Taking a Swipe at Credit Cards

By Jorden Meltz

Feeling the heat from both consumers and potential new regulations, credit card companies have begun to make changes in their policies and transaction fees. Legislation will soon be drafted on creating a Consumer Financial Protection Agency which will have the ability to set rules governing credit cards, mortgages, and other financial products. In accordance with this and President Obama’s recent action towards regulating financial services, banks and credit issuers have had two very different reactions. The first set of reactions, whether they are a good gesture by the banks or just the banks trying to implement new regulations before they are forced too, are those that are consumer friendly. The second set is the attempt by banks and credit companies to try and either get as much money as they can before new legislation is passed or the recession forcing them to take drastic measures. Some of these not so consumer friendly actions taken by banks and credit card companies have included interest rate increases without cause, card cancellations, increasing minimum payments, and increases in fees. On the opposite side, some banks have begun to offer checking accounts that aim to limit overdraft fees and issue credit cards that allow consumers to pay off certain monthly expenses without incurring finance charges. The next few months will be very interesting for both banks and credit card companies as some will continue to find ways to squeeze as much money out of consumers as possible before they must abide by new regulations and others will start on a path towards more consumer conscience business principles. In an industry based on interest charges and fees, it seems banks and credit card companies might be the ones finally paying late fees, as it seems long overdue regulations are finally beginning to be put in place.

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The Leaner Baby Boomer Economy

The downturn is putting a crimp on baby boomers' free-spending ways, and the likes of Mercedes and Starwood Hotels are scrambling to keep up
by David Welch

Mercedes is the quintessential boomer brand. Drive down an American highway, and odds are good that the person piloting the Benz in the next lane was born between 1946 and 1962. And Mercedes-Benz (DAI) has prospered right along with America's huge postwar generation. Back in 1986, when the first baby boomers turned 40, Mercedes sold 99,000 cars in the U.S. In 2006, when those boomers hit 60, the automaker moved almost 250,000 vehicles, a fifth of its global total.

This year, Mercedes will sell a third fewer cars in America. In Montvale, N.J., Kristi Steinberg, who runs Benz's North American market research operation, has a nagging fear: that sales won't recover for a long time because boomers, history's wealthiest generation, are tapped out. "I don't know if anyone knows yet if this is a blip," she says, "or a defining moment like the Great Depression."

Executives such as Steinberg always knew boomers would curb their free-spending ways as they approached retirement. But not in their most nightmarish imaginings could they have predicted that an economic maelstrom would cripple the customers they have courted and counted on for 30 years.

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posted by Leah Gorham

Credit Scores at Risk

Posted by Jorden Meltz

"This is blindsiding people," said Evan Hendricks, author of Credit Scores & Credit Reports (Atlas Books). "For a significant portion of people having their credit scores go down, it had nothing to do with what they did. This is the system making credit scores go down. This is a new thing in history."

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.

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.

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HSBC to sell Polish consumer finance oprerations

Posted by Nick Porcell

HSBC Holdings /quotes/comstock/13*!hbc/quotes/nls/hbc (HBC 57.56, +1.12, +1.98%) /quotes/comstock/23s!a:hsba (UK:HSBA 723.30, 0.00, 0.00%) said it's going to sell its Polish HSBC Credit branded consumer finance portfolio, and its credit card portfolio, to Alior Bank SA for a premium to the book value of the receivables at the date of completion. The gross asset value of the two portfolios was PLN1 billion (US$350 million) at the end of July. Following the sale of its non-core consumer finance portfolio, HSBC Bank Polska will focus on growing its personal banking services aimed primarily at Premier and middle class segments. The bank will also continue to strengthen its global banking and markets and commercial banking businesses.


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CFPA: Evening Out the Financial Playing Field

By: Robert Katz

With the current recession coming to an end as we look to the future we must learn from what has happened. President Obama has taken it upon himself the thus make sure this never happens again. His proposal for a Consumer Financial Protection Agency is aimed at preventing all the risky lending and borrowing that got us into this mess in the first place through regulation of banks, credit card companies, and other financial institutions.

