Category: Debt Management

With an increasing amount of consumers looking for debt consolidation loans and other ways to manage their finances in preparation for the upcoming holiday shopping season, gift cards can be a way for consumers to ensure that they are only spending a set amount, or can be an easy gift option for friends and loved ones.

Yet many gift cards have dormancy penalties, which charge cardholders a fee for inactive cards, making the bill consolidation advantages of gift cards a little less appealing.

American Express, responding to criticism from consumers and anticipating a future law prohibiting dormancy fees on gift cards, announced Wednesday that it has eliminated the $2 fee placed on its gift cards for each month of inactivity.

Although the company will continue to charge an upfront purchase fee, the dormancy fee – which goes into effect after 12 months of inactivity – was eliminated. This change is effective immediately, and is applicable to cards that have already been purchased.

Gift cards and other prepaid cards have become an even more popular payment option thanks to the recession, as consumers look to control their spending and consolidate debt – a recent report from Mercator Advisory Group found that the total load volume of prepaid and gift cards increased by $27.4 billion between 2007 and 2008.

With millions of Americans out of work, many people are turning to credit card consolidation to make ends meet, but it seems that for people with the right skills, unemployment isn’t a problem.

According to a recent report from the Associated Press, jobs in nursing, engineering and some other niche fields are not only paying well, but have a number of openings companies are finding hard to fill.

The AP notes that Steve Jones, a recruiter in the medical industry, says he has a number of jobs he can’t find employees for. Jones told the news provider that he has more than 200 "critical" jobs in the hospital field that he is having trouble filling – many of which pay more than the national average.

But Jones and others looking to find the right candidates says most of the people filling out applications do not have the proper skills for the jobs.

That’s not good news for the millions who have lost their jobs during the recession, and the forecast seems to indicate job losses will continue.

Appearing on ABC’s This Week on Sunday, former Federal Reserve Chairman Alan Greenspan said he believes the unemployment rate will reach 10 percent before heading back down.

During the economic downturn, many people are looking to consolidate debt and reduce their spending with some turning to prepaid cards for help. And according to a recent study, the amount of money being loaded on those cards is rising.

The report from Mercator Advisory Group finds that the amount loaded on both closed loop and open loop cards increased from $220.3 billion in 2007 to $247.7 billion last year – a 12.4 percent rise.

It seems that an increasing number of people are turning to these cards as a way to spend money on items and services they use regularly. The report finds that a number of types of closed loop cards – those that can only be spent at a specific store or business – saw big increases over the last year.

For example, cards used for digital media saw a 24 percent increase while cards in the petroleum sector saw a 23.2 percent rise over the year.

In fact, it appears that the rise in the popularity of Apple’s iTunes store has had a big impact on the prepaid card industry. According to the report, the digital content category increased 17 percent in 2008 to $8.04 billion. Of that segment, digital media saw some of the biggest increases with 24 percent growth.

Minnesota Attorney General Lori Swanson is cracking down on companies making false promises about lowering interest and credit card rates in exchange for up-front fees paid by consumers.

Swanson announced Tuesday that the state had filed separate lawsuits against three companies posing as debt counseling services that had charged initial fees for services that were never rendered. The three companies singled out by the lawsuits were Priority Direct Marketing, which charged fees of up to $1,590; Clear Financial Solutions, which charged fees of up to $999; and Moneyworks LLC, which charged fees of up to $1,995.

According to the lawsuits, the fraudulent debt counseling services made unsolicited phone calls to residents throughout the state promising lower rates and savings or a full refund for their services. After getting consumers to bite on their claims and pay, the companies would provide a poorly run service, or no service at all, while not returning the refunds.

Additionally, Priority Direct Marketing also allegedly claimed falsely to be affiliated with the government’s federal economic stimulus plan.

"Many people are struggling to keep up with their bills in this tough economy, and a new cottage industry of debt assistance companies promises to help them. But these companies often do little or nothing to justify their high fees, leaving people in even worse shape," said Attorney General Swanson.

In addition to the lawsuits, Swanson also issued a warning to consumers about debt assistance programs that could look to take advantage of the poor economic conditions to lure those in need of debt management into scam.