A classic tip for those looking to lower their cable television bills or their credit card interest rates may work in the world of auto insurance. I was reading a Consumerist post about USAA’s website technical issues and their response to, for a few hours, “losing” a woman’s IRA when I saw this little gem in the comments:

xspook: I had their auto insurance for many years. I decided to shop around and found a much cheaper (over $600 a year savings) policy elsewhere. When I called to cancel, they offered to lower my policy, but couldn’t match the price I got elsewhere. That actually pissed me off, because, as a 10 year loyal customer I should’ve been getting the best price. Now that I tell them I’m leaving, they reward my loyalty with a lower price. Adios USAA. (emphasis mine)

Insurance is a tricky business that I know only a little about. In reading the Berkshire Hathaway Letters to Shareholders, the traditional payout on insurance premiums always seems to be in the 90’s (they make money by investing the float between when premiums are collected and claims are paid). That confirmed something I’ve always believed, that a large component of my car insurance premiums were dictated by risk. Riskier car? Higher premiums. Some accidents or speeding tickets? Higher premiums. Fair enough, that’s why I get insurance, to protect me.

But this little anecdote showed that threatening to leave your car insurance (or any insurance provider) can lower your premiums. I imagine the game that gets played is that all the organizational discounts, good driver discounts and such are up for grabs if a CSR can get you to stay. Who knows?

Either way, shop around for insurance and try twisting some arms to see if you can get a better rate.

If you’ve bought yourself a new car and are looking to get rid of your old one, or simply want to get rid of a car, consider donating it to an organization that accepts car donations. Selling the car will almost always be better than donating from a financial standpoint, but donating offers benefits that may trump the money depending on your situation. After detailing five reasons why you should donate your car, I’ll give a few scenarios where donating is better than selling.

Here are five solid reasons why you should donate your car:

#1. Selling Is A Pain

Selling a car is a pain in the ass. First, you’ll need to advertise somewhere. You can put it on Craiglist or eBay and do the new school thing, or go classic and chalking up “For Sale” on the windshield and leaving it by the road. If you go with Craigslist, you have to deal with all the local flakes, crazies, and lowballers who are looking to snatch up a good deal. With eBay, well, you have to deal with the national flakes, crazies, and lowballers who may or may not rip you off. If you leave it by the road, it might get towed, it might get broken into, or you simply won’t get enough interest. It’s no secret that selling a car is a pain.

#2. A Wonderful Tax Deduction

If you’re already a charitable person, consider donating your car rather than cash. While it is a bit more work for your charity, it’s still a win-win for both parties. Most charities that accept vehicle donations know what to do with them, so really there is minimal headache on your part. Most will be able to appraise your car or simply offer a receipt that lists the Kelley Blue Book, NADA or Edmunds private party value as long as it’s under $5,000. If it’s over $5,000, then you’ll need an independent appraiser but that’s usually not a big deal.

#3. It’s Done As-Is

If your car needs improvements, then the organization will make them and list the improvements on the tax receipts. You won’t have to fix up problems with your car beforehand. While you could sell your car as-is on the open market, chances are the number of interested parties is going to diminish tremendously. Prospective buyers will want to have a mechanic check it out, they’ll take it for a test drive, and they’ll otherwise need to go over the car with a fine toothed comb. You can’t fault them, if you were going to drop a few thousand dollars on anything, you’d go over it with a fine toothed comb too.

#4. It’s Fast

Want to donate? Call up the organization and let them know. They take care of it all from there. Think of all the time you’ll have saved by not having to show the car, not having to go on test drives, not having to meet prospective buyers in a random parking lot, not having to give out your private information to strangers, and not having to worry about whether you’ve missed anything (taxes? sales receipt? title?). The organization takes care of it all (many offer free towing too!).

#5. It’s A Good Thing(tm)

At the end of the day, you know that you’re doing something that helps an organization and its members. By selling, you don’t get as much for your car as you would by selling it (presumably). If your car is worth $5,000, you get a $5,000 charitable deduction off your income for the purposes of taxes. If you’re in the 25% tax bracket, then the deduction is worth $1,250 of cold hard cash. If you sell the car for $5,000, then you get $5,000 of cold hard cash. It’s a significant difference but ultimately you’re doing a tremendous service to that charitable organization.

