Chance Gates' Blog

RISMEDIA, February 23, 2010—(MCT)—Credit card issuers are now going to have to play by a whole new set of rules that are considered consumer-friendly—but will also cut into some of their traditional sources of revenue.

Don’t expect those companies to take that lying down. Card issuers are expected to spend the next year experimenting with new products and fees—as well as higher interest rates—testing just how much consumers are willing to shell out.

The Credit Card Accountability Responsibility and Disclosure Act, signed into law in May, is a sweeping overhaul of the card industry and includes provisions to help reduce the amount of interest consumers pay. The bulk of reforms are set to take effect February 22, 2010.

As card issuers prepared for the new rules in recent months, many have raised interest rates on customers—to the dismay of consumer advocates. At the same time, the weak economy and fears of rising defaults caused card companies to cancel accounts and lower credit limits on anyone who appeared risky.

The CARD Act will help many vulnerable consumers. “The biggest winners are consumers who have been taken the most advantage of,” says Josh Frank, senior researcher with the Center for Responsible Lending. These are cardholders who carry balances and have seen their interest rates jump or card terms change for no apparent reason or because they accidentally triggered a late fee, he says.

Consumers who are good managers of credit, though, might be unhappy to find that card issuers may be passing on higher interest rates and fees to them.

Here’s what the next year in credit cards might look like:

Up, up and away: The CARD Act doesn’t prevent issuers from raising interest rates, although there are more restrictions on when and how they can do so. Because card issuers can’t quickly raise rates or change terms on their riskiest customers, they will charge higher interest rates across the board to protect against potential losses, banking experts say. Synovate, which tracks card solicitations, found that offers in the fourth quarter of last year carried an average rate of 13.5%, up from 11.47% a year earlier.

Charge or else: “A lot of the talk around the industry is trying to figure out some of the fees that are going to come,” says Anuj Shahani of Synovate. He says one of the most anticipated: the inactivity fee. Card companies say it costs them money to maintain accounts, and they are starting to slap a fee on unprofitable customers who rarely use their cards.

Welcome back, annual fees: Once common, annual fees now usually appear only on subprime and high-end reward cards, Shahani says. But card issuers are eyeing a revival. Synovate reports that 35% of card offers in the fourth quarter carried an annual fee, the largest percentage in a decade. A year earlier, 23% had annual fees.

Fees for not knowing your limits: Issuers have typically covered customers going over their credit line, but often for a steep price of $35. The CARD Act doesn’t allow over-the-limit fees unless customers opt to have their overcharges covered. Many card issuers are working 24/7 to develop opt-in policies, Brauneis says. Consumer advocates expect a big promotional push by banks to get customers to sign up for this service. Don’t take the bait. “I can’t think of many consumers for whom it would be worth it,” Frank says.

Pricier balancing acts: The standard fee for transferring a balance from one card to another used to be around 3% of the amount transferred, not to exceed $75 or so. But that fee has been going up to 4% and 5% in the past year, and the dollar cap has disappeared. So you can end up paying hundreds of dollars on a transfer. Consumer advocates expect issuers to continue pitching balance transfers to collect the lucrative fees. If you’re tempted to transfer to another card for a lower rate, make sure you know the terms. Card reforms require that promotional rates must last at least six months, so check what your rate will jump to after that.

Skimpier rewards fro some: Card issuers last year watered down rewards, such as reducing points on purchases or trimming cash-back awards. That dilution is expected to continue on basic cards. But issuers will be launching richer reward programs to compete for the most profitable customers: good credit risks who carry a balance, pay interest and occasionally trigger fees.

New law, new products: Issuers have introduced new cards in the past six months, and they say these products have been in the works for a long time. But many seem designed in the spirit of the CARD Act, which aims to make card rules clearer and turn us into better money managers.

(c) 2010, The Baltimore Sun.

Distributed by McClatchy-Tribune Information Services.

