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President Obama has really rocked the credit card world since he’s taken office. Of all of the industries affected by the downturn in the economy, the credit card industry has been hit as one of the hardest. President Obama passed the credit cardholders bill of rigths this year which gives protection to you as a consumer. As a result of this, prepaid debit cards are on the rise in popularity. We have just written a new article on this located here.

It’s the date on the calendar that, all by itself, strikes the most fear into the hearts of men across America. No, it’s not Tax Day, Election Day, or the NFL draft. I’m talking about that holy grail of the romantically entwined, Valentine’s Day. Do you feel like you’ve barely just caught your breath (and cooled your credit card) from the holidays? Think again, buster. It’s a new year, but the financial strain is not yet over for many people in America. I myself feel like it’s impossible that 2012 is already 1/12 over, but the proof is in the dates – the most loving day of the year is a few brief weeks away.

If you are lucky enough to have a sweetheart (lover, special friend, paramour, cuddlebunny, etc), now is the time to be thinking about how you are going to celebrate the holiday. I know that the pressure is on – my own spouse has been hangdog for weeks trying to extract from me my preference between jewelry and pampering (a pedicure and spa day) in advance of the big day, despite the fact that I don’t think much of Valentine’s Day on the whole. Here’s my advice for the fourteenth, however unsolicited: put your credit cards away someplace safe, and fight back the urge to go nuts. It is just far too easy to run up crazy charges on your plastic in the quest to get the big day just right, when people are frequently losing the true meaning of the holiday in a demented festivus of consumerism gone wild.

I made the mistake of wandering into Target the other night while waiting with a friend for our movie to start, and was dumbfounded by the assortment of red and pink merch that was on display. This was more than just your normal assortment of heart-shaped candy and faux roses in bud vases. There was abundant evidence that Valentine’s Day home décor is rapidly becoming a “thing,” much in the same way that people now go crazy decking the halls for Halloween and Easter. I saw Valentine’s Day themed throw rugs, wall hangings, paper lanterns, centerpieces, and knick knacks. There also seemed to be an entire aisle devoted to the creation, serving, and consumption of homemade VD tasty treats, from cookie cutters to sprinkles, from blush-hued spatulas and heart-shaped measuring cups (how impractical!) to festive plates, chargers, cutlery, table linens, and tumblers. There were even aprons embellished with lace and a splattering of hearts. This was in addition to the piles of cupid, heart, LOVE, and kiss-emblazoned clothing, from cheeky lingerie to bawdy boxer shorts, cute tees for the kids and suggestive ones for the grown-ups, hair decorations, candy-striped leggings, and even flannel PJs. Nor is the flood of pink and red limited to your local Bullseye: Go to the mall, the grocery store, the local mass merchandiser, or (Heaven forbid!) a jewelry store. Prepare to be dazed by the festoons of paper hearts, and the general mess of dart-stricken hearts, Cupids, and lipstick kisses that you see everywhere. It’s an epidemic, my friends.

There’s one thing that is common between all the goodies targeted at Valentine’s Day revelers – the opulent boxes of chocolate, the bottles of wine, and the taper candles to give a romantic glow – all of these things cost money! Let’s not even talk about how much money it costs to do things “right” and take your loved one out for a fancy dinner on the 14th. Many dining establishments charge special prices for meals on this day, meaning that you will pay big bucks for a meal that is very likely to be not all that special, considering the massive crowds and the hurrying that is probably going on in the kitchen. Many dining establishments will have special prix-fixe menus for the day, meaning that there is a limited selection and a set price. You can’t even treat your sweetie to their favorite dish!

