Some tell-tale indicators

Research shows that in the most recent recessive years, movie ticket sales have increased steadily. According to the National Association of Theater Owners, tickets have sold 9 percent more this year than they did last year the same time. Though consumers are cutting back on many other things, their movie entertainment is not one of them.

Rise in gardening

Another indicator of how the economy is doing is the number of households who grow their own produce. This year there has already been a 19 percent rise in homes with their own vegetable, herb and fruit gardens. That adds up to an estimated 43 million people gardening this year. Although “fun and recreation” are cited as motivators, most homes agree that saving on the price of food is the main reason they are maintaining gardens to their homes.

Online dating services & romance novels see more activity

During tough times, dating services see more activity. It seems that during recession periods, more Americans are looking for their significant other, or at least someone to go to the movies with. Romance novel sales pick up drastically during recession periods, as well. Consumers are looking for debt relief and if they can’t find it literally, they will find it temporarily through books. Harlequin, a leader in romance novel publishing, noted a huge increase in sales in 2008. Their revenues were up by 32 percent and on a consistent rise the beginning of 2009. Similar increases occurred during the hard times of the early ’90s

The alligator economy

Another unusual indicator of how the economy is doing is the alligator economy. Louisiana houses Savoie’s Alligator farm, one of the largest of its type in the nation. They sell gator skin hides to tanners, who in turn create high-ticket items for the likes of Louis Vuitton and D&B. Spokesperson for Savoie’s reported that they have “not sold a single hide since November.” This is another economic indicator that the economy is not doing well and consumers are cutting back on luxury items. Gator farmers are losing money quickly because of lack of sales, and they need to find innovative ways of maintaining the hides they do have.

Signs of the times

These five odd indicators are revealing signs that give economists a picture of how the economy is fairing. If consumers are seeking debt relief, it may seem odd to look at alligator farming numbers or sales in romance novels, but over time, they have both proven to be accurate indicators of the state of the economy.

The problem of negative equity

In fact, economists are predicting that many homeowners will be in worse shape within the next two years than they have been in previous. Studies are showing that almost half of the US’s 52 million borrowers will have negative equity by the beginning of 2011. According to the report done by Deutsche Bank, the number of borrowers with negative equity is telling of a huge pool of owners who will either default or go into foreclosure.

Down payments valued at zero dollars

Negative equity happens due to various factors, but the most common is the decline of home values. Since the recession, that has been a chronic problem within the housing market. According to real estate website Zillow.com, home values throughout the country have declined by 22.3% since mid-2006. To the average home owner who put down 20% of their mortgage, that means their down payments have lost their complete dollar value. Karen Weaver, research analyst at Deutsche Bank, said, “The continued decline of US home prices will contribute to rapidly rising rates of negative equity. The most obvious implication is for mortgage defaults.”

Watch for the signs

When it comes to the housing market, all homeowners should be watching the market. There are clear signs when a home is at risk of declining in value. More and more homes are proving that falling behind or going into foreclosure have more to do with home value drop based on the economy, than on job, credit, or income. Here are some signs to watch out for:

1. Foreclosures in your area. The biggest danger sign to watch for is when neighboring homes start falling into foreclosure. Mark Zandi, chief economist at Economy.com, said “When one home on the block goes into foreclosure, every home’s value drops by 1%… if two homes on the block go into foreclosure, every home’s value drops by 3%.” Once homes start dropping considerably due to distressed properties in the neighborhood, it’s difficult to overcome. While small personal loans or savings can rescue homeowners in minor trouble, adding a difficult neighborhood market can mean disaster.
2. Homes not selling. Another sign to watch for is the number of homes in a neighborhood that are not selling. The underlying message is that buyers and sellers have not been able to come to an agreement on the transaction. Zandi believes that “the time on the market is always a good barometer of demand for homes and for the price homes are transacting at. The longer it appears that neighbors are taking to sell their home, the more likely it is that they are not getting the price they want and that prices are falling.”
3. Rising unemployment rates. Generally speaking, cities with the highest unemployment rates suffer from the highest home value loss. For example, Merced, California’s unemployment rate is one of the highest in the country at 17.6% and home values have declined by over 40%. Homeowners in areas with high unemployment rates are cautioned that if primary industry in their cities were hurt due to the recession, their home values may fall even quicker.
4. Distressed homes. Neighborhoods with a notably high number of distressed properties are at a higher risk of homes losing value. Zandi confirmed, “Normally dented siding, peeling paint and broken porches are signs that neighbors are having trouble making ends meet and can’t pay for the care of their homes. The mere fact that they are not investing in their homes will affect you, too.”

Time is the key to overcoming negative equity

Although the issue of negative equity is a serious one, it isn’t an inevitable repercussion of the recession. Homeowners who plan on keeping their homes for the next five to seven years most likely will recoup any lost value of their properties. For homeowners who are finding it hard to make ends meet, small personal loans should be used for the shortfall, rather than borrowing against the mortgage. Then taking a wait-and-see attitude may be the best option in coming months.

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How do they monitor credit card risk?

The purpose is to calculate who may be a credit risk and methodically weed them out of the mix. If consumers use their credit cards at secondhand clothing stores, or discount grocers, lenders are taking note. The assumption is that if a consumer uses certain stores, they could be in financial strains. Based on purchasing behaviors, creditors are making decisions about consumer’s creditworthiness and changing the terms of the credit agreement accordingly.

Congress is getting involved, however. Federal regulators are looking into the extent to which credit lenders are using shopping information against consumers. It’s become a standard practice that if a consumer poses a credit risk, lenders either increase their interest rate, slash their limits or both. Federal regulators are trying to create a watchdog service to protect consumers’ rights.

A new credit card reform law

President Obama signed a new credit card reform law into action this year. There is a provision requiring a federal investigation into the practices of credit card issuers using shopping information against card users. Namely, lenders seem to be using information about where consumers shop, what they purchase, the category of merchants they shop with, their locations and the mortgage company they work with as a basis for increasing rates or reducing limits. US Representative Maxine Waters said, “Where a person shops, in my opinion, has little bearing on whether they can pay back a credit card balance… I want this study done because I want to stop some of these outrageous practices in the future.”

Reporting on lenders

The Federal Reserve and Federal Trade Commission have until August 22 to gather information on credit lenders and assess whether or not they are unfairly watching consumer’s habits. Regulators have to decide if negative profiling affected minority and low-income credit card users. American Express is one issuer of credit cards that acknowledged its former usage of profiling information to limit the amount of credit it extended to customers, though they have since discontinued the practice.

