The Credit Card Sham

Posted at 5:31 AM, Oct. 10, 2008

I had to share this with everyone.  If you haven't in the past recieved one of this calls from one of your credit card issuers, wait. 

I had the ultimate pleasure of speaking with a representative from Discover Card to let me know what a preferred member I was.  From there, she assured me that this call was not to solicit an immediate response from me, but instead, wanted to send me some information about a new program designed to address the economic concerns with the public.  Namely, how to protect your credit in the event of job loss, etc. 

Now I know this isn't exactly a "new" product, I have received these calls before, just under a different name.  Here is what they promise.  In the event of say job loss, you can have your payments reduced or suspended for a designated period of time without penalty.  All this peace of mind for a mere $.89 for every $100 dollars.  Sounds pretty good right?  Wrong.

Here is what they don't tell you.  If you take for example a balance of $5,000 you will be charged monthly an additional $45 which will cost you $534 extra dollars at the end of the year.  ON TOP OF the interest you are already paying.  So, should you unfortunately need to activate such a plan, your interest AND additional fees will be accrued to your already mounting debt.  In addition, if your card is in a hold pattern, you can't use it.  This isn't a reality scenario for the average person who just lost their job and most likely has little to no savings.  Studies show people lean on their credit cards for such necessities when money is tight.  This is in no way beneficial to the credit card holder.  The banks are looking out on how they can make money off your already growing fears about the economy.  Shame!  Lastly, just by saying "ok" you can send me information to review, you inadvertently agree to be enrolled after 30 days, money back guaranteed of course.

Instead, consider taking that $45 (or more if you have higher debt or more than one card) and put it on auto savings into an account.  Some savings is better than none.  Then tell the credit card companies where they can stick their preferred customer products.

How Your Credit Rug is Being Shaken

Posted at 5:07 AM, Apr. 4, 2008

Lenders are turning towards other means to delve into consumer's history.  No longer are traditional methods the only means to assess credit risk for borrowers.  How you pay your rent and utilities will also impact your score, which up until recently, was only used as desperate measures for those with poor credit or lack-there-of.  Other scoring systems are being implemented along with well known FICO to establish a consumer's credit worthiness.

Breakdown of What the Big Guys Are Using

Make sure to keep all your bills current and paid on time.  Even forgetting to pay the cable bill on time can affect your ability to get the best interest rate whether buying a house or a car.  It can even determine whether or not your current credit card holders decide to raise your interest rate or reduce your spending limit.  Remember, your overall debt management can be used against you, even by an unrelated creditor.  Take heed.

20 Ways to Plug Financial Leaks

Posted at 3:45 AM, Mar. 19, 2008

Americans Are Illiterate

Posted at 4:58 AM, Mar. 10, 2008

Are you one of the many Americans that can be catergorized as financially challenged?  Recent study indicates that our nation carries far more debt and with that, minimal understanding of it's true cost and how long it would take to pay it off.  CNN ran the story.

How To Get a Leg Up on Your Cash Flow

Posted at 5:22 AM, Mar. 1, 2008

Here is a terrific article about giving repair tips to those who need help budgeting and keeping accountability with their money.  I personally am in this group. 

 Our monthly budget is mostly based on my husband’s income for he has the steady paychecks versus myself who works on commissions (I use my checks to make larger payments on debt, create savings, pay for household repairs and renovations and paying for our children’s tuition).   For example, I do the budget planning ( a service provided by the company) with our electric and gas bills.  In addition, most of our bills are auto pay either directly from the company or I do online banking and TELL my bank to make payments on a given day once a month.   So far the only bills I pay manually every month are my cell phone ( I admit, I do not trust them!) and my major credit card since the required payment changes and thus my monthly payment.

Larger payments, such as my HELOC and student loans, I have my bank transfer funds every two weeks (half my payments each pay period) into a separate account and then the creditors are paid out of that account. By adding just a few dollars more, say the sum is $435.78 every month, I summarize up to $500 and transfer $250 every two weeks. By doing this I create a small cushion (or savings if you will) and I am not feeling the burden of certain pay-periods that have larger bills due than the other. Even my mortgage I pay every two weeks (in half and rounded out) so by the end of the year, I have made one whole extra payment and the beauty of it is, I don’t have to make ONE paycheck stretch a whole month when the other is mostly devoured by the mortgage payment had I chosen to pay monthly.

 Now there still are times that I have to stretch the dollar farther than others, but it definitely has been less painful and certainly eased some of the stress. I have a much better idea of what is left over to spend on groceries (which is not a fixed expense and therefore I can do cutbacks when necessary) and other extravagances like the designer coffee. The advise offered plus a few I have suggested here are a means to take those small steps towards financial balance.

The 10% Rule

Posted at 5:14 AM, Feb. 29, 2008

Utilize no more than 10% of your credit in order to have balance in your life.  This is the advise according to a recent article on CNN.  Funny, this runs very similiar to Biblical prinicipals about the 10% rule. The premise, if you have a $10,000 credit limit, carry no more than $1,000 in debt at any give time.  Pretty step considering the average consumer carries a debt balance of $8,000.  Note, this does not reflect student loans, mortgages, or other large ticket items.  Just good ole consumer debt.

Do You Think You Are Financially Prudent?

Posted at 4:58 AM, Feb. 25, 2008

I came across this article from PBS and Frontline that did an entire series about the Secret History of the Credit Card.  I will tell you, this will challenge even the most confident consumers when it comes to being fiscally sound.  Watch these online videos and learn some hard facts such as:

Did you know that you can have your interest rate changed based on your behavior with a completely unrelated creditor?  Even if you have never been late with your MasterCard creditor, but say, 3 years ago were 60 days late for a payment on your car, your MasterCard holder could decide at anytime to change your current interest rate (regardless of the intro terms) to a much higher rate. 

This could change your attitude the next time you pull out the plastic.

February is Free Credit Reports for Illinois

Posted at 3:31 AM, Feb. 15, 2008

Now more than ever has knowing what your credit score matters.  At www.AnnualCreditReport.com you can download a copy of your report for free from all three of the major credit reporting companies.  In the state of Illinois, Feburary marks the beginning of a new year, so anytime within the next twelve months, you can request your copy. 

I recommend as a way to monitor your credit report without paying for a service is to choose one of the companies and download that report this month, then in June, another company, and then lastly in October, the third.  Since you may only obtain 1 copy per company, you can take advantage of spreading them out.  Do note that each and every company has it's own tiering system, so even though you credit may be blemish free on say, TransUnion, EquiFax could be another story.  No matter how you choose to do it, I strongly recommend checking your credit report for erroneous information.  It is estimated that over 60% of credit reports contain inaccurate or false data, such as a payment that wasn't credited or a deliquency that wasn't yours.  Check it!  What you don't know could hurt you. 

You also might want to take your reviewing to the next level.  These free reports have a disadvantage in that they do not provide FICO scores, but for a very modest fee, you can obtain these scores and see where you rank.  If you are not in the market for a large purchase or refiancing, take this opportunity to improve your score.  Check my related articles for tips on how to improve your credit scores, and how to do clean up repair if necessary.

February is Free Credit Report Month

Posted at 4:45 PM, Feb. 13, 2007