After complaints about the effect of the Credit Card Act on stay at home parents, the CFPB will propose a new rule to remedy the situation. It is yet another stunning example of how our legislators continue to enact laws with unintended consequences, one that was supposed to prevent college-aged students from getting in debt over their heads has managed to tear a strip of dignity from a politically coveted demographic – stay-at-home moms.
To say it has it has stirred up a hornet’s nest is an understatement and right now, politicians and regulators can’t find enough cover to protect them from the stings.
It seems that a provision of the Card Act of 2009 that was designed to curb lending to college students by requiring that they be able to qualify based on their own income, and not that of their parents, also applied to anyone who can’t verify personal income. So, moms and dads who leave the work force in order to raise their kids have been subject to the law and many have found it difficult, if not impossible to qualify for credit on their own.
Under this clause, the only way a homemaker can obtain credit is if a spouse co-signs for the loan or credit card. Never mind that they may have an impeccable credit history, and never mind that they work every bit as hard as the family’s bead winner; or that many of them leave well-paying jobs to do what needs to be done; they are now relegated to the ranks of the non-creditworthy in the eyes of lenders.
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For people struggling with debt, forming a DMP (debt management plan) through the CCCS to pay down and eliminate it is a good option. The Consumer Credit Counseling Service (CCCS) is a viable and legitimate solution that shouldn’t be mistaken for one of those debt consolidation or settlement companies that advertise on late night TV. It is a true non-profit that charges minimal fees and provides real advocacy services for debt-stricken people looking for a way out of their nightmare. They don’t make any unrealistic promises or claims and they require that you shoulder the responsibility of following a debt management plan.
The question that arises for many people who agree to a debt management plan (DMP) is whether it adversely affects their credit score and their ability to get credit.
The simple and somewhat blunt answer to that question is, “what does it matter as long as you can stop the debt spiral?” For most debtors, the DMP offers the only possible light at the end of a long, dark tunnel. The reason you even consider a DMP is because your debt situation has become unmanageable.
You are probably making minimum payments in trying to keep up with balances that are exploding due to increasing interest rates, and you find yourself juggling debt payments with other budget needs, maybe having to skip one occasionally. Your credit score has already fallen to sub-prime levels, and at your current pace, it will continue to plunge. So, what exactly is your question again?
The DMP offered through CCCS works primarily because your commitment to not add more credit during the payment period enables them to negotiate lower interest rates with your creditors. What had been 19% to 29% rates are typically reduced to below 8%, sometimes as low as 2% (some creditors may go to 0%). It is highly unlikely that you could negotiate those rates on your own. So, the single monthly payment you make to CCCS goes to pay down all of your debt at a pace three or five times faster than you could do on your own.
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Money Crashers was chosen by Directbanc.com as one of the Top Five Personal Finance Blogs We Like, notable for their sound financial advice. Gyutae Park, one of the founders, was kind enough to share the story behind their personal finance blog, and what distinguishes them from the rest.
1) Can you share with our readers the inspiration behind your blog and its history?
Money Crashers was started back in 2006 with the inspiration of helping people better manage their money and improve their “financial fitness.” We found that they don’t teach this stuff in schools, and many people get deep into credit card debt early on. We want to help people avoid financial pitfalls and educate themselves when it comes to money.
2) As Money Crashers has steadily gained popularity and recognition in the press, what strategies have you employed to grow your site but still remain personable to your readers?
We definitely strive to remain personable with our readers and engage them with questions and relevant anecdotes whenever possible. Personal finance can be fun, so that’s the approach many of our contributors covering various topics take.
3) Of your 11 Indispensable Principles of Money Crashers, which one do you find that consumers have the most difficulty in attaining?
Of the 11 Indispensable Principles of Money Crashers, the one that people struggle with the most is principle number one: Always spend less than you make. Although the concept is simple, it is often an overlooked concept. I frequently speak with people who say they just can’t find ways to save, and that they never have enough money. Usually, these difficulties come down to this one simple principle.
It’s important to approach this concept with a dual strategy. First, you must actively look for ways to save more money, which can be achieved in a variety of ways. Reducing monthly bills by downgrading services (such as cell phone plans and cable TV packages), clipping coupons to save money on groceries, and using the Internet to find the best prices for consumer goods are all great places to start.
Second, you can always look for ways to boost your income. For instance, you can do something as simple as completing paid online surveys. It won’t make you rich, but it is an effective use of spare time to generate a little extra money on the side. Also, you can collect unneeded items from around the house and sell them online via sites such as eBay and Amazon. If you’re willing to take a little risk and invest more time, you can also start your own side business. If you identify one of your key talents and figure out a way to make money from it, you have a much better chance of getting your monthly spending beneath your level of income.
