How our money experts save money, #7 in a series

I’ve started bringing my lunch to work a couple of times a week, which I hadn’t done in ages. This is easy in the summer because we like to grill on weekends and always seem to have stuff left over. Doing this probably saves $5 a day or so, not a lot of money, but something.

I’ve also put off replacing the 12-year-old car I drive to work each day, hoping to squeeze at least another year out of it. Ditto for my computer printer at home, which won’t do color anymore but manages a passable black-and-white.

In the failure department, I bought a bunch of those new all-cotton, no-iron shirts for work, figuring I’d save the cost of sending my shirts out. Unfortunately, I’ve found them about as comfortable as plastic wrap, at least in the summer. Once they wear out—and they seem to do that rather quickly—I’m going back to the old kind, even if it means learning how to use one of these.
—Greg Daugherty, executive editor and CR Money Adviser retirement columnist

Do you have an unusual money-saving tip to share? Please post a comment, below.

How our money experts save money, #6 in a series

I never leave the house without my coupons. I keep an envelope in my purse with coupons for department stores, clothing chains, and outlet stores as well as groceries.

If you're heading to an outlet to save money, be sure to hit the Web site of the outlet mall so you can save even more. If you're heading to the supermarket, don't just clip the coupons from your local paper. Go online to coupon sites like coupons.com and smartsource.com. Also,check out retailer and manufacturer Web sites. If, for example, you buy a lot of organic products, be sure to check out the Web sites of food companies like Stonyfield Farm, Organic Valley, and Earthbound Farm. If you like to shop at Sears, you can sign up at the company's site for a newsletter that keeps you up to date on the latest special deals.—Lisa Lee Freeman, editor in chief, ShopSmart magazine

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How our money experts save money, #5 in a series

I've put off buying a new car—$4.50 per gallon of gasoline is quite an incentive—and take mass transit to work. I sacrifice some time, since that takes 40 minutes door to door instead of 10 minutes. But I estimate I'm saving more than $400 every month by spending $80 on bus fare versus nearly $500 on auto payments and gasoline. 

I've even diverted that $100 per week into a separate account to keep track of the savings. It'll make a great down payment on the car when I eventually purchase one.—Chris Horymski, associate editor

Do you have an unusual money-saving tip to share? Please post a comment, below.

Time is running out to tell the Fed your credit card story

Over 30,000 people have submitted comments to federal banking regulators on proposed rules to rein in credit card abuses. The proposals take aim at some of the credit card industry's most egregious practices, such as hiking interest rates on existing balances, applying your monthly payment to the lowest-rate portion of your debt first, and not providing enough time to make payments without incurring a late fee.

The regulations are open for public comment until Aug. 4. If you’d like to make your voice heard on this issue, click here.

Advocacy groups see these proposals as a good first step toward leveling the playing field between credit card issuers and cardholders. Consumers Union, our parent organization, recommends that they go even further to:

• Limit high “penalty” rates, and how long card issuers can keep you at those levels.
• Prohibit fees for paying a credit card bill by phone or Internet.
• End random changes in interest rates for future purchases “at any time for any reason.”
• End all retroactive interest rate hikes, even if there has been one payment that is 30 days late.
• Prohibit account-opening fees that are more than 10 percent of the credit limit, rather than the Fed’s proposed 50 percent. Multiple over-limit fees also should be banned during a single billing cycle.

In new housing bill, tax perks for some, costs for others

The housing bill passed last weekend by Congress to help some homeowners threatened with foreclosure, as well as wounded lenders Fannie and Freddie, offers some interesting tax perks--and one pitfall--for some other folks.

•First-time homebuyers credit. Folks who purchase on or after August 9, 2008 and before July 1, 2009, get a refundable, $7,500 tax credit. The credit is 10 percent of the purchase price or $7,500, whichever is less. (Married folk who file separately have to split that credit; the IRS hasn't determined what to do with unmarried filers who purchase a home jointly). Like a lot of tax breaks, this one phases out as income increases. The phase-out starts for married folks with $150,000 in adjusted gross income and singles with $75,000 AGI. It's not available to a few populations, including non-resident aliens.

