Are You in Control of Your Credit?

The first e-mail about my column today, Credit Cards Cost, No Matter What, came early at 6:57 a.m.

Neal Rubin, a features columnist at the Detroit News, was won over by my argument that even responsible credit card users over spend with plastic.

"I thought today's column about the hidden hazards of credit card usage was so valuable that I referred to it in my Detroit News blog," Rubin wrote. Click here to read Rubin's blog.

I also heard from F. Richard Garland of North Kingstown, Rhode Island this morning. He wrote: "I do pay off my credit card balance each month, but you are probably right to say that I spend more by using a credit card than cash."

Garland pointed something else out about our credit card usage. He said: "Every 'swipe' of the card [don't you love the euphemism - when I was a kid, to swipe something was to steal it] generates a fee. Store owners are a savvy lot - they don't eat the fee as a convenience to the customer for shopping there. The wide spread use of the credit card system has had the effect of raising prices by two or three percent or more to pay for the system."

At 7:57 a.m. I got a nasty note from someone who only identified herself as "Christy." She wrote: "Which one is it? Are we 'suckers' or are our brains programmed to spend more with plastic?"

Well, Christy my dear, I don't have to pick one. We are both. We are suckers to believe we aren't being suckered. And some people rationalize that when they use plastic they spend the same as if paying with cash, even though research and experience shows otherwise.

Let me try to explain to folks like Christy -- who are so brainwashed by retailers and credit card issuers -- why we over spend with plastic. In the quest to get certain rewards like airline miles you may have to spend thousands of dollars. Research shows that you likely would not have bought as much if you had to use cash. So let's say you have to spend $10,000 in one year to get a $500 "free" airline ticket. If you bought $5,000 more stuff or services than if you had used cash, that $500 isn't really such a reward. With the money you don't spend, you can buy your own airline ticket and still make out better.

I will concede that some credit card purchases would have still been made with cash, and some people may in fact spend the same on plastic as they would with real dough. But for many of us, it's just too easy to purchase more with plastic.

"Credit cards continue to be one of our most abiding financial challenges. Combined with retail innovations, such as 800-numbers and Internet shopping, they make every waking moment a potential spending opportunity," writes Stuart Vyse in a recent op-ed for the Providence Journal. Vyse is a professor of psychology at Connecticut College and author of "Going Broke: Why Americans Can't Hold on to Their Money," which was the Color of Money Book Club selection for March.

Vyse also wrote to me today about my column. He's studied quite extensively the use of credit.

"I think that people believe that the only important aspect of using plastic is paying interest," Vyse said in his e-mail to me. "If I am paying off the balance each month, what difference does it make if I use plastic? I get the points for free. But every transaction is a complicated combination of forces. The prospect of points greases the spending response. The swiping habit (or clicking habit) with the card makes impulsive action more likely and also makes it harder to remember how much we have spent in the past. The memory problem alone can cost a lot of money. Using cash or checks takes more time, requires a little math, and, in some cases, requires the foresight of getting to the ATM. It was a very different world when we had a cash-only economy. Banking hours were very inconvenient, which forced us to do a little daily budgeting. Check-writing also involves a bit of record keeping. All of this helps keep consumers aware of their balance sheets in a way that swiping does not."

Got it now Christy?

To read Vyse's op-ed click here.

I also encourage you to read my column Inside the Mind Of a Debtor Nation, a review of Vyse's book.

Vyse was also an online guest in a March live web chat.

Mortgage Misery Continues

I have to be honest, every week I'm tempted to avoid writing about this country's mortgage problem. But how can I when it has led us into a near recession -- if we aren't already in one?

In its latest report, RealtyTrac says more homeowners fell behind on their mortgage payments last month, pushing the number of homes facing foreclosure up 65 percent from April 2007. Actual foreclosure filings -- default notices, auction sale notices and bank repossessions -- were up by 4 percent. One in every 519 U.S. households received a foreclosure filing in April.

The foreclosure trend is also beginning to hit people living really high -- in high-priced homes. At least in the Washington metro area, foreclosures in affluent areas are now increasing, reports Post reporter Kendra Marr today in Luxury Foreclosures.

Marr finds that foreclosure signs, common in less affluent neighborhoods since 2006, are now starting to pop up in the well-off suburbs where homes go for $1 million or more. "Although those kinds of homes are in the minority now, real estate agents predict the numbers will swell," she writes.

To read the RealtyTrac report click here.

And for those homeowners facing foreclosure or fighting to hold on to their homes, legislative action may not help them anytime soon.

As Lori Montgomery and Jeffrey H. Birnbaum reported recently, more than 1.2 million homeowners may be left without aid if Republicans and Democrats don't come to an agreement on a housing bill.

The two political sides have been in negotiations for more than a month. But talks broke down last Friday, and finding a bipartisan proposal to ease the nation's housing crisis may not be feasible. Read Senate Talks Collapse On a Housing Bill (May 13).

If you're in the market to buy or sell despite recent housing events, it's likely you won't have trouble finding an agent. Your brother, cousin or neighbor is probably one. Check out Your Friend, Your Agent? (May 10). The National Association of Realtors has more than 1.2 million members writes Beth Gilbert. With all those members, you're bound to know a few. Gilbert offers tips on how to preserve a friendship, navigate pitches and pick the right real estate agent for you.

