This Lazy Sunday comes to you… on a Monday. I specifically waited an extra day so that I could post the results of the blog scholarship - voting for which ended at 3am Eastern time, this morning.

Congratulations to Kim Klein, the grand prize winner! She’ll have a nice $10,000 to help her get her law degree!

I didn’t make grand prize, or runner-up, but thanks to all of you, I did make the Top 10, which means I’ll be receiving a nice $100! Hey, don’t knock that $100 - that’s two textbooks I don’t have to pay for!

A lot of people have come to me about the “unfairness” of awarding a scholarship, especially one of this size, based on an internet poll. I don’t want to sound in any way like an ungracious loser, but I tend to agree. I hope that if College Scholarships.org offers this again next year, they will reconsider the award process.

In other Lazy Sunday news…

REPORTER magazine has their new site up and running, so if any of you are interested in reading the article I was interviewed for, you can now access it online. The article is the cover story from the September 14th issue (PDF), and it starts on page 9 of the PDF file. Sorry - there are no pictures of me! Just an interview on why I had to drop out of school, how I managed to go back, and some advice for my fellow college students.

There is one error in the article - it says that I got a job in web design to pay the bills. This isn’t entirely accurate, but since it’s really hard to explain what I do for my job, I let it slide. Suffice to say, I work “on the internets.”

In an off-handed comment to a fellow student, my Marketing professor asked how much we were paying for the class, per hour. He estimated it at $45 per hour, and I, with a thirst for numbers that rivals the thirst of Tantalus, decided to actually do the math.

Congratulations to the two of you who are still reading after that intro, and have not yet been scared away by my obsession with math.

I did a rough calculation in class, based on the number of credit hours I was taking. But when I got home later, I started thinking about the other factors involved. Don’t I pay to take the final exam? Aren’t I really paying for the privilege to do homework and study?

The final question comes down to: How much do I pay, per hour, for school, and am I getting good enough grades to justify that price?

So I made a spreadsheet. In fact, I made it and posted it on this site, so if you want to download it, you can. You can download it just to see my calculations, or you can download it to calculate the rate you’re paying for your schooling!

The Hourly Cost of College - click to download!

Observations from my Own Data
As you can see if you grab the spreadsheet, I’m paying $52.51 per hour for my college education. This is based on doing only 5 hours a week of homework outside of class - which is pretty accurate for my current habits, and also a little sad.

The good news is that I can lower that hourly rate by putting in more hours of work. $52.51 sounds pretty high for my current B average - but if I put in more hours, I can pay less per hour for a B+!

Most professors have told me that each class is probably going to require twice the number of hours outside of class as homework and studying. For example, my 4-hour-a-week class should require 8 hours a week of studying and homework. That sounds a little crazy for my liberal arts classes, but it certainly was true of my film classes - plus some! So I guess it evens out.

So if I change the number of homework hours in the spreadsheet from 5 to the recommended number, 20, my rate drops to…. $25.93.

Obviously, this sort of number is extremely arbitrary. The total amount I pay for tuition has nothing to do with how many hours of work I put in. But the purpose of these numbers is really to re-frame my education in terms of finances - to trick myself into procrastinating less by telling myself I’m saving money by studying more.

Observations from a Friend
Everyone is going to use this spreadsheet a bit differently. When I made the “other” category, I was thinking of hours spent doing homework and studying outside of class. But when I sent the spreadsheet to a friend, he included all of the clubs and activities that he wouldn’t be doing if he weren’t in school.

This is an entirely valid way to look at it - not only is he paying to be educated, but he’s paying for all of the campus activities he engages in.

His rate, since he’s much more studious and active than I am, came to a sweet $23.44 an hour.

After calculating that, he did something else I didn’t do: he factored in his scholarships. I decided not to bother, because I knew if I started down that road, I’d start trying to factor in my loans and the interest I’d pay on them - and then there’d be too much math - even for me!

After factoring in his scholarship, his rate dropped down to $14.12 an hour. Lesson learned? Scholarships matter.

Your Turn
I would love to see what some other people get. I’m not very studious, and I go to a rather expensive school, some I’m interested in the rates others are paying. If you are comfortable sharing your rates in the comments or by email, I’d love it!