When Donating Is Better $$$

If your car needs extensive repairs before you could sell it and you don’t have the funds to repair it, donating is going to be a better option for you. My wife’s car had a blown head gasket that pretty much killed the engine on her car. If she wanted to sell it, she’d have to overhaul the entire engine and that would’ve cost a significant amount of money. So instead, she donated the car to the local school so that the shop class could work on it. She received a sizable charitable donation receipt, the school received a car they could work on, and everyone was happy.

(Photo: orinrobertjohn)

This week, my wife and I went to Costco and picked up two bikes that we’d been looking at for quite some time. Some cycling purists would say that you should always get a bike from a local bike shop. While I agree that the personal service at a local bike shop is far better than at Costco (no explanation necessary), the reality is that there are two reasons we are getting these bikes and neither involve hardcore mountain biking or racing.

First, our little suburban area of Columbia is designed for biking. All the little shopping centers and parks and lakes are separated by an intricate network of walking and bicycle paths. On Wednesday, I rode around a nearby lake, through some paths, and popped out beside a little shopping center with a Subway to eat lunch with my wife and her co-worker. On the way back, I did some exploring and easily found the right path to take if we ever want to bike to our favorite Chinese restaurant, Hunan Manor, as well as our gym. Forget walkability scores, bikability is where it’s at.

The second reason is that I work from home and find myself doing a lot of intra-city driving to places where I am taking small roads. Why not replace the use of my car with a bike? Lower my already relatively small carbon footprint, get some exercise, and enjoy the fresh air! I’m not ready to sell my car but I’m certainly going to be using it less and less now that I have a bike.

The bikes were a good $200 a piece. While in the pantheon of bicycles, $200 is considered cheap, in the pantheon of bicycles I’d be willing to buy, $200 was about the limit. I understand that you get what you pay for and a “good bike” costs in the thousands, but I don’t know and cannot appreciate the difference. My wife doesn’t know and cannot appreciate the difference. For now, we can enjoy the heck out of our $200 bikes and then upgrade if necessary. We are acting our age financially.

For security, we bought two OnGuard Bulldog STD 5010LM Bicycle U-Locks as they were the highest rated sub-$30 lock by Scott Elder of Slate.com. He wrote about his experience trying to break into a whole bunch of bike locks and this one was the best of the bunch under $30. Again, you can spend much more for a beast of a lock (and those with $5000 bikes should buy a beast of a lock), but these should fit our needs just nicely.

Do you own a bike? Any tips or suggestions?

The price of gas has dropped by a significant amount the last month or so (though a barrel of oil popped up $6 yesterday!), we might be looking at the beginning of oil slipping out of the stratosphere (could be lowered demand, could be speculators running for the exits, who knows!?). This begs the question, will all of our energy consumption habit changes stick?

Whenever people think of high fuel prices, they think back to the energy crisis of the 70s. One big difference between this last energy crisis and the 70s was that in the 70s, there was rationing. If you wanted fuel, you couldn’t necessarily get any. In the energy crisis today, and I loathe to even call it a crisis, you can buy gasoline anytime you wanted to. It might have been close to four dollars a gallon but you didn’t have to wait in lines or wait for the right day to buy. I think that’s a huge difference.

Here’s the scary part. The last energy crisis should’ve been a wake up call … but we hit the snooze button. Here we are, dealing with our reliance on oil, and there’s nothing that says our changes and the presidential campaign rhetoric this will result in action. I never lived through the last energy crisis but the stories I’ve read show a time when that crisis had a greater impact on one’s life.

As a naturally frugal person, I didn’t make many changes to my life to conserve energy. I’ve always had an eye on the recurring costs of things like my car, so I’ve never had a gas guzzler. I own a Toyota Celica and my first car was an Acura Integra, both are efficient with fuel. I try to use as little energy as possible, even before electricity prices spiked dramatically in Maryland, simply because I didn’t want to pay for something I didn’t need to. Let’s be honest, I need the money more than the power company!