If you buy a home in 2009, you also can opt to treat the purchase has having taken place on December 21, 2008, and file an amended 2008 return to get the credit early.

The rub with this credit is that you have to start paying it back in the second year you own the home. You have 15 years to make the repayment; if you move before then, you have to pay the remainder back in full. There will be no interest due on the repaid credit.

•Deductions for non-itemizers. Homeowners who don't itemize can take up to $1,000 per married couple, $500 for singles, from their state and local property taxes as an additional standard deduction on their 2008 return. This is a nice perk for taxpayers who own their home outright or who have very small mortgage interest payments that don't merit itemizing. "This provision allows them a deduction to defray some of the costs of home ownership, but just for one year, " notes Mark Luscombe, a tax analyst with CCH, a tax information company in Riverwoods, Il.

On the other hand, some folks may end up paying more...

•Potential pitfalls for second-home owners. Folks who own second homes with the intent of using them as primary residences will no longer fully benefit from a powerful tax break for home sellers. The current law says that if you move to a second home, live there for at least 2 years and then sell it, you can exclude up from income up to $500,000 in gains (for couples filing jointly) and $250,000 for (singles and heads of household).

A new provision pro-rates the exclusion based on the amount of time you own the house as a primary, rather than secondary, home. If, for instance, you and your spouse own a vacation home for 25 years and make it your primary residence for 5 years before selling, you'll only get a portion of the exclusion: 5 years/25 years, or 20 percent. If you sell and realize a gain of, say, $300,000, you can only exclude 20 percent of that gain--$60,000--versus the full $300,000 allowable under the current law.

The new law only applies to activity after January 1, 2009, however. So if you've owned your second home for many years, the new "ratio" won't have as dire an effect on you as it would had you bought the home in 2009.

How our money experts save money, #4 in a series

My home is heated by oil, and I lock in my price per gallon for the year
each spring. Feeling sticker shock when I was faced with my price per gallon
jumping from $2.96 last year to $4.13 for the coming year, I've become much
more vigilant about all of my home energy costs. Our house has central air
conditioning, but this summer on all but the steamiest days, we're keeping
the AC off and turning on the attic exhaust fan to keep air circulating
through screen doors and windows. It does a surprisingly good job of
keeping the place cool while making my electric bill more manageable.
I'm also having a handyman friend help me make sure all of the windows and
doors are as weather-tight as they can be before cold weather sets in.

The other big increase I've noticed is our tab at the grocery store, so
for the first time I'm regularly paying attention to and using coupons.
Even more important, I've starting using cash for groceries. It's
amazing how much more you weigh the value of whatever you're tossing in the
cart when you're paying with bills out of your wallet rather than with a
check or a debit or credit card. Those junk food things the kids used to
sneak in don't make it to the cash register anymore, and that's a good thing
health-wise in any case.

And finally, I'm following the advice I've always heard about checking my
tire pressure regularly to get the best gas mileage for my car,  and
combining household errands into one trip rather than running out on the
spur of the  moment to the bank, P.O., or drugstore.—Andrea Rock,
senior editor

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How our money experts save money, #3 in a series

I now buy my gas exclusively from Costco. It may not necessarily be absolute rock bottom, but it's dependably lower than most other name-brand stations in my east San Francisco Bay area. On Sunday, only four competitors had a 1- to 15-cents per gallon lower price, while 30 others charged 2 to 32 cents a gallon more than the $4.39 I paid, according to the AAA Gas Price Finder. Gas in California is already more expensive than in much of the country. The peak I've paid was $4.50.

We're taking the advice from my Cut Your Spending by $500 per Month report and repurposing leftovers better. Also stocking up on sale items. Major coup recently: I bought four 30-ounce jars of Best Foods mayonnaise at two for $5. Regular price is about $4.99 each, and it's not always on sale when we run out.