The sign-up period for getting a $25 bonus when opening an E*TRADE Complete Savings Account ends on October 31st. Since the referral email can take up to a week to send out, this is really your last chance. If you’re interested, contact me, and leave the email address you want the referral email sent to.

One note: since they started this promotion, E*TRADE has dropped the rate on this account down to 4.7%. This isn’t something to worry about - many banks have done this since the Fed rate adjustment. 4.7% is still a really, really good rate on a savings account, considering the nation average is something like .25% (yes, POINT 25 percent, not 2 point 5 percent!).

You can also just leave a comment on this entry saying you want a referral - just make sure you use the email address you want the referral sent to!

Hi Stephanie,
I love your website and it’s really helped me take initiative of my spending and savings habits. I’m 20 and I have pretty awful credit. I finally got my credit score and it’s 520. I have two credit cards that will be paid off no later than December and I have a few things on my report that I’m disputing?
What can I do now to drastically improve my credit? I now have a job and once everything is paid off I just want to make a big change so I can be on the path to having good credit. Any suggestions?
Thanks,
Corey

Corey, this probably isn’t what you want to hear, but what you’re doing right now is exactly right, and there isn’t a whole lot more you can do. Improving credit is, unfortunately, a rather slow process. But you are on the right path, so don’t lose hope!

Let’s take a quick look at the five elements that make up a credit score, just to see if there’s anything else you might do. From the Wikipedia entry on credit scores:

• 35% ? punctuality of payment in the past (only includes payments later than 30 days past due)
• 30% ? the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
• 15% ? length of credit history
• 10% ? types of credit used (installment, revolving, consumer finance)
• 10% ? recent search for credit and/or amount of credit obtained recently

Punctuality of Payment
This is the largest chunk of your score, so it’s very important. This includes more than just payments on lines of credit - any bill that’s more than 30 days past due can show up here. Be sure to stay on top of your utilities, cell phone, car payments, credit cards… all of it! If you have to pay something late, make sure you don’t let it get to 30 days past due.

Ratio of Debt to Credit
As the second biggest chunk, this is more important than most people think. Once you’ve paid off your credit cards, you’ll probably want to start using them again (without carrying a balance). This will help you establish a series of on-time payments, which is good for the “Punctuality of Payment” chunk above. However, you don’t want to charge too much, or else you’ll throw off this chunk.

Even though you’re going to pay your cards off every month, try not to charge more than 30% of your total credit limit - across all of your cards. Remember that last bit - it’s the total debt on all of your cards out of the total credit limit of all your cards!

Length of Credit History
There’s nothing you can do to boost this, and it’s probably not one of your strong points, since you’re only 20 years old. Thankfully, it’s only 15% of your score, so don’t fret over it. However, there are one thing you can do to make sure you don’t hurt it - that is, don’t cancel your oldest card, if you can help it. Unless it’s an awful card with lots of ridiculous fees just for having it, keep it around for as long as you can.

Types of Credit Used
At only 10%, this isn’t hugely important. You’ll probably eventually end up with a car loan and a mortgage to balance this out, but for now, it’s more important to focus on other aspects.

Recent Credit Inquiries
Yep - just asking for credit hurts you. But not much, and not for long. There isn’t a whole lot you can do here either, except for simply not filling out every credit card application that comes in your mailbox!

You’re doing good by paying off your cards and making a commitment to improve your score. Just focus on keeping your debt-to-credit ratio low and making payments on time, and you’ll see drastic improvement.

Jonathan over at My Money Blog did a post about the Best Credit Card for College Students. This isn’t the first time I’ve seen this, since it’s based on a CNN Money article. In fact, not only have I seen this information - I went ahead and applied for the recommended card back in early September.

The card in question, the mtvU Platinum Select Visa Card for College Students by Citibank, does seem like the ultimate credit card for college students. A into 0% APR for balance transfers and purchases (which I was going to take advantage of), 5% back on restaurants, bookstores, record stores, movie theaters and video rental stores. And “bookstores” includes Amazon.com, where you can buy anything you could ever possibly want - and get 5% back.