Here’s an idea: this year, give your loved one a kiss and nothing more. An old song got it right when it said that the best things in life – and I daresay that love qualifies – are free. Chocolate is nice, but it’s not free… ergo, it doesn’t factor into the equation. If you go the traditional route and give your darling a dozen red roses (around thirty bucks this time of year), a box of scrumptious sweets (twenty to thirty bucks, again), a great dinner out (one hundred twenty bucks, if you add the wine selection), and a fancy dessert at home with candles and rose petals (forty bucks again), you could easily blow half a week’s paycheck on one night out! Why – just because society dictates that this is the one day of the year that you need to be ostentatious about your love for one another? It’s a farce. Don’t do it. Trust me. If you really like candy, go hit the stores on the 15th when it is 50% off. It will taste just as good. And if that isn’t a lesson about the important things in life, I guess I don’t know what is.

As one final word, let me tell you the same thing that I told a gentleman friend (no, not that kind… I’m happily married) who was considering a Valentine’s Day proposal of marriage to his beloved. He asked me what I thought, and I couldn’t tell him NO! vehemently enough. If you have a steady sweetie and were thinking that February 14th could be the day that you pop the question, I beseech you to think again – unless you already have chosen and purchased the sparkler that you intend to slip on her dainty little finger. Because this IS the prime season for proposals, a lot of jewelry stores have already upped the prices on a lot of unspectacular diamonds, thinking that love-stricken men desperate to get the timing right won’t notice that they are getting a subpar stone for a Tiffany’s price. Wait until March, and then stage your dreamy proposal. Your credit card will thank you, and your beloved will be too swept off her feet to car about the calendar. Anyway, let’s be totally honest here – Valentine’s Day proposals are a bit tacky, anyway!

With competition between banks stiffer than ever for attracting new credit cardholders, many credit card companies are really upping their game when it comes to incentives and rewards for opening new accounts. For those savvy to the credit card rewards game, there has seldom been a better time to get goodies for using your plastic. You might think that there could be no downside to bonuses from your credit card company, but think again. Depending on what the reward is and how much it is worth, you might be on the hook for paying taxes on it. The IRS is sending a message to consumers across America, and that message is: don’t think you can get away with not claiming your freebies.

Let me say one thing off the bat, for those of you clutching your pearls and freaking out on the other side of the computer screen: credit card rewards points themselves are not taxable. If you use your rewards cards strategically to game the best virtual income this way, rest easy. Depending on how you obtain them, rewards may be taxable as income, according to tax experts and the Internal Revenue Service. People who covet and collect rewards can rest easy. The traditional rewards points earned when making purchases with credit cards or debit cards are still tax-free. It’s credit card reward point ‘gifts’ that are taxable, says the IRS.

To differentiate, think about the perks and goodies that are given away as part of recruitment drives for new banking accounts of all sorts. The value or worth of these promotions is considered income, and if it exceeds six hundred dollars, banks are required to send 1099 tax notices to both the IRS and the rewards recipient. Depending on the taxpayer’s deductions, tax bracket and other income, the rewards bonus could turn into tax liability. Mark Steber, chief tax officer for Jackson Hewitt, the nationwide tax preparation service, warns that, with the “scope, the size, the simple magnitude of the gifts… all increasing,” more and more taxpayers may be on the hook without even realizing it.

Banks have seriously upped their levels of rewards in the face of revenue losses over the past two years courtesy of federal regulators cracking down on abuses in the financial industry. Banks can no longer count on billions of bucks in income from overdraft fees, late fees, overlimit penalties, and the interchange fees that used to go cha-ching cha-ching each and every time that a cardholder swiped their debit card at the point of sale. Banks are now pretty desperate to re-accumulate lost business. One way that has sprung up in popularity is offering tempting incentives to customers who commit to opening new rewards accounts. The most common? Giving away twenty-five- to forty thousand free rewards miles or points to new customers who meet purchase thresholds in the first ninety days after signup.

The competition for consumer sign-ups is turning into something of an arms race, says Steber, with credit card companies vying to outdo one another with bonuses. These companies desire customers: their services, their deposits, and their card purchases. They are willing to go to extremes to get them, and that means offering bigger and bigger rewards. They are all trying to outdo one another, and the customer wins from this competition. Well, kind of.

