Identity Theft, Credit Cards, Windfalls, and More

Reader Mailbag

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Credit cards and miles
2. Buy it for life: backpack
3. Lending Club?
4. Unexpected $5,000 windfall
5. Completed journals and identity theft
6. 2-for-$3 deals and other bargains
7. Pitching ideas to national newspapers
8. Buying a rental property
9. Pizza delivery tipping
10. Grocery store pricing trickery
11. Different levels of frugality
12. No-contract data plans
13. Dry cleaning
14. Identity theft worries
15. Total value of Amazon Prime

A couple of weeks ago, my mother-in-law put on a master class in how to host a large group of people at one’s house. She managed to make 24 houseguests over the course of four days feel comfortable and welcome, provided great meals for everyone, and made sure everyone had an excellent time.

How did she do it? Planning. Lots of planning.

I took a look at her planning notes for the event. It filled up pages and pages with grocery lists, meal plans, schedules for when to prepare meals, ideas for activities, contingency plans, lists of where to borrow things from and when to return them, and so on.

She prepared much of the food ahead of time on the two days before guests arrived, refrigerating and freezing many of the items so that they could be pulled out for final preparations and serving.

In short, she put in a ton of time in advance to make sure everything went well.

I deeply appreciate her efforts. It also gave me plenty of ideas for how to handle such events in the future when our children grow older and we need to plan large events for them and their families.

Q1: Credit cards and miles

My husband and I opened a United Chase Visa in 2010 when we were flying United primarily. We use this card for most all of our day-to-day expenses (groceries, going out, Netflix, etc), have never had a balance or late payment, and the card comes with a $95 annual fee. In the past year or so, we’ve found United’s flights to be more expensive than Southwest and have been flying Southwest almost exclusively (we fly ~3 times a year). Does it make sense to open a Southwest Visa (it’s essentially the same card as the United)? Since the United card carries a $95/yr fee, do we close that card? I’m thinking we should open the Southwest card, keep the United card open through that transfer, then cancel it.
- Susan

The main question I have is whether you have another credit card that’s older than the United Chase Visa.

One major component of your credit score is the length of your credit history, which is usually established by the opening date of your oldest credit card. If you cancel your oldest card, you’re going to hurt that aspect of your credit score.

If you have another old card, I wouldn’t worry about this at all – just switch cards when it makes sense for you. If you don’t have another old card, I would first open the new card, then close out the old one during a period where you won’t have any reason to use your credit for anything for a while. Don’t do it right before getting a car loan, for example.

If you do that, you’ll survive the small negative hiccup that the cancellation of the United card might have on your credit score.

Q2: Buy it for life: backpack

When I travel (4-5 times a year) I rely on my backpack for most of the trip. Sometimes I even pack everything for the trip in that backpack. I always buy fairly cheap backpacks but they fall apart after 2-3 years. What is your choice for a “buy it for life” backpack?
- Andrew

Honestly, there are a lot of good backpacks out there. It really depends on what you want to use it for.

For me personally – someone who mostly wants a pack to take on family excursions and to the library – I love the North Face Recon. It is a great day pack for the purposes mentioned above. I can carry my laptop, a tablet computer, a notebook for writing, several pens, chargers, a few books, some sandwiches, a few beverages, a small game or two, and more in there without skipping a beat.

If I travelled a lot, I’d probably look at picking up the slightly larger North Face Surge II. It meets the carry-on requirements of most airlines and folds open in a unique way for airport security checks so you don’t have to dig out your laptop. This bag would probably serve me as the only bag I would need on a three day trip that didn’t require formal business attire.

For me, the North Face bags are the best bang for the buck out there. The one I’m most familiar with is a North Face Recon which barely shows wear after almost ten years of use and it costs less than $80, so that would be my pick.

Q3: Lending Club?

Is Lending Club a legitimate way to invest money? Is it a scam or can you really get good returns on your investment there? A friend of mine says they put $10,000 in there and have earned about 13% a year since 2010. I am worried that it is a pyramid scheme.
- Daniel

You can get good returns on your investment there. However, there is certainly risk involved. You have to be smart when using it.

For those unaware, Lending Club is essentially a short-term lender that allows ordinary people to provide the money for lending and receive most of the interest payments that people make. They tend to target people who are sub-prime but don’t have truly disastrous credit – people who might want a car loan but the local bank won’t sign for them, for example. Investors can supply that money.

