Credit card interest rates are going up. Has your bank dropped the bomb on you? (Photo: wilpf.org)

If you have been relying on credit cards to get by each month, you may need to borrow money just to pay the minimum payment these days. Credit card companies are raising interest rates dramatically in an effort to stay ahead of the declining economy. But the problem is that they are not just doing this to those who have had problems paying their bills on time, but those who have always paid on time. Does this seem unfair to you? Yes, but the cold reality is that people who have had their credit cards for 10, 20 or even 30 years, with previous interest rates at about nine percent, are now getting slapped with rates over 20 percent!

Is This Legal?

Yes, because the fine print in your agreement that you signed when you first accepted your credit card states that they can raise your rates at their discretion. But it will not be for long, because the new rules affecting their behavior, known as the Card Act of 2009, will not take effect until August, 2010. Regardless of your personal situation, even if it hasn’t changed, the overall financial environment has changed, creating more risk for banks and credit card companies. If they spread out the risk, they can limit their losses on those who default on their payments.

Shouldn’t I Be Notified?

Currently, banks do not need to give you more than 15 days to let you know that your rate will be increased, and what you can do about it. Did you miss this notification? You probably did, as they put this in your monthly statement, or even in a separate envelope that you may mistake for junk mail and throw it away. You have a chance to decline the new rate and continue paying off your bill, but if you miss the deadline, you will be stuck with the new rate. After August, 2010, you will get at least 45 days notice, which should help you actually see it.

My Rates Increased – Now What?

The ideal situation is that you catch the notification before the deadline and call your bank right away to let them know that you decline this new rate. If you opt out of this new rate, they will close your account, but you will continue paying off the balance at the lower rate.

However, if you miss the deadline, another option is to pay off any balance that you owe and close your account. You can possibly borrow money at a lower rate than what your credit card is currently at to pay off the balance and save yourself thousands of dollars in interest rates.

Or, if you want to keep the account open, transfer the balance to a lower rate card. Be sure to check your credit on your other card first, as well as what the balance transfer fee is. If you are not careful, you may end up paying more in fees doing this, than if you were to accept the changes and keep your account open.

Plan Ahead

The best route to saving money in the long term is to plan ahead. Before you borrow money to pay off your high credit card debt, create a budget that shows where your money will go and when. This way, you know exactly what to count on. Of course, creating a budget is only half the story—you must stick to the budget you create, so that you will have no need for credit cards or high interest loans in the first place.

Credit cards are both a blessing and a curse for millions of people worldwide. Managed use of this form of consumer credit can help build one’s credit score and provide a convenient means through which to transact with merchants who require a credit card in order for a consumer to secure services (automobile rentals, hotel rooms, etc). The key to managing one’s credit card usage, however, is a something that many consumers do not practice: paying off the balance each month. By making only the minimum payment, credit card debt grows significantly as interest is compounded. Revolving lines of credit like credit cards can saddle a consumer with a lifetime of debt.

Then There’s Identity Theft

Use of credit cards can expose consumers to the nightmare of identity theft. Whenever you pay a restaurant bill with your card, you’re exposing yourself to risk if the server is less than honest with your sensitive information. If you’re shopping online at a site with less than industrial-strength security, great potential for an information leak is there. Giving your credit number over any form of telephone connection is highly problematic as well.

Such scenarios of financial pain and horror might cause you to wonder how you can keep yourself from becoming a victim. One answer is to use payday loans rather than credit cards in emergency situations where you need quick cash, as the process does not generally expose you to potential identity theft. However, having a small number of credit cards can be beneficial to your FICO score (indicating diversity in your credit portfolio, which creditors like to see), so perhaps a better long-term answer would be how to make credit card usage less dangerous.

Make it Anonymous, Perhaps?

Elli Androulaki and Steven Bellovin of Columbia University recently published a study entitled “An Anonymous Credit Card System” which proposes a system that could serve as a solution to this problem with credit cards. Consumers would be able to kept close track of their credit card usage while banks would be able to justify the payments it makes to merchants through an anonymous E-cash system.

An Anonymity Barrier

One of the benefits consumers enjoy when using credit cards is that logs of transactions are readily accessible. In addition to convenience, this provides a level of security in that consumers can challenge erroneous charges. However, such logs can be a double-edged sword in that banks can (and often do) sell that consumer profile information to third parties. What the study authors propose is a system that maintains the benefits while at the same time protecting consumer and bank privacy through a barrier of anonymity. For consumers, however, the anonymity system express is conditional in that the consumer must make honest attempts to keep up with payments. If an overspending transaction occurs, the consumer is blacklisted from the anonymous service.

For online retail, truly anonymous credit cards would prevent any unauthorized outsider from acquiring information about a transaction or those involved in the transaction. Androulaki and Bellovin stress that banks would not be able to create profiles that they sell without the cardholder’s permission. In order to achieve this level of privacy and security, the authors have created a theoretical system whose high points will be discussed here.

The Dawn of Credit Card Security

According to previous studies of credit cards and state-of-the-art security methods, measures have existed since at least 1994, but such schemes have involved extraneous trusted parties to maintain security. Furthermore, previous credit card protection schemes offered no expense reports or means of error correction for consumers. Using E-cash as a money substitute that cannot be copied or spent more than one time has furthered security schemes, but it requires prepayment to function and works only for online transactions. It also provides no avenue for error correction or clear listing of transactions. Prepaid debit cards are limited in their security application for similar reasons.

What the authors propose is a system that combines an E-cash system for making payments and a combination of “blind and plain digital signatures” for other operations. Consumers, merchants, card-issuing banks, acquiring banks (institutions merchants are authorized to receive payments through) and credit card associations (Visa, MasterCard and others who set transaction rules between the different bank types named here) would all be served by this system. Credit cards under the new system, write the authors, “should not be forgeable or usable by any third party. It should be possible for cardholders to track their transactions (Expense Report Service) and provide an undeniable proof of any mischarge (Error Correction Service) without endangering their privacy.”

How E-cash works

There are two types of E-cash used in this system, drawn from “wallets.” One is accessed by the consumer while the other is where merchants deposit E-cash received from the consumer. Blind signature schemes are used to ensure that merchants get paid and consumer identities are protected from third parties. If set limits are exceeded, conditional anonymity of the consumer is revoked – an added incentive to make payments, which appeases the banking establishment. For the most part, merchants and consumers are identified only by signature keys when they open their E-cash accounts with their banks. In order for consumers to access their E-cash credit cards, they create an anonymous pass code. Backups, multiple layers of encryption and loss recovery systems are present here, as are timestamps for online transactions; consult the study for a more detailed account. It is interesting to note that encryption is performed by the consumer during the anonymous credit card origination process, via secure home software. Thus, a home computer would be required.

How are Anonymous Credit Cards Paid?

Obviously a consumer honor system would be inappropriate, so the consumer is required to report the amount of money spend each month to the card-issuing bank. Regular backups and reporting are required to protect both banks and consumers. Spending is proven through receipts. The card-issuing bank then computes the consumer’s monthly payment through the same formula used today for standard credit cards.

How Does Error Correction Work?

The consumer has the right to contact their credit card association in the event of an error or fraudulent use. In the event of a error, a receipt is required in order for a correction to be made. When the merchant makes the correction and gives back funds via E-cash, the currency passes the refund to the credit card association, who in turn moves it to the merchant’s acquiring bank. It is the acquiring bank who finally moves the funds back to the consumer’s card-issuing bank. If fraudulent charges require purchase cancellation, the exchange is handled in a similar fashion.

