photo: Don Hankins
We all know what it means to be “nickel and dimed to death.” It usually refers to those incidental purchases made throughout the day: a cup of coffee, a newspaper, a pack of chewing gum, money for a parking meter. Over the course of a month they add up and put a considerable dent in your budget. In these tough economic times you can’t afford to be nickel and dimed to death.
Now, the rise of safe financial transactions over the internet has enabled us to be nickel and dimed to death online. There’s even a technical term for it: micropayments.
PayPal defines a micropayment as a transaction of less than $12, with some purchases being as low as 99 cents. They are quick, simple transactions made on the web for things like music, iPhone apps and newspaper stories. Let’s take a few minutes now and talk about this virtual chump change and how to manage your budget in a new micropayment world.
Songs, TV shows and movies
Remember the old days when you had to buy a whole CD but you only really liked two of the songs on it? Well, micropayments (on iTunes especially) have given us a convenient way to buy only the media we want, when we want it.
When purchasing small bits of media online keep these things in mind:
1. Consider using iTunes gift cards rather than your credit card.
Micropayments become macropayments if you purchase a lot and are running a credit card balance month to month. The interest you end up paying on your credit card adds to the cost of your purchases. But you pay no interest when you purchase a prepaid card.
2. Consider renting TV shows/movies rather than buying.
After all, Avatar wasn’t exactly made to be watched on the matchbook-sized screen of your video iPod. When you rent, you have 30 days to watch the movie. Convenient if you’re traveling and know you’ll need something to do in the airport.
3. View your purchase history every month.
An old-fashioned budget was usually a piece of paper with columns on it listing your monthly expenses. iTunes offers a feature that lets you view your total purchases to see how much you are spending each month on media. (It’s even easier with Mint.com, which enables you to track all your spending in one place and is completely free to use.)
One of the first principals of budgeting, whether it’s micropayments or any payments, is to divide purchases into “needs” and “wants.” There are all kinds of apps that are “kind of cool.” But you should limit your purchases to the productivity apps; ones that help you schedule meetings, find restaurants or keep track of your business expenses.
Also, keep these in mind when purchasing apps for your smartphone:
1. Don’t waste your money on silly apps.
The fact that it’s cheap doesn’t mean you should buy it. Do you really need a virtual stapler?
2. Is there a cheaper alternative?
The American Heritage Deluxe dictionary is $24.99. Unless you’re a professional Scrabble player, you can get the Wordbook English Dictionary and Thesaurus for $1.99.
3. Try before you buy.
This is a new feature added to iTunes for selected apps. Although most apps listed are the “stripped down” version, not the full-fledged app itself.
Like the media you purchase on iTunes, newspapers are looking at their content as candidates for micropayments. Advertising revenue is drying up as the seemingly infinite amount of news on the web makes it very difficult for online papers to make money solely on ads. The big names like The New York Times, The Wall Street Journal and especially Fox News have been considering using micropayments as a means to “monetize” their content.
If the news content you peruse on a frequent basis goes toward this kind of system, then you’ll want to weigh the benefits of using micropayments to purchase just the articles you want (like the coverage of your favorite sports team when you live far away) versus actually subscribing to the paper itself. Newspaper archives already use a form of this system but beware: Their goal is to sign you up for an annual membership — at least. If all you want is a few articles, pick the lowest membership option available.
Virtual goods and upgrades
People who play online games, especially via social networking sites like Facebook, are using micropayments to purchase virtual goods, and it’s become a huge industry. A Mafia Wars stunt (featuring Snoop Dogg blowing up an armored car) recently drew two million viewers online. A recent study shows that one in five Americans are now playing social games and companies are taking advantage and looking to separate you from your hard-earned nickels and dimes.
If you find yourself getting sucked into these games, be careful. They’re addictive, and like a lot of addictions they can put a dent in your bank account. Also, when possible, use Paypal or a Playspan Ultimate Game Card to purchase items in the virtual world. Some of the websites advertising goods are operating overseas and you don’t want your credit card information falling into the hands of real Russian mobsters.
nickel and dime it
One of the hardest things about budgeting and living within your means is keeping track of your spending. It’s easy to keep track of your rent, car payment and insurance payments. But you might consider micropayments such as we’ve mentioned too small to even bother with. Be aware of how much you’re spending. Nickels and dimes add up to dollars — and you work hard for your dollars. You need to work just as hard to make sure you’re not wasting them in cyberspace.