Archive for the ‘Credit Cards’ Category

CARD Act of 2009 Makes Paying Down Your Credit Cards Easier

The Center For Responsible Lending released its analysis of the payment provisions of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (the CARD Act) earlier this month. It found that new provisions in the law  require credit card companies to apply any amount paid above the minimum payment to the balances bearing the highest rate of interest.   This translates to a savings of two dollars in interest for every one dollar paid above the minimum payment.

People who will benefit the most from this are those who carry balances at different interest rates. In the past, credit card companies would apply anything received above the minimum to the balance carrying the lowest interest rate, allowing them to generate more income.  This change won’t affect people with credit card balances at a single interest rate.

What Is A Charge Off?

A charge-off is an accounting tool that lenders use to write off debts they deem as uncollectable. Creditors will normally charge off accounts which remain delinquent for six months or more.  This allows them to declare a loss on their balance sheets and, accordingly, reduce their tax liability.

Simply because your account has been charge off does not extinguish the debt, Most often, charged off accounts are sold to third party collection firms who will continue to attempt to collect from you. They’ve usually purchased the debt from the original creditor for less than the amount owed.

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Financial Reform Passes In Senate, Long Fight Remains Ahead

The financial reform bill has passed in the Senate, which includes the Consumer Finance Protection Agency, the brainchild of Elizabeth Warren, head of the TARP Oversight Panel, Harvard law professor, and bankruptcy expert.

The fight is not over, however, and the financial services industry hasn’t stopped working hard to weaken the final bill.  Robert E. Story, Jr., Chairman of the Mortgage Bankers Association released a statement today that remains inline with previous statements:

Unless improvements are made during the Senate-House negotiations, this bill will likely bring regulations that will only further constrain credit for borrowers, make real estate purchases more expensive and drag out the ongoing turmoil in the real estate markets.

The financial services industry doesn’t like the reform bill one bit. They don’t like the fact that they face new rules that limit their ability to gouge consumers. The sad truth is they really don’t have much to fear, at least from the Senate version of the bill. While it does do some things that are good,  among them, the audit of the Fed, and the creation of the CFPA, it doesn’t reinstate the Glass-Stegall Act,  nor does it address “too big to fail.” You can bet that they’re going to fight to further weaken the CFPA, too, because after all, too much consumer protection is a BAD thing.

 

If_Anti-CFPA_Folks_Ran_Toyota_Today_by_crlonline

Source image: http://pixton.com/comic/gl8jabmu

My First Stupid Financial Decision

Usually, I get on anyone who is overly sanctimonious when doling out personal finance advice because, well, they do sound sanctimonious and they ignore the larger issues that face most American families today.  Having said that, some folks do make boneheaded moves in the finance department, me included.

When I was in college, I thought it was a bright idea to get an American Express card. There were some folks on campus who signed me up…did they care that I didn’t have a job or any income really, apart from what student aid I was receiving at the time, combined with an allowance from my mother? No, they didn’t. They were happy to sign me up and I went right along with it, foolish girl that I was.

Now, had I had an ounce of financial sense, I would have used my card as it was intended to be used. I wouldn’t have gotten into any trouble at all and would have been on the road to having excellent credit. But, I didn’t. I didn’t realize that since my American Express card was a charge card, as opposed to a credit card, that I had to pay whatever balance I had run up during the month in full at the end of the month. I went a little crazy and before long I owed more than $1,000 and, of course, I couldn’t pay it. There went my fledgling credit file.

It is a good thing that there are now measures in place that prevent credit card companies from setting up shop on college campuses, and while I do believe that some of the blame for my early credit transgression does lie with the credit card company, the ultimate responsibility lies with me. In my case, I was a stupid kid who got into trouble with credit.

I did end up paying it off, but it took a long time and my credit was damaged. Starting off with damaged credit is not a good thing and I don’t recommend it to anyone.

Most Banks Lending Standards Remain Unchanged, Federal Reserve Report Shows

hand with credit card

 

The most recent Federal Reserve  quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices shows that most banks are maintaining the lending standards they have in place currently, while some banks have tightened these standards even further.

Banks tightened lending standards as a response to the economic downturn and the financial crisis that occurred in 2008. Banks appear to be maintaining these standards. Today, banks are requiring a higher minimum credit score  and are in general keeping credit limits lower than in the pre-crisis years.  The full report is available here.

The Over-Consumption Myth Is Keeping Us From Enacting Meaningful Financial Services Reform

Despite the persistent rhetoric that people in financial trouble deserve to be there because they made poor choices and now must face the consequences of those choices, the real story behind why so many American families are riding the edge of financial devastation is not as simple as that.

As Elizabeth Warren explains in her paper entitled the Over-Consumption Myth,  the average middle class family carries more debt than it did a generation ago. However, this debt is not due to overspending on frivolous items such as designer clothes, designer foods, or big screen televisions.

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Too Big To Fail? Too Big To Exist!

 

Some facts to ponder from Senator Sanders’ remarks:

  • The four largest banks issue two-thirds of United States credit cards
  • The four largest banks make half of all U.S. mortgages
  • The four largest banks hold forty percent of bank deposits and $7.4 trillion dollars in assets.

In the late 19th and early 20th centuries, our government passed the Sherman and Clayton Acts, which were aimed at ensuring a competitive environment in which the free market can operate. Standard Oil, which at one point, controlled 91% of production and 85% of final sales of oil, was broken up because it was too big.  More recently, AT&T was forced as part of a legal settlement, to break up into smaller companies. It held a sanctioned monopoly over telephone service for many years.

Over the past thirty years, our anti-trust laws have been largely ignored. If there was ever a time when they need to be dusted off and put into action again it is now. The banks control too much of the United States and their folly has hurt not only the U.S. economy , but the global economy as well.

What do you think? Is it time to break up the banks?

Debt Collectors Are Scum: It’s The Truth!

Even David Ramsey, one of the “personal responsibility” gurus, thinks so:

 

 

 

Understandably, no one wants to hear from the debt collector and most collection activity is not viewed in a positive light. Having said that, debt collectors have earned their shoddy reputations and 90% of them violate the law with every call they make.

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Target To Stop Issuing VISA Cards In Favor Of Its Own

Target

 

The Associated Press reported today that Target will stop issuing VISA credit cards to its customers in favor of its own store credit card. Citing research that shows consumers will spend more money when using a store brand credit card rather than the more generic VISA, Target hopes that this change will increase retail sales, which have been flagging as the economy continues to languish.

The change will not occur until next Thursday and will not affect current Target VISA holders, about 70% of the store’s credit card holders.

Lindsay Lohan Owes More Than $600,000 In Credit Card Debt

The 23 year old Lohan, a once promising young actress, has run up well over $600,000 in credit card debt. She has been at last cut off by one credit card company and faces a lawsuit from another if she can’t pay her bills.

Lohan’s income is not what it once was, given that her last hit film was 2004’s Mean Girls and club invitations haven’t been fetching much more than $5000 to $10,000.  Times are tough for everyone, I guess, although the strains of pity flowing off the violin playing for Lohan’s plight may be too low to hear, owing to its microscopic size.

Maybe Lindsay could use some credit counseling as well as drug rehab?

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