Giving an agency authority like this is a new and revolutionary idea, and is directly aimed at protecting the consumers. All the democrats in congress are trying their hardest to get this proposal passed, but the banks and credit card companies are gathering their forces to fight back. The CFPA as proposed would have regulatory authority over any and all services or product offerings by financial institutions, with most types of insurance as the only exception. In affect allowing it to create rules and regulation over real estate, mortgages, credit cards, debit cards, consumer loans, financial advisory services, prepaid cards, etc. To say the least, financial institutions aren't happy about this for it will result in a massive loss in revenue for them, losing the ability to screw over their customers, of billions a year.

I for one am all for this agency and feel this is one very large step Obama is making towards the big change he promised us in the beginning of his administration. Just think, with billions of dollars put back into the pockets of the consumers this could possibly bring back the middle class and give our economy the push it needs to be on the rise again.

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Credit or Debit: The new rules of "charging it"

Posted by: Zach Lungo

It's no question that banks and other financial institutions have had a tough time making it through this economic recession. From large corporate closures and takeovers like Wachovia and Lehman brothers to vast changes like Goldman Sachs' reclassification as a bank, it is obvious every line of revenue counts. However, banks are now beginning to phase out overdraft fees and other policies.

This new change in policy could stand to be an enormous loss of profit for banks that have been struggling to stay viable and profitable. In 2007 banks earned $29 billion in overdraft fees. However, only 5 percent of customers accounted for over 68 percent of revenue from overdraft fees. Meanwhile 74 percent of customers didn't incur any overdraft fees. Traditionally, overdrawing an amount of only $6 using a Bank of America card could incur a fee of up to $35 that could potentially be applied multiple times a day. Customers who have debit cards would automatically be signed into an overdraft program that allowed them to overdraw their account and be forced to pay the overages and a penalty. The new changes will allow customers the choice of opting out of the overdraft program which would cut out a large portion of bank profits should the customer choose not to use the program.

What customers should begin to look out for are ways banks are going to begin to try to make up this lost revenue now that they will have the choice of using the overdraft program. Some of the places they may start to charge more could be in the form of online banking access, free checking accounts bundled with other services, or allowing an extended "grace" period where funds can be replenished to cover earlier purchases. JP Morgan Chase says they won't apply fees to accounts overdrawn by $5 or less. Not exactly a bargain. Ultimately, eliminating these fees can reduce the daily stress of potential overdraw situations. However, customers may begin to start being charged for services they once got for free.

Original article: http://www.google.com/hostednews/ap/article/ALeqM5gxnKdk6KNylBR8LP_pejAi9T-e1QD9AT9N981

My Argument for High-Yield Bonds

By Matthew Maillet

Economic rallies in the past have brought impressive returns for investors in the high-yield bond market. Notably 2005 through 2007 brought greater returns in high-yielding bonds more so than that of the intermediate-yield bond market. High-yielding bonds are also referred to as junk bonds, because these types of funds invest their holdings in below investment-grade bonds. Below investment-grade bonds receive this rating due to their potential risk for the company defaulting on its duties to pay bondholders principal and interest payments. With this assumed risk however, junk bonds that do not default (which is usually the case) return a much greater payout than investment-grade market bonds during times of economic rally. Consequently, junk bonds are also hit much harder during times of economic downturn. While no investor should let high-yielding funds dominate his or her portfolio, it may be profitable to designate a minor portion of one’s portfolio to junk bonds during this current economic climate of potential long-term uptrend.

Before entering the junk bond market however, it is important to learn about specific funds that meet your needs. The Merrill Lynch High-Yield 100 is a prominent index of the 100 largest high-yielding bonds on the market. This index recently showed impressive gains compared to other bond markets: “over 8%, about three and a half percentage points more than investment-grade intermediate-term corporate bonds and four and a half percentage points more than 10-year Treasuries” (Updegrave). These types of promising returns show great potential in this current economic climate. Great promise also means substantial risk for the investor.

