Choosing the right credit card can be challenging. (Photo Credit: CC BY/MoneyBlogNewz/Flickr)

If you pay for everything in cash, learning how to find the best credit card may not be for you. However, if you plan to use credit cards responsibly and pay them off each month, choosing the right credit card is important. Save cash with these helpful hints.

No credit card is perfect

Imagine a credit card with a permanent zero percent interest rate, rewards and an ample grace period during which no late payment penalties occur. Now crumple up that fantasy and get ready to wade through thousands of credit card offers on sites like Bankrate and Credit Card Offers, to name two of many. The path to finding your ideal credit card must begin with a clear assessment of where you stand. The ideal situation is to pay off your credit card balance each month, but most people fall into one of these three categories:

1. You’re attempting to pay down a pre-existing balance
2. You sometimes carry a balance, spread across multiple cards
3. You have either no credit history or are sporting a battle-scarred credit rating

1. Paying down the mountain

If you’re already dealing with a balance, you’ll want a credit card that offers a low introductory rate and an even lower rate on balance transfers. Such cards generally don’t offer additional perks, such as frequent flier miles. However, most credit card companies have pulled rewards programs off the table these days, so go for a great interest rate, no annual fee and no hidden usage fees.

Read the fine print to ensure that things won’t go south after the initial rate expires. If you execute a large balance transfer, you probably won’t pay it all off during the introductory period. Hence, be prepared for when interest rates go up. Watch out for loopholes in the introductory rate, too. It may only apply to purchases and not balance transfers. The cap for balance transfers may also be significantly lower than your approved credit limit.

2. Be prepared, balance carrier

If you plan to use a credit card regularly and carry a balance, go for a rewards program that offers air miles, points or even cash – if you can find such a program. Watch for expiration dates on your rewards, blackout dates for airline miles and minimum-spending requirements for cash-back programs. When it comes to managing your balance, choose a card with at least a 20-day grace period. That way, you can avoid being charged interest before you even receive your bill.

3. No credit? Not necessarily a problem

While no credit or bad credit will limit your options when it comes to choosing a credit card, many online resources can clue you in to the best subprime secured credit card offers. Try not to carry a large balance on a secured card because the APR is almost always more than 20 percent. Upfront fees of $200 or more on a card with a credit limit of only $250 should not even be considered.

Sources

Bankrate

Credit Card Guide

Motley Fool

New Hampshire Governor John Lynch. Image: marcn/Flickr/CC BY

New Hampshire Gov. John Lynch vetoed a bill Wednesday that would raise the ceiling title loan lenders can charge. The bill would have allowed up to 25 percent interest charged monthly. The state joins 31 others in disallowing these kinds of loans.

Short term loans secured by vehicle titles

Title loans are short term loans secured by vehicle titles. The current rate allowable, adopted by the state in 2008, is 36 percent annually. That is the same cap allowed nationally on loans made to members of the military and their families. That federal bill was passed by Congress in 2006 and signed into law by President George W. Bush.

State Bill 57

New Hampshire State Bill 57 would have allowed lenders to charge up to 300 percent annually. It also would have increased the percentage of the principal a borrower would have paid to renew the loan from 5 percent to 10.

Bill had many detractors

Lynch supported the veto by saying the bill was opposed by many legislators in both parties, as well as the Local Welfare Administrator’s Association, AARP, the Banking Department, the Department of Justice, the New Hampshire Community Loan Fund and New Hampshire Legal Assistance.

Governor says it would hurt families

The bill, Lynch said in a press release, would be detrimental to families, the community and to the economy. The current 36 percent cap, he said, is “reasonable and well thought out. There is no evidence that reversing that law would benefit New Hampshire. On the contrary, there is significant evidence that it would harm our state and families.”

A cycle of debt for vulnerable families

“Failure to repay a loan could lead to seizure of the family car,” Lynch explained, “Which is often essential for family members to maintain employment. “Furthermore,” he said, “for vulnerable families, these excessive interest charges could force them further into a cycle of debt and potentially onto public assistance.”

Sources

Governor NH
Boston.com

Right now, it's Landlords over Tenants. Image: umjanedoan/Flickr/CC BY

Renting a home is not as easy at it once was. As the economy degrades, more and more people are looking to rent, while the number of available rentals is down. Landlords have the upper hand and can afford to be much more selective about who they rent to. The renter has to be more savvy than ever to ensure a happy outcome.

Not so good for the renter

According to Christina Argon of Ebay, rents went up 2 percent in the first quarter of 2011 and are expected to rise 3 or 4 percent over the rest of the year. Vacancy rates, however, are dropping as renters are choosing to stay put. Vacancy rates are down 6.2 percent from this time last year. The trends point to an improvement in the housing market and may be an early sign of economic recovery. It is not, however, currently a great position for the renter to be in. Rents are rising, vacancies are more scarce, competition is tougher for properties, and landlords are less willing to make concessions or offer incentives.

Do your homework

But there are many things a prospective tenant can do to hedge bets in the rental game. The first is to begin early and do your research. Start a month or two before your current lease expires. Once you find a house or apartment you like, contact the County Clerk to search the public records for legal action or liens against the property. Remember, each rental you apply for will require a background search with accompanying application fee. It is best to narrow the field as much as possible ahead of time.

Background checks

Landlords today routinely check credit scores and criminal backgrounds. While some blotches on the credit report do not necessarily spell rejection from landlords, they will be turned off by consistent late payments on utilities and other bills. And, of course, the cleaner your criminal background the better. One or two minor marks will not disqualify a person, but any pattern of legal problems could be very difficult to overcome.

