Health gift-card fees can make you sick

Adding a new twist to the growing gift-card industry, the Healthcare Visa Gift Card from Pennsylvania-based insurer Highmark is designed to be used exclusively for health-care products and services. But as gift cards go, this new one is much like the old ones, with enough fees and restrictions to give you indigestion.

Though the health-care gift card is billed as "a unique way to let loved ones know just how much you care," it’s little more than a bank-issued gift card with all the typical ailments. Want to buy one? That’ll cost you $4.95, plus a minimum $1.25 shipping fee. Lose it? Pay $4.95 for a replacement. Want to close out the account and take the balance? That’s another $6.95. Still have a balance after eight months? A monthly $1.50 fee will be deducted from what’s left.

So what do you get for all this? Not much. Unlike other bank-issued Visa gift cards, which are valid at most merchants that accept Visa, the Highmark card is supposed to be used only for health-related purposes, such as doctor and hospital visits, dental work, eyeglasses, medications, ambulance services, health spas, and so on. It can be loaded with as little as $25 or as much as $5,000.

It sounds good in theory, but there’s a big problem. The Visa electronic payment system isn’t capable of limiting the individual products purchased with a card, at least not yet. So Highmark does the next best thing: It limits card usage to businesses that typically market health-care services and products. But falling into that category are discount stores such as Target and Wal-Mart, supermarkets, and wholesale clubs (not to mention the candy aisle of your local pharmacy). That means your elderly aunt can use the card to support her cigarette habit, satisfy her sweet tooth, or buy just about anything else her heart (as unhealthy as it may be) desires.

What to do. If you would like to help a loved one pay for health care, there are better ways to do it than buying a gift card. You can simply write a check to his or her doctor for the next visit or pick up the cost of a prescription.

If you really prefer to give a gift card, consider one from a health-care retailer, such as a pharmacy. While you won’t prevent recipients from using the card to buy soda and Cheez Doodles, you will avoid saddling them with a bunch of fees and other annoyances common to the Healthcare Visa Gift Card and other bank-issued cards. —Anthony Giorgianni

Scamster dance: Don't fall for "tax rebate" hoax

An economic stimulus package proposing tax rebates for most Americans hasn't yet been signed, but scam artists already are using it to try to separate us from our money.

The IRS reported a new scam today, in which consumers get a phone call from someone identifying himself as an IRS employee. The caller tells the targeted victim that he is eligible for a sizable rebate for filing his taxes early and asks for the victim's bank account information for direct deposit of the rebate. Without direct deposit, the caller says, there will be no rebate.

It's a hoax. The economic stimulus package hasn't been signed, and process for distributing the rebates has not yet been finalized.  And besides, the IRS would never contact a citizen that way or require direct deposit for a rebate. If you follow through on this scam, you risk being robbed of your money and your identity.

In another scam—a first, according to the IRS—citizens get e-mails addressing them by name and suggesting they're candidates for tax audits. The e-mail instructs recipients to click on links and fill in account information--data that thieves can then use for identity theft.

Don't fall for this one, either. The IRS says it doesn't send unsolicited, tax-account-related e-mail to any taxpayer.

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If you're wondering what you will get from the economic stimulus package, check this blog regularly. We'll update you on your due—and advise you on sensible ways to use it—as soon as the bill is signed.

--Tobie Stanger

Q&A: Lower credit limit, lower credit score?

Q: I used to have a Citibank Visa with a $20,000 credit limit and a Visa from my bank with a $20,000 limit. I canceled the Citibank card and lowered the limit on the other card to $10,000. Will this affect my credit score?

A: It depends. Thirty percent of your FICO credit score is based on amounts owed, and that part of your score includes your credit-utilization rate, which is the amount charged on all your cards as a percentage of your total credit-card limits. So if you have only one card with a $10,000 limit and you’ve got a $2,000 balance, your credit-utilization rate would be 20 percent. With an $8,000 balance, your rate jumps to 80 percent. Credit issuers generally like to see a credit-utilization rate of 30 or 35 percent, or less.

"If a credit report shows no outstanding balances, then the credit utilization is zero," says Craig Watts, a spokesman for Fair Isaac, creator of the FICO score. "In this situation, closing one account and lowering the limit on the other probably had no effect at all."

If you had a balance on the remaining card, your score would have been affected by your actions. But Watts says your score would recover in a few months.

There are other factors that can affect your credit score. Consumer Reports Money Adviser offers more recommendations on how to stay on top of it.

Don’t be duped by fake check scams

A colleague brought us a letter he received in the mail at home that included a very real-looking check for $3,860.95. The letter informed him that he’d won $288,000 in a lottery, and that the amount of the check was deducted from his winnings, partially to pay the taxes that would be due on the total amount. The letter, which bore no return address but was posted in Canada, went on to instruct the “winner” to call for specific instructions on how to claim the full prize.