The IRS has never really had to pay much attention to credit card rewards sign-up bonuses before now, for two main reasons. First of all, up until recently, the type of rewards classified as income rarely – if ever – met the six hundred dollar threshold at which issuers had to report them. Secondly, the very type of reward that people are receiving the most – the points that they accumulate for big trips or splashy merchandise – have been earned as the result of the consumer making purchases with a credit or debit card. Citi spokeswoman Emily Collins points out that “rewards and airline miles that are provided in connection with a purchase on a credit card are routinely not subject to individual income tax reporting,” Citi spokeswoman Emily Collins, said in an e-mailed statement. And yet, on the other side of the coin, when a consumer receives some sort of a gift or incentive for opening a checking account “whether cash, a toaster or airline miles,” as Collins puts it – the value of that gift is, in fact, almost always considered to be income and therefore subject to being reported. This is a unique, distinct entity from miles or points earned by credit card customers for their purchases. It’s a picky distinction, but one that counts to the IRS.

Citibank blew the issue open and put it at the forefront of public attention when it sent out a flurry of 1099-MISC notices to customers who took advantage of a 2011 Citi promotion that offered 25,000 American Airlines frequent flier miles to anyone who opened a new bank account. One such customer told Bankrate.com that he was deeply surprised to see the notice showing six hundred forty-five dollars in “income” for the frequent flier miles. Citi, on the other hand, claims that the standard disclosure found in the terms and conditions of its promotions and on its ThankYou rewards program website makes this statement: “When frequent flier miles are provided as a premium for opening a financial account, it can be a taxable situation subject to reporting under current law.” The disclosure goes on to spell out the fact that, in accordance with federal tax code, Citibank may be required to file a 1099 form with both the consumer and the IRS for the tax year in which rewards were issued, and that customers are “solely responsible for any personal tax liability arising out of the redemption of ThankYou Points.”

An IRS spokeswoman, Michelle Elderidge, confirmed that Citi’s procedures for reporting were the right ones. Frequent flier miles given away as a “premium” for the opening of a new account can, in fact be considered taxable, she stated. Elderidge urged all rewards card customers to consult with a tax prep professional to determine what, if any liabilities they might have for rewards gifts they received in the past tax year. She stated that customers who have more than one account with a bank or who received multiple rewards for different promotions would receive a 1099 for the total amount received during the tax year. She points out: “The IRS also notes that information on a particular Form 1099 may include various different sources of income from the issuer.”

Tax experts say that being issued a 1099 for credit cards reward “income” is quite rare, and that there is little chance that Citi’s 1099s impacted more than a few of its customer base. Eric L. Green, a tax attorney with the Convicer & Percy law firm in Connecticut quoted by CreditCards.com, states that he has “yet to see” any of his clients receive a 1099 in conjunction with a rewards program. He disagrees with the section of law that would, theoretically, count such rewards as income in the first place. He states that credit card companies give consumers something of value – which, “in theory, would be income.” Still, says expert Steber, don’t take such statements as carte blanche to ignore a 1099 from a bank if one is sent to you. Nowadays, the IRS is quite efficient at tracking income. Should a taxpayer fail to report a 1099 income that has been submitted, they could easily trigger an IRS letter and the threat of a penalty.

Traditional rewards that many rewards card users have come to love are still safe and tax free because they are tied to purchasing something with a payment card. Many of the promotions currently on the market offer rewards points to sign up for credit cards with a caveat that the applicant must make a minimum amount of purchases within the first few months of opening an account. Those rewards are contingent upon spending. Steber explains the difference thusly: traditional rewards are “considered a reimbursement of the fees that you’re paying in association with being a member. It’s a rebate of your fees.” This structure, he says, accounts for the way that a great many rewards programs are set up.

