried about fat content, use milk alone, or all cream if you want it really rich. Again, the actual amount is highly flexible — ultimately, all that matters is that you can pour the resulting mixture … more like a batter than a dough.

We try to keep a low-glycemic diet around here, so I used pourable Splenda. White or brown sugar also works, of course. One cup made for a lightly sweet pudding, but you can adjust to taste. I also prefer the slight tartness of cranberries over raisins. Generously add spice — whatever from the list above you have on hand, to taste. This last time I used some of everything except the allspice, including fresh minced ginger (because I had roots but no powder).

Preparation couldn’t be easier:

1. Melt some butter in a shallow baking dish.
2. Put the torn bread bits in, tossing them around a bit.
3. If you’re adding dried fruit, sprinkle that on top of the bread.
4. Mix everything else in a separate bowl and pour it evenly over the top.
5. Bake at 350° until the custard is set — probably between 20 and 40 minutes.

I like it warm with just a touch of maple syrup drizzled over the top. I guarantee even the pickiest kidlet will eat their crusts when served like this!

(Photo by minjungkim.)

Consumer Reports

My first-ever magazine subscription, when I was 19 years old, was to Consumer Reports. Other ones have come and gone, but I’ve been a loyal nonstop CR subscriber for twenty years now, and I read every issue cover-to-cover. (The complete lack of advertising makes this a remarkably pleasant experience). I also pay extra for full access to their web site, because the search function is darn handy, and keeps me from having to store and sort through years of back issues.

A lot of what they report on is not of immediate use to me, of course — for example, we buy one car every decade or so. But every time we are ready to make a major purchase, I check CR. About 80% of the time they have a ratings list including feature and price data, plus a detailed explanation of how to assess quality of models not listed. In the past four years I’ve used CR to choose an oven, two televisions, a washer and dryer, a computer printer, a digital camera, and a gas grill — all of which have performed beautifully. That’s not even counting the small stuff, like comparisons of laundry detergent effectiveness, or — in the most recent issue — condoms! Plus they have frequent articles alerting readers to issues like credit card traps and health insurance pitfalls.

Cost: $42 per year ($23 print, $19 web).
Savings: several hundred dollars per year.

(If you want to be extra-frugal, get the web-only CR for $26 per year. I happen to enjoy the print magazine enough to warrant the extra $16, but the important information is all available online.)

Consumers’ Checkbook

A little over a year ago I added Consumers’ Checkbook to my arsenal. They’re sort of like a regional, service-focused version of Consumer Reports, offering both ratings and in-depth reports on various services. They’re only available in seven metro areas, but fortunately for us, one is Puget Sound.

So far this year I’ve used their ratings to select a veterinarian, a dermatologist, and a car repair shop. Checkbook doesn’t have a full report on doctors, so the dermatologist didn’t come with a price comparison or savings. But their feature on ‘doctors rated highly by other doctors’ did help me get someone good. I don’t know anyone locally who visits a dermatologist, so without Checkbook it would have been a crap shoot.

The vet and auto repair ratings, however, have arguably saved us hundreds of dollars this year alone.

Veterinarian:

I know plenty of people with pets, so finding a good vet has never been a problem. What’s harder is finding one that’s both good and cheap, relatively speaking. Here Checkbook’s price comparison between veterinarians was stunningly useful. It would have taken me many hours to do that research on my own. And look at the range!

There are big vet-to-vet price differences. For example, for spaying a 25-pound, seven-month-old dog, charges we found at local vets ranged from $90 to $532. Many of the lowest priced vets rated very high on our customer survey. It is possible to save money and also get top-quality care for your pet.

The vet I selected with Checkbook’s info turned out to be not just great but also very reasonable in cost. When our cat developed alarming symptoms earlier this year, it was worth a lot to know that I wasn’t going to be hemorrhaging money in tests and treatments.

Auto Repair:

Over the last couple of weeks, our trusty little 1999 Honda Civic has been exhibiting some alarming behaviors, such as a sudden loss of electrical function while going 60 mph on the interstate.

Car repairs scare me, because I know very little about automobiles, so it’s very easy to take me for a ride, so to speak. Fortunately, we have a car mechanic in the family — too far away to fix our problem, but at least he could make a long-distance guess at the cause and give me a rough idea of a reasonable charge for repairs.

His assessment: either the ignition switch (~$125 retail part) or the distributor ($450-$500 retail part). Either one would take, he guessed, about one to one-and-a-half hours of labor. (His shop charges $80/hour for labor, for comparison.)

