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July 29, 2009

Debt Settlement Offers Coming From Unlikeliest Of Places: Credit Companies

The rising unemployment rate and the economic slow down is hurting many American consumers. Consumers are now finding their budgets stretched thinly just to cover their basic expenses. Many are finding out that their monthly take home pay is just enough to cover their daily expenses. As a result, they have had to prioritise their spending and one of the first budgetary expenses to go is credit card debt payments resulting in the rise of defaults and charge-offs for credit card companies.

Debt Settlement Offers Coming From Unlikeliest Of Places: Credit Companies The rise in defaults and charge-offs are also hurting credit card companies considerably. In May this year credit card defaults reached 10%. This is the highest it has been for some time now. With 10% of their uncollected debts considered as unrecoverable, credit card companies are now desperately seeking for ways to recover at least some of these debts.

Credit card companies have the option of selling these debts to collection companies. However, this will mean that they will be seeing pennies for every dollar. A more attractive option for credit card companies is to offer a debt settlement arrangement to their debtors.

In a credit card debt settlement arrangement, the credit card companies get a percentage of the original debt from the debtor in exchange for which the credit card company will consider the debt paid. Although the credit company does not get the original amount back, at least they still get a percentage of the original debt. This also has some appeal for credit card holders burdened with debt, mainly because this will allow them to settle their debts for a value much lower than the original debt.

Some credit card companies have taken it to themselves to call up their debtors to offer them a debt settlement program. Credit card holders carrying debts on their credit cards can also call up their credit companies themselves and ask for a debt settlement arrangement. Not everyone is eligible for a debt settlement arrangement. However, considering the current economic situation, the chances that a credit card holder can secure a debt settlement arrangement for herself or himself is quite good.

Although a credit card debt settlement arrangement might seem like a great idea for getting rid of credit card debt for credit card holders, they need to be aware that there is an unpleasant side effect. If a card holder goes for a debt settlement arrangement, his or her credit score will receive a large black mark for it. Considering that this black mark stays with them for seven years, credit card holders should think twice before going for a debt settlement arrangement.

The rising unemployment rate and the economic slow down is hurting many American consumers. Consumers are now finding their budgets stretched thinly just to cover their basic expenses.

July 13, 2009

Interest Rates On The Rise, Debts Decline For Credit Cards

According to figures recently released by the Federal Reserve, consumer credit card debt has declined further. In May, credit card debt annual rates decreased by 3.65%. Consumer personal savings are on the rise as well. Personal savings rate, a measure of the amount American consumers set aside from their disposable income for savings, climbed to 6.9%.

Interest Rates On The Rise, Debts Decline For Credit Cards The April figures placed savings at 5.6%. These figures show a trend of American consumers moving towards a financial habit of frugality, tightening their budgets and settling their debts while minimizing expenses.

The current trend towards frugality is likely to stay for the long term. Consumers, stung by the economic crisis and currently burdened with the credit crunch, are likely to focus more on building up their savings and keeping their cash instead of spending. Furthermore, the activation of the credit card bill will most likely make it easier for consumers to keep a tight rein on their money. The transparency amendments in the bill alone will help American consumers realize just how much their debts will cost them, making them choose smarter when they want to spend. The entirety of the credit card bill won’t become active before February of next year but, by the 20th of August, a part of the bill will become active which will make credit card companies give 45 days advance notice for any rate changes and force them to send credit card bills three weeks before they become due.

With these two regulations in place, credit card holders will have more time to figure out whether they want to stay with their credit companies, in the case of rate hikes, and how to best payoff their debts, in the case of monthly bills. Credit card holders who are amply forewarned of any rate hikes by credit companies will have enough time to shop around for better credit card deals before the increased rate actually becomes active. Also, if they receive their credit card bills earlier, credit card holders will have enough time to arrange payments accordingly, thus avoiding late payment fees and interest hikes.

While consumers go for frugality, credit companies are busy increasing interest rates and fees and cutting off credit. Chase cards recently upped their minimum monthly payments from 2% to 5%. Bank of America raised their balance transfer rates to 4% from 3%. A few of the major credit companies are also moving their fixed rate credit cards to variable rate ones. Thus, interest rates can still fluctuate without ample notice even with the credit card bill in place.

July 1, 2009

Can You Really Settle Debts Through A Partial Payment?

