Five Worst Holiday Money-Wasters

Avoid bank and retailer fees and other big money wasters this year.

Holiday time is tough enough on your budget. You don’t want to spend more than you planned because a retailer or credit-card company came up with some tricky way to squeeze more money out of you. Well, you can beat the system! You just need to know where to look for these sneaky shopping traps.

Trap No. 1

Hidden debit-card fees

Whipping out your debit card to pay for holiday goodies probably seems like a budget-friendly idea because the cash is immediately withdrawn from your account. No need to worry about paying interest on a credit card or fees for bounced checks. But using a debit card could end up costing you a lot more than you’d think. In the past banks would reject a debit purchase that was more than the amount you had in your account. But many banks now process the purchase-and then hit you with an overdraft fee. Those charges range from $25 to $35 at 16 of the largest banks, according to a July Consumer Federation of America survey. If you buy several gifts in one day and use your debit card to pay for gas, groceries, and lattes, you could be hit with multiple fees. In September, Bank of America, JPMorgan Chase, and Wells Fargo announced plans to lower or eliminate overdraft fees. Let’s hope other banks will follow suit.

Dodge it! Use a credit card for large purchases, especially if you pay the full balance each month. Credit cards give you a lot more protection than other forms of payment if your account number falls into the wrong hands or if you have a legitimate beef with a seller and want to dispute a charge. Use a debit card only for small purchases if you’re relatively certain you won’t need the extra protection a credit card provides and you’re sure you won’t go over your balance.

Trap No. 2

Phony sales

Many highly promoted “door buster” sales, particularly ones that take place on Black Friday (the day after Thanksgiving) and the following Cyber Monday, offer deep discounts on hot-ticket items. Black Friday has earned the reputation as a bargain-hunter’s dream because retailers feature a limited quantity of high-profile, attention-grabbing toys or electronic items at or below cost to draw you in, hoping you’ll also purchase lots of full-price merchandise. There’s a more deceptive version of deep-discount sales, though: An item is advertised at a superlow price on a Web site, but it’s a phony come-on. The goal is to get you to buy something else and spend much more. If you try to buy just the sale item, you’ll often find that the retailer cancels the sale, claims the product has been back-ordered for months, or sends you lower-quality merchandise or items that you never ordered. Returns can be difficult, if not impossible.

Dodge it! To protect yourself when you’re shopping online, be wary of unrealistically low prices. Don’t make a purchase if you’re pressured to buy additional products or services. To be supersafe, stick with merchants you know. Also, follow these other tips:

* If you go to a door-buster sale, don’t buy other items in the store unless you have done the research ahead of time and know they’re a good deal.
* Don’t worry about missing a one-day sale. It’s very likely that another supersale will come along. Last year we found plenty of so-called one-day sales that were extended.
* If someone on your list wants this year’s hot item, hit the stores as soon as you can. Go early to beat the crowds or try online. Last year we found that online retailers sometimes offered special savings early in the morning.

Trap No. 3

Unnecessary warranties

This holiday season, shoppers are expected to spend more than a billion dollars on extended warranties. Appliance and electronics retailers push shoppers to buy extended warranties or service plans because the store keeps 50 percent or more of what they charge for them. That’s much more than they can make just selling the products. But extended warranties are notoriously bad deals because some repairs are already covered by the standard manufacturer’s warranty that comes with the product. And our data show that products seldom break within the period the extended warranty covers — after the standard warranty has expired and within two to three years of purchase. When electronics and appliances do break, the repairs, on average, cost about the same as an extended warranty.

Dodge it! Our decades of brand research have shown that products are reliable enough that we don’t think you need extended warranties. But if you’d like the peace of mind an extended warranty can provide, you might be able to get similar coverage by charging the item on a credit card. Check your card agreement; some cards, especially gold and platinum ones, lengthen the original manufacturer’s warranty by as much as one year. If you can’t rely on your card’s additional coverage, channel your inner Scrooge. Get the cheapest deal you can on an extended warranty by including the cost of one in your price comparison. Always try to negotiate a better deal. And don’t pay more than 20 percent of an item’s purchase price for any warranty.

