Amazon vs Macmillan. The world’s largest online retailer, which accounts for 15-20% of books sold in this country, pitted against one of the sixth largest book publishers. A match between titans.

Up until its fight with Macmillan, Amazon charged $9.99 for an ebook. But instead of pricing all ebooks the same, Macmillan wanted Amazon to charge between $12.99 to $14.99 for ebooks it published, which is called the “agency model.” The price of a Macmillan book would decrease over time as the book lost its status as a new release. The deal was similar to the one Macmillan (and four of the other “Big Six” publishers) had just signed with Apple for use with its iPad.

In response, Amazon removed all of Macmillan’s titles from its web site.

In the end, though, Amazon — in its words — “capitulated” because Macmillan held a “monopoly” on its books:

Dear Customers:

Macmillan, one of the “big six” publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases.

We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books. Amazon customers will at that point decide for themselves whether they believe it’s reasonable to pay $14.99 for a bestselling e-book. We don’t believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative.

Kindle is a business for Amazon, and it is also a mission. We never expected it to be easy!

Thank you for being a customer.

In its announcement, Amazon doesn’t wrap itself up in the American flag, but it does wrap itself up in the “consumer protection” flag. Amazon claims that it wants to sell “consumers” ebooks at reasonable prices — $9.99 instead of $14.99. But Macmillian won’t let Amazon do that because Macmillan has a “monopoly” over its books and apparently wants to gouge the customer by charging much more than the book is worth.

Amazon’s Deceptive Argument

Amazon’s argument is deceptive, for several reasons.

Companies That Make Products Have Monopolies over Those Products

Macmillan publishes books, which gives it control over the books that it publishes. And if book publishing is a monopoly, as Amazon claims, so is about every other business that produces products. Colt firearms has a monopoly over Colt firearms. Firestone tires has a monpoly over Firestone tires, Hallmark Greeting Cards has a monopoly over Hallmark Greeting cards. And so on ad nauseam.

By saying that Macmillan has a monopoly over its books, Amazon is setting up a straw horse — all the better to make itself seem like a White Knight for the “consumer” — in this case, readers.

$9.99 Is Not Necessarily a Reasonable Price for an Ebook

Amazon is a book wholesaler, not a book publisher. That is, Amazon — like any other bookseller — buys books from publishers such as Macmillan at wholesale prices, increases the price, and then resells the books to the public. Because of its size (the country’s 19th largest retailer) and buying power ($19 billion in sales), Amazon gets around a 50% discount on books it buys from publishers. (By contrast, chain stores get around a 40% discount and independent book  stores  get around a 20% discount. No wonder Amazon can sell books at such low prices — because it buys them low, which is an advantage other booksellers, especially independents, don’t have.)

So Amazon actually pays $15 for, say, a $30 book, but sells it at $9.99. That’s a called loss leader. Amazon sells the ebook at below cost in order to gain market share — and put other booksellers out of business.

The book Amazon wants to sell at below cost might be an ebook, but considerable time and expense went into producing that book:

• The writer spent time researching and writing the book.
• The writer’s agent spent time getting the book ready to sell to the publisher and also did all the work of finding a publisher that would buy it. The agent also went to considerable effort to look out for the writer’s interests.
• The editor spent time reading and editing the book.
• The graphic designers spent time designing the book cover and book layout.
• The marketing people spent time devising a marketing campaign
• The publisher spent money marketing the book

Some people might say that an ebook  shouldn’t cost much because the work of creating it has already been done. But that’s not true. According to Erick Sherman:

the electronic versions [of hardcopy books] only save a little money per copy in printing and inventory costs. The vast bulk of the expenses in writing, editing, production, and marketing remain.

Amazon Uses Cheap Ebooks to Sell Kindles

Amazon loses money on its $9.99 ebooks. So how does Amazon make up for its lost revenue? By selling Kindles at between $260-$490 each. That’s right. The Kindles have a high profit margin. And once a reader buys a Kindle and begins reading ebooks on it, he or she is glued to the Kindle.

And that’s just what Amazon wants.

Amazon’s Great Deception

Amazon’s Great Deception is that, like WalMart, it wants to get a strangle hold over what products — in this case, books — are sold to everyday citizens like you and me. And Amazon’s talk about “monopolies” and “reasonable” prices is just a smoke screen to hide its real agenda.

Amazon actually wants to reduce choice and put independent book  stores, as well as chain book stores, out of business.

How is Amazon trying to do that? By:

• Emphasizing the “consumer’s” right to a low, low price
• Controlling readers’ access to ebooks
• Controlling rights to a writer’s ebooks

Emphazing the “Consumer’s” Right to a Low, Low Price

I mentioned in my post about how chain stores turned us into consumers that we went from being a nation citizens who shopped to being a nation of “consumers” whose role it is to expect low prices. The notion of low prices is key to Amazon’s business model. And it’s central to how Amazon markets the Kindle: Amazon customers should expect to buy ebooks at below cost — regardless of how the below-cost pricing affects publishers and writers.

Amazon’s market clout, which lets it buy books from publishers at wholesale prices independent book stores and chain books stores can’t meet, lets it charge lower prices than its competitors. That’s hardly an even playing field. Amazon’s size also lets it sell ebooks at below cost — something that independent book stores can’t do, unless they have a death wish to go bankrupt.

Like WalMart, Amazon’s charade as a champion of low-cost products comes at a high cost to “consumers” by limiting what they can read, and by driving independent book  stores out of business, and by siphoning money from towns and cities to Amazon’s corporate coffers.

(If you go on the Amazon Forum, you’ll see a lot of people denegrading Macmillian and praising Amazon for its “pro-consumer pro-book” stance.)

Controlling Readers’ Access to Ebooks

Through its claims to digital rights management (DMR), amazon controls readers access to the ebooks its sells. To put it simply, Amazon — not you — owns the ebooks you “buy” from the Kindle store. The DMR contract that you agree to when you download the ebook prohibits you from sharing the ebook with someone else, reselling the ebook, or moving the ebook to another brand of ebook reader to read. (Of course, right now even if you move the ebook to another brand reader that reader can’t read the format of the Amazon ebook.)

I believe that some ebook readers are incompatable with the Kindle as well — and also with one another. However, Amazon is the Big Enchilada that’s trying to take market share from everyone else.

The situation is fraught with peril for anyone who likes to read, for anyone who wants to write and be published, for publishing companies, and for both independent book  stores and chain book stores. Blogger Farhad Manjoo fears for the future of the publishing industry and wonders “what will happen when it [Amazon] has no rivals.

Controlling Rights to a Writer’s Books

Amazon controls the rights to a writer’s books that it sells electronically — even if you, the writer, own the copyrights to your books. To have Amazon publish your book, you have to agree not to allow readers to read your digitized book on any other book reader except the Kindle. If you won’t agree, then Amazon won’t sell your book as an ebook.