If you have been following the news, you are probably aware of how much of a crisis the credit card industry is in right now. If you are also one of the many Americans who are having problems with credit card debt, you are probably highly interested in getting rid of those debts quickly.

Can You Really Settle Debts Through A Partial Payment? You’ve probably heard of debt consolidation loans, credit counseling options and debt settlement companies. You might also have come across a strange article or news item where some lucky credit card holder was able to settle their debts for by paying an amount far lesser than their original debt. “Is that for real?”, you probably ask yourself. Actually, yes it is and here’s why.

Credit card companies are now experiencing a large number of charge offs. A charge off is when the company has to consider a debt as a loss. Usually, a debt is written in the books of a credit card company as an asset. However, once the credit stops paying that debt, the credit card companies get worried. This is because, if the non payment continues for six months, they will have to writ it off as a loss. This means that the debt is very likely to remain unpaid. For obvious reasons, credit card companies want to avoid this as much as possible.

This is where a debt settlement arrangement comes in. As mentioned earlier, a debt settlement is when a debtor pays an amount far lower than the original debt to have it settled. Because credit card companies do not want to list debts as losses, they are more agreeablt to letting the debt be settled for a lesser amount than losing the entire amount instead.

This kind of arrangement is actually what is making debt settlement companies large profits right now. The ability of these companies to settle debts for far lesser than they are worth are enticing many people to sign up for their service, even with their high upfront costs and risky practices. What most consumers don’t know is that, debt settlement arrangements can easily be arranged by the consumers themselves. There is really no need for a third party negotiator.

If you have a large credit card debt and you are having some trouble paying it off, you should probably call up your credit card company and see if you can get a debt settlement arrangement. The chances are actually very good that you can actually have your debts forgiven while only paying around fifty to seventy percent of the original debt. Sounds great? It is but you should know that by going into a debt settlement agreement, your credit score will take a big hit. The record will also stay with your score for seven years which will greatly stifle your ability to take out a loan.

July 1, 2009

Getting Rid Of Multiple Credit Cards

The economic crisis has had an enormous effect on the average American consumer. Traditionally very free with their credit card use, the average consumer now considers carefully every purchase made on their plastic. While credit cards had become the preferred method of transaction in the past few years, nowadays cash is again becoming fashionable and with good reason.

Burdened with the economic and employment crisis, a majority of credit card carrying American consumers have been unable to keep up with their credit card debt payments. The resulting financial collapse that affected the credit card companies almost brought even the biggest and best of them to bankruptcy. It also brought forth the passage of the controversial credit card bill. The credit card bill is set to heavily regulate the way credit card companies are making profits. The result will be hat credit card companies are going to lose many of their most profitable income lines.

The upshot of all this is that, now, credit has become very expensive. Credit card companies are raising interest rates and fees like there’s no tomorrow, which is literally the truth. Consumers are, understandably wising up and being uncharacteristically careful of their credit card spending. Whereas, in the past, owning several credit cards was the norm, many credit card owners are now thinking of ditching their extra credit lines and maintaining only one or two.

One of the biggest problems with getting rid of a credit card line is that it will have a big effect on the consumer’s credit score. The credit score is what dictates the ability of a consumer to take out a loan. The lower the score, the more difficult to get a loan. One of the actors that affect a consumer’s credit score is the ratio between his available credit and the balance that he carries. Logically, by terminating a credit line, he will lose some of his available credit which will lower that ratio. However, keeping a credit card active is fast becoming very expensive. Many companies are bringing back annual fees and, for a card to remain active, the owner has to make regular purchases on it.

Financial experts agree that, nowadays, it is unwise to keep multiple credit lines. They suggest that, for those who want to get rid of unused credit lines, timing is key. Card holders who expect to take a loan should try to keep their credit score as healthy as possible. Therefore, terminating a credit line may not be advisable. When terminating a credit line, it is also important to remember that, usually, the older the credit card, the bigger its effect on the score, so card holders are advised to keep their older credit cards and terminate newer ones instead.

June 30, 2009

Practical Tips For Debt Ridden Credit Card Owners

Getting a credit card can be quite a liberating experience – until you find yourself deep in credit card debt. With the current economy the way it is, if you are carrying a large balance every month on you credit cards, you are possibly in a very risky financial position.