A third or less of income

Another factor to consider is what you can afford. You may have set ideas on this, depending on your own needs and spending patterns. But one needs to consider this from the landlord’s perspective. Generally speaking, a landlord will consider a prospective tenant who earns at least three times the rent. A person looking to rent an apartment for $1,000 a month will likely be rejected if they do not have an income of $3,000 a month, or roughly $39,000 annually.

Lock in a lease

When you find the place that you can afford and that meets your needs — and you garner the landlord’s approval — Argon suggests trying to lock that rate into a lease of 12 or 18 months. Experts say rents will only go up in the foreseeable future. Keep it as low as you can for as long as you can.

Patch
Marketplace
Daily Finance

One saved is one earned. Image: stevendepolo/Flickr/CC BY

The economic crisis affects most of us every day as we tighten our belts and keep our wallets in check. But like a dieter craving sweets, temptation is always there to consume beyond our means. Thankfully, there are simple things you can do when the cravings get to be too much.

Think ahead

Thinking long term can help. Instead of seeing savings and frugality as a chore, think big picture. You and your family will be happier if you aren’t overextending to pay off last month’s splurge.

Realistic frugality begins with a realistic plan. If a budget is too restrictive, it adds stress to your life. That constant pressure may lead to abandoning the budget altogether. Make your plan realistic, but not a “starvation diet.”

Include some fun

While a budget must begin with month-to-month obligations and essentials — mortgage, groceries, car insurance, utilities –  it should also include some “fun money.” If you enjoy sports, make sure to include some greens fees or club dues. If concerts or theater are your thing, figure in a ticket every couple of months.

Another way to achieve this is to keep a “fun fund,” which is reserved only for a specific goal. Instead of giving in to every impulse, focus on the really satisfying ones and put a little away toward it out of every paycheck. Maybe there is a trip you want to take, or one luxury item that you truly want. With a little patience and persistence, it can be yours.

Ways to cut corners

For the day-to-day items, there are many things you can do to cut corners. Here are just a few suggestions to get the ball rolling.

Most beauty schools and community colleges offer cut-rate haircuts and beauty services, as students need opportunities to practice their craft. While that may sound risky, rest assured most places only let advanced students touch the paying customers.

Second-hand and thrift stores are a wonderful resource for items we use every day. Flea markets, garage sales and Craigslist are good, too. Somebody once said one man’s trash is another man’s treasure. Go explore. You never know what you might find for a song.

Fuel expenses are one of the worst drains on our resources these days. Try public transportation, carpooling and consolidating trips. Remember, the less you are behind the wheel, the less you are spending.

Tell yourself ‘Wait’

The best thing you can do to stay frugal and on budget is tell yourself to wait. We see something on television, online or in a store and think we just have to have it. Tell yourself, “Wait.” How many times have we given in to that urge, only to see the item gather dust or wind up in the next garage sale? Chances are it is a whim brought on by budget fatigue, and the burning desire will go away. If the feeling persists, then maybe it is something worth saving for in your “fun fund.”

Sources

Walletpop
The Frisky
Retire by 40

The Federal Reserve is going to announce the debit card swipe fee cap soon. Photo Credit: MoneyBlogNewz/Flickr.com/CC-BY

The Federal Reserve will soon make a definitive ruling on capping interchange fees, or debit card swipe fees charged to merchants by banks. The Fed was mandated to set a cap on the fees by the 2010 financial reform laws, but it may set the cap higher than anticipated.

Merchants cheering prospect of lower swipe fees

For the past year, there has been a tug-of-war in the press and in Congress over interchange fees, the fee that banks charge merchants to wire money from the accounts of customers who have made purchases with debit and credit cards. Merchants ranging from small mom and pop stores to corporate juggernauts such as Walmart and Target, according to Bloomberg, lobbied members of Congress to vote in favor of the interchange fee cap. Financial industry titans such as Bank of America and JPMorgan Chase, along with small credit unions and community banks, lobbied members of Congress to do the opposite and delay any “swipe fee” cap, if not vote to get rid of the legislation outright. The Federal Reserve, according to DailyFinance, is going to announce the cap on swipe fees soon.

Cap could be set higher

The Fed had tentatively said it would cap interchange fees at 12 cents per transaction, but insiders are saying that the fees could be set as high as 24 cents per transaction. Currently, merchants are charged an average of 44 cents per transaction, according to MarketWatch. If fees are set at 12 cents per transaction, it will be a reduction of almost 75 percent. It only costs banks about a penny to make the transaction. The banking industry is estimated to take in more than $1 billion per month from swipe fees. The cap on the debit and credit card transaction fees is a portion of the Dodd-Frank Act, the financial reform laws that were passed in 2010. The card fee cap was mandated by the Durbin amendment to the Dodd-Frank Act, which will take effect on July 21.

Expect user unfriendliness

Due to the massive loss of revenues, consumers can expect that many former perks of banking will either disappear or come with far more conditions. A debit card transaction cap has been bandied about in the press by megabanks such as JPMorgan Chase and Wells Fargo, and free checking accounts have largely gone extinct. Changes to rules regarding overdraft protection fees have cost banks dearly, as well. It is estimated that banks and credit unions have lost about $1.6 billion in revenue, according to MyBankTracker, when financial reform laws mandated that customers have to be asked if they want to “opt-in” to overdraft protection programs. Faced with a drop in revenue that the banking industry is used to, the consumer is the party who will end up feeling the pinch.