4) Personal finance covers a broad range of topics. How do you choose which ones are the most interesting and useful to your audience?
We try to stay as current as possible regarding the topics of the articles we provide to our readership. This year, we have focused on the topics that are currently affecting people’s wallets the most. We have offered tips on how to combat rising gas prices, how to effectively deal with job loss, and ways to save money when purchasing groceries.
We also field ideas from our readers and subscribers for what they would like to see more of. We are very active with our social media accounts, and have received plenty of great ideas from our readers.
5) In your opinion, what are the top three personal financial topics that you see trending for this year?
- Consumer Spending. As we crawl our way out of the recession, consumer spending is poised to modestly increase. You do need to exercise restraint, however, to avoid falling back into bad financial habits.
- Housing. I don’t know if we will experience huge gains in the housing sector, but many experts claim that we are very close to bottoming out, if we haven’t done so already.
- Credit Card Rewards Programs. As people now better realize the importance of prudent spending, many utilize debit card for purchases in lieu of credit cards. Therefore, issuers will step up their efforts to get people to sign up for credit cards. Companies will do this by offering more attractive rewards programs. While these are great to take advantage of, you need to understand that these rewards are worthwhile only if you pay your balance in full every month.
6) On a personal note, what do you and your business partner envision for yourselves and Money Crashers in the future?
We definitely want to continue growing the site and spreading awareness for personal finance education. We may look to build out additional tools for managing money in the future, but that’s our number one priority for the time being.
Cash back rewards credit cards from Discover and Citi are once again popular with consumers. After several years of scaling back on vacation plans, or postponing them altogether due to the troubled economy, all indications are that, before the end of the year, Americans are going to act on their pent-up need to hit the road.
Although gas prices are starting to inch down, other travel costs such as air fares and hotels are not. This year, however, more travelers will be cashing in on their credit card rewards in order to stretch their travel budget. With many planning on funding as much as 50% of their travel costs with points or cash back rewards, credit card rewards programs are playing an ever increasing role in a resurgent travel industry.
Air travel and hotel stays are expected to be the primary target for rewards redemptions. And this year, the cruise industry has seen a 10% uptick in bookings using rewards. For those hitting the road, many will be using the cash credits accumulated in their cash back rewards programs to offset gas, restaurant and hotel costs.
This year, cash back rewards have supplanted airline and hotel points as the preferred method of redemption, due largely to their greater flexibility in booking flights and stays without regard for blackout dates or limited availability. When cash back rewards are used to book a flight, the tickets are actually purchased through the credit card company, whereas airline rewards points are redeemed directly with the airline which can limit the availability of seats for rewards travelers. Although it is possible to earn free travel more quickly using airline rewards credit cards, people seem to prefer more flexibility in making their travel plans, so cash back credit cards have become more popular for many travelers.
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If you’re among the millions of people who are taking proactive measures to take control of their debt, you may be considering cancelling one or more of your credit card accounts. It’s a move that many people make with the best of intentions; however, it could actually do your credit standing more harm than good, at least in the short run. While reducing your credit accounts can reduce the temptation to use credit, it can also make you appear less credit worthy to the credit bureaus who consider several factors when calculating your credit score.
Your credit score is calculated using five key factors: Payment history, credit utilization, length of credit history, new credit and credit mix. When you cancel a credit card account, you could negatively impact at least four of these factors:
Payment history (35%): Your score is not only affected by how well you make on time payments; it is also affected by the number of accounts to which you are making payments. Reducing the number of accounts, even though you are paying everything on time, will shrink your payment history which can limit your scoring.
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While there have been plenty of reasons to vilify variable annuities (high expenses, high surrender fees, sales charges), there may now be reason enough to take another look at them, especially if you’ve grown weary of the wildly gyrating stock market.
In fact, the variable annuities being offered in the marketplace today may just be the ideal investment for anyone, young or old, who wouldn’t mind reaping the rewards of the market while virtually eliminating the downside risk. And, before the variable annuity critics jump all over this, we will mention that there is a cost for that. We’ll explain later.
The one distinct benefit that variable annuities have offered investors is the guaranteed death benefit which meant that their beneficiaries would receive, at a minimum, the principal investment upon the death of the annuity owner. That would have been a very significant benefit for beneficiaries who lost an investor-loved one following the 2008 stock market crash. And, it is also the reason behind the higher expenses of variable annuities.
The issuing life insurer charges a mortality fee to provide that guaranteed death benefit. But, what if, in addition to protecting your beneficiaries against the loss of your principal or portfolio value, you could also protect yourself from losses in your portfolio. What would you pay for that?
