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Credit Card Act Might Mean Higher Fees

The Credit Card Act of 2009—which takes full effect in February 2010—eliminates some of the unfair penalties credit card companies charge their customers. Say good-bye to the Universal Default Clause, a vicious device that permits a credit card company to raise a person’s interest rate for making a late payment to another creditor. And tighter restrictions will be placed on credit card companies’ methods for assessing finance charges.

While these changes might seem like a good thing, beware. The credit card companies are making up for lost profits by charging higher interest rates and fees, lowering limits, and increasing minimum payments.

 All these increased fees might make you want to cancel some of your credit cards. I caution against this for two reasons:

  1.  Canceling credit cards can lower your credit score by reducing the average age of your accounts. And if you cancel a card with a balance, you will have a high balance-to-limit ratio, which is bad news for your credit score.
  2. The tighter restrictions on creditors means credit cards will be harder to come by. What if you cancel your cards, only to find that you cannot get approved elsewhere?

Instead, pursue other options:

  1.  Call the credit card company and ask for a customer-retention specialist. Ask why you have been assigned higher fees/lower limits. Do not admit to anything that might make you appear to be a credit risk. Do let the representative know that you have been a loyal customer and that you object to the change in policy.
  2. If the representative does not reinstate your previous terms, consider “opting out.” The Credit Card Act of 2009 allows you to keep the old terms as long as you stop using the card and continue paying the balance. If the representative does not reinstate your previous terms, you could “opt out,” but consider this option seriously. The Credit Card Act of 2009 allows you to keep the old terms as long as you stop using the card and continue paying the balance. NOTE: This will result in either a closed or an inactive credit card account, both of which could hurt your credit score. Before choosing this option, read 7 Steps to a 720 Credit Score for a full explanation. 

 If you haven’t already shared your credit card “horror” stories, comment below, the more detailed the better.

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Beware of Interest-Induced Holiday Hangovers

Almost half of banks responding to a survey by the Federal Reserve said they were increasing interest rates.

Suffering not only from the recession, but also from the new restrictions mandated by Congress, banks are passing the buck—or rather, they are grabbing the bucks wherever they can find them by increasing interest rates to make ends meet.

With the holiday season fast approaching, this is bad news for consumers who turn to credit cards to finance their holiday shopping. To stave off compounding interest charges—and the holiday hangover that corresponds with mounting credit card bills, we suggest leaving the credit cards at home when headed to a mall. Instead, follow this plan:

  1. Make a budget for each person on your shopping list.
  2. Label envelopes with the names of each person for whom you are buying a present.
  3. Place the amount of cash appropriated for each person inside the respective envelope—no more and no less.

When purchasing a present, withdraw cash from the appropriate wallet. This method creates a psychological barrier to impulse shopping. If you are tempted to splurge on a gift—let’s say you are robbing from Peter’s envelope to buy a gift for Paul—you will be dissuaded when you realize you will need to withdraw money from another person’s wallet to cover the extra cost of the gift.

If you want a copy of my book, “Preventing the Credit Holiday Hangover,” submit a comment below with your best money saving technique.  I’ll email the book out to you immediately!

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Credit Card Companies – Can They Do That?

Have you had your credit card interest rates go up?

Have you been treated unfairly by your credit card companies or banks?

Are you willing to tell your story?  If so… you can help!

I’m heading back to Washington to lobby our elected leaders and I need as many stories as possible so we can make a difference.

Let’s face it…. The LAWS are not fair, and they need to be changed!

 Tell me your worst story about your bank or your credit card company.

1)   What happened?

2)   What did they tell you?

3)   Why wasn’t it fair?

The more detail the better!

Post your comments below!  Do it now!

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Bank of America’s “fair” Move

I guess it’s fair, after all, it’s their company… no wait, it’s us, the taxpayer who saved them. So after the bank accepted billions and billions of dollars in taxpayer stimulus, they have decided that credit card interest rates are too low, even though rates are much lower. That makes sense.

Not only are they cutting our credit limits (previous posts), which impact our credit score, but also are raising our rates, which is going to impact how much we can pay, which will also impact our credit score.

Bottom Line: If you get a notice of a your credit card raising its interest rate; call the bank and agree not to charge any more on the credit card, and they will keep your previous rate. Per my book, 7 Steps to a 720 Credit Score, make sure that your balance is under 30%, so your credit score won’t be negatively impacted.

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US Security Council and Our Credit Bureaus

The Los Angeles Times published an article today about the UN’s Security Council split response about North Korea testing the rocket. Big Surprise.

Since when do we expect the UN to actually give a firm demand? They are master hedgers. It reminds me of our credit bureaus. It reminds me of our banks. It reminds me of the credit card companies.

