Credit cards in the US

Almost everyone in the US uses credit cards as a way to pay for debt. Dependency on credit has grown immensely throughout the economy, as lenders in the past were more than willing to extend funds to borrowers. Unfortunately, the recession put a damper on that freedom, when credit card companies were sent reeling by their former over-enthusiastic lending. They began using tactics like cutting people’s limits, even if they had more than that limit charged. This automatically put them in a higher interest rate bracket, and many times unjustly cost them over-limit fees. Credit card companies also began charging higher interest rates without notice to consumers, based on their “adjustable rate” clause in the contract. It was unscrupulous acts like this that pressed the Obama administration to face the credit crisis head on, making legislators step in and find ways of regulating credit card company activity.

Understanding credit cards

To understand what impact credit card companies’ actions have on credit, it’s important to understand how credit is scored. A consumer’s credit score is made up of five different components:

1. 35% is based on history of payments
2. 30% is based on debt percentage, or credit being used versus credit available
3. 15% is based on the length of time credit has been open
4. 10% is based on new credit taken out
5. 10% is based on a mixture of the overall credit a consumer has

Knowing this, the most important thing a consumer can do is pay their bills on time. This is the largest contributor to credit scoring. It’s also important to have a good mixture of all of these elements to maximize a credit score.

Also, length of credit is very important. It’s much more beneficial to have a good payment history with one credit card company than to open new cards that have no history. Consumers should always keep good-standing credit cards open to benefit the most from them.

Debt consolidation companies

Many experts advise against using debt consolidation companies because they do what consumers can do for themselves, for free. A debt consolidation company will charge large fees to negotiate. Experts say that if a consumer wants outside help they should contact the NFCC, the National Foundation for Credit Counsel. They charge a small fee, but it is much less than a debt consolidation firm. The NFCC will communicate with lenders on a consumer’s behalf to work out an affordable plan. They also will work with the consumer to create a workable budget that allows the client to pay down debt as soon as possible.

Debt questions to ask

One important issue to face is what actions led a consumer to having credit card problems. Did overcharging send the credit amount skyrocketing? Did fees due to late payments do the damage? Are credit cards too widespread? These are all questions that need to be addressed for consumers to create healthy relationships with credit. On the other hand, the credit card problems may be due to extenuating circumstances such as unmanageable medical costs. If this is the case, bankruptcy may be a more viable option for the individual. Regardless of what the solution is, it’s important to get to the root of the credit card problem and take care of it. The future after the recession is still unknown and consumers have to work hard to make sure they will be financially sound.

Now that the recession is over, people are still having a difficult time managing. Though the market is showing some signs of stabilizing, people are still trying to get out from under the huge debt they stored up. If you are one of the millions of people who are struggling with debt survival, here are some tips on how to handle your finances.

How to handle debt

There are some things to do if you have debt. Here are the most important:

1. Budget. Get on a strict budget. This is of premiere importance when you are mired in debt. You want to know where the debt problems are and what you’ve done to create it. Write down everything you spend for a month—from your daily coffee to child care. Get specific with where your money is going down to the penny. Once you have that, then categorize your items as necessities or discretionary.
2. Plan. Have a debt plan to pay down your highest interest cards first. You want to minimize the time you are paying on them because they are costing you more in the long run. The best thing to do is write everything down and start paying one by one. Work on the highest, then the next, etc., until you work your way down to the smallest debt you have. For bigger amounts it may take a second job to help, but you’ll be thankful you made the extra effort when your credit card debt is gone.
3. Consolidation. Should you consolidate or not? We’ve all seen the commercials for consolidation. They advertise as if the one move to work with them will solve all your financial problems with one phone call. That is not true. The basics of a consolidation company are that you are taking one big loan to cover all of your existing payments. It can work if you are willing to sever your credit card payments afterwards. Also, beware of consolidation firms that ask for large upfront fees to fix your credit. You can do that yourself with some care and organized work.
4. Be honest. It’s important to do some self-analysis and find out why you got into debt in the first place. Was it due to overspending? If so, why? Is there an emotional reason you are spending so much? If you knew you didn’t have the money, what compelled you to buy anyway? You need to know what beliefs are going on in your head when it comes to spending and be willing to change them. The worst thing you can do is get on track financially, only to fall back into your old patterns of spending.
5. Collectors. If your debt gets to the point of having collectors call, you need to know what your rights as a consumer are. Debt collectors cannot harass you or abuse you. They cannot imply that you have committed a crime or imply that you will be arrested if you don’t pay a debt. You have the right to tell them to not call you at work or home.