We also buy cat food in 48-can cases and have re-assigned our two cats to "outdoor" instead of "indoor" status, saving us a fortune in cat litter. —Jeff Blyskal, senior editor

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How our money experts save money, #2 in a series

Our daughter’s college years are just around the corner, and costs like gasoline, heating fuel, and local property taxes continue to spiral upward. To gain some control—and a bit more sanity—I’ve been tracking our spending more carefully using budgeting software (more on that in future blogs). My husband and I are talking more frequently about money-saving measures and letting our teenager know we’re putting the brakes on some spending. And we’ve taken the following steps over the last six months:

1.  Started using the Honda Civic sedan much more than the Subaru station wagon. Savings on gas: Yet to be determined.

2.  Raised our auto insurance deductibles (comprehensive and collision) to $1,000 from $500. Savings: $350 a year. I also looked into dropping comprehensive coverage altogether, a strategy CR recommends
for older cars. Based on the market value of the 2002 Honda, however, I determined my car was still valuable enough to insure.

3.  I started doing my own pedicures. Savings: about $20 per visit.

4.  Let the cleaning service go. My husband, bless him, is now showing his skills with the vacuum and toilet brush. Savings: about $1,700 a year.

5.  Canceled Netflix. We hardly ever used it. Savings: $120 a year.

6.  Changed to a less-expensive hair conditioner and face cream. Savings: Maybe $50 a year.

7.  Tried hanging our laundry out to dry in the sun. It required a little more work, but the drying time was about the same as with as my dryer, and the sheets smelled great. I don't know how many pennies in energy I saved, but it was a "green" gesture that felt good to do, and the neighbors didn’t complain. (Tip: Putting the wet towels in the dryer for just 10 minutes with a fabric softener sheet appears to make them a little less stiff; I’m still experimenting with the timing on that one.) Savings: Yet to be determined.

8.   Told my daughter she’ll get no rides to our nearby high school this fall, unless the weather is really severe or she has a very large project to transport. Savings in time: 20 minutes per day. Savings in gasoline: Who cares? She’s getting some exercise!

9.   For next fall, decided to look into a cash-on-delivery heating oil company, rather than the full-service but far more expensive dealer I use now. Projected savings: 30 cents a gallon, or $270 a year.

10.  Checked out the local consignment shop. Biggest recent score: Matching Eileen Fisher silk pants and jacket (perfect condition) for $17. Estimated savings over new: $400.

The one thing I will not yet scrimp on is my hair cutter. He is great and worth the premium I probably pay over others at less expensive salons. But I’m spacing my cuts further apart than before. —Tobie Stanger, senior editor

Do you have an unusual money-saving tip to share? Please post a comment, below.

How our money experts save money

Editor’s Note: With rising gas and food prices, falling home values, and a stock market that seems to change direction by the day, many Americans are watching their spending. We decided to ask our resident money experts what, if anything, they’re doing on the frugality front, and each day for the next several weeks, we’ll be posting their responses. Here’s #1 in the series:

1. On two trips this summer, I declined free upgrades offered by the car-rental company (one was to a sports car, the other to an SUV). I expected to do a lot of driving and wanted the better gas mileage of the pared-down Volkswagen Golf I'd reserved. (Also wanted to see how it drove, in case it's my next car.) In the past, I've taken free upgrades to "fun" cars (one was a convertible, another was a big, upscale sedan).

2. My husband and I check with each other before picking stuff up on the way home from work; we used to both stop for milk or whatever and wind up wasting it. And we only buy fresh produce if we intend to use it immediately. No lofty "I should eat more salads and fresh fruit," then winding up throwing most of it away.—Jean Pietrobono, managing editor

Two tricks for saving more money for retirement

Last week, I invited readers to share any secrets that have helped you save for retirement or some other worthy goal.

Here, in that spirit, are two of mine:

1. For discretionary purchases like clothes, CDs, or electronic gadgets, I’ve found it helps to pause and consider whether I’d get more pleasure from possessing this thing, whatever it may be, or from having the money invested somewhere. It’s amazing how often the thing goes back on the shelf.