It’s very clear that North Korea acted unfairly by breaking the rules that they agreed to. Isn’t it equally unfair that our credit reporting system impacts 80% of Americans with errors and that those American lives are being impacted because of those errors?The UN will not take action, just like our government has not taken action. The only difference is that the credit reporting system can be fixed via education. North Korea… well, it’s a little more difficult to negotiate with tyranny.

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Business Credit and Personal Credit – You Can’t Get One without the Other

The Wall Street Journal published an article today about why banks started lending to small businesses even though “on paper” their financial statement didn’t look like they could pay back the loan. A 1995 study by Fair Isaac Corp. and Robert Morris Associates, found that a small business cash flow and financial statement had little correlation with how the owner would pay his bills. “A stronger prediction was the business owner’s personal credit score,” says the article. Now the year is 2009 and credit is tight. If your credit score was important 5, 10, and 15 years ago, today it’s absolutely critical. Per the small print on the agreements with your credit card companies, they can run credit checks anytime to make sure your on time on other bills. If your not, be prepared to have your interest rates raised or your credit limit dropped.

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Are Your Credit Limits Being Changed by Your banks?

According to USA Today, 11% of US Consumers (about 22 million people) had their credit card limits cut, even though they pay their bills on time and have good credit. For many small business owners, this can be a big problem as they use their credit cards to help keep their business running. If you don’t want your lenders to cut your limit, it’s very important that you do not change your spending habits. Meaning, if you typically pay your bills in full each month, then do your best to continue to pay them in full each month. If you typically pay 50% of your bill each month, then do your best to continue to pay at least 50%. Banks are looking for changes that will show “financial hardship,” and many times they will jump to conclusions.

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WANTED: The Truth!

There is an article in the Wall Street Journal today how home prices have dropped just under 30% in the 10 biggest cites in America. At the same time, we’re getting reports from the National Association of Realtors how “sales are going up and that this is the time to buy.”

Well whether it’s the time to buy or not, I don’t know. What I do know is that lending guidelines are continuing to get tougher and tougher. Part of the reason is because the credit scoring requirements are continuing to go up and up.

Here is the disconnect: the lending guidelines and credit scoring requirements continue to go up and there is no education about the guidelines or credit scoring. People think if you pay your bills on time, you’re going to have perfect credit, which is WRONG. So until more people can qualify by teaching individuals that paying your bills on time is not necessarily going to guarantee you a perfect credit score… there is going to continue to be disconnect, which will impact how significantly the real estate market can recover.

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Who else is as WRONG as an Educated Attorney?

This weekend I had a conversation with well educated attorney, probably around 65 years old, she asked me, “How are you doing in this economy? What do you do?” I responded, “I’m in education and finance; we sell products on saving money and specifically, how to raise your credit score to reduce your monthly payments.” She said, “Oh yeah, I understand all about credit. That is one problem I don’t have to deal with.” She continued by saying, “I only have one American Express card and that’s all I use.” I said, “Well statistically speaking, if you have one credit card it’s going to hurt your credit score.” She said, “I do know that, in fact, I had 11 cards, and I closed them all down.” My response, “Well, statistically speaking when you close down your accounts it will hurt your credit score.” She said, “I did know that, but it’s not a problem for me because I don’t need credit.” From there, I let the conversation die. The bottom line, I hear this every single day. Every day, I hear that, “I’m different.” In reality, if you are living in America, we are all the same when it comes to your credit score. Even though this woman thinks she “doesn’t need credit,” she does and let me explain. Does she have car insurance? Yes, and that could be impacted because of your credit score. Does she have a mortgage? Most likely, and that WILL be impacted by her credit score. Does she have kids? Yes, she had three of them. Most likely, her kids don’t have her resources and if she is teaching her kids this information; they are starting down the wrong path. This woman thinks that she doesn’t have problems, just like the 100M Americans who don’t think they have a problem.

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Spending… the PROBLEM That Nobody is Talking About

I’m hearing over and over, “the economy is recovering, the economy is recovering!” Ben Bernanke said last week that he expects our recovery to come this year and of course our politicians are saying its “right around the corner.” Let me ask you a question: In your world, who is spending more money today than they were a year ago? This is the fundamental problem that we are faced with. 70% of our economy is based on people buying things. For our economy to recover, the government needs people to buy bigger cars, changing their IPods, new homes, etc. etc., thus the lower rates and rebate checks from the government. The problem is that spending money got us into this problem, and the government wants us to spend more to get us out of the problem… BUT… nobody is spending! In my world, conversation after conversation is about saving more, not spending more. Are we really going to get out of the woods this way?

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