Waters added, “I’m concerned that limiting credit based on where a person shops or neighborhood they live in could amount to red-lining.” Red-lining is the practice of targeting specific demographic areas or neighborhoods for the purpose of discriminatory housing, insurance or lending actions.

Address privacy issues

In addition to not being fair to consumers, there are privacy questions to address. “Obviously that is something that most credit card holders are not going to think about,” said Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse. “They’ve obtained a credit card and think they can go out and use it in any way they like.”

Suggestions from experts

Until rules are sorted out, many experts are encouraging cardholders to pay with cash, use gift cards or prepaid debit cards in lieu of their credit cards. Shopping at wholesale outlets or discount grocers may also thwart profiling. One expert suggests spreading purchases over a few credit cards to avoid triggering alerts for a single lending company. Stephens added, “Cash is the ultimate privacy protector. It’s kind of hard to trace. With most other payment mechanisms, there is going to be a trail.”

The state of lending today

Prior to the recession any score of 700 or higher would have no problem finding a lender. Now, rate adjustments begin at 740, with every 20-point drop adding another adjustment. The result of the shift in credit scores is that people with decent scores need to pay more for loans or make quick changes in their credit habits to increase their scores. Some drops in credit scores may even be hidden to consumers. For example, Todd Huettner, president of Huettner Capital, said, “One of my clients always had a credit score of 740. When she went to refinance, she found out her score was at 719. The reason was she put a new washer and dryer on a store credit card. Many store cards are actually revolving credit, which means your limit is essentially your starting balance. So that purchase maxed out her card and caused a 20-point score drop.”

How things changed in the world of credit

Last year the nation’s two largest mortgage lenders, Fannie Mae and Freddie Mac, struggled in the market. Due to the lending crash, both companies changed their definition of “risk.” Any borrower with a credit score below 720 fell under this new definition and is affected by its change. Sean Cragg, VP of sales for Gold Star Mortgage Financial Group, said, “These fees have nothing to do with the mortgage company or its various products and cannot be negotiated away.” All providers of mortgage, auto and personal loans must comply with the new rules. Only financial institutions holding their own portfolios can dictate and follow their own guidelines.

Is there hope for the future?

So the question is: Is there hope for the future in lending? David Chung, managing director of CreditXPert, Inc., said, “There are many factors, including proposed legislation and regulation that continue to change the mortgage lending landscape. In the near term, it is more likely that this benchmark will continue to rise than fall.”

To individual borrowers that means more difficulties in finding funding. Chung added, “Often, lenders will quote rates that include the adjustments, without calling attention to them, in order to avoid a negative reaction from their customer.” What is stable, however, are the general requirements for finding funding. In today’s world of credit, here are the requirements:

• Great credit
• Stable income, with a minimum of two years of steady employment
• Reserves after closing
• Down-payment
• Low debt-to-income ratio
• Good loan-to-value percentage

Being proactive with credit

For any consumer looking for mortgage, auto or personal loans, it is more important than ever to work on credit scores. Chung said, “Virtually everyone can raise their scores by at least 10 to 20 points, sometimes significantly more in 30 days.” It may take some persistence and care, but in the end the savings will be worth it.

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The credit card for most of the 1990s and the first decade of the new millennium was the most often tapped source of credit for the middle class. 76.2% of U.S. households used credit cards. (Source: Federal Reserve Bulletin February 2006) When a family needs immediate access to resources that are not available from their current income, they look to credit cards. However, personal credit has proven to be one of the key destroyers of wealth for average wage earners. The average household in the United States carries an average credit card debt of $10,000 or more. (Source: Nilson report April 2009) While there is the instant gratification of borrowing against future income, the bill will always come due. If a family does not have a structured plan for repayment and clear understanding of how their personal credit works, the chances for entering a financial difficulty increases.

The Crisis of Personal Credit and the Middle Class

The problems surrounding the current use of credit have manifold sources. The first is the general lack of financial education offered to the general population. If you don’t know how money and credit works, you can’t use them properly. The other problem is the confusing language of credit cards. While many households get offers in the mail concerning low interest rates, they are left ignorant of the complete set of fees included for various actions. This makes it hard for many consumers to make informed choices concerning the credit card that would be the best personal fit for their finances.

Credit Card Reform

Congress recently passed the Credit Card Act of 2009 as the government started to understand the role that these problems with credit have in causing the recent recession. Not only were there the lessons of firms such as AIG and Lehman brothers; there was also the concern raised by some analysts that defaults by credit card holders could fuel a financial relapse into recession. The reform bill does some important things to make credit fairer and simpler to use.

1. It placed a ceiling on certain rates and fees
2. It requires that language concerning the features, rates and fees of a card be written in plain English
3. Created a Consumer Protection Agency to give consumers a federal conduit to forward their complaints to concerning violations of the Credit Card Reform bill.
4. Prevented Minors from having access to credit cards by raising the age limit

The Individual Importance of Financial Responsibility

The solution for families wanting to get out from under credit card debt doesn’t stop with the passage of a government bill. It also requires better self-education about personal finance. For example, one needs to learn how to properly leverage personal debt against family assets. It also means knowing the real meaning of what a financial asset or liability is. For example, one of the biggest misconceptions for the average consumer was that their home was an asset. However, an asset adds to your resources; it doesn’t drive you into financial bankruptcy. Most homes are bought on credit rather than cash, so they end up being a drain on families’ incomes. So knowing the makeup of your personal finances is an important first step.

Saving more than you spend is another important thing that middle class households are starting to learn. This is important because these reserves can help pay down debt and improve purchasing power in a more concrete way than credit. Many experts suggest that a family save around 20% of their income.

Conclusion

The inherent problems concerning personal credit become possible to overcome by taking into account the new strides made by legislation and combining it with the hopeful emergence of a financially educated public.

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Qualified first-time and repeat home buyers can still take advantage of the federal home-buyer tax credits. The credits are back, after a short hiatus, and prospective  home buyers stand to save thousands of dollars by taking advantage of them.  They should be used wisely,however. Here are a few things to keep in mind:

The deadline is approaching

The deadline for the federal home-buyer tax credits is April 30, 2010. That means that if you want to use the credit, you have to have your home under contract, or in escrow, by that date. In addition, the transaction must close within 60 days. Although 60 days may sound like a long time, consider that the average home takes just under that to close. Also, if you are a first-time buyer, you should start looking soon.