Breaching the Veil of Anonymity

As mentioned previously, consumer anonymity is dropped if credit cards are charged over their limit. In that instance, all E-coins withdrawn by the consumer are traced. The authors mark this as necessary for loss recovery. But seeing as how a cardholder may open as many anonymous accounts as desired, being able to achieve transaction linkage is possible.

Buying into the Checks and Balances

The anonymous credit card system proposed by the study authors could eliminate identity theft altogether (until someone figures out how to introduce decryption technologies in the middle of the process). That could occur, but the system proposed could be the best current option for safe credit card use.

I find it interesting that the proposed system would require consumers to hang on to their receipts. It’s something consumer groups and banks (not to mention mom and dad) always advise us to do, but how often do we practice what they preach? If you’re a conscientious consumer who already keeps track of such things, your adjustment to such an anonymous credit card system would likely be painless. For those of us who are forced to become more accountable, the transition would be more difficult. However, it is a much safer financial road to travel. It is also a responsible road. Sure, payday loans are still be more desirable in situations where carrying a balance over from month to month becomes too expensive, but credit cards will still have their place. The layers of checks and balances that preserve security may sound inefficient to some, but remember that the financial world rarely gives us something for nothing. This isn’t trading freedom for protection, in my opinion.

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.

Add a "c" to "Shleppers" and you may have an arduous journey! (photo: flickr.com)

No one wants to max out their credit cards when moving. But that’s what happened to John Winston of Salem, Massachusetts: “We were a simple move…going to a neighboring city. Our moving company promised that it would cost $875, and a possible added cost for extra time. That was reasonable.”

In the end, the moving company gave John an onsite estimate of $1,950, after his things were loaded on the truck. Fearing the movers would hold his property hostage, he decided to pay the bill with a credit card and dispute it with the office later.

The dispute with the office never happened, however, because the moving company closed before John could contact them. The company completed the move, but John ended up paying the entire $1,950. The contract he signed clearly stated that any disputes had to be handled prior to moving.

How to move without breaking your budget

Moving can be a disaster if consumers aren’t prepared for the transaction. People who are moving should settle the details before the moving truck shows up. Here are some tips for moving without breaking your budget.

Do some comparison shopping

Moving costs can vary widely based on the company you choose. Check with at least three companies before signing on the dotted line. Visiting CityMove.com is a great way to get online bids from several moving companies. Consumers can compare quotes and decide which services are most important and most cost effective.

John Katz, CEO for Flat Rate Moving Company advises, “Request the moving company visit your home prior to moving so they can see exactly what items, big and small, are going to be going. You don’t want any surprises on the day of the move for yourself or for the company.” Also, make sure that quotes include an estimate of how long the job will take. The last thing you want is additional charges to your credit cards for over-time hours.

Perform background checks

Consumers should also run background checks on every company they are considering. The Better Business Bureau can give valuable information on the business dealings of each company and consumers can see the complaints, if any, that have been filed. Make sure the company doesn’t have any repeat offenses, such as continually showing up late, misrepresenting themselves, or overcharging. BBB.org or Yelp.com can provide reviews of businesses. Consumers should also ask moving companies for three recent client references.

Sort through your stuff

Moving time is a great time to get rid of things you don’t use or need. Moving estimates can be made on either total weight or per-hour rates. Either one can be minimized by less having less to move. Garage sales, donations, and give-a-ways are great ways to get rid of things you don’t want to pay to move. Not only does getting rid of excess baggage cut down on moving expenses, it provides extra cash from garage sales or a tax deduction receipts from donations.

Jon Sorber of Two Men and a Truck, suggests people move small items themselves. Sorber said, “Every time a mover has to go into the house, that’s more time [you're paying for].” It’s often easy to move lamps, plants, books, china, and toys for yourself. You can also can pack items, roll up rugs, and break down bed frames yourself rather than pay movers to do it.

Invest a little extra effort

With a little extra effort, consumers can spare themselves unnecessary expense when it comes to moving.  Rather than maxing out credit cards, paying twice as much as the estimate, or paying for unnecessary things like packing, consumers should take a proactive approach to moving. Doing so will save time and ultimately, money.

Learn how you can organize your bills so that they seem less of chore and more of an achievement.

You see them every day, and you hate to open them. What more exciting news could they possibly bring than reminding you of your obligation? Don’t they realize there is a recession going on? Do they think you have extra cash lying around? Rather than looking at them like the 800-pound ogre that won’t go away, begin organizing bills by priority and take a conquering approach to them.

According to psychologist Maslow’s hierarchy of needs, the first thing you have to satisfy are physiological needs such as food, shelter and breathing. This is generally a good guideline to follow, but you don’t have to exactly stick to it to the T as you’re organizing which bills to pay first. You may want to consider this recommendation.

Keep a Roof Over Your Head

As you’re leafing through those dreaded envelopes, organizing the bills in order of least ulcer-inducing, remember first that you’ve got avoid sleeping under a bridge. Mortgages may be the biggest pain because they are the largest payment, but if you consistently miss paying that bill, then be prepared to pitch your tent underneath the nearest overpass. Okay, perhaps that’s a bit harsh. At least consider that you have to first take care of your physical needs.

Got to Get Around

The second priority in organizing your bills is making your car payment. Unless you live in a city and have daily access to fast public transport, you need be able to get to and from work or to that next job fair. In the United States, Canada and other spread out societies, you can’t really go too far without wheels. We are highly dependent on cars to perform day-to-day functions.

Health Insurance

Despite this being under large debate in the government, health care is not something to gamble with. Swine flu, cancer treatments, disability-related injuries, obesity and stress-related symptoms have all affected physical and mental health in some form or another, especially in this economy. You need to be able to see the doctor whenever necessary. Don’t leave your health to chance and whimsy.

Who’s On First

Pay the bill that has the earlier date. You might have thought this would be the first criterion in paying bills, but you have to consider your personal needs as you’re organizing. Can you afford a negative balance in your checking account until payday rolls around the next week? Or can you afford to lose your house for a month as you maintain a positive balance in your checking account? Once you meet your physical needs, then you can take on the pesky bill that knocks early at your door.

Highest Percentage Credit Cards

Paying off high interest-rate credit cards is emphasized time and again by financial experts for good reason. Missing these payments on a consistent basis just piles on unnecessary fees. Remember that you are paying a penalty for being late. If you show up late to a meeting, you get a stern look. If you’re late with a promised card payment, you’re slapped with an added cost you don’t need right now. Some credit cards are a lot harsher about your delinquency than others by how high they charge you.

Even a place like this is hard to enjoy when you don't know what you're paying! (photo: wikimedia.org)

Now that the recession is leveling off, many people are getting ready to start using their credit cards again. Because the economy is projected to reach its turnaround point mid-summer, consumers are looking to use their cards to pay for summer vacations.

Marilyn Dean of Los Angeles, California stated, “We haven’t had a real vacation in two years…the first year we just opted not to go but the second year the recession hit us hard and we couldn’t.” Like many other Americans, Dean is planning for a year of normalcy, and that includes a well-deserved vacation.

Paying for vacations

When it comes to paying for vacations, many Americans are looking to their credit cards. Anne Banas, editor of SmarterTravel.com, stated, “It’s pretty much the best way to make a purchase, especially your big items. It’s just really easy. And you don’t lose much in the exchange.”