The debt issued by the company offering these junk bonds does not receive investment-grade ratings due to their higher chances of default down the road. While most of these companies will not default on their payments, the higher chances of them doing so greatly affects the market value of their issued bonds.

If an investor does turn to the junk bond market, it’s important to take a detailed look at the specific holdings of a given fund. There are a number of resources available online such as Morningstar.com that shows the holdings of a fund. It is much safer to chose a fund that avoids the “junk of the junk,” meaning that most of their bond holdings are rated B or above. This can lead to more security for the investor down the road. Thus, investors with a medium-to-high appetite for risk , should consider entering the high-yielding bond market for greater returns.

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Chase to help Cardholders tackle Debt

Posted by Chris O'Sullivan

More than twenty million Chase Credit cards have been updated with Blueprint, a set of tools to help cardholders control spending and reduce debt. The new program is in reaction to decreased consumer spending on credit cards as they try to lower debts.

Instead of putting away credit cards, Blueprint allows customers to choose which purchases they want to pay off in full, avoiding interest, and which charges they want to pay off over time on a revolving balance, like a traditional credit card.

The expenses that the cardholder chooses to pay off in full each month, such as grocery store purchases, or gasoline, are separated on the statement so that consumers can see how much they need to pay on those purchases plus payments on the revolving balance purchases.

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Lessons of a Bull Market That Never Happened

By BRETT ARENDS

Posted By: Robert Katz

Much of the financial news this month has revolved around the one-year anniversary of the Panic of 2008 -- the collapse of Lehman Brothers, the takeover of Merrill Lynch, the government's bailout of Wall Street.

But there's another anniversary for investors. It is 10 years this weekend since the publication of "Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market," a popular seller that became the poster child of 1990s stock-market hubris.

Authors James K. Glassman and Kevin A. Hassett weren't quite the Dan Browns of their day, but in their book they nonetheless claimed to have discovered a virtual secret code buried within the stock market.

In a nutshell, they argued that, even in that period of wildly "irrational exuberance," shares were massively undervalued. Their reading of history revealed that shares were far less risky over time than was widely assumed. As a result, they concluded that the Dow Jones Industrial Average, which at the time stood at 10300 or so, was really worth more than three times as much.

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America vs. Credit Card Rates



By Andrew Lipsitz

Recent reports by a coalition of retailers have found that Americans pay about 2% of their money in transaction fees when using their credit cards. Although the fee is actually paid by retailers, consumers feel it the hardest when paying retail prices. Compared with rates across seas, this rate is twice that of the British rate and six time that of the European Union cross-boarder rate.

"If we paid the same low credit- and debit-card swipe fees as consumers in Australia pay, then the net benefit for American consumers would have totaled $125 billion over the last four years," the report says.

Businesses across the nation are feeling the backlash as the report also suggests that these fees are now the single most non-labor operating cost. On the consumer side of the spectrum, some consumers have had enough with the jagged spike in credit card interest rates.

California native, Anne Minch, single handedly launched what is now known as a “debtors’ revolt” on youtube.com, claiming that she would refuse to pay her balance because of an unfair credit card interest rate hike from the Bank of America. The result of her video, in which she refers to Bank of America executives as "evil, thieving bastards,” was that she had been contacted by an official at Bank of America, talked about her finances and how she believes they can abuse their power, and the two finally came to a fair agreement based on her financial status.

Bank of America has recently announced, as the result of a law restricting their ability to raise rates and fees, that starting in October, consumers will be able to apply for its new Basic Visa card. The new card will offer one rate for all transactions and offer consumers an easy to manage, easy to understand credit card.



Sources:

http://www.time.com/time/business/article/0,8599,1924409,00.html

http://www.huffingtonpost.com/2009/09/21/ann-minch-triumphs-in-cre_n_293423.html

http://www.washingtonpost.com/wp-dyn/content/article/2009/09/17/AR2009091704484.html?hpid=sec-business

Ignore Stock Price, Focus on Value

Posted by: Matthew Maillet
Article by: Pat Dorsey

It's all too easy to think that a stock that has risen sharply is no longer a bargain -- or conversely that shares that have been cut in half must be a good deal. If only investing were that simple.