But Amazon wants to be more than a book seller. It wants to be a publisher, too, by encouraging writers to self-publish their books as ebooks and sell them on Amazon. Is publishing on Amazon a good thing for writers?

Not according to Damon Brown, who says that authors who self-publish ebooks on Amazon put themselves in a particularly bad situation and also put themselves at Amazon’s mercy. First, by allowing the writers to self-publish, Amazon eliminated the literary agent, who typically deals with the publisher and looks out for the writer’s welfare. So the writers are left on their own, with no one to represent them.

Second, in its contract with those self-published writers, Amazon gains total control of their books without providing the benefits a traditional publisher gives them:

The new Kindle deal gives Amazon as much power as a traditional book publisher over an author’s work, but it lets Amazon own the rights without the promise of promotion, negotiation or other traditional publishing options. There is no marketing budget. There is no return of rights after the book goes out of print – - because, well, it will never go out of print. There is no renegotiation if the Amazon decided to use the book someway with its Kindle apps – - and no guarantee the author would be paid additionally for it since it isn’t technically a “book”.

If you own an independent book shop or like to buy online from independent book stores, you won’t be able to find the digitized versions of books that Amazon sells. You’ll only be able to find — and buy — them at Amazon.

The fact that Amazon “capitulated” to Macmillan is good for readers like you and me and, hopefully, for independent book  stores. Why? Because Amazon — not Macmillan or any other book publisher — wants to develop a monopoly over the books you and I read. And Amazon’s “capitulation” put a wrench in its gears, slowing it down but not stopping it.

A Better Alternative

We’ve been through this problem many times before — from proprietary computer software to VHS to DVDs. The readers who are being preyed on by Amazon — people like you and me — should demand a single format for ebook readers.

If Amazon wants to become a publisher of ebooks, then it should act like a publisher. It should make its ebooks available to other stores and web sites that sell ebooks — just like every other publisher does.

Amazon criticized Macmillan because it wanted to use Apple’s “agency model” of pricing. In this model, Apple acts as the distributer of the ebooks, not the wholesaler, and lets the publisher set the price up to a $14.99 ceiling. As time goes by, the price falls just as happens with hardcopies. Perhaps the “agency model” isn’t the best model, but it’s a lot better than Amazon’s.

And Amazon should collect sales tax on the books it sells. But that’s another story.

In my last post, I listed the first six lessons I learned from living unchained. Here are the last four.

Lesson 7: Fast Food Franchises and Chain Restaurants Have Turned Mediocre Food into a National Norm

I think it was Stan Luxenberg in Roadside Empires: How the Chains Franchised America who said that fast food chains guarantee a consistent level of mediocrity.

Appleebee's "Neighborhood" Bar & Grill

I’ve been aware of how mediocre fast food and chain restaurants are for several years before we began our experiment in unchained living. So doing without them has been more than easy for me. I never ate much fast food anyway because I thought it tasted lousy. But I’d still eat it from time to time — until around 2004 or 2005. At that time, Lisa and I had our company that manufactured rubber art stamps and were driving to a convention in South Carolina (or some place like that). Normally, we’d stop at a roadside rest area and get some fast food for lunch. So we stopped and went to a Taco Bell. My taco tasted so bad that I threw it away after the first bite. Lisa’s food was bad, too, and she threw her meal away as well. We vowed then and there never to go to a fast food “restaurant” again.

From then on, whenever we travel and need to stop for lunch, we go off the road and find an independent restaurant or diner. We’ve discovered some great eateries and have had some wonderful food.

As an aside: Last year one of our friends told us that her friend works at a Taco Bell. The friend’s job each morning is to mix the meat slury that Taco Bell puts in its tacos. The friend got so disgusted at the sight of the slury that she refuses to eat at Taco Bell any more. (Yeah, yeah. I know. This is a third-hand story.)

Luxenberg also says that no chef will work for franchises because they stifle creativity. Good food isn’t what the chains and franchisors are after. They want food that can be cooked quickly and always taste the same anywhere in the country.

Unfortunately, many people have grown up on fast food and it’s become “comfort food” for them.

Lesson 8: Locally Grown or Raised Food Is Great and Buying It Helps Local Economies

Buying at a Farmers Market

I became aware of locally grown produce and locally raised meat, which taste better than industrially grown produce and industrially raised meat. Many people claim that industrial agriculture is the wave of the future. But it’s only been around since the 1970s — forty years. That’s not a long time. And the change came mainly because Nixon’s secretary of agriculture, Earl Butz, changed the way corn farmers were subsidized — which helped lead to the rise of industrial farming.

I learned about the difference between industrial food and organic food. I also learned the difference between industrial organic and “true” organic. And I learned that you have to be on your guard when you read pastorial stories about the organic food that’s raised and grown industrially. That “free range” chicken might just have access to an open door that it never goes out of because it’s been raised indoors for most of its short life. The more information can get, the more informed buying decisions you can make.

I learned that when you buy local food at Farmers’ Markets, you can keep more of your money in your community. I also learned, though, that “local” has become such a hot term that chains and global corporations such as Starbucks and Frito-Lay are laying claim to being local through expensive PR campaigns.

You also have to be on your guard to figure out what those PR campaigns mean when they claim to be local because “local” can have so many definitions. For me, “local” means being within 50 or 100 miles. “Local” also means that much of the money I spend stays in the community.

Lesson 9: We’re Citizens — Not Consumers

Until I began living unchained, I never questioned my role as consumer. But the more I learned, the more I questioned the “consumer” label. Finally, reading Stacy Mitchell’s Big-Box Swindle became my “a-ha!” moment.

I’ve come to realize that the bigwigs who run national and international chains and global corporations aren’t really interested in the communities their stores are in. All they’re interested is in the “bottom line.”

Owners of independent stores, on the other hand, are interested in their communities because they’re members of those communities. If a tax needs to be raised to support a local need, those independent store owners might vote for it even it it does mean increased taxes — because their community need it. The honchos who run the national and multi-national corporations, though, will oppose the measure simple because it will take away from their bottom line. After all, these guys need to keep their shareholders happy, not the members of the communities that their stores are in.

So-called “consumers” — people like me, who buy from stores — are citizens of towns and communities, too. If we want our towns and communities to survive, we have to support the businesses owned and operated by our fellow citizens. It’s a matter of self interest.

Lesson 10: I Liked Living Unchained

I liked living the unchained lifestyle.

I Liked Interactions with Shop Owners and Shop Workers

I enjoyed having personal interactions with shop owners and the people who work in their shops. Oftentimes in chain stores and chain restaurants, what interaction there is is impersonal. Lisa and I have established some nice friendships with local shop owners and staff both here and in other states.