Some consumers are worried about exchange rates, however, those are secure. Both Visa and MasterCard secure money based on “wholesale rates offered to large banks and corporations,” instead of the retail rates most customers are charged. Every time Americans use a credit card for an overseas purchase, they are guaranteed an excellent exchange rate.

Stiff fees for overseas purchases

Although the exchange rate is taken care of if a consumer pays with credit cards, there are other things to be aware of when traveling. Fees can crop up quickly with any overseas purchase. Most banks charge a “currency conversion fee” when their customers purchase items outside the US. This fees can range anywhere from 1% to 3% of the purchase price. Consumers should do some advance planning and call their credit card companies to find out what the fees for foreign conversion are.

A recent study by Bankrate.com showed that Capital One was the only card company that did not pass the conversion fee on to their customers. If you know you’re going on vacation in a few months, it may benefit you to open a credit card account that has no conversion fees and use it solely for travel.

Over-the-top fees for cash advances

Taking out cash advances on credit cards is a huge budget-breaker. Interest rates on cash withdrawals often exceed 20%, and that interest begins accruing from the minute the money is withdrawn. David Lytle, editor of Frommers.com, stated, “The rates on those things are awful. It’s the worst way to get money.”

Hidden fees for debit card withdrawals

When traveling abroad, the best way to get money is to use a local ATM and a debit card. A debit cards is linked directly to the cardholder’s account, so it deducts funds automatically. Consumers should be aware, however, that some banks charge anywhere from $2 to $5 for each withdrawal from an ATM outside their network. It’s also possible for some banks to charge 2 to 3% of the amount withdrawn with a debit card at an ATM.

Consumers need to understand the fees and policies of their banks before they travel abroad, and if they find a bank that offers a better deal it may be wise to open a special travel account. With some careful research and planning, paying for  an overseas vacation really can be worry-free.

Credit cards should be used carefully. However, if you need a car, the incentives available now could make using a credit card to buy a car feasible. (Photo: picasaweb.google.com)

If consumers are in the need of a car, this may be the right time to use credit cards to do it. Most dealerships have huge inventories and no way to get rid of them. The recession has put auto dealers in difficult positions, since most Americans are in no hurry to invest in big-ticket items. That’s great news for consumers who are looking to make an auto purchase. Potential savings on a car are substantially greater and selections are huge. Most auto dealers are making generous deals, with cash-back options and low financing rates. Cars that once were marked up are now being marketed at well below the sticker price, and sometimes even lower than the dealer’s cost.

Scott Painter, CEO of TrueCar, said, “There’s no question that you should get a screaming deal… the slump in sales resulted in discounts so steep that new cars can sometimes be less expensive than comparable used ones.” According to research done by TrueCar, last year dealers sold approximately 21 percent of 2009 models for less that dealer price. This year, that number is up to 25 percent already.

Dealerships Feeling the Pain

Adding to the auto industry climate is the rapid closings of many dealerships. In 2008 there were 1,200 closing dealers, this year GM Corp alone is planning on closing 1,200 to 1,500 franchises. These closings have helped turn the industry upside down. For example, at one time the Range Rover was a high-quality luxury vehicle. Now, there are fleets of the vehicles available with $12,000 cash-back on purchases. This isn’t the only vehicle with this kind of savings. Cadillac’s CTS sedan comes with $7,000 in incentives, while Ford’s 2010 Transit Connect vans are already coming with a $300 cash-back special.

Credit Cards: A Near Necessity

Credit cards are almost a necessity in today’s world. Many people use credit cards for everything from everyday purchases to big-ticket necessities. Although the recession has taken its toll on the credit and lending industry, companies are trying to right their wrongs and help customers make purchases. Recently, the federal government has stepped into the credit card mess, citing unscrupulous activities and demanding changes. Credit card companies understand how bad they look in the eyes of the public due to their dodgy dealings. Some companies are cutting customer’s limits, but also bringing down interest rates to make payments more manageable. They want to have customers who continue to pay on their bills, rather than just file bankruptcy or abandon the accounts.

Because of this, credit cards are slowly being used once again to fund high-ticket items like cars. With the overwhelming discounts and deals available, this is a wise choice for some consumers. Lilah Branson of Nashville, Tennessee said, “I need a car and I wasn’t planning on buying on in the recession. But then I saw the deal my credit card company offered and the deal the dealership had…combined, the deals were too good to pass up.”

Things are Slowly Picking Up

Credit cards are helping people again, slowly integrating back into everyday use. No one knows the where economy will be once the recession is completely over, but consumers are steadily getting their feet wet and wading back toward normalcy.

More creditors are agreeing to settlements on credit card debt before law changes make their rates illegal. (Photo: picasaweb.google.com)

A new study is showing that many lending companies are settling debts on delinquent credit cards. As a new way of mitigating losses, many credit card companies are settling cards for notably less than the total amounts owed. Edward McClelland, a writer in Chicago, is a consumer who had an outstanding balance of $5,486 to deal with. At a loss, McClelland offered the credit card company’s customer service representative half of the amount. Surprisingly, his offer was accepted without supervisory permission.

A growing trend with credit card companies is to accept settlements directly from customers. Due to the unemployment rate in the nine percent range and more people struggling with bills, companies are opting to take what they can get. Companies are also giving their customer service teams direct authority to settle with customers. David Robertson, publisher of the credit industry journal called “The Nilson Report,” stated that “Now it’s the card company calling you and saying, ‘Let’s talk turkey.’”

The Credit Card Secret

Many card companies are keeping their new settlement policies secret, however. Only a few are willing to disclose their new loss mitigation plans. Bank of America and American Express are both professing to using the tactic on a “case-by-case” basis. And other companies are mum on the topic, though the Bankers Association stated that settlements are a growing practice.

This change in procedures is an indicator that the credit card industry is losing some of its control over the market. The upcoming credit reform bill is another looming change that factors into lenders’ planning processes. Once 2010 arrives and the bill is passed, companies will have a hard time raising interest rates and many of their once-common fees will no longer be legally applicable. The reality is that despite changes and more rules for credit cards and lenders, they are still looking for ways to find debt relief. It’s estimated that credit card debt is reaching $939.6 billion and a record level is being written off. Adam K. Levin, founder of Credit.com, stated that “Creditors would rather have a piece of something now, instead of absolutely nothing down the road,”

Future Plans for Creditors

For the first time, credit agencies and banks are examining new programs that would allow counselors to use reductions of principal as part of their account settlement processes. Previously, counselors would work with companies to modify interest rates and late fees, but the balance had to remain unchanged. It was the one non-negotiable factor in accounts.

In addition, many creditors were used to being tough on delinquent customers, citing their assets as proof they could pay. In the end, creditors could sue or put a lien on the credit holder’s assets. The after effects of the recession have created a credit-holding body that has less to lose. This is posing a problem with credit card companies who still want their money, but find little options on how to get it.

Credit Cards Settling Like Never Before

Debt relief for companies issuing credit cards is a number one priority. The swelling amount of delinquent accounts that have come from the faltering economy has forced them to consider a new, more realistic methodology for dealing with consumers. They are willing to settle with customers and take what they can get, rather that staunchly demand money they probably will never see.

Novak Djokovic may need one of his credit cards to help pay the fines for his latest on-court outburst. (Photo: Wikipedia.org)

“Use one of your credit cards, Novak!” I shout from my semi-comatose position on the couch. I just witnessed a tennis player’s breakdown that’s going to cost him money, maybe lots of it. Novak Djokovic missed a tiny little lob over the net and smashed his racquet into the court surface in rage. The racquet, of course, folded and close-up shots from the TV cameras showed possible ridges in the court surface.