At least some in the mortgage business are seeing some growth.

Islamic finance companies are offering Muslim home buyers mortgage financing alternatives that allow borrowers to avoid paying interest on their loans, which many believe their religion forbids. Read more from N.C. Aizenman's A Higher Law for Lending (May 13).

Tough Times Spur Thieves

Now that metal is selling for record high prices, thieves are looting construction sites and stealing massive sculptures in the middle of the night. Some crooks have even resorted to taking gravestone plaques. And homeowners are not exempt from this type of thievery. Burglars are also stealing copper wiring and metal pipes from homes.

Officials are now taking steps to stop this crime. One man could be facing up to 245 years in prison for trying to sell large amounts of copper to scrap metal business owner Dave Fusselman. Check out Thefts Rise With Copper Prices (May 11) by Kari Lydersen.

Soaring gas prices have also resulted in a spike in gas thefts. Read more in "U.S. Gasoline Theft on the Rise Along With Prices" (Apr. 24).

All across the country motorists are being hit with this problem. See some broadcast news reports from around the country including:

* Tulsa, Okla.

* Augusta, Ga.

* Hamburg, N.Y.

* Orlando, Fla.

You might want to invest in a gas cap with a lock or buy a bike. Read Gas Prices Knock Bicycle Sales, Repairs Into Higher Gear" (May 11) by AP reporter James MacPherson, who reports that more Americans are dusting off old bikes or buying new ones as gas prices skyrocket. Some are even using bikes for year-round commuting. Steve Stelton, 47, of Bismarck, said he's in shape because of it and has saved "a ton of money on gas."

Inflation Cools Summer Travel

A new survey has found that 57 percent of Americans plan to spend less money on summer trips. A third of vacationers said in a survey that they plan on staying with family or friends. Scott Vogel from our Travel section offers some tips from bargain travel experts for saving while on vacation. Here are a few:

* Steer clear of hot spots. Instead of Paris, Spain and Britain, try Bulgaria, Turkey and Romania.

* If traveling by air, fly on a Tuesday or Wednesday. Use booking sites that can show you what days airfares are at their lowest.

* When choosing a hotel, call around because some are now offering gas cards as an incentive to prospective hotel guests.

You can find more tips in This Year, The Heat's Really On (May 11).

Find the best travel bargains by air, land and sea in What's the Deal? (May 11) a weekly roundup of travel deals by Carol Sottili.

Burn Baby, Burn

Would you burn your tax rebate check in protest?

Tim Donaldson, a 43-year-old schoolteacher, burned his $618 rebate check to provide warmth for his wife and two sons.

"It burned for quite a while," Donaldson said.

And if you believe that story, you still believe in Santa Claus.

There is no Donaldson, although the sentiment may be real for a lot of people. The check-burning story appeared in The Onion, a satirical Gen-X newspaper. You can read the fake story here.

I doubt anyone would go to such extreme measures to protest the way the government is trying to stimulate the economy, and I'm sure Jonathan A. Parker, a finance professor at Northwestern University certainly would advise against it. Parker wrote recently that it was our civic duty to buy things with our rebate checks.

I asked if you agreed with Parker. Here are some responses:

"We really need to get away from the consumerist society we've become," said John Kenyon of Wheaton, Md. "I'll be retiring one more credit card with my rebate, by the way, which will leave me with just one small clump left in my path toward living totally debt free."

Ruth Ann Monti of Scottsdale, Ariz., writes: "I used my stimulus check to help with once-a-year expenses such as car registration renewal and the dogs' shots. I also used it to pay for a Chinese language and culture camp my son wants to attend...Sorry retailers!"

Donna Miles had plans for her rebate check, and then she got her mortgage statement. Miles was $120 short. So, she'll be paying that off and replacing her car windshield. The St. Louis, Mo., native said, "Jonathan A. Parker will be disappointed in me, I will not be boosting the economy."

"Since when is consumption our civic duty?" asks Eric K. Abrams. "Tell ya what; Mr. Parker can use his check to buy me something nice...As for me, I'm investing while the market is low, and paying down home improvement debt with my stimulus check," says the Bow, N.H. resident.

Shauna Jones said that minus the $116 she owes the IRS, she's saving half of her rebate. She'll put it in her "emergency fund."

"I'll take the other half to the grocery store and buy as much food as I can and take it to our local food bank. I have been so strapped the last three months I have not been able to donate because I could just barely feed myself," says the Harviell, Mo., resident.

Taxes Still Due

Jones isn't the only one who owes the IRS.

In October 2007, federal employees racked up a bill of $1.23 billion in overdue taxes. These are people who have not filed a tax return or who have an unsettled income liability. Even the White House and Congress have tax slackers. Roughly 212 of the 6,700 employees in the Senate and about 38 workers in the Executive Office are delinquent writes Federal Diary columnist Stephen Barr in Tax Deadbeats on the Government Payroll (May 13).

Let's not forget Wesley Snipes either. In April, the actor was sentenced to three years in prison for failing to file his income tax return. Snipes was ordered to pay $17 million in back taxes, penalties and interest.

Don't be like Snipes. If you haven't paid your taxes, read It's Better To File Late Than to File Later (Apr. 20).

You are welcome to e-mail comments and questions to singletarym@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Charity Brown contributed to this e-letter.