I learned this the hard way a few years ago. In the summer of 2006 I bought some MasterCard stock after the credit card company went public. In the first few months the shares moved up steadily, but then they rocketed from $70 to $90 in just a week's time. Since I was on an overseas business trip with little time for research, I reflexively sold a chunk of my holdings.

Dumb move. As it turned out, the company's profit margins were growing faster than I had anticipated -- boosting MasterCard's value -- and the shares topped out at $320 a couple of years later. If I had paid more attention to the value of the business, rather than the price of the stock, I might have held on.

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Jobs...Learn to Live With Them or Without Them?

By: Robert Katz

In today's economy loosing your job, getting paid less for your job, or starting your own business are some of the scariest things to think about. Because all we are all trying to do is keep our jobs. But why should we have to be? The best way to stay ahead of any of these fears is to stay proactive.
Most likely scenarios today for loosing your job are: you screwing up, don't get a promotion you wanted, or your companies cutting back. If you stay proactive and don't just say there's nothing you can do, any bad situation just creates other opportunities. If you screw up, yeah you shouldn't have in the first place, but this is the time to confess right away and fix the problem before anyone even knew there was one. Now because of the extra effort you put in the company and/or customer will recognize and remember you. Say you ask your boss for that promotion you've been waiting for or a raise you feel you deserve and you get shut down. Don't get angry and quit or mope around the office feeling sorry for yourself stay proactive and ask why you didn't get what you want. There's no shame in not getting what you want; there's only shame in not getting what you deserve, because you've earned it. Ask your mentor or someone you trust around what salary they think someone at your position should be making. Or ask your boss what it is you need to do to earn the raise and/or promotion, and develop a plan to get that done. Now many companies are cutting back because of the economic climate, but if you one of the ones still around don't just expect that you are going to be next, step up! Go above and beyond what you need to do and start learning what others are doing. You might find something you like better or are better at in the process. Yet, if all else fails starting your own business shouldn't be scary if you plan right.
The main things you have to keep in mind is that there is no security in going solo, so start with a years salary saved up and maybe try to teach some classes on the side while you start up. Always look for ways to build your social network and subtly advertise your business or services. Most of all trust your self and your clients, but know that at least one out of 30 will not want to pay. Starting your own business isn't a walk in the park, but if you keep a lot of these things in mind and not put all your eggs in one basket its always a viable option.

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What are my obligations if I co-sign a loan for another person?

Posted By: Robert Katz
By: LawInfo
Published: 01/2009
What should you do if your twenty-something son asks you to co-sign his car loan? While you love your son, you’re not sure if he will be able to make the loan payments. What happens if you co-sign the loan, but your son doesn’t make the payments? Will you have to make the payments for your son?

These all too common questions that parents and grandparents face when their sons, granddaughters, and/or random relatives who are down on their luck come to them to co-sign loans, whether it be for a car, an engagement ring, or just some quick cash. Before you agree to co-sign another person’s loan, however, you need to be aware of your rights and responsibilities for that loan.

The bottom line is that if your son doesn’t make the loan payments as agreed, then you are responsible for making the payments due on the loan. Can you really afford to make an extra $250.00 car payment each month? If not, then you might think twice before co-signing that car loan.

Does it matter that you weren’t the one who needed the loan, or that you’re not the one driving the car? The short answer is no. You are liable for the loan. In some states, the bank or lender can come after you for the loan payments even without first going after the primary person on the loan. The bank can refer you to a collection agency, report you to the credit bureau, sue you, and have your wages garnished, just as if you had originally taken out the loan yourself. Plus, if you pledge your property, such as real estate, a car, or furniture in order to secure the loan, you could lose that property if the loan payments are not made as ordered.

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Credit Scores: What You Need to Know Now

Posted by Andrew Lipsitz
Written by KAREN BLUMENTHAL

Are you keeping score?

Credit scores have been getting a lot of attention lately, as lenders tighten credit standards and contend with new legislation that has, among other things, reined in how credit-card issuers can raise rates.

