Archive for the ‘Credit Cards’ Category

Should College-Age Kids Have Their Own Credit Card?

Should college-age kids have their own credit card? That’s a difficult question to answer and a lot depends on the maturity level of the kid. One 18 year old may be vastly more mature and financially savvy than another, so making the blanket statement that no college-aged child can manage his or her own credit card isn’t quite correct.

There is no doubt that giving a credit card to someone who doesn’t yet have a stable income is risky, but, if your college-aged child is otherwise responsible, then allowing them to begin to build that all-too important credit history early may be a good choice.

Regardless of whether your child is a spendthrift or a miser, be sure to comparison shop for the best card for him or her, and along the way,  provide a little financial education as well. It is too bad that high schools don’t offer money management classes and sadder still, colleges are all too willing to lend money to their students without educating them on the interest they are accruing and the repayment terms. In this, you, as the parent, need to take the lead on this.

The CARD act of 2009 has some special provisions regarding the issuing of credit cards to those under the age of 21. Among these is the requirement no credit card may be issued to someone under 21 unless they a.) have a cosigner, or b.) they can demonstrate the ability to repay the credit card balance. In addition, no “prescreened” credit card offers may be sent to those under the age of 21.

Having good credit is of vital importance these days, and young people need to be taught sound money management practices early so that they can avoid credit troubles down the line. Having a credit card and using it wisely is a good way to start learning these principles.

How Many Credit Cards Are Too Many?

There is no hard and fast answer for this question. It is true that lenders look at open credit lines as a temptation to get into more debt, but it is far more important to look at your debt-to-income ratio than just your total number of credit cards. In fact, your debt- to- income ratio can tell you if you, as an individual, are carrying too many credit cards.

Your debt-to-income ratio is your total amount of debt divided by your income. To be safe, this number should never be greater than 25%. When you apply for a loan, the lender may look at your credit file and take all of your available credit, even if you haven’t used it, and do this calculation to see what your debt-to-income ratio could become should you max out all of your credit cards. If the number is greater than 30%, then the lender will likely consider you a higher risk.

You can do this calculation yourself and if your debt-to-income ratio, with all of your credit lines maxed out is greater than 30%, then you probably are carrying too much plastic. You should consider closing some of your open accounts. Be careful, though, not to close your oldest credit accounts. Doing this will negatively affect your FICO score since account age is one of the influencing factors.

Warning To All Capital One Customers

Capital One will apparently charge you a late fee if your payment is made past the payment cutoff time, regardless of time zone differences. For example, one lady was charged a late fee because she made her payment 45 minutes after the cutoff time, which was 5PM. However, she’s on the West Coast and Capital One’s payment center is on the East Coast.  Going by her time zone, her payment was on time.

It appears that Capital One is taking advantage of a major loophole in the CARD Act, which does allow credit card companies to set a 5 PM cutoff time for accepting payments, but fails to specify that the cutoff time must be time zone neutral, meaning that payments will be counted as being made on time according to the time zone of the customer.

It should be noted that the government had to make it a law that the credit card companies must give you enough time to pay your bill, and that the amount of time had to be spelled out to the letter. The government should have therefore known that it would need to specify time zone issues as well.

Once again, you can count on the credit card companies to interpret the law in any way that best increases their profits. Fee income in the giant unregulated world that existed prior to the CARD Act’s passage has left the banks and credit card companies feeling entitled to screw their customers and make big bucks doing so.

Until the government acts, if it even will, to amend the law for these situations, be sure to make your payments in the morning that they are due, or if possible the day before, to avoid any chance that you’ll be screwed into paying a late charge.

When Five Days Late Equals Thirty Days Late

American Express apparently starts counting the days you’re past due from the date your billing statement is printed instead of the date your payment is due. This policy seems to fly in the face of the CARD act rules which state that credit card companies must give you at least 21 days from the time you receive your bill to make your payment.

One reason they might be getting away with this is because, according to Latoya Irby:

Fortunately, this is just an issue of phrasing and doesn’t impact late payment penalties or credit bureau reporting. It can just scare you into thinking your balance is seriously delinquent when it’s only mildly delinquent.

Another reason might be that American Express is a “charge” card rather than a credit card. There may be loopholes in the law that allow this.

Still, this policy smacks of operating in bad faith and, really, I do not see how a company can expect payment on the day the bill is printed when you haven’t even had a chance to receive your bill!

Perhaps AMEX customers ought to complain to the FTC.  American Express is clearly violating the spirit of the CARD Act, which aims to restore fairness to credit card company policies.

Elizabeth Warren Appointed Interim Head Of CFPA and More!

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President Obama has finally done something that makes sense! He’s given Elizabeth Warren the job as interim head to establish the agency. He has also made her a special advisor answerable only to him to set this up properly. What this means is that ole Timmy Geithner, the bankers’ best buddy, won’t have too much say over the agency or Ms. Warren’s stewardship.