Sources

Daily Finance

Bloomberg

MarketWatch

MyBankTracker

White House adviser Elizabeth Warren is in charge of setting up the CFPB. Image: Leader Nancy Pelosi/Flickr/CC BY

The U.S. Consumer Financial Protection Bureau (CFPB) is set to open next month in spite of attempts by Republican Senators to stop it. The bureau, which is the result of last year’s Dodd-Frank Act, is seeking input as to which financial entities it needs to regulate in addition to banks.

Bureau to police the consumer financial industry

The 2010 Dodd-Frank Act, which created the bureau, states that it will regulate banks with more than $10 billion in assets as well as payday lenders and non-bank providers of home and student loans. The act does not define, however, what other “larger participants” of the financial markets it should cover.

Created by the Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act is a federal statute that President Obama signed into law July 21, 2010. The law seeks to regulate the financial services industry to an unprecedented degree. From it, the CFPB was born, under White House adviser Elizabeth Warren. The stated mission of the bureau is to “make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.”

“Consumers deserve the peace of mind that financial companies — both banks and non-banks — are following the rules,” said Warren. The bureau has until July 2012 to determine which industries will be regulated and in what ways.

Non-bank industries to be targeted

In a statement released Thursday, the bureau stated several “larger participants” that could be targeted. Those include consumer credit and related activities, consumer reporting, check-cashing, money transmitting, debt-relief services and prepaid cards. However, the bureau is also asking for input into which industries it should oversee.

Republican resistance

The bureau has met resistance from the start by Capitol Hill conservatives. The bureau can’t begin its work until a permanent director has been appointed, and some Senate Republicans have vowed to block anyone the president may nominate for the job. The bureau, however, is continuing to lay its foundation for the scheduled opening on July 21.

Bureau opposed by banks

Bank lobbies have also opposed the creation of the bureau, arguing that it will lead to fewer loans and fewer financial choices for consumers. They say it will have a negative effect on economic growth.

Sources

Reuters
Advisor fyi
Fox

"Greatest Vitamin in the World" pitchman faces federal indictment. / Image: shannonkringen/Flickr/CC BY-SA

Well-known TV pitchman Don Lapre, who bills himself as “the king of infomercials,” has been indicted in Phoenix, Ariz. Federal prosecutors have charged Lapre with 41 counts, including conspiracy, mail fraud, wire fraud, promotional money laundering and transactional money laundering.

As seen on TV

Lapre, 47, was often seen on television infomercials between 2004 and 2007, claiming he turned his hard-luck life around with get rich quick schemes and enticing viewers to follow in his footsteps. He famously pitched how he made $50,000 a week from his one bedroom apartment. The campaign is perhaps best remembered by some for being parodied by David Spade on Saturday Night Live.

‘The Greatest Vitamin in the World’

The charges against Lapre were handed down last Wednesday by a federal grand jury in Phoenix. They stem from allegations that Lapre bilked 220,000 viewers out of $52 million by enticing them to invest in worthless online businesses through his company called The Greatest Vitamin in the World. Additionally, the charges claim Lapre was personally paid $2.2 million from the company between 2004 and 2007.

False claims of support

The infomercials promised investors that they would be backed by an expensive national advertising campaign and other services. However, federal prosecutors claim they were misled. Allegedly, after investing they were pressured to pay for additional advertising and services.

‘He will face justice’

“This indictment goes to show that if something sounds too good to be true, it probably is,” said U.S. Attorney Dennis K. Burke. “Mr. Lapre used incessant nationally televised infomercials to hawk his vitamins and worthless websites as a way to get rich quick without working hard. His scams swindled a sea of victims, but thanks to the efforts of the Postal Inspection Service and the IRS, he will face justice.”

Hundred of complaints received

The company was closed down in 2007 after the Phoenix Better Business Bureau, the Internet Crime Complaint Center and the U.S. Postal Inspector Service received hundreds of complaints.

Lapre is due to be arraigned in a Phoenix U.S. District Court on June 22. The charges could carry potential fines of $250,000 to $500,00 per count, as well as federal prison terms between five and 25 years.

Sources

Walletpop
USA Today
Daily Mail

Don Lapre hawks ‘tiny classified ads’

Visit America's Credit Unions website to find a credit union near you. (Photo Credit: CC BY/John Benson/Flickr)

One of the most important decisions consumers can make regarding their money is where to keep it. Banks are a common option, but those who have tried depositor-owned credit unions will argue that the advantages over banks make them quite worthwhile. Here are a few of the advantages of choosing a credit union versus a bank.

Shareholder versus depositor interest

While large commercial banks are the domain of corporate shareholders – and hence most concerned with generating profits for a small, select group – credit unions belong to the members. Volunteer customers even serve on each credit union’s board of directors. The sense of shared ownership is reflected in the name credit unions give to checking accounts: share draft accounts.

Interest rates on loans are generally lower at credit unions than banks, and the rate of return on deposits can be significantly higher, particularly on CDs. A credit union’s responsibility to its depositors is highly desirable for the average banking customer.

Smaller size, better individual care

Considering that credit unions are smaller than most banks and generally have fewer overall customers, the opportunity for greater individual care from a financial professional exists. The tradeoff here is that ATM networks may be smaller with credit unions, and the list of services provided will be slightly abbreviated when compared with those of a large bank.

NCUA stability

The banking crisis has caused many smaller banks to go under. Larger banks have depended upon federal bailout money and taxed the reserves of the Federal Deposit Insurance Corp. to the limit. Credit union deposits are insured against loss by the National Credit Union Administration, and the number comparison is telling, reports Bankrate. From the beginnings of the financial crisis through May 2011, 44 FDIC-insured banks failed, versus only nine NCUA-insured credit unions. This disparity exists largely because banks made more risky loans in their drive to boost shareholder profits.