2.  Sometimes when I feel the urge to spend just for the sake of spending, I’ll instead write a check to a mutual fund. For me, at least, that seems to satisfy much the same craving. Writing a check to charity does the trick, too, but won’t do anything for your retirement.

What’s worked for you? Please let us know by clicking on Comments, below.—Greg Daugherty

Greg writes the “Retirement Guy” column each month in the Consumer Reports Money Adviser newsletter.

Bank failures then and now

It’s hard to watch news clips of depositors lined up outside IndyMac Bank branches in California without recalling similar scenes from Depression-era documentaries or the fictionalized bank run in “It’s a Wonderful Life.”

But there’s one big difference between then and now, besides the fact that yesterday’s bank failures are remembered in black-and-white, while today’s are broadcast in living color. That is, we now have federal deposit insurance to protect our savings, up to certain limits, in the event of messes like this.

The Federal Deposit Insurance Corporation, which has taken over the operation of IndyMac, issued this statement on July 13 in attempt to allay depositor fears and describe once again how FDIC coverage works.

Our Money blog explained both FDIC coverage and other types of investor protections in this recent roundup.

What, if anything, should bank depositors be doing at this point? We’d suggest checking to make sure your accounts are within the FDIC insurance limits and, if not, moving the excess to another bank, just to play it safe. You may also be able to restructure your accounts within your current bank to assure you’re covered. Other than that, we see no cause for action or for alarm.

The not-so secret of retirement saving

A reader of our Money Adviser newsletter took us to task last week. Our “Ask the Adviser” page had answered a question from a reader who wanted to know if he could avoid taking required distributions from his 403(b) plan. He calculated them at roughly $113,000 a year—a happy hardship if there ever was one.

Why, the complaining reader wrote, were we wasting space on that guy’s “problem” when many Americans have no retirement savings at all?

The easy answer is because he asked us. But the complainer still had a point. What advice would we have for people in that more serious predicament?

Well, life being what it is, many of us will go through a rough patch or two (job loss, health problems, whatever) when saving for retirement becomes all but impossible. The last thing we need is a finger-wagging lecture about mending our wasteful ways.

But when we’re in a position to save, it’s a good idea to do so. And the best way I know is the obvious one: Spend less than you take in, invest the difference, and then don’t mess with it.

Our Web site has lots of tips on saving more by spending less, most recently this article.

Next week I’ll pull together some additional suggestions on saving for retirement. Meanwhile, we’d love to hear about strategies that have worked for you. Just click on Comments, below. All we ask is, no finger wagging, please. —Greg Daugherty

Greg writes the “Retirement Guy” column each month in the Consumer Reports Money Adviser newsletter.

Visa offers some relief from painful 'debit holds'

The organization that writes the rules for processing payments you make with your Visa card will change them this fall to reduce the chances that an annoying “debit hold” placed on the money in your bank account will cause inconvenience or, in some cases, overdraft fees.

The rule in question has to do with how gasoline purchases made with a debit card are handled. Currently, when you swipe your debit card at the pump, the gas station can place a debit hold on up to $75 of the money in your account until the actual transaction clears through the system. Since that can take as much as two to three days, you may buy $20 worth of gas but be denied access to $75 of your money for several days. This can lead to bounced checks or other overdrafts, and the onerous penalties that they bring. (See "The Dark Secrets of Debit" for more of the problems that debit card users face.)

Under its new “real time clearing” rule, however, Visa will make it possible for holds to clear in as little as a few minutes and no more than two hours. “Consumers are feeling enough pain at the pump and we strive to relieve some of those frustrations through real-time clearing,” says Stacey Pinkerd, head of Global Debit Products at Visa.

The rule change, which will take effect this October, follows years of lobbying by Consumers Union and other organizations that complained the old rule was unfair to consumers. Gas stations must adopt the new rule in order for their customers to reap the benefits. 