As credit card companies continue to hike rates and continually change the terms and conditions of your account, it is crucial for credit card users to make the most of their credit. The following tips will help you get on track to using your credit card wisely.

1. Pay on time. Paying your credit card account on time helps you avoid late fees as well as penalty interest rates applied to your account, and helps you maintain a good credit record. A good credit record leads to a higher credit score, which helps you qualify for lower interest rates. Know the date your payment is due. If your bill is due at an inconvenient time of the month- for example, if it’s due on the 10th and you get paid on the 15th- contact your credit card company to see if they will change your billing cycle to fit your cash flow.

2. Stay below your credit limit. If you go over your credit limit on your card, your card issuer could charge a fee and increase your interest rate to a higher penalty rate. To avoid this, keep a record of your spending or check your balance online. Also, be aware that some merchants (for example, hotel and car rental companies) put a “hold” on your credit card based on their estimate of the amount you will charge. This can reduce your available credit until the final charge is processed.

3. Avoid unnecessary fees. Credit card companies not only charge late payment and over-the-limit fees, but also fees for cash advances, transferring balances, and having a payment returned. Some companies charge a fee when you pay your bill by phone. Pay attention to the transactions that trigger these fees. If you need a cash advance, withdraw enough so that you don’t have to take a second cash advance and incur a second fee later in the month. Read your credit card agreement to learn more about the fees that your credit card company charges.

4. Pay more than the minimum payment. If you can’t pay your balance in full each month, try to pay as much of the total as you can. Over time, you’ll pay less in interest charges- money that you will be able to spend on other things, and you’ll pay off your balance sooner.

5. Watch for changes in the terms of your account. Credit card companies can change the terms and conditions of your account. They will send you advance notices about changes in fees, interest rates, billing, and other features. By reading these “change in terms” notices, you can decide whether you want to change the way you use the card. For example, if cash advance fees increase, you may decide to use a different card for cash advances. If you have a card with a variable rate or if you have an introductory rate that is ending, be aware that credit card companies are not required to send you a notice about raising your interest rate. Interest rates are listed on your monthly bill. Read your bill carefully and take note of any changes.

For more information, visit www.federalreserve.gov.

With the start of  2010 , what will you be looking forward to in the New Year? Buying your first home in the Reno/ Sparks area? Sending your last kid off to college? Or obsessing over your own personal mountain of debt, even more worrisome in this uncertain economy? It may feel like “Resolution Impossible,” but if you follow Eric Tyson’s advice, you’ll remember ‘10 as the year you finally took control of your financial future.

“While the situation is improving, Americans carry too much consumer debt,” says Tyson, author of Personal Finance for Dummies, 6th Edition.. “If you have credit card debt or auto loans, take some solace in the fact that you’re far from alone and that many others have overcome these hurdles. Consumer debt is not okay, particularly in a slow economy such as this one. It can damage your personal relationships and mental well-being, not to mention the stability of your financial future.”

Here are a few tips from Tyson that will help you improve your financial health in 2010:

Partake in a little self-reflection. A misaligned mindset toward spending and shopping—compulsive or otherwise—can severely affect your financial and personal well-being. If you think you might have a problem with shopping or spending, there are several questions you should ask yourself:

-Do I feel guilty about shopping?
-Is my shopping causing financial trouble?
-Is my shopping, spending, and accumulated debt leading to feelings of helplessness, anger, confusion, fear, or depression?

Make a plan and stick to it. The reason so many New Year’s resolutions fail is that we simply state the thing we want to improve and then never create a plan for helping us get from point A to point B. Most people don’t like to plan unless we’re talking about something fun, like a vacation. But actually, planning for your financial future is a little like planning a vacation. You’re organizing your money and time so that you get to do all the great things you want when you get there. Look at it that way, and you might actually enjoy the process.