Payday loans at a credit union near you

Recent programs instituted by the NCUA, such as Better Solutions, have enabled credit unions to offer payday loans and similar short term loans to customers at annual interest rates that top out at about 28 percent. A 30-day repayment period is required, and the number of loans a customer can take within a six-month period is limited to three.

Banks versus credit unions

Sources

America’s Credit Unions

Bankrate.com

MonitorBankRates.com

As states try to get rid of payday loans, other types of loans pop up in their place. Photo Credit: AR McLin/Flickr.com/CC-BY

Virginians frequenting pawn shops and title lenders more

Many states have passed laws intended to closely regulate, if not outright eliminate, payday loan lending. However, such laws don’t eliminate the need or demand for a short term credit product. The state of Virginia passed laws several years ago capping the interest rate on payday loans, which has reduced use of that particular product but not demand for financial help. Up to 10 percent of all Virginia households were estimated to have used some sort of alternative financial service, according to BusinessWeek, in a recent study done by the University of Virginia. Four percent of Virginians reported using payday loans at some point and 3 percent frequent pawn shops. Between 2004 and 2008, 70,000 Virginian households used refund anticipation loans and between 2005 and 2009, almost 150,000 Virginians used car title loans.

New class of lenders

Some of the most frequent laws passed against payday lending mandate loan repayment be done over a period of more than two weeks. The state of Colorado passed a law a year ago making the repayment period six months instead of a couple of weeks, according to the Greeley Gazette. As a result, former payday loan lenders are offering six month installment loans. When Arizona let the law allowing payday lenders to lapse in 2010, many thought that payday lending would disappear. Instead, according to the Arizona Republic, many stores simply started offering car title loans instead. In February of this year, a bill was introduced to the Arizona legislature that would authorize installment loans at higher-than-normal interest, as many consumers still need a source of short term credit. North Carolina, according to BusinessWeek, just approved a bill authorizing installment loan lenders to charge more than 36 percent interest on loans up to $1,500.

Supply and demand still rule

Though there are many products that a lot of people find less than palatable, such as payday loans, there is obviously still a demand for these products. A lot of people who don’t have access to bank credit find themselves short in between paydays or have an emergency come up that they didn’t plan for. Then they have to seek out alternative financial service providers in order to get the credit they need. Because many of these lenders don’t benefit from the kind of protections banks enjoy, they have to charge higher interest rates in order to stay open. It is undeniable that there is a demand for these types of short term credit.

Sources

BusinessWeek on VA

Greeley Gazette

Arizona Republic on payday loans leaving

Arizona Republic on new loan bill

BusinessWeek on North Carolina

Merchants are starting to move away from debit and credit cards, as the interchange fees they have to pay banks to get paid are cumbersome and expensive. Photo: MoneyBlogNewz/Flickr.com/CC-BY

There is a huge showdown going on between banks, merchants, regulators and legislators over interchange fees on credit cards and debit cards. Interchange fees are charged to merchants every time a customer uses a card, and the controversy over the fees is leading businesses to rebel against the way things have been done for years.

Card fees becoming less palatable to businesses

Some people may have noticed that coffee shops, gas stations and other businesses have begun imposing a minimum purchase amount a person has to make in order to use a debit card or credit card, and there’s a reason for it. It’s called an interchange fee, and the bank that a person has their credit or debit card through charges a fee to pay the customer’s charge, and it costs, on average, 44 cents according to CNN. Banks are fighting furiously to keep the fees as they are because they make billions for the banking industry. Merchants are championing the legislation because they are fed up with having to pay banks to get money they are owed. Anthem Blue Cross, according to the Los Angeles Times, is going to start charging customers to make automatic payments from their credit or debit card account.

Credit card companies moving into prepaid cards

Some credit card companies are moving into the prepaid card market. For instance, American Express recently announced that it is launching a new prepaid debit card, according to Time. Visa and MasterCard already offer them, along with companies like GreenDot and others. It turns out there’s a good reason. Prepaid debit cards, which have to be reloaded with cash but don’t have overdraft fees and don’t require a bank account to get, aren’t subject to the same regulations. GreenDot, according to Reuters, derived 30 percent of its income in 2010 from interchange fees and, unlike debit card counterparts from Bank of America or JPMorgan Chase, prepaid debit cards are exempted from the interchange fee cap.

It’s chip to be Square

Not everyone has to accept traditional payments systems or opt to only accept cash. Mobile payment system technology is starting to increase its presence in the marketplace. For instance, the Square mobile payment system has a card reader that plugs into a smartphone, and users can download the Square application to begin accepting payments through mobile devices. It’s compatible with Android phones, iPhones and iPads. Square is also working on a payment network in which merchants using the service can deduct payments from a person’s debit or credit account by simply verifying the customer’s identity and don’t have to swipe a card, according to the Washington Post. There are also Near-Field Communication systems being implemented nationwide. NFC technology uses a chip mounted in a card or a cellular phone that a reader registers and charges the appropriate linked account. South Korea, according to Reuters, plans to have 300,000 NFC equipped merchants by the end of the year.

Sources

CNN

Los Angeles Times

Time

Reuters on Green Dot

Washington Post

Reuters on mobile payment systems

Federal Reserve Chairman Ben Bernanke is being urged to create stronger regulation of business credit cards. Photo Credit: MoneyBlogNewz/Flickr.com/CC-BY

Members of Congress are urging the Federal Reserve to do more about regulating business credit card marketing, especially regarding small businesses. Currently, small business credit cards are not subject to the same regulations in the CARD Act that apply to their private counterparts.

