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  • New credit card protections proposed by Federal Reserve Board

    New credit card protections proposed by Federal Reserve Board The Fed announced that there are several proposed changes for Truth in Lending laws. The alterations to the rules are designed to further increase protections for consumers and to eliminate some ambiguity for lenders.

    For example, the Fed proposed additional regulations for when a lender can revoke the terms of a promotional offer, it said. Now, when a bank promises no interest charges on credit card debt for six months after a new account is opened, it cannot change that agreement to the consumer's detriment unless the account goes delinquent for more than 60 days.

    In addition, the Fed said application fees should be covered by the same limits it places on other charges during the first year of an agreement. Further, lenders must consider a person's individual income, rather than their household's, when setting limits on the amount of credit card debt they can accrue.

    Many consumers have been able to successfully cut their total credit card debt in recent months, partly because of these federal protections.

  • Verizon reverts plan to charge more when consumers take on credit card debt

    Verizon reverts plan to charge more when consumers take on credit card debt. Verizon was going to begin charging customers with its landline phone, FiOS cable and internet and DSL internet services an additional $3.50 every time they made a single payment by taking on credit card debt, according to the Consumerist. However, this may no longer be the case.

    The site said when customers go to Verizon's official payment site, they are met with a message saying, "We recently let you know that one-time payments using a credit/debit/ATM card would soon be processed by a vendor who would charge a $3.50 fee. This change will not take place as scheduled and we will notify you in advance of any future changes."

    There was some speculation that this policy was instituted in an attempt to convince more customers to enroll in its autopay system, which would not charge consumers for taking on monthly credit card debt. It would instead ensure that more customers paid their bills on time and in full.

  • Citibank sees less defaulted credit card debt in September

    Citibank sees less defaulted credit card debt in September. Citibank said that its charge offs – credit card debt that is 90 days or more behind and deemed uncollectable – declined to 8.99 percent in September after it spiked at 11.18 percent in August, according to Businessweek. Prior to that, it had reached 9.75 percent in July. Citibank reported sharper improvements than any other major lender for the month.

    Meanwhile, the bank saw its rate of delinquency – credit card debt that had gone 30 days or more without a payment – decline as well, though considerably less sharply, the report said. September's late balances made up 4.93 percent of all accounts, down from 4.95 percent in August.

    Delinquent and defaulted credit card debt is often closely tied to the national unemployment rate. However, these figures have continued to decline over the last year even as joblessness has persisted across the country, hovering at or around 10 percent.

  • Debt Solutions

    Many Americans are looking for a solution to get out of debt. Fortunately, there are a number of simple debt solutions that will allow consumers to take back control of their finances by managing their debt loads sensibly.

    Consumer credit counseling is a debt solution program for those who are unable to make their minimum payments and are undergoing financial difficulties. However, consumer credit counseling programs could take up to 6 years or longer to complete and they require an individual to pay back the full principal balance of the debt that is owed, albeit at a lower interest rate. Consumer Credit Counseling Services, on average, have very high rates of client cancellation, as clients often find that the payment relief is not enough to alleviate their hardship quickly enough. Another downside is that while working with a credit counselor will not affect the credit score, it will show up on a credit report, which could be viewed unfavorably by some lenders.

    Another debt solution for those who are in serious debt is to find a credit consolidation loan. These are given by lenders in lump sums large enough to pay off all of a consumer's outstanding debts at once. While this doesn't affect the amount of money they owe, it will reduce their total number of lenders to just one, and in some cases lower the interest rate. However, these loans are difficult to qualify for, and lenders may require borrowers with sub average credit scores to collateralize an asset before granting the line of credit.

    Contacting a debt settlement company is one of the most common debt solution options available to consumers. These organizations have trained negotiators, who speak directly to a lender on a client’s behalf to reduce the total amount owed. Often, these debts can be reduced by roughly 50 cents on the dollar, and settlement programs can enable consumers to become debt-free from enrolled accounts in as little as 24 – 48 months. Generally, creditors will demand a lump-sum payment when a settlement is negotiated, although many creditors are also willing to structure settlements over time. While it is possible for an individual to pursue this debt solution strategy on their own, there are many companies that professionally offer this service and can be much more effective in achieving positive results.