Trap No. 4

Gift-card charges

Sure, buying gift cards can shorten your holiday shopping time. You don’t have to rack your brain to come up with an appropriate gift for the hard-to-please folks on your list or spend hours hunting for whatever present you settle on. But we advise shoppers to avoid gift cards. Some come with purchasing and processing fees, expiration dates, transaction fees, and inactivity fees that unfairly diminish their value over time. And the recipient could end up with a worthless piece of plastic if a company goes out of business or files for bankruptcy protection after you buy its card. There’s also a good chance your card will not be used. A quarter of the people we surveyed last November still hadn’t used a gift card they received during the previous holiday season.

Dodge it! In one bit of good gift-card news, American Express announced in September that it would no longer impose fees on its gift cards — but it will still charge you $3 to $7 to buy one. Consider giving cash instead of any gift cards issued by credit-card companies, banks, or malls. If you do buy a gift card, stick to those issued by retailers, which are relatively free of expiration dates and pesky fees.

Trap No. 5

Return fees

Many electronics items, especially cameras, camcorders, computers, monitors, printers, scanners, projectors, PDAs, and GPS devices, are subject to a 15 to 25 percent restocking fee if they are returned opened or if they’re not in a factory-sealed box. If you return a refurbished item, it might be subject to a restocking fee, too. You might even be charged a 15 percent restocking fee for some appliances, tools, and lawn-and-garden products if you don’t return them in their original packaging. Merchants can’t resell as new any item after the package has been opened, so they penalize you for opening it.

Dodge it! Don’t open the package if you don’t want what’s inside. Items like computer software, music CDs, and movie DVDs aren’t generally returnable for another title after the seal has been broken. But if you do break a seal, some stores will give you a partial refund of a restocking fee if you ask. You should not have to pay a restocking fee if the item was defective when you unwrapped it. And always find out about a store’s return policy before you buy. Things like restocking fees and limits on what you can return vary among retailers, and some retailers have a different policy online than they do in their stores.

Provided by ConsumerReports.org

4 Signs that Your Home May be Losing its Value

Despite signs that the real estate market is bottoming out, millions of homeowners are likely to find themselves in worse shape within the next two years.

Nearly half of the nation’s 52 million mortgage borrowers will have negative equity by the end of the first quarter of 2011, up from the 14 million at the end of this year’s first quarter, according to estimates in an Aug. 5 report by Deutsche Bank. With so many borrowers underwater – or owing more on their home than it’s worth – the risk is high that they’ll default and their homes will go into foreclosure, says Mark Zandi, the chief economist at Moody’s Economy.com. (Moody’s Economy.com estimates that 17.5 million mortgage borrowers will be underwater by early 2010.)

Negative equity is the product of several factors. The most significant weight is the broad and persistent decline in home values. A Zillow.com index of home values fell 12.1% year-over-year during the second quarter, resulting in a total drop of 22.3% since the market peaked in mid-2006, according to an Aug. 11 report by the online real estate marketplace. Many buyers who bought their home around the peak with a 20% down payment have lost that dollar amount.

“The continued decline of U.S. home prices will contribute to rapidly rising rates of negative equity,” Karen Weaver, a Deutsche Bank research analyst, wrote in the report. “The most obvious implication is for mortgage defaults.”

Current homeowners, or those shopping for a home and who are concerned that they’ll end up underwater, should consider how long they expect to live in their house. Being underwater doesn’t affect homeowners unless they plan to sell, Zandi says.

Individuals who are staying put for at least the next five to seven years will likely recoup the lost value of their home, says Amy Bohutinsky, a Zillow.com spokeswoman. In addition, homeowners should refrain from borrowing against their mortgage, she says.

Those who find themselves underwater can turn to the federal Making Home Affordable plan, which can help you refinance or do a loan modification.

Whether you’re at risk for falling behind may have more to do with the economy and your neighborhood than your job, your credit or your income. Here are four warning signs that you’re heading underwater.

1. Foreclosures in Your Neighborhood

The quickest way to end up underwater is to live in a neighborhood that’s plagued by foreclosures.

When one home on your block goes into foreclosure, your home’s value drops by 1%, Zandi says. But that isn’t a one-to-one relationship. If two homes on a block go into foreclosure, your home’s value will drop by more than 2%.
As homes go into foreclosure, they create a domino effect, lowering home values throughout a neighborhood in a cascade beyond homeowners’ control.