I Liked Not Buying in to the “Consumer” Experience

Not being able to shop at chain stores meant that I would buy less “stuff.” Not being able to buy a lot of “stuff” made me become a more dispassionate observer of the shopping experience — and I became more aware of how shop-happy so many of us Americans are. We shop for many reasons. I think, though, that one of the main reasons is because we’re taught to shop at an early age, as part of our enculturation process. And our shopping enculturation is reinforced constantly every day by ads all around us — on billboards, in magazines, on television, at the movies, on the web sites we visit, on buses, at airports. Everywhere we’re bombarded by ads.

We also shop for many other reasons. For recreation. Because we’re depressed. Because we’re happy. Because we’re bored. Because we want the hottest new product. So we won’t disappoint the kids. I think, though, that many of us shop because we’re missing something inside ourselves that we hope to replace with physical objects. But once we get those “things” that we wanted so much, the emptiness returns and we go searching for other “things” to fill the void. I think that perhaps we need fill that inner void by being less materialistic and more spiritual.

For example, the best Christmas present Lisa gave me this year was a donation to our local animal shelter, Ark of Cleveland.

(Of course, even though we’ve gone there before just to look at the dogs and cats — but not to adopt. When we went there a week ago to give them the donation, we ended up adopting an adorable one-eyed kitten. We named her Mahitable, after my great great great grandmother, who was born in 1793 and founded, with the help of her husband, John Lutts, my branch of the Lutts family. I’ll put photos of Mattie on the Our Pets page shortly.)

I Liked Supporting Local Businesses and Helping My Community

Daniel Knight, Owner of Blue Collar Joe's

I liked the fact that I was supporting local businesses. That feeling is tied in with my seeing myself as a member of my community instead of a consumer whose task it is to support the Gross National Product. (That’s a really heavy responsibility!) I liked supporting my community and keeping a lot of the money I spent inside the community.

I Liked the Independence

Shopping chain free made me more independent — and also more discriminating about how I spend my money. I’m less likely to be “sucked in” to buying something because of an ad. Shopping chain free has made me a more savvy shopper

Conclusion

So what my conclusion to all these lessons? Simply this: I liked living unchained and will turn the experiment into a lifestyle. This doesn’t mean I won’t shop at chains, though. I will if I can’t get something at an independently owned store of if I have to go really, really out of my way to get something. But for the most part, I’m going to stay unchained — and loving it.

See also:

• 10 Lessons I Learned from Living Unchained: Lessons 1-6

Well, Lisa’s and my experiment in living an unchained life for a year ended on December 31, 2009. Now we can return — if we want — to shopping at chain stores and eating at chain restaurants. Did I gain any insights from that year year of “sacrifice”? Did I learn any lessons?

Actually, I learned quite a few lessons.

Lesson 1: Living Unchained Can Is a Balance Between Convenience and Principle

Living without shopping at chain stores and eating at chain restaurants can be difficult. We’ve been trained by society to want convenience. We do not want to wait — and we do want everything now.

I struggled with balancing convenience and principle. A nonchain store might not be nearby. And if you’re in a hurry, you might not want to spend the time traveling a long distance just to pick up a single item. (For me, a round trip to Cleveland from home is sixteen miles.) After all, just how much is your time worth?

Also, nonchain stores tend to carry a much smaller variety of products than the chains. So if you need a particular item, you might be able to get it only at a chain store. I certainly found that to be true. I tried to find substitutes. But in some cases — such as wanting to use a certain kind of Selsun Blue shampoo — I could only find the item at a chain store.

Another example is buying gas for the car. As far as I know, there’s only one independent gas station in the Cleveland, TN, area. It’s on the other side of McDonald, where we live, toward Cleveland. For me to gas up the car on the way home from work in Chattanooga, I’d have to drive several miles past my house to go to the station and then return home. I simply wasn’t prepared to do that — especially when I tend to gas up on the way to work or on the way home at night. In the beginning, Lisa talked about using the gas station, but even she ended up not using it.

I also found not having access to a video store a privation. Our only alternative was to buy used DVDs at used book stores. Toward the end of the experiment, though, we did find a small, struggling independent video store (that’s since changed hands). But the store has few choices. (Now that the experiment is over, though, neither Lisa nor I have run out to Blockbuster to rent one of the DVDs from last year that we were lamenting about not being able to watch. Go figure!)

For me, living an unchained life became a balancing act: convenience vs. principle.

Lesson 2: Sometimes You Have No Alternative But to Go to a Chain Store

Sometimes I had to buy something at a chain store because that was the only place I could get it. A good example is our buying a new dehumidifier at Sears. We tried to find a dehumidifier at an independently owned store, but none of those stores carried dehumidifiers.

Lesson 3: You Have to Plan Ahead

I mentioned balancing convenience and principle. I learned that you can reduce the tension by planning ahead. If you see yourself getting low on something, buy a replacement before you run out. By doing that, you won’t have to run to the store to replace an item you need to use right away. You also can buy two of the same item. When the first runs out, replace it so that you continually have a spare on hand.

Planning ahead doesn’t take much effort — and can save a lot of time and frustration.

Lesson 4: I Spent About As Much Money as I Usually Did

A lot of people told us we’d end up spending more money because we weren’t shopping at chain stores. For me, that wasn’t true. I ended up spending less money than usual. For several reasons.

I Didn’t Need a Lot of Stuff

Many times I found myself wanting to buy something. But when I thought about it, I realized that if I bought it, the thing would just sit around collecting dust. I became aware of the many needless things I used to buy.

I Had Less Opportunity to Buy Stuff

I might have seen stuff in a chain store, but I realized I couldn’t buy it. After I left the store, I forgot about the item — so obviously I didn’t need it. How many of you have had that experience?

Savings in Other Areas Outweighed Higher Organic Food Prices

We tried to buy organic food whenever possible. It’s true prices for organic foods are higher than regular industrially raised food. But I wasn’t buying as much in other areas, so the differences balanced themselves out. I did like the fact that I was eating healthier. I also liked the fact that I was supporting a lot of local farmers and shop owners.

Lesson 5: Chains Stores and Chain Restaurants Are Everywhere

I was never really aware of it before I began the experiement, but after I did I discovered that chain stores and chain resturants are everywhere. They’ve spread like a virus over the American landscape. They’re crammed into strip malls. They’re filling up malls. They’re all over the place!

After a year of living without chains, I’ve become sensitized to their presence. It’s not a good feeling when I think about how the chain stores and franchises have forced so many independent stores out of business and how they’re destroying cities and towns across the country.

Lesson 6: Chain Stores and Chain Restaurants Are Destroying Cities and Towns — and the Middle Class

During my year of unchained living, I’ve learned how chain stores, big-box stores, and chain restaurants are destroying towns and cities — and the middle class. For me, this was a wake-up call. I’d never thought about this before because I’d always seen chain stores and fast food chains as part of the local community and economy.

They’re not.

