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The Big Fix

Sloppy shopping has cost Americans millions of dollars. Now consumer activists have put together a Top 10 list of purchasing mistakes aimed at stopping the flow of red ink.


Considering that we buy more goods and services than consumers anywhere in the world, Americans are not very good shoppers.

Impulse buying, fed by a drumroll of advertising, is an expensive habit: Consumer debt is at a record high and personal bankruptcies are rising. "Too often we make quick decisions without weighing the long-term costs," said Ken McEldowney, executive director of Consumer Action, an advocacy group that has offices in San Francisco and Los Angeles.

Now, in a bid to help, a coalition of consumer activists, including McEldowney, has released a list of Ten Big Consumer Purchase Mistakes. The Consumer Literacy Consortium would like to see it taped to every refrigerator door in America. These mistakes are easy things to correct, the group emphasizes.

"Consumers lose billions of dollar each year because of hasty, uninformed purchases--not just on big ticket items but on everyday purchases as well," said Stephen Brobeck, executive director of the Washington-based Consumer Federation of America.

Brobeck, whose federation links 240 consumer groups representing 50 million people, organized the consortium several years ago, pulling together a group of consumer educators, government agencies and businesses, all working in consumer education.

The group hoped to widen its educational net, said Robert Krughoff, whose Checkbook magazine offers extensive ratings of businesses and services in the Washington, D.C., and San Francisco Bay areas. Despite a growing number of print and online consumer publications, and the traditional popularity of Consumer Reports magazine (circulation 4.6 million), most of the nation's 100 million households are not reached. The Consumer Literacy Consortium acknowledge it's an uphill struggle. "Basically we are trying to counteract the mass of advertising that's designed to get people to buy regardless of the outcome," McEldowney said. "We are hammered with so much advertising, it almost seems un-American not to have a lot of credit cards and use them constantly."

The group's first step last year, and the keystone of its campaign, was publication of a brochure titled "66 Ways to Save Money." There are more than half a million of those now in distribution, in English and Spanish.

And even though much of the list seems quite obvious, Mary Ponder, senior projects director for CFA, pointed out that it was compiled from the experience of consumer affairs offices. "These are the areas consumers complain about after the fact," said Ponder, who discussed each buying mistake:

No. 1: Leasing rather than buying a car because you believe that leasing costs less. "Cars are now leased by 30% of buyers and it's projected to be 50% by the end of the decade. It's no longer just a luxury market and there are a lot of inexperienced shoppers. Research shows that a surprising number of people don't realize they won't own the car when the lease expires."

No. 2: Not carefully searching for a competent, honest auto mechanic. "There are so many complaints from consumers who think they've been ripped off. Look for a mechanic who is certified and well established, and has done good work for someone you know."

No. 3: Assuming your insurance agent will "shop the market" to find you the best auto or homeowner policy. "Don't go to a single agent and ask for insurance. You need to compare."

No. 4: Not holding a cash-value life insurance policy for at least 15 years. "If you don't hold it for 15 years you are throwing the money away. Most people don't understand the difference between term insurance and cash-value insurance."

No. 5: Not maintaining the minimum bank balance required to avoid checking fees. "Banks are charging an increasing number of fees. Don't be careless and let your balance slip."

No. 6: Holding many credit cards. "Get it down to one or two. This is debt consolidation and you'll get a better picture of what you are spending. These companies not only charge interest, they also charge fees."

No. 7: Taking out a 30-year mortgage loan, rather than a 15-year loan, just because the monthly payments are lower. "You can save tens of thousands of dollars in interest by shopping for the shortest-term mortgage you can afford. On a $100,000 fixed-rate loan at 8% annual percentage rate, for example, you will pay $90,000 less in interest on a 15-year mortgage than on a 30-year."

No. 8: Paying in full for a home improvement before the work has been satisfactorily completed. "Home repair companies typically ask for advance payment for materials and labor. But we want people to realize they have lost their leverage once they have paid in full."

No. 9: Purchasing new appliances that are not energy efficient. "Most people don't realize that federal law now requires Energy Guide Labels on major appliances. Read them and you will be startled by the difference, which can mean huge savings on your utility bill."

No. 10: Not comparing unit prices found on supermarket shelves. "You can save hundreds of dollars a year by comparing price-per-ounce or other unit prices on shelf labels. It takes a little time, but pays off on your grocery bill every week."

* "66 Ways to Save Money" is available free from the CLC by sending a self-addressed, stamped business envelope to "66 Ways," P.O. Box 12099, Washington, DC 20005-0999.

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