Bank of America has announced that they will end overdraft fees on debit purchases. It sounds like a good thing for consumers and it is, until you wait for the other shoe to drop. Where will B of A recoup the half billion dollars it will lose from this new proposal? When the company augmented their policy to waive the overdraft fee if the account holder was less than $10 in debt, they lost $160 million.

For the consumer, this is great! If you don’t have the money then you shouldn’t be allowed to make the purchase. If you don’t have enough cash and then try to make a purchase you have to put something back. Bounce a check and a business may no longer accept checks from you. Not enough in your bank account and you can’t make the purchase. Seems logical and sounds like a great concept. Yet there is still a nagging voice asking what will Bank of America get in return? If many people opt out of overdraft fees then the bank will lose money. Who is going to pay? What will the consumer have to give up or pay for in return for B of A’s largesse?

There was an article in Time the other day about energy efficient light bulbs may actually cause consumers to spend more on their electric because the perceived savings makes people keep the lights on longer. The phenomenon was likened to dieters who over-indulged in reduced calorie treats. Too much of a good thing can actually be bad or negate the benefits. Energy efficient furnaces, light bulbs and other items are beneficial to saving energy but can also make people think since they are saving money they could have the lights on longer or crank the furnace up.  Then they are spending more money rather than saving money.

It is nice to have energy efficient bulbs. When the electric rates increased in Illinois I did notice a slight increase but as I changed more of my bulbs to energy efficient ones my bill didn’t increase dramatically, they remained about the same. I didn’t change any habits but I did think that it was better to save money and the need to change the light bulbs less frequently.

The amount that I saved kept my energy bill in check. If the savings were large enough, I probably could have indulged in something more tangible but keeping my bill relatively the same amount was good enough for me.

Wal-mart recently announced that they would be stocking fewer brands on their shelves. This isn’t a new issue. Last year, the Wall Street Journal described how retailers were reducing shelf space for different items. There were other retailers mentioned, over six months later when Wal-mart mentions that certain brands would be discontinued from their stores, then more people take notice.

Consumer choice is a good thing. Generally when the consumers stop buying items then that is a sign to the manufacturer that consumers don’t like their goods. Instead, since the market has become so competitive, it is important to cut the losses. For big box stores, items that sell the fewest units are discontinued. They may still be made by a company but not available to consumers. Where does that leave a person who really has “fallen in love with” a particular brand that has fallen out of favor because other brands are better advertised. This doesn’t mean that certain brands are necessarily better because they are available in a store, it just means that the greater the brand recognition – through marketing, then the greater the response by sellers.

Some of the choices that consumers were offered were not real choices but repackaged versions of the same. When items that are truly different aren’t being carried anymore where will a consumer turn? The internet. The are extraneous that choices will go away -think the different varieties of soft drinks – Cherry Dr. Pepper, Coke Zero, vanilla flavored?

Since consumers are holding on to their purse strings a little tighter, the additional options aren’t as enticing as they used to be which means that we will have to get used to fewer choices for some items and greater choices for others. We will survive this. Prior to the late 90s cars came in a wider array of colors and styles from the factory. Now there are fewer than 10 for most makes.

Reducing the choices offered to consumers allows us to focus on the important things (e.g. does the product really work). Then we can shift from the extrinsic value we are encouraged to believe a product has.

Consumers spent an average of $811 on holiday gifts, significantly more than the $699 they initially planned to spend, according to a Consumer Reports survey expected to be released today. About 4 in 5 consumers bought gifts, and in a good sign for discretionary spending, many shoppers bought for themselves, the poll found.

While this sounds good for retailers, spending more than you intended to spend makes it difficult to stick to a budget for Christmas spending. The article continues to say that many people also used their credit cards for purchases. Spending $112 more on gifts than you anticipated can mean the difference between having money for the electric bill or a few tanks of gas. Still the results of the survey are for an average… This does not mean that everyone went over their budget or even those who went over their budget only spent $811. There still may be people who spent well over their budget but had no financial problems. If a person can afford to spend $811 or $5811 on Christmas gifts without causing problems for their budget it’s not an issue, which is where surveys such as these give the wrong impression. A person’s cost of living makes a difference in how and what they can really afford to spend. A free spender who became newly frugal or at least cut back on spending but with a higher income might see spending less than a thousand dollars a bit low for holiday gifts, especially if they have many gifts to buy.

Banks are offering very little in the way of interest and yet are still vying for the consumers money through the way of fees. One way of inciting people to save would be to offer a greater interest rate. To get the best interest rates for certificates of deposit, you must have large deposits. If you are saving for a long term goal such as a down payment, college savings or other life event, then look at savings bonds, especially if you have more than five years until your goal. Five year CDs all pay less than the current amount that I bonds pay and the minimum for an I bond is $25 for an online investment and $50 for a paper bond. The drawback to this is that the limit for savings is $5,000 per savings account per year. This helps if people want to accrue a laddered approach to savings.

To get Americans to save, raising the interest rates would be a good start – not everyone likes the risk of the stock market and by saving money this would add some security to the money that people have. When your money will only earn 2% (at the most) on a $10,000 deposit it really isn’t a great encouragement to save, if you weren’t in the saving mode. Where do people put money if earning a tiny amount of interest isn’t incentive enough to save?

This could be where we are now savers, those who are truly interested in saving will save but those who need that extra push or want a secure investment for their liquid assets would like to know that saving is really worth it and not just a waste of time.