    Whatever debt solution a consumer chooses, they should be aware that there are risks involved and do research on the company that is providing the service. While no debt solution process is going to be easy, there are good companies offering successful solutions that have lasting benefits. 

  • Lower My Debt

    Many Americans struggle when trying to lower their debt. A common question people have when they are struggling financially, is “How do I lower my debt?” Some solutions are more aggressive than others and depending on your individual situation; each one has its benefits. Making an assessment of your situation and calculating the amount of debtyou owe, how much you can afford to spend each month towards paying off that debt, and how quickly you want to tackle them will assist you in choosing which debt solution will work for you.

    “Lower My Debt” the Old Fashioned Way

    Spending less equates to saving more. This method requires a major lifestyle change and eliminating wasteful spending in order to save money and pay off debt. According to bankrate.com, below are the top 10 things that Americans waste money on: 

    1) Coffee- Most people spend about $4.00 a visit at Starbucks. If you’re visiting Starbuck’s every morning that equates to $20.00 per week on coffee. That’s approximately $80.00 per month and $960.00 a year spent on just coffee. 

    2) Cigarettes-According to tobaccofreekids.org, the average price for a pack of cigarettes in the United States is $4.54. If you smoke a pack a day, you’re a spending $1600 a year on cigarettes. Cutting down on smoking, not only is better for your pocketbook but will also be better for your health! 

    3) Alcohol-Going out to the bar or club during the weekend can add up. With, drink prices as high as $10.00; you are spending about $50-$100 a night on alcohol. The rounds of drinks you buy can add up, not to mention, having to tip your bartender. Doing this every weekend will equate to about $1200 spent each year on alcohol and a hangover you are sure to have the next morning. 

    4) Bottled Water-A bottle of Aquafina (20 oz.) can cost you about $1.00. If you’re buying a bottle a day, that’s about $365.00 a year spent on something that you can practically get for FREE. This is something simple that you can cut back on, why spend the extra cash if you don’t have to. 

    5) Manicures-Manicures and pedicures can cost anywhere between $30 and $50. Going to the nail salon about twice a month will cost you approximately $100. Limit your visit to the nail salons for only special occasions. Even cutting your visit to one time a month can save you $600 a year. 

    6) Car Washes-If you just want a standard wash and dry service, a car wash can cost you about $20 a visit. If you’re washing your car every week that’s about $100.00 a month spent on something you can do yourself at home. 

    7) Weekday Lunches out-Most people spend about $9.00 a day to eat lunch during the week. That comes out to about $2300 spent each year on lunch food. Take the extra time each night to pack yourself a lunch. Just spending a little time doing this, can save you a lot of money in the long run. 

    8) Vending Machine Snacks-Snacks sold at the vending machines usually cost about $.75-$1 and will sometimes require more than one bag to satisfy that craving appetite. Take the time out to buy snacks at the grocery store and bring it with you to work so that you’re not tempted to visit that machine every day. Remember, every little bit counts! 

    9) Interest Charges on Credit Cards-According to indexcreditcards.com the average consumer credit card rate is 14.03%. Typically, minimum payments are calculated to only pay 1%-3% of your balance. So, if you have a card that has a balance of $5000 and you are only making the minimum payments of 2% of your balance, it will take you about 22 years to pay off the debt. If you are one of those asking the question – how do I lower my debt – try to make more than just the minimum payments and get those cards paid off! 

    10) Unused Membership-Gym memberships can cost about $30 – $40 a month. If you are not using your gym membership, you are flushing about $480 a year down the toilet. Check with your gym, and see if they can place you on a “pay per visit” plan, where you can pay each time you come to their gym. Or, check with the area you live in, some apartment complexes have onsite gyms their residents may use free of charge. 

    As you can see, making a lifestyle change and saving can assist in helping those who are asking, “How do I lower my debt?” This method is the least aggressive. It is best for individuals who don’t have major debt challenges and are still current on their payments, as there are no negative credit consequences.  

  • Those who can’t take on credit card debt pay in other ways

    Those who can't take on credit card debt pay in other ways A reporter for the Associated Press participated in a one-month experiment to see how much it cost those who don't have a bank account and can't take on credit card debt.