It’s No Longer Your Father’s Variable Annuity
In recent years, annuity providers have been engineering their variable annuity products to create an opportunity for investors to enjoy the upside of the market without the downside risk. To that end, many variable annuity products now include additional guarantees that will protect your principal while you are living, ensure that your portfolio generates a positive return even during market declines, and provide you with a minimum amount of income regardless of the fluctuation in your investment account.
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Over the last few years, as tax revenues have decreased against exploding deficits and mounting federal debt, we’ve heard more rumblings in the halls of Washington, D.C. of some kind of government takeover of our retirement plans. And, as the American people see its government policies lurch towards the type of socialist democracy practiced in the failing experiment called the Eurozone, such threats don’t seem too farfetched.
After all, the struggling economies of Ireland, France, and Hungary have forced some form of a government takeover of both public and private pensions.
Why would our Government even consider it?
It wouldn’t be our government that decides to get into our retirement plans; it would be the politicians, specifically the Democrats that view them as lost tax revenue. In the battle raging in Congress over how to get the deficit under control, the Democrats see raising more tax revenues as the only real solution.
Each year, hundreds of billions of dollars that the government would otherwise receive in taxes is pocketed by people who contribute to their 401k and IRA plans. Politicians have been eyeing the tax deductions afforded to retirement savers as a source of revenue.
In fact, it has been proposed on several occasions, most notably by the Clinton administration, that the provisions in the tax code be changed, at least temporarily, to be able to tax the earnings or reduce the deductibility of contributions.
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Miss T., founder of the blog Prairie Eco-Thrifter, stopped by Directbanc.com to tell us how living a frugal and green lifestyle has changed her life. She also offers some helpful tips to live a simplified, enviromentally friendly lifestyle without negatively affecting your bank account!
Miss. T’s bio, in her own words…
I am a prairie raised woman who is passionate about saving money, being healthy, looking out for our environment, and most of all having fun. Since I have a passion for writing and helping others, I started this blog as a way to share my thoughts and ideas with people like me who also want to live a simple life while still having fun.
1) Could you please share with our readers your motivation for starting your blog and living an eco-friendly lifestyle?
I have spent the last four years living this philosophy and it has greatly improved my life. Before that my life was very stressful to say the least. I had bills that I couldn’t pay, my relationships were suffering, I would constantly impulse shop and yet wouldn’t ever use the stuff, and I was exhausted not happy. I really had no balance and I wasn’t spending my time, energy, money, or health on the life I really wanted.
I was living a life that I thought I should be living- keeping up with others’ expectations of me as a person; keeping up the Jones’s through my shopping habits; trying to be the ideal mate and hiding my true self; striving for a career that didn’t satisfy me. I was a young, self-conscious, fearful adult that was afraid to be true to myself. Eventually I realized I had to make a change. This was not the life I wanted to live.
2) When you decided to alter your lifestyle to one that was more frugal and earth friendly, what was the most difficult thing to change?
I think the hardest thing was not allowing my emotions to take over. I have often made decisions, bought items, and done things as a result of emotion and I needed to change that. It wasn’t getting me anywhere. Once I became conscious of my emotions and was able to push them to the side and think about things objectively I made much better decisions. I also become more aware of my actions which allowed me to notice if what I was doing was green and frugal.
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In theory, company-issued credit cards are a good idea for all concerned. The company can benefit with the tracking capabilities of company credit cards, and they can establish controls to keep spending in line with their budget. Employees benefit by using their employer’s money for business expenses without having to go through the hassle of expense reimbursement.
But in practice, things can quickly go awry, and employers and employees can suddenly find themselves at odds with each other and their financial troubles. The problems usually occur where the company has no formal, written guidelines for corporate-card use, and if they do, employees fail to read or adhere to them. Then, what seemed like a good idea becomes a big mess for everyone.
Corporate card abuse has become a big issue of late, especially with some high profile cases making the news. Although it came up because of a political hack job, the revelation of Senator Marco Rubio’s misuse of a corporate card, issued by the Republican Party of Florida, spawned a number of articles about the problem.
Rubio defended his actions by declaring that he quickly repaid any personal expenses and by pleading ignorance in some instances. Of course, being a politician with ambitions for higher office, this seemingly minor issue is likely to come back to haunt him. For employees caught in similar circumstances, they may not get off so easily misusing company credit cards.
Other recent high profile cases, such as the executives from Goldman Sachs and Marriott Corp. who were fired, fined, or prosecuted for corporate card abuse, may be at the extreme end of the issue. However, employees at all levels in any company can face both personal and professional retributions. Companies are becoming less tolerant of misuse and are quicker to act with employees either through sanctions or termination.