We didn’t call the number but we’ve seen this sort of thing before, so we knew it was a scam. For one thing, our friend never entered any lottery or sweepstakes, which presumably one would have to do in order to win. But this type of rip-off takes other guises—job offers or mystery shopper assignments, potential love interests in other countries, overpayment for items being sold at auction, even free pedigree puppies. What they all have in common is that they ask you to send money or personal information back to the scam artist.

The ones that come with checks attached might be the most convincing. You’re told to deposit the check and immediately send part of the proceeds to a third party for a reason that sounds legitimate. Of course, by the time you find out that the check was bogus, you’re out the money you sent—and probably bounced check or overdraft fees that your bank will hit you with.

“Most Americans don’t realize they are financially liable when they fall for these scams,” says Susan Grant, vice president of the National Consumers League. “There is no legitimate reason anyone would mail you a check or money order and then ask you to wire money in return. People need to know that checks can take months to clear, even if the money initially looks like it’s in your account."

The National Consumer League says that victims lose an average of $3,000 to $4,000 in fake-check scams. The league, along with the U.S. Postal Inspection Service and other partners, recently launched a Web site, FakeChecks.org, to help spread the word about these scams.

Bottom line: As realistic and enticing as that check looks, don’t cash it. File a report with the Federal Trade Commission or the postal authorities.
 

Recession’s bright side? Bargains for brave consumers

Let’s say you have some cash on hand, your job (or other source of income) is secure, and you love a good bargain. What opportunities might a recession bring?

First a disclaimer: Nobody, including us, knows what’s ahead for this economy or, indeed, precisely what’s happening now. (Recessions are officially determined after the fact by the National Bureau of Economic Research.)

However, the battle-scarred veterans of our Money team have seen our share of recessions, and some of us even took notes. Based on our collective judgment, here are some of the possible buying opportunities that consumers with cash—and the guts to spend it—may find:

Homes. Home prices are already down in many parts of the U.S. Where they go from here is anybody’s guess, but few of us would expect them to rise at a steep pace anytime soon. So if you’re in the market for a home, now could be a good time to start looking and get a baseline feel for the market—even if you decide to hold off buying for a while.

Mortgages. Interest rates are already relatively low, averaging 5.42 percent for a 30-year fixed-rate mortgage as we write this. Credit standards have been tightening, though, so expect higher hurdles in getting the very best rates.

Stocks. Some are sure to become bargains, but unless you’re a stellar stock picker, consider a no-load stock index fund and hope to benefit from an overall rise in the market. Keep in mind that stock prices will often start upward well before a recession ends, as investors look ahead to better times.

Credit cards. Our resident credit expert thinks people with good credit scores should have a golden opportunity to negotiate for lower rates. Issuers will want to hold onto creditworthy customers more than ever.

Cars. If demand continues to drop (sales for 2007 were down compared to 2006), carmakers and dealers will have to do something to move their wares.

Appliances and electronics. Ditto.

Luxury goods. Sales are already slowing, we hear, so high-end goods may carry less-high prices.

EBay stuff. People eager to raise cash may be auctioning off knickknacks and whatnots in record numbers. So that Pee-wee Herman doll or first edition of Proust you’ve long wanted could be yours for the clicking.

Home remodeling. Lower demand should mean more room to bargain and, possibly, less wait to get the work started. If you need to finance your home improvement, you might also find favorable borrowing terms if your credit score is high.   

Travel. Our travel expert says to expect fare cuts from the airlines, but beware of the carrier going bankrupt before you can use your ticket. Hotels and rental cars should see cuts too.

Other services. If it’s something consumers can put off until the economic clouds clear (cosmetic dentistry vs. an aching tooth, for example), demand should drop and prices along with it. And it rarely hurts to haggle—even in the best of times.

Who’s to blame for Cablevision’s high phone number-transfer fee?

We were surprised recently to hear that consumers who switch to Cablevision’s Optimum Voice VoIP telephone service are charged a one-time $40 fee to keep their old telephone numbers. Posing as a prospective customer, one of our reporters recently asked a Cablevision customer representative for an explanation. The representative said that Cablevision merely is passing on charges imposed by customers’ former companies to transfer the numbers to Cablevision. In this case, the company was Verizon.

Curious, we called Verizon officials, who told us they don’t charge Cablevision or any other company anything to transfer customers’ numbers. A Cablevision spokesman told us he had no idea why his company’s representative blamed Verizon. He explained that Cablevision came up with the fee to compensate for “processing,” “back-office,” and “other costs” associated with arranging the number transfer. He said part of the cost is offset by the company’s $9.95 installation fee for double- and triple-play subscribers, which he said is lower than other companies. (We know of companies that in most areas don’t charge installation fees at all.)

A few days later we called another Cablevision customer representative to see what would happen if we asked the question again. And sure enough, that representative also blamed the fee on Verizon.

After further research, we came up with our own theory about why Cablevision reps are blaming other companies for the fee. It’s embarrassingly high. In fact, most major carriers, including Comcast, Verizon, and AT&T, don’t charge new telephone customers anything to transfer their old numbers. Cox charges about $10 in some areas, though nothing in most. Similarly, Time Warner charges $20, but only in some areas.

