Les Misérables 2.0: the American consumer.
That’s the theme of of Dean Bakopoulos’ second novel, “My American Unhappiness.” The book follows the personal and financial struggles of Zeke Pappas, a 33-year-old scholar who interviews Americans about why they are discontented for his pet project, the “Inventory of American Unhappiness.” Bakopoulos started writing this book in 2007 – just before the recession hit. “Like many people, Zeke was living pay-check-to-pay -check and was willfully ignorant about what was coming.”
Bakopoulos, 36, a professor of creative writing at Grinnell College in Iowa, had his literary debut with “Please Don’t Come Back from the Moon” about the men of a small, depressed Michigan town who take off for the moon, leaving the women and children behind. And he has just finished a new yet-to-be-published book called “Evolve.” That too is another bleak commentary on American consumerism. The plot? Class warfare breaks out over an addictive new energy drink.
In the spirit of Zeke’s “Inventory of American Unhappiness,” Pay Dirt asked Bakopoulos why he believes Americans need cheering up.
For years, credit cards have been offering rewards to consumers who spend. Now, a new company does just the opposite: it rewards consumers who save. And the prizes are eye popping: a trip to Hawaii, a Toyota Prius, a $50,000 college scholarship. The catch? Good luck getting them.
Launched today, SaveUp rewards consumers who pay down their debt or put more cash into their bank accounts. Here’s how it works: Consumers link their debts (including credit cards, car and student loans, mortgages etc.) and bank accounts from pretty much any U.S. bank to their SaveUp account. The site automatically awards 1 credit for every dollar saved or every dollar of debt paid off.
Not only is it encouraging healthy financial behavior, but consumers can rack up rewards points much faster than when they swipe their credit card. Most credit cards give just one to three cents back on every dollar a consumer spends. And there’s no cost to using SaveUp – it’s free to all consumers.
Buy dog food at the pet store today and tomorrow you might see ads online for grooming tools or training classes — if credit card companies are allowed to target consumers based on their purchases.
MasterCard and Visa are working on plans to market their transaction data to advertisers, according to today’s Wall Street Journal. Currently, targeted ads only reflect browsing behavior and purchases on particular sites, but companies want to be able to sell advertising based on offline transactions as well – a change that is already raising privacy concerns.
“People don’t like to be tracked by what they buy,” says Linda Sherry, a spokeswoman for consumer advocate Consumer Action. The companies could also hand over enough information that marketers can vary pricing based on number of visits or previous purchases. “That just seems totally unfair,” she says.
It looks like consumers are not preparing to cut up their credit cards just yet, despite a background of economic uncertainty and fears of a double-dip recession. Experts say that means retailers will want to take advantage of this confidence while it lasts with early sales. Interest rates on credit cards fell to below 13% in the second quarter of the year – according to new data released Friday from the Federal Reserve – hitting 12.92% down from 13.48% in the first quarter.
Although the Fed’ report showed consumer credit unexpectedly plummeting by $9.5 billion last month – the biggest decline since April 2010 – analysts say that drop is to do more to banks writing off debt than consumers changing their behavior. When that’s taken into account, consumer credit actually rose 66% in the second quarter, says Odysseas Papadimitriou, the chief executive of CardHub.com.
After a few years of austerity, credit card debt is rising again. According to data released this week by credit-card comparison web site CardHub.com, consumers racked up $18.4 billion in credit card debt during the second quarter of 2011, 66% more than what they amassed during the second quarter of last year and more than four times what they did two years ago.
At the current rate, consumers are on track to end the year with $54 billion extra in credit card debt, following a $9 billion increase last year. That suggests consumers are amassing credit card debt at a faster rate than ever, says Odysseas Papadimitriou, chief executive at CardHub.com.
This spike, however, occurred while the economy was still on the upswing and consumers were feeling relatively good about their financial outlook. That has changed in the last few months, and the volatility in the stock market and unpredictability in Europe could cause consumers to reverse course in the third quarter, says Papadimitriou.
A gold card just isn’t what it used to be, now that card companies are making premium cards available to, well, just about anyone.
But for shoppers looking for something truly exclusive to carry in their wallet, a card that keeps out the riffraff, say, banks have created new, super-premium cards. Among the contenders:
JP Morgan Palladium. Launched this spring for the financial services firm’s high-net-worth private banking clients, the card is made from an estimated $1,000 worth of actual palladium. For an annual fee of $595, the card offers no spending limit and a long list of benefits, including free first-class upgrades on British Airways when you buy a full-fare business-class ticket, a free hour of flight time with the purchase of a 25-hours at a partner company that charters private jets by the hour, unlimited access to many airport lounges… and two points per dollar spent on travel, one point per dollar on everything else.
Fewer consumers are up to their eyeballs in credit card debt these days — but for some, a lower credit card balance is coming at the expense of the mortgage.
The average consumer has an average of $6,355 in credit card debt, according to a CreditKarma.com report released today — 18% less than this time last year. Consumers are getting better about paying on time, too. Last week, a study from credit reporting bureau Experian found 20% fewer consumers are 60 days late on their credit card payments than were in 2007, while a separate study from TransUnion this week said the 0.6% who are 90 days late is the lowest in 17 years.
As recession-weary families crunch the numbers, higher education becomes even more of a budget-blaster. But a SmartMoney.com story, “Colleges That Help Grads Get Top Salaries,” can help focus decision-making. SmartMoney’s Matthew Heimer took reader questions about the value of an Ivy League education, compared to non-Ivy private schools and public universities on August 11. Replay the event.
The recent market machinations are the latest indicators that the economic outlook is anything but rosy. For consumers, it’s not a bad time to reassess your financial picture and make a new commitment to saving and paying down debt — the right way.
A study in a forthcoming Journal of Marketing Research found that consumers often take what can be an expensive approach to paying down debt: They wipe out small balances first rather than focusing on the balance with the highest interest rate. “Our research finds that people really like closing accounts,” says study co-author Cynthia Cryder, an assistant professor of marketing at Washington University in St. Louis, Mo.
There’s new evidence that whether or not you’re trying to keep up with the Joneses, their fiscal fitness — and that of everyone else in your city — has an impact on yours.
This month, Men’s Health — perhaps better known for its “fattest cities in America” feature and shirtless male cover models – has now graded the financial fitness of 100 American cities. The magazine examined personal bankruptcies, average credit scores, debts, late payment rates, credit usage, homes in the foreclosure process, spending on housing and average 401(k) contributions to award grades from A+ to F. Lincoln, Neb., topped the list and was one of just six to receive an A+. Dead last: Las Vegas. (The opening salvo: “Have you heard about the new high-stakes game in Vegas? It’s a gamble called ‘living there.’”)
No surprise, the list is heavily influenced by to the poor economy: the bottom 10, along with Sin City, also includes five California cities and two in Florida. It’s not a stretch to guess the housing market collapse and high unemployment rates have led consumers in those troubled areas to put more on their credit cards and less in their retirement accounts.
Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to firstname.lastname@example.org or tweet @SMPayDirt.