So I’m fairly confident that any changes I have made will stick because they’ve been so tightly integrated, I feel as though I never changed in the first place! How about you?

(Photo: notjake13)

We’ve made it through four of the seven deadly sins of personal finance and touched on many good topics so far. The first few were easy - have an emergency fund, don’t raid your retirement, budget, and plan and project for the future. We’re starting to get into a bit of the hazier areas of personal finance, where the answers are quite so clear cut and where much of it depends on you and your specific situation. You could argue that failing to budget isn’t so bad a sin, the reality is that math will do the budgeting for you if you decide you don’t want to. When you run out of money, you’ve hit your budget.

I doubt anyone can argue against today’s deadly sin…

Being Improperly Insured

The reality is that insurance is a very difficult subject to tackle because it provides you protection against the unknown. Since you’re protecting against the unknown, it’s difficult to know how much protection you’ll actually need. Insurance is also very temporal. When you pay the premium for the month or the year, that protection is gone once the insured period passes. I’ve been driving for nearly five years and never once made a claim. That’s five years of auto insurance premiums gone. (I’m not complaining, I consider myself very lucky!)

But you can’t look at insurance that way and many people do. Insurance is a hedge against unknown events that could potentially bankrupt you and it’s a way for you to purchase peace of mind. So, how do you ensure you have the right amount of insurance? How do you avoid getting too much coverage or too little? Sadly, it’s mostly a judgment call but here’s how I approach it.

My approach towards insurance is that it should protect against catastrophic events. Not everyone is like that and that’s certainly not the “right” or “best” way to approach it, I don’t know what the “right” or “best” way is (or if there even is one). My tolerance of risk is such that I’m comfortable with assuming some self-insurance (high deductibles) in order to pay lower premiums.

How should you approach it? I can’t answer that other than to say that you have several factors that will affect how you adjust your coverages and deductibles:

• Assess your financial situation. If you have a fully funded emergency fund, consider increasing it and self-insuring through higher deductibles. If your current automobile insurance has a deductible of $500, increase it to $1000 and put the premium savings into your emergency fund. If you work in a volatile industry or have irregular income, consider adjusting your insurance so that any negative events don’t cause extreme financial distress.
• Known your own “riskiness.” If you’re a bad driver who is prone to accidents or mishaps, lower your deductible. There’s no sense in being prideful and making the wrong financial decision by increasing deductibles or removing certain coverages. If you live in a dangerous neighborhood, lower your homeowners deductible so that you’re better covered in the event of a break-in or fire.
• Know the statistics. Some cars are burglarized more than others, some neighborhoods are rougher than others, and some ethnicities are more prone to some medical problems. Be aware of these statistics, many of which can be found online, and use them to adjust your coverages.
• Your tolerance towards risk. If peace of mind is priceless to you, adjust your insurances so that you obtain that. You can’t quantify stress and all we know about its effects are that it’s bad on the body. Paying a few extra dollars so you can sleep better at night and prevent a few gray hairs is money well spent. Frugality is important but your health is more important.

I’m sure there are actuaries who know insurance backwards and forwards who would disagree with me, if you are such an actuary I invite you to let us know what you think.

Well well, it looks like we finally have the return of a long lost cash back favorite from a year or two ago… the coveted 5% cashback on supermarkets, drug stores and gas stations credit card in the form of the Citi Diamond Preferred Rewards card.

A few years ago, there were a dozen of these types of cards. In the last year, that number dropped to zero. Those that did exist only offered it on gasoline and imposed ridiculously low limits such as the Discover Open Road card (gives 5% on gasoline but only up to $5 a month!). Back in the heyday, each were vying for “share of wallet,” the industry term for how much of your spending gets put on their card. They often earn a couple percentage points per transaction so the hope is that you use the card for more than the 5% categories, which is a loss leader for them (this ignores the finance charges, fees, and other charges they impose for a variety of reasons).

