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by glen on 28. June 2009 12:29
Major banks have been hit hard by bad mortgages, fears are growing that troubled financial institutions are going to have another consumer headache to deal with: credit card defaults.
There have been no shortage of warnings about the business as the economy continues to sputter. Fearing a wave of credit card-related losses, banks have been aggressively setting aside funds to help cushion the blow. One problem, is that banks aren't quite sure just how severe the losses will be. With unemployment rates, widely viewed as the most reliable indicator of future credit card losses, climbing to 8.1% in February - its highest level in 25 years. The widely used rule of thumb is that charge-offs typically climb to 1 percentage point above the unemployment rate. Many expect the unemployment rate to keep rising throughout the year. Even a small FICO score drop in today's environment of tight credit can make the difference in getting a mortgage, a car loan, or another credit card, and it can have an impact on the interest rate a borrower pays. The FICO score ranges from 300 to 850 and the best mortgage rates are generally given to borrowers who have at least about 730. Banks are cutting limits in the face of a deteriorating economy. U.S. credit-card default rates reached record highs. The worsening unemployment situation is causing banks to worry that even good customers could quickly become risky customers. As a result, the companies are preemptively slashing credit lines, especially those that aren't being used.
The banks might be tightening available credit in reaction to new federal legislation, taking effect in the middle of next year, that will restrict how credit-card companies raise rates. Among the other rules designed to benefit customers, banks will only be able to hike rates on existing balances if a customer is 60 days late on a payment, and it must provide 45 days' advance notice before increasing rates. It pays in this environment to keep the balance-to-limit ratio below a third and keep a close eye on any changes to credit reports.
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There's no way to know how many good credit scores are being lowered by the credit limit cuts. FICO said its study showed that borrowers whose available credit was cut did not see a change to their median FICO score, which remained at 770. But the survey ended in October 2008, just as the financial crisis was beginning. It's unclear what has happened since then. As always you should Control your Debt to take charge of your money.
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by glen on 16. June 2009 12:36
Your credit score now controls so many aspects of your life, whether you can rent an apartment, get a car loan, credit card or mortgage. Everyone knows late payments will hurt their score. Did you know so will closing a credit card account and it dosen't matter who closes the account. That is not part of what will factor in to computing your credit score.
| Closing an account whether it’s done by you or the lender can only have a short-term negative impact on your credit score. This is due to what’s called debt utilization the ratio of your total debt to total credit limit this counts when its your credit score. Closing a credit card reduces your available credit, but doesn’t reduce the amount you owe, making it look as if you’re using more of your available credit. Here’s how that works you have four credit cards and each has a $5,000 limit, making your available credit $20,000. You have no balance on one card and a combined balance of $6,000 on the other three. Your utilization rate is about 30 percent. Credit experts say you should try to use 30 percent or less of your available credit. What happens if you decide to close the card with the zero balance because you don’t use it anymore? Your available credit drops by $5,000 but your total debt doesn’t change, your utilization rate jumps to 40 percent ($6,000 debt on $15,000 of available credit) and your credit score will drop. If you close a card and you have virtually no balance on your other cards the impact on your score will not hurt you, to go from 2 percent to 10 percent utilization rate. Now jump from 10 percent to 50 percent and you’ll get clobbered, do the math before you close an account. If you have a good reason to close a card, such as a big annual fee on a card you don’t use, then consider closing it. Just don’t close a bunch of credit card accounts all at once if you plan to apply for a car loan or mortgage in the next six to twelve months. Control Your Debt, Control Your Credit, take charge don't just charge. |
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by glen on 8. June 2009 14:13
Credit cards are as much a part of the American economy as $20 bills, so what if consumers has sworn off plastic money altogether.
Some consumers are making the choice to not use credit cards and stick strictly with cash.
Credit card debt is the biggest hindrance in being able to take care of our families and get prosperity for our selves. So if your paycheck is going toward paying credit card debt, you won't get close to your financial goals in a timely manor. Income as a wealth-building tool, with debt a big part of your budget plan, income just pays all the bills. Debt is not a tool; yes there is good debt, but bad debt is a method to make banks wealthy, not you. Nearly 80 percent of American families have at least one credit card, 44 percent of families carry a balance on their credit cards, and Americans pay about $15 billion a year in penalty fees.
Last week the House overwhelmingly passed a Credit Cardholders' Bill of Rights, intended to protect consumers from sharp interest rate increases, harsh penalties, short payment windows and other abusive practices. A similar measure is moving through the Senate. President Obama is pushing the legislation. The issue is not credit cards are bad, it is that a people need to have self-control, then a credit card can be a tool to manage your money. Prudent use of a credit card is taking advantage of reward programs and paying off the balance every month. If a person is having trouble paying off their credit card balances, then they need to stop using them, pay down their balances. Management of a credit card may be successfully if control is used over the card. Some people need someone very direct to help them correct their behavior. There was said once, that credit cards are kind of like power tools: They're a great convenience, they can get the job done faster, but they can be dangerous, in untrained hands. Consider untrained hands to be someone who is not disciplined financially, or maybe they're young and haven't had the exposure to credit and debt. For the average American, the problem may be them having one or two credit cards with recurring expenses making monthly payments. That are not making the Debt go down or away.
