Archive for the ‘Spend Page’ Category

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Why does the price of a plane ticket change so much?

Friday, January 8th, 2010

Have you ever gone online to find that the price of an airline ticket has doubled since last night? Airline prices remain a mystery to most, but there are basically three major factors that influence the variable price tag:

Yield Management - This is a complicated computer-based model that constantly adjusts the prices of the remaining inventory of tickets to yield the greatest dollar amount for the remaining seats. (Pretty smart, huh?) The program uses many inputs including historical booking patterns, demand, market competition and events in the market to squeeze as much revenue as possible from every seat.

Competition - If American Airlines is competing against U.S. Air, or Delta, their prices will stay similar because all of these major airlines use similar yield management software. But if they’re up against a low-cost provider like JetBlue, they’ll have to adjust their prices for the effected flight routes in order to stay competitive.

Cost - This is lowest priority in setting prices since the going rate for seats, availability of aircraft, and customer demand are all ultra-sensitive to fluctuating markets. Often, airlines are not able to pass their costs onto customers because, well, there are always other means of transportation if flying is too expensive.

While airline prices are going to fluctuate dramatically, understanding the fluctuations can help you book the best plane ticket, and get a good deal. You can also try sites like kayak.com and others, which show you the average prices over time for the flight you’re planning.

Why does your mocha frapp cost more in New York than in Pittsburgh?

Friday, January 8th, 2010

It just seems to make sense that a drink from a chain like Starbucks should cost the same amount no matter where you are when you order it. The menus are the same and the coffee all comes from the same place — so what’s the difference? To understand, you need to realize that you’re paying for much more than just espresso and the Barista’s snazzy signature green apron. While some operational costs are the same for all stores in a megachain like Starbucks — the coffee itself, for instance — other costs vary depending on the location of the individual store.

The cost to hire the best Baristas, or wages, varies from state to state. Taxes are much higher in some states than others. The cost of renting space in a city like New York is simply much higher than renting space in Pittsburgh. Even the price of milk varies greatly depending on where you are. When you pay a few cents or a dollar more for your drink in New York than you would Pittsburgh, you’re really paying for the heightened costs of running a business there.

Starring… The Perfumer?

Monday, January 4th, 2010

The fragrance industry takes a new approach to selling their products: promote the perfumer.

  • Previously fragrance companies linked their perfumes to the identity of designers, then celebrities, now it’s the actual maker.
  • Fashion magazines increasingly reference perfumers by name, helping drive this trend.
  • Fragrances made by large manufacturers are less likely to publicize a fragrance’s creator, as they rely on a team of art directors, consultants, clients, as well as perfumers.

Facts & Figures

  • Frederic Malle’s company, Editions de Parfum, was the first to celebrate perfumers by name.
  • Seminars are held where perfumers meet with customers and discuss the inspiration for their fragrances.
  • During the first nine months of 2009, sales of prestige fragrances were just over $1.38 billion in department stores, representing an 11% decline.

Best Quote

“Makeup did it with the makeup artist. Skin care did it with doctors. What’s happening is the fragrance industry is realizing the perfumer is the ultimate celebrity of fragrance.” – Karen Grant, Analyst at NPD Group

Does anyone use paper checks anymore?

Tuesday, December 22nd, 2009

While the ten-pack of free checks might seem a bit much, don’t throw them away just yet. Checks are playing a diminishing role in everyday life, but they still have their uses.

In the past, paper checks were the preferred method for paying for large purchases, getting paid, sending money, paying bills, etc.. But now when you walk into a store, the most likely thing coming out of your wallet is your debit or credit card. Getting paid? Companies can now directly deposit into your checking account without you ever having to go to the bank. The reason for the shift away from paper checks is simple – ease of use. Writing a check can be a hassle: it takes time to fill it out, you have to go to a bank to deposit one, and you always have to order more. For these reasons and more, banks have mostly transitioned to electronic forms of check processing and even utility companies are now accepting credit/debit card payments.

Even though paper checks are definitely on their way out, they still serve some vital financial roles. Checks are a great way to securely send large sums of money to individual people. If you are renting an apartment, for example, you’d be very lucky to find a landlord that would accept a credit card to pay rent. It’s not hard to imagine though, that soon this process will be replaced by an easier electronic method.

While paper checks will probably one day become extinct, you’re still likely to find yourself digging them out once a month or so.

Are scholarships taxable?

Monday, December 21st, 2009

Scholarships and fellowships are considered tax-free as long as two conditions are met:

First, (as obvious as this seems) you have to actually be enrolled at a university. Second, the scholarship or fellowship has to be used to pay for tuition or required books and supplies. Expenses due to room and board, traveling, or optional supplies don’t count (they’re considered incidental expenses, so they go towards calculating your adjusted gross income instead), and you have to report any payments you received for doing any kind of teaching or counseling that was required by your scholarship or fellowship (although there are some organizations that exempt you from this rule).

Students who receive scholarships or fellowships to do work in, say, a hospital setting may find the tax question a bit more fuzzy. If you’re ever unsure, just check with your sponsoring institution.

What happens if you don’t pay your taxes?