Meanwhile, several firms, preying on our insecurities, are pushing credit scores and credit-score-tracking services for a monthly fee.

For all the attention they generate, though, credit scores are largely misunderstood. For instance, your precise score matters only when you're in need of new debt, like a home, auto or education loan or a new credit card, which should be a fairly rare occurrence.

You don't have just one score, but many. Your FICO score, the one developed by Fair Isaac Corp. that runs from a low of 300 to a high of 850, will vary depending on which credit bureau is reporting it and the kind of lender that requested it.
So the score that costs you $15.95 at MyFico.com may not be the score your lender sees. Beyond that, the three credit bureaus— Equifax, Experian and TransUnion— sell their own proprietary scores.

Confused about what to believe? Here are some common myths about credit scores:


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The Skinny on Debit Card Rewards

By Matthew Maillet

By 2015, debit card transactions will account for nearly 60% of purchases. And, just like credit card reward programs were so popular, by the end of this year, more than half of debt card issuers will have a rewards program.

These programs are similar to what you'd get with a credit card: cash back rewards, frequent flyer miles, earning points with a specific merchant. But there's one BIG difference between credit card reward programs and debit card reward programs. Namely -- debit card reward programs are greatly watered down.

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The Power of Credit Karma

By Matthew Maillet

Staying on top of your personal credit score rating is an integral part of consumer finance. With that said, many “free” online credit checks include fine print details that limit user accessibility. One online tool that has been gaining attention recently is creditkarma.com. Credit Karma is a pro-consumer resource that gives registered users access to unlimited credit checks. Registering on the site only takes a few minutes, and once you have proven your identity you are granted access to constant credit checks as well as various tools that help consumers improve their score.
As of February 2009, Credit Karma had already provided 250,000 registered users with over 850,000 free credit checks. Aside from unrestricted access to constant credit checks, the website also partners up with a number of credit card companies, mortgage lenders, and banks to provide users with a number of excellent tools for building positive credit. Credit Karma is the perfect resource for college students on a tight budget whom would like to stay informed about their credit scores. “The first step to improving your credit is -- knowing where you stand” (Haley). With that said, there is no reason not to register on CreditKarma.com

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The Future of Personal Finance?

We all wish we were better at our personal finances, but it's just too confusing — and boring! Secretly, we wish someone else would do it for us. This is the key factor behind the success of Mint.com, a website that was started three years ago by then 25-year-old CEO Aaron Patzer in his Silicon Valley apartment. Now it has been sold to Intuit for a stunning $170 million.

Mint, which was launched two years to the day before the announcement of its sale, works like a personal financial manager. You sign up and give it the online passwords to all your bank accounts, credit cards, retirement accounts, mother's maiden name, everything. It requires that you show the Full Monty. In return, Mint shows you, with minimal effort on your part, a complete picture of where the heck all your money is going. Many potential investors in Patzer's idea thought people would simply never be bold enough to hand over all that information — Patzer himself admits to some early doubts. Turns out they underestimated how lazy or desperate we all are. In its first month, Mint signed up 50,000 users. At sale time, it had 1.5 million.

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Posted by Chris O'Sullivan

Financial Scams and Traps to Look Out For

By: Robert Katz

Today’s current economic recession is due to the fact that across the US there are more and more people buying too much, loosing there jobs, and then going into debt. With so many people in financial crisis there are many banks, credit companies, and organizations out there that say they want to help with your problem, but people don’t realize they are actually scams and traps.

The FTC, Federal Trade Commission, stated Advance-Fee Loan Scams, Credit Repair Scams, and Scholarship and Educational Finance Schemes and three most common being dealt with now. Yet they are easy to sniff out. Advance-Fee Loan Scams with promise you a loan for just a small upfront fee of $25 and then send you to talk to someone else or just never call back. I like to say when something does look to good to be true it usually is. An offer to pay some small upfront fee to get a huge loan, when no other bank will even talk to you, is one of those times. Credit Repair Scams are the most popular and there are a bunch of different kinds.