Small businesses at mercy of banks and card companies

A group of Congressmen are lobbying the Federal Reserve to implement regulations regarding credit cards extended to businesses, especially those marketed to small businesses, according to the Wall Street Journal. A group of Senate Democrats, including Senator Charles Schumer of New York and Senator Bill Nelson of Florida, are urging Federal Reserve Chairman Ben Bernanke to do something about enhancing disclosure requirements on credit card accounts offered to small businesses. Areas of concern include interest rate hikes, fees for going over spending limits and other types of fees that are prohibited for regular consumer credit cards. Credit card companies are not mandated by law to follow the Credit Card Accountability Responsibility and Disclosure Act when it comes to business credit cards.

Clever dodge of CARD Act

Part of the concern over the non-regulated status of business credit cards is that credit card companies are offering the cards to people who aren’t business owners; all a customer has to do is apply for the account just like a normal credit card and start using it once approved. Card issuers don’t have to ask for a business license number or proof that the card is for business purposes, which Chairman Bernanke is being urged to make mandatory. The senators also are concerned that business cards make up a fair portion of direct mailed credit card offers, according to BusinessWeek, as they cite a Pew study that found 9 percent of all credit card offer mail between 2006 and 2010 was small business card offers. The same study estimated that Americans received more than 2.6 billion pieces of such mail in that period. More than 6.7 million went to senior citizens.

Small businesses grapple with credit card companies

Processing credit and debit card transactions can be a hassle f0r small businesses. Many stores have mandatory purchase amounts that customers have to meet in order to use their debit or credit card because of interchange or swipe fees. Merchants are charged to receive funds from the bank or credit card company, and they have to pay to use credit and debit card processing machines. Many simply pay, but some are finding ways around it. For instance, the Square payment processing system that allows someone to use their iPhone, iPad or Android phone as a card reader is getting 100,000 more users per month, according to Entrepreneur. Square charges 3.5 percent of the transaction, far less than traditional methods of accepting credit or debit payments.

Sources

Wall Street Journal

BusinessWeek

Entrepreneur

What kind of cake is your credit report? (Photo Credit: CC BY-SA/Alex Gorzen/Flickr)

If you’ve had a bankruptcy, foreclosure or lots of missed bill payments, you know that your credit score was diminished. But do you know about the smaller things that lead lenders to believe you’re a credit risk? A few FICO foibles can cause credit card issuers and lenders to view you with less favor and lead them to either deny you credit or charge higher interest rates.

Too much credit is a bad sign

While it may be a fact that people who max out their credit cards tend to apply for more credit cards, such behavior does not speak well to potential creditors. Too many credit applications in too short a time raise red flags. Norm Magnuson of Consumer Data Industry Association told Bankrate that banks have “shrunk the window” of frequency in which applications for credit audits are performed.

“It used to be months and months. Now you find companies doing account monitoring monthly or every other month,” he said. “That would raise some questions.”

A short sale isn’t magic

When you’re upside down on your mortgage, the specter of foreclosure may not be far away. Lenders will sometimes tell you that a short sale is the way to go. Even though you’re taking a loss, at least you’re avoiding foreclosure. Yet, how a lender reports a short sale to the credit bureaus can be just as damaging. Experian’s Vice President of Public Relations Maxine Sweet says even though the account is technically settled, the short sale ends up hurting your credit score as much as a foreclosure.

The best thing to do, advises SmartCredit.com President of Consumer Education John Ulzheimer, is to negotiate with your lender so that the difference between what’s left on the mortgage and the amount repaid isn’t reported as balanced owed.

Co-sign at your peril

Whether it’s an auto loan, student loan or any other large scale loan, if you’re a co-signer and the primary borrower defaults, you’re on the hook. Hopefully, you keep in touch with the person for whom you co-signed. Otherwise, you may not know the damage being done to your credit until it’s too late.

Minimum effort, maximum worry

It may seem easy to settle for the minimum payment on your credit cards each month, but there’s nothing easy about what that does to you in the eyes of prospective creditors.

“It suggests you’re under financial stress,” says Nessa Feddis of the American Bankers Association. “You may be defaulting.”

A busy report can indicate trouble

The more inquiries for credit that appear on a credit report, the more tiny nibbles that are taken out of your FICO score. If you know you’ll be applying for big loans – home, auto, education – try to do it all within a two-week window. This will minimize the inquiry impact, as they will be treated as a single unit. The same does not apply to credit card applications, however.

Disputing credit report mistakes

Sources

American Chronicle

Bankrate

MSN Money

This Swiss bank mailbox is not as private as once thought. / Image: pierre bedat/Flickr/CC BY

U.S. and Swiss authorities have engaged in informal talks regarding bank secrecy in Switzerland and other European countries. They are negotiating a deal for  a common settlement to avoid prosecution by the U.S. under the Foreign Account Tax Compliance Act. The settlement, if reached, could be in the multibillions. Sources say that the settlement could come as early as July.

A tradition of secrecy

Banks in Switzerland are regulated by the Swiss Financial Market Supervisory Authority (FINMA). The country has a centuries-old tradition of bank secrecy, which became law under the Swiss Banking Act of 1934. Under that law, Swiss banks are not allowed to divulge the personal account information of their clients. Lebanon, Singapore and Luxembourg have similar policies.

The practice of bank secrecy has often been accused of enabling underground economies and organized crime. Rudolf M. Elmer, a former Swiss bank employee, has testified that Swiss bank secrecy “is a global problem.” He went on to say that, “offshore tax evasion is the biggest theft among societies and neighbor states in this world.”