Monday, December 21st, 2009

Every taxpaying American citizen is required by law to file a tax return by April 15th of every year. Failing to submit your tax forms on time, or submitting them with incorrect information, is a crime that can earn you jail time if the IRS finds out, but you might wonder just how that happens. What is the process through which the IRS catches you and decides whether or not to press charges?

Businesses have to file tax returns for all their employees, so as long as you aren’t self-employed, tax infractions are relatively easy to spot. Even if you don’t work for anyone else, the IRS tends to audit the very wealthy more often, and since your tax records from years past are kept on file, the IRS can spot the discrepancy if you just stop paying taxes all of a sudden. The IRS also performs some random audits every year for statistical purposes, and every tax return that goes through gets a DIF score – basically, a measure of how suspicious it looks. If your DIF score is high enough, the computer program that evaluated your tax return will audit you automatically.

The good news is that the IRS generally won’t press charges even if they do bust you – they’ll probably just file a tax return on your behalf and then charge you for it. But anyone who files an incorrect tax return – or doesn’t file at all – is potentially at risk for jail time, so it’s worth it to keep careful records.

Death and taxes?

Monday, December 21st, 2009

As crazy as it may seem, there is actually such a thing as a “death tax,” and it’s exactly what it sounds like: the government does, in a manner of speaking, charge you money for dying. But since you, being deceased, are obviously not in a position to make any payments, it’s your heirs who have to take care of death taxes, also known as inheritance tax and estate tax.

Inheritance tax is the tax you have to pay in exchange for inheriting money in someone’s will; estate tax is the same principle applied to property instead of money. While these taxes are often staggeringly high – they’re currently at up to 45% and expected to grow in the years to come – they only apply to extremely high net worth estates (over $3.5 million as of 2009). Inheritance and estate taxes have long been controversial; their supporters argue that inheritors didn’t earn any of these assets themselves and so should have to surrender a big chunk of them to the government, while detractors say that people work hard to earn money with the expectation that it’ll be there to make their children’s lives easier. Some people attempt to set up complicated networks of trusts in order to avoid these taxes, but it isn’t easy to do so. The Bush administration attempted, unsuccessfully, to phase out inheritance and estate taxes, but for the present it seems that, much like death, they’re simply a fact of life.

It’s important to know, though, that the tax laws surrounding death can vary somewhat from state to state. Make sure to check with your local tax authority before dying.

How do you know if you have to file an income tax return?

Monday, December 21st, 2009

Income tax filing requirements are easy to describe but difficult to state specifically. Basically, you have to file a tax return if your income for the fiscal year is above a certain level. What is that level? That’s the tricky part. The numbers can vary from year to year, so if you’re not sure whether you qualify, you can check the IRS website to find out. But here are some general rules of thumb that determine the relative level you have to reach:

Here are the minimum income requirements for several filing statuses for 2008:

  • Single and under 65: $8,950 (though if someone else can claim you as a dependent on their tax return, this number will be slightly lower)
  • Single and over 65: $10,300
  • Head of household and under 65: $11,500
  • Qualifying widow(er) with dependent child and under 65: $14,400

Hungry for more filing facts? We’re here for you:

  • If you are over 65, your income has to be greater than a younger person’s to qualify for taxation.
  • If your filing status is head of household or qualifying widow(er) with dependent child, your income has to be greater to qualify than if you file as single.
  • If your filing status is married filing separately, you must file a tax return.
  • If someone has claimed you as a dependent on his or her tax return but you still received income for that year, you have to file a tax return if your income is above a certain level (usually relatively lower than for non-dependents).
  • You may also have to file a one-time-only tax return if you don’t normally make these levels but you come into a sudden sum of money (say you’re unemployed and win the lottery, for example).

So while the numbers may change, the basic principles behind them are that the IRS cuts you more of a break if you’re over 65, the head of a household, or widowed with a dependent child.

Can anybody look at your credit score?

Thursday, December 17th, 2009

While your nosy neighbor isn’t allowed to look up your credit score, almost any business with a legitimate purpose can. So what makes a credit inquiry legitimate as opposed to a neighbor’s snooping?

The rules that govern who can look at your scores are spelled out clearly in the Fair Credit Reporting Act. Someone who wants to see your score must have an acceptable business or financial reason to do so. People who are evaluating whether you qualify for credit cards, loans, insurance policies, jobs, or housing rentals all have a “legitimate” reason for looking at your credit score. For those situations, a credit score is vital in determining whether you are a good candidate or not – their businesses depend on this information to know you are consistent, trustworthy, and dependable with money. What this means is that any company that stands to gain from looking at your score is entitled to do so.

In most of these situations, though, a person must first authorize the company to obtain their credit score. If you don’t want your loan adviser to look at your credit score, then he won’t be able to. The only caveat is that if you refuse, you probably won’t be getting that loan…

What is the gray market?

Thursday, December 17th, 2009

Everyone has heard of the black market (at least in movies), but what is the gray market? Unlike the black market, the gray market is not technically illegal, but it is often unauthorized. Instead it’s a kind of loophole, as it involves distributing items in a way that the original manufacturer would not have wanted.

Let’s use cell phones as an example. An individual or private company buys a bunch of BlackBerrys at retail, wholesale, or discounted prices, and then resells the phones at a higher price. Usually, this new price is cheaper than what your local AT&T store will sell a BlackBerry for, so customers are more likely to spend their BlackBerry dollars there.

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