2. Homes Lingering on the Market

When “For Sale” signs linger in a neighborhood for three or more months, that may mean buyers and sellers can’t agree on a price. In that environment, homes are unlikely to sell unless the seller lowers their asking price.

“The time on the market is always a good barometer of demand for homes and for the price homes are transacting at,” Zandi says. “The longer it appears that neighbors are taking to sell their home the more likely it is they’re not getting the price they want and that prices are falling.”

Compare the time it took for homes to sell in your neighborhood three years ago vs. today; if it’s taking weeks or months longer to sell, the prices homes can fetch are dropping, Zandi says.

3. Increasing Unemployment

In most cases, the cities where homes have lost the most value during the past year also possess the highest unemployment rates.

Homes in Merced, Calif., have lost 40.2% of their value year-over-year, the biggest loss of home values in the nation, according to Zillow.com. The city’s unemployment rate is the fifth-worst among 372 metropolitan areas at 17.6%, according to June data from the Labor Department. El Centro, Calif., where home values plunged 37.6% year-over-year (the second-biggest drop in the country), has the worst unemployment rate at 27.5%.

Individuals living in areas battered by high unemployment are likely to see their home values drop further, especially if they live in areas dependent on dwindling industries – like Central Valley, Calif., and the mortgage lending business or Detroit and the auto industry, Zandi says.

4. Homes in Disrepair

Dented siding, peeling paint and broken porches could be signs that neighbors are having trouble making ends meet and can no longer pay to take care of their home, Zandi says. Or they may have gotten an appraisal and discovered their homes have dropped in value and are no longer worth the cost of repairs. Inevitably, as the condition of homes in your neighborhood worsens, home values are likely to drop.

“The mere fact that they’re not investing in their homes will affect you too,” Zandi says.

What Underwater Borrowers Have in Common

Risky Mortgages

Some 77% of option-ARM borrowers and 50% of subprime mortgage borrowers were estimated to be underwater as of the first quarter of 2009, according to the Deutsche Bank report. With option-ARMs, borrowers could make minimum monthly payments that didn’t even cover the loan’s interest. As the market declined, these balances grew over time. With subprime mortgages, borrowers often had poor credit scores and little documentation of their financial situation. In both cases, borrowers often ended up with a large mortgage relative to the house’s price.

Date of Purchase

Individuals who bought their home between 2003 and 2008 are at risk of being underwater because they bought while prices were rising, Zandi says. The risk is greater for those who bought between 2005 and 2006, as the market approached its peak.

Excessive Borrowing

Many individuals borrowed against their home when it appreciated in value during the bubble by taking out a second mortgage or tapping into a home equity line of credit or home equity loan. This borrowing left their home with less equity to weather the drop in home values.

Home’s Location

The areas that have been hit the hardest by plunging home values include the “sand states” of Arizona, California, Florida and Nevada because they brought the most speculation, easy credit and overbuilding during the bubble, Zandi says. Also hurt: the states where unemployment is especially high and manufacturing jobs have been eliminated like Michigan, Ohio and Indiana, Zandi says.

by AnnaMaria Andriotis
Copyrighted, SmartMoney.com. All Rights Reserved.

Get Paid to Drive Your Car

You probably have heard stories about businesses that will pay you just to drive around with an advertisement on your car, but do these opportunities really exist? And, if so, how do you find them?

They’re called “free car” programs or “get paid to drive” promotions. These programs do exist, although they aren’t as plentiful as they once were. The key is knowing where to look and having what it takes to make you an ideal advertising driver.

How it works

Here’s the basic premise of the “paid to drive” concept: A company seeks people — regular citizens, not professional drivers — to go about their normal routine as they usually do, only with a big ad plastered on their car. The ads are typically vinyl decals, also known as “auto wraps,” that almost seem to be painted on the vehicle, and which often cover a large portion of the car’s exterior surface.

The car owner is then compensated, usually a few hundred dollars per month, which is essentially a “rental” payment for letting the company use that space. In the past, there’s also been a “free car” version of this concept. The company provided the driver with a new, prewrapped car. In this situation, the drivers usually didn’t get any cash; their payment amounted to the free use of a new car. However, companies quickly discovered that giving away a bunch of free cars didn’t make economic sense, so few still take this approach, says Drew Livingston, president of Free Car Media in Los Angeles.