Looks like they’re making a come back with the Citi Diamond Preferred Rewards card is leading the way.

Any catches? Yes, there are a few. Like all Citi cards, the cashback now comes in the form of ThankYou Network points rather than straight up cash. Those with student loans can convert the points into “cash,” making it a truly 5% cashback card. If you don’t have student loans, you’ll have to take it in the form of gift cards to get a full percentage value. You can always sell the gift cards and still get close to 5% cashback in the worst case.

Another catch is that the 5% promotion is for the first 12 months. I normally don’t like promotional offers (with the exception of when the Citi CashReturns had 5% cashback on everything) but right now this is the only card that offers 5% on the “everyday shopping” category (which includes supermarket, drug stores and gas stations). There are a couple alternatives if you’re looking for a gas cashback credit card, but none exist (to my knowledge) for supermarkets.

Finally, the only limit on cashback is an annual limit of 75,000 ThankYou points - it’s unlikely you will reach that limit ($15,000 in spending in the 5% categories!).

Some other features that may be of interest: 12 month 0% APY balance transfer, no annual fee, 1% cash back on everything else. The 12 month 0% APY balance transfer is nice but it has a balance transfer fee of 3% with no limit, I’d pass on that. The no annual fee is standard and the 1% cashback on everything else is also pretty standard.

Overall, I think this card is a good option if you’re looking for a way to shave 5% off your supermarket and gas bills.

Update: Other 5% Cashback Cards

Since writing the post, I’ve received numerous emails about two other credit cards that offer cash back in this category: Blue Cash from American Express and the Chase Freedom card.

Blue Cash from American Express. The Blue Cash from American Express offers 5% cashback at supermarkets, drugstores and gas stations with no limit whatsoever. The card also offers a 0% balance transfer for 12 months with a 3% transfer fee capped at $99.

Chase Freedom. The Chase Freedom card is a slightly different type of cashback card in that it gives you 3% cashback in your top three spending categories (which can change based on your spending each month). It’s not a 5% card, despite what some people claim, but I mention it because it’s better than 1% and they offer $50 cashback after your first purchase.

Last winter, I did a fair amount of driving in the outskirts of Washington D.C. and on one of those occasions, hit a pretty nasty pothole. I was only about a mile away from my destination so continued onward and then checked on the tire after I parked. I looked at it and, fortunately, no big deal. After my meeting, I drove back to my office. It was an uneventful, leisurely (stop & go traffic) thirty minute drive. After parking, I didn’t check the tire and just went inside. I didn’t notice I had a flat until I came back out, three hours later, at the end of the day to go home. Sonofa… fortunately, I had a spare and I had Costco tires, so I drove over to the local Costco and had the tire repaired for free (a great reason to get your tires from Costco if you can stand the wait).

One of my friends, he wasn’t so lucky. In fact, he saw the same pothole day after day after day (even calling it into the Virginia Department of Transportation, or whatever agency is in charge of roads in Virginia) on his commute and one day, by freak accident, caught the edge and it tore up his tire’s sidewall. He was furious. He saw that pothole every day, even reported it, and still it persisted and he wanted to know if he could get reimbursed for it.

Apparently it’s not a common problem. According to TRIP, a national transportation research group, “deteriorating urban pavement conditions cost the average driver more than $400 annually.” Four hundred dollars! The worst offenders are major metropolitan areas such as New York, San Francisco, Los Angeles, and even Baltimore, but TRIP estimates that 23% of major metropolitan roads are in poor condition.

Did you know that damage caused by a pothole may be reimbursable by the county, city, or state depending on the circumstances? Until my friend mentioned it, I didn’t.

Can You Win?

Governments aren’t as good at paying back money as they are about taking it in the first place, so you probably want to be pretty confident that you’ll win before going through the arduous process. The transportation authority is responsible for the damages if you suffered damage after they knew about the existence of the pothole. In some places, the transportation authority doesn’t even need to know about the existence of the pothole for you to be reimbursed. In those areas, it’s assumed that the responsibility of road maintenance falls on the transportation authority at all times. It’s pretty much a crapshoot.