Again, Checkbook reports wild variation in local costs:

There are dramatic price differences. For example, to replace the water pump and timing belt on a 1999 Ford Contour, we found prices ranging from $393 to $950. Hourly labor rates range from $60 to $140. There are many top-quality, low-priced shops. Indeed, we found no relationship between the prices shops charge and the quality of their work.

(Are you seeing a pattern here?)

Checkbook listed ten repair shops within five miles that earned their top recommendation for both price and quality. (Hourly labor charges in our immediate area ranged from $73 to $110.) Jak picked one on a direct bus route that had a $75 rate and customer comments extolling their ‘honesty and service’.

As Jak was the one to take the car in, I didn’t interact with them directly, but the results were impressive. The diagnostic mechanic couldn’t quickly determine whether it was the ignition switch or a distributor problem, but rather than suggest we replace both — which would mean more money for him, and the tack many shops would take — he persevered.

Ultimately he was able to confirm the fault was in the ignition switch, which he replaced. He charged us for one hour labor and — based on the information I got from Bill — something that must have been very close to his own cost on the part. Total charge: $120. It could easily have been double that at another shop for the very same repair; a lazy or dishonest mechanic might have tried the distributor and charged us $600 or more.

Cost: $14 per year (print and web).
Savings: several hundred dollars per year.

(Note that Checkbook subscriptions are for 2-year periods, and cost varies slightly among locations.)

One reason is that some of my recently personal-finance writing has gone to Get Rich Slowly instead. In addition to the aforementioned discount grocery store adventure, I did a post on Discovering — and challenging — your financial values, which might just be my personal favorite for the year. A third post, this one about furniture, will be up on GRS soon.

But the primary reason I’m spending less time writing here (or anywhere) is that since mid-August I’ve been working hard on a new project — one that I hope will ultimately be of interest to Pocketmint readers. I’m not ready to announce a lot of details yet, but I will say that it’s a web-based application (like Gmail, or Facebook) which will help people save money on a regular basis.

We’re building a prototype now, and in another month or two I expect to be ready to enter an alpha-testing phase. If you’ve never been involved in software development before, alpha testing is where a small number of people — in our case perhaps around a dozen — use the app and tell us what they like and don’t like about it. We attempt to change the things people dislike or find confusing, and let the alpha testers try it again. After a few rounds of that — maybe another couple of months — we move into the beta phase, where we open the app to the public.

Alpha testers are a huge help to software designers and developers. In return they get a few unique perks: they get to see the app before anyone else, and to have a major voice in what the finished product is like. In the case of this specific project, alphas will also get a permanent free account to the software. So down the road, when we’ve added a bunch of cool extra features that everyone else has to pay for (and believe me, there are some very cool things on our drawing board), alphas get a free pass to all of it. Think of it like trying out a very early version of Flickr or Evernote and getting a permanent Pro/Premium account.

If this is something you’d like to try, and you live in the greater Seattle metro area — roughly Everett to Tacoma — email me with ‘alpha tester’ as the subject. I’ll write back with a few questions and if it all works out, add you to our alpha team.

Apparently I have a block on writing formal ‘book reviews’. I have no trouble discussing books, verbally and informally, but the moment I start trying to write about them I seize up over doing it properly.

So this is not a book review, it’s a brief casual monologue about a book I thought was worthwhile. Right? Okay then. (Er, maybe not so brief. Oops.)

The general premise of Cheap is neatly encapsulated in the title: the ‘discount culture’ that pervades America today has a number of costs, borne by both the naive consumer (in the form of shoddy goods and false bargains) and the world at large (in the form of environmental destruction and human rights violations).

Cheap is not a polemic; rather it is a measured, deeply researched examination of a cultural phenomenon — one I suspect most Americans today take for granted.

The first quarter or so of the book is devoted primarily to tracing the roots of the ‘discount store’ and related phenomena, all the way back to the first example of mass production two hundred years ago. (No, not cars — guns.)

If I have one criticism, it’s that I felt that the biographical details of discount-store pioneers occasionally dipped into tedium. Nevertheless, the broader historical perspective was illuminating. Have you ever imagined shopping in a store with no price tags? Yeah, neither have I. But before John Wanamaker came along, that’s just how things were done. Here’s another, more recent example of cultural shift:

President George W. Bush’s stirring call to spend after the fall of the Twin Towers in New York City on 9/11 seemed surreal to those Americans who recalled President Carter’s 1979 “sweater speech,” in which he donned a cardigan and asked Americans to turn down their thermostats to conserve energy for the sake of national prosperity and security.