Chains Force Independent Stores Out of Business

Chain stores and big-box stores such as WalMart force independent stores out of business by underselling them — and then raising the prices after the businesses have gone under. Box-box stores such as WalMart don’t really offer low, low prices. They just make people think they do by using a lot of loss leaders and using phychological techniques — including special colors and displays — to make people think they’re getting great deals on items.

Chain Stores and Fast Food Chains Use a Business Model That Pays Part-Time Workers Minimum Wages

In Roadside Empires: How the Chains Franchised America, Stan Luxenberg talks about the business model most chain stores and fast food chains use to help ensure their profits — aka their “bottom line.” A model they could have chosen was to hire a small number of full-time workers and pay them a livable salary. Some stores actually chose that model and have done quite well.

But the business model most chain stores and franchisees chose was the exact opposite: to hire numerous part-time, nonunion workers and pay them a salary they can’t live on. You can see that business model in action every day of the year at chain stores and fast food chains such as WalMart, Target, Marshalls, McDonalds, and Wendy’s.

This business model has created a large class of poor workers who have to rely on food stamps and other government subsidies to get by. In fact, one chain store puts fliers in its break room that tell their part-time employees how they can apply for food stamps.

The workers also have no health insurance. Even now stores such as WalMart and Marshalls — which are seeing increased profits during the recession — are “transitioning” full-time workers to part-time workers. I assume the reason is because the honchos at corporate put the money they save in health care costs towards their bottom lines.

But who picks up the tab for chain stores’ employees’ food subsidies and health care costs? The tax payers. That’s you and me. The honchos who run the chain stores and big-box stores are using our federal and state tax dollars to increase their bottom line. These are the same people who talk about “free enterprise” and oppose health care reform or call such reform “socialism.” Part of their profits are based on socialism.

Chain Stores Replace Jobs That Pay Well with Ones that Pay Poorly

Chain stores and big-box stores replace good paying jobs with low paying ones — after forcing the stores that paid good wages out of business. In Big-Box Swindle, Stacy Mitchel relates the story about how in one town WalMart forced the bicycle maker Huffy to close its manufacturing plant, lay off its 650 American workers, and move its manufacturing facilities to China. Those workers, who were union members, made $11.00 an hour, plus benefits. A few years later WalMart opened a Supercenter on the same 50 acres that Huffy had occupied, but paid its nonunion workers only $7.00 an hour.

You can see this happening all over the country.

Chain Stores Drain Money from Local Economies

Chains drain money from local economies. For every $100 spent at a chain store, only $48 $43 of it stays in the community. But for every $100 spent at an independent store, $68 stays in the community. I never thought much about where the money I spend unltimately ends up. But now I do

See also:

• 10 Lessons I Learned from Living Unchained: Lessons 7-10

If you’re someone who enjoys a long soak in a warm tub with plenty of bubbles, you’ll love Soak.

I don’t know if we told you, but a couple of weeks ago Lisa and I went back to Massachusetts for a week to visit my sister in Cape Cod as well as some friends who live north of Boston. One of the things I wanted to do was visit some of my old haunts. One of those places was Newburyport, MA. Lisa and I both love the place and have discussed moving there.

Dan Outside Soak

One of the delightful things about Newburyport — aside from its quaint, historic downtown — is the large number of independently owned shops and restaurants. We hadn’t been to Newburyport in almost ten years. As we walked along State Street with our two friends, Mark and Leslie, we noted that many shops from our last visit were still there. Other shops were new.

One shop that caught our attention was Soak, which bills itself as “The Newburyport Soap Bar and Bath Shop.”

Now, I’d never heard of a soap bar before, and the concept didn’t really grab me. But Lisa and Leslie became thrilled at the prospect of going inside to browse. I went inside, too. I must admit, I found Soak to be a marvelous shop with plenty of charm — and a very friendly owner named Diane Sirard.

Soaps, Soaps, Soaps — and More

Once I stepped inside, I understood why Soak calls itself a soap bar. The shop carries handcrafted soaps galore. All kinds of handcrafted soaps tastefully crammed into the little shop. Some soaps are locally made while others are imported from all over. The combination of scents in the soap bar was enough to send you into a soap high. Lisa and Leslie couldn’t contain themselves when faced with all the choices. Leslie ended up buying some vanilla-scented soap for a friend.

Soak also carries other bath products besides handcrafted soap, including trendy women’s pajamas and super-soft terri cloth robes. (Lisa was drooling over the pajamas.) Soak sells shower curtains too.

If you’re looking for unique handcrafted soaps, bubble baths, essential oils, and other bath products, Soak is where you’ll find them. They’ll make great gifts for friends, loved ones — or for yourself.

Tea Forté

Inside Soak -- Tastefully Crammed Shelves and Displays

Soak also carries a wide assortment of Tea Forté. Lisa and I first had Tea Forté in a cute little tea room in — of all places — the Adirondack Mountains of New York while Lisa was working at the Fort Ticonderoga museum.

If you haven’t heard of Tea Forté yet, Tea Forté is a silken tea infuser that’s shaped like a pyramid, and holds whole tea leaves or herbs. You put the infuser into a cup and then pour in boiling water. The water goes through the silk and circulates around and through the tea leaves, infusing the tea leaves’ flavor into the water. The whole “ceremony” can be quite elegant. And the tea tastes much better than tea brewed from regular tea bags.

Lisa loves Tea Forté and prefers it over other kinds of tea. Lisa also likes to drink a cup whenever she wants to pamper herself. Lisa couldn’t pass up this opportunity at Soak to stock up on more Tea Forté.

Things for Men

I thought that Soak was just for women, but I was wrong. Soak also sells shaving products.

You probably know that I gave up my Gillette shaving cream for an old-fashioned soap mug and shaving brush. Well, I was pleasantly surprised to find that Soak sells shaving soaps, shaving brushes, and razors!

Leslie Buying Her Vanilla-Scented Handcrafted Soap from Owner Diane Sirard

I spent a lot of time examining some beautiful shaving brush-and-razor sets that would make any man proud to have on display by his shaving mirror. In fact, I came close to buying a set, and will the next time I go back.

Soak also carries Essence soap shaped to fit into a shaving mug. The handcrafted soap is called “Essence” soap because each kind has its own distinctive fragrance, and also contains some related natural product — such as sandlewood, rosewood, or sage. The soap is made by a company in France and imported and sold by Baudelaire. Diane had several kinds of men’s Essence soap in stock.

I ended up buying the Sandlewood Essence soap, which has a Celtic symbol on it. The soap is vegetable based and — a big selling point for me — contains shea butter. (Shea butter is good for your skin, as I mentioned in my post about giving up Gillette shaving cream.) I wish now that I’d bought a couple of other kinds of Essence soap, too.

If you’re in Newburyport, be sure to stop by Soak. I’m sure you’ll agree that the shop is a soap bar with plenty of charm — and great handcrafted soap and bath products.