This is Gonna Cost!

Whatever happens, this little display of temper is going to cost you, Novak. Probable fine from the APT tennis organization will be in the region of $10,000, wasted racket – $200, repairs to courts surface – a whole debate. The Shanghai Club may decide to lay a complete new surface, because the surfacing contractor will no doubt tell them that it is impossible to ‘patch’ a court surface… “We will never get it perfectly smooth.” If you are really unlucky, they may decide to resurface all the courts in the club so the colors match. As far as the racquet is concerned, one of your credit cards will look after all the messy details.

The Money Angle

This year is the first that Shanghai joins eight other cities in hosting an ATP World Tour Masters 1000 event, the new top tier of tournaments on the ATP World Tour. It is also the finale to the three-week Asian swing of the ATP World Tour. The prize money is over five million dollars. Wow, Novak, you couldn’t have picked a worse place for your demonstration. Over a billion Chinese will remember you.

We Understand

We may be highly critical of your actions and your uncontrollable desire to smash something, but inside we do understand. The court surface was a better choice than your opponent, Gilles Simon, or the umpire or even some stray character out of the audience. But the media is going to dine out for weeks on this event. All sportsmen and others who are trained to such a high pitch snap easily. My grandson, aged nine, lost a swimming race by a touch last week and he’s inconsolable, mentally kicking himself for taking too long on a turn. He hasn’t smashed anything in rage, but I’m sure he will learn as he gets older.

Ambition

It’s all about ambition, the desire to win, to excel, to never be second. Every time we are on the way to the swimming pool, grandson reminds me that his ‘dream’ is to swim in some future Olympic Games. I hope he makes it. Then he says, “What was your dream when you were my age, Pop?” It’s difficult to explain that I wanted to be a tail-gunner in a Liberator bomber. Luckily, I was too young to achieve my dream.

The Novak Djokovic Dream

Novak has achieved his. At age 24, he will be elevated to the world’s number three ranking in a week’s time, something very few people manage to do. He has already won about 14 million dollars playing tennis, so he walks with a wallet full of unlimited credit cards. The racquet-slamming incident was not money linked, just an outward sign of sportsman’s total frustration.

Banks have suffered through the recession with huge mortgage industry defaults, but a new fear that credit cards will do the same is looming. Ken Lewis, Bank of America CEO, stated he believes that despite the government’s $700 billion rescue program, it will be “an awful year” for credit cards and companies that issue them.

It’s estimated there are almost $76 billion in credit card loans, and more than half of that debt is held by Bank of America, JPMorgan Chase and Citigroup.

The charge-off rate

Already setting the stage for disaster is the banking industry’s estimate that  their charge-off accounts have reached a historic high of 7.73 percent. Most experts anticipate that figure will increase, as the unemployment rate is still dangerously high.  This rate is commonly accepted as the most accurate indicator of future losses in the banking, mortgage and credit card industries.

Analyst Mike Taiano believes that the charge-off rate could be higher than 10 percent by year’s end. “With the economy the way it is, most consumers are still struggling. … Though there are some indicators that we are through the recession, there is still a long way to go to recover,” he said.

Bracing for the loss

Unlike the recession of the ’80s, when unemployment rates ran high also, this generation brings its own set of problems. First, new proposed legislation is set to allow consumers to request their banks reduce their mortgage debt if they have filed bankruptcy. Experts are fearful that this will cause more people to file bankruptcy so they can default on credit cards and other outstanding debts.

On the brighter side

David Robertson, publisher of the Nilson Report, stated that it’s “encouraging” that banks are adept at maneuvering recessionary periods after “years of practice.” When facing credit card losses, they know what cautionary actions to take.

For example, banks are slashing limits already and raising interest rates to bring in as much revenue as possible.  They are also working their customer service teams exceptionally hard, encouraging communication with customers. American Express is a leader in the mitigation process and recently offered their credit card holding customers a $300 cash-back return if they paid their account balances off and the closed their accounts before April.

Citibank

There is also news that Citibank is joining the ranks of a banks coming up with strategies to mitigate loss.  The company is looking to work out a joint venture for its private credit card division that serves retailers, as a way of moving out of the credit card business altogether.  However, experts say Citibank is alone in wanting to distance themselves from the credit card industry.

Most banks know they will have a difficult time attracting a completely new set of customers and would rather work hard to keep the ones they have, while easing their own risk.  Stuart Gunn, director of Bridge Strategy Group, stated: “If you want to be the retail bank of choice, it means you have to have CDs, debit cards, home equity loans and credit cards. Do you really want to exit one of the major lines of business?”

This Federal Reserve/Vanderbilt/Penn study tries to connect payday loans to credit ruin, but what they leave out suggests a rosier alternative. (Photo: flickr.com)

Credit cards have proven to be both a useful tool in establishing a credit history and a bane to those consumers who hope to maintain a good credit history. The temptation to “swipe and go” has been actively cultivated by the American media. With the magic plastic in hand, consumption is quick and easy. Those who pay off their credit cards each month may escape the revolving interest trap, but the vast majority of credit card users must not pay their balances in full. If they did, why would credit card companies offer reward programs? If consumers weren’t tied into earning points and paying interest fees, the programs wouldn’t be profitable for the companies.

What about Payday Loans?

According to multiple sources, over 10 million U.S. households use payday loans each year. These short-term loans are paid off over a set period of time, typically two weeks’ time. They fulfill a need and are not a swipeable ticket to impulse purchases. Certainly payday loans CAN be used for impulse buys, but lenders make it clear that this is not advisable. Furthermore, the amount available is finite, typically smaller than the credit limit available on a credit card.

Yet Sources Continually Try to Connect Payday Loans to Financial Ruin

Take the January 2009 interdisciplinary study “Payday Loans and Credit Cards: New Liquidity and Credit Scoring Puzzles?” Written by Sumit Agarwal (Federal Reserve Bank of Chicago), Paige Marta Skiba (Vanderbilt University Law School) and Jeremy Tobacman (University of Pennsylvania), this study attempts a statistical correlation between credit card default and payday loan use. In particular, the trio attempts to make the case that consumers consistently make bad decisions by choosing to take out payday loans when they have credit card liquidity.

There must be a reason that consumers make such a choice, however. Agarwal, Skiba and Tobacman do not define such reasons, so I will attempt to fill the crucial gap.

Methodology and Results

Agarwal, Skiba and Tobacman analyze a sample of 102,779 people who took out payday loans from a single lender (this is significant, as I’ll show in a moment) and 143,228 with credit card accounts in states where the same payday loan company operates. They discovered that while credit card issuers used FICO scores as the primary means of determining a consumer’s credit worthiness, the payday lender used Teletrack scores instead, which tend to track borrowing history more on the subprime scale.

According to the study authors, Teletrack scores were eight times more effective at predicting payday loan default than FICO scores. Thus, it can easily be assumed that the more effective credit evaluation device creates more successful payday loan transactions that it would defaults and additional fees. The mainstream media is too often ready to accuse the payday lending industry of wielding such fees like a fire hose on unwitting consumers, but the truth of the matter is much less dramatic.

Payday Loan Customers Have Access to Prime Credit

Even though the authors’ study indicate that on average, consumers who use payday loans have a lower average income compared with those who just use credit cards, the same study indicates that their average FICO score is still in the 620 or slightly lower range. Thus, they can still access prime credit cards.