On a personal level, employees are finding themselves personally liable for charges where a company refuses to pay the bill or is unable to due to financial troubles. The credit card companies are intent on getting paid, so they are just as willing to go after employees as they are the employers.
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Have never heard of a daily money manager (DMM)? It’s not something that you will hear anyone readily admit, but most people are lousy money managers. And, we’re not talking about sophisticated portfolio management or financial planning; we mean the day-to-day task of keeping the household financially afloat by managing a budget, paying the bills, balancing the check book, paying down debt, staying organized, finding ways to save – all those things that people know they have to do, but either can’t or won’t due to a lack of knowledge, time or accountability.
How else do you explain the fact that American’s still hold an average of $16,000 of credit card debt paying an average of 13% interest? Or that less than 5% of Americans currently put away any savings? Poor money management is endemic across the entire economic strata and there doesn’t seem to be a self-cure. Enter the Daily Money Manager – the money doctor is in the house.
Chances are that you have never heard of a daily money manager (DMM). You won’t see them advertised because they generally work off of referrals, and you probably won’t hear many of your friends talk about them because, well, who wants to admit they can’t handle their personal money matters? But, they’re out there, and they come fully equipped to whip you into money management shape, or if you prefer, they’ll simply take the load off of you so you can focus on other priorities.
DMMs aren’t just for the financially inept or financially strapped. The ultra-wealthy also use DMMs, known in those circles as family officers to do precisely the same thing. The reality today is that many people – from single moms, to widows, to busy entrepreneurs, to successful CEOs – can be easily overwhelmed with the demands of daily money management.
A DMM can step in to keep your money flowing and keep you out of trouble. They can be especially valuable for decoding complex insurance or government programs, such as Medicare, Social Security, and health plans, to ensure you are optimizing the benefits available to you.
Among the multitude of tasks and responsibilities a DMM will undertake are:
- Organize your personal finances, including filing systems, online accounts, and setting up your personal financial software like Quicken or Mint.com
- Set up a bill paying system. They will either pay the bills themselves or automate your bill pay
- Conduct an analysis of your cash flow and spending habits to show you where you can save or pay down debt faster; they will help you create a budget, a spending plan and generate cash flow reports
- They will work with your creditors to resolve disputes or negotiate better credit terms.
- On a daily, weekly or monthly basis they will reconcile your accounts, sort your mail, pay your bills, and track your spending.
- They will restructure your debt situation by consolidating accounts and transferring high interest balances.
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It began innocently enough. You swipe your grocery club card at checkout, and as you gather your bags, the checkout clerk hands you some coupons with offers on the products you just purchased. Never mind that one included a dollar off on a product you just paid full price for, because from that moment on, your purchasing behavior was being tracked and compiled so that future offers could be tailored to your preferences.
Most people don’t give retail tracking a second thought. In fact many find it convenient that the store will bring to their attention only those products in which they have an interest.
Flash forward to the future, and you walk into Wal-Mart. Unbeknownst to you, your retina is scanned for identification, and the next thing you know you are being handed a printout of the day’s specials. But the only items you see are those that you have purchased in the past or that are recommended based on your purchasing habits. Convenient? Perhaps. Creepy? Most definitely.
As for credit and debit cards, you can’t possible think that the card companies don’t track the billions of transactions made each day for use in data mining and marketing. Information on your buying habits is like gold to marketers who want to be able to make a direct pitch to you if you match their profile.
Now, the card companies don’t actually sell your personal information to anyone, but they do compile the data in a way that creates target profiles, by zip code, so the marketers who do buy the data can find you more easily.
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Is it time for a cruise? After several years of scaling back their vacations due to self-imposed austerity, Americans are, once again, taking to the high seas aboard a resurging cruise industry. Cruise bookings are up 10 percent and the cruise lines are trying to boost that number even higher by offering great deals and lower prices.
And now, vacation travelers can bring the costs down even further with cruise travel rewards that can buy you onboard goodies, an upgrade to a plush stateroom, or a big discount on a booking. When beefed up cruise rewards meet lower cruise prices, it’s definitely time to cruise.
Credit Card Travel Rewards
If you are even thinking about going on a cruise, you really should explore your options for a travel rewards credit card. Many credit card travel rewards programs have enhanced their rewards for cruise vacations. For instance, with the Chase Sapphire Preferred Card, you can earn a 20% discount when you book through its Ultimate Rewards. You can also redeem Ultimate Rewards for gift cards on Carnival and Royal Caribbean, at a rate of $100 off per 10,000 points.
And, of course, when you book your cruise with a Chase Sapphire Preferred Card, you will earn 2 points for every dollar spent on travel. Chase will also start you off with 40,000 points just for spending $3,000 within the first three months. All of that adds up to a dream cruise vacation at a budget price.
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