Practical Tips For Debt Ridden Credit Card Owners Aside from the bad economy and the dry up in employment, you will also have to contend with increasing interest rates and fees. Banks are currently very eager to earn as much as they can out of you. You see, not only are credit institutions in a bind due to the economic crisis, they are also in a hurry to earn as much as they can before the credit card bill takes action against them, which should be around February next year. Right now, it is a very bad time to be a credit card holder with a big debt.

So how can you get yourself out of credit card debt? There are no hard and fast rules on how you can do this. It depends mostly on what your financial situation is like and what can work for one person may not work for another. However, one thing that every credit card holder who wants to zero out their balance should do is to review their financial situation. Basically, you want to figure out how much you owe and how much you earn. Figure out where your finances are going to every month, how optimal is your credit card payment set up and how much “free” every month.

To start with, list down all your credit cards. For each of your credit lines, list your balance, their minimum payments and interest rates. After doing that, figure out your income and see how much is the exact amount that you can safely allocate to debt payments every month. Although it is tempting to allocate as much as possible to debt payments, make sure to reserve some cash for day to day expenses. Also, give yourself some financial leeway for unexpected events.

Once you’ve got that list and you’ve figured out your available cash for debt payment, pay off the cards with the smallest balance first, regardless of its interest rate. Now list your cards according to their rate of interest. Schedule your payments so that you make only the minimum payments for all your credit cards except the one with the highest interest rate. The remaining debt payment allocation that you have should go to paying off your credit card with the highest interest rate. Once that’s done, move on to the card with the next highest interest rate until you have all your debts paid off.

June 22, 2009

A Great Deal For People With Credit Card Debt

It is no secret that the credit card industry is currently having a hard time keeping their finances afloat. The economic crash and the resulting rapid increase in credit card delinquencies and write offs caught the credit companies highly exposed and, as a result many found themselves in the brink of a financial collapse. A timely bailout from the U.S. government has kept most of the major credit card companies afloat. However, the credit card crisis still remains and, as unemployment continues to grow and the economy remains practically stagnant, credit card companies are going to need more than just a government bailout.

The biggest problem for credit card companies right now are unpaid debts. A Nilson report from April 2009 puts outstanding credit card debt at $972 billion by the end of 2008, just a few digits away from hitting a trillion dollars. The report also states that about 15% of American consumers had been late in making their credit card payments and 8% had not paid their debts at all. The resulting rise in toxic assets and write offs ultimately caused the current credit crunch.

Credit card companies, when they issue credits, get to write those credits as assets in their books. However, when it comes to delinquent balances, credit card companies begin to worry when the missed balance payments approach six months. This is because, by regulation, once a credit balance surpasses six months, credit card companies are forced to write the balance off. This does not mean that the debt is forgiven, the company can and will do their best to collect the debt. However, it has basically become a loss for the credit company when it is delinquent for that long.

Obviously, credit card companies would do everything to avoid having a debt reach or exceed six months of non payment. With the current credit crisis, keeping away from write offs becomes doubly important. Because of this, credit cardholders having credit card debt problems may be in for quite a surprise.

Due to the high number of write offs that credit card companies are facing, a majority of credit card companies are now allowing their customers to pay off their debts at a fraction of the original amount. Reports have come in of credit cardholders getting their debts forgiven by paying just 50%, or even less, of their original debt. All credit cardholders have to do is to contact their creditors and make an offer. Some companies are even making the offers themselves.

As great as the deal sounds, there is still something credit cardholders need to be wary of. Credit cardholders who enter into these kinds of deals will get hit hard on their credit scores.

June 18, 2009

Credit Card Companies Opting For Quick Fixes

As the economic recession continues, credit cardholders are getting weighed down by credit card debt more and more. Rising interest rates and fees threaten to make it heavier still. However, a curious budding practice among credit card companies may be the answer to credit cardholders’ problems.

1194188_31355691 While credit cardholders are worrying about their individual credit card debts, credit card companies are also in dire straits financially themselves. In March, revolving credit was recorded at a total amount of $939.6 billion. Revolving credit is often used as a measure of credit card debt as it is a close approximation of the debt value. According to the Federal Reserve, during the first quarter of the year, the total credit card debts that credit companies had, 6.5% were debts that were 30 days overdue, at least. The Federal Reserve first began following this particular data in 1991 and, since that time, the value from the first quarter was the highest that they ever encountered. The write offs that credit card companies were also at a peak.