Why is it then that, as the authors indicate,

Two-thirds of people in the matched samples have at least $1,000 of credit card liquidity on the day they take their first payday loans, much more than the typical $300 payday loan.

It’s an interesting question. A 2001 survey by Elliehausen and Lawrence regarding credit card availability and usage found that 56.5 percent of respondents who used payday loans had bank-issued credit cards with liquidity available, but 61 percent “hadn’t used them in the past year in order to avoid exceeding the cards’ credit limits.”

People Don’t Like to Admit When They Fall to Temptation

The authors show us that there is a steady decline in credit card liquidity leading up to the time when consumers take out payday loans, but the liquidity doesn’t disappear entirely. The authors comment that

This is interesting because it speaks to the question of why people borrow on payday loans. If liquidity were flat until a large drop one month before the payday loan application, we would suspect that a single large bad shock had unexpectedly arrived. Since we find average liquidity falling steadily, impatience, general financial mismanagement or persistent shocks seem more likely explanations.

Perhaps what Agarwal, Skiba and Tobacman define as “impatience” or “financial mismanagement” could include the psychological temptation having a credit card that needn’t be paid off in full each month (advisable, but generally not required). It would be worth studying that factor in greater detail, as I know from first-hand experience that having access to credit, using it and allowing it to revolve month-to-month is an easy trap. In my opinion, such situations are not out of the ordinary. Closer study is warranted.

The Author’s View of Payday Loans is Limited

Obviously, if you only survey financial results based on the clientele of a single payday lending operation, your results will be far from definitive. When the authors claim that credit card holders who take out payday loans are 92 percent more likely to experience credit card delinquency, such a dramatic number indicates to me that the statistical sample is much too small to be meaningful. If consumers evaluated by Teletrack are generally less prone to payday loan defaults, why would credit card defaults be all that different?

It is significant to note here that applying for payday loans does not generally depend upon or impact one’s FICO score. That is one of the major selling points of the product, as consumers with less than perfect credit can take out a payday loan for a set amount when necessary. There is no system of revolving credit at work with payday loans; the balance is paid in full at a set date two weeks in the future. Furthermore, since payday loans obtained after Teletrack reference are generally not recorded in a consumer’s credit history, other lenders cannot use a consumer’s payday loan history against them when they apply for large-scale loans for homes, vehicles, education, etc. If banks could use payday loan information against consumers, they most certainly would. Their track history of penalizing and confusing consumers with credit card terms prompted President Obama to step in with fair credit practice legislation, which in my mind only serves to support my argument that banks will charge whatever they can.

Why Don’t Credit Card Companies Use Teletrack?

You’d think credit card companies would find any subprime information about a consumer to be valuable in their attempts to justify higher rates and limiting practices. The study authors indicate that the reason credit card issuers don’t normally use Teletrack is that the credit bureaus charge them for each credit query. Perhaps the leverage they can glean on a consumer is not valuable enough to counteract the fees?

Temptation Yields to Payday Loans

Considering how much damage a consumer can do to their credit history by allowing revolving interest credit cards to spiral out of control, the set maturity period of payday loans could readily be considered a better option. From a psychological standpoint, not having a tempting credit card in hand when you surf E-commerce sites or drift through the local shopping mall could be advantageous to the consumer. While Agarwal, Skiba and Tobacman have the beginnings of a useful study here, a larger sample of both credit card issuers and payday loan businesses is needed to make a more meaningful assessment of the payday loan’s supposed correlation with credit destruction. Perhaps then consumers can more easily see that the practices of banks who issue credit cards may be the most harmful advice out there. See the video below if you aren’t convinced of that yet…

Related Video:

If you are looking for Payday Loans, Apply Now!

(Photo courtesy of flickr.com)

Lenders are starting to offer credit cards to consumers again. It’s no secret that lending to troubled borrowers was the beginning of the credit-industry downfall. Have credit card companies learned a lesson? Or are they headed down the same road again?

Brenda Jerez, who recently overcame credit problems by slowing paying off each bill in installments after medical expenses and emergencies left her $50,000 in debt, is already being solicited by credit card companies again. Said Jerez, “It’s like I’ve got some big tag: target this person so you can get them back into debt.”

Targeting troubled-credit consumers like Jerez  seems like a sure-fire way to repeat the cycle of default lending. But this type of consumer is the biggest customer base for many credit companies.

The next troubled market

Lenders are use sophisticated techniques to target consumers by creating detailed profiles of their financial health. It’s estimated that over 100 million Americans have been profiled thus. The information is sold to other credit companies, mortgage brokers, and banks that all compete for the next untouched market, and they seldom care if that untouched market is less than qualified. Jim Campen, executive director of Americans for Fairness in Lending, said, “They get people who they know are in trouble, they know are desperate, and they aggressively market a product to them which is not in their best interest…It’s the wrong product at the wrong time.”

Predictive modeling

Predictive modeling is a new tactic being used by credit card companies to predict the likelihood that consumers will need lenders, even before the consumers know it. Sometimes bulk letters are sent to homeowners asking if they want to refinance. Later, via email or telemarketing, lending companies find out whether the consumers threw the forms out or used them. This can indicate to companies offering credit cards or home loans which consumers may be in the market for a refinance loan in the near future.

Mortgage triggers

Mortgage triggers are another strategy used by mortgage loan companies is. When a consumer applies online or at a bank for a home loan or refinance, banks automatically get their name and information and can check their credit history. Then they offer the consumer loans and vie for their loan package.

Since 2005, Experian, Equifax, and TransUnion all have sold lists of consumers who apply for loans to banks and mortgage brokers. Alan E. Geller, CEO of Vision Marketing, said, “We call people who are astounded . . . they say, ‘I can’t believe you just called me. How did you know we were just getting ready to [apply for a loan]? We were just sitting back laughing.”

Benefit or detriment?

So the question remains whether or not this form of credit is truly a benefit to consumers, or if it’s just another way for credit card and mortgage lenders to trap people once again. Many experts maintain that it is beneficial to have credit available, but they also warn that without a solid plan to tackle debt, consumers may find themselves in even worse financial predicaments than the ones they are in now.

(photo from flickr.com)

Consumers are still relying on payday loans to make ends meet as President Obama calls for credit card reform.  The President is demanding a credit card reform bill by the end of this month.  “Americans know that they have a responsibility to live within their means and pay what they owe…but they also have a right to not get ripped off by the sudden rate hikes, unfair penalties and hidden fees that have become all too common,” he said.

The Credit Card Holders’ Bill of Rights has been passed by the House of Representatives, and is awaiting Senate approval.   The bill targets unscrupulous credit card companies who employ double-cycle billing and retroactive interest rate increases.  It also would prevent anyone under age 18 from having a credit card.

Correcting an “abuse that goes unpunished”

“You shouldn’t have to fear that any new credit card is going to come with strings attached, nor should you need a magnifying glass and a reference book to read a credit card application. And the abuses in our credit card industry have only multiplied in the midst of this recession, when Americans can least afford to bear an extra burden,” President Obama said. He acknowledges that the availability of credit is essential to a healthy economy, but opposes patently unfair credit-card company practices.  His goal is to stop the “abuse that goes unpunished” and create a watch dog to examine and monitor the policies and practices of credit card companies.

