Smart Consumer USA – Global Citizen

One aspect of returning to the USA that I have never gotten over is the constant barrage of sales pitches one must endure on a daily basis in this country.  I continue to make more shocking discoveries about how savvy companies are at separating me from my money.

This is a phenomenon I had not really noticed until I had gained experience abroad and then returned to my native country with a fresh eye.  I’d like to share with you how things are done in Japan, Saigon and then point out a few tricks that are employed here in the USA that are so slick, even an experienced traveler (with a business degree) often will miss.

I’d like to start off with my business school experience at The Ohio State University.  The courses you are required to take spread the gamut from statistics in manufacturing to how the Federal Reserve works.  One will learn some things that are applicable to the real world (can be used in daily life) but to be honest, these discoveries tend to stay in academia and are only useful for taking tests or in some side department in a large corporation.

I have found it much more beneficial to get out of the USA, see how things work in other countries then come back and start from square one in the USA.  Now, I ask questions and if something does not make sense to challenge the charges.

In real life, I believe we are all “institutionalized” to some extent.  We observe that many charges are “normal” and that everyone pays them.  We trust that the big company will take care of us and give us a fair deal.  After all, everyone else is doing it and how could we know more than the big institution that is telling us it is a great bargain?  I believe the following are some of the main factors that keep us paying unnecessary charges.

1. Institutionalization – These are the big companies with many customers.  One individual is unlikely to challenge the status quo

2. Confidence – Often, we do not feel confident to challenge the large companies because we simply think they know more than us.

3. Passivity – We simply do not pay attention.

I have often written about these subjects in this blog but it was always piecemeal and I was never able to hit the target head on.  Sometimes I wrote about credit cards, other times it was healthcare and I even compared the sales process of selling coconuts in Vietnam to the complicated sales tactics they use in the USA.  In this post, I hope to hit the mark a bit more fully although so as not to bore, I’ll be brief on each point.

1. Japan

In Japan the purchasing of products and services are straightforward.  The cost is the cost and no questions are asked.  In Japan, it is dishonorable to overtly overcharge customers.  This is not to say some items are overpriced but very rarely are side deals cut and if coupons or discounts are available this is visibly advertised.

a.) Bic Camera

– Bic Camera is one of the only companies that obviously overcharges.  They offer a “point card” in which if you accumulate enough points you can get a generous discount off an item.  The customer sees the discount and is happy.  Yet, from my business school teaching, there is never a free lunch.  Instead, everything is overpriced and the discount you receive has already been made up by the company for selling you overpriced items in which you bought to accumulate the points.  This is very similar to America but they are still far behind in terms of how to trick customers.

One reason is that Japan is still very much a cash society.  It is very hard to hide charges and fees when customers are deciding to hand over paper or not for any specific items.

2. Vietnam

In Vietnam, credit cards are pretty much non-existent.  In fact, the use of banks is very rare as well.  At HSBC, the requirement to open an account was $5,000.  The reason for this is they do not want to have to deal with many small savings deposits which would use their resources (customer service) but not give much capital in which to make investments.

When you go to market, there are roughly two prices, the Vietnamese price and the foreigner price.  I never really had a problem paying the foreigner price for some vendors because I usually felt very generous.  Yet, for the long term expatriates this can be a big nuisance because one will constantly feel gouged.

Therefore, the foreigner quickly learns how to say “too expensive” in Vietnamese.  Also, we remember how much something usually costs, the seller tries to sell it for more and we say no and offer the standard price.  The seller comes down a little and after we play this game for a while sometimes we have to walk away but as we turn the price comes down to the standard.

Then, so we don’t have to bargain each time, we can just return to the same seller who will not play the price game anymore so long as they know who we are.

3. America  – The main point of this post

a.) Credit Cards

Credit cards have been the biggest scourge in getting people into debt.  It is simply much easier to scan a piece of plastic to receive an item than hand over a big wad of cash.  With a credit card, it seems like nothing is lost, yet something is gained.  However, if we were handing over cash then it would really feel like something has been lost and we are making a real trade.

With cash, we would be much more likely to ask for a discount (should we not be institutionalized and have confidence) but the use of a card just makes it too easy.