Not only that, but the card also gives you Thank You Points for getting good grades! A 4.0 could get you a $20 gift card at one of the many, many stores included in the Thank You Network.

Sounds awesome, right? I wish I could give a glowing review of this card, but alas, I cannot. Because instead of actually getting the card, I ended up in application hell.

It started out pretty much daisies and roses. The online application process was exceedingly simple, and didn’t even ask for my household income! (That probably should have tipped me off that this was not actually going to go smoothly.) So I sent the application into cyberspace, and waited.

And waited. And waited. Finally, after about 3-4 weeks, I got a letter from Citibank. There was no indication as to whether I was approved or denied - it just said that they needed more information to verify my enrollment as a student. “Fine,” I thought, “That’s fair, since it’s a student card and all.” Except the “verification” was just the beginning of application hell.

In order to verify that I was a student, they wanted the following:

• A copy of my student ID, front and back, with a current enrollment sticker OR
• A copy of a paid tuition bill for the current semester
• AND a copy of a bill (from the last 90 days) for a land line phone (cannot be cell phone)
• and if the land line phone bill was not under my name, they would ALSO need a copy of one of my bank statements from the last 90 days.

Ugh. This was already starting to get annoying. First of all, my school doesn’t DO “current enrollment stickers” on our IDs, so it was going to have to be a copy of the tuition bill.

Secondly, I can count on one hand the number of college students I know who even have a land line. Luckily, I happen to be one of those - but only because I moved home to live with my parents this year. But, of the college students I know with land line phones - none of them have the bill in their name. Some of them don’t even get a bill, because their phone service is wrapped up in the school’s housing bill.

So, fine. I mailed in the obnoxious amount of paperwork to verify my “studentness,” and waited.

And waited. And waited. About two weeks later, I got a phone call from Citibank, just telling me to call them back (this was an answering machine message). Confused, I called the number, and the lady on the other end of the phone didn’t know why I was calling, either. Since the answering machine message hadn’t given me a reference number, I had to give the customer service agent my social security number in order for her to look up the account.

That’s a major loss of points guys - there are few things I hate as much as giving out my social security number, especially on the phone.

So the lady, who was very nice, actually, looked up my account and said that I needed to resend my tuition bill, because it was printed from a website, but didn’t contain an “http.” This was actually my fault - I don’t have a printer on my computer, so I’d saved the bill page and then took it to another computer to print. So I accepted my responsibility, and asked her was address I should send a properly-printed tuition bill to. (Note this now: nothing else was said about there being any other problems with the paperwork I had sent in.)

So I sent a new tuition bill in, and waited. But this time, I didn’t wait long! Two days later, before they could have possibly received the second tuition bill, I got an email from Citibank. An email saying “You have been denied because we could not verify your student enrollment.”

What?!?

I waited a couple days, to make sure the new tuition bill had time to get to them. And then I called again. This time I had a reference number, but because I couldn’t understand the customer service rep very well because of her accent, I ended up screwing up my “password” and then having to give her my social security number anyway.

It’s like nails on a chalkboard when I have to give out my social security number on the phone.

So she pulled up my account info, and said that there was a problem with my tuition bill. The problem this time was that it didn’t contain my social security number. “Well of course it doesn’t have my social security number on it! My school switched to not using our social security numbers because it’s a security risk!” I said. (Also, couldn’t they have mentioned this the first time I called?)

The women informed me that I would have to send in a copy of my student ID with a current enrollment sticker. I told her my school doesn’t do current enrollment stickers. She told me I would have to get the school to send a fax, on school letter head, with my reference number, my home address, and my social security number to Citibank.

And that’s where I gave up. I have no interest in going down to the Registrar’s office, and giving them all of my information, asking them to type it up and then fax it to Citibank. Nope - not worth my time. 

The long and short of it is, if two or more of the following are true for you, don’t apply for the mtvU Platinum Select Visa Card for College Students:

• Your school doesn’t put “current enrollment stickers” on your ID.
• You tuition bill doesn’t have your social security number plastered on it.
• You don’t have a land line phone in your name.
• You don’t like giving out your social security number as if it were candy.

I can’t believe I let them pull my credit report for this. So lame!