The amount of the credit varies

People need to understand that the amount of the tax credit is not set in stone. In fact, it’s actually 10% of the sale price of the home. Remember though that there is a maximum on the credit of $8,000 for qualified first-time buyers and $6,500 for qualified repeat buyers. For example, let’s say a first-time buyer finds a home for $75,000. Their tax credit would be $7,500. On the other hand, if repeat buyers find their dream home for $110,000, the maximum tax credit would be  $6,500.

Consult the experts

It’s never a good idea to try to sort through complex tax laws yourself, even if you do some research. Make sure you find the right people to guide you through the purchase and help you out. You want to have a mortgage lender who helps you find the right loan product, a realtor who can help you find homes with the right requirements and a tax preparer who knows the details of qualifying for the credit. Working together, they can create a sure-fire plan of action so you can take the tax credit and have all the necessary paperwork to prove your eligibility.

Be wise about lenders

Remember the lending boom? Part of the problem with it was that companies were lending via unscrupulous lending policies. They suggested people take out much larger loans than they reasonably could afford. They suggested people withhold certain information. They even doctored the numbers on loan applications. Don’t be a victim. If your lender suggests any of these practices, run. As Patti Ketcham, owner of Ketcham Realty Group, said in a Bankrate.com article, “It is critical that buyers educate themselves and that they not fall for the slick smoke and mirrors. Anytime you have found money, it brings out all the rats.”

Arm yourself with knowledge

In the end, it’s up to buyers to protect themselves from fraud or other unfair dealings. Take advantage of the federal homebuyers’ tax credit, but act wisely. Surround yourself with the right professionals who can guide you through the process and then enjoy the benefits. The credits are a great way to reduce the cost of moving into the home of your dreams.

It’s an exciting time for those moving back into the world of earning payday cash. The recession was difficult on the mainstream worker. Almost every industry suffered setbacks and had to lay-off and let-go of good workers. A lot of jobs were eliminated during the process. Now that the recession is over, workers are again entering into the workplace and hoping to return to their old ways of life. Though it may seem like an easy transition, some workers are finding it difficult to commit to a healthy financial life. Here are some tips on what priorities to have if a worker is returning to work.

The new priorities of Americans

Pre-recession, priorities were different. Most Americans were stretched beyond their limits and relied on credit to put off payments. While that lasted for a few years, it soon came crashing down as lenders started closing their doors. Now that consumers are moving back into the workplace, they have a new set of priorities in terms of financial management. Here are the new issues consumers are concerned with:

• Confronting debt. All consumers who are newly employed need to take a hard look at their debt. Not having a job for a few months inevitably drains funds and can make debt increase quickly. Those new to the workforce need to be focused on paying down debt before shopping for the latest trend. It’s easy to get caught up in spending without addressing financial obligations. Experts will say that high debt is bad from numerous viewpoints. There is money lost to interest, lowering credit scores and high debt-to-income ratios to threaten future credit. It’s best to put as much of the new paycheck towards paying down high-interest debt as quickly as possible.
• Getting insured again. Numerous Americans let their insurance lapse due to lack of funds from unemployment. Now is the time for them to get back their appropriate level of financial protection. The newly employed should talk to their employment’s HR department and find out how to sign up for health insurance. There normally are strict windows of time when employees can sign up and new hires should be aware of the procedure.
• Being thrifty. Again, it may seem like a good time to get back into spending, but that isn’t the best idea. Financial planner Adam Leavitt said, “The best way to rebuild after unemployment is to act like you still are.” Using payday cash wisely means remaining on a strict budget to build up cash reserves and investments. Most likely after long-term unemployment, cash accounts were depleted and investments were ignored. After finding employment, the best thing to do is start readdressing savings goals.
• Refinancing options. It’s also a good time to consider refinancing once a stable job has been found. It’s a great time to refinance due to all-time low interest rates. According to Bankrate.com, some consumers can still find a 30-year fixed rate loan for 5%. Saving money can be that much easier with some mortgage flexibility.

Employment after the recession

Anyone who has been unemployed knows the stress that comes along with it. Now that the recession is turning around, more people are finding full-time employment, and that means being wise with new payday cash coming in. Spending is still not the best idea, but rather putting money to work for financial goals is wisest. Careful examination of finances can create a plan that will benefit savings goals, investment accounts, and overall future financial health.

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Oftentimes, the lure of owning a business is more about mistaken notions of fast cash and being your own boss, than about hard work and decision-making. Too many failed business owners believe that the biggest advantage of working for themselves is having no boss. Sure it sounds good, but often a would-be entrepreneur isn’t prepared for the rigors of running a business. It takes vision, capital, courage, commitment, and determination to run a business and without those things, many entrepreneurial hopefuls are quickly shut out of the market.

Avoid the misconceptions

The best way to decide if being an entrepreneur is right for you is to take a close and honest look at your motives, and compare them to those of former business owners.  Here are some common misconceptions to avoid:

1. I don’t need a business plan. A new business owner may think that having a solid business plan written down is a waste of time. Hee may fool himself  into thinking that a “mental plan” is enough to get the business started., and this can be a regrettable mistake. Writing a plan down lends mental clarity. It also can show a business owner any missing parts of his plan. For example, a business plan will hone in on exactly how much capital is needed to start up operations, how much is presently exists, and viable options for coming up with the rest. A “mental plan” is much less likely to have all details in place.
2. I have a unique vision. A good idea is not the same thing as a viable business. A potential business owner’s love for a new product doesn’t mean there is a market for it. The simple fact that one person (the would-be business owner) is willing to pay $49.99 for a product, doesn’t mean that other people are. Millions of people have had a great idea but only a few have been able to build a business out a of it.
3. The competition is no problem. Some potential business owners are so focused on the idea of making fast cash that they forget to do their homework. Venture capitalists hear this all the time: “This widget is going to generate money because no one else makes it!” The reality is that if no one else makes it, one of two things is going on: Either the business owner hasn’t really searched hard enough or the product isn’t in demand.
4. I want the satisfaction of owning a business. Ego is another enemy of business ownership. Some owners insist on running the show but have no real idea of how to do it. Successful entrepreneurs stick to what’s best for the business and are willing to defer to more knowledgeable managers when necessary. For them, ego isn’t a part of the equation when dollars are at stake.

Think twice about business ownership

Fast cash and running the show are both nice, but not necessarily the best motivations for starting a business. Much more is involved and potential business owners should sit down and consider their true goals before starting out. Unless you’re prepared to handle the full responsibilities of an entrepreneur, it’s best to keep your day job and leave business ownership to someone else!