What does the company get out of this type of ad strategy? Lots of exposure. The auto wraps tend to be colorful and eye-catching and attract lots of attention. Plus, it’s a form of advertising with a captive audience, meaning people who are stuck in traffic and can’t avoid seeing the wrapped car alongside them, Livingston says.

The companies usually select drivers who live in desirable locations such as high-traffic, urban areas. A company’s ideal driver can vary depending upon the target demographic they want to reach, according to Brandon Clarke of DrivenMedia, a Phoenix-based advertising company that specializes in creating branded vehicle campaigns for clients. For example, a tech or electronics company may seek drivers who live on or near college campuses, so as to gain exposure with the college crowd.

The vehicles in these programs are often equipped with GPS tracking devices, so the companies can make sure the drivers spend sufficient time in the desired areas.

‘Paid to drive’ primetime

Paid-to-drive programs were very popular five to 10 years ago. Gas was cheaper, and people were spending more time on the road. There were plenty of Web sites devoted to these programs, including many fee-charging sites that acted as a middleman and promised to connect willing drivers with companies seeking vehicles for their ads.

Then, fuel prices spiked and people weren’t spending as much time in their cars, Clarke says. At the same time, online advertising became the rage.

Current opportunities

Still, there are opportunities out there, if you know where to look.

Livingston says his company’s client companies still have plenty of campaigns running nationwide. Business slowed slightly right before the recession but returned when the economy started going south.

“Consumers are seeking ways to make money, while companies are cutting back on spending for television campaigns and looking for more affordable advertising strategies,” Livingston says.

On average, Livingston’s clients put about 800 to 1,000 wrapped cars on the road.

Like other similar companies, Free Car Media serves as a matchmaker. Interested consumers register at MyFreeCar.com and then are notified when they meet the criteria a client seeks in potential drivers.

Drivers are paid an average of $700 to $900 per month, with campaigns usually running a few months long. Drivers use their own cars which are fitted with the wrap. “They don’t actually get a free car,” Livingston says. “But the monthly payment is generally enough to cover their auto expenses like car payment, gas, etc., for the month, so that’s where the name comes from.”

It doesn’t cost anything for drivers to sign up, and Livingston warns people to avoid any sites that do charge a fee.

“There are a lot of unscrupulous companies that want to charge you $20, $30 or more when you can get this information yourself for free. I get calls on a weekly basis from people who are upset because they were scammed,” he says. Livingston says that anyone who is directed to his site after paying a fee to another service should demand a refund.

Adding to the confusion, many of the sites — legitimate and questionable — have very similar names, often some variation of the words “free” and “car.” So it’s important to check out the Web site carefully, watching for any mention of fees or membership costs.

Finding drivers

Clarke says his company puts a lot of effort into recruiting brand influencers, or drivers who are a perfect fit for the client’s target audience.

“Recent engagements have focused on family-oriented and consumer driven advertisers who are generally trying to create awareness within a specific region among active moms with active families,” Clarke says, adding that busy soccer moms would make perfect driver candidates for these campaigns. “With active families being such a coveted demographic, incorporating their vehicles is ideal since they’re getting tremendous exposure parked in the pick-up line at school, at the Saturday morning soccer games, etc.”

There are important criteria for driving candidates. “Background, driving record, employment verification, personal interview, as well as having mandatory minimum auto insurance coverage are part of the vetting process,” Clarke says. “We’re also looking to incorporate an online personality assessment tool and a short online defensive driving course.”

Interested drivers can sign up for opportunities at Drivenmediaonline.com. “We compensate drivers within a range of $300 to $500 per month, with incentives and other engagements that allow them to earn more,” Clarke says. “Our typical campaign lasts three to six months, with the time frame and vehicle type being the primary factors for determining their monthly compensation.”

by Bobbi Dempsey
Copyrighted, Bankrate.com. All rights reserved.

What You Dont Know About Gas Stations

1. “Good luck finding the best deal.”
When it comes to gas prices, most stations are branded—meaning the name of a major oil company hangs out front—and must buy gas from their proprietary company. They can’t shop around. With a lock on sales, the oil companies charge each station a different price depending on various factors, such as the station’s competition and its location. That means a station can pay as much as 46 cents a gallon more than one down the street, and that cost gets passed along to you.