    The report said she piled up $93 in fees and charges that those who are part of the banking system never have to worry about. That works out to over $1,100 a year for those who go unbanked. For example, she paid $28 to cash a paycheck, $1.50 for every money order she had to send out to pay bills, and a dollar or more every time she swiped her prepaid debit card at a store.

    The report said many consumers don't have the ability to take on credit card debt for a number of reasons. The majority of those households that are considered under- or unbanked bring in less than $30,000 a year, and rely on services like check-cashing companies and payday loans. Many also rely on prepaid debit cards, but these carry their own fees, including paying just to set up an account. In addition, some may charge up to a dollar a minute to call the issuer's customer service hotline, or $5 every time the user adds more money to the account. However, there are many hassles associated with not using a credit card or bank that consumers may take for granted. For example, if someone with a prepaid card wants to use it to take cash out of an ATM, they are often hit with hefty fees to do so, with some companies charging up to $5.

    Many consumers who can't get a credit card may have a history of bad credit and are no longer able to qualify for a new account from a lender. Many banks have tightened restrictions on the minimum credit score a person can have to qualify for even the most basic card.

  • Utilities charge more to consumers who take on credit card debt

    Utilities charge more to consumers who take on credit card debt According to a new report in the New York Times, many large utility companies charge consumers for the convenience of taking on credit card debt to pay their bills rather than using other payment methods, including paying by debit card. For example, Con Edison charges people who use their credit cards to pay their electric bill $4.75 a month. National Grid, likewise, charges $2.25 for the transaction.

    The report said the additional fees are related to the price credit card companies charge them to process every transaction. A Con Ed spokesman told the newspaper that if it didn't charge those who take on credit card debt when paying their bills, they would have to pass the costs onto every customer instead. And because that company is a public utility, it has to keep its prices as low as possible.

    A few years ago, Visa and MasterCard agreed to reduce the cost of interchange fees they charged utility companies to process a transaction whenever a consumer took on credit card debt to pay their bill, the report said.

    However, even the reduced costs can present problems because Visa's rules often prohibit them from charging more to cover these fees, the report said. Meanwhile, MasterCard allows educational and government institutions, including public utilities, to charge the convenience fee with no third party involved. As a result utilities that engage in this practice typically have to hire a third-party company to process payments involving credit card debt, the report said. It did so instead of raising rates.

    In recent months, more businesses have begun complaining about the interchange fees lenders charge them to process transactions that result in credit card debt. Even small businesses can see their costs rise by thousands of dollars a year by allowing customers to pay by credit card. However, recent laws allowed merchants to begin instituting minimum payment amounts that allowed them to mitigate the cost of these transactions, which typically range between 2 and 4 percent of the total price of the purchase.

  • Get Out of Debt Fast

    Many people are looking for a way to get out of debt fast. Although bankruptcy is an idea that often comes to the minds of most consumers first, this is an option that many Americans would prefer to avoid if possible. The good news is that there are several alternatives to help consumers get out of debt fast.

    Four Ways to Get Out of Debt Fast:

    1. Paying more towards your debts each month is an option that may not seem possible for some, but for those of you who are truly committed to get out of debt fast you may be able to work out a monthly budget that allows you to pay more towards your debt than before. This will not only reduce the principal balances more rapidly, but it will significantly cut down what you would otherwise pay in interest. It is usually best to focus on paying down the creditors with the highest interest rates first, while leaving those with the lowest interest rates for payoff last.
    2. Another way to get out of debt fast, or at least pay the debt off more quickly, is to simply contact one’s lenders and ask for a lower APR. While this method does not always work, it never hurts to try. Some consumers who have been able to stay current with their monthly payments might be able to talk their way into a more favorable rate. If a creditor knows that you have the opportunity to transfer your balance to another lender, they are likely to try and keep your business.

    3. Speaking to a credit counselor, who can suggest a debt management plan that could help you pay off your debt within four to seven years, is another option. Although this method is not as quick, many counselors make consumers devote considerable time to a financial education process that will also help draw up a sound financial budget and eliminate unnecessary expenditures to further chip away at their debt. In a credit counseling program, consumers will pay back every dollar of the principal they owe, albeit it at a lower interest rate.