Get rid of your four-wheeled debt. Too many people define necessities by what those around them have. A brand new car is not a necessity, although some people try to make it one by saying, “I need a way to get to work.” Guess what? There are plenty of far less expensive used cars out there that will also make it to your office. If you take out an auto loan to buy a car that you really can’t afford and you take a similar approach with other consumer items you don’t truly need, you’re going to have great difficulty saving money and accomplishing your goals. Moreover, you’ll probably feel stressed all the time—which is a poor trade-off for the (short-lived) “new car smell.”

Start making your purchases based on need, not emotion. It can be easy to give in to all of those advertisements telling us how much we “need” that new car, expensive gym membership, or trendy outfit. Marketers play on insecurities, fears, and guilt and suggest that you can feel better about yourself by buying their products. You won’t be able to overcome spending and consumer debt until you recognize these pressures and how they corrupt your buying decisions.

Research before you enter the store. Prior to going shopping for necessities that aren’t everyday purchases—say, a new refrigerator—do some research first. Your research will help you identify brands, models, and so on that are good values. You don’t want to make an expensive mistake.

Watch your food budget. Dine out less and keep stock of the groceries you already have. Learn to cook if you don’t know how. Try to keep a healthy inventory of groceries at home. This will minimize trips to the store and the need to impulsively dine out because your cupboard is bare. Try to do most of your shopping through discount warehouse-type stores, which offer low prices for buying in bulk, or grocery stores that offer bulk purchases. Saving on the amount you spend on food will help you put more money toward paying off your debt and eventually setting money aside for investments.

Become more energy efficient. Check out opportunities to make your home more energy efficient. Adding insulation and weather-stripping, installing water-saving devices, and reducing use of electrical appliances can pay for themselves in short order. Many utility companies will even do a free energy review or audit of your home and suggest money-saving ideas.

Watch what you are paying for insurance. Many people overspend on insurance by carrying coverage that’s unnecessary or that covers small potential losses. Coverage of small losses, such as $100 or $200, is not useful for most people since such a loss wouldn’t be a financial catastrophe.

“It won’t be easy getting out of debt, and it’s certainly not something you will be able to achieve overnight,” says Tyson. “Like losing weight, it’s something that takes constant dedication but has a great payoff in the end. Whenever you lose focus or feel like giving in, think about the wonderful benefits of financial well-being. Once you’re out of debt, the money you are able to invest will mushroom into substantial savings that will allow you to get more for your money,” concludes Tyson.

About the Author
Eric Tyson is one of the nation’s best-selling personal finance book authors and has penned five national bestsellers. His work has been featured and quoted in hundreds of local and national publications and media outlets. He was also a featured speaker at a White House conference on retirement planning. A dynamic and provocative speaker, he has spoken at many corporations and nonprofits.

For more information, visit www.erictyson.com.

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• Primary school children to be given compulsory lessons on avoiding debt (telegraph.co.uk)

These days one of the biggest impediments to closing a Reno/Sparks real estate sale can be the buyer’s ability to get a mortgage.

Here are some tips for anyone who hopes to land a loan:

• Turn to the government. The biggest source of loans these days is the Federal Housing Administration (FHA) and the Veterans Administration (VA). These programs accept borrowers with lower credit scores and allow them to put down as little as 3.5 percent of the purchase price.

• Document, document, document. Borrowers will need bank statements, brokerage statements, W-2 forms and tax returns.

• Boost credit scores. Borrowers should avoid having more than one-third of their maximum borrowing capacity outstanding on one credit card. If necessary, rotate the debt among several cards.

• Work your connections. Comparison shopping is easy online, but if your customer has an established relationship with a local bank, suggest they try that lender first.

Source: BusinessWeek.com, Christopher Palmeri (01/23/09)

Being a Reno/Sparks real estate consultant I always appreciate any question or comments on the Reno/Sparks real estate or any of the articles I post.

Send all questions to chance@ballard-company.com

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• What is a “streamline” mortgage? (zillow.com)

Being a Reno/Sparks real estate consultant I always appreciate any question or comments on the Reno/Sparks real estate or any of the articles I post.

Send all questions to chance@ballard-company.com

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• Younger people have trouble getting credit (money.cnn.com)