UBS paid out millions in 2009

In 2009 UBS, a prominent Swiss financial institution headquartered in Zurich, paid the U.S. $780 million to avoid tax evasion prosecution. The financial records of 4,450 American UBS clients were handed over to Washington, effectively puncturing the laws protecting Swiss bank secrecy. Similar probes have come from Germany, Italy and Britain, all of whom suspect their citizens of using Swiss accounts to evade taxation.

FACTA adopted in 2010

The Foreign Account Tax Compliance Act was adopted by the U.S. in March of 2010 to prevent Americans from evading taxes by hiding assets in off-shore bank accounts. The FACTA forces non-U.S. banks to disclose information regarding accounts held by citizens of the U.S.

July settlement unconfirmed

Mario Tuor, a spokesman for the State Secretariat for International Financial Matters, said that talks had been under way, but he would make no confirmation regarding a possible July resolution.

Sources

NY Times
Reuters
UBS

The Senate did not pass an extension on the debit card fee cap. Photo: MoneyBlogNewz/Flickr.com/CC-BY

The deadline for the Federal Reserve to decide on whether to institute a debit card fee cap is in July. The Senate failed to extend the deadline in a close vote, and it appears the Fed will have to make a decision. The cap could have serious implications for consumers.

Federal Reserve has weeks to decide

Among the provisions of the Dodd-Frank Act aimed at reforming the financial industry is the provision concerning interchange fees, the fee that banks charge merchants when people use debit cards to pay for things. Some contend that merchants are paying too high a price, but others say banks will be forced to recoup revenue by passing the loss onto customers. Under Dodd-Frank, the Federal Reserve was given until July 21, 2011, to decide how to cap debit card fees, according to CNN. The Senate tried to pass an amendment that would push the deadline back, but the six-month delay was defeated 54 to 45. Banks currently average a charge of 44 cents per transaction, according to the Wall Street Journal, and the Federal Reserve proposed to cap the swipe fees at 12 cents.

Consumer bureau still lacks director

The Dodd-Frank Act created a Consumer Financial Protection Bureau, an independent agency to regulate consumer finance products like mortgages, credit cards and payday loans. Special adviser to the president Elizabeth Warren has seemingly spent more time in Congress dealing with partisan squabbles than helping to establish the agency, which is what she was appointed to do. It is rumored, according to Bloomberg, that President Obama will nominate former banker Raj Date to head the CFPB. Date has been one of Warren’s top assistants and formerly worked for Capital One and Deutsche Bank AG. Date has to get a Senate confirmation to be head of the bureau.

Possible coming fallout

Earlier this year, several large banks threatened to put cap on debit card usage if debit card fees are capped. If the Federal Reserve caps fees at 12 cents per swipe, consumers will likely pay for it in some fashion. The cap on bank fees last year led to the near-demise of free checking. There is an exception to the swipe fee rules, according to the New York Times. Any financial institution with $10 billion or less in assets is exempt. However, that may be small minority; it’s estimated that fewer than 100 individual banks and three credit unions nationwide fit that criteria. The banking industry earns more than $12 billion of its annual revenue from swipe fees.

Sources

CNN

Bloomberg

Wall Street Journal

New York Times

Many credit unions are now offering payday loans. Image: informatique/Flickr/CC BY-SA

Credit Unions, which are generally considered more trustworthy than traditional banks, are more and more frequently offering short term loans that rival payday loans in many aspects. This change comes in response to new federal guidelines. Many analysts find this trend disturbing, while others see it as offering credit union members more options.

Many find credit unions appealing

Credit unions are cooperative financial institutions that are owned and controlled by members. By dispensing prudent loans without the profit motive of traditional banks, they are becoming more and more attractive to jaded consumers. Many say they are fed up with the hidden charges and impersonal customer service they receive from regular banks. However, when it comes to immediate short-term financial needs, credit union members have often had to to look elsewhere.

That is changing rapidly as more and more credit unions are offering low-cost, short-term loans with higher interest rates.

Federal rate cap increase

The National Credit Union Administration, in a voluntary program called Better Solutions, offers a package of services and products for participating credit unions. In September 2010, the NCUA changed its rules for short-term loans, raising the annual interest rate cap from 18 to 28 percent. Under these new guidelines, a credit union must allow borrowers at least 30 days to repay a short-term loan and not to allow more than three per customer in a six-month period.

A less predatory option?

More than 500 federally insured credit unions are offering these kinds of loans. Industry advocates say they are offering their customers alternatives to more predatory lenders on the market. “We spent a long time trying to do this in a way that would work for members and for the credit unions and not be predatory,” said Debbie Matz, chairman of the NCUA.

Detractors ascribe profit motives

Detractors, however, ascribe much less altruistic motives to the loans. Some say it is just a way to generate more revenue for an industry that suffered greatly in the financial crisis of 2008-2009.

Credit unions, which operate as nonprofit groups, aren’t allowed to raise investor capital like traditional banks can in times of trouble. According to the NCUA, about 4,600 credit unions — or about 7 percent of the industry — are at a high risk to fail.

Linda Hamilton, a consumer activist in Salt Lake City, says “they are promoting these loans as payday alternatives, but they are not really alternatives.” Hamilton, who is opposed to payday loans, sees these credit union sponsored loans as little more than the same thing.

Guidelines are voluntary

Because the new NCUA guidelines are strictly voluntary, many credit unions sell loans at higher rates than the federal program suggests. The Mountain America Federal Credit Union in Utah, for example, offers a five-day $100 loan it calls “MyInstaCash.” The loan costs $12, a 876 percent annual interest rate.

Be informed

Karen Datko of MSN Money says that these credit union payday loans aren’t necessarily good or bad. “It really pays to be an informed consumer before you apply for one,” she advises.