Managing day by day, in this economy with the credit card companies upping interest rates without a lot of warning, reducing credit limits sometimes, you can get caught.
Look at it this way if we just use cash and debit cards, it's a much better idea, Credit cards are too risky for every day use. When something does happen to you and you have a bunch of debt. When life happens you lose your job or whatever it may be. With more of debt in your life, you might be in a bitter situation. To drive the point home: "The borrower is servant to the lender."
Excessive debt is a clear warning sign that people are living beyond their means. In danger of being enslaved, think of it this way, debt elimination is essential. Take Control of Your Debt, stop letting Debt Control Your Money and how you live your life.
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by glen on 26. May 2009 12:46
Major Banks have been hit hard by bad mortgages, are now, fearing that troubled financial institutions are going to have another consumer headache to deal with: credit card defaults.There has been no shortage of warnings about the business as the economy continues to sputter.A widely used rule of thumb is that charge-offs typically climb to 1 percentage point above the unemployment rate. And many expect the unemployment rate to keep rising throughout the year.With that in mind, analyst think the charge-off rate could wind up peaking at a level north of 10%.Of course, this is not the first time that credit card issuers have had to contend with relatively high unemployment. During the recession in the early 1980s, the jobless level peaked at 10.8% in late 1982. But some experts point out that this is a much different time for the industry.Not only did a much smaller slice of the American public own a credit or charge card, the amount of credit issued by the industry was just a fraction of what it is today. As of January 2009, the amount of outstanding credit in the industry totaled just under $1 trillion, compared to just $70.5 billion in 1982. Banks have a whole other host of problems to worry about now that they didn't have to contend with in the 1980s.Democratic lawmakers have proposed legislation that would allow so-called "mortgage cram downs," which would let judges reduce mortgage debt for individuals who have filed for bankruptcy.Many in the banking industry fear that passage of this bill could prompt many homeowners to file for bankruptcy and default on many of their other debts, including credit cards.But some analysts point out that the magnitude of any future credit card problems will be mitigated by the fact that most banks' credit card businesses are a fraction of the size of their ailing mortgage portfolios..What is also encouraging is that banks' credit card operations have become much more adept at adjusting to tough economic times after years of practice, including the downturn that followed the dot-com bubble earlier this decade.Facing additional losses, credit card issuers are doing what they can to insulate themselves from further losses, including lowering credit limits for some cardholders, closing accounts or getting out of the business altogether. The new credit card bill signed by the President is thought of being a victory for consumers, financial experts say the bill could have unintended consequences as credit card companies look for ways to make up for potential lost revenue. Those measures could include more cards with annual fees and the loss of a grace period before interest accrues, which would affect even those consumers who pay off their balance each month."So we're not going to give people a free pass, and we expect consumers to live within their means and pay what they owe," Obama said. "But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives." This all said the bill won’t take effect for nine months, so I encourage you to Control Your Debt. Creditors are not going to just lie down and take it on the chin; they have the will to get their way .
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by glen on 19. May 2009 12:28
Finding a family member or close friend to add you as an authorized user on their credit account, ideally one with a long history of low balances and on-time payments. Account-authorized users gain all the positive (and negative) history of the account. Your low score won't affect the primary cardholder's credit -- they can even block you from using the card. Be sure to keep tabs on the account any problems, a late payment or overcharged balance can hurt your score. Even a small loan shows up on a credit report, helping to improve a person's score. Banks are still willing to offer short-term installment loans, which require a fixed payment each month. Offer up collateral then find the best rates, shop around at community banks and credit unions. Often the rates are better, and they tend to look beyond your score. Use secured cards, make a deposit say, $200 to $500 which serves as the credit limit on the account for the next 12 to 18 months. Borrowing against your own funds, lenders tend to be more lenient about application standards. As long as the cardholder pays on time and keeps their balance in check, the issuer typically promotes them to a regular, unsecured card.
Note even these cards can have interest rates and fees that are painfully high.When signing up, request that the card issuer reports your transaction history to all three credit bureaus. Find a list of secure cards, visit CardRatings.com, as well as Credit.com. As always Control Your Debt, after all isn't your money worth it.
