What I’ve Been Up To

This Week in Your Wallet: January 10, 2012

Here’s a heads-up for the New Year:  If you’ve always thought you’d like a credit monitoring service – but just didn’t want to pay for one — or if you’re paying for one and would prefer to get the same (or at least pretty much the same) for free, now you can.

CreditKarma.com – which has long provided the ability for you to access your credit score for free – is now giving away credit alerts, which is pretty much free credit monitoring.   As they do for their credit reports, they’re getting their data from TransUnion, one of the free credit bureaus.  And if the bureau sees new inquiries, accounts, public files, collections, liens or the like, you’ll get a rapid-fire heads-up.

What do you have to give in return? Bandwidth.  CreditKarma.com, like other sites in its space, makes its money by enticing its customer base to switch credit cards, mortgage companies, auto lenders, etc., by offering them better deals.  (Because they have access to your credit report – providing that is part of subscribing – they can see what and who you have today.)  If you switch, and the site has a relationship with the product it’s recommended (it doesn’t always) it earns a bounty.  About 10%  to 20% of the people who join the site make at least one switch.   The ads appear on screen.  The company also emails its user base approximately once a month.

According to company CEO Ken Lin, a quarter million consumers have signed up for the offer in the last week, a significant bump to the existing user base of four million.  I asked Lin, who said his company is paying TransUnion for these alerts (but would not say how much), how it could afford to do this.  “We can’t spend too much on marketing,” he said.  “Look at Experian.  They spend more than a half billion a year promoting their product.  That’s why they charge so much.  We’re focused on the viral aspect.”

So, we’re spreading the word.  And note – if you were signed up for scores on CreditKarma, you’re not automatically signed up for alerts. You have to visit the site and opt in.

Now here’s a look at the other headlines for the week:
Menu prices on the rise…

Last week, Denny’s and Starbucks announced modest price increases to their menus. Unfortunately, new research suggests that this may be just the tip of the iceberg.

According to a survey from Nation’s Restaurant News, 67% of restaurants said they will increase menu prices this year (compared to 31% that said they would hold them steady). The good news is that of the restaurants looking to make increases, two-thirds said they were planning to hike prices just 1 to 3 percent. (That’s what Starbucks did – the cost of a tall brewed coffee or latte went up 10 cents in New York City.) The other third said they are looking at increases of between 4 and 6 percent, and only a small fraction said they were looking at more than 6 percent.

What’s behind these increases? Not restaurant greed, I can assure you. This is all because of rising commodities costs. Across the board, food prices are supposed to go up by 3% in 2012, according to USDA forecasts. Beef prices are rising substantially more than that (15 to 20% on various wholesale cuts of beef), and pork prices are also rising substantially (but not as much as beef). Milk, egg and coffee prices will be up in 2012 as well — hence why we’ve seen the increases at Starbucks and Denny’s.

If you’re looking to learn more about these rising food prices, this Nation’s Restaurant News article has some great information. Additionally, I encourage you all to tune into TODAY on Thursday morning — I’ll be on the air discussing this trend in even greater detail. (If you can’t tune in, check my website later in the day — I always post the clip.)

… But is eating out becoming a bargain?

It sounds crazy, especially considering the above, but this Daily Finance article points out that the cost of groceries has risen more than the cost of restaurant food and asks: is eating at home still a good deal? One of my Twitter friends pointed out that it costs much more to feed herself and her husband at home than out.  I didn’t have the luxury of digging into her grocery list, but she has a point I know resonates with many.

Your potatoes may cost 12 percent more than they did in 2010, but potato hash at your neighborhood diner only increased an average of two percent last year. Despite all evidence to the contrary, restaurants are reticent to pass on significant price increases to the consumers. Eateries can and do make cuts in other areas (labor, overhead, paper products, etc) to compensate for the rising cost of food. Grocery stores don’t have this luxury.

The USDA predicts that the price gap between eating in and eating out will continue to narrow in 2012. Eating in still has the edge… but for how much longer?

Have a great week!

Jean