Sources

Paydayloan.net
Washington Post
MSN

New poll says mom and dad still pay the bills. Image: meddygarnet/Flickr/CC BY

A new study shows that 59 percent of parents are still providing financial support to their adult children who are not students. The study suggests that the recession is preventing them from leaving home. In some cases, it is forcing those who have left to move back — so called “boomerang kids.” The study, called the Harris poll, was conducted online for the National Endowment for Financial Education and ForbesWoman last month. The study polled 1,074 U.S. non-students ages 18 to 39 and their parents.

Pressure higher for this generation

Ted Beck, president and CEO of NEFE, a nonprofit financial education group, said “Parents are continuing their involvement longer than we expected. The general sentiment is that financial pressures are higher for this generation.”

Parents and the young adults surveyed agreed. Sixty-five percent of the adult children said their generation faces tougher financial pressure than their parents did. And 32 percent of their parents agreed that they had it easier than their children do. Further, 43 percent of parents said they were providing support because they were “legitimately concerned” about the finances of their children. Another 37 percent said they did not want their children to struggle in the same way they had to.

How it breaks down

The lion’s share of parental support, at 50 percent, is in housing. Living expenses account for 48 percent of parental financial support. Transportation costs make up 41 percent of parental aid.

Among adult children living at home, 75 percent say they are helping out financially, and 42 percent say they are contributing in non-financial ways, such as cooking and house work.

Other factors involved

Psychologist Vivian Diller, the author of “Face It,” believes that the economy is not the sole factor in this trend. “In the last 20 to 30 years, the family structure has become more child-centered,” she says. “Boomer parents were very willing to make sacrifices for their kids, giving them the sense that it would continue until they were on their feet. Now parents are supporting kids’ lifestyles.”

But, she warns, continued financial support could have negative consequences. “Because they have been protected, some children don’t learn reasonable ways to manage money, and they run into trouble.”

Pitfalls of parental sacrifices

Thirty percent of parents surveyed say they have given up privacy because of adult children moving back home. And 26 percent have admitted to taking on additional debts.  Another 7 percent say they have been forced to delay retirement.

“If parents are going to financially support their adult children, they should first have a serious talk about their kids’ expectations so that everyone protects their financial futures,” Ted Beck says. “We all want to ensure the best for our children. But if you are taking on extra debt or delaying retirement to help your adult child, you could be making a mistake and putting your own financial future in jeopardy.”

Sources

ABC
NEFE
Reuters

Debt reduction or debt relief companies promising that debts can be settled for pennies on the dollar are probably scams. Photo Credit: Jon Sullivan/released to Public Domain.

Over the past few years, some may have noticed a greater number of advertisements and other media relating to debt relief or debt settlement companies. Though many of these companies are legit, there are a number that are scams. Despite increased regulations, there are still a lot of fraudulent debt relief companies out there.

Crooks ignore Federal Trade Commission regulations

More than half a year ago, the Federal Trade Commission created new regulations to help deal with the growing number of complaints about ineffective or fraudulent debt settlement and debt relief companies. Debt servicing companies, according to KNDU, an NBC affiliate in Washington state, are prohibited from asking for an advance fee, have to make specific information available up front and cannot misrepresent themselves in any way. Companies have to give customers realistic estimates of how much money the could save and disclose exactly what fees are included in the service. However, some companies are not following the law.

Large debt relief company busted

Freedom Debt Relief was stung recently by the states of Washington and New York for not following laws regarding debt services, according to WalletPop. The California firm was found to have misled consumers in those states. The company agreed to a settlement of nearly $2 million to be paid to its customers in both states. The company previously settled similar cases with four other states and is currently part of a class action lawsuit. The Federal Trade Commission, according to the Wall Street Journal, recently won large settlements against two debt management companies illegally “robocalling” customers with automated phone messages. Advanced Management Services NW and Dynamic Financial Group were found to have robocalled customers and told those who responded they could reduce debt for a hefty upfront fee. Advanced Management Services offered a refund if efforts were unsuccessful, but both companies would just pocket the cash and send a card telling customers to pay credit card bills on time.

Too good to be true

The old maxim that “if it looks too good to be true, it probably is” holds true when it comes to debt settlement companies. The Federal Deposit Insurance Company and Federal Trade Commission both warn that any company promising to remove negative items from credit reports or a settlement for “pennies on the dollar” is probably a scam. Also, it is illegal for any debt settlement or debt reduction company to ask for any money whatsoever until after the debt is reduced or somehow changed. There are also plenty of nonprofit debt counselors who can help consumers come up with a debt reduction plan. The FDIC advises consumers look at a not-for-profit credit counseling service before looking at any for-profit debt reduction service. For instance, check with the National Foundation for Credit Counseling to find qualified financial advisers in the area.

Sources

WalletPop

KNDU

Wall Street Journal

FDIC

FTC

National Foundation for Credit Counseling

Recession curbs teen shopping habits. Image: Paul Keller/Flickr/CC BY

The recession is now being felt even in the youngest demographic of consumers. Teen spending is on the decline, according to the just-released 2011 Teens & Money Survey from Charles Schwab & Co.

Once big spenders feel the pinch

Traditionally, teens ignore economic trends and spend impulsively no matter the pinch on the purse strings at home. However, teen spending is down 14 percent this spring. The impact is significant. As a group, teens spend an average of $125 billion in the U.S. each year.

No budge on home entertainment

Teen spending has dropped in nearly all the markets which they traditionally impact the most: apparel, beauty products and entertainment activities like restaurants, concerts and movies. The only place teens seemed unwilling to cut corners is in home entertainment. Music, DVD and video games rose from 7 percent to 8 percent of teen spending.