Soak
7 State Street
Newburyport, MA 01950
Phone:
978-465-SOAK
(978-465-7625)

I just read an article in The New York Times about vaccines to prevent E coli in in cattle. The vaccines aren’t for people like you and me. They’re for cows. Well . . . actually . . . the vaccines aren’t really for cows. They’re for people like you and me. It’s just that the cows are the ones that get the injections.

I guess if you don’t like injections, that’s good news. But if you’re concerned about food safety, that’s bad news.

Our Beef with E Coli

Industrial Feedlot

Beef becomes contaminated with E coli in two ways.  In the first way, feces on the skin of cattle contaminate meat on the cattle being killed and cut up in the slaughter house.  How do feces get on the skin of cattle? In the industrial feedlot, where they’re forced to mill around in pools of their own feces during their stay in there while they’re waiting (unknowlingly) to be sent to the slaughter house to be killed.

In the second way, workers inside the slaughter house have trouble keeping up with the fast pace of killing. Sometimes a worker might slice through a cow’s intestines by accident, spewing its feces on meat. Ugh!

Vaccines for E Coli

Instead of addressing the problem of feed lots and slaughter houses, scientists at pharmaceutical companies have developed vaccines to prevent cattle from getting E coli. Two companies — Epitopix in Minnesota and Bioniche Life Sciences in Canada — have developed vaccines.  Epitopix’s vaccine was approved by the U.S. Agriclture Department, which is letting the company sell the vaccine at the same time that it’s testing the vaccine. Bioniche Life Sciences’ vaccine was approved in Canada. The company is waiting for approval in the U.S.

Cargill, the slaughter house that processes the largest amount of ground beef in the country, is coordinating and paying for a large-scale study to test Epitopix’s vaccine.

Originally, the Agriculture Department established a high standard for approving Epitopix’s vaccine. But the company complained, so the Agriculture Department lowered its standard to one the company could meet pretty easily.

The Solution Not Wanted

What the New York Times article doesn’t mention is that a solution already exists for preventing E coli:  stop raising cows industrially. Before the 1970s — when the Nixon administration industrialized the raising and slaughtering of cattle — E coli wasn’t a problem.

During the Nixon administration, the government encouraged farmers to raise more corn than they could sell. As a result, farmers and feedlot owners began feeding corn to cattle.  Because a cow’s digestive system was made to digest grass — not corn — farmers and feedlot owners had to begin giving their cows antibiotics to prevent them from dying.

The corn diet not only resulted in cows on drugs, but also resulted in cows producing extremely fat meat — which resulted in increased health problems — such as heart disease — in the people who ate the beef. (The meat in the grass-fed cattle contained less fat, and the fat wasn’t as bad for people.)

The ground beef we buy at the grocery store consists of trim — smaller pieces of meat that normally would be considered waste. (Artificial filler also goes into the ground beef, too.) The trim comes from all over the country and from other parts of the world. The pound of ground beef you buy at the grocery store could be made up of trim from any number of U.S. and foreign companies.

The people who raise and slaughter the cows we eat — such as Cargill — don’t want to go to the expense of tracking where all the trim that goes into their ground beef comes from.  Some companies also refuse to test their ground beef for E coli because it might actually be discovered, which would prevent them from selling it.

E Coli Vaccine and Chicken Feces

One statement in the article I found particularly appalling:

Dr. Kent McClure, general counsel of the Animal Health Institute, a pharmaceutical industry group, said that while the review [of the Epitopix vaccine]took longer than he would have liked, the new legal clarity could pave the way for other food safety vaccines.

One possibility, he said, was a vaccine for campylobacter, a bacterium that infects poultry without making them sick, but which causes millions of cases of food poisoning each year.

Industrial Chicken Shed

I looked up campylobacter infections on the Internet. The bacterium lives in the intestines of a lot of wild and domestic animals — including chickens. So the bacterium also is in the animals’ feces. For the industrial farmers who raise thousands and thousands of chickens, the bacterium becomes a “people problem” when the feces in their chicken contaminate food or meat.

As it turns out, chicken feces is a source of income to chicken farmers.

According to a recent Los Angeles Times article (October 31, 2009),  industrial farmers sell their poultry litter — including chicken “feces, spilled chicken feed, feathers and poultry farm detritus” — to the feedlot owners to feed their cattle. Between 1 to 2 million tons of it a year.

No wonder people are getting sick from chicken feces!

The Los Angeles Times article also says that a “coalition of food and consumer groups” asked the U.S. Food and Drug Administration to put a stop to the practice of feeding chicken waste to cattle.  Coalition members include Consumers Union and the Center for Science in the Public Interest.

One of the world’s largest consumers of beef also also wants the practice stopped:  McDonald’s Corp.

E Coli Vaccines for Animals — the Great Cop-Out

Vaccine Cop-Out

My take from reading the New York Times article is that the Industrial farmers, feedlot owners, and processors (such as Cargill) want to use vaccines as a substitute to actually dealing with the causes of food safety. If they inject E coli vaccine in their calves, they won’t have to worry about dealing with the problem of their unsanitary feedlots and the frantic pace of slaughter and processing in their slaughter houses.

The industrial chicken farmers want an E colin vaccine so they won’t have to deal with the problems in their own chicken yards, too. And they can continue selling their chickens’ feces and other waste to the feedlot owners, who can continue giving them to their cattle to eat as food. Yum, yum!

The industrial food producers want their vaccines to they can continue their business as usual.

The pharmaceutical companies want the vaccines, too.  Just think of the millions upon millions of cows and chickens that will need shots each and every year! The pharmaceutical companies stand to make billions of dollars from vaccines.

Locally Grown Meat — Safer and Healthier

Personally, I don’t have to worry about the ground beef I eat. I know where it comes from because I buy my meat locally. The ground beef comes from a single cow. I know where on the cow the meat came from, the date the cow was killed, and there the cow was processed. I also know that the cow lived the way nature intended — on grass — that the cow was slaughtered humanely. The fact that the cow had E coli in its intestines isn’t an issue or a potential health problem. E colin in a cow’s intestines is normal. It only becomes a problem in industrialized farming.

I also know that the beef — and other kinds of locally bought meat and poultry — I buy and eat is more healthy for me than the meat and poultry people buy at most grocery stores.

If you’re interested in learning more about how and why the way we raise and slaughter our cows and chickens has put us at risk, you should read:

• Michael Pollan’s Omnivore’s Dilemma: A Natural History of Four Meals
• Eric Schlosser’s Fast Food Nation: The Dark Side of the All-American Meal

So what do you think? Will you feel safer or more comfortable knowing that the beef or chicken you ate was given a vaccine against E coli?

Do you think that the vaccine is a cop-out to addressing the problem of our food safety and our tainted meat?

Local is hot.

