Credit Card Companies On The Run…Finally!

April 30, 2009
Economic News and Information for Consumers 

The credit card industry has finally been slapped with much deserved and long overdue regulations.  However, most of these new regulations will not go into effect until July of 2010.

The one regulation that will go into effect soon is the notice to increase interest rates or other terms of your card agreement.  We’ll see this begin in a quick 90 days.

Why all the sudden legislation against credit card companies?  Consumers have been complaining, loudly!  Most will agree that credit card companies at least border on predatory.  They show up at college campuses looking for younger adults with fresh credit and easy sign-ups for their cards.  Recently they even tried to show up at high schools but that was quickly knocked down.

Complaints have been furious in recent months as battered banks took steps to recover their losses at the expense of their good-paying customers.  If you have any credit cards at all it’s more likely than not that your interest rate has been increased, your credit line reduced or your card canceled altogether.

These tactics are frustrating enough but when you add in the fact that many people weren’t even given notice, it gets much worse.  Think about this.  If you have a $3,000 limit on your card and a balance of $1500, then the bank suddenly (without notice) cuts your line in half, you’re looking at zero credit availability and serious damage to your credit score (FICO).

Your FICO score is calculated in large part by your available credit.  The more available credit you have relative to balance, the better your score.  This can be up to 30% of your score so it’s significant.

The best advice today is to contact your credit card company and review the terms of your agreement.  It’s likely to have changed.

The average American household with a credit card has over $10,000 in debt, with interest rates over 20% on many cards, the balance will quickly grow.

If you are one of these families, know that you can have your debt consolidated.  This process can reduce interest rates, fees, and payments while protecting (or improving) your credit score.  To learn more fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Continued Unemployment 2009 > When will it end?

The economy is shedding roughly 600,000 jobs per month, forcing more and more to unemployment but the figure that’s even more important is the continued unemployment figure.  This figure shows those that are still unable to find jobs after a specified period of time continues to rise.  This means that businesses are holding off on hiring until they know for sure that the economy is turning around.

The good news is that the economy will indeed get better in spite of economic initiatives from either party. The market has a way of working itself out but it does take time.  People need to feel confident about spending money again, when that happens, things will begin to improve.

The bad news is that employment is typically the last aspect of all this to improve.  It’s the last to fall, last to rise theory that has been shown in a number of recessions, so if you’re looking for a job, it will take more time.

We have seen some signs of hiring but those positions are typically very niche and higher dollar.  Blue collar jobs for construction, car building etc. will continue to falter until the very end.

Some analysts believe that we’ll have improvement this year but others say we have quite a ways to go.  If we use the housing market as an indicator, we know we have at least 6 months to even make a dent in the inventory.  This is due to moratoriums that essentially dragged out foreclosures and evictions and put a lag on recovery.

Just last month these moratoriums finally expired.  This will cause inventory to rise significantly toward the end of the Summer, forcing downward pressure on prices.

If you’re unemployed now, take any job you can get.  The type of job is not nearly as important as the resulting cash flow.  When the economy improves you can always go back to your specialization.

Getting out of debt > Can’t make payments on credit card

Many people have recently lost their homes to foreclosure or are in the process.  A foreclosure is a serious mark on your credit but not one that will stick with you forever.

The scoring for FICO scores changed recently so more weight is given to current events.  Over time your credit score will improve greatly so long as you continue to make on-time payments for other debts.  Your foreclosure will become less of a factor as you move forward and manage your debt properly.

The FHA will provide a loan if you’re 3 years removed from foreclosure or bankruptcy so there are options.

There will also be an opportunity to obtain seller financing.  Seller financing essentially means that the seller owns the house outright and would like to finance the sale as opposed to using a bank.  Your payments would be made directly to the seller.  The seller obviously retains the right to foreclose if you default on the loan just like a bank would do.

Credit cards have become an enormous credit problem not only for consumers but also for banks. Consumers have become increasingly dependent on credit as job losses and expenses increase.  This dependency has forced balances higher while at the same time banks are reducing lines, and increasing interest rates.

The reduction of a credit line while you’re carrying a balance will likely damage your credit.  If you have a credit card it’s more likely than not that your terms have been affected over the last year or will be shortly. Call your bank to be sure.

If you’re carrying credit card debt greater than $10,000 and can’t pay it off fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Loan Modifications > Banks get Fed payoff

Loan modifications have been in the news for months.  The mere mention of the term leads people to believe that there is a path to modifying their home loan that will allow them to stay but in past months, this has not been the case.

In fact, most banks took federal money and held onto it when they were supposed to loan the money out to consumers, homebuyers and those wanting to refinance or have their loan modified.  Essentially banks protected their balance sheets and left the American public hanging.

The administration has had a difficult time with banks because they are a private industry (except for those that accepted government bailout money).  They can’t simply tell banks to modify loans or to provide new loans to home buyers but they can create incentives and that’s just what they did.