    4. Debt settlement is the process of negotiating with creditors to achieve a payoff amount that is a substantial reduction to the current balances that are owed. Creditors are very willing to negotiate on debt balances that are in arrears, because if a consumer were to file bankruptcy, they stand to get nothing. In order to succeed in such a program, consumers need to diligently save the funds that are required to make settlements, which typically run around 50 percent of the total current balances and last between 24 to 48 months.

    When you are looking for the best way to get out of debt fast, you should explore all of your options and carefully consider the pros and cons of each process. Always make sure to do your due diligence on the companies offering the various solutions. While no reduction process is going to be easy, there are great companies that can help you get through a tough spot. 

  • Credit card debt fell in August

    Credit card debt fell in August. According to the latest statistics from the Federal Reserve Board, the amount of nationwide revolving credit, which is typically associated with credit card debt, declined by $5 billion between July and August, from $827.2 billion to $822.2 billion. This drop, which totaled 7.2 percent, was the same proportion observed in July, and slightly less than June's reduction of 7.5 percent.

    Meanwhile, total consumer credit, which includes both credit card debt in addition to other borrowings such as auto loans and mortgages – also known as nonrevolving credit – fell about $3.3 billion. This marked a decline of about 1.7 percent at an annualized rate after the Fed revised its estimate of July's fall up to 2 percent from 1.8 percent. Currently, total consumer debt amounts to $2,414.3 trillion.

    This was the result of a 1.2 percent increase in nonrevolving credit, which rose from $1.59 trillion to $1.592 trillion, the Fed said.

    In recent months, many consumers have attempted to shed some of their credit card debt, and this may be evidenced in declines so far this year of 8.5 percent and 7.2 percent in the first and second quarters, respectively, the Fed noted. In the fourth quarter of 2009, revolving credit tumbled 12.4 percent.

    Banks have been more selective about the kind of consumer to whom they will lend money. Many have boosted minimum credit scores for consumers to qualify for loans for both assets and those which may lead to credit card debt. In fact, most types of institutions, such as commercial banks, finance companies, credit unions and savings institutions all tried to scale back their loan volume, while the federal government made a more concerted effort to help borrowers get access to lines of credit.

    However, many financial experts are now wondering if all the declines in consumer credit card debt in recent months are due to Americans being more conscientious about paying off their bills or the high national charge off rates. These have remained elevated even as delinquencies in general fell to lows not seen since the beginning of the recession. However, charge offs have also slowed over the summer.

  • Citi sells part of its credit card debt to General Electric

    Citi sells part of its credit card debt to General Electric. According to a report in the Wall Street Journal, Citi and GE reached an agreement on the sale of about $1.6 billion of the banking company's credit card debt. However, that is a relatively small amount when compared to what Citigroup wants to free itself from.

    The report said Citi Holdings, the banking giant's division in charge of reducing its unwanted loans, securities and businesses, held about $465 billion in assets as of June 30. That includes CitiFinancial North America, the company's biggest consumer finance business. However, the amount has been whittled down by about 20 percent, from $582 billion in the second quarter of 2009, when Citi decided to try to sell or cut down assets that didn't "fit with its banking strategy."

    Currently, Citi Holdings makes up about 24 percent of Citigroup, the report said.

    The credit card debt Citi sold to GE was taken on using cards it did not issue under its own brand. Rather, they are "retail partner" loans, for which delinquency rates are slightly higher than for its normal accounts. In all, Citi handles retail credit card businesses totaling about $50 billion for a number of large companies, such as Home Depot and Exxon Mobil.

    Last month, Citi Holdings also announced it would sell the company's 80 percent share in Student Loan Corp. to Discover Financial for $600 million. It also sold $3.5 billion in commercial real estate loans to JPMorgan Chase in August, and spun off or sold several overseas ventures in Latin America, Japan and Europe.

    Many lending giants may have become concerned about the state of consumer credit in America in recent months, as some people have had trouble paying off their credit card debt. While delinquencies – accounts 30 days or more behind – have declined, they're still elevated above levels observed prior to the economic crisis. The same is true of charge offs – accounts 90 days or more behind and deemed uncollectable – though the most recent statistics saw an increase in this type of credit liability for the first time in a few months.