I’ve been hoping for this, as so many other Americans have across the United States. Ms. Warren is a tireless consumer advocate with a pragmatic no-nonsense approach to finance. The banks don’t like her because she wants to close the loopholes in the laws that allow them to take advantage of those least able to cope with financial difficulties.

To be sure, Ms. Warren does not advocate reckless spending and living above one’s means. All she wants to do is bring back the concept of fairness to consumer finance.  She also understands that what has happened to most Americans in the last thirty years is not that we’ve spent our way crazy, buying big screen TVs and McMansions. She understands that the average middle class family has slowly been leveraged out of the American dream by the fixed expenses, those expenses which cannot be budgeted away.

She wants to do away with credit card and mortgage contracts that are hundreds of pages long. She wants consumers to be educated about what they’re signing when they get a credit card or a home loan. She wants them to understand and truly be able to compare between financial products and make educated decisions for themselves. Right now, there is no way they can do that, because really, who is going to read through pages and pages of a credit card contract that even the credit card company representatives can’t understand let alone explain?

So, hurray to Elizabeth Warren!

3 Debt Relief Options For Credit Card Debt

The following is a guest post written by financial consultant Neil Williams.

 

With the state of the economy, consumer credit card debt is mounting. Debt is spreading like an epidemic in the United States. More and more people are getting trapped in the vicious cycle of credit card debt. Only debtors know the problems of being overburdened with credit card debt. So, if you are a financially troubled debtor seeking for debt help, then have a look at the various debt relief options that can help you bring yourself out of the credit card debt hole.

Thousands of people seek some sort of debt relief every year. Most commonly, debtors seek debt consolidation or refinancing which provides them with the benefit of lower monthly payments and interest rates. But there are some more options that can bring you out of debt. Read on to know about them.

  1. Consumer credit counseling
    Those debtors, who cannot manage their debts on their own, can seek professional help. Consumer credit counseling will provide you with professional credit counseling. The credit counselor will guide you to manage your finances and implement a personal budget for you. This budget will help you manage your finances well. They will identify the problems which have led to such poor financial condition. After detecting the problems, the credit counselor will advise you how to manage your finances well so that you again get a grip on your finances.
  2. Credit card debt settlement
    Debt settlement is a debt relief option which should be considered by debtors only if their last option is to file bankruptcy. Debt settlement is a good option for debtors who have a large amount of debt and they can’t find any way out to pay off their huge debts. Once you sign up with a debt settlement company, your debt consultant will negotiate with your creditors and attempt to reduce your total outstanding debt amount considerably. Creditors often forgive 40-50% of the outstanding balance amount. You have to pay some debt settlement fees to reap the benefits of these services.
  3. Credit card debt consolidation program
    Credit card debt consolidation is another way of paying off your debts in affordable monthly payments. If you enroll yourself in a debt consolidation program, then your debt consultant will negotiate with your creditors in order to lower the interest rates on all your credit card debts. The creditors often agree to lower the interest rates as they see that the debtor is paying through a debt consolidation program. This reduces the monthly payments of the debtor. Instead of making multiple payments to multiple creditors every month, you just have to make a single monthly payment to the debt consolidation company.

It is very important for consumers to know the truth about credit card debt. They should know that there are various debt relief options that help consumers to pay off debt easily and timely.

Credit Card Companies Milking Consumers: The Number One Reason Why We Need Elizabeth Warren as Director of The Consumer Financial Protection Bureau

An article today in the Washington Post discussed how credit card companies are now charging customers with good credit, who manage their finances wisely by paying off their balances in full every month. Such customers are now finding that they’re having to pay an annual fee, where they didn’t before.

The reason for this is that credit card penalty fee income has been reduced by the new credit card regulations and the banks, not wanting to see sources of profit dry up, no matter how ill-gained those profits were, are now having to charge the only customers they have left: those with good credit who have traditionally never been a great source of profit. As Curtis Arnold, owner of CardRatings.com says “The only true deadbeat customer is someone who has a card and never uses it. Just having good credit alone in today’s market is not enough for that customer to be profitable."

The article goes on to say that this problem illustrates the “challenges” facing the credit card industry, as if the only choice credit card companies have in order to make money is to find new ways to screw people. Really? Why is interest income not enough? Why do they need fee income? They don’t…they’re just greedy, having been accustomed to years of being largely unregulated and able to do whatever they wanted without consequence.

Because the credit card industry and Wall Street in general is so corrupt and so greedy, we need a strong watchdog to lead the newly created Consumer Financial Protection Bureau. Harvard Law Professor Elizabeth Warren is the best qualified person for that job, and if the Obama Administration allows Timothy Geithner and his cronies to place another industry sycophant in that position, then you can be sure that the agency will do nothing more than rubber stamp whatever fee scheme the credit card companies come up with next.

If you don’t want to be charged exorbitant fees, then I suggest you write to President Obama and to your senators and tell them you want Elizabeth Warren to head the CFPB.