The best approach I’ve seen – and something I’m going to talk about in detail in a future article – is to put a reasonable amount of money in there, as your friend did, and then spread that money out across a lot of loans. This spreads out your risk. If you put all of your eggs in one basket, you raise the stakes quite a bit – things will probably turn out fine, but if you put it all on one loan where someone defaults… you lose your money.

Lending Club helps you to do this automatically by allowing you to set up filters. If you set up a reasonable filter – such as not lending to anyone with a credit score under 600 and lending a maximum of $50 per loan – you can earn a pretty good return there (with a few bumps in the road). Lending Club tends to have fewer defaults when the economy is growing (as it is right now) and more when the economy is hurting (as it was in, say, 2008).

Q4: Unexpected $5,000 windfall

I know this is kind of a general question, but what would you do if you had $5,000 end up in your lap unexpectedly. Let’s say you have no outstanding debt to pay down and a healthy 911 emergency fund already exists. I’ve read multiple online articles regarding investing it, yada, yada. That’s all well and good, but I’m really just interested in what you’re take would be.
- Adam

I’d sit down and ask myself what my biggest financial need will probably be in five or ten years. Will I be wanting a house down payment? Will I be scared about retirement? Will I be wanting to save for my child’s college education?

Whatever that biggest worry is, I’d address that worry with the $5,000. If it’s a concern where you think you’ll need the money in five or ten years, I’d lean toward keeping it in cash. If it’s a long-term concern, I’d invest it. If it’s for retirement, I’d open up a Roth IRA and put the money in there. If it’s for a child’s education, open up a 529 for that child.

I don’t know what the specifics of your life are like, so I can’t address what your specific worry would be.

My specific worry is probably related to my children’s education. If I found $5,000, I’d probably split it up among their 529 accounts, giving them each an equal amount.

Q5: Completed journals and identity theft

I am an avid journaler. I tend to fill out a journal in about three months and then I put them in a box in my closet so I can look at them. I like pulling out old ones every once in a while because it’s like reading about me… but it’s not really me because I’ve changed so much.

My concern is with identity theft. The journals have a lot of detail about my life in them and someone could potentially use them as a basis for stealing my identity, right? How do I keep them secure?
- Marcus

I am also an avid journaler. I fill up a Moleskine-sized journal every two to three months.

Honestly, I’m not too concerned with identity theft when it comes to those journals. They don’t contain specific pieces of data about me that people could exploit. They could read them and put together a fairly accurate picture of my life, but it wouldn’t give them passwords or credit card numbers or Social Security numbers. I’d recommend never putting them in a journal.

If this is something you’re worried about, open a safe deposit box at a bank and store them there. Whenever you fill up a new journal, store it there. Another option would be to scan the whole thing, Dismantle the binding, feed the pages through a scanner, and then shred the pages. This would allow you to encrypt all of that writing so that no one but you could ever see them again. You could also move to an all-electronic journaling system, though I actually switched back to pen and paper.

I actually want my journals to be around for descendants to read. I love reading notes from my grandparents and great-grandparents. I tend to look at my journals in that light – what would they like to see? I don’t worry about letting them know personal details because I’ll probably be dead by then.

Q6: 2-for-$3 deals and other bargains

Here’s a great tip for the grocery store. When you see a deal for something that’s 2-for-$3 or 10-for-$10, you usually don’t have to buy all of the items to get the discount. Usually you can buy one item and get the same discount so you could just spend $1.50 to get one of the 2-for-$3 items or $1 to get just one of the 10-for-$10 items!
- Danielle

That’s true if there are no other markings on the sales flyer or the sales tag. However, you’ll often see statements like “Reg. Price $2.39″ that undermines the sale.

Also, if you’re taking advantage of this, watch the checkout process very carefully. Some stores might mention the sale on a tag, but then their computer operates the sale much differently than you would expect, causing you to pay regular price. You really have to watch for this yourself.

While it’s a good idea to keep this strategy in mind, it’s never a guarantee of a discount on each individual item.

Q7: Pitching ideas to national newspapers

How can I go about pitching stories to newspapers like USA Today? I recently did an interview with a big celebrity musician ahead of her tour around the country next month and would like to get it published somewhere with wide coverage.
- Randy

Your best bet is to figure out who the editor is for the section of the newspaper you’d want your story to appear in. Contact that editor directly and pitch your story.