First Frity-Lay uses its “Lay’s Local” ad campaign to make us think its potato chips — produced at a rate of 10,000 bags per hour — are local. Now Starbucks®, the maker of bitter and burnt coffee, is unbranding itself by opening “Stealth Starbucks.”

What’s a “Stealth Starbucks”? It’s a Starbucks coffee shop that passes itself off as a local, independent coffee shop.

Stealth Starbucks Coffee Shops

Starbucks New "Local" Coffee Shop Under Construction

Starbucks opened its first Stealth Starbucks coffee shop in July of 2009. The shop is called 15th Avenue Coffee & Tea and is located in Seattle’s Capital Hill neighborhood. Apparently no one at Starbucks knew what a local coffee shop was like. So, according to The Seattle Times, Starbucks employees spent over a year visiting three local coffee shops to borrow ideas for creating their concept of “local” coffee shop. One group of “researchers” even carried folders labeled “Observations.” The new 15th Avenue Coffee & Tea coffee shop combines elements from all three real local coffee shops.

Nothing at 15th Avenue Coffee & Tea connects it to the Starbucks brand. (After all, this is an unbranding campaign.) In fact, the Stealth Starbucks coffee shop resembles many local coffee shops in looks and operation. Funky interior. Coffee and tea tastings at 10:00 a.m. sharp. Different options customers can choose for brewing their coffee and tea. Poetry readings and live music. Beer and Wine. And super-premium Starbucks ice cream (in unmarked containers, I assume).

15th Avenue Coffee & Tea -- Starbucks in Disguise

The Stealth Starbucks coffee shop will sell Starbucks coffee, of course — but the packages on all coffee and tea products will have the name 15th Avenue Coffee & Tea instead of Starbucks. The shop also will sell coffee that other Starbucks shops don’t sell. Shop employees also will roast coffee in small batches, the way real local coffee shops do. So hopefully the coffee bought at the Stealth Starbucks shops won’t taste bitter and burnt.

Customers can even suggest local causes the new “local” coffee house can become involved in.

The Starbucks marketers who devised the concept of Stealth Starbucks coffee shop came up with a couple of “innovative” concepts to show that the shop is “local.” As a snack food chain, Starbucks had to standardize its coffee and pastries to maintain the same level of consistency throughout its 16,000 world-wide locations. So in their American shops, they got rid of their baristers and put in automatic espresso makers. The espresso machines guarantee that the coffee will taste the same in every Starbucks shop. But 15th Avenue Coffee & Tea is using baristers to make coffee manually using La Marzocco espresso machines.

Inside 15th Avenue Coffee & Tea -- No Signs of the Starbucks Brand

When it first started out, Starbucks used to buy locally made patstries. But as it expanded, Starbucks dropped local bakeries and turned to using “thaw and serve” pastries. Today, a limited number of bakeries make the pasteries you buy at Starbucks. After they’re baked, the pastries are flash frozen and then shipped to the Starbucks shops throughout the country, where the pastries are thawed out and sold. But 15th Avenue Coffee & Tea Starbucks will buy its pastries from a local bakery.

On November 18, Starbucks opened its second Stealth Starbucks shop, called Roy Street Coffee & Tea, in the same Capital Hill neighborhood as the first. Following Starbucks’ marketing plan, the coffee and tea products at this shop will carry the name “Roy Street Coffee & Tea.” For the sake of variety, coffee and tea tastings at Roy Street Coffee & Tea are at 2:00 p.m. sharp instead of 10:00 a.m. The new shop also will sell a few things not sold in 15th Avenue Coffee & Tea.

Starbucks plans to set up at least one more Stealth Starbucks coffee shop in Seattle. If the shops are successful, Starbucks will roll out Stealth Starbucks shops in other cities. Each shop will have a name that will make people think the shop is part of the community.

Stealth Starbucks Coffee Shops with a Story

Inside 15th Avenue Coffee & Tea -- Not Your Typical Neighborhood Coffee Shop

In my first post on the “Lay’s Local” ad campaign, I mentioned how Frito-Lay preceded it with a “Happiness is Simple” marketing campaign. “Happiness Is Simple” tried to make people nostalgic for the simpler times they believed existed before today’s economic problems arose. The Frito-Lay’s marketers tried to link that nostaliga with Lay’s Potato Chips. In my second post on the “Lay’s Local” ad campaign, I mentioned how industrial organic food comes with a story. The purpose of the story is to make us feel good about the food we’re buying.

It turns out that — like the Frito-Lay marketers — the Starbucks marketers are using both nostalgia and stories in developing and promoting their Stealth Starbucks coffee shops. The Seattle Times provides a telling quote from Michelle Barry. She’s the senior vice president of Hartman Group, a market-research company in Bellevue, Washington. Barry says that

It’s not about nostalgia per se, but more about telling a story and reappropriating some things from the past and re-imagining them in a new environment.

The nostaslgia and the story for the Stealth Starbucks coffee shops come from using salvaged materials in building and furnishing them. For 15th Avenue Coffee & Tea, some of the furnishings came from former Starbucks coffee shops. Other salvaged materials included wood from an old ship and from a retired barn. For Roy Street Coffee & Tea, some furnishings came from a local movie set, a local high school, and antique shops.

The varied materials and furniture give each Stealth Starbucks coffee shop a different look and feel, making it appear that the shops are actually independent and local.

Why Stealth Starbucks Coffee Shops Aren’t Local

The Starbucks marketers want us to think their Stealth Starbucks coffee shops are local and independent. But the shops aren’t. Just to drive the point home, let’s look at some criteria that distinguishes a local coffee shop from a chain coffee shop:

I don’t think many people who like to buy their coffee from local, independent coffee shops will be fooled by the new Stealth Starbucks shops. After all, they’ve deliberately chosen not to buy their coffee at Starbucks. They prefer to support their local communities. They probably already know that $68.00 of every $100.00 spent locally stays in the community. But only $43.00 spend at a chain store such as Starbucks stays in the community.

It will be interesting to see how the Stealth Starbucks coffee shops progress as they’re opened outside of Seattle.

Have any of you been to a Stealth Starbucks coffee shop yet? If you have, write a comment to let us know what you think of them.

In an earlier post, I explained why I threw out my Gillette shaving cream. I also mentioned that I’ve been making my own bay rum aftershave for the past several years. So I thought you might like to know how to make bay rum aftershave. After all, you can’t get any more local than making your own shave lotion!

Making your own aftershave is really economical. For the price of a bottle of vodka and a bottle of rum — plus an orange and some everyday spices — you can make a liter or more of aftershave. That’s enough to keep you going for months. And compare the cost of making your own to the cost of buying commercially made aftershave.

My recipe for how to make bay rum aftershave isn’t original. I found it on the internet, but have adjusted it a bit.