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You may avoid student loans with these tips for saving for college

Throughout history, parents have used savings, unsecured loans and credit to get their children through college. Since 1996 however, a new savings vehicle has been on the market and growing numbers of parents are utilizing it. Section 529 plans offer tax-advantages for saving when it comes to college savings. One thing to remember is that college costs are not set to decrease any time soon. In fact, since the 80s, they have consistently risen straight across the board. Also, for parents who wait too long to start saving, many older savings options won’t help. For example, the Coverdell Education Savings Account has an annual contribution limit of $2,000. If parents don’t open it until a child is in high school, it most likely will only put a small dent in college funding. Finally, prepaid tuition plans sound good, but children have to go to schools that participate in the plan. That limitation could mean disaster for a student wanting a specific field of study.

The 529 Plan

State-sponsored college savings plans allow flexibility in choosing a school. In addition, parents starting to save later still have the opportunity to make a sizable investment. The Section 529 plans allow people to invest in a predetermined pool of stock and bond investments. Most plans involve dividing investments according to a given asset allocation that is determined by the child’s age. Younger children traditionally have more aggressive asset allocations and older children have more conservative ones.

The lifetime contribution limit for the 529 plan often times is greater than $200,000 and that affords a great flexibility in how much parents contribute. All earnings in the account are tax deferred and for parents living in the state when the plan is used, they also may be eligible for state tax deductions. Once the child reaches college age, the account can be used to pay for qualified higher education expenses. If money remains in the account after paying off college, the balance can be transferred to a younger sibling or other related family member headed for college.

The advantages and disadvantages of a 529

Older methods of paying for a child’s college meant dipping into savings, taking out unsecured loans or family assistance. Today, the 529 savings vehicle is offering a much less intrusive method of saving for college. The biggest advantage of the fund is that the plan is flexible and has few limits. Plus the state-sponsorship means that they are tax-deferred vehicles for saving money. The other big advantage is professional asset management. Each participating state contracts an asset management firm to handle the plan. You can find out what company your state uses by visiting SavingForCollege.com.

Disadvantages

When it comes to the disadvantages of the plan, there are a few to note. First, the plan is funded by various stocks and bond investments. With any stock or bond-funded account, there is a risk to be aware of. When it comes to the 529 Plan, returns are not guaranteed. That means that potentially your account could lose value, or remain the same. Companies cut back on the aggressive stocks and bonds as the child ages, but risk is never completely out of the picture.

Parents also should have a complete understanding of the contribution and withdrawal rules to the plan prior to signing up. Every state has its own rules in terms of procedures, so be sure to read up on what state is applicable. There are also penalties to be aware of if withdrawals are not used for higher education expenses.

Choosing the right plan

It takes some research to find the right savings vehicle for college funding. The Section 529 plan can be extremely helpful, but there are other options to consider. A prepaid tuition plan may make it possible to lock-in on a college’s tuition rate. That can cut down considerably on savings, unsecured loans and credit needed to fund a shortfall. Coverdell Accounts may be useful for parents who start saving early and commit to saving religiously every year. What plan a parent uses needs to be individualized to their specific financial situation. Research is key in finding the right solution to the problem of funding college.

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It’s not that difficult to find emergency money if you are willing to sacrifice. Now that the beginning of the year is here, many people are making New Year’s resolutions. Five of the most common are quitting smoking, exercising, eating healthier, decreasing debt and saving more money for emergencies. These are all good goals to have but many people don’t realize that on top of being beneficial, they also can save people a lot of money if they manage to commit to the changes long-term. Here are some ways each one will benefit your bank account.

Smoking drains your wallet

On top of smoking being bad for you, it also is a huge cost to the average smoker. A study done by the American Lung Association said that smokers listed “saving money” as the number one reason they wanted to quit. If you are smoking just a pack a day, you are spending anywhere from $1,825 to $3.650 a year for your habit. Add to that the cost of caring for smoke-heavy clothing throughout the year, and the expense can get out of control.

Quitting can save you money when it comes to insurance premiums. Normally smokers have to pay 15 to 25% more on health insurance premiums than nonsmokers and 50% more in payments for life insurance. If you manage to stop smoking for a full year, you also will be privy to special nonsmoker rates on both health and life insurance premiums.

Everyone says they want to exercise

According to the National Association of Health, on average Americans have to spend $7,800 on their health care. President of the organization Scott Leavitt said, “More than half of these costs are the result of lifestyle choices.” Research is showing that exercise can bring down those costs. Leavitt stated, “If people are eating right and exercising three times a week for 20 minutes a day, they see prescription costs decrease by 70% and medical costs decrease by 30%.” Medical research has shown that exercise can have positive results on conditions like diabetes, high blood pressure, high cholesterol and heart disease. Dietician Katherine Tallmadge said, “With exercise alone a lot of patients are able to go off of medications entirely or cut medication in half.” The savings here is substantial for people looking to save more and increase their emergency money funds, rather than throw their money away on bad health.

Eating healthier can save you money

Contrary to what some people believe, eating healthy does not have to be a budgetary stretch. Tallmadge said, “The fat, the salty, the sweet, that’s the expensive stuff. You can buy a 10-ounce bag of potato chips for $2.59. For the same amount you could buy four pounds of raw potatoes that have vitamins and fiber.” Some good tips for those who want to save money are to buy leaner cuts of meat, eat protein-rich beans and buy produce when it is in season and least expensive. Tallmadge instructs clients to “not focus on what is the cheapest, but rather what is going to meet their needs most economically.”

Debt is a huge expense

It costs to carry debt. Just ask the millions of Americans who are currently mired in billions of dollars-worth of it. The average American owes $8,329 according to a 2009 Nilson Report survey. That debt costs to maintain. For example, people who are carrying that much debt may be trying to pay it down. If they have a 15.99% APR and are making minimum payments of $167 per month, it will take them 33 years to pay the debt off. And they will end up paying over $15,000 in interest alone. On the other hand, in the same scenario, if they increase their payments to $200 a month, that same debt can be paid off in just five years and have a total interest of $3,800.

Creating an emergency fund is crucial

As many Americans learned during the recession, it’s difficult to manage without savings. When you have savings, you won’t be forced to use high-interest credit cards to manage emergencies. You also won’t need payday loans or short-term loans to cover the shortage. If you have an emergency bill of just $500, and have to put it on credit, you could easily end up paying $580 due to a high interest rate. It’s best to do an assessment of your budget and see where you can come up with savings. Small things like buying fast-food for lunch or stopping for a morning coffee can add up over the course of a month. Cutting back on these two items alone can bring anywhere from $40 to $200 in savings to your bank account.