Moving forward with debt

It’s important to understand the rules of debt and how to manage it. Understand that it is up to you whether you want to get out of debt for good. A lot of it involves taking a hard and cold look at your former actions, and then being proactive about changing them in the future.

Amusement parks are in dire straits, and you could reap the benefits.

Amusement parks are looking for debt relief by bringing in new customers. Both Disney and Universal theme parks are facing a tough time. They know that to manage their finances they need to find new customers to lure in. These two, and many smaller parks, are looking to deep discounting prices of entry and ride fairs, to spur attendance once again.

Operators are trying to come up with the lowest admission prices they can reasonably work with. “This is the most aggressive year that I’ve ever seen for discounting in the theme park industry,” stated Robert Niles, editor of Theme Park Insider web site. The recession has driven many families to cutting out their vacation plans altogether, opting for close-to-home activities or visiting and staying with relatives.

Discounts are huge

For the first time, Disneyland, Universal Studios and many Six Flags parks are digging deep to bring their prices down. Besides the prices of admission, they are discounting items and rides inside the park.

Disneyland is offering three-day pass for just $99. Many of the Six Flags parks are offering buy-one-get-one-free ticketing. Universal Studios will be offering a $60 six-month pass to people living in the area. This is the first time parks are offering these types of discounts beyond the normal “slow season pricing,” which is normally offered only during early spring and late fall.

Staycationers

A trendy term in the amusement park industry is “staycationers.” A staycationer is someone who lives close to the theme park. Parks are trying hardest to lure these visitors in, because they seem to be the most receptive to advertising.

Haley Marks, spokesperson for Disneyland stated, “It’s unrealistic to think families will drive hundreds of miles to Disneyland anymore. At least not during the recession. … So our marketing and advertising is focusing on the families already in the area. We are trying to bring them in to keep our finances flowing, even though it’s at a much slower rate.”

That seems to be the philosophy behind wooing staycationers into parks. Although the numbers will be down, there will still be people in attendance. For parks to remain open and manage to find debt relief, they need to keep revenues coming in, regardless of how slow them become.

The future of amusement parks

Like businesses in all industries, amusement parks are going through a change. Smaller parks are unable to withstand the drought of customers and closing. Mid-sized parks are fighting for their lives. Large parks are the only ones with enough capital to be creative with marketing and advertising, hoping to bring in a new customer base that will carry them through the recession.

Mark Kane, park president of a Six Flags park stated, “The whole world is on sale, and we are emphasizing our sensitivity to the economy and trying to offer more deals … not only at the gate but throughout the park.”

Take advantage of savings

This is a great time for consumers who are looking for debt relief to still find fun vacations. Eliot Sekuler, Universal Studios Executive, stated “I can’t remember a time when we really worked harder to come up with new things for people to come see and more value to make it more affordable.” Everyone believes that the discounting will remain until the market recovers. As Sekuler added, “Parks are competitive and will not give up their market shares. We will fight for customers for as long as it takes.”

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.

Since the recession began there has been an increase in payday loans in America. Every country is seeing some economic downslide and France is no exception. How they are dealing with their financial stress is different; the French are selling their generations-old wine. For France this is the worst their economy has been in over 30 years, and this is the first time they have taken to pawning wine as a way of raising extra money.

$273,000.00

The Credit municipal de Paris is taking wine in exchange for cash or loans to the people. Lenders and pawnbrokers are seeing a huge demand in recent months for citizens to raise money by turning to their wine cellars. Approximately 2,500 bottles have already been auctioned off, bringing in a total revenue of $273,000.