With the passage of a few months, the numbers have hardly gotten better which has credit card companies worried. Furthermore, regulations dictate that a credit card balance that has been six months delinquent will have its value reduced to zero in the credit card company’s books. The thinking is that if the borrower is unable to pay up to that point, the probabilities are that the debt will never be repaid.

Faced with high toxic assets and losing the entire debt to a write off, credit card companies are doing the unexpected, they are accepting debt payments 50% or lower than the original debt to have the debt forgiven.

According to Credit.com founder Adam K. Levin, creditors are willing accept a small percentage of the debt payment rather than get nothing in the end. Thus, credit cardholders with large debts that cannot pay their debts completely have the opportunity to offer their credit company payment which is only a percentage of the original debt in order to have their debts completely removed.

The situation is such that credit cardholders who call up their creditors can have these kinds of offered accepted directly by the customer support person they are talking to without consultation of their supervisors. In fact, some credit card companies are actually doing the calling themselves and offering similar deals to people with unpaid debts.

The trade off of this seemingly fantastic kind of deal is that the credit cardholders’ credit records will have a large black mark on it. Still, compared to the prospect of carrying heavy debt indefinitely, the trade off seems worth it.

June 17, 2009

A Practical Guide To Getting Out Of Debt

getout Debt is one of the biggest problems facing American consumers these days. The spending habits of Americans have been less than stellar in the past few years. The majority of American consumers also carry revolving credit card debt due to high credit card spending. With the economic and employment crisis, American consumers got into debt more and more.

If you are one of those who have been affected by the widespread debt problem, you might find these practical guides to getting yourself out of debt useful.

Inventory

Before you can begin digging yourself out of debt, you first have to review your financial status and see how deep you really are in. Knowing exactly what debts you are facing and what your income status is will help you get a clear picture of how you can manage your finances.

You should start with making a list of all your debts. Write down as many details as you can such as the size of the debt, the interest rate and others. You want to make as clear a picture as possible of all the debts that you owe.

Prioritize

Once you have your list, you should be able to pinpoint which debts need to be paid faster. As a rule, the higher the interest rate of a debt, the faster you have to pay it off. If you have debts which are secured against your property, make sure to prioritize that so you don’t lose it.

Advice

As a consumer, you have many avenues to turn to if you are looking for financial advice. One of the best ways to get advice is through credit counselors. These people can help you analyze your entire financial setup, beyond what debts you have, and give you advice on how you can solve your financial problems. They can even talk to creditors for you to arrange for better terms. Best of all, they work for minimal pay or even free.

Freebies

The government is well aware of the financial situation of American citizens and is providing some financial support lines for them. If you are a pensioner or you’ve just lost your job, try visiting entitledto.com to see if you are eligible for government benefits.

Relax

If you have been carrying your debts for a while now, you have probably been subject to some bullish calls from your creditors. Do not get too rattled by these. This is one of the reasons why it is important to get advice from professionals regarding your debts. They can inform you of what your rights are and the limits of how creditors can collect their money. Being informed of your rights will also prevent you from getting scammed by unscrupulous people looking to make money off people having debt problems as well.

June 12, 2009

Robocalls Scam Alert

It seems that the credit card debt crisis is spawning a variety of innovative scam artists. One of the latest are the so-called Robocalls that questionable companies are making to catch unwary credit cardholders looking for a quick fix to their debts.

Robocalls Scam Alert The Better Business Bureau has been alerted and is monitoring the practices of these robocalls. Robocalls are actually just telemarketers who are cashing in on the current panic over credit card debt.

The call usually starts with an automated message which states that “This is our final attempt to reach you since you’ve not responded to our other calls to discuss your credit-card debt”. It then gives instructions on how the callee can dial another number to talk to an actual person. Understandably, if the one receiving the call has some serious credit card debt, he or she would be tempted, to say the least, to make that call. When the phone number given is dialed, the first thing that is asked from the caller is their credit card number and the “operator” will then give a sales pitch on how he or she can help the caller manage his or her credit card debt.