However, unless you have a significant scoop or have a significant media presence already, you’re probably going to get turned down – or, more likely than that, you’ll get no response at all. Most space either goes to staff writers, writers with a relationship with the editor, or to people with a strong pre-existing media presence.

Your best approach is to share this interview online. Find a fan website for this performer and try to get your interview published there.

Q8: Buying a rental property

My husband and I make about $70K per year. We have no children and don’t intend to have any. We own a very modest house free and clear and have no other debts.

We have about $20K saved up and have been thinking about purchasing a rental property. There is a duplex for sale about five blocks from us for $120K. If we take out a $100K 30 year fixed rate mortgage to buy that property, our payments are only $500 a month. We can probably rent out the units for $600-700 a month in our area, netting us more than $1,000 a month in profit.

What are we missing? Why wouldn’t we do this?
- Sara

For one, you won’t get $1,000 a month in profit here. You’ll owe property taxes and insurance on that property, which will eat up thousands a year. Plus, there will inevitably be repair costs, which will be on you as the property owner.

There will also be time investments, as you’ll want to inspect the property regularly. You’ll also be called in to deal with maintenance issues – unless, of course, you hire a management company.

All of this will eat right into that $1,000 a month – and that assumes you can find people to rent that property. That’s far from a guarantee – and if you don’t have a renter, you’ll be losing money.

Q9: Pizza delivery tipping

What is an appropriate amount to tip for pizza delivery? We will sometimes order pizza on Friday nights (for pizza and movie night!) and they will bring two pizzas and I will tip them $5. My wife went crazy when I told her this and said I shouldn’t tip more than $1 for pizza. What is the right amount to tip a pizza delivery person?
- Stephen

You should always tip between 15% and 20%. Delivery people often make their money based on tips and they’re much more likely to hurry to the house of a person who tips well and leave the poor tippers until last – after all, why would you want to hurry to bring fresh and warm pizza to the house of someone who doesn’t tip?

Assuming your pizza total is $20, $3 to $4 is appropriate. If your total is more like $30, you should be tipping $4 to $6. Your $5 tip is right in line.

This is particularly true if you order pizza each week. You likely have a semi-regular delivery guy who will remember you and what you’ve tipped. If you’re a poor tipper, he probably won’t rush that pizza to your house (and, honestly, given how pizza delivery guys make money, I wouldn’t blame him).

Q10: Grocery store pricing trickery

What I’d like to know is whether there is a law in New Jersey (or federally) that if an item is offered at two for $10.00, a single item can only be priced at $5.00. I seem to remember this being made a law.
- Mary

As mentioned in an earlier question, sales that are marked as 2/$10 do not require you to buy two items to get that special rate.

However, there is a big exception. If the tax mentions an individual price, they can charge you the regular price for that item. Retailers will sometimes say things like “must buy 2″ or “buy 10, save $5″ or “buy 5, get 1 free” to avoid this.

There are no standardized laws for this that I’m aware of. I spent a long time digging around to find specific laws in New Jersey regarding this and I couldn’t find any.

Obviously, if a business does not honor their posted sale, there are usually penalties involved. However, the exact terms of this sale seem to vary from store to store without standardization. If you don’t like the price at the checkout, don’t buy the item.

Q11: Different levels of frugality

Do you have any advice on handling different levels of frugality in a marriage? My wife and I are frugal but we do it in very different ways that often contrast each other. Let’s say our blender dies.

I would just wait around and see if we actually needed to replace it or if everything we did with it was handled by something else. I’d only buy one if we needed it. My wife on the other hand will start shopping for a blender immediately and spend two months and a lot of hours figuring out the cheapest price on the best bang for the buck blender. She’ll end up buying it and I don’t even think we need one! So it ends up being a money disagreement.

How do we kill off this disagreement?
- Art

As soon as the item breaks, make a deal with her. Suggest that she can start looking for a good discount for the item, but that you won’t buy it for at least a month. If you don’t see a situation where you actually need the item in a month, you won’t buy it; otherwise, you’ll use what she discovered in her research.

This method lets both of you win. You’re discovering together whether you actually need the item. If you don’t, then your frugal sense should come out on top. If you do find that you miss the item, your wife’s strategy is superior.