Recipe for How to Make Bay Rum Aftershave

The ingredients for how to make bay rum aftershave are:

• 1/2 cup of vodka
• 2T of rum
• 2 bay leaves
• 1/4t of whole allspice
• 1 stick of cinnamon
• Zest of 1 orange
• 1 bottle with a screw-on lid
• Cheesecloth

The instructions for how to make bay rum after shave are:

1. Pour the vodka and the rum into the bottle.
2. Add the orange zest and the spices to the liquid.
3. Screw on the bottle lid and store the bottle in a cool, dark place for at least two weeks.
4. When the time is up, pour the liquid from the bottle through a strainer into a container to catch the large pieces of waste.
5. Pour the strained liquid through several layers of cheesecloth to catch the smaller pieces of waste.
6. Pour the aftershave into an aftershave bottle
7. Enjoy the aftershave.

Whenever I make a batch of aftershave, I either double or triple the recipe. And I store it for longer than two weeks. I think letting everything steep longer makes the scent stronger.

Also, just compare the ingredients you use to those of commercial aftershaves. Old Spice Original uses the following:

• Denatured alcohol
• Water
• Fragrance
• Benzyl alcohol
• Propylene Glycol

Personally, I feel better using natural ingredients such as orange peel and bay leaves.

Making Aftershaves with Different Scents

Once you know how to make bay rum aftershave, you can alter the base recipe to make other kinds of scents. For example, instead of using orange zest, you could use the zest of a lime or lemon. Lately I’ve been wondering what the aftershave would be like if I added apples. Or maybe even the spices for making apple pie. But perhaps having a face that smelled like an apple pie might be going a bit too far!

If any of you try making the bay rum aftershave, please leave a comment to let us know how you made out. And if any of you have been making your own aftershave, perhaps you could share your recipe with us.

See also:

• Why I Threw Out My Gillette Shaving Cream

While living unchained in America, Lisa and I have been reading a lot of books about consumerism, chain stores, food, and other related subjects. We’ve been learning a lot from the books and thought you might be interested in reading them too. But we wanted to give you the opportunity to buy them from independent booksellers at independent bookstores — not from chain bookstores. So we became IndieBound affiliates.

What is IndieBound? It’s a group of independent booksellers who belong to the American Booksellers Association. They formed IndieBound in response to online bookstore chains such as barnesandnoble.com — and also amazon.com.

When you click a book link, either on our blogs or on our Books page, you’ll be taken to the IndieBound web site. You can select the version of the book you want — paperback, hardcover, audio, and so on. When you click on the version, you’ll be taken to a page that lets you select a local, independent bookseller to order it from. You can shop for other books to add to your order as well. The page also lets you find out the locations of independent bookstores near you.

We’ll receive a small commission for each book you purchase, which will help defray the expenses of running our web site.

Why Buy from IndieBound?

When you buy a book from a local independent bookseller through IndieBound — and also when you buy from other local, independent businesses — you help your community by:

• Keeping $68.00 out of every $100.00 spent in your community instead of $43.00 of every $100.00 spent at a chain
• Helping local businesses create higher paying jobs than those offered by chains
• Keeping more tax dollars in your community, where the money can be reinvested in your community
• Providing more in charity donations to your community because local, independent business people donate twice as much money to local charities than the national chains donate
• Creating a smaller carbon footprint than that created by regional and national chains because of reduced packaging and transportation
• Providing a greater variety of products — including unique ones — for you to chose from than those offered by chains
• Supporting your friends and neighbors who own the local businesses in your community

Other Independent Booksellers We Examined

We chose IndieBound after carefully examining affiliate programs with several other independent booksellers. And most of them were local, individual booksellers. Buying from them would help their local economies — but only individual local economies. IndieBound allows you — the buyer — to choose the independent bookseller you want to make sure your money helps the local ecomony you want.

Initially, Alibris was a strong competitor with IndieBound. Alibris claims to be “the Internet’s largest independently owned and operated marketplace.” Alibris also claims to support “thousands of individual sellers.”

But when we investigated Alibris further, we learned that Alibris is owned by the private equity firm Oak Hill Capital Partners. Alibris also partners with chains such as Amazon, Barnes & Noble, Borders Books, and Books-A-Million. When you order a book, you can get a gift certificate that you can use at Sears.

We think that instead of supporting independent booksellers, Alibris undercuts them. IndieBound doesn’t.

From IndieBound, you can buy books that are currently in print. Many of the books we read about consumerism and chains are out of print. So we’re looking for an online bookseller from which you can buy out-of-print books.

In the first part of this series on store credit cards, we saw why chain executives want you to apply for them. By having a store credit card, you develop loyalty to the chain. You’ll also buy more “stuff” from the chain’s stores because you’ll pay for the merchandise with credit instead of cash.

In the second part, we saw that applying for and using a store credit card — or any other kind of credit card — can lower your credit score. The high interest rates on store credit cards also can drain you financially.

In this post, I’m going to talk about what I personally think is the best kind of credit card to have: a credit union credit card. I’ve had one for over thirty years, and it’s the only one I have. A report on the best and worst credit cards in a 2007 issue of Consumer Reports shows why. The article says that APRs for credit union credit cards were lower than APRs for bank-issued credit cards (9-11% vs. 17%). The article also quotes George Overstreet, who teaches finance at the University of Virginia, as saying why credit unions offer better deals on credit cards than bank credit cards (or store credit cards):

Credit unions are run by members, so they have a vested interest in providing credit at very low rates. And they are more focused on keeping their members happy, while banks have to worry more about keeping their investors happy.

Currently, the APR on my card is 10.90% (although I always pay the full balance at the end of the month).

Credit Unions also give loans with lower interest rates than banks. I remember in the 1990s, when I was buying a new Honda, the salesman tried to get me to finance the loan through him. He thought Honda financing had low interest rates. So he asked me how much interest I’d be paying for my loan through my credit union. When I told him, he said in surprise, “I can’t touch that!”

Many credit union credit cards also are competitive in offering rewards, just like bank cards and store cards. My own card pays me a percentage of what I spend on it annually. This perk doesn’t change my spending patterns, but I do like to see the money suddenly show up in my credit union savings account at the end of each year.

Another nice thing about credit union credit cards — and loans you get through the credit union — is what happens when you get hit by tough times. Unlike banks or loan companies, the staff at your credit union will work with you develop a plan to pay off the debt. After all, you’re not just a customer, but a member as well.

One final note: Congress has passed legislation that will change some of the practices of credit card companies. Already some companies have raised the interest rates on their cards, and doing other things, to head off the legislation. But the credit unions aren’t. The new policies that are being forced on the for-profit banks and credit card companies are policies that credit unions have been following for years.

Do any of you have credit union credit cards? If so, what do you think about them?

See also:

• Why Chains Want You to Get a Store Credit Card
• How a Store Credit Card Can Hurt You

In the first part of this series on store credit cards, we saw why chain executives want you to apply for them. By having a store credit card, you develop loyalty to the chain. You’ll also buy more “stuff” from the chain’s stores because you’ll pay for the merchandise with credit instead of cash.