A new mortgage saving program was mentioned today.  This program is providing a payoff to banks that modify loans.  Details are forthcoming on this new program but basically a bank that modifies a loan under certain conditions will receive several thousand dollars from the Fed to do so.

Now that banks are motivated to do loan modifications, they might just do it but it’s dependent on whether or not the payoff is worth it.  It may not be large enough for banks to make that jump particularly given the fact that most people re-default on their loans even after a loan modification.

On the positive side, interest rates are extremely low and money is slowly becoming more available.  

If you’re interested in having your home loan modified and need assistance, fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Can’t pay your credit card? The next big crisis…

One problem with America has been the accumulation of debt instead of wealth.  During the industrial revolution it was all about growth, saving and marking smart decisions for American families but that slowly changed as we became more of a debt-based society.

There are some good debts, like home mortgages but others can be very problematic.  In the distant past people would buy their cars with cash.  They figured if you don’t have the money right now for the car, you don’t have it at all.  This changed with creative and cheap financing offered by every major auto maker and banks all over the country.

We’ve all seen the fact that basically anyone could get into a car, even one that is extremely expensive.  We cared less about getting from A to B and more about how we looked getting there. Rising repossessions are a sure sign that financing didn’t work in the end.

But autos are not the next big thing to fall, it’s actually credit cards, which are completely unsecured.  Just like autos, anyone could get a credit card and lots of them.  The goal for banks is to get consumers stuck with a balance so they can charge high interest rates, additional fees and all while also charging fees to the merchant.  It’s an incredibly lucrative business for banks with little risk.

Even as consumers defaulted on their cards, banks still did well by raising interest rates in their good customers.  They also cut credit lines or canceled cards altogether.  It’s more likely than not that one of these scenarios has played out with your card.  If you think it hasn’t, call your card company and make sure.

Some analysts believe the next big crisis will be the continued defaults on these cards, possibly larger than the housing debacle.  But the reality is that card companies have insulated themselves well by charging extra fees and interest to their good customers.  The chances of banks hurting from card defaults is not nearly as high as those at risk from bad home loans.

If you’re stuck with a high balance credit card that you can’t pay off, get the debt consolidated before it destroys your credit.  Debt consolidation will reduce your payments, eliminate fees, protect your credit, stop collection calls and create a path to being debt-free within 18-36 months.  

For more information on debt consolidation, fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

How do I stop collection calls? Bankruptcy and options

Most of us have received a collection call or notice at some time or another in our lives.  Even if you’re the most on-time payer in the world, creditors still make mistakes on accounts and even call the wrong people on occasion. 

The calls and letters are frustrating and intimidating as they are intended.  The obvious goal is to get you to pay the debt.  Remember that the person calling you only gets paid if you pay the debt.  You are one of hundreds of calls they will make in a day so try not to take it too personally.

But collection agencies do need to follow rules when they contact you.  Many don’t, so it’s best to be informed of your rights.  When you’re in-the-know, you can inform collection agencies that they’ve violated the law and you can take action.  Be sure to document what’s happening and keep good records.

To better understand your rights, read the Fair Debt Collection Practices Act.

After you know your rights remember that the creditor has rights too.  If you do indeed owe the debt, it will need to be dealt with, preferably sooner than later.

Ignoring creditor calls and notices is a bad idea because they will not go away.  If calls suddenly stop, it probably means your account has been turned over to an attorney to file suit.  This is inescapable because the creditor can obtain a judgment, which can be turned into a lien on your home or a garnishment of your wages.

But you do have options.

Bankruptcy can be kind of a nasty word but really it’s just a financial tool designed to give people a second chance.  Bankruptcy does cure collection calls (by law) but it will leave certain debts like student loans, child support and spousal support.  

Bankruptcy can be expensive when done properly.  Plan on paying an attorney $1500-$2500 depending on your area.

Debt consolidation is another option that won’t damage your credit like a bankruptcy filing will (for up to 10 years).  Debts are effectively reduced either in overall balance or by reducing the interest rate.  The typical debt can be down to zero within 18-36 months while potentially improving your credit.

If you have unsecured debt greater than $10,000 and would like to learn more about consolidating your debt, fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Should I Keep My Credit Cards? Credit line cut in half…

Dr. Debt from Fox News answers some great economic questions in the video below.

Of note were two questions regarding keeping old credit cards that aren’t really used and what to do when a credit line is cut in half.

If you have old credit cards that you no longer use, it could be a decent idea to cancel them but that comes with some conditions.  You should not cancel all of your cards, but rather, keep the ones you’ve had the longest with the best payment history.  You want future creditors to see you in a positive light when it comes to your pay habits.  Furthermore, your credit score (FICO) is calculated in part by the amount of available credit you have so it’s better to retain a decent line.