Wall Street Is Circling The Wagons Against Elizabeth Warren as Head of Consumer Bureau

The newly created Consumer Financial Protection Bureau was an idea conceived Harvard Professor and long time advocate for the middle class, Elizabeth Warren.  Since the agency was her idea, and she is obviously the most qualified person to lead it, then her confirmation as its head should be a shoo-in.

That would be true in the real world, but in the Washington Beltway, what is up is down and what is wrong inevitably turns out to be right as long as enough lobbyist money is spent to woo political officials along the way.

Wall Street was extremely opposed  to the consumer financial protection bureau and  through their lobbying efforts, managed to get it moved within the Fed instead of outside it. Beyond that, they haven’t managed to weaken it any further, but appointing a Wall Street insider would ensure that the agency would have no teeth and be practically useless.

Treasury Secretary Timothy Geithner,  a Wall Street insider if there ever was one, is quite opposed to Warren, who has dressed him down a time or two as he appeared before the Congressional Oversight Committee that she chairs. Where no one else would ask the tough questions, Elizabeth Warren did, and when the answers given were less than candid or complete, she poured on the heat.

 

 

 

Now we hear that Senator Chris Dodd, Chairman of the Senate Banking Committee does not believe that there are sixty votes in the Senate to confirm Warren as director of the CFPB.  From the article:

I think Elizabeth would be a terrific nominee," Dodd told NPR’s Diane Rehm on Monday. "The question is, ‘Is she confirmable?’ And there’s a serious question about it.

Senator Dodd has taken a great deal of donations from the banking industry and while fighting for financial reform, he has also worked to weaken it at the behests of his donors. His remarks today are even more of an indication that Wall Street will fight tooth and nail to prevent Warren from heading the agency that was her brainchild.

New Rule By Fed Limits Credit Card Late Fees & Penalty Fees

Yesterday, the Federal Reserve issued a new rule that addresses unreasonable late fees and other penalty charges and requires credit card companies to re-evaluate any interest rate increases they’ve made since January of 2009.

The new rule does the following:

1: Prohibits late fees greater than $25 for the first late payment unless the credit card company can demonstrate that such late payments cost them a greater amount.

2: No penalty fee may exceed the dollar amount of the violation. This means that if you go over your credit card limit by $10, the credit card company can’t charge you more than $10. Likewise, if you’re late on your minimum payment of $35, the penalty associated with missing this payment can’t exceed $35.

3: Prohibits charging inactivity fees on dormant accounts. No longer can credit card companies charge you just because you aren’t using the card. They still can close your account, however.

4: Credit card companies are required to reconsider any interest rate changes they’ve made since January 1, 2009 and reduce them if they can’t be justified.  While not an interest rate ceiling, which would be better, this part of the rule makes credit card companies reduce the rates they inflated to compensate for the CARD Act’s effect on their bottom line.

Debtors’ Prison?

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Although jailing people for unpaid debts was made illegal in the 19th century, in some states, particularly creditor friendly states like Minnesota,  it appears that debtors’ prisons still exist.  A Minneapolis Star Tribune story revealed a disturbing practice by the debt collection industry: using the power of a bench warrant to arrest debtors for failure to appear at court hearings.

The way it starts is that the debt collector gets a default judgment, which gives them the power to garnish wages, levy bank accounts, and seize personal property in order to satisfy the judgment. As part of the process, a hearing is conducted where the debtor must reveal his income and property to the debt collector.  While the individuals in the story were not technically arrested because they owed money, the judges oftentimes set the bail at the amount of the debt.

The story also mentions a couple of other states the connection between the person’s arrest and the debt is more direct: Indiana and Illinois. In one case, an Illinois judge ordered a man jailed for an indefinite period until he could pay $300 toward a debt to a lumber yard.

While most people will not face jail time for unpaid debts and while certainly, debtors’ prisons are no longer legal, the out of control debt collection industry has never particularly cared about what is legal and what isn’t.  Most debt collectors at best straddle the law and at worst outright ignore it.  The tactics of one firm caused this Florida man so much grief that he committed suicide. His family is now suing that firm for wrongful death.

There are steps you can take to avoid the worst debt collection tactics:

1: If you are sued, do not allow the debt collector to get a default judgment by failing to file an answer in time. In most states, you have up to 30 days to file a response.  While you may file the answer yourself, consulting with an experienced consumer law and/or bankruptcy attorney  is highly recommended. If you cannot afford an attorney, there are many who provide legal services to low income individuals for free or at a very low cost. You can find one in your state by going here.

2: Consult with a credit counseling/debt management agency. A credit counselor will work with you and your creditors to arrange a payment plan that you can afford and that will have your debts paid off in a few years. Most creditors will work with debt management counselors to lower your payments to an affordable level and will stop collection efforts once they are aware that you are on a debt management plan.

3: If you have no income or your current income is so low that you can barely cover your necessities, then it’s time to file for bankruptcy. Chapter 7 bankruptcy can protect you from judgments and creditor lawsuits. To find a bankruptcy attorney you may go here or here.

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