5 Bad Deals for Consumers to Avoid

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BOSTON (TheStreet) -- Consumers' confidence and sentiment are down, and who can blame them? Even when they try to be frugal, someone's getting them to splurge.

The Conference Board's Consumer Confidence Index was down 4.7 points last month, while the Thompson Reuters/University of Michigan Consumer Sentiment Index inspired celebration by falling 0.7 points instead of 2.3 points. Spending is actually up slightly, as the Commerce Department said the U.S. economy expanded 3.7% last month, but consumer expectations are down as job numbers stagnate and housing numbers slump.

It's a time when Americans are trying to be more stingy -- with the Commerce Department noting that Americans saved 5.9% of their disposable income in the second quarter -- but finding it increasingly difficult to do so amid poor package deals and overblown promises. Retail sales edged up 0.4% in August, but exactly how much of that gain did Americans really want to spend?

Across several sectors, the consumer is getting a raw deal. From "bargains" that include a lot of throw-ins they didn't ask for to "rewards programs" that don't yield many rewards, the consumer faces a retail and service culture where blue-shirted guys in large towers spend their days deciding what the customer wants and values before discarding that information and going with what works in their or their company's best interest. That's business, but that's also how garages, attics and storage units fill with useless crap and wallets fill with cards scarcely worth the plastic they're stamped on. We at TheStreet have put together a list of "deals" to avoid not just because they're bad decisions, but because they're bad investments:

Frequent flier programs: Want to know what the best frequent flier program is? Here's a hint: There isn't one. In speaking with Tim Winship, travel industry website SmarterTravel's expert on frequent fliers, the lines between the carriers' rewards plans fade from gray to nearly nonexistent. For example, AirTran customers may miss the carrier's business-class seating once it merges with Southwest Airlines, but they'll miss its A+ Rewards frequent flier program less than they think. Why?

"The big picture, as far as I'm concerned, is that the decrease in competition erodes the incentive for airlines to be more innovative with their frequent flier programs," Winship says. "The AirTran program and the Rapid Rewards plans are quite similar because, as a historical matter, AirTran copied Southwest's rewards program, as many of the discount airlines did."

United (Stock Quote: UAL) and Continental's programs have been so closely aligned that there isn't much separation between the programs. Delta (Stock Quote: DAL) consolidated Northwest's program into its SkyMiles program. They all offer more opportunities to earn miles than can be listed here and, in their rewards sheets, the amounts of miles needed for redemption aren't significantly different from one another. The key separations are destinations and available reward seating, with the first being easily more measurable than the last. Winship says that when SmarterTravel asked him for a "Best Frequent Flier Program" for their annual editors' choice awards, he replied simply that there wasn't one -- that there are big-carrier rewards programs and small-carrier rewards programs, and that JetBlue's (Stock Quote: JBLU) recent tweak of its frequent flier program showed just how quickly they're homogenizing.

"They redesigned and relaunched their program along the lines of the Virgin America program, which is revenue-based where you earn points according to the cost of the ticket purchase, and that's the model I expect Southwest to go with when they revamp Rapid Rewards."

"Keep the Change": The basic premise of Bank of America's (Stock Quote: BAC) "Keep the Change" plan is sound: Americans have a hard time saving and need help doing so. Great. Sadly, Bank of America's plan, which rounds up debit card purchases to the next dollar and deposits the difference into a customer's savings or money market account, is more of a piggy bank than a nest egg.

Words such as "automatic" and "matching" get customers' attention, but the fact that Bank of America only matches 100% of the plan's deposits for the first three months and then 5% for the duration -- with an annual maximum of $250 -- sours the pot a bit. That Bank of America's standard savings account yields only 0.05% interest doesn't help, either.

Here's an idea: Start actually saving a fixed amount of money in a separate account at, oh, ING, with an interest rate of 1.1% or greater and, instead of spending money in the hope that you'll get 502 purchases that round up by 49 cents, you stop being an imbalanced debit card junkie, save without spending and earn that $250 more quickly.

Cable bundling: So, Comcast, a subscriber can get sweet Internet and cable hookups for $99 to $179 a month for 12 months and all he or she has to do is get a landline phone and caller ID service they neither want nor need? Awesome!

Even as the Centers For Disease Control notes that 20.2% of homes only use mobile phones for calls, up from 14.5% in 2008, while exclusive landline users dropped from 34.4% of the population in 2005 to just 17.4%, cable and Internet providers seem bent on fixing them up with a phone just like grandma had. This is put forth as sound business logic not only while the country quickly cuts Ma Bell's cord, but also as it holds on to wireless phones longer -- with J.D. Power noting that wireless customers hold onto their phones for an average of 20.5 months, or 17% longer than they did a year ago. As smartphones take hold, they're also willing to part with more money for the privilege, with the average mobile bill jumping from $69 three years ago to $78 today behind expanding data plans.

Some carriers are starting to get it, as Verizon (Stock Quote: V) now offers a $70 "double play" version of its $90 "Triple Play" that nixes the landline and saves the consumer $240 a year. Granted, Verizon hasn't figured out how to incorporate the voice, text and data customers from its mobile plan into an all-in-one deal for multichannel and Internet, but it's taken an important baby step toward value.

Supermarket "sales": Whether you're a SuperValu, Kroger, Safeway or A&P customer, you've likely faced the same scenario: A shelf at the end of the aisle with four of your favorite products on sale for $10. As you regularly pay $3.49 for this foodstuff you can't live without, you're overjoyed at the possibility of acquiring four of said item at a 28% discount. What you're not looking for is either the missing part of the sign that says it's $2.50 no matter what, or the part that tells you it's $2.69, still a better deal than that $3.49, but not as good as initially advertised.

This one isn't the market's fault as much as it is the consumer's; it's human nature to stock up in the interest of frugality, hedging against, for instance, commodities price hikes that raise the cost of coffee. But when either the perishable item goes bad or the nonperishable goes forgotten in the cabinet, it's not the store's fault you need a new one. The easiest supermarket rule is the one that prevents most wide-eyed buying problems: Stick to the list.

DVD "value packs": Sorry, Wal-Mart, Target and Best Buy, but you're all notorious for packaging DVD and Blu-ray discs together for a low price and not offering them separately for a proportionate price. Wal-Mart, for example, is offering a Nicholas Cage three-pack featuring the money-troubled actor's work in Con-Air, The Rock and Gone in 60 Seconds for $20. Let's say that, as a consumer, you like one or even two of the three but either own or can't stand the third film. Can you buy the discs separately for less than $7 a pop? Absolutely not, but you can get Con-Air alone for $14.

What if you really liked the Jason Statham insomniac action flick Crank, but found Crank 2 somewhat lacking in substance? Could you forgo the $17.99 Blu-ray two-pack and just get the one film for a sweet $9? No, but you can totally pay that much for the Blu-ray of just the first installment ... or $22.99 for the super-sweet special edition.

 

We understand that without these stores pushing for bundling, there wouldn't be the evolution-proof DVD/Blu-ray/digital copy packs of movies such as Iron Man 2 or Toy Story 3, and that there's pressure to sell the mounds of crap that studios push on retailers each year. Cable stations have played their share of Caddyshack 2 just to show Caddyshack every so often, but no witting consumer will pay $12.29 for The League of Extraordinary Gentlemen when he or she knows its going for $10 in a $19.99 double pack with Entrapment.

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