The tax liability comes in when the reward is not tied to purchases you have made. This puts credit card rewards in the same category as prizes you might win on a TV game show, or those fabulous presents given away by talk show hosts like Oprah Winfrey or Ellen Degeneres. If these gifts exceed six hundred dollars in value, they must be claimed. It was a lesson that Winfrey’s studio audience learned the hard way in 2004, when everyone received a new car. The IRS said those are taxable property windfalls,” Steber says. “That’s what this [rewards gift] falls into.” You are so excited about winning a new car that you don’t register anything but happiness, he says, but you end up owing about seven thousand dollars – a rough estimate of the taxes on an average new car – and may not know it until April.

An interesting fact to emerge from the examination of this phenomenon is the realization that many banks simply don’t bother to get involved in reward income reporting, figuring that customers can figure out the tax implications of their swag on their own. Wells Fargo doesn’t offer rewards points for signing on for new credit cards, says spokeswoman Lisa B. Westermann. “Our giveaway for opening a checking account is usually a plush pony, which wouldn’t require a 1099,” she says. Wells Fargo’s disclosure reads: “Any tax liability, including applicable state sales tax and state and federal disclosures, connected with the receipt or use of a reward is your or the reward recipient’s responsibility.” At Discover Financial Services, customers earn cash back bonuses when they use their Discover More and Open Road cards. The bonus points can be redeemed for statement credits, gift cards, merchandise or to donate to a charity. It’s not that nobody considers credit card rewards to be income, as attorney Green stated – it’s that they simply don’t care.

Discover spokesman Matthew Towson explains that, with the Discover Miles card, customers earn air mileage points. With every ten thousand miles accumulated, customers have the option to trade in their points for one hundred dollars off the price of an airline ticket or redemption for gift cards or similar value. He states that the cash back bonus itself is not taxable per federal law, since it is technically considered a rebate and therefore not subject to taxation.

This brings up another salient point in the issue of credit card rewards and taxation, which is the value of non-currency rewards like points. To wit: how much does 25,000 in airlines miles equate to in dollars? Citi’s policy says: “The valuation of ThankYou Point redemptions for Form 1099-MISC tax reporting purposes will be at Citibank’s sole discretion.” Steber from Jackson Hewitt says the valuation is “complicated on a good day … You value it when you have the unrestricted right to it or when you have unrestricted use of it. What are miles worth? They may not have any readily ascertainable value.” After all, air prices change drastically. There is no fixed form of valuation.

According to Steber, the rewards tax issue is just part of the larger problem of Americans largely underreporting their income. The only reason Americans would ever even think to report “earnings” from credit card rewards is because the bank in question sends out a 1099 form documenting the gift to the IRS. If the six hundred dollar threshold isn’t met or the bank doesn’t report the gifts, there is a great chance that the IRS will remain clueless about how much taxpayers receive in this manner.

Still, the burden is on taxpayers to accurately report their income – and that includes sources that they might disagree with. Many don’t, but they should. The IRS believes that the underreporting of American income was the single biggest contributor to the tax gap in 2006. That gap is defined as the difference between what Americans owe in taxes and how much they actually pay. In 2006, the most recent year available from the IRS, that gap stood at $450 billion. Of that, $68 billion was from underreported personal income. Steber puts it thusly: if you make money (from your eBay job, your bank, and/or your employer), you have to pay taxes. End of story.

Did you read this blog title and start humming? (Mission accomplished!) If so, there’s a good chance that you grew up in the same generation as I, when a trip to Toys “R” Us was nothing short of comparable to a tour through Heaven’s pearly gates. So many toys in one place! A kid could find anything they wanted there. Toys “R” Us is still the hotspot for a new generation of kiddos enchanted by playthings – although I think the theme song is a thing of the past – but it’s likely to become a scarier place for parents in the near future. According to a Reuters report, higher Chinese production costs have made it so that consumers of toys will soon be paying more dearly. In particular, the manufacturer Mattel (creators of the ubiquitous Barbie doll) are expected to be hiking prices in the near future.