How To File A Claim

First, you need to get your documents in order. You will need to provide repair bills, record of the location of the pothole, as well as the time and date of the accident.

Next, you need to determine who is responsible for the road. If it’s a city road, you’ll want the city’s Department of Transportation. If it’s a county road, you’ll want the county’s Department of Transportation. Lastly, if it’s a state road, then go to the state’s Department of Transportation. Some governments have online forms for you to fill out, otherwise require a phone call, but ultimately you might want go the route of the telephone so you talk to someone and get the full story on what the rules are for your jurisdiction.

Your claim may not be paid out but it’s worth a shot, sure beats filing a claim with your insurance company and getting your rates jacked up.

(Photo: rudiriet)

This week I had the pleasure of chatting with Tess Vigeland of American Public Media’s Marketplace Money show, BeingFrugal.net’s Lynnae and Steve of Brip Blap for an upcoming segment on personal finance bloggers. It was a lot of fun and an honor to participate in a show that I listen to every week (I listen to the Morning Edition and daily show every day, Money is only on during the weekends) and a lot of fun to chat with Lynnae and Brip Blap . I don’t know when it’ll appear but I’ll keep you all posted.

Why not start the roundup right with a couple posts from Lynnae and Steve? Steve’s latest post is about work life balance. We deal with it here as well, my wife has a 40 minute commute that artificially inflates her “at work” time by an hour and a half each way. Fortunately her office is moving to a new facility five minutes away, but for many the answer isn’t that easy.

Lynnae has a great vacation tip for her Tightwad Tuesday series: rent a vacation home. You pay a little more but you get a lot more than if you go the regular hotel route.

Interviews!
I also had a little three question interview with Shark Investor in which I bared my soul, shared all the secrets I knew, and gave away money. I actually didn’t do any of that but I did answer three questions and had a good time doing it, go check it out.

Preparation Is Crucial
What separates the people who are financially successful and those that find themselves always mired in debt? Preparation. Money Saving Mom is a blog I just discovered that I absolutely love. Besides compiling all the great couponing deals in an easy to read manner, she’s also what I consider financially successful. I have no idea what her bank account balance is but it’s not important because of how she responded to a negative comment on her site. A commenter lambasted her about van and how she should just buy a new car. She could buy a new car, but she hadn’t planned or prepared for it… so it’s not going to happen. “But here’s the deal: while we have money in our bank account, we don’t have money saved or allotted for a new vehicle or even a used vehicle.” That thinking separates those that are financially successful and those mired in debt.

Do Not Mix Business With Friends
A post on Alpha Consumer caught my eye this week, it was a sad story of a friendship gone wrong in a business transaction. If you want a legal perspective on the case, Kim called on Kathryn Dickerson, a partner at Smolen Plevy, a Vienna, Va., law firm.

If you want my opinion, it’s that if you mix friendship with business, be very clear in expectations and get everything in writing to avoid conflicts. I’ve heard many a story where friends thought there was an understanding… until there wasn’t, because nothing was written down and memories fade.

Unlimited Usually Doesn’t Work Out
We, as human beings, are really bad at predicting usage and so this Consumerist article about NYC Unlimited Metrocards, which is highlighting a NYTimes article, isn’t that surprising. We usually overestimate how much we plan on using something and so the a la carte option, of paying as you go, may usually work out better than the unlimited option. Ahhh we are so predictably irrational!

Here are a few other great posts in the blogosphere you should check out:

• Lazy Man is selling his endorsement of Prosper loans to the highest bidder! Buy his endorsement and pay a lower rate, it’s totally worth it! (it’s a joke)
• SVB writes about the MPG illusion, fuel efficiency is on everyone’s mind with high gas prices.
• Nickel discusses freezing your credit, a great preventative measure if you don’t foresee needing credit (or don’t mind the hassle).
• Flexo wonders if we’re turning it around or is our market optimism a little early. Personally I think it’s early, all these CDOs still have to get unraveled and considering how corporate accounting works…
• I haven’t seen it yet but guess what Kung Fu Panda can teach you about becoming a millionaire!
• Need something cheap to do this weekend? How about this list of 100 free things to do this weekend from The Simple Dollar?
• Last but not least, Jeremy of GenXFinance writes from the front lines: Changing Your Risk Tolerance Based on a Bear Market.