A reader left a question in the comments (edited for length and spelling):

I just wanted to ask?

What Is A Debt Consolidation Loan? Is there anyone else here in a similar position as me with mountain of debt they are struggling to pay? I am seriously considering [a debt consolidation loan] to help my family.

Like a lot of people we started slipping into debt when I lost my job and couldn’t meet the monthly bills. I have heard a lot about debt consolidation loans but I don’t know what’s right or wrong?

Any feedback from anyone would be appreciated.

Deepest Thanks

Danni

Wikipedia defines debt consolidation as “taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.”

A debt consolidation loan can be a good idea if you need it, but there are several pitfalls to be aware of. Bankrate’s article “Debt consolidation: cure or continued credit problems?” does an excellent job of describing this pitfalls.

First of all, a debt consolidation loan is a lot like cold medicine - it treats the symptoms, but isn’t a cure. A lot of people who take out debt consolidation loans end up back in the same trouble again later. There has to be a shift in behavior and a commitment to stay out of debt in order to make a difference in the long run.

The Bankrate article offers some additional concerns and tips:

Before you sign on the dotted line, be sure that the costs of the new, bundled loan will truly be less than what you’re already paying various creditors. For many consolidation-loan candidates, their current credit woes mean they won’t get the lowest-available interest rate. Plus, when there is nothing to secure the loan (such as your home), expect the lender to bump up the rate.

Calculate interest and fees on all your existing accounts to determine the total of the payments you now make. Then compare those amounts with the consolidation loan numbers to make sure it truly is a better choice.

And, as with any product, shop around. The bank down the street may offer an attractive loan rate, but a check of your local credit union could turn up better terms, says Deborah McNaughton, author of “The Get Out of Debt Kit.”

Another problem with debt consolidation loans is that although they may offer lower annual interest rates, they usually come with a longer repayment term. This is how they why they offer a low monthly payment: because you’ll be paying on it for a very, very long time. And a long repayment period means paying more interest overall.

In general, working to manage your debt yourself before turning to another loan is usually better. Strategies like the Debt Snowball can help you plan out your own debt repayment plan - if you can manage to pay off your debts without the help of another loan, you’ll be better off in the long run.

Today is Blog Action Day - the day when bloggers around the web, and around the world, are uniting to bring environmental issues to light. The following is my offering to this great movement.

I try not to be too heavy-handed with it, but sometimes it just comes through. I’m a tree hugger. Perhaps it’s a product of growing up in a small town, a rural community with vast amounts of nature to enjoy. Perhaps it comes from my parents, who instilled a love of camping and the outdoors in me from a young age. Or maybe Smokey the Bear really just got to me when I was young (only I can stop forest fires!).

However it came to be, I have dedicated a large portion of my time and energy to making sure that I live a life of conservation and environmental awareness. The beauty of all this is that it naturally saves me money. Attempting to use less resources, to reuse items that can be reused, and to recycle tends to be easier on the wallet. After all, if you use less, you buy less!

I do take this to somewhat of an extreme. I engage in a practice called Compacting. The basic principle of Compacting is that you make an agreement with yourself not to buy anything new, with the exception of food, health, and safety products. Everything else must be bought used, or gone without. From the Compacting blog:

1) to go beyond recycling in trying to counteract the negative global environmental and socioeconomic impacts of U.S. consumer culture, to resist global corporatism, and to support local businesses, farms, etc. — a step, we hope, inherits the revolutionary impulse of the Mayflower Compact; 2) to reduce clutter and waste in our homes (as in trash Compact-er); 3) to simplify our lives (as in Calm-pact)

Compacting was largely started as an environmental movement, but it was quickly discovered that Compacting could save vast amounts of money. Since each Compacter makes the agreement with themselves, they decide how far they want to go with it. Some Compacters in cities have given up cars as part of their Compact, since gas and other maintenance items must be bought for them. This may not be possible for those of us living in areas where biking and public transportation are not possible.