(This sentence alone sent me scurrying off to learn more about Jimmy Carter, a president I barely remember. The man put solar panels on the White House! In 1979! And then Ronald Reagan came along and took them down again. /facepalm)

Having covered the history of America’s adoption of the discount mindset, Shell turns to the source of that mindset — the psychology of price.

Sadly, even when we know we’re being tricked, the tricks still work: people respond differently to a $9.99 price tag than to a $10 one. We’ll pay more for a sale sweater with a ‘regular’ price of $249 than one with a ‘regular’ price of $89, even if we are absolutely certain that the $249 is inflated.

And sometimes we’re oblivious to the stratagem in play. I always assumed outlet malls were rurally situated because of lower real estate costs. But no! It’s a ploy: once you’ve driven an hour or two you’re invested in the trip and therefore will buy more to justify the time and effort you’ve already spent.

In many cases, we’ve been conditioned to think something is a bargain when it really is nothing of the sort. You think Wal-Mart has ‘always low prices’, right? Chalk one up to the marketing team if so: Wal-Mart has higher than average prices on a third of its merchandise. And on those items for which prices are lower? A third of them offer savings of two cents or less.

Meanwhile, the rise of discount stores has lowered American wages; where department store staff salaries and benefits once totaled 18% of sales, today’s discounters spend a mere 6 or 7% of sales on their staff.

Later chapters move beyond the cost to the individual consumer and into the realm of the cost to people in foreign nations (who are intrinsic to the supply chain) and the cost to the health of the planet.

IKEA had begun to lose its luster for me even before I read this book, but the chapter in which Shell tours IKEA headquarters in Sweden was enough to finish the job. Artfully interspersed with the marketing-approved statements from the CEO and various employees is solid research that debunks IKEA’s claims of environmentalism and spotlights the devil’s bargain we’ve made by embracing mass-produced cheap furniture over careful craftsmanship.

And then there’s the chapter on the dangers of cheap food. I gave up meat twenty years ago, so the description of what the pork industry calls “PSE” (for “pale soft exudative”) left me shuddering but secure in my moral stance. Unfortunately for me, however, most of the chapter is devoted to the environmental deterioration and human degradation resulting from the explosion of Asian shrimp farms. Shrimp is a significant component of my diet, in part precisely because it’s become so cheap. This presents a dilemma I have yet to resolve.

Shell is not advocating that we all spend profligately in service of craftsmanship and social or environmental responsibility. On the contrary, she admonishes Whole Foods for contributing to the false dichotomy of value vs. quality. “What is missing here,” she says, “is what we used to take for granted — the happy medium. Consumers are left to choose between discount retailers whose practices they find questionable and high-end stores whose prices they cannot afford.”

Who gets it right? According to Shell’s book: Wegmans, a small chain of grocery stores in the Northeastern U.S. I’ve never been to one, but I read the description hungrily. (If any Wegmans shoppers read this blog, I’d love to know what you think of it.)

The cost of change, in fact, may not be nearly as prohibitive as we think. A University of Massachusetts economist calculates that, for example, increasing the wages of Mexican apparel workers by 30% would raise the price of a shirt in the United States by just 1.2%. Would you pay an extra quarter on your $20 shirt to make that kind of difference in the life of a Mexican sweatshop workers? I would, if I could trust that my quarter was actually going to Mexican workers and not to some corporate CEO.

Cheap is hot off the presses with a publication date of July 2009 and statistics as recent as 2008. Shell talks frankly about the recession we’re experiencing right now, and shows some of the ways in which America’s fascination with ‘cheap’ has contributed to our current problems. Hard though it may be in a time of rising prices and falling wages, I believe it’s good to be mindful of hidden costs, and this book is a great way to start.

(Photos by Kenneth Hynek, Stef Noble, and marissaorton.)

Here’s one example: consumer Kevin Johnson had his credit line slashed by two-thirds despite a stellar credit score (764) and a flawless history of on-time payments. Why? Because “… other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express.”

Excuse me?

Analyzing his recent purchase history, Kevin came to suspect that Wal-Mart was the ‘establishment’ in question, but couldn’t get anyone at American Express to confirm, deny, or elaborate on their message.

A May article in the New York Times entitled “What Does Your Credit-Card Company Know About You?” shows just how absurd this has become (emphasis mine):

Most of the major credit-card companies have set up systems to comb through cardholders’ data for signs that someone is going to stop making payments. Are cardholders suddenly logging in at 1 in the morning? It might signal sleeplessness due to anxiety. Are they using their cards for groceries? It might mean they are trying to conserve their cash. Have they started using their cards for therapy sessions? Do they call the card company in the middle of the day, when they should be at work? What do they say when a customer-service representative asks how they’re feeling? Are their sighs long or short?