Faced with such instability, Gainesville, Fla., resident Steven King plans ahead: “If I know I’m going out of town, I try not to buy gas so I can fill up after I leave.” King says he can save 10 cents a gallon by purchasing gas on the road. You’d be similarly wise to shop around—with prices constantly in motion, the cheapest gas may not be at the same station every time.

2. “I hate it when gas prices go up.”
Stations earn on average between 10 and 15 cents on a gallon of gas. Ironically, they earn the least when prices are highest. When fuel climbs, gas stations must shrink their profit margin to remain competitive, meaning they earn less per gallon than usual. But another big cost during tough times is something they can’t do anything about—credit card fees, which add up to about 2.5 percent of all purchases. When gas is at, say, $2 a gallon, the station pays credit card companies 5 cents a gallon; when gas hits $3, that fee becomes 7.5 cents—more than half the station’s entire average profit. “Those credit card fees are miserable for the gas station business,” says Mohsen Arabshahi, who owns five Southern California gas stations.

How do station owners make up for lost revenue? “Prices go up like a rocket and come down like a feather,” says Richard Gilbert, a professor of economics at UC Berkeley. For several weeks after wholesale prices drop, stations can earn as much as 20 cents a gallon before retail prices are lowered to reflect the change.

3. “My gas isn’t better for your car; it’s just more expensive.”
Oil companies spend lots of money explaining why their gas is better than the competition’s. Chevron’s gas, for example, is fortified with “Techron,” and Amoco Ultimate is supposed to save the planet along with your engine. But today more than ever, one gallon of gas is as good as the next.

True, additives help to clean your engine, but what the companies don’t tell you is that all gas has them. Since 1994 the government has required that detergents be added to all gasoline to help prevent fuel injectors from clogging. State and local regulators keep a close watch to make sure those standards are met; a 2005 study indicated that Florida inspectors checked 45,000 samples to ensure the state’s gas supply was up to snuff, and 99 percent of the time it was. “There’s little difference between brand-name gas and any other,” says AAA spokesperson Geoff Sundstrom.

What’s more, your local Chevron station may sell gas refined by Shell or Exxon Mobil. Suppliers share pipelines, so they all use the same fuel. And the difference between the most expensive brand-name gas and the lowliest gallon of no-brand fuel? Often just a quart of detergent added to an 8,000-gallon tanker truck.

4. “If you’re smart, you’ll put that debit card away . . .”
Your debit card might be a convenient way to pay for gas, but it’s a no-win proposition. When you swipe a debit card at the pump, the bank doesn’t know how much money you’ll be spending until you’ve finished pumping. So to make sure you have the funds to cover the purchase, some stations ask banks to automatically set aside some of your money: That amount can be $20 or more. That means even if you just topped off your tank for $10, you could be out $30, $50, even $100 until the station sends over its bulk transactions, which can take up to three days. If your funds are running low, you might end up bouncing a check in the meantime—even though you had the money in your account.

Unfortunately, paying inside with your debit card isn’t much of a solution either. Many banks charge their customers between 50 cents and $1 for the privilege of using their debit card in any PINbased transaction. The American Bankers Association estimates only 13 percent of consumers pay these fees, but critics say the practice is on the rise and consumers are often unaware of these charges.

5. “. . . and don’t even consider applying for our gas card.”
When it comes to gasoline credit cards, a little research goes a long way. The good deals are great, but the bad deals are really bad. Similar to store cards issued through retailers, gas cards are riddled with drawbacks, says Curtis Arnold, founder of CardRatings.com. APRs are high, starting above 20 percent; many don’t offer rebates on gas purchases; and they often lack standard protections such as fraud monitoring and zero liability for unauthorized transactions.

What about a Visa or MasterCard affiliated with a gasoline brand like Exxon or BP? They often offer lower interest rates and significant rebates, but limit your ability to shop around. In December 2005, a few months after gas hit $3 a gallon, Justin Andringa of Minneapolis considered a Shell MasterCard with a 15 percent rebate on gas purchases. But the rebate was temporary; he decided to stick with his Citi Dividend Platinum Select card, which gives him a 5 percent rebate on all gas purchases no matter where he buys it. “I’m a college student,” Andringa says. “I need to save money.” The deals on these cards are constantly changing. So visit CardRatings.com to find updated information.