The resolution’s staying power

Committing to any of the above resolutions can create emergency money. Consistent changes on a small scale will add up over time. Whether you are stopping smoking, committing to exercise, changing your diet, getting rid of debt or saving more, you will be thankful when you look back in a year from now. While others will be in the same position they were in December 2009, you’ll be able to revel in your accomplishments.

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Retailers post-recession

Things are looking good for retailers. With the Christmas season just ending, many retailers were worried that they would have much more depressed sales numbers than ever. The recession was weighing heavily on everyone’s mind and stores were bracing for a lagging season. A Christmas miracle happened for them though – shoppers appear to have used last-minute shopping techniques. These last-minute sales caused retailers’ numbers to reach higher than predicted.

Namely there were two things that caused the last minute rush: 1) Shoppers procrastinating and waiting for last-minute super-specials; 2) the East Coast’s snowstorm that hampered some shoppers plans forcing them to shop in a hurry. Although things are looking up, true numbers won’t be available until the week after Christmas. That’s when experts officially close the books on the holiday season and assess performance.

The procrastinators weigh in

David Bassuk, managing director of AlixPartners, said, “The procrastinators were really out in force. But I think retailers needed to be more aggressive to fight for those sales. A lot of people are still willing to hold out until after Christmas because the deals weren’t as good.” For example, Joe Roberts of Madison, Wisconsin, purchased a PlayStation 3 for his son. He waited to shell out the $300 cost due to the recession. Roberts is self-employed as a designer of manufacturing equipment whose wife most likely will lose her job soon. He said, “I don’t feel good about our outlook.” There were millions of procrastinators shopping this season and they brought the last minute surge retailers were looking for.

The weather can contribute

The weather definitely can contribute to sales. When consumers don’t feel safe driving, or can’t drive due to weather, they put off shopping altogether. The East Coast’s snowstorm just prior to Christmas made retailers worried. Wally Brewster, spokesman for General Growth Properties, said that merchants had to make up for lost sales after the roads were cleared. The peak in customers was a welcomed surprise, but most likely numbers will still be about the same as they were last year for the retail mall.

A full assessment

It won’t be until January 7th that retailers release their official numbers for the 2009 season. It will be interesting to see how well they really did post-recession. Most analysts expect that retailers’ fourth-quarter profits should be healthy due to them not having to slash prices more than anticipated. Plus, their numbers were also cushioned by lean inventories so there was not a lot of unsold merchandise left to eat up profits. Once the economy does weigh in on the numbers, analysts are expected to release their official assessment for the2009 year of shopping.

Change is about to come

Most experts believe that the recession is officially over and now it will take time for things to stabilize. One of the biggest contributors to retailer’s lagging sales is the unemployment rate. With many companies set to begin hiring full-time employees at the beginning of 2010, analysts are encouraged. They believe that the economy will start turning around as soon as jobs are again available to consumers.

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Working with a Financial Planner

Financial planners serve an important purpose in today’s world. You’re a busy person – you work hard every day and you just don’t have time to figure out how to best allocate your investments or how to plan ahead for your retirement. That’s okay – there are plenty of financial planning professionals available today who can help you with these needs. Here’s how to choose the right one for you:

What are Your Specific Needs?

Everyone is different – maybe you need help determining how to invest an inheritance you received, or maybe you just need a little advice on how to be sure you’re on track for retirement. That’s why the first step to selecting a financial planner is determining why you need this advisor in the first place. Performing this self-evaluation will also help you decide which type of professional to contact. For example, a Certified Public Accountant (CPA) is the best choice to handle your tax-related issues, while a Certified Financial Planner (CFP) will be able to handle a wider range of concerns.

Seeking Out Recommendations

Once you’ve decided what type of financial planner you need, you’ll need to narrow down the field. In any given city, there may be dozens of CPAs or CFPs – how do you know which one is right for you?

Just like you’d ask around for recommendations on a new doctor or hairstylist, solicit advice on local financial planners from your friends, relatives and neighbors. Ask who they’ve used before, what they liked and didn’t like about the planner and whether or not they’d recommend the planner to you. Person-to-person advice is some of the most honest information you’ll get – at the very least, it’s a more reputable source of referrals than the direct mail flyers you receive or the “true story” testimonials the planner has featured on his or her website.

Conduct Financial Planner Interviews

After soliciting referrals from your friends and acquaintances, you should have a short list of financial planner candidates that interest you. Gather as much information on them as you can from the phone book and internet and then call to set up an initial consultation. This meeting should be free and will give you a chance to meet the financial planner and learn more about his or her money management philosophy.

One of the first things to ask in these interviews is how the planner is paid – which is typically by commission, a flat fee or a fee based on your assets. A commissioned sales person makes a percentage off of every purchase that you may make, a situation which obviously sets up the potential for abuse if the planner tries to pressure you into a particular sale. Planners who charge flat fees typically bill by the hour or by a set fee for a particular service (for example, a set amount for a comprehensive financial plan), while other planners charge a percentage of the assets you invest with them as an annual fee. There’s no one way that’s right or wrong, but it’s important that you feel comfortable with the pricing structure the planner uses.

Finally, don’t be afraid to trust your instincts – after all, this is your money we’re talking about! After interviewing all of your potential candidates, do your best to choose the one you have the most confidence in and who you feel has the best long term plan for managing your money.

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Buying a new vehicle

Anyone looking to purchase a new car most likely is concerned with how to get a personal loan. In the past people were able to pay cash for car purchases, but due to the recession, now most people are in need of financial help. If you are looking to buy a vehicle, there are some rules of thumb to remember during the process. First of all, anyone looking to search for loans should start with a good budget. Knowing your financial situation is crucial when deciding on what price range you can afford. Start off with a basic assessment of your expenses versus your income. Remember to take into account insurance and car maintenance when coming up with your final numbers. You want to make a wise decision with what you can afford because it will dictate your payments for years to come.

Checking credit scores

Today’s world is all about credit. Anyone who has tried to get a loan knows how important the credit score can be. Don’t ignore your credit and then get the bad news when you are sitting across from a loan officer. Rather, do your own research. Pull up all three of your credit reports. A good rule of thumb is to request them six months prior to applying for a loan. Once you get your reports check the following items:

• Name, address, and aliases

• Each individual account

• Amounts owed and dates

• Judgments, if any

• Bankruptcy information

• Outdated information

You want to write to the credit bureaus and challenge any issues that are inaccurate, outdated or misleading.