“Americans are already getting squeezed by exorbitant gas prices,” says Michelle Jun, staff attorney for Consumers Union. “It’s unfair for gas stations to impose a hold on their customers’ own money for amounts that exceed how much they’ve spent on gas. Visa deserves credit for taking this step. Now it’s time for MasterCard to end unfair debit holds at the pump and for every gas station to adopt this new process.”

Unfortunately, the change only applies to gasoline purchases, and not to other merchants that can also place debit holds, including restaurants, hotels, and car rental agencies. Moreover, Visa’s largest competitor—Mastercard—has yet to respond to calls to change its debit hold rule. CU is encouraging consumers to send a message to Mastercard telling them to end this problem with its debit cards.

You can find out how quickly your gas purchase is processed by checking your bank account on-line.  Once Visa’s new rules go into effect in October, you should ask your local gas station if it processes your gas purchase at the pump in real time.  You can also check this by getting your account balance two hours after using a Visa debit card to buy gas to see if the purchase cleared. If your local gas station doesn't process your purchase in real time, you can avoid debit holds by paying the station attendant with your debit card and PIN rather than swiping it yourself. Of course, you can also pay with cash.

More on home monitoring systems

In response to our blog post on aging in place resources a few months ago, we’ve received a steady stream of requests for ratings of home monitoring systems. These are electronic devices that provide a way for an elderly person to summon help if there is an emergency. There are two basic types:

Pendants and wrist bands. A personal emergency-response system is one. Made famous by the “I’ve fallen and I can’t get up” TV ads, these battery-operated systems require the person to wear a pendant around the neck or a device on the wrist. In an emergency, he or she pushes a button to activate it and then speaks into a microphone. The device sends a signal to a call center, which will contact local emergency services or a caregiver. Cost is about $30 a month. Two national providers of such devices are Philips Lifeline and Advanced Alert. The downside to this low-cost security is that if there is a crisis, the wearer needs to be conscious and able to push the call button.

Motion monitors. Another type of service involves monitoring the elderly person’s environment for motion. Infrared motion sensors placed around the home determine if there is a lack of movement for a certain period of time. They can detect, for example, if your parent enters the bathroom and doesn’t leave. About six companies make these detectors. QuietCare’s service uses an average of five to seven sensors, and it costs $90 to $100 a month. One advantage of these systems is that they’re unobtrusive; they don’t need to be worn and activated if an emergency occurs. A drawback is that they can trigger false alerts.

Consumer Reports has looked into these services in a preliminary way and found that testing them presents some logistical challenges. The service component—the response from the monitoring company to a signal—likely will vary widely based on location. Compliance with the instructions—for example, will the elderly person wear the pendant at all times?—also is a factor. We will continue to study this issue to see if we might be able to provide some guidance down the road.

For those of you who are considering these services now, perhaps the best advice we can offer at this time is to network with other caregivers and share experiences. Some useful Web sites include the National Family Caregivers Association, American Association of Homes and Services for the Aging, Center for Aging Services Technologies, Children of Aging Parents, Agingcare.com, and your local Area Agency on Aging (to find one nearly, click here). Some of these sites include forums where you can solicit advice from other users.

You can also share information by posting your comments here.

Home buyers should look beyond low prices for long-term values

The bad news in today’s housing market could be good news for you if you’re looking to buy a home. In many parts of the country home prices are falling and the inventory of homes for sale is growing—and likely to go higher as rising foreclosures add to the glut of homes on the market.

Single-family home prices dropped 7.7 percent in the first quarter of the year, the largest year-over-year decline since the National Association of Realtors began tracking metropolitan prices in 1979. The median sales price fell to $196,300, down 4.8 percent from the first quarter of 2007. With mortgage rates still at historically low levels—recently hovering around 6.5 percent for a 30-year fixed loan—the stage is set for home buyers to test the market.