Credit card companies react

Credit card companies argue that the new Bill of Rights may backfire by making it more difficult for consumers to obtain credit. The proposed law, they contend, will place such constraints on the industry that even credit-worthy applicants may be left out in the cold.  They also claim that new rulings enforced by the Federal Reserve already deal with many of the protections the President is rallying for with the new bill.

An urgent call for reform

Regardless, President Obama is asking that The Credit Card Holders’ Bill of Rights be adopted at once.  The urgency of his request is a response to the public outcry over the excessive fees and unethical conduct of credit card companies that have cost consumers billions of dollars.  The President also stated, “Instead of fine print that hides the truth, we need credit card forms and statements that have plain language in plain sight, and we need to give people the tools they need to find a credit card that meets their needs.”

Borrowing money to pay excessive fees

Gail Brennan of Tallahassee, Florida stated, “We’d love to trust credit card companies again.  But because of the high interest rate hikes and late fees, we’ve lost faith.  When you suddenly have to use payday loans and borrow from family to pay for just your minimum on credit card bills, there’s a problem.” It is the hope of legislators that a compromise can be found — one that protects borrowers’ rights and brings a profit to credit card companies, while spurring the use of credit once again.

People like using credit cards

Most people aren’t going to stop using credit cards once the recession is over. Studies have shown that people like using credit cards and want the freedom to do so.  The problem lies in having to juggle other expenses and take out payday loans or other short-term loans just to pay credit card fees.  The recession has brought to light the unethical side of credit card dealings, and the Credit Card Holders’ Bill of Rights aims to correct it.

Changes in the credit card industry hit consumers hard. Payday loans may indeed be the more viable option for cash-conscious consumers. (Photo: flickr.com)

Payday loans are proving themselves to be lifesavers in today’s economy.  Traditional lenders are closing doors quickly to extending credit and it’s leaving Americans in a panic.  Bills are being left until last minute, expenses are being cut drastically and families are downsizing to handle the strain.  Normally credit card companies offer an invaluable service of allowing people to buy on credit and pay later.  In today’s market, this option is becoming obsolete.

Credit Card Companies Changing Their Ways

For years, Americans have relied on credit.  It’s a great idea. The lender advances payment for a small fee and the consumer is able to pay later, while enjoying their purchase now.  Unfortunately with the recession, credit card companies are being forced to restructure their credit policies and procedures.  Consumers are the ones who will be suffering as a result, but there isn’t much they can do about it.

Some recent changes in procedure include:

• Credit card lenders are applying payments to low-interest-rate accounts before high-interest rate ones

Obviously this means customers are being charged a lot more in interest.  Credit card companies are taking advantage of multiple account holders by paying down their lower rates accounts, but not the higher-rated ones.  It’s useless to have a special introductory rate of zero percent if your payments on your normal-rated account are accumulating.

• Credit card lenders are closing customer’s accounts

Lenders are safeguarding themselves by closing inactive accounts.  Many people have an emergency credit card kept aside for only special uses.  Credit companies are taking this as a threat to recouping money. Their thinking is if a consumer has an emergency card and suddenly starts using it, they are having a financial emergency. If they are in the throes of having to use an emergency credit card, what are the real chances of them being able to repay the money?  Companies don’t want to take the risk and they are closing accounts that have no activity on them.

• Rewards are being cut

Sure you were wooed to a credit card because of the reward programs, but those are quickly being cut.  This is the least detrimental for consumers because it doesn’t mean a monetary loss, but it still cuts down on their benefits.  Credit card companies are also asking card holders to spend more to reach rewards.

The economy is affecting credit tremendously and consumers are suffering as a result.  Many people rely on credit in times of trouble, but this is quickly being ended due to credit card companies changing their rules.

An Uncertain Future

A lot of Americans are left to fend for themselves in the struggling economy. Those who have jobs are looking for payday loan aid. Those who don’t are looking to extra money-making jobs on the side to tide them over.  Everyone is looking to 2010 for true answers and improvements in the economy, but whether or not it will benefit people like they think has yet to be seen. No one can accurately predict what the future will hold.

Is Relying On Credit An Option?

Credit card companies are changing their rules to protect themselves from further losses. This leaves card holders on the edge of their seats anticipating further credit cuts and cutbacks.  Credit is no longer a safety net for consumers, but rather another financial aspect of their budget that has to be vigilantly managed.  Only time will tell how much credit card companies will change the face of credit as they evolve through the recession.  Until there are some concrete answers, consumers are left to look to payday loans and short-term funding for their emergency financial needs.

APPLY NOW for your Payday Loans

Credit cards wiped me out...

I’ll be honest with you. My history with credit cards was nothing to write home about. In fact, it was downright scary.

I’d been irresponsible. When I was young, I thought that money was easy to come by, as my parents seemed able to buy me most anything I wanted. All I had to do was put on the right sad face, pout and scream. Sometimes I wish I could go back and do my childhood all over again, if for no other reason than to give my parents a break.

Didn’t they teach me the right things?

OK, you may be thinking that my parents didn’t set proper boundaries for me or establish firm guidelines for behavior. You’d be right.
Once I reached college and was in a position to begin establishing my own credit, I took the reins with furious glee… and promptly drove my financial wagon off a cliff. A clean credit report was the last thing on my mind.

It seemed so easy. Credit applications covered campus like flood waters. In my bookstore bag, at the cafeteria, in the mail, left on my doorknob – everywhere. I saw friends buy snowboards, new clothes, video games and grub at the local taco shop anytime they needed it.

Just whip out the plastic. So simple, yet so dangerous.

What I didn’t realize is that compound interest compounds very quickly. A few trips for food, a few more for fresh threads and one late credit card payment quickly amount to a very large bill. I needed credit fixing, and I needed it bad. Payday loans helped me when I was in dire straits, but I needed a complete financial makeover if I was going to avoid this happening again.

So I changed my ways. I avoided binge spending and worked hard to make my payments and patch things up with my creditors. Once I showed them that I would use my credit responsibly and make all of my payments on time, my credit report history was on the way back up.

What to do with those cards…

Once I had my cards paid off, a thought crossed my mind: would I keep all of them? I didn’t really need as many credit cards as I had, but I didn’t want to damage the credit I’d worked so hard to rebuild after my brush with the bill collector grind house.

Here’s what I found out via Fair Isaac, the company behind credit scores. If you’ve had a card for a long time, it carries more weight. Luckily, that wasn’t the case with me. Secondly, how much of the total available credit you’re using is important. I had two credit cards with $1,000 total credit. One card was paid off, while the other carried a $300 balance.

I held on to one

OK, I fibbed, I still use that card after paying things off. Since I have a handle on how to repair credit now, I’m comfortable with that.
Anyway, I figured it would be safe to cancel the card I’d paid off. I’d been told that it wouldn’t damage my score, but it also wouldn’t raise it. However, by canceling that card, I’d still have a $300 balance, but my total credit line would be only $500. Thus, I’d be exceeding the 30 percent limit and damaging my overall credit score.

Thus, I didn’t cancel the paid off card. My plan is to keep things under control and use both cards to build my credit score. My credit check is thankful for it! And remember how I told you I got payday loans to help when things were at their worst? You can do it to, if you need!

(That’s not me in the video, by the way…)

Related Video:

The one thing you need to do in order to prepare for investing, besides applying for a short term loan, is to get completely clear on your financial goals. This will help to determine how much you need to invest, as well as how aggressive you want to get with your investing strategy. For example, if you are close to retirement and you haven’t started investing yet, then you will need to go with safe investments that will provide a secure income for when your main source of income becomes greatly reduced. However, if you are young and are just starting out, you have more time to recover from a bad investment here and there.