Decide on new-versus-used purchases

The next decision to make is whether or not you want to buy a new or used car. A new car can be tempting, but remember that there is a reason why this country sells about three times as many used cars as new ones. People understand now more than ever that cars depreciate the minute they leave a lot. In today’s recession people are more discerning than ever and aren’t prone to throwing away unnecessary funds. In today’[s economy it’s best to not be tied to a large personal loan, but rather opt for a loan that fits into your budget. New cars inevitably come with higher price tags. Unless you have the funds to pay more, and lose more in depreciation, a good used car is the most advantageous option.

Pick the best car for your life

Finally, car buyers should consider what type of car they realistically need. For example, a car being purchased to drive children around needs to have ample room. On the other hand, a car for a senior citizen should be more focused towards economical choices. Other questions like “Who is the primary driver?” and “How many passengers will normally be driven around?” should also be addressed.

Buying a car wisely

In the end, buying a car is a big decision. Anyone in the market for a car should be wise with decision making. Especially in today’s economy, people need to be as cautious as ever regarding finances and that includes big-ticket item purchases. Most likely a personal loan will be needed to fund the cost, but minimizing it can save thousands in interest payments over the years of the contract.

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Do you wonder what short term loans and mental health have in common? So do most people, but the marital counseling field is saying, “Quite a bit.” It’s no secret that the recession has brought many couples to their knees in terms of financial stress. They are trying to manage money, family, children, jobs and home life in a time where the recession is not being cooperative.

One family feeling the pressure is the Fields family from Kansas City, Missouri. Husband Jeremy Fields lost his second job just prior to the recession. His wife, a stay-at-home mom, returned to work part time to try to shore up their income. Of the difficulties, he said, “It never was to a point where we were yelling and screaming at one another, but there definitely was some tension that could be felt.”

The University of Georgia’s study

The University of Georgia conducted a research study on the affect the economy has had on the need for marital therapy. It also aimed to create a therapeutic program that blends the need for both mental and financial well-being. The Fields participated in the study, and wife Kelly said, “I loved the fact that they were together because all the people I know who are married, their biggest problem is money and who is spending what and not paying the bills. … I thought, this is genius to talk about both.”

Researchers believe this is the perfect time for the study because of the recent recession. The stress of bills is much greater than it was prior to the economic downturn. Therapists are recognizing the stress as the culprit in a lot of suffering marriages. Kristy Archuleta, financial planning professor at Kansas State, said, “When something financial does come up in a session that provokes a lot of anxiety, It is glossed over with another problem. So you might work on another problem that has some impact on the finances, but never address the financial issues that are going on.” Things ranging from mortgages, to utility bills to short term loans can all add up and stress a marriage to the point of collapse. Therapists are seeing this more and more post-recession.

Therapy is changing

The methods of therapists are changing as a result of the new sources of stress in the world. Traditionally, counselors didn’t address clients’ budgets or debt reduction plans, but today a new group of therapists are seeing finances as a hot topic. John Grabel, financial planning professor at Kansas State, said, “Couples don’t have a clue what to do. A lot of middle America is facing financial and marital problems combined. Where do they turn?” The answer to that is the growth of a new type of marital counselors who are addressing finances as a source of stress in daily life. Approximately 30 practitioners nationwide are starting to focus on “Financial Therapy” as a niche market. They believe that the interplay between therapy and finances is an important one to address formally. Grabel added, “Just like a marital counselor would normally address arguments, communication and child care, they are now addressing loans, finances and monthly bills.”

One more marital issue to think about

The new therapy topic of finances is taking hold. In particular, because of the recession’s affect on marriages nationwide, therapists are addressing the topic with open arms. Clients are responding positively to the discussions. Kelly Fields added, “It definitely helped us realize that there are ways that you can take the financial strains and be able to live with them comfortably and not take things out on each other.” Counselors recognize how paying mortgage loans, short term loans, monthly bills and salaries have noteworthy affects on marriage. They are empowering clients to address their financial concerns positively and effectively, in an effort to better their marriages.

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Everything from simple payday loans to the most complex high-finance trades are set to fall under strict new rules by the government. Recently, the House passed new legislation set to police the financial industry. The goal of the move is to avoid repeating the same mistakes Wall Street made a year ago when it sent the nation into the recession.

Part of the new legislation would give the government control over companies that are perceived as a threat to the financial well-being of the nation. In addition, it would create an agency to oversee all consumer banking transactions. The change was made on a party-line vote, 223-202, with no Republican support.

The Obama administration

The move was a win for the current Obama administration, but it did alter some of the president’s suggested cures. Much of the burden of policing the industry falls on the Senate. President Obama heralded the House’s action and called on Congress to act quickly to get the bill to the White House for his approval. He said, “The crisis from which we are still recovering was born not only of failure on Wall Street, but also in Washington. We have a responsibility to learn from it and to put in place reforms that will promote sound investment, encourage real competition and innovation and prevent such a crisis from ever happening again.”

Democrats are hoping that the legislation will help address all the issues that led up to the recession. Representative Barney Frank said, “Let’s put it to the American people: Do you prefer the Republican position of doing literally nothing to rein in these abuses or should we try to rein them in?”

Much of the disagreement between both parties centers on the issue of thoroughly policing the financial industry, versus leaving it alone. Republicans believe that the move would “burden” the business world. Republican leader John Boehner said, “This house has been on a spending spree, a bailout spree and a regulatory spree that I could never have imagined in any of my prior 18 years here in Congress.”

Now that the legislation is moving, financial institutions can expect governance. The big news is that any financial institution falls under the rules—from providers of small payday loans to high-end trade firms. The only ones to be exempt would be companies so small their actions would not have a defining impact on the economy as a whole.

Who would govern?

The bill calls for the creation of a Financial Services Oversight Council, which would be composed of the Treasure secretary, Federal Reserve chairman and the heads of regulatory agencies to monitor the financial markets. Their job would be to watch impending threats to the nation’s economic constitution and immediately act. It would identify companies and actions that require strict standards. The Council would have the authority to take apart even strong companies if they were thought to be a risk to the economy. A $150 billion resolution fund would be created and funded by companies with large assets and hedge funds worth at least $10 billion.

The future of the bill

The future of the bill is still up for debate among party members. Should the vast expanse from payday loans to high-yielding trades be policed under the same body and function under the same rules? The parties involved are sharply divided on the issue, but for now the new legislation is headed to the President for approval.