But buying in this market is no cakewalk, especially given the challenge of securing a loan in a credit-crunched environment. With the widespread uncertainty over how much farther prices could yet fall, buyers must take extra care to get not just a lower price, but long-term value as well. “It’s true that today you can buy many properties for less than you could a year or two ago,” says Peter G. Miller, a nationally syndicated real estate columnist and creator of the Web site, OurBroker.com. “But property you buy still has to make good economic sense. If you’re buying a home in an area where the price of local property has gone down 15 percent, that doesn’t mean it won’t go down further—you could be looking at a false bottom.”

One thing most experts agree on: This type of market is best for longer-term buyers. “If you’re buying with the idea of selling again in two or three years, you need to be particularly careful,” cautions Steve Casper, owner of Comey and Shepherd Realtors in Wyoming, Ohio. “We can’t give any kind of assurance you’ll be able to recoup your selling expenses.”

Follow these tips to help secure the best deal you can.

Thoroughly research the area. It’s still true that real estate prices reflect local conditions, and we do mean local: at the neighborhood and community level. So before even beginning your search, scope out the listings for comparable houses in your price range and location. You can find them on Web sites such as Realtor.com, or ask a local real estate agent to do it for you.

In places where homes had meteoric rises in the last few years—as in parts of California and Florida—prices have been susceptible to a downward trend. In other areas, including much of the Carolinas, prices remain strong. You’ll want to find out the number of houses for sale in your chosen area, as well as the number of days houses have stayed on the market. When new inventory is increasing faster than sales, it’s a sign prices have further to fall.

Consider using a buyer’s agent. Though most people use a real-estate agent in their house hunt, brokers receive their commissions from the seller, and are obligated to get the highest sale price they can. A “buyer’s agent” works exclusively for the buyer, and so has a fiduciary responsibility to negotiate the lowest price possible. Typically a buyer’s agent charges a percentage of the purchase price—usually 3 percent, which comes out of the sales commission of the listing agent—or a flat fee or hourly rate. A buyer’s agent will help locate suitable homes, do the background research that helps in negotiating a fair price, and work out the terms of sale and contract contingencies.

Though there are agents who designate themselves as a buyer’s broker or agent, many also work for the same firms as listing or sales agents do. Their loyalties can be divided, notes Jon Boyd, an Ann Arbor, Mich.-based buyer’s agent who is former president of the National Association of Exclusive Buyer Agents, a professional organization that requires its members work in offices that do not accept listings.

“There are cases now where sellers are offering bonuses to agents who bring in a buyer,” he says. “But that information is only available to agents—the consumer never really finds out about it.” The NAEBA code of ethics requires the agent to disclose any bonuses up front.

Go beyond pre-qualified to pre-approved. Getting “pre-qualified” involves a very limited check of your finances, based on the information you supply the lender. Far more valuable is being “pre-approved” for a loan, which means the lender has independently checked your financial background as well as your credit rating, and has approved you for a specific mortgage amount. To get the best mortgage rate, you’ll have at least a 20 percent down payment and excellent credit. Make sure you’ve checked your own credit reports at least two months before you begin your home search, so you have time to address any errors or negative information that could affect your ability to get the best loan terms. You can obtain one free credit report a year from each of the three major credit bureaus by visiting AnnualCreditReport.com; you can get your FICO credit score and one credit report for $15.95 from myFICO.com.

Gathering information ahead of time is especially crucial for first-time buyers, notes Adorna Carroll, a buyer’s broker with Realty3 Carroll & Agostini/Valley Properties in Connecticut. “First-timers not infrequently come to the table with credit issues—lower FICO scores and sometimes a blemish on their report that needs an explanation,” she explains. “The process enables me to work with them and their loan originator to get them into a real buyer’s mode.”

Pre-approvals typically last from 30 to 45 days, but in these swift-changing credit markets it’s wise to check in with your loan originator before you execute a bid. “The mortgage market is so volatile,” says Judy Andersen, an exclusive buyer’s agent in New City, N.Y. “I know of a recent case where three days before closing, the bank didn’t fund the loan, and left buyers scrambling to find another.”