Before you start

Before you start investing however, you need to first determine when you will need this extra income. If you are close to retirement, then this will be within the next few years. Next, you need to determine how much you want to earn from your investing activities. If you are only looking for modest gains in the long term, then look for slow growth funds that will help you achieve that. But if you want aggressive gains in the short term, you will need to look for the more volatile stocks. While these are often risky and you could lose everything you put into them, they also can pay off very well, with the potential of making you very wealthy.

How do Payday Loans Help?

Once you have determined your financial goals, you will need to make sure that you have the financial resources to get started. That’s where payday and short term loans come in. But don’t misunderstand me—I am not, by any means, telling you to misuse these or get yourself in debt way over your head…because that will not help you achieve your long term financial goals. I am, however, telling you that if you do not have the resources to get started, applying for a short term payday loan could help you make the initial investment needed to begin your investing activities.

Be Responsible!

I must caution you though—if you do this more than once or twice, you could get yourself into trouble by digging yourself into a hole. Meaning, if you take out a payday loan, and then when payday comes, you use that check to pay off your loan…then you take out another loan to cover your living expenses…and so on and so on it goes until you are buried so deep in debt that you can never recover. The responsible way to do this is to take out only that amount that you can comfortably live without from your next paycheck, so that you are not digging yourself into a hole.

Credit Cards?

Will credit cards work? That depends on the fees you have on your credit card versus the fees you end up paying for your payday loan. Determine the difference, and go with the method that will give you a lower rate. However, many people tend to have tarnished credit, so a credit card may not always be an option. Either way—you need to determine what will work for you, so that you can take charge of your financial future!

Ever wonder how you can rack up such a huge credit card debt so fast? Many people tend to use their credit cards at grocery stores, mostly buying convenience foods. Why the lure of these items? Why is it that people would rather spend money on pre-made convenience foods that they could make for themselves for a fraction of the cost? For one reason, these foods make a hectic life a little easier. Many baking mixes, for example, brag on their packaging, “Just add water,” while other mixes, such as stuffing, say, “Ready in 5 minutes.” Is the lure of these foods so great that we would willingly go into debt just to shave off a few extra minutes of cooking time?

The pull of these products is mainly due to advertising. When you see a commercial for a popular pancake mix—you know the one where the mom is shaking up the mix and water in the container—what is that message telling you? That it’s easier to buy their products versus putting an extra three minutes of making it yourself. The truth of the matter is, if you were to buy the ingredients and blend them yourself, you would get a better tasting, cheaper product than you could buy on the shelf—and for pennies.

Healthier and Cheaper Alternatives

Staying on the pancake mix idea, you could blend the dry ingredients, using whatever flour you want, such as whole wheat or grain versus the highly refined flour used in the commercial mixes, and store them in food storage bags until you are ready for it. Then, when you want to make pancakes, you would simply place the desired amount of your homemade mix in a bowl and add in your wet ingredients. It’s pretty much the same process you would go through with the commercially made mixes.

Not only are these homemade mixes cheaper, they can potentially be healthier for you. It really depends on the ingredients you use. Instead of using refined flour and sugar, you can use a whole grain flour and Stevia or Xylitol. Or, save the sweetener for when you actually mix your wet ingredients in, especially if you want to use honey or molasses instead of a dry sweetener.

By making your own mixes, you know exactly what is going in your food versus the commercially prepared mixes. But the best part of making your own mixes is that they come out to cost 10 times less than the store-bought counterparts. Say a box of pancake mix costs $2.79 and you can only get one batch out of the box. That’s an expensive batch of pancakes. Now, let’s say that you can get an entire bag of flour for that much, and you only use 2 cups. This option is much less expensive, saving your credit cards for more pressing emergencies.

There are other homemade convenience foods that you can create, such as cake mixes, pudding mixes, syrups, sweetened condensed milk, and so much more. There are no limits to how many convenience foods you can make at home. The key is to figure out what your favorite convenience food has in it, and start experimenting. Or, you could just search the internet for recipes to get you started. The sky’s the limit!

Control What You Eat…For Less

When you make your own homemade convenience foods, you are able to control what you are eating, for much less money, and you save how much you are spending on your credit cards. Because if you can create your own mixes, you can begin living within your budget and relying on your credit cards less. While saving on your credit cards, you can also save on your waistline. By creating your own homemade convenience foods, you can put in healthier ingredients, which when used, you can then begin to bring your body’s health into balance. When everything is balanced, you will then begin to lose weight. It’s all part of the process—you start living frugally, and you lose weight in the process! How cool is that?

Recently, the House of Representatives approved President Obama’s Credit Card Bill of Rights. In a nutshell, it protects consumers against sudden rate hikes and hidden fees. Unlike fast loans and short term loans, credit card companies depend upon fees hidden deep in the legalese in order to bleed more money from already overspent taxpayers. Now some new information has come to light about a number of proposed credit card practices that will hurt responsible customers while riskier ones are aided by Obama’s policies.

Andrew Martin reports for the New York Times that the days of good customers being able to take advantage of cash-back and frequent flier rewards may be a thing of the past. Not only that, but the previously shunned annual fee may be returning – and some say it’s just to get extra money out of the customers who always pay on time.

From Bush’s Dennis Moore to Obama’s Robin Hood

Lessening penalties on risky borrowers is the name of the game with the Senate credit card bill, but what of the good customers? It almost seems backward from the credit card companies’ point of view. Late payers and those in default produce billions of dollars in fees for the credit card industry, so let’s take… less? Although those consumers clearly need to regulate their spending behavior, this legislation is good for them (particularly during this recession).

To make up for that lost income, the credit card companies will target consumers with good credit. It sounds like an Obama Robin Hood plan. Will this drive more good customers to rely on cash  – plus fast loans and short term loans – and leave their credit cards behind?

The hit list… where good customers are on the firing line

Here’s what banks will be loading in their credit card cannons and firing upon clean credit consumers with extreme prejudice:

1. Annual fees (formerly the mark of a credit card you wouldn’t want)
2. Cutting out cash-back and other rewards programs
3. Charging interest right away on a purchase instead of allowing a grace period

“It will be a different business,” said Edward Yingling, CEO of the American Bankers Association. “Those that manage their credit well will in some degree subsidize those that have credit problems.” It will be a socialist coup for the Obama administration. Get ready to eat crow, capitalists. This was the man you voted into office.

Interest rates will still go up

Major credit card companies like American Express, Citigroup, Bank of America and others have begun to raise interest rates already, but now the bulls eye on responsible customers is just too much. Ultra-profit is unnecessary; reasonable policies and the convenience of credit cards should be enough for them to generate good business. The upcoming Senate credit card bill will not cap those interest rates, so banks will be allowed to continue to raise the bar. But they’ll have to do it slowly and with greater disclosure of term changes.

A flat rate? What’s that?

Once, banks issued credit cards to only the best consumers. A flat interest rate of 20 percent was the norm, and there was an annual fee for the service. Changes in usury laws and the establishment of the credit reporting agencies prompted banks to invent variable rates that were geared toward what they perceived to be the credit risk of the cardholder.

The obvious result of this new practice – which began to take hold in the 1980s – is that credit card companies began to exact significant revenue from the bottom end. America’s current economic recession has changed that model, as those lower-end consumers are much less able to pay than before. Now low-end customers get dumped by banks, or their credit limits are lowered. The money has to come from somewhere, so as I’ve said, the banks take it from the good customers.