Information about exactly what businesses and purchases count against you is a closely guarded secret. The only specific data I have been able to find was in a single lawsuit filed by the Federal Trade Commission last year which cites one Visa card issuer for “an undisclosed ‘behavioral’ scoring model that penalized consumers for … cash advances and transactions with the following types of merchants”:

• Direct marketing merchants
• Marriage counselors
• Personal counselors
• Automobile tire retreading and repair shops
• Bars and night clubs
• Pool and billiard establishments
• Pawn shops
• Massage parlors

According to Marketplace, “splurging looks bad, and … scrimping looks bad”:

“Say Mr. Good Credit rewards himself with a rare trip to the spa? His card company might think he’s trying to relax because he’s stressed about money. And what if he decides to go bargain hunting? ‘Oh my gosh, maybe you’re about to lose your job. You’re starting to downscale to lower-cost stores.’”

Yes, even frugality can be considered a warning sign; one analysis found that “people who bought cheap, generic automotive oil were much more likely to miss a credit-card payment than someone who got the expensive, name-brand stuff.”*

What can you do? Not much. You can avoid or pay cash for suspected red-flag items like alcohol or therapy. But we are playing a game where the rules are not just secret but constantly shifting, and a behavior that’s innocuous today may be blacklisted tomorrow. “Many people don’t understand how almost every transaction they make today could trigger a readjustment in bank analytics,” says credit-card expert and consumer advocate Dr. Robert Manning.

At left: a six-minute segment on Good Morning America that aired this past January, profiling Kevin Johnson’s situation and the growing data-profiling problem.

Previously: credit cards part one and part two.

Next, in part four, I’ll cover the good news and the bad news about the recently passed CARD legislation. And finally, in part five: my personal response to the mess.

*(An aside: I buy a lot of generic groceries, and know that it only rarely makes a difference in quality, but I know very little about generic as applied to motor oil. I called my brother-in-law Bill, who owns and runs a car repair shop, to find out whether expensive name-brand oil is actually any better than cheap generic oil. His answer, in brief: it’s a gamble; 9 times out of 10 generic is the exact same oil, rebranded. That tenth time, though, you’re getting crap, and your car can suffer. Interestingly, in that brief conversation I learned enough for two whole posts on automobile frugality. Expect to see a lot more about cars on Pocketmint in the future as I tap this familial resource!)

(Photo by mjb84.)

“A visit to the Island of Misfit Foods” is today’s topic: how I set my food snobbery aside and learned to love Grocery Outlet. If you enjoy the post and would like to see more from me, let JD know in the GRS comments. (These articles are ‘audition’ pieces for a regular writing gig over there. There are six other very strong candidates however, so I’m trying not to hold my breath.)

For those of you coming from Get Rich Slowly, welcome! Feel free to poke around in the tags in the sidebar at right for other posts of interest here on Pocketmint, or subscribe to the RSS feed. I also post to Twitter and you’re welcome to follow me there, but it’s a personal account where I talk about everything, not just personal finance.

My fingers seem to be healing, so maybe the worst is over. I hope to return to ten-finger typing — and more Pocketmint posts — soon.

I’ll be back to Pocketmint as soon as I can … think me up some cooler weather, ’kay?

This makes record-keeping easy. At the nadir of our debt we had nine or ten cards between us, which makes for a lot of due dates to track every month. As you might expect, we missed several deadlines over the years.

Now I only have to monitor the balances of two accounts, and worry about one monthly due date. We pay the full balance on the Amex card every month, so never incur fees or interest charges.

I’m very happy with this system. Except for one thing: it’s trashed my credit score.

I confess that once I’d paid everything off I stopped even tracking how many lines of credit I had open. I used to know them by bank, so there would be the Providian card, the First USA card, the Citibank card, etc. But those darned banks keep eating other banks, and the names wouldn’t stay the same. We started out with one Chase account each; four years later we had six (or maybe seven?) different Chase cards, which I could no longer tell apart. J.P. Borgan Chase!

To make matters worse, I’ve never been very happy with Chase, after a couple of predatory ‘gotcha!’ stunts like moving our due date up by a week without warning. I had no intention of using any of those cards ever again, but I left them alone because I knew that closing lines of credit can drop your credit score.