A greater awareness

According to the Schwab study, 90 percent of teenagers surveyed said they were affected by the recession. Schwab concludes that they have a heightened awareness of financial issues than they did four years ago. Most said they were more appreciative of the things they have and are less likely to spend impulsively.

The ‘Recession Generation’

Carrie Schwab-Pomerantz, senior vice president of Schwab Community Services, said: “It seems clear that the great recession has changed the mindset of teens. It has given these ‘Recession Generation’ youth(s) a deeper appreciation for what they have and how hard their parents work. This may be the silver lining to the economic downturn.”

Financial education begins at home

“To help quench their thirst for material goods, teens appear to have opened up to the idea that learning about money management is a potential solution to the problem,” said Bryan Sommer, founder of Kids Money Management.

The majority of the teens surveyed cited their parents as their main educators on money matters. Eighty-two percent of surveyed teens say their parents have taught them the basics of financial management.  And 77 percent go so far as to call their parents great financial role models.

Unemployment a factor

Unemployment accounts for some of this trend in teen spending. The teen unemployment rate, at 22 percent, is the lowest it has been in 10 years.

Sources

Newser
Commoncensus
Daily Finance

In gold we trust - at least in Utah. / Image: sirqitous/Flickr/CC BY

Last March the Utah state legislature passed a law making gold and silver coins legal tender. In the wake of that decision, a Salt Lake City entrepreneur is proposing a system by which consumers can use those precious metals for everyday purchases.

Franco plans new depository

Craig Franco, CEO of Pacific Rarities, is planning to open the Utah Gold and Silver Depository as early as June 1. His company will allow consumers to deposit their and gold and silver currency and draw on it for purchases, just like using a debit card.

A way to spend precious metals

“With the state of Utah monetizing gold and silver,” Franco said, “the question then became, how do we provide a common vehicle for commerce to transact?”

According to the new Utah law, the sale of gold and silver coins will be exempt from state taxes, which makes the idea very attractive to many. However, the state can’t force businesses to accept them in place of paper currency, hence the market niche Franco is attempting to seize.

A wait-and-see attitude

“Because we’re dealing with something so forward thinking, I expect a wait-and-see attitude,” Franco said. “Once the depository is executed and transactions can occur, then I think people will move into the marketplace.”

Legislators attempt to send message

The bill was proposed by Republican state Rep. Brad Galvez. He intended the bill to be largely symbolic, serving as a protest against Federal Reserve monetary policy. While he says “We’re too far down the road to go back to the gold standard,” Galvez maintains that Americans are losing faith in the dollar and that “this will move us toward an alternative currency.”

Economist Ralph Danker, who helped draft the Utah legislation, said, “making gold and silver coins legal tender sends a strong signal to Congress and the Federal Reserve that their monetary policy is failing. The dollar should be backed by gold and silver, so we have hard money.”

Other states consider following suit

Many other states are now considering bills similar to Utah’s. Earlier this month, a Minnesota Republican lawmaker proposed a bill to set up a special committee exploring the option. Virginia, North Carolina, Idaho and several other states are contemplating similar bills.

The gold standard abandoned

The idea of gold-backed money was set aside during World War I because of the nation’s need to pay for the war effort. During the depression, President Fraklin D. Roosevelt took steps to prohibit gold and silver currency as a measure to prevent hoarding. In 1971, President Nixon abandoned the gold standard altogether.

Critics call new law extreme and backward

Commentators have criticized the Utah bill as libertarian and extreme. Political columnist Dana Milbank said it was a bizarre formula concocted by “tea party chemists.”

“What backs currency is confidence in a government’s ability to pay debt, its government system and its economy,” said Carlos Sanchez, of N.Y’s CPM Group. “We’d be going backward in financial development.”

Sources

Huffington Post

Daily Finance

Fox News

Payday loan regulation passed by Texas Senate. / Image: swanksalot/Flickr/CC BY-SA

Two measures designed to regulate the payday lending industry were passed by the Texas Senate for the first time on Monday. Reactions to the legislation have been mixed; supporters call it is a good start, and critics say it does not go far enough.

Bills are both passed by large margins

Both bills, 2592 and 2594, were the result of negotiations between the payday loan industry and consumer groups.  The bills passed the Senate vote by a large margins.  Bill 2592 passed 27-3 and 2594 passed 28-4.

New bills require fee disclosure

The legislation, proposed by Sen. John Carona, R-Dallas, requires short-term lenders to obtain a state license and to disclose information about their fees to their customers.

Fees remain unregulated

Those fees, however, will remain unregulated. “What we present to you today,” said Sen. Corona, “is the limit of what we could do. I leave this session disappointed that we’re not able to do more.”

Critics want the ‘cycle of debt’ to be addressed

Some say the bills are merely token efforts, claiming that the proposed legislation does not address what has been called “the cycle of debt.”  This refers to borrowers who extend their short-term loans multiple times, leading to heavier fees.

Previous bill

A previous bill written by Sen. Wendy Davis, D-Fort Worth, and by Sen. Royce West, D-Dallas, called for much tougher regulation.  That bill required a cap on fees, but never made it to the floor for debate.

Federal law requires fee caps at 36 percent a year for military families.  That limit, however, has not been enforced in Texas.

Davis calls legislation ‘disappointing’

Davis claims the legislation was diluted by lobbyist for the payday loan industry.  “It’s very disappointing,” she said. “It makes you lose your faith in democracy.”

House still needs to approve the bills

The House must approve Senate changes before the measures can go to the governor.

Sources

American-Statesman

Financial Blog

Seek4News