Have a great weekend everyone!

Some friends and I were recently discussing rental car strategies, one of them was planning a vacation to Hawaii, when the subject of debit cards came up. None of us had ever rented a car with a debit card before (we did begin our personal finance development in the era of free and cheap credit after all!) and that was the only card my friend had! To be honest, I didn’t think it mattered if the card was a credit card or a debit card (and I erroneously said so!), but I was wrong.

I usually advise against the use of debit cards because the card is linked directly to your bank account. One erroneous or fraudulent charge can have a cascading effect that generates an avalanche of fees and penalties. I’ve read and heard many a story of a dozen insufficient fund fees and low balance fees following some key-in error, it’s terrible.

Anyway, it turns out that renting a car with a debit card is a big pain in the ass. The reason is because your “credit limit” is really the funds within your account, unlike with a typical credit card. The end result is that many companies will tack on a “reasonable premium” to cover the rental period and potential overages such as fuel and damage to the vehicle.

For your convenience, here are the policies of major companies:

• Hertz: You can reserve a car with a VISA/MC debit card and a hold will be placed for an “estimated amount of the rental charges plus a reasonable amount to cover any incidental charge.” No mention of what “reasonable amount” means though.
• Enterprise: Policies appear to vary from location to location so you’ll have to call the rental site for actual requirements.
• Budget: Again, like Enterprise, some locations accept them and some don’t. Under 25 can’t use a debit card though. The ones allow debit cards require a hold for the estimated charges plus the greater of 25% or $300 (or $500 in the Northeast and North Central regions).
• National, Alamo: These companies are both owned by Vanguard Car Rental USA Inc. so they have the same policy of allowing debit cards.
• Avis: They allow debit cards and they will put a hold for the estimated rental charges with a minimum of $500. If you don’t spend $500, the balance will be returned but may take up to two weeks!
• Dollar: They allow debit cards and will put a hold for the estimated amount of the rental plus 15% or a “minimum amount,” which isn’t specified. In that General Policies page, it’s section F. Credit Qualifications/requirement.
• Thrifty: Some locations will allow debit cards and may require a “debit card check and credit inquiry screening,” whatever that means. The debit card must also be a VISA/MC debit card, anything else isn’t accepted.

As you can see, using a debit card is a bit of a pain and sometimes the hold can last up to two weeks after the rental! That’s a very long time.

My advice? Get a credit card with auto rental liability insurance and use it to rent your car. The card provides some supplemental insurance, you don’t have to deal with debit card hassles, and maybe you earn a few points along the way.

According to howstuffworks.com, the United States consumes about 400 million gallons of oil a day across 100 million households, or approximately 4 gallons per household per day. If you drive a 25 MPG car, that’s a hundred miles of driving a day. How does your household stack up? You using more or less than your four?

If we melt Greenland, we can get 50 billion barrels of oil. Actually, it’s already melting and oil companies already have oil exploration licenses to start poking around in Greenland. So, really we need to do nothing differently. Oh, and I heard penguins and polar bears make excellent soups so let’s melt the ice from under them too.

General Motors, as of the recent IRS report, has sold a mere 8,485 hybrid vehicles. By comparison, Toyota crushed the 60,000 limit and Honda just recently exceeded it. Ford is over halfway there. GM is, well, slightly slower out of the gate but remember the tortoise beat the hare.

The Tesla Roadster is a fully electric car made by Tesla Motors. On a single charge, it can travel 220 miles with an efficient of a reported 4.7 mi/kW·h which is the equivalent of 135 MPG. $100,000 is the price of one of the Tesla’s “Signature One Hundred” in all its tricked out glory. Fortune just published an article yesterday about the Tesla.

Have a great weekend everyone!