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With the economy in the doldrums and the holiday season fast approaching, many people are looking for ways to make a little extra money on the side. While decreasing spending and taking on extra work are the most logical actions to take, this is often not enough for many people. Some of these people are exploring the wealth of get-rich-quick schemes to be found online while others are looking into more unusual opportunities. Here are three unusual opportunities that at least some people have had success with and might be worth considering.

Donating your reproductive cells

The idea of being a sperm donor has been the subject of endless crude jokes for years, but believe it or not there is real money to be made by selling your sperm or eggs. Women’s reproductive cells, or eggs, fetch much more money than men’s reproductive cells, sperm, because they are harder to obtain. A woman can expect to get $3,000 to $8,000 for her eggs while a man can get anywhere from $1 to $200 per donation for sperm. To be a successful donor, you will generally have to be physically fit, disease free and well educated. Further, you will have to undergo a series of medical examinations and psychological tests before any reproductive center will pay for your cells. Women also have the option of becoming surrogates, or carrying the fertilized eggs of another woman until birth for women unable to carry their own children. Surrogates usually get about $25,000 for carrying the child to term.

Becoming a clinical trial subject

Like sperm donors, many jokes – and even several television comedies – have been based on the idea of volunteering to be the test subjects for medical experiments. Nevertheless, this is a legitimate way of making money which can also leave you free to do other work at the same time. A clinical trial usually runs between ten and ninety days and can pay anywhere from $50 to $5,000 apiece depending on the clinic, the drug being tested, and the risk factors involved. Although you will be asked to provide a comprehensive medical background before taking part in a clinical trial, you do not have to be in perfect health or shape to participate. In fact, some trials specifically seek out subjects with particular pre-existing conditions, so having high blood pressure or asthma may get you more money as a clinical trial subject than a healthy person.

Selling your hair

Believe it or not, your hair may be worth more than you know. There is a whole industry that uses human hair to make wigs and hair extensions and if your hair is long and healthy it might be worth quite a bit of money. A good batch of strong, healthy hair can usually get the seller between $300 and $900, and if your hair is particularly long, pretty, or otherwise desirable you can get considerably more for it. Generally the key factor is length, the longer the hair the more it is worth. Hair having vivid color or that is untreated and healthy tends to be worth more. You can find any number of businesses online that will buy your hair right away and the process is fairly simple and direct.

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The home buying process seems like a fairly straightforward idea. The sellers and their agent reach an agreement with the buyers and their agent. Since agents study the local real estate market, it is assumed that the asking/selling price is on target. The bank then comes in via the appraiser to make sure the value of the home is sufficient to off-set the bank’s risk of the buyers defaulting. If all adds up, the deal is done. Every party has a vested interest in making the deal work because no deal equals no money for anyone. For many years appraisers were under pressure to find enough value to justify approving the loan. This added to inflated home prices over the last 20 years. To deepen the problem, easy credit allowed more people to enter the market driving up demand and sending home prices soaring. Appraisers had to find more and more value to make the deals work. Everything seemed fine as long as everyone agreed on the value and kept paying for it.

A Self-Defeating Prophecy

For many years, the role of the appraiser was just assumed in the home buying process. There seemed to be so much value in homes that the appraiser’s only job was rubber stamp the deal that was already done. What many failed to realize was that banks and their appraisers created that perceived value; that is until the market collapsed. With all of those ill-equipped new homeowners defaulting on their mortgages left and right, home values plummeted. The house of perception the banks and their appraisers built came crashing down. To make matters worse, an economic downturn drove people from their jobs and, consequently, out of their homes. Lower home values also meant little or no equity. When it came time for all the marginal homeowners to refinance to cover their balloon style mortgages, the cupboard was bare. They defaulted, too.

Those Who Study History…

The immediate reaction by mortgage companies to the housing market collapse was to tighten credit. They pulled in the reins so much that almost no one who needed money could get it. This seemed like a justified reaction given the magnitude of the financial earthquake shaking the nation. One problem with looking back too long is that the economy doesn’t move forward.

A Self-Defeating Prophecy, Part II

The role of appraisers now has become one of defender of the bank. They seem to have swung too far the other direction and are being reactive to the crisis the same way they were reactive to the greed that caused it. The truth remains that no deals equal no money for anyone. The appraisers are so consumed by protecting the bank against defaults that they are missing the fact that this tight fisted approach is hindering any recovery effort in the housing market. Nobody qualifying for a home loan is just as damaging as everyone qualifying.

Comparison shop to save money on large medical expenses.

Consumers are using payday loans to fund their growing medical costs, and the practice may be necessary for a while longer. Although people were hoping for a swift-ending recession, medical costs may be one thing that rises steadily in coming years.

According to a survey done by benefits consultant company Hewitt, the average “insured worker at a big company is likely to spend $3,826 on insurance premiums and out-of-pocket medical costs in 2009.” That cost is up by 9 percent since last year, which is an almost unbelievable statistic considering the inflation rate is nearly 0 percent. In difficult recessionary times, health care is one industry that seems impervious to cutbacks. Another Hewitt study showed that the average retiring couple will need $250,000 in savings for medical expenses alone, despite Medicare and Medicaid.

Finding savings in health care

Despite predictions, there are ways for consumers to minimize their losses. The recession has brought about a new frugality and method of handling unplanned bills, including medical ones. Here are some strategies many consumers are using.

Negotiate your medical bill

First, be sure to negotiate. Ruth Levin of Continuum Health Partners stated, “The uninsured frequently ask for a discount or a payment plan, but most insured customers don’t realize that they can (also) negotiate.” In particular if consumers have a large deductible, negotiating can make a huge difference in the out-of-pocket expense. Doctors are willing to charge less if the services are paid for up front because they understand that in the end this saves them billing/processing money. Another tip is if consumers have large bills, they shouldn’t automatically use their credit cards to pay up. Many providers work out interest-free payment plans with customers.

Consumers should comparison shop, the same way they would if purchasing a high-priced item. If a test is needed, patients should ask doctors to recommend more than one facility. Then, call insurance providers to find out which one will complete the test at the least cost to the patient. Cigna Insurance offers an online payment estimator where patients can compare pricing on common tests such as MRIs or CT scans.

Medications can provide savings

When an emergency prescription is needed, many consumers use payday loans to cover the immediate cost. Although this may be a knee-jerk reaction, all patients should try generic equivalents. They can be a fraction of the price and bring medical expenses down substantially.