Look for leverage. Knowing how long a house has been on the market and why the owner is selling can give you extra bargaining power. “Sellers’ motivation makes a huge difference,” says Andersen. “If it’s a divorce or relocation, a new baby on the way and they need more space, then you’ve got a highly motivated seller.” (Another common scenario: the seller bought in the last few years and has a mortgage resetting at an unaffordable rate.)

Protect yourself. As the buyer, you write the purchase agreement, so you can include whatever provisions you want. A crucial one: a contingency clause that includes an inspection of the house that is satisfactory to the buyer. Once you have the inspection report, you’ll be able to identify what costs you may face in the next five years, notes Miller.

“Inspections are the most significant deal breaker,” notes Casper. He points out that some purchase agreements give the seller the right to correct any defects found, a version his firm no longer uses. “Some buyers were getting stuck with what they didn’t want to cure,” he says. “If there’s a serious foundation problem, you may not want the house under any circumstances; there’s no absolute assurance it will get fixed properly.” In the purchase agreement his firm now uses, “the buyer has the right to walk if the inspection isn’t satisfactory, and they don’t have to give any reason,” adds Casper.

Remember that even with the deafening drumbeat of falling prices, prices will depend on local market conditions. “If a property is priced right, and there’s a limited inventory within that dollar range, the buyer has less leverage,” says Carroll. “It’s the local market that determines who’s under the gun, and it’s not necessarily the seller.”—Barbara Bedway

You don’t have to be Leona Helmsley to provide for a pet

News reports that the late real-estate heiress Leona Helmsley left a fortune estimated at $5 billion to $8 billion for the care of dogs—in addition to the $12 million the hotel queen bequeathed to her own dog, Trouble—have started tongues (not to mention tails) wagging. 

They're also likely to raise awareness among less well-heeled pet lovers about the need to make sure our dogs and cats, parrots and ferrets will be well taken care of if they happen to outlive us.

The Consumer Reports Money Adviser newsletter explained how to do that not long ago in this article on pet trusts, wills, and other legal alternatives.

Fashionable frugality

It’s not news that energy and food, among other regular expenses, are taking an increasingly large chunk out of the average family’s budget. Survey after survey shows Americans are worried about their finances and cutting back where they can. And the federal economic stimulus payments, which were intended to boost spending to help avert a recession, are more likely to be used for necessities than for discretionary items such as electronics and apparel.

In this climate, frugality has become fashionable again. The Consumer Reports Money Adviser recently published a list of belt-tightening moves you can make to trim your overall spending. And the Consumer Reports Money Lab analyzed regular household expenses and found ways you can save a total of up to $500 a month on such things as car and life insurance, telephone, and banking and credit card fees.

We’ll keep bringing you money-saving ideas to get you through this and future financial storms. And we invite you to share your tips by posting comments here.

Don’t get clobbered by multiple credit-card rates

If you typically maintain a credit-card balance, you might be paying more than one interest rate. You can have a multirate balance if, for example, you transfer $1,000 using a card’s 0 percent balance transfer offer, spend $1,000 on purchases subject to its standard interest rate, and then use the card to get a cash advance, which gets hit with the card’s highest rate. For example, a staff member’s Citibank card recently charged a standard interest rate of 15.24 percent but had a cash-advance rate of 22.99 percent.

When you make a payment, card issuers typically apply it to the lowest-rate balance, which in this case is the amount subject to 0 percent interest. You pay off that balance first, and the issuer charges you the higher interest rates on the rest of the money you owe, month after month.

Federal banking regulators recently proposed reforms that could reduce or eliminate this practice. And Congress was considering legislation that would prohibit this and other abusive credit-card practices. But until such reforms are enacted, you can avoid those extra fees by using different cards to maintain balances at different rates. For example, if you use a 0 percent interest promotion to transfer a balance to a card, don’t use the card for any other purpose. Charge your new purchases on a second card, then make your biggest payments on that card. And try to avoid taking cash advances, since there’s no way around their high interest rates.—Anthony Giorgianni