One wine expert, Robert Gorreteau, stated “In the wine cellars of Paris and even in the wine cellars of provinces, there are veritable treasures.” As the economic slump worsens, Parisians are turning their wine into money. Paris’ oldest financial institution has seen loan for wine requests increase to about 500 a day, up 30% since last year.

People are seeing wine trading for cash as a more reasonable option than finding loans that could cost them potentially thousands in interest rates and fees over its lifetime. They would rather part with a bottle of fine wine, collect their money and be done with it. One auction saw a 1982 bottle of Chateau Petrus sell for $2,660. With this kind of return, it’s no wonder France is unloading its wine collection for cash.

Americans seek extra funding

Americans are also looking for creative ways to build up funds. Pawn shops in the US are seeing a great increase in the flow of customers looking to trade their wares for cash. Nola Grayson of St. Paul, Minnesota stated, “We see pawn shops as a simple way to pay bills. It’s like a garage sale, only without the hassle of preparing. You take your old things that are slightly used, and get cash in return.”

Payday loans are also more popular than ever. They are seeing a notable rise in applicants hoping to be approved for upfront funds. Paperless loans are simple, quick and a stress-reliever for people who qualify. More Americans than ever are seeking to make ends meet with nontraditional funding.

The world is looking for relief

Overall the entire world is going through a grand shifting as a result of the economic distress it is under. People everywhere are looking for ways to pay their bills, while they wait for governmental agencies to regroup, and hopefully reinvigorate the economy. Many major cities are using stimulus plans of some type to spur their economy out of the recession that has been holding on since last year. Much of the regrouping is a result of mismanagement, but it’s too late to lay blame. As one economist said, “Whether Americans are getting payday loans or Parisians are selling wine, everyone is looking to get through the hard times the world economy is under. There’s no point in looking back, people need to keep looking to the future and work hard to recover.”

Homeowners looking for mortgage loan modification programs are encouraged by Citigroup to apply with them. Many homeowners are finding that their mortgage payments are unmanageable due to the recession. Many are falling behind, or at risk of doing so in coming months. Citigroup is one lender that is offering relief to their approximate 500,000 at-risk borrowers. Over the next 6 months, Citigroup is encouraging customers who may find themselves unable to pay their mortgage to contact customer service for answers.

Currently, the requirements are that borrowers must be current on their mortgage but believe that future months’ payments are in peril. Their goal is to reduce monthly payments to 40% of the borrower’s gross income, thus making their payments affordable and keeping them in their homes.

Interested borrowers

Borrowers who want to pursue Citigroup’s mortgage loan modification program will have to provide documentation to be considered for the program. Here are some documents to have on hand:

• Paystubs for at least the past two months
• W-2s from both 2007 and 2008
• Any additional income earned from part-time jobs or freelance work
• Total household expenses
• Insurance payments for house, car and life
• Property taxes
• If applicable, dues to associations for condo/townhome owners

The company then will review the information. All expenses will be added together and divided by the total income, to get the debt ratio. This ratio will dictate new payments as Citigroup will:

1. Reduce the interest rate for customers
2. Propose new loan terms
3. Reduce the loan balance

The lender is hoping that the changes will bring in a new group of customers who are able to make steady payments, thus making Citigroup’s revenues consistent.

Geographical concerns

Homeowners who are in high unemployment areas or where home values have taken sharp declines are a priority with Citigroup. Their mortgage loan modification is specifically targeting these customers, wanting to help them with manageable and affordable housing. In particular, the bank is looking to Arizona, Florida, Michigan, Indiana, Ohio and California as the target areas where recessionary effects have taken hold.

Another priority group is borrowers whose credit scores have seen a sharp fall over the past few years. Citigroup is taking this as a sign that these customers may be heading into bill payment problems in coming months. The company wants to step in and avoid any further issues before they occur.

Both groups are going to be asked to fill out a mortgage loan modification application and provide income and expense documents. The company is aggressively prioritizing these sectors to mitigate company risk.