In addition to the creed of not buying new, here are some other things I do to as part of my Compact:

• When buying food items, I strive to buy those with the least packaging.
• I attempt to drive my car only as often is as necessary, combining trips and staying on campus all day instead of driving home and back.
• Recycling as much as possible.
• Consuming media electronically whenever possible. This means reading newspapers and magazines online, as well as downloading songs from iTunes instead of buying CDs (not that I’ve actually had the money to buy songs lately!).
• Using Freecycle both as a way to find items I need, as well as a way to give away items I don’t (I gave a lot away during our recent move.
• Eliminating unneeded objects from my life, via Freecycle, donation, or garage sale (I’m still working on this - sometimes, it’s hard to let go).

You can see how these behaviors improve both my environmental impact and my bottom line. But I understand that many people aren’t prepared to sacrifice quite so much as I have. But anyone can take the ideas of the Compact and adapt it to their own life. These tips are not just for those of us who have dedicated ourselves to the cause. If everyone adopted just a few of the Compact principles, there would be a great force of change.

More information on the Compact can be found here:
The Compact Blog
SFGate Article on The Compact
The Compact Yahoo Group

“You spend 15% more when you use a credit or debit card instead of cash.” Have you ever seen this statistic before? Chances are, you have. But here’s a question for you - have you ever seen the study this statistic comes from?

Lots of people quote this statistic, without citing a source. This isn’t limited to small fries in personal finance blogging - the Wall Street Journal has an article titled As Cash Fades, America Becomes a Plastic Nation which says: “When people pay with plastic, they tend to spend more — often more than they have in the bank,” without offering anything to back up that claim. Dave Ramsey also threw the statistic around in his article The Truth About Credit Card Debt - also without citation.

So where did this statistic come from, and is it even true? I started in on an epic quest to try and find some answers.

My Epic Quest (For Answers!)

I had a lot of trouble tracking down whatever study this may be - at least, any study that I could get access to without paying for. And what good is a study that I can’t link to, and let you guys look at yourself?

I did find a few studies that may have the answers. Such as Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay. This study looks like exactly what I was looking for, but I couldn’t access it without whipping out my own credit card. However, the abstract for the article was very helpful:

In studies involving genuine transactions of potentially high value we show that willingness-to-pay can be increased when customers are instructed to use a credit card rather than cash. The effect may be large (up to 100%) and it appears unlikely that it arises due solely to liquidity constraints.

In other words, this study shows that people do tend to spend more on credit cards, and it is unlikely that this is just because credit cards offer access to more money.

Still, I was not satisfied; I wanted a study that I could actually read through myself. Luckily, I found The Realities of Spending (PDF), a British study that I could actually access and read. This study examines the psychological reasons why a person might spend more using a credit card.

Some things to be gleaned from The Realities of Spending:

~ Adding a $30 expense too a $637 credit card bill makes the $30 expense seem smaller. Grouping transactions on a credit card bill makes the size of individual expenditures seem smaller, which increases spending.

~ Thinking about the cost of a purchase while consuming or using it can lower the pleasure gained from the purchase. Credit cards block this by disassociating the payment from the consumption - in other words, you don’t feel the pain of paying for something while using it if you use your credit card.

~ This works the other way as well: the pain of paying can be cushioned by thinking about the benefits of the purchase. This is why it’s easier to put “things” on our credit cards instead of “experiences” - while we’re paying off our credit card, we can think of all the enjoyment we’re still getting from our iPods, HD TVs, and that cute little robot vacuum cleaner.

~ Credit cards provide the most “decoupling” of payment and transaction out of all the payment methods. In other words, you buy now and pay later, and so act of buying and paying become “decoupled” in your mind. Credit cards do this in a number of ways:

• The increased period of time between when you make the purchase and when you pay the bill.
• Grouping many different transactions into one bill.
• A great diversity in the types of transactions can also reduce coupling - so if you buy gadgets, food, gas, and a range of other things on your card, it will reduce coupling for all those purchases.
• You don’t see actual money leaving your hand, you just write your signature on a piece of paper or on a little screen.
• People generally have a low recall of what they’ve paid for with their credit card. I know I do - I had to comb through my old statements and make a crazy spreadsheet in order to remember all of the purchases I made with my credit card.

So, Do We Spend More, or Not?