Some of the types of credit repair scams are: The Scam of Credit Counseling, Debt Relief Negotiation Firms, Debt Management Scams, Consolidation Scams, and Build Financial Trust. Credit counselors are meant to help clarify your financial situation and give you strategies to help manage it better. Upfront fees for such a service over $50 or requests for your financial information before being told what the service you are even being provided are two ways to sniff out this scam. Each of these other scams can be uncloaked in the same way. Upfront fees or interest charges and promises to fix all of your financial problems are the biggest signs that this company doesn’t really want to help you, but profit off your situation. Yet, the legal solutions banks offer with their “debt cards” might be just as bad, if not worse, than these scams.

Banks bring in over $7.8 billion is overdraft fees every year. You know those little fees they don’t tell you about that they hide in the fine print that turn your $2 stick of gum into a $35 gourmet meal. These banks need to stop acting like vultures and just deny these transactions in the first place. This is one of the reasons why the economy is in this poor situation because banks are in effect creating billions of dollars of consumer debt that we shouldn’t have to be paying. Illegal or legal these practices are despicable, so I’ll leave it up to you to decide which is worse. The important thing really is to just know how to prevent these vultures from duping you.

Sources:

http://personal-debt-management.suite101.com/article.cfm/how_to_avoid_debt_relief_scams

http://roomfordebate.blogs.nytimes.com/2009/09/08/the-debit-card-trap-or-sound-choice/?scp=2&sq=consumer%20financial%20scams&st=cse

http://www.ftc.gov/reports/Fraud/finance.shtm

CFPA: Hero or Menace?

By Andrew Lipsitz

The Consumer Financial Protection Agency (CFPA) is a 150 page proposal written by the Obama administration and was created to regulate basic consumer finance and put an end to this so called "culture of irresponsibility."

The agency would set up new standards for standard mortgages and mortgage loans, restrict to its best power any risky loans, investigate financial institutions and impose a few new laws that are aimed to protect credit card users. Basically, the agency would mandate that all financial institutions must offer plain “cookie-cutter” financial products to their clients, which would require these institutions to pay costly regulation fees. While some argue that this is the best approach to help reshape and sustain the economy, others believe that in a country with so many different situations and needs, a “one-size-fit-all” approach is foolish.

Many banks have responded extremely negatively towards the proposal for an agency, including industry leaders such as JP Morgan Chase and Wells Fargo. The opposition does not end there as thousands of small banks, mortgage lenders and independent mortgage brokers press their lobbyists to go to battle.

“Administration officials said the proposal would create a ‘level playing field’ and provide the same regulation for particular consumer products regardless of what kind of financial institution was selling them.” Industry leaders fear that this regulation would create a lack of competitiveness as well as innovation for financial products.

http://www.nytimes.com/2009/07/01/business/economy/01regulate.html

http://www.huffingtonpost.com/tom-donohue/consumer-protection-shoul_b_279273.html

http://www.politico.com/news/stories/0609/23790.html

Is home-loan modification the right step?

Posted by Andrew Lipsitz

Q I am a business owner, and due to economic downturn our business receipts are down by almost 40 percent. I've been using my credit card to help keep the business afloat, and my credit-card debt has gone very high.I am starting to have difficulty paying my home mortgage each month. I have contacted consumer credit-counseling services, and they are working on helping me with a credit-card-repayment plan. They also suggested I apply for a home-loan modification.Am I taking the right steps, or are there some other alternatives I should consider? Also, how will my credit rating be affected by these moves?A If you have maxed out your credit cards and are having trouble making your mortgage payments, you need help in figuring out how to get these amounts in line with your income.As difficult as it might be, a properly designed and administered debt-management plan is a good way to go. If you need a debt-management plan, your credit history and credit score have likely already suffered either because your debt-to-credit limits are out of whack or because you have started to pay some of your bills late.Joining a debt-management plan shouldn't affect your credit negatively, and as you start making your payments on time and in full through the plan, your credit history and credit score should improve, as you feel more in control of your debt.

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