Patients also can go to Drx.com. This site allows users to compare retail prices on medications to find the equivalent at a cheaper price. Research is involved, but consumers can find cost-effective alternatives to their prescription needs.

FSA, flexible spending accounts

Another way to save money is to use the FSA. Studies show that 80 percent of employers offer this type of savings account, but only about 22 percent of employees enroll. The account allows people to set aside a portion of their monthly pay for health care expenses. Consumers don’t have to pay payroll or income taxes on funds that go into an FSA. This fund can be used for co-pays, deductibles, prescriptions and sometimes even over-the-counter medications. Many companies are making their usage simple by issuing debit cards that work just like a bank-issued card but can only be used for medical expenses.

There are two catches to the FSA. If you don’t use your fund, you lose the money. For this reason, estimating how much to put aside is key. Workers should look at past medical expenses and gauge how much may be needed to store away in the fund. At the end of the year consumers can normally deplete any leftover funds with purchases like eye glasses, OTC drugs or other small medical purchases.

The second thing to remember with FSAs is that timing is everything. Normally consumers can sign up for the accounts only after a major life status change such as the birth of a child, or marriage. There also is an open-enrollment period to watch for. Consumers need to be sure to watch for when their employer’s enrollment begins and be ready to sign up.

Handle the growing costs of health care

Regardless of the economy, the reality is that medical costs are on the rise and projected to keep moving up as time goes by. Consumers need to be wise and use new techniques to bring costs down. Some people use savings and payday loans to manage emergency costs, but there are other ways of minimizing expenses. Be wise and use negotiating, generic medications and FSA accounts to handle the growing costs of health care.

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The concept of an investment banking university is relatively new. To date only a small number of these specialized universities have been established. The chance to earn high salaries and work in a dynamic environment make investment banking an attractive career choice, but increasingly complex financial regulations and high demands for computer literacy to give a distinct advantage to new entrants with a higher education.

There is every reason to believe the number of courses aimed at potential investment bankers is likely to increase in response to the premium placed on the entrants’ education. In addition to regular brick-and-mortar universities, online course providers are also rising to the challenge by adding investment banking to their course options.

Investment banking university options

The investment banking university options currently available include degree-level courses that last up to three years and shorter training courses organized by investment houses for trainees.

The concept of the investment banking university is particularly popular in the UK. New British programs focus on teaching applied finance theory and offer industry-specific training. These programs are designed to develop management skills on a practical level. Students are offered the opportunities for internships in leading investment banks during the summer months.

Investment banking university concept popular in former Soviet block

The emergence of a capitalist economy in the former Soviet countries has clearly generated a demand for investment bankers, and consequently it is not surprising that universities in Moscow and Kiev now offer investment banking courses.

In addition to explaining the internal structure of a typical investment bank, these courses include subjects such as how to market bank services and how to effectively perform business evaluations and financial modeling. As other developing economies improve their financial infrastructures, the need to train their own investment banking staff is likely to encourage the opening of investment universities in many other countries.

Investment houses enthusiastic about training programs

Although investment banks cannot offer degrees on a university level, and their internal investment banking university programs last a matter of months rather than up to three years, they have evidently realized the value of advancing the education of their trainees in this manner.

One of the best known investment houses in New York claims its investment banking university gives an opportunity for trainees to meet with senior executives so that they quickly gain an appreciation of the global reach of the bank and its ethical standards. The course is taught both by bank staff and outside experts. Subjects covered include accounting, corporate finance, credit analysis and financial modeling. The trainees are also offered specific training to enable them to acquire the technical skills required by specific investment banking house departments.

The Obama administration is working hard to reform laws for companies who issue credit cards. On May 22, the president signed off on the Credit Card Accountability, Responsibility and Disclosure, or Credit CARD, act of 2009.

The bill is set to improve the way companies deal with consumers and act as a watchdog agency that protects users. Here are some of the benefits of the new law.

Increases are retroactive

Card companies can no longer raise rates on an existing balance unless the customer is 60 or more days past due. There will no longer be “anytime, any reason” clauses that almost every credit company employed in former contracts.

If the cardholder does trigger the default rate, the bank has to be willing to restore the rate if the cardholder maintains six consecutive on-time payments. Rates also can’t be raised the first year after the card is issued and low introductory rates have to last at least six months.

Rate hikes

Lending companies are still able to raise credit card rates, but they have to give consumers 45 days notice before the new rate is effective. This can help consumers to budget more wisely and switch to new credit cards if needed. Currently, notification time is only 15 days.

Gail Scherwood, a consumer in Billings, Montana stated, “The notice we received was dated two weeks prior, but we didn’t get it until four days before the increase. That didn’t seem fair.” This new rule hopes to resolve this issue, and give customers time to react to pending increases.

Fees

Fees are another hot topic with credit cards. Cardholders no longer will face over-limit fees “unless they elect to allow the creditor to approve over limit transactions.” Also, in general banks won’t be able to charge fees to consumers who pay their bills over the phone or online.

The only fee they will be able to tack on is an expediting fee at the consumer’s request. In addition, if cardholders pay at a bank’s branch, the payment must be posted same-day to avoid late fees.

Student credit cards

There are restrictions on students ages 18 to 21. This consumer group has to have:

1. An adequate income or a co-signer
2. Attended a financial literacy course

If they don’t have both, they won’t be approved for a credit card. This law protects young people who, in the past, were heavy targets for the credit card industry. As a result, many young people were overwhelmed with debt because of the “free” credit cards they were being inundated with. A recent survey showed that the average college student is holding $3,173 in credit card debt. This is a record high since 1998 when the first study was done.

Double-cycle billing is over

Another result of the new credit CARD law is a ban on double-cycle billing. This is when credit card companies base their finance charge on the current and previous balances. This allowed companies to charge interest on debt already paid from the previous month.

Payment allocations

Previously, payments were applied to lower-rate balances first, thus bringing in fees and interest rates on higher balances. Credit card companies are no longer able to do this. The new law requires that any “above minimum payment is applied first to the credit card balance with the highest interest rate.” This could save thousands for consumers.

More time

Finally, consumers will have more time to pay. Card companies must send out statements to consumers 21 days prior to payment due dates. This will give people adequate time to make their payments and adjust their budgets.

Credit CARD

The new law for credit cards should be enacted shortly. It will do a lot to monitor companies’ actions and protect card users. President Obama’s goal was to set in motion a safeguard for credit users, and this law is the first step to reaching that goal.

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