The economy

The recessive economy has played a heavy role in the banking industry. Lenders who were once lending without caution, are now seeing how detrimental haphazard lending was. In an effort to turn things around, banks are taking proactive steps to reach out to customers in trouble, or reaching a troubled state. They want to help them stay in their homes by making payments affordable, as dictated by their debt ratios. Any customers who feel they need the help should contact Citigroup and fill out a mortgage loan modification application. Now is the perfect time to reach out for help that is available.

As home values continue to fall, people are looking to short term loans as payment options. Things are difficult in the recession and a continuous drop in home values are proof. According to the AP, home prices fell in nine out of every ten US cities throughout the first quarter of 2009. The National Association of Realtors said that median sales prices of homes declined in 134 out of the 152 cities studied. The floundering economy is taking its toll on home owners’ whose equity is quickly dwindling.

Almost half of home sales are made up of foreclosures or other distressed properties. David Resler, chief economist of Normura Securities, stated “I think we’re near a bottom, but we’re not there yet.” He believes, along with other analysts, that the housing industry will hit rock bottom soon, and then slowly begin to rise again by the end of this year. Alan Greenspan, of the Federal Reserve, agreed adding, “We are finally beginning to see the seeds of a bottoming”, but noted the huge inventory of for-same properties as a major concern.

Future hope

A consortium of real estate agents are hoping that Obama’s tax credit for first-time buyers will spur more people to venture into homeownership. The $8,000 tax credit is making it popular for potential buyers to move into homeownership. However, in higher priced neighborhoods that tax credit still doesn’t make things affordable. Leon Grammer of New York City stated, “I would love to take advantage of the tax credit and move out of my apartment. It would be great to take advantage of the market right now, but the homes in my area are still way out of my price range. Even with all of Obama’s perks.” Grammer is not alone. Many in the real estate field agree that the government should be doing more to stimulate housing sales and without some intervention, the recession is sure to linger on longer.

Shaun Donovan, of the Housing and Urban Development Commission, said that the Federal Housing Administration will begin to allow borrowers to apply for short term loans and turn Obama’s $8,000 tax credit directly into their down payment. He said the credit “is not only a tremendous opportunity for first-time buyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing.”

More research

Research is showing that the mid-price of homes throughout the US is $169,900, which is down almost 14% from last year. The biggest drops were seen in Fort Myers, Florida, where homes have dipped beyond the 50% range in value. Saginaw Michigan, Akron Ohio, San Francisco, San Jose, Phoenix and Sarasota Florida have all seen housing values decline 40%. With this type of blow to the industry, it’s no wonder homeowners are worried. Homeowner Calvin Brunte said, “We had planned on taking out a home equity loan to do some major fix-ups in our home. With the recession and the economy, we can forget that for at least the next couple of years.”

Still waiting for rock bottom

Home values have still not hit rock bottom. Homeowners, realtors and investors are all waiting for the market to reach the turning point. Unfortunately, that turning point is slow in coming, even though some communities are allowing the first-time home buyer an $8,000 tax credit to be converted into a short term loan as a down payment. Hopefully, the market will even itself out soon and once again, people will be able to invest in their homes.

As the recession continues to weigh down the economy, taxpayers are looking to payday loans as an option to pay bills. Payday loans are short-term loans that are quick and easy to apply for. To apply for these loans you have to be over 18 years of age, have steady employment and an active bank account. If you are accepted, the lender will calculate how much you qualify for and it will be deposited to your bank account within a few days, sometimes hours. Many taxpayers are finding the payday loan a great option for funding as they wait for the recession to end.

Microsoft

This past week Microsoft Corporation reported its first decline in revenue in its history as a public company. As the world’s leading software giant, the company’s quarterly profit dropped by 32%, bringing it to $2.98 billion, from $4.39 billion one year ago. Despite being one of the largest companies worldwide, Microsoft has proven it is not immune to the recession. In January it had to cut over 5,000 jobs, succumbing to the market’s downfall. CFO Chris Liddell stated that the company expects their decline in revenues to continue “at least through the end of June.”

Microsoft is not unlike all companies. GM, Chrysler, and Bank of America are all experiencing lulls in their revenue generation business, indicative of a long and arduous recessionary period still to come. When industry giants are being swept away with the market, smaller businesses and consumers know that they are far from being out of rough waters.