Working together like this can save you both money. Even better, it will gradually steer you away from “unitasking” items in your home, pushing you toward reliable items that can be used for a multitude of things.

Q12: No-contract data plans

We’re looking for a no contract pre-paid data-only plan for our laptops for when we travel. We’re looking for something in which we would have the option to pay for a day, a week, or a month. We might also consider a monthly plan if it’s a good deal. We currently have a pre-paid option through Verizon but we’re wondering if there might be a less expensive option out there. Any suggestions?
- Shawn

There are a lot of providers out there offering no-contract prepaid data plans. Ting provides 2 GB per month for $35 without a contract. Virgin Mobile offers 1.5 GB for $25 per month. Both use the Sprint network, and both seem to beat the offers I could find from Verizon.

If you’re just doing pure data, Virgin Mobile is probably better. If you want to incorporate a bit of calling and texting, Ting will probably assemble a better package for you.

I have personally used Ting and had a great experience in the recent past. I have not used Virgin Mobile. However, as I noted above, both use the Sprint network, so I would assume service would be similar for both.

Q13: Dry cleaning

My workplace basically requires everyone to wear a suit. I own five of them and can wear each one twice before it looks wrinkled and you can notice dust and stuff on the jacket, so then I take them in to get dry cleaned. The problem is that it costs like $15 per dry cleaning, so it’s costing me $7.50 each time I wear my suit never mind the eventual cost of replacing it. What are some strategies for minimizing this?
- Kevin

If you’re getting your suits dry cleaned every other week, you’re dry cleaning them too much. You should try very hard to cut that down to once a quarter or so.

If you’re seeing lint on your jacket, you should simply pick up a lint roller and use it all over the jacket. A good lint roller will get rid of all of those specks and fuzzy things.

If sweat or odor is your problem, you should wear a t-shirt underneath, along with plenty of deodorant.

If wrinkling is your problem, try hanging up your suit in the bathroom while you take a shower so that the natural humidity helps remove the wrinkles. Also, it never hurts to learn how to use an iron if wrinkles are a serious problem.

Q14: Identity theft worries

Six years ago the company I bank with asked me if I was interested in a credit card particularly suited for college students. I told them that I was interested and would like more information about it. Several weeks later I received a letter in the mail saying I was denied for that line of credit.

At the time I didn’t care, I didn’t really want that credit card anyway. But now, it bothers me that the bank submitted an application for me, though all I wanted was more information, and that due to being denied, it lowers my credit score.

Is there anything I can do about this so many years after the fact?
- Erica

If this incident occurred six years ago, it should have virtually no impact on your credit score right now. I hesitate to completely say that it has no impact… but it’s not much at all. Most events disappear entirely off of your credit report after seven years and have diminishing returns on your credit score as these events approach the seven year mark.

If I were you, I’d just check my credit report and make sure that everything on there made sense and then forget about it.

However, if this happened in the very recent past (a few months or less), I’d contact the bank’s customer service line and get things straightened out as soon as possible.

Q15: Total value of Amazon Prime

You have said before that your family is a member of Amazon Prime. Do you think it is worth the $80 per year? Why or why not? I feel like I don’t understand why someone would pay for it. Why not just get Super Saver shipping on the stuff you want?
- Arianna

I think it’s worth the $80 per year, for several reasons.

The biggest one occurs when we forget a non-perishable item or two at the grocery store. In order to get a single item that we might have forgotten, one of us will have to make a trip to the store to buy it, not only wasting an hour of time, but also eating up the price of gas and putting a few miles on the car. It not only takes less time but is substantially cheaper to just order that item and see it appear on our front step in two days.

Another reason is that we’re no longer tempted to add unnecessary stuff to our orders to bump them up to the Super Saver level. If I need a book for work purposes or want to buy a $15 gift for someone, I don’t have to struggle to find items to add to the box. I just submit the order and there’s no shipping cost – it just shows up on our front doorstep in two days.

Add on top of that the video streaming, the Kindle Lending Library, and the music streaming and we’re really happy with the annual cost of Prime.

Of course, for it to be worthwhile, you have to make some fundamental shifts in how you buy things. You basically need to price-check Amazon for almost everything you buy that isn’t perishable, for starters, and you have to be willing to give their streaming services a shot.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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