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Sunday, February 21, 2010

Currency Conversion Fees and Sales Tax on Food: What Me Worry?

All those fees and taxes. Funny About Money faces a new 2% tax on groceries in Phoenix and is considering whether it's worth it to go to the no-tax Commissary with her frugal friend.

The New York Times has a piece on the 3% fees for currency conversion that the evil credit card companies tack on.

Needless to say, 2% or 3% is more than you can make on your money in most bank accounts or CDs these days. So why do I say What ME Worry? Am I losing my frugal edge? After all, I did counsel a fellow blogger to get the designer purse she wants, rather than several less thrilling alternatives.

No, I don't think I'm losing my frugal edge. After all, I popped into Big Lots this morning to take advantage of their 20% off sale.

Sometimes it's just not worth it to worry about those percentages because it doesn't pay or because you can't win.

Grocery tax. My esteemed state with its regressive tax system has long had sales tax on food. It used to be the regular tax (almost 10%). A few years ago, it was made more progressive and lowered to about 4%, with a concomitant rise in state income tax. I supported this, even though it went against my own pocketbook. Plus, I don't spend that much on food. It seems to me that it's better to learn frugal grocery shopping tips, which will save you far more than a few percentage points, than to worry about the tax.

That's why I stock up: I have lots of cabot cheddar that I got at a killer sale ($3.40/lb), plus loads of canned tomatoes that I got a Big Lots. Ditto for the 50 lb. sack of oatmeal I bulk buy.

That's why I learned to cook. As it happens, home made food is healthier, better, and--it is true--quicker than going to a restaurant or a fast food place.

Now the currency conversion fee charged by credit cards is awful. We tried to evade this a few years ago. I learned--as did many people who responded to the Times article--that Capitol One does not charge the fee. So we looked into getting their card. But their customer service and general ratings leave much to be desired.

So I called every one of our cards to inquire about the fee. Our LLBean visa (only used for free shipping from that company) had the lowest fee. I called three times to double check. I even asked if there were any additional fees that I might not know about. I was assured that there were not. We got the bill--and presto--they did have the lowest fee for currency conversion, but they also had tacked on a surcharge for something or other. I called the company to try to get the surcharge removed, arguing that the customer service reps had not informed me about the charge. No success.

We figured out that, given our generally frugal ways and the fact that our credit cards have rebates between 1% and 2%, we should just be mellow about the currency conversion charge. It is, as Mr. FS pointed out, a tiny part of the cost of the trip. We save more than the charge on the whole trip simply by buying less in the souvenir department and subbing a few picnics in a park for restaurant meals.

In other words, sometimes apparent frugality really doesn't pay. In fact, I use the term apparent frugality because it's not frugal to waste your time and drive yourself crazy when you have little chance of succeeding. Funny did the math and came to the same conclusion.


Over the Cubicle Wall said...

Very true. Sometimes it is just less stressful (and more fun) to spend the nickle rather than save the dime.

FB @ said...

Hear hear. Need to spend your money to make yourself happy once in a while. As long as it doesn't become a habit, go for it.

I totally agree with this statement too As it happens, home made food is healthier, better, and--it is true--quicker than going to a restaurant or a fast food place.

As a consultant who has had every opportunity to eat out 3 times a day, 5 days a week, IT GETS BORING.

Believe it or not, all I want is some cheese and bread after a week of decadence.

Shelley said...

In Britain, there is no sales tax; the sticker price is what you pay at the check out. However, we have 'VAT: Value Added Tax' (love that name) at 17.5%, not just on consumables but on services and on utilities. Last year the government dropped this to 15-15.5 (I'm not sure which) but it's back up again now. Strangely, it isn't applied to children's clothing or to certain foods. For example, VAT isn't added to fruit, but it is to fruit juice. I find it interesting to see what items are classed as necessities and which are luxuries. As you say, you can't beat it, so it doesn't bear worrying about.

The currency conversion charge does matter a bit more to me, as my income (rent) is in dollars and I live on pounds. Also, as taxes are much higher in the UK than in the US I generally pay UK tax on my rent income but not US tax, which I think is fundamentally wrong, but nobody asks my opinion. So, I've taken to bringing money over to put into UK tax sheltered accounts. I doubt that I'm smart enough to win this game, currency exchange rates constantly fluctuating as they do and banks playing the 'no commission' game when all that means is a lousy exchange rate...

I do what I can about frugality and try not to sweat the rest.

Duchesse said...

Taxes (theoretically anyway) are supposed to pay for things we all use or support (like roads, schools, etc.) Fees don't. So avoiding tax has for me some ethical consideration. I am wading into politics here, and live in a country with a much higher tax rate than the US. Just saying.

If you travel outside your country the Capitol One card sounds good; if only used occasionally would you care that much about service? But I hope they don't have one of those nasty fees for not using your card, talk about gouging!

There will always be a spread b/t buy and sell rates on currencies but a service charge as high as Visa's is not trivial if you spend shop when you travel, as I occasionally do. So I take a big wad of euros, that way I don't pay the fee and don't get a bill.

Duchesse said...

"As it happens, home made food is healthier, better, and--it is true--quicker than going to a restaurant or a fast food place."

re restaurant: depends, doesn't it? re fast food: home is always better, I'd hope!

My Dad would insist "home is better" and my mother would be dying for a break and the pleasure of being served.

Frugal Scholar said...

@Cubicle--Did you make that up? I like it (and never heard it before).

@FB--I agree about the food. When my daughter comes hoe, she says"Where are the burritos?" I do love to cook.

@Shelley--You do have a reason to gripe about the conversion fee. Hopefully, you will find a way to circumvent it.

@Duchesse--You too have a reason to try to find a way around it. As for food--it is rare that I am impressed by restaurant food, even in my foodie state. I do enjoy the experience now and again.

Funny about Money said...

Ten percent! Now that IS regressive!!

Maybe what New York City needs to do is raise its food tax, rather than tell restaurants they can't put salt in the chow. Make it exorbitant enough, and even New Yorkers will start cooking at home.