Government help

While the auto industry and banking industry both received government help, other large corporations are left to use expense saving tactics to manage. Cut backs in employment represent huge potential savings to large corporations. Almost every large corporation today has seen some kind of lay-off, or has one pending. Although the unemployment lines are growing, many experts hoped large corporations would be able to stabilize the employment situation and create more jobs for the U.S. Unfortunately that is not the case. It seems that everywhere people are being laid off in an effort for businesses to survive.

The evolution of the payday loan

Those who are still employed are also suffering. They are looking to payday loans, not as an emergency fund option, but rather to make it through a month of bills. It used to be these were solely for emergency bills or unexpected needs. These days, it’s these types of funding that are getting consumers through their bills and are a standard practice. Melanie Shaller of Norwalk Virginia said, “My family uses payday loans almost every month. We didn’t plan on it; it just became a life-saver. We don’t plan on using them forever, but in today’s market there just aren’t a whole lot of other options.” Her sentiment is shared by a whole fraction of the population.

Help coming soon?

Americans are hoping for a turnaround in the market. When it will come, no one knows for sure. Analysts are projecting mid-2010 is when things finally will regain some normalcy and balance. No one knows exactly what that means, however. It could be that consumers are left with completely different loan structures and credit card policies. It could be that they are no longer benefiting from using these types of funding and payday loans are a more stable an option. Only time will tell where the market will be in a year. Consumers are left to wait it out and hope.

Currently taxpayers are suffering and looking to payday loans for getting through the strain. The recession has left people short of cash, but high on debt. One option that is gaining momentum is looking to the payday loan as a way to overcome the short-fall. These types of short-term loans normally require that the applicant is over 18 years of age, has a job and an active bank account. Once these criteria are met, he or she can apply. If approved, they will receive the funds they qualify for within a matter of a few days, sometimes sooner.

These nontraditional loans are becoming life-savers in a recession that is showing no signs of ending this year. It’s estimated that mid-2010 is when taxpayers will be seeing tangible improvements in the economy and benefits from huge government bailout money. Until then, people need to be creative and look to alternative ways of finding funding.

A weakened financial system

According to Treasury Secretary Timothy Geithner, there is a continued weakness in the U.S. financial system that is being spurred on by less consumer lending and high costs for credit. Concurrently, the International Monetary Fund estimates that the U.S. banking system could end up losing over $2.7 billion from credit issues and banks may still need over $275 billion in capital advancements.

Inspector general of the bailout program Neil Barosky stated that a recent report on the bailout program shows that the buying-up of bad assets is “tilted in favor of private investors and creates potential unfairness to the taxpayer.” All parties conclude that this plan is better than alternatives, but it remains to be seen how beneficial it truly is to individual citizens.

Despite the credit situation improving, there is still a decline in personal loans, including extending credit and both commercial and industrial loans. That leaves consumers on their own to find extra money, with credit card companies tightening up their lending policies. Consumers are looking to payday loans for aid because it seems the only viable and quick option for finding funding.

“Ultimately we have to look at two things, one is do institutions have enough capital to be able to lend [again] and does the system as a whole work for the American people for recover,” stated Geithner. So the economic analysts and pundits are being cautious, while trying to assess the economic situation as it is evolving.

Economist Joseph Stiglitz is suggesting Congress create a “financial products safety commission” to continue to police the banking industry. Their goal would be to assess whether financial products are “toxic to the banking system” and blow the whistle on ones that are.

The purpose of these committees is to create watch-dogs who are able to stop any potential problems before they happen, as opposed to how the recession occurred. It was a lax lending procedure that moved the U.S. economy into the recession. The goal for the future is to create safeguards against that ever happening again.

Payday loans are reliable

With the decline in personal loans, taxpayers are suffering more than ever. They are looking to ways of paying bills that are unique and beneficial to their purpose. Much of the government focus is on huge corporations in the banking industry and helping them out of their precarious situations. Americans have to look out for themselves and payday loans are becoming an easy option for bill payment.