And get this: When we told the Cablevision rep that we wouldn’t sign up for the company’s VoIP service unless she ditched the fee, she went off to speak to a supervisor and came back happy to waive it.

Well, we have a suggestion for Cablevision. Do away with the fee for all new customers, not just for those who are savvy enough to ask.

Recession ahead? Already here? Neither?

Nobody knows the answer to those questions or will for a while. But the dreaded R word is certainly in the air and the news at the moment.

What might a recession mean to you—and what should you be doing now just in case?

We dipped back into the CR archives to see what we had to say during the memorable recession of 1990-‘91. Our advice today would be much the same:

1. Get a grip on your cash flow. When you have a spare moment, make a list of your typical household expenses. Divide it into two columns: items you don’t have much immediate control over (mortgage or rent, for example) and those where you have more discretion (groceries, eating out, clothes, vacation travel, etc.).If you need to slow your cash flow in the months ahead, plan to attack the discretionary items first. You may also discover cash leaks you can plug right away—and should anyhow, recession or no.
2. Stash more cash. If you don’t already have an emergency fund, now would be a good time to create one. The conventional advice is to keep three to six months of living expenses in a reasonably liquid account, such as a bank or money-market fund. If you have a lot of assets, few debts, or rich relatives, you may be able to get away with less, but this is a good starting point.
3. Reduce your debts. You’ll waste less money on interest payments and reduce your overall monthly expenses. As a general rule, we noted in 1991, it’s best to keep monthly debt payments (apart from your mortgage) at no more than 15 to 20 percent of your take-home pay.
4. Consider your job. How well you’ll fare in a recession will depend in large measure on whether you can keep your customary income coming in. So try to be realistic about your job security as well as your employer’s prospects. It might be time to revise the old resume, just in case.

Remember, too, that recessions aren’t forever. The 1990-‘91 one ran for eight months, economists later determined. In fact, it was already half over by the time most articles like this started appearing.

Consumer Reports Money Adviser offers some additional tips on recession-proofing your finances.

Fidelity reopens a revamped Magellan Fund

After 10 years, Fidelity has re-opened its flagship fund Magellan (FMAGX) to new investors this month. The fund, made famous in the 1980s by manager Peter Lynch, had difficulty outperforming the market in the 1990s and was considered an “index-hugger” by many—in other words, the fund’s portfolio and performance was similar to that of the Standard and Poor’s 500 index. But you paid management fees of close to 1 percent a year for the privilege of owning Magellan, as opposed to 0.1 percent for Fidelity's Spartan 500 index fund. 

In a sense, Magellan became a victim of its own success. As its assets grew to over $70 billion, the fund had more money than its management could invest effectively. Today, at $42 billion, it has more room to maneuver.  And star fund manager Harry Lange, in just two years at the fund, has transformed Magellan into a lean large-cap growth fund with interesting characteristics—the top holdings include Google, Corning, and Nokia—and a handsome 19 percent return in 2007. It remains to be seen how it will perform in what will likely be an economic downturn in 2008, but it’s clear that Magellan is no longer vanilla. —Chris Horymski

Supersize your restaurant savings

Here’s a tip to save both money and calories: Buy the big size and split it. “With the mega-sizing of restaurant meals, sharing is the best way to save money and improve your health at the same time,” says Dayle Hayes, a registered dietitian in Billings, Mont.

For example, at one major fast-food chain, splitting a large order of fries instead of buying two medium-sized ones will save you and your lunch mate 190 calories (90 of them from fat) and about $1.59. And that’s just the fries.

Do you have some money-saving tips to share? Post them here by clicking on “Comments.”

Watch for gotchas in ‘triple play’ deals

It’s nearly impossible to miss all the ads for combined Internet, TV, and telephone service. These bundles can save you money, but like so many deals that sound great, the devil is often in the fine print.

For example, the promotional price—$99 is typical—doesn’t include taxes, franchise fees, or other charges. You may also have to pay monthly rental charges for cable boxes, remote controls, or other equipment. There might be installation, activation, and shipping fees, too.

And some companies don’t make it easy to find out what you’ll pay after the promotion ends. Making matters worse, the price for one service, say, the telephone, might increase after only three months, while Internet service might go up after six months.

And the package can change, too. We found one company that added a $15 charge for unlimited long-distance calls when its promotion ended.

Here’s what you can do:

• Before signing up, scour the provider’s Web site for frequently asked questions, and read the “terms of service” for details.
• Then call the company and review all requirements and charges, including taxes and fees.
• Ask what you’ll pay after the promotion ends.
• Find out if accepting the promotional price means that you’re agreeing to a contract. If so, take note of the penalty you’ll face if you terminate the service before its term is up.

For more on how to choose a triple-play deal and ratings (available to subscribers) of providers, click here. 

—Anthony Giorgiannni