All this is great for the chain, but not for you. Why? Because applying for — and having — a store credit card can hurt you by lowering your credit score and draining you financially.

Hurting Your Credit Score

Store Credit Card Trap

Fair Isaac Corporation (recently renamed FICO™) creates credit scores, called an FICO™ score. Most lenders use your FICO score in deteremining how risky it is to give you a loan. FICO scores range from 300 to 850:

• 700-850 — very good to excellent
• 680-699 — good
• 620-279 — OK
• 581-619 — bad
• 500-580 — worse
• 300-499 — worst

If you have a bad credit history, and you’ll have trouble getting a loan. And if you do manage to get a loan, you’ll probably pay high interest on it.

What’s your FICO score got to do with store credit cards? Several things.

Applying for a Store Credit Card Can Lower Your FICO Score

Each time you apply for a store credit card, the cashier runs a credit check on you. And each credit check lowers your FICO score a few points. So the more store credit cards you apply for, the more points you lose on your credit score. Having too many outstanding balances on multiple store credit cards raises red flags to lenders. Also applying for too many rewards cards within a short period of time — such as Christmas season — raises red flags. Those red flags make you appear as a poor credit risk.

It’s especially important not to apply for a store credit card — or any other kind of credit card — within a year before you apply for a house loan or other major type of loan. Applying for the card could jeoardize getting your loan. Sales associate doesn’t tell you that when they ask you if you want to sign up for a rewards card. In fact, they probably haven’t a clue that might happen.

Getting Declined for a Store Credit Card Lowers Your Credit Score

Getting Rejected Can Hurt Your Credit Score

Sometimes a sales associate will entice you to apply for the store credit card by saying that even if you get declined you’ll still get the discount. Some people know they’ll be declined, but apply anyway just to save the 10% discount on the transaction. Big mistake! Getting declined for a charge card lowers your FICO score even more than applying for a card.

Closing a Store Credit Card Can Lower Your FICO Score

Sometimes a sales associat might tempt you into applying for a store credit card by suggesting you pay off the bill and then cancel the card. That way, you can still buy the item and get your 10% discount.

Doing that is a big mistake.

Part of your credit score is determined by the total amount of credit available to you. By getting approved for the store credit card, you just increased your total credit limit. But if you cancel the card, you’ll decrease your credit limit, which will lower your credit score. And canceling more than one recently approved rewards card or other kind of credit card will decrease your score even more.

Canceling a store credit card doesn’t wipe that charge account off your credit records. Instead, the charge account remains part of your credit history for seven years.

Getting a New Store Credit Card Decreases the Average Age of Your Credit History

Part of your credit score is based on the average length of your credit history. If you’ve had a credit card for ten years, you have a long credit history. But getting a new credit card shortens the average length of your credit history, which also lowers your FICO score. And the more credit cards you get, the shorter your credit history becomes, and the lower your credit score drops.

Store Credit Cards Have Low Credit Limits

Most store credit cards have low credit limits — say, $500 or $1000. Unlike traditional credit cards, which usually have much higher limits, it’s easy for you to approach the limit on a store credit card. But when you approach your credit limit, you can lower your credit rating. If you approach your credit limit on several credit cards, your credit rating will drop even more.

Paying High Interest Rates

Many store credit cards charge higher APRs — Annual Percentage Rates, or interest rates — than traditional credit cards such as Visa, MasterCard, or Discover. According to The Simple Dollar, many store credit cards have a high APR of 22.99%. Some rewards cards go even higher.

High Interest Rates = Financial Problems

One reason corporate executives push their store credit cards is because many card holders don’t pay off their rewards cards every month and have to pay interest on the balance left on their cards. True, the recession has motivated many of people to pay off their balances and others to simply stop paying. But many of people are still carrying over balances and paying the interest on those balances. And many people are still applying for — and receiving — a store credit card.

Many people apply for a store credit card just to get the 10% discount. Then, instead of paying off the bill when it comes due, they carry the balance over to the next month. By carring over the balance, though, they allow the high interest rate to eat up the 10% they saved. The only way to keep the savings is to pay the balance when it comes due.

Store credit cards also tend to have very low minimum payments. So if you pay the minimum rate, it could take decades for you to to pay off the credit card balance.

Let’s take a look at some store credit cards and how they can hurt you.

Home Depot

Home Depot offers a store card with no annual fee and an APR between 17.99% and 26.99%. The APR you get is based on your credit worthiness. In the fine print, though, Home Depot says that less than 50% of the people who apply for their store credit card will get an APR of 25.99% or higher. So over half the people who qualify for their card will pay an annual interest of 25.99% or more. That’s quite a high rate! And even Home Depot’s lowest rate of 17.99% is pretty high.

Home Depot doesn’t say anything about minimum monthly payments, except that they are “low.”

As an enticement to spend at Home Depot, the chain offers a special promotion: a six-month grace period of no payment, no interest. But only if you charge $299 or more on your card in a single transaction. Home Depot places no limit on the number of $299 transactions. But in the fine print Home Depot says that if the you don’t pay off the $299 by the end of the promotion, you’ll be penalized. The same holds true if you miss a payment.

Spending $200 to save around $40 doesn’t sound like a good idea to me. It is a good idea, though, to the executives who run the company.

WalMart

WalMart offers a store credit card with no annual fee and a flat APR of 22.90%. You also can save 3¢ off the “regular street price” of gas if you fill your car up at one of WalMart’s participating filling stations. I couldn’t find any specific information about minimum monthly payments.

WalMart also has a promotional offer of no payment and no interest for six months on an initial purchase of $299.

Kohl’s

Kohl’s offers a store credit card with no annual fee and a variable APR — currently 21.9% — which the company determines quarterly. Kohl’s also offers 10% off your first day’s purchases. I couldn’t find any specific information about monthly payments.

As an extra enticement, Kohl’s offers you “extra discounts on everything 12 times a year,” which lets you “[s]ave as much as $120 annually.” But in the fine print they add that the $120 figure is “[b]ased on shopping all events with average purchases of $100 each and average additional savings of 10%.” So to save $10 a month, you have to spend $100 a month. Some deal!

TJX

TJX offers as store credit card, called a TJX Rewards™ Card, with no annual fee and a variable APR, which currently is 21.99%. You get 10% off your initial purchase. For Every $200 you spend at Marshalls, TJMaxx, HomeGoods, and A.J. Wright, you get a gift certificate for $10. I couldn’t find any specific information about monthly payments.

Is there a better alternative to store credit cards and bank credit cards, all of which have high interest rates? You bet there is. And I’ll talk about it in my final post in this series.

See also:

• Why Chains Want You to Get a Store Credit Card
• The Credit Union Credit Card — a Better Alternative