The amount of credit card offers I used to receive was simply astounding.  Yet, in recent years, a “Do Not Solicit” list was created in which you could opt out of these offers.  OptOutPrescreen.com was an easy way to stop all this junk mail from landing in your mailbox.  This was also suggested by privacy protection companies as it was very easy for criminals to steal your mail, sign up for a credit card on your behalf and then charge to your name.

Now, I still receive an incredible amount of credit card offers but it is only from those with whom I have a “business relationship.”  This means, if I had signed up for their services (airlines, retail stores etc.) they were exempt from the above list and could still send me offers.  Now, I receive about 6 credit card offers a week.  The worst offenders are the following

1. American Airlines – 56 credit card offers in the past year
2. Southwest Airlines – 15 credit card offers in the past two months.

After a while, I just decided to start saving all the offers to see how many I could accumulate.

These cards are offering me “free miles” when I purchase items using their card.  On the surface it would seem like a decent deal and it can be if one is careful.  Yet, these cards work the same as every other cards and their purpose is not to give you free stuff.

The Tricks:

1. The credit card companies are willing to bet that most consumers cannot control their spending and will leave a balance on the card.  Then you will be paying them for their loan

2. The interest rate:  They start off with a 0% interest rate to lure you in.  Then it jumps up to 13.24% (for the Southwest Card).  This is bad enough but if you fail to make a payment it jumps up to 29.99%!!!

3.  The Minimum payment amount – All cards will “suggest” you simply pay the minimum amount when the bill comes.  This is asking you to leave a balance on your card so they can make money.  The minimum amount is always low.

Example:

1. I spend $1,000
2. I pay the minimum amount of $15 which leaves $985 as the balance I owe
3. 15% interest on $985 =  $147.75 that I now owe the company which increases the total I owe to $1132.75

So, the airlines are making money off of you!  The free miles they will give you often come with blackout dates concerning which dates you can travel.  They will let you use the miles on days when travel is low so the seats were going to go empty anyway.

Now, times this one card example by 10 cards which is the average amount of cards American citizens carry and it is pretty easy to see why we got in so much trouble with the credit crisis.

Retail stores are also very savvy with this.  They will offer to save you a small amount on your purchase if you sign up for their card.  Sure, you save $15 or so on the first purchase, but if you leave a balance on the card you could quickly be in the hole $300 or more over time.  Not a good idea.

But credit cards are easy, let’s look at other examples.

2. Cell Phone Networks

The amount of money it takes to run a cell phone network has never been disclosed.  The US Congress asked the cell phone companies how much but they refused to answer.

Yet, this is not the issue.  Cell phone companies are a private business and have the right to make as much money as possible without governmental interference.  I am not concerned with how much money they make, but what I am concerned about is how much they are overcharging me as an individual.

My basic cell phone plan for two people costs $150.  (with data plan).  In Vietnam it cost me $15 a month.

I am not griping about the country differences but would just like to point out the absolute shock I had when I learned how much cell phones cost here in the USA.  Sooooo, what to do about it?

a.  Company discount

Most cell phone companies have thousands of deals with major companies and institutions.  All you have to do is ask and that could garner you a 10% – 25% discount off your annual bill.  If your company does not have a deal you are not out of luck.  These stores are staffed with teenagers who might be willing to work with you.  When I first decided to switch to AT&T my company did not have a discount.  Yet, I told them I received 15% off at Verizon and I got the staff member to work with me.

Often, the teenagers will simply not care (unless they take their job too seriously) so my advice is to simply lie or make up a business card with a company they do have a contract with.  They have no way to really confirm (because that would cost money) so just show a fake business card and get the discount for the highest amount.

b.) Overseas calls

– AT&T has run advertisements saying their network “works” all over the world.  What they not tell you is if you do use their network, they will absolutely devastate you on your next credit card bill ($1000 or more) especially for smart phones.

The worst is the Iphone which connects to the internet automatically for all sorts of things.  The cost of taking an Iphone overseas is astronomical.

AT&T does offer a “Global Plan” but those are really only for business people who have the company pay the bill anyway.  These people really do need an easy way to keep in touch with the office and since the company is footing the bill anyway, who cares!