6. “Looking for the cheapest gas in town? Try the Internet.”
You can’t actually buy gas online, but Web resources can help you find the cheapest fill-up in town. Among them, GasPriceWatch.com and GasWatch.info help people track pump prices. But the most comprehensive of the bunch is GasBuddy.com, which includes a network of 174 local sites, complete with maps and message boards that tally gas price by ZIP code. “People are frustrated by the variation in the price of gas,” says GasBuddy.com cofounder Jason Toews, and they’re using the Internet to take control.

It has worked wonders for Sue Foust. Every day, as she passes roughly 10 stations on her commute across Tucson, Ariz., Foust makes a mental note of their prices, then posts them on TucsonGasPrices.com, a local affiliate of GasBuddy.com. Then every four days or so, when she needs to fill up, she checks the prices others have posted in her area. It turned out the Shell station she used to frequent is one of the most expensive in the city. Now she fills up elsewhere. “I really do feel like I’m saving money,” she says.

7. “It’s a gallon when I say it’s a gallon.”
It’s hard to know if you’re getting all the gas you paid for at the pump. But in some places there’s a very good chance you’re not. The state or county weightsand- measures department usually checks pumps for accuracy, but in some areas it can be years between inspections. Arizona, for example, has only 18 staff members to check the state’s 2,300 stations.

That means stations there can expect a visit once every three to four years, according to Steve Meissner, an Arizona Department of Weights and Measures spokesperson. In 2005, 30 percent of the more than 2,000 complaints the department received were valid, and it levied $167,000 in fines. The good news is that it’s often easy to catch the most common problem: Older pumps in poor repair may begin charging you for gas before you’ve pumped it. Check the meter to make sure it registers $0.00 before you begin and doesn’t start charging you before the fuel is flowing.

8. “I might gouge you on a soda, but my coffee’s a real bargain.”
With margins on gas taking a hit—in 2006, fuel sales made up 71 percent of revenue but only 34 percent of gross margins—stations are increasingly looking to their convenience stores for income. Given that fact, you’d assume the average Kwik-E-Mart to be a terrible place to buy just about anything. But that’s only partially true.

Stock that usually sits on the shelf does tend to be vastly overpriced, so if you forgot ketchup on the way to a barbecue, you can bet you’ll pay a lot more for it at a gas station than you would at a supermarket, says David Bishop, director of convenience retailing for Willard Bishop Consulting. What about popular beverages? You’ll pay more for a 20-ounce soda at a gas station than you would for a two-liter bottle in a supermarket; water and energy drinks similarly tend to have high markups.

But there are bargains to be had: Some high-volume goods, such as cigarettes and beer, are often competitively priced at gas stations. And a cup of coffee goes for a fraction of what you’d pay at Starbucks.

9. “If you’re having car trouble, you’re in the wrong place.”
The days of the local gas station staffed with a skilled mechanic have all but come to an end. Station owners are swapping car lifts for beverage cases and car washes, anything that brings in a highvolume stream of income and traffic, says Dennis DeCota, executive director of the California Service Station and Automotive Repair Association. The more people who pull over for a soda, the greater the chance they’ll top off their tank and vice versa, the thinking goes. Few owners want the hassle of a business like car repair even if it earns the same amount of money as a convenience store.

In addition, repairing cars is increasingly expensive, and the ill will and potential liability from a fix-it job gone wrong are more of a headache than many owners are willing to risk. Today a service station can require $100,000 worth of diagnostic equipment—a significant investment. It’s a risky venture with little payoff, says Southern California station owner Arabshahi. In fact, Arabshahi removed the service station from one of his locations after he bought it. “I don’t have a service station because I am not a mechanic,” he says. “If he messes up a job, then it’s my name on there.”

10. “You don’t even need gas to run your car.”
Cars run on gasoline—but not all cars need gasoline to run. In fact, 6 million cars on the road today (mostly from U.S. manufacturers and built since 1998) are “flexible fuel” vehicles that can run on E85, a fuel that is 85 percent ethanol and only 15 percent gas. When Minneapolis resident John Schafer bought a car in late 2001, he chose a Chevy Tahoe because it’s a flexible-fuel car. Since then he’s filled up almost exclusively with E85. The big difference he’s noticed: Cars using E85 get about 15 percent fewer miles to the gallon. But it’s a drawback he’s willing to put up with. “I’m committed to the technology,” Schafer says. “With E85, it burns cleaner so it won’t pollute as much.”