“How much do we make? We’re not at liberty to disclose.”

Penalty interest rates and late fees are two areas where the government does not require that banks give up the tally. Clearly it’s a significant figure, though. Experts estimate that the figure had increased by around $1 billion annually in recent years. This year, some predict it will top $20 billion.

Simply curbing interest rates will cost credit card companies a great deal. Last December, the Federal Reserve figured it would cost them around $12 billion a year in lost fees and income. The credit card bill under consideration in Congress would, according to Martin’s article, “build on the Fed rules and further squeeze banks’ revenue when they are being hit with a high rate of credit card charge-offs.”

Weep not for credit card companies

It’s difficult to generate sympathy for credit card companies, who have made billions off unfair, deceptive practices.

“The business model will change because the business model doesn’t work for the public,” said Gail Hillebrand, a senior lawyer at Consumers Union. “In order to do business under the new rules, they’ll actually have to tell you how much it’s going to cost.”

Austan Goolsbee, an economic adviser to President Obama, recognizes credit card issuers’ right to profit, but he believes they must do so honestly and not to excess. Excessive rate increases and hidden fees that had become increasingly common amounted to “a series of carjackings,” he said.

“Are there no prisons?”

Goolsbee closes with a telling statement about the sickening attitude credit card companies have about their business: “The card industry is giving the argument that if you didn’t want to be carjacked, why weren’t you locking your doors or taking a different road?”

President Obama’s credit card bill is a mixed bag. The drive for mega-profits have made monsters of them all. Rest assured that fast loans and short term loans to not carry the same stigma.

Related Video:

I am not a fan of the Center For Responsible Lending. It isn’t because I’m against responsible lending, it’s because at the root, they do not in fact advocate responsible lending. Any group whose leadership supports toxic housing market activities of Herbert Sandler, Golden West Financial, World Savings Bank, Self-Help, Inc. and the ugly organization of our times – ACORN – cannot be trusted as an honest authority on responsible lending. I’ll take installment loans as needed, regardless of their dubious claims backed by flawed research.

However, that being said, they do have some reasonable things to say. In a recent press release, the CRL encourages citizens to tell their Senators to support H.R. 627, legislation that would help millions of credit card holders.

Consumers have been held hostage

The United States Senate is in the process of voting on credit card legislation that could help customers “avoid hidden fees and penalties,” as well as “unfair retroactive interest rate increases.”  The CRL takes the high road and encourages consumers to act now by telling elected officials to support H.R. 627 in the Senate. If you aren’t sure who to talk to, try Visible Vote, a handy app for the iPhone, Blackberry and Facebook.

The Senate bill, according to the CRL, is “even stronger than what the House passed on April 30.” H.R. 627, aka the Credit Card Accountability Responsibility and Disclosure Act of 2009 (or the “Credit CARD Act“) would take long overdue measures to guard multitudes of consumers against abusive practices that credit card companies have had on the books as business as usual for some time. During this difficult economy, it’s all the more important for legislators to look after the populace and protect them from nefarious policies. President Obama believes H.R. 627 will help steer the country in that direction; now’s it’s time for the vote.

According to the CRL, here are the key things H.R. 627 would accomplish in the bloated credit card market:

• Allowing increased interest rates on existing balances only after borrowers are 60 days late in making a payment
• Prohibiting over-the-limit fees unless consumers affirmatively take steps to allow over-the-limit transactions to be approved
• Requiring payments above the minimum payment to be allocated to the highest-interest rate balances first

They even provide a link where consumers can take action and make their elected officials aware of their opinions about credit card companies. For those who prefer to call, the Senate switchboard number is (202) 224-3121.

A CRL study? OK, just go with it this time…

Selective Interpretation?, a recent study commissioned by the CRL, points out that the top eight credit card companies – representing 80 percent of balances – are raising interest rates and increasing fees right before our eyes. The Federal Reserve has issued new rules to regulate this, but it won’t go into effect until July 2010. In the interim, H.R. 627 is absolutely necessary to stem the tide of greed on the part of credit card companies.

The study continues to hold credit card companies’ heels to the fire:

In the last six months, all continue to hike interest rates on existing balances on an “any time, any reason” basis; CRL estimates at least 10 million account holders received rate hikes.  Five of the top eight increased transaction fees, late fees, or fees for account maintenance.  At least one top issuer broadened the definition of several other fees – over-the-limit, returned payment, and convenience-check fees – so more customers are required to pay them.

We can’t afford runaway fees and limitless credit card company greed. Tell your Senator to vote yes on H.R. 627.

Related Video:

The most powerful votes we cast are the little choices we make every day. We put a lot of time and effort into debating and formulating world-wide environmental issues and solutions. But on Earth Day it seems appropriate for us to stand back from the forest and take a look at the trees.

Think about the color of money

Take, for example, the choice to use cash or a debit or credit card for your next monetary transaction. When you pay for lunch today or stop at the store on your way home from work, will you use a plastic card or bills made of cotton and linen? Or will you make a blended transaction by paying with cash obtained from a cash advance on your credit card?  These are choices we make every day – and like all our day-to-day choices, they add up to powerful votes about our environment. So in honor of Earth Day, let’s consider which vote is the greenest one.

Start with the raw materials

Plastic

Credit cards are made of polyvinyl chloride, a petroleum product that is rarely recycled, lasts just about forever in a landfill, and produces dioxins when incinerated. According to slate.com it takes about 4.25 grams of petroleum to manufacture one 5-gram credit card. Multiply that by 1.6 billion—the number of credit, debit, and ATM cards produced in America in 2007.  The lifespan of a credit or debit card is just two to four years. Add to this the billions of gift cards and store charge cards we manufacture every year.  Now throw in the fact that most gift cards are used only once.

Paper

At first glance, paper currency seems to have advantages. Paper currency is made of a blend of low-quality cotton and linen waste fibers. Cotton and linen are renewable resources. But the picture is not all rosy, much less green. Cotton and linen production requires an enormous amount of farm land. Conventional cotton cultivation – a particularly noxious bane to the environment — requires extremely large quantities of water, pesticides and fertilizers. According to figures compiled in 2007 by the Danish Environmental Protection Agency the cultivating, harvesting, and ginning of cotton are nearly as energy-intensive as the manufacturing of PVC.

Add to this the fairly short life spans of paper currencies and the fact that paying with paper also requires the production of coins. Extracting metals is environmentally devastating and energy intensive. According to figures published by the United States Mint, some 41,000 tons of metal were used to make America’s change in 2008. Some of the metal, of course, is recycled, but the production of coins from recycled metal uses energy and resources, too.

Consider the unknown and hidden costs

Raw materials and production are only the beginning of the analysis. There are also the costs of transportation and storage of paper money and the electricity required for debit and credit card transactions. And when you begin to ponder the unknowns — like what sort of effects electronic payments have on data centers and third-party processors — an informed choice doesn’t seem possible.

Use the green stuff

The relative greenness of cash and credit may be beyond our ability to analyze, but we don’t have to throw in the towel. The simple and environmentally sound choice is to stop unnecessary spending. However we choose to pay, buying more things we don’t need will always be the worst choice for the environment. Using a credit card encourages us to make impulsive and unnecessary purchases with money we don’t have. With the green stuff, on the other hand, what you see is what you have and you can’t spend more than that.