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by glen on 12. May 2009 05:37
Jacking up interest rates is not only an easy way for card issuers to boost profits, but it also makes them look more financially sound amid rising defaults. Issuers may also be trying to get the most money they can out of consumers before new Fed rules go into place in July 2010 that prohibit them from raising interest rates on existing balances unless the cardholder is more than 30 days late with a payment. Further regulation is likely by the House Committee on Financial Services it will discuss interest rate increases in a series of hearings this month on predatory lending practices and credit-card reform. Also reintroduced is the Credit CARD Act, which reinforces the Fed rules and -- if passed -- could bring them into effect even sooner. Raising rates may help the credit-card issuers bottom line in the short term, but long term it’s a game of Russian roulette, getting people to pay the most they can in interest without going into default. While raising rates is routine with riskier cardholders, desperate issuers have broadened the pool to include those with good credit scores and spotless payment histories. Make no mistake; higher rates push even the most financially-stable consumers closer to financial ruin. Rising interest rates cause minimum monthly payments to creep higher. Sometimes moving beyond a consumers’ ability to pay, leading to a domino-effect increase in bankruptcies.A credit card holder may be struggling to pay off $3,500 in debt on a card that opened in 2007. Never been late with a payment, yet the bank raised the APR last fall to a steep 25.99% from 16.99% -- then promptly shut down the account. When called by the card holder to try to negotiate a better rate, a representative tells the card holder terms on closed accounts are fixed. It’s a new day and, accountholders affected by rate increases are given the opportunity to opt out, that’s right they can pay off their balance under the existing terms before the card is closed. Once an account is closed, terms in affect at the time continue to apply. Shocked and feeling misled or betrayed, finding that even Paying bills on time, only make the minimum payment. Always keep balances low -- since lenders like to see that you have lots of available credit. That you aren't using more than 30% of it isn't enough in this new time of credit. You must pay off your balance in full each month, understand what is seen is that end-of-statement bill this is the entire credit bureaus see. New rules to the credit card game are Control Your Debt; watch out for changes in your statement. Be ready to take charge of things each month, because now its buy beware all over again.
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by glen on 5. May 2009 08:38
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Recently credit card holders have been complaining of dramatic interest-rate hikes (in one case from 9.9% to 17.9%), fixed interest rates being converted to variable rates, sudden account closures and other changes in terms. Most of them are mystified -- they say they pay their bills on time and send more than the minimum monthly payment. Now that card holders are paying attention to credit limits and annual percentage rates. A long with reading any notices that come in the mail, card holders are spotting all changes in terms for the worse looking- especially for any thing they can't remember , such as making a late payment or exceeding a credit limit. Then getting on the phone and working thier way up the supervisory chain. A computer may have swept your account into a portfolio review, but humans have the capability to override automatic changes.
Recognize that you have the right to reject new terms, but think twice before you do so. If you opt out, your account may be frozen while you pay off your balance under the old terms, and then closed. Closing the account can have repercussions, especially if it is one you've had for a long time. Longevity of your credit history accounts for 15% of your credit score. Be aware that balance transfers aren't what they used to be, credit standards are stricter for 0% offers. Whereas a score of 720 used to suffice, 750 now seems to be the cutoff of CreditCards.com. Terms that used to last 12 months have been cut to six. Times are tougher, say credit-card companies, and a rising tide of delinquencies and defaults leaves little choice but to toughen up on consumers. Fueled by populist anger, lawmakers on Capitol Hill are determined to pass legislation that gives consumers more rights, and President Obama has outlined his support for reform. The House passed a Credit Cardholder's Bill of Rights on April 30, and the Senate has its own reform bill pending. Despite the powerful banking lobby, legislation could well be signed into law as early as this summer, although implementation of many provisions may be delayed until next year. At a minimum, a new law will likely incorporate Federal Reserve regulations scheduled to take effect in July 2010. It's a good bet you'll see an end to arbitrary rate hikes on existing balances, for instance, and issuers will likely need your permission for approving charges that exceed your credit limit, triggering fees. As always until then take Control Of Your Debt, remember waiting for Washington can cost you money. |
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by glen on 27. April 2009 12:46
Washington has been pressing the credit card industry to adopt more consumer-friendly practices. That's because credit card issuers have been tightening the screws on consumers -- even ones who are up to date and on time paying their bills. Consumers are complaining not only that rates are rising, but that limits are falling -- hurting credit scores. Some issuers are closing accounts due to inactivity -- which can also hurt your credit score. Here is a specific example of change according to Lowcards.com: increased rates 11.9% from 7.15%. Experts expect some kind of reform, there are two bills in Congress -- both would ban credit card companies from abruptly jacking up interest rates and fees and preventing young adults from getting credit cards. Next year -- July 2010 -- the Federal Reserve puts in place new rules on credit cards. Here's what you can expect: limits on over-the-limit fees, the end of universal default and,a longer billing cycle.