Then in the spring of this year Jak and I began to receive notices that one card or another had been closed due to inactivity. At first it was a surprise; in nearly twenty years I’ve never before had a bank close an account because I wasn’t using it. Previously they’ve just tried to woo me back by sending more ‘convenience checks’ and offering temporary low interest rates. The Wall Street Journal explains this shift in strategy: “As credit-card delinquencies rise, closing inactive accounts helps companies reduce their exposure to risky credit holders. Issuers close credit lines … if the card holder is deemed unprofitable, which is essentially the case when the card goes unused.”

I hated the idea of juggling purchases across multiple cards again, and decided not to change my behavior in hopes of stopping any other closures. It was a partially emotional decision rather than a strictly logical one, but for me the potential score drop wasn’t worth the effort and increased risk of screwing up.

When I got the termination letter from Discover, however, I had a sharp pang of regret. That was the first credit card I got in college; when it closed my ‘credit history length’ dropped from 19 years to just 2. I don’t have clear before-and-after credit scores, but since history length accounts for roughly 15% of your score, I figure that had to hurt.

I called Discover to find out if the account could be reopened. No dice; I was offered a new account, but of course that would do nothing for my ‘length of credit history’ number. They wouldn’t budge on reopening the one I’d had for nearly two decades.

This week I pulled credit reports and took stock. Jak still has three Borgified Chase accounts active (my guess is that Chase realizes that he’s still employed full-time and I’m not); I have just the one Amex card open.

Honestly, I prefer it this way. Despite my brief worry that I’d done the wrong thing by not saving the Discover account, I feel relieved to be done with all the extra cards. I have a sense of freedom and control that was missing before.

Still, it was not without cost. If we ever apply for another mortgage, the credit score will matter. It might even be making a difference right now in our car insurance rates, or in job applications.

If you’re concerned about having the highest possible credit score, you should pick the one or two cards that you’ve had the longest and make sure to put a purchase on them every few months. There’s no guarantee that they won’t be closed anyway — issuers can close an account at any time for any reason — but it improves your odds.

The bad news is that making purchases on your credit cards carries a whole other set of risks — sort of a ‘damned if you do, damned if you don’t’ scenario. I’ll cover those in part three.

(Photos by Andres Rueda and jessemoya.)

Like most people of my generation, I got my first card in college. Then, and for the next twenty years, getting credit was deceptively easy. I used it in all the typical foolish ways: to pay bills during periods of unemployment, to finance an unsustainable small business, to live beyond my means.

In early 2007, after more than a year of concerted effort and lifestyle changes both major and minor, my partner and I paid off the last of our credit cards. (We still have the original mortgages on our house, but have never rolled outside debt into that loan.) I swore then that I would never carry a balance on a credit card ever again. And I haven’t.

But I do still find it useful to charge purchases to a single card, paid in full each month. Here’s why:

• Purchase tracking — This is the big one, as any attempt to budget or control spending relies on it. No matter how diligent I try to be with recording my cash transactions, I still miss one from time to time — and never mind tracking my spouse’s cash, that’s like trying to catch raindrops with my tongue.
• Overdraft protection — I try to keep a minimum cushion in the checking account and everything else in savings, where it earns interest. Putting purchases on the credit card instead of debit frees me from constantly monitoring our available checking account balance to prevent stiff overdraft fees.
• Cash-back rewards — Our Costco AmEx card gives us a tiny percentage back (1-3%) on purchases. Last year it was just over $500 — not exactly chump change. This year we’re spending less, so the total amount will drop, but even so: 1% > 0.
• Vehicle insurance — On the rare, rare occasion when I need to rent a vehicle (which hasn’t happened in the last two years, but no doubt will at some point), the extra insurance provided by a credit card saves me money.

The problem? Now that I’ve mended my profligate ways, the credit card companies no longer consider me useful.

Credit cards (and indeed the entire banking industry) work via cross-subsidies. Some of the people (a recent article quoting ‘industry lobbyists’ put it at roughly 40%) are the sort of credit user I am now, taking advantage of the benefits above without actually generating income for the issuing bank. The rest are the sort of user I used to be — carrying large balances at high interest rates, occasionally missing a payment and generating large fees and even higher interest rates. The income from that 60% has been enough to not just cover the other 40% but generate enormous profits for the banks as well.

Then along comes the worldwide credit crisis and — salt in the wound! — an act of Congress that finally puts limits on the bank’s ability to gouge their customers.

If you’re one of the 40% of responsible (aka ‘non-profitable’, from the bank’s perspective) credit users, be warned; they’re coming for you. They may have already begun. I’ll explain the first big change in part two.

(Photos by zingersb and jc.westbrook.)