While E85 generally costs less than regular gas, there is some concern that it may grow prohibitively expensive as demand outpaces supply: By 2006 ethanol was not just being used in E85—it also composed 15 percent of every gallon of gas sold. Supplies of ethanol are likely to grow thin, which could drive up the price of E85. And even die-hard Schafer says he won’t buy E85 if it starts to cost more than gasoline.

by Jim Rendon
Copyrighted, SmartMoney.com. All Rights Reserved.

New Low-Cost Airline to Sell Seats for $9

A new low-cost airline will begin serving mid-sized U.S. cities that it thinks larger carriers have left behind.

Clearwater, Fla.-based JetAmerica said 34 nonstop passenger flights a week will start July 13 at Toledo, Ohio; South Bend, Ind.; Melbourne, Fla.; Newark, N.J.; Minneapolis and Lansing, Mich. Twenty-eight flights start or end at Newark Liberty International Airport. The carrier will add six more flights — from Toledo to Minneapolis — starting Aug. 14.

JetAmerica is targeting small and midsize cities like Lansing, which has seen the number of daily flights at its Capital Region International Airport fall from 35 to 12 the past five years. The decline is part of a national trend that has seen airfares increase at those airports as daily flights have decreased.

Robert Selig, head of the Capital Region Airport Authority, said JetAmerica will give Lansing business travelers direct access to New York City and carry leisure travelers to central Florida.

“We don’t have access to either one right now,” Selig said. “So, this is going to fill a major void in our schedule.”

Filling that void won’t be cheap.

The Lansing, South Bend, Melbourne and Toledo airports are subsidizing JetAmerica with $1.4 million in grants in its first year, along with about $867,000 in waived airport fees and $1.1 million in marketing and advertising assistance.

South Bend, Toledo and Melbourne received their grants from the U.S. Department of Transportation’s Small Community Air Service Development Program, which has awarded $104 million to 223 recipients since 2002 in an effort to restore lost service and bring air fares down.

Newark and Minneapolis, each of which serve more than 20 million passengers a year, are not offering assistance to JetAmerica.

John Weikle, chief executive of JetAmerica, said the subsidies will help insulate the new carrier from spikes in jet fuel prices. Higher fuel prices have contributed to the failures of at least four major airlines since 9/11. Smaller carriers have also been hurt.

Surging fuel prices helped bankrupt ultra-discounter Skybus Inc. last year. Weikle founded that Columbus, Ohio-based airline known for its $10 fares. The bankruptcy cost 450 employees their jobs.

JetAmerica’s pricing scheme will share some Skybus characteristics.

Prices will start at $9 a seat and top out at $199. The $9 price will apply to the first nine to 19 seats on each plane. Passengers will pay $15 to check a bag. Food, drinks and in-flight TV will also come at a cost.

The carrier is starting out with one leased Boeing 737-800, expects to add a second in the first month, and have as many as four by July of next year. Weikle’s business plans calls for an additional 189-seat jet to be leased every four months.

Each Boeing 737-800 can fly to four cities a day, Weikle said.

Weikle estimated JetAmerica’s revenue at more than $50 million in the first year and about $150 million in the second. He compares his business model to that of Wal-Mart Inc., which started out by serving cities of less than 50,000 people because competitors were not interested in them.

JetAmerica plans to serve Melbourne, Fla., with at least six flights a week. Richard Ennis, executive director of Melbourne International Airport, said JetAmerica’s planes and nonstop routes persuaded him to support the carrier. Melbourne, a coastal community about 70 miles southeast of Orlando, recorded a 45 percent decline in passenger traffic at its airport from 2000 to 2008.

Ennis said carriers with larger jets like the Boeing 737-800 charge less per seat, which is an advantage enjoyed by Orlando International Airport and Orlando Sanford International Airport.

“It’s the only way I can beat them out,” Ennis said of the neighboring airports.

By Victor Epstein, Associated Press Writer
Provided by Associated Press