This creates a nice segue to our next topic of what to do when your bank halves your credit line.  Know that this is happening to many people, even those with stellar credit.  It’s more a function of banks pulling in credit to protect their own balance sheets from further damage.

When a bank cuts your credit line a few things can happen.  Your credit score can be reduced significantly because your available credit has dropped.  You can be hit with fees you had not planned on because you suddenly charge over your limit.  You also lose valuable access to credit, which many people are using for necessities.

Remember that when you’re dealing with banks, you can negotiate.  If your lines have been cut or rates have increased, call them and ask that the changes be reversed.  The bank reps do have some room to make these changes.

 

Where NOT to make cuts in the family budget!

The recession has been tough on everyone.  Most of us have made cuts of one kind or another, whether it be fewer lattes and trips to the favorite restaurant or more substantial cuts like a second vehicle.  Some cuts are certainly prudent but others can place you and your family at risk.

Auto insurance is one of those things you probably hate to pay each month but it’s an absolute necessity. It might seem ok to let it lapse for a month or two but consider the damage this can create.  Almost any size accident will result in repair cost that would be difficult to cough up for many.  Keep the auto insurance and request a deductible you can afford.  Remember to check for the under-insured and uninsured parts of your policy as these can have a huge impact.

Too many Americans lack health insurance and for most it’s through no fault of their own.  The fact is that rising costs have priced people out completely.  Plus many companies have cut benefits significantly for employees.  BUT, if it’s possible to make cuts elsewhere, do it.  Health insurance is one of those things we’d never like to use but things happen to those of us who least expect it.  If a tragedy happens and you need health care, are you covered?  If not, can you come up with the tens of thousands it could cost for medical bills?

If you don’t have a policy, do some research.  The market is competitive so you should be able to find something that fits into your budget.

Remember when you make cuts to only pick the expenses that you absolutely don’t need, coffee is a good place to start!

 

Home Sales Still Falling > California’s Shadow Inventory

Existing home sales fell again by 3% in March, 2009.  Some analysts had predicted the housing market was beginning to bottom but this was based on false data.

It is indeed true that home sales had begun to increase as bank-owned homes flooded the market with great deals, with this came a perceived reduction in inventory.  But this inventory had effectively been manipulated with moratoriums that were in effect throughout the country.

Basically, any mortgage held by Fannie, Freddie and other banks under control of the Fed (due to bailout funding), was held up in the moratoriums for months.  It started over the holidays when a policy was put in place to stall foreclosures for the season.  The Fed simply didn’t want to be part of evicting families during the holidays, but the lasting effect has not been a good one.

What was created was a shadow inventory of homes just waiting to hit the market all at once.  This inventory is huge and should flood the already saturated market throughout the Summer placing downward pressure on prices.  Prices in many areas, particularly in California, have already been cut by 40% from their ridiculous highs in 2005-6.

What does all of this mean to you?  If you’ve been foreclosed on but not evicted, plan on being evicted soon with the moratoriums expiring.  If your foreclosure was held up, that will begin soon as well and our feeling is that banks will be expeditious in their efforts to recoup their losses through the sale of these assets.

If you’ve been looking for a home, you might consider waiting just a bit longer as inventory increases and prices drop.  There are numerous tax incentives, federal and state, when you buy a new home so make sure you do it before the end of the year!

Credit Cards, Can’t Pay-What do you do?

If you thought the mortgage disaster was bad, get ready for this one.  Though some analysts believe the upcoming credit card mess will be smaller, others believe it could be even bigger and there’s no avoiding it.

The housing mess threw credit markets into disarray and they’ve remained there for over a year.  The government bailouts, which provided billions to banks for liquidity, was supposed to be loaned to consumers but that never happened.  Instead banks held onto this new found money and became incredibly selective about where “their” money was going.

The result has been continued stifling of liquidity for consumers, particularly those holding credit cards.

Most of us have credit cards.  If you have a card, even if it’s paid off in-full, you’ve likely had changes to the terms.  These changes can include increased fees, higher interest rates, reduced limits and cards that are canceled altogether.

This may all seem illegal but it’s not, at least until July 2010 when new regulations take effect.  Until that time, plan on your credit card company taking advantage of you.

These new tactics have thrown many consumers into debt during a nasty recession.  Carrying a balance today is extremely difficult and bad for your credit too.  If you can pay off your card, great, go for it and keep doing it.  If you’re stuck with unsecured debt exceeding $10,000 you might consider consolidating the debt.

Debt consolidation will stop collections activities, while protecting your credit and creating a path to being debt-free within 18-36 months.  One alternative is bankruptcy, which could be the only option for some but it’s expensive, time consuming and doesn’t relieve you of responsibility of all debts.  Check with a bankruptcy attorney to be sure.

To learn more about debt consolidation, fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

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