I’ll give you my usual answer: absolutely maybe. It really differs from person to person, especially when we’re talking about whether those psychological effects will occur with a debit card, instead of a credit card.

For example, I find that I tend to spend more with cash. Seriously! Here’s why: almost everything “serious” (bills) that I have to pay for comes out of my checking account, usually through online bill pay or a check. Therefore, in my brain, any money I have in cash can’t be used for “serious” things. It’s “fun money!” because it’s in cash form.

Of course, in the back of my mind, I know that I could easily put that cash into my checking account and turn it into “serious money.” But the part of my brain that makes impulse purchases doesn’t really listen to that other part of my brain.

I’m not the only one like this. Trent of The Simple Dollar has a problem with cash burning a hole in his pocket, as well.

So What Now?

You’ve got to figure out what type of person you are. You might already have an idea of whether you spend more on cash or plastic in your head. Think about how it feels when you pay for something with cash, debit card, and credit card.

But you’ll also probably want to track your spending. I’m a big proponent of doing this anyway - so in addition to writing down what you buy and how much you pay for it, jot down what form of payment you used. Once you’ve got enough data, you’ll figure out what kind of person you are. Then you can figure out which form you can best use to curb impulse spending.

Poorer Than You means a great many things to me these days. It’s the first thing I check on when I wake up in the morning (obsessive much?) and I’m constantly jotting things down in a notebook when I get ideas for entries. It’s held me accountable for my own finances, giving me a push to keep going. Without it, I honestly don’t know if I would be where I am today.

I’ve known about The Blogging Scholarship for some time - longer than Poorer Than You has existed, actually. I’ve had many different blogs for many years, but all of them before PTY were personal, and never seemed appropriate to submit for the scholarship application. But this year, with PTY healthy and nearing its first anniversary, I decided to throw my hat into the ring.

And wouldn’t you know it, I’m a finalist. The scholarship committee reviewed my application and, along with 19 other finalists, I’m enjoying a position of honor right now. I’ll tell you: I’m truly ecstatic just to have been chosen as a finalist. And now the decision is up to voters. So here’s my humble plea:

 
(Voting ends October 28th)

Added bonus for PTY stalkers: They listed my last name! It’s cool - I’m not the only Stephanie Collins in the world. In fact, I’m no where near the first result that comes up on Google - that honor goes to Stephanie Collins the renowned body builder! (Or maybe that is me… you don’t know!)

I hope that you check out the blogs of the other finalists as well. I know I’m making my way through the list! I also hope that those among you that have blogs will take the time to write a post about the Blogging Scholarship. I think it’s an excellent idea that rewards people for a sometimes-thankless activity. Not to mention we could all use a bit of help paying for school!

It’s time for another Lazy Sunday - I’m sick, so I’m trying to stay in bed as much as possible. Apparently “staying in bed” means “taking two trips to the mall,” but I must never end my search for a pair of pants that actually fit me! Anyway, here’s your Lazy Sunday picks for today:

Coinstar is offering a an extra $10 Amazon gift certificate when you convert $30 worth of change into an Amazon gift certificate. Hmm… might be time for me to head to that coin counting machine! Coinstar doesn’t charge a fee if you get your money in the form of a gift certificate, but it does if you get your money in the form of cash.

There’s an article over at Christian Personal Finance that I absolutely adore called Money doesn’t solve money problems. This is the message I wish I could get through to all of my friends who say “I am too broke to save,” or “I don’t make enough money to do anything about it.” Personal finance all comes down to one simple behavior: spending less than you earn, no matter how much you earn.

Need more evidence that money doesn’t solve money problems? Look at these lottery winners who ended up worse off than before they won!

If you’re anything like me, you have a lot of really random stuff in your kitchen, and have no idea what you could make with it all. That’s where the site Cooking By Numbers comes in really handy - just check off the foods you have in your kitchen and VOILA! Recipes you can make, sorted by difficulty!

Lastly, here’s a sure-fire way to turn your kids into tax-free millionaires. Just do me a favor if you do this - teach them financial responsibility as well, so that instead of dumping out their Roth IRAs at age 18, they start contributing to them. I mean, don’t you want them to be happy, healthy, successful multi-millionaires?