Christmas 2011 is now a warm memory. For those of us – like me! – who are sick and tired of all the holiday brouhaha by January 1st, this is a good thing. One of the great things about the early days of the New Year is that we get a better sense for how the retail industry performed in the all-important month of December. Who came out ahead in the big Christmas shopping bonanza, and who slunk back to the North Pole with mediocre gains… or even losses?

It should go without saying that you should minimize trips out to the cinema if you are really interested in saving money, since ten dollars per ticket is not “budget” in anyone’s vocabulary. That doesn’t mean that you should not ever treat yourself, however. If you really want to see something on the big screen or are out on a date, try to go to the theater before 6PM. You can still enjoy the environment of the movie theater with the big screen and the great sound effects, but you’ll get to pay a “matinee” price for your ticket. It’s not a huge savings, but any lower expense is a savings! If you are lucky enough to have a discount theater in your neck of the woods where movies are only one or two dollars a ticket, this is a fantastic way to catch first-run movies at lower prices. Yes, it requires a little patience… but if you make a habit of going, there will always be something you have been waiting to see! Another great way to save at the movie theater is to avoid the concessions stand. I won’t touch the argument of whether or not to sneak your own snacks and drinks into the theater, because it’s a very divisive issue, but I will say that avoiding the temptation to pick up nachos, popcorn, or Sno-Caps at the theater will save you a lot of money. Another option is to go just after lunch or dinner, thereby making sure that you aren’t hungry when you sit down.

Another pretty foolproof way to save money is to keep tabs on your use of electronics. Many people in this environmentally-conscious day and age already do this, but make sure that your household is in the habit of unplugging appliances whenever possible… not just turning them off. Apparently, unplugging the TV instead of just switching it off can save a lot of electricity! When not in a room, switch off the lights and the fan. It takes a little while to get in the habit, but you will soon be doing it without even thinking. Also, consider the use of a programmable thermostat to control your A/C and heater usage. Yes, you may need to shell out a little bit of money to replace the one that you have, but the savings can really justify the initial cost before too long. At the very least, educate yourself on what each appliance uses and unplug a few of them. You might really be amazed how much money you can shave off your electric bill, which is a major source of spending for many households.

You can also save money on your vacations, if you are willing to put in a bit of work. Some financial “experts” would argue that you should not indulge on a vacation if you are truly trying to live an austere lifestyle, but I argue back that getting away every so often is a necessary part of saving our sanity in the busy lives that we lead. There can be no realistic doubt, of course, that vacations are also a huge drain on the family finances. Did you know, though, that you can cut the cost of a vacation significantly by planning and booking ahead of time? Well ahead of when you plan on leaving town, be sure to bookmark travel sites for finding inexpensive airfare, hotel etc., and book at least two weeks in advance for the greatest savings. Make sure that you always weigh the price of driving somewhere versus taking a plane when you have the time to do so, since fluctuating gas prices can really change things in this issue.

As a final lifestyle tip towards saving money, do yourself a favor and keep your distance from lavish, high-roller friends who will set a bad example and encourage you (either to your face or subconsciously) to break your budget habits in an attempt to keep up with their free-wheeling spending. You know the type of folks I am talking about: they buy a new car every other year – or worse yet, lease it; they have large screen TVs, iPads, iPhones, and every other conceivable electronics gadget from the day it hits the market; they eat out at fancy restaurants every other night, and they generally live way beyond their means. Please do yourself a favor and keep your distance from these folks, no matter how nice they may seem. It’s not that these people necessarily mean you any harm, and it’s not that they are bad people – it’s just that jealousy is a bear, and there’s no need to expose yourself to discontent and longing when you are making positive steps towards improving your financial situation and staying on the right track. What’s more important – your friends or your peace of mind? Keep in mind that all their goodies now won’t mean much in a few decades when you have a well-funded retirement fund and no debt.