But for the rest of us, there is a better way.  Here is what I did on a recent trip to Japan and Vietnam

– Remove the SIM card from the phone and leave it at home.  The Sim card is what connects to AT&T so no SIM card, no charges

a.) Japan

Most smart phones have WIFI.  What I did in Japan was simply look for an open connection and then use Skype (or Google Voice) to make my calls.  The drawback is you are not constantly connected, but who needs to be when on vacation anyway?  Also, many connections have security enabled or are pay services, but if you just continually refresh your WIFI, finding an open connection is not that hard to find.

b.) Vietnam – I took my old phone and just bought a SIM card in Vietnam for $5.  Then I was connected completely for the duration of my trip after letting everyone know what my new telephone number was.

Finally, AT&T has just come out with a price restructure for their data plans.  Currently, it costs $30 for unlimited data.  They want to take this away and offer a certain amount of data for a set price which they claim will save 95% of their customers money.  BUT, DON’T DO IT, TAKE EVASIVE ACTION, IT’S A TRAP!!!

I have read a few business/PC magazines that say this could be a good deal but I do not agree.  The Iphone4 is about to come out and over time Video conferencing is going to be the new standard.  Video conferencing takes an ENORMOUS amount of bandwith and soon AT&T will be raping their customers again.

In the computing world, I have always gone with the “more is better” philosophy because today, we think we have enough speed, RAM, Disk space whatever.  Yet, over time it is never enough.  I’m sticking with my $30 data plan and perhaps I’ll even set up my phone as a webcam in the future and really use up all the bandwidth I can just to stick it to AT&T.

3. Comcast (Internet Service Providers)

There are many options in the USA for internet service providers.  The Gold Standard is cable and that usually only leaves one option.  For me, it is Comcast and these folks are serious over-chargers.  I payed them too much for too long and then got wise.

I gave them a call and said I did not understand why I was paying $80 a month for basic cable and high speed internet when I could get it basically for free with WIFI.  Here is what you tell them to get them to lower your bill

a.  Don’t care about TV

– They will tell you the cost is justified due to the basic cable TV package.  Tell them you can watch all your shows on the internet and you do not care about the Cable.

– Be ready with quotes from other companies.  I got my bill lowered to $50 a month by doing so

b.) The Modem

– I really HATE this one and I just realized how much it was costing me.  Comcast and most other cable providers will LEASE you the modem which they charge $5 a month.  It doesn’t seem like much until you consider the fact that I have “leased” it for 4 years.  Therefore, 12 months times four years times $5 = a $240 modem that I still do not own.

I am going to call them and tell them to take their modem back and go buy a better one from Best Buy.

4. Scare Tactics

A good crisis is always a good time to make money.  In the USA they often use the “what if” factor to scare people into buying some product or other.  In business, you have to “create the need” and convince people that they need something they have hitherto not realized they needed!

a.) Bird Flu – Where did that go?  The drug companies made a lot of money on this one.  I even bought into it because I was in Vietnam at the time and they were calling it the source of the outbreak.

However, I soon realized it was a bunch of crap and even at the height of the crisis, I asked my waiter to please give me raw eggs for my Sukiyaki because dammit, I need raw eggs on my Sukiyaki!!  They did not have any on hand due to the crisis so I payed him $10 to run to the corner store and buy some.

b.)  H1N1 – After the bird flu there was the swine flu.  Again, all sorts of “safety” products were being sold.  Hand sanitizers are still all the rage and I refuse to put that goop on my hands.

Sure there is something to be said for washing your hands, but I have always subscribed to the “Pig Pen Theory.”

Notice, in the video, “Pig Pen” is the dirtiest one of the bunch.  Can you guess which one has the best immunity?  Yep, it’s Pig Pen because his natural bodily defenses have stopped most germs from getting him sick.  Therefore, this selling of hand sanitizers, while it has it’s uses, is pretty much a scare tactic employed by the companies that make them.  Pretty soon, I would imagine they will all be convincing us we need to be living in plastic bubbles to keep the killer germs away.

In conclusion, there are many other examples I could bring but the post has become long and I’ve run out of steam.  Perhaps I’ll add to this post later but for now this is all I’ve got.

Author: Mateo de Colón

Global Citizen! こんにちは!僕の名前はマットです. Es decir soy Mateo. Aussi, je m'appelle Mathieu. Likes: Languages, Cultures, Computers, History, being Alive! (^.^)/

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