As you watch out for credit card companies also be on the lookout for bank rates, ATM fees average $1.97. That's 11 percent higher than the prior year another common culprit: overdraft fees. Overdraft fees kick in when you don't have enough money in your account to cover a transaction some banks charge a monthly maintenance fee regardless of your balance. While others will ding you only if you fall below a minimum balance you could also be charged a teller fee, just for going to the teller. If you have an express, or an online account you could even be dinged for writing too many checks. Don't use another bank's ATM 99.2% of ATMs surcharge according to bankrate.com. To avoid these ever-growing fees, use your debit card to make a purchase, and just ask for cash back. If you really just need an ATM, make sure you avoid the ones at airports, casinos or any other place where the machine is the only way you can access money. Overdraft fees can be brutal as high as $40 in some cases and Consumer Reports estimates that translates to over 1000% interest. Here's how you can avoid them: link your checking account to your savings account ,keep track of your deposits/withdrawals and, if possible keep a cash cushion (especially if you have companies that withdraw money from your account automatically). Check the bank's policy for the maintenance fees and/or teller fees, make sure you ask the bank what fees you'll be on the hook for. When possible join a credit union, generally credit unions have lower fees and higher saving rates on their products. If you're looking for a credit card, the terms and conditions are generally easier to understand compared to large commercials banks. A credit union membership may be set up through your employer, a neighborhood association or a church group. You may even be able to join a credit union that serves just your local community. To find out where the credit unions are in your area, go to the National Credit Union Association website. Use all the tools you can it your money don't let it be taken from you, just because you were not Watching Out for your Money.
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by glen on 21. April 2009 05:25
Budgets are a necessary evil they are the only practical way to get a grip on your spending and to make sure your money is being used the way you want it to be used. Creating a budget generally requires three steps identify how you're spending money now. Evaluate your current spending and set goals that take into account your long-term financial objectives. Track your spending to make sure it stays within those guidelines. Don't drive yourself nuts, but watch out for cash leakage bewares of luxuries dressed up as necessities. If withdrawals from the ATM machine evaporate from your pocket without an apparent explanation, it's time to keep better records. If your income doesn't cover your costs, then some of your spending is probably for luxuries - even if you've been considering them to be filling a real need. As your annual income climbs from raises, promotions and smart investing don't start spending for luxuries until you're sure that you're staying ahead of inflation. Beware of spending, don't count on windfalls, and always aim to spend no more than 90% of your income. That way, you'll have the other 10% left to save for your big-picture items. Think of what you want as a long term goal, a new home, or retirement plans. Thinking like this will help as you set your budget and Control Your Debt.
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by glen on 14. April 2009 13:06
Every year, the bills go nowhere. This year could be different. Many insiders on both sides of financial services issues expect pro-consumer legislation to ride the populist wave.If not now, then when momentum is certainly here.The bills would, among other things, ban card companies from abruptly jacking up interest rates ,fees, and prevent young adults from getting credit cards .As legislation last week moved further than ever before, financial sector lobbyists are redoubling their efforts to knock it off course. Their aim: prevent Congress from passing anything stronger than new Federal Reserve changes already set to take effect in July 2010.Banking lobbyists warn that tougher rules, especially those proposed in the Senate, could make credit card lending more costly or curb the issuance of new cards -- and in turn slow the recovery of slumping credit markets.Meanwhile, credit cards are weighing on consumers' minds and wallets. In February, credit card debt that companies can't collect -- and thus give up on reached a 20-year high, according to Moody's Credit Card Index. The rate at which consumers made late credit card payments also rose to a 17-year high. Preference on existing credit card legislation for many of the same reforms that the tougher Senate bill proposes, such as banning credit card issuers from making "unilateral" changes to the consumer's contract.Federal Reserve rule changes set to kick in next year would stop higher interest rates from being imposed when consumers are late paying unrelated bills. The changes also stop companies from averaging finance charges from two previous cycles, a practice that dings consumers who carry a balance and pay it off.The House bill is similar to the Federal Reserve changes, with a few more reforms. It would also prevent card companies from marketing and issuing cards to those younger than 18. And it bans credit card companies from charging a fee for payments made over the phone. This year, the Senate bill is even tougher than the House bill, preventing credit card issuers from raising interest rates and fees even if the consumer's general credit risk goes up.If credit card companies can't charge fees and interest based on general risk, all card holders will have to pay more because customers with good credit scores will have to subsidize those with weaker credit scores.Many Senate Republicans and a few Democrats have said they don't like the Senate's legislation, making passage unlikely without concessions. The Senate bill also prevents those under 21 from getting credit cards unless a parent or guardian backs them up or if they take a government-approved financial literacy test. The Senate bill also prevents retailers from charging "dormancy" fees on gift cards that aren't redeemed within a certain period of time.
While veterans political watchers expect a credit card bill of some type to pass this year, it all remains to be seen. All this means to you, stay on the look out for changes in your credit card statements. Control Your Debt this is the only way to keep creditor's from controlling your money.
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