With all this said – I’m not necessarily saying that you should take all these tips to heart and follow each and every one. Just as too much work and not enough play can make Jack a dull boy, so can too much frugality suck the juice out of life. Being too cheap can make both you and the people around you very miserable – and yes, there is a difference between thrifty and cheap. So, pick out a few tips at a time that will work for you and make them a habit, before deciding if you can incorporate more money saving habits in your daily routine. You may really go with some of them, you may lose some and pick up others. It may take some time for you to really get in the groove of what lifestyle habits you want to stick with to help you realize your personal goals of financial solvency and freedom from debt. It’s worth the time and effort that you expend. Any steps you take towards a financially-healthier future will pay dividends in the long run!

To save both dollars and inches on your waistline, avoid the vending machines. Sure, these machines are filled with a tempting array of tasty treats like candy, snack cakes, and pies… but pretty much every single thing that is dispensed via vending machine is not only dripping in fat and calories, but is also being sold at a huge markup. If you really need a snack at work and find yourself jonesing for little treats, however, consider creating a secret stash of snacks. If you like drinking soda and have a fridge at the workplace, save a refrigerator pack in the fridge with a post-it with your name on it. If you have a long commute, consider a stash for the car as well and avoid a quick drive-thru visit. There are ways to get your fix and not put a hex on your wallet!

For books that you perhaps need but can’t check out from the library (or those for which there is a long wait), make sure you look into the possibility of buying used before you buy anything new. The great thing about books is that the content inside is just as good after ten readings as it was the first time. The spine may be creased and the pages may be dog-eared, but it’s still a book. And used books tend to fetch only half the price of their new counterparts, on average. For students and voracious readers, that can add up to quite a bit of difference! Check your city directory to see if you have a half-priced bookstore locally. If you are shopping for schoolbooks, consider checking on the web for bulletin boards, mailing lists etc, and price compare on websites like addall.com.

While we are talking about your bank: be on the lookout for ATM fees, which are the other snake in the grass of consumer banking. Do you know what ATMs are safe to use with your debit card so as to not be charged by your bank? While some banks waive fees for all ATM transactions on any ATM machine, most don’t. You can generally find the information for your specific debit card in the ridiculous pile of fine-print text that your bank gave you with your plastic. Be sure to use only those ATM machines where your bank will not charge the fees, or withdraw directly at your bank. It’s worth a little inconvenience to not pay five dollars (when the ATM fee plus your bank’s fee are added) just to get money out of your own account!

The next tip is one for the ages: buy generic when you can! After all, very few people can tell the difference between breakfast cereal from Kellogg’s or the supermarket brand. Frankly, my kids like the Publix Lucky Charms knockoff better, owing to the fact that the marshmallows are bigger! And dairy stuff, really – do you really care what brand milk you buy? In regards to certain items, it all tastes the same. I’m not asking you to give up on your brand-name favorites when the taste or quality is markedly different (just try to tear the Coke, Tide laundry detergent, or Peter Pan peanut butter from my cold, dead hands), but consider making the switch when it is just force of habit making you reach for a familiar brand. You will likely find in many cases that the generic brand saves you money and is very much comparable to the original. Even if there is a small difference in taste, consider whether the tradeoff is really worth the price difference. It may be, it may not be. It’s all up to you.

While you are getting ready for work, suck it up and pack yourself a brown bag lunch to take along, too. You will save beaucoup bucks by skipping the office takeout, even if you only do it a few days a week. Look, I’m not expecting you to skip out on crucial networking opportunities or connections by avoiding the workplace ritual of noshing en masse at a local café. Still, you can surely pack yourself something two or three times a week, right? It’s all about achieving a balance. There are plenty of tasty, appetizing options, so don’t let that be an excuse! In fact, if you have a dual 2012 resolution of gaining wealth and losing weight, then packing your own lunch is definitely the way to go. You can eat cheaper and healthier when you bring a meal along.