Technically, the service that the operator offers, calling a lender to negotiate a better debt payment arrangement for the caller, can be quite helpful. The problem is that they charge anywhere from $700 to $1,000 for a service that any credit cardholder with a large debt can do for him or herself without incurring any costs. These large fees, which usually have to be paid upfront, are hardly necessary and only put more burden on the credit cardholder who is probably already struggling with debt.

Aside from basically scamming people with a service they can get for free, these robocalls also violate the “do-not-call” laws. Numerous complaints have been made to the Better Business Bureau about the practices of the companies behind these robocalls. They are not only a nuisance but they are also a danger to credit cardholders who are not that familiar with their credit rights.

For credit cardholders who receive these robocalls, the best thing to do is to hangup immediately. If, for some reason this is not possible, then refrain from giving away any personal information such as your credit card or bank number or your social security ID. To stop these calls from disturbing you, you can try and put your number on the do-not-call list. You can do this by visiting the website: “donotcall.gov” . If they continue to call you after you’ve done so, you can report them to the Federal Trace Commission through the same web address.

June 10, 2009

Smart Spending Means No Credit Card Woes

With the way the economy is going, you really don’t want to get yourself into credit card debt. That’s why, as much as possible, you should try to make smart choices whenever you use your credit card. If you are thinking that you are better off getting rid of your credit cards, don’t. Your credit cards are the primary link to your credit score and, if you surrender your credit cards, you will most definitely lose out on your credit score.

Smart Spending Means No Credit Card Woes One of the worst ways that you can get into credit card debt is when you fall for their aggressive marketing practices. Credit card companies are always looking to expand their customer base. More customers mean greater profit. Thus, you are always going to find some very attractive offers from credit card companies. Take this with a grain of salt. For instance, some companies offer credit cards with waived annual fees. Make sure that you know how many years that fee is waived. 0% interest rates are another common trap. With a deal like this, they are just waiting for you to miss one monthly payment. Once you do, you’ll see your interest rates rocket sky high.

Another thing to remember is to be smart with your monthly payments. Obviously, make every effort to zero out your monthly balance every month. That means charging your purchases smartly, making sure that you will have the money to cover your balance at the end of the month. You don’t want to be charged late fees. You should also make a point of reviewing your monthly statement carefully. Banks are notorious for charging you with unearned fees or with ghost purchases. Make sure that you are being billed fairly. If you have any doubt, call the bank immediately. This is also good practice for detecting credit card fraud.

As much as possible, use your credit card for credit purchases. Some credit cards offer a service wherein you can also withdraw cash from an ATM using your credit card. Don’t use this service. For one thing, the charges are way higher than a normal ATM card. Also, you don’t want to get used to this kind of practice. Small withdrawals have a way of ballooning over time so that you will realize only when it is too late that you’ve accumulated a huge debt.

If you are fond of the convenience of using credit cards, you should look into debit cards. Debit cards can be used just like how you use credit cards. The main difference is that, with a debit card, your purchases are taken against an existing balance, maybe in your bank account. That means that whatever you charged to your debit card, it is already paid the moment the transaction goes through. No need to worry about monthly bills.

June 5, 2009

Get Creative To Get Over Your Credit Card Woes

The credit card crunch has every American cardholder scratching their heads on how to keep their finances afloat, especially in this bad economic times.

Get Creative To Get Over Your Credit Card Woes The problem of credit card debt has ballooned ever since the economic downturn first began. Credit card companies, getting burdened by huge profit losses, are trying to bail out themselves by passing it down to their customers. The result: high interest rates and astronomical fees. Clearly, if you have any type of credit card debt now, you need to get out of it as soon as you can.

There are a lot of ways you can get rid of your credit card debt. If you are really in deep, you can seek the help of credit counselors. They can help formulate a financial plan for you which, at the very least can stabilize your finances by lowering your monthly payments while making only a minimal sacrifice on your debt interests. However, if your credit card debt is still at manageable levels, you can try and do it yourself. You just have to keep in mind that getting over your credit card debt needs only some self-discipline and a lot of creative thinking.

Creative thinking means that you approach the problem of credit card debt at different angles, figuring out where you can make changes, even just small ones, to get credit card debt out of your life. To be able to do this, you have to have at least some understanding of your credit card bill. If there is one thing that you must remember, it is this: keep an eye on your interest rates.

Your interest rates dictate how much your bill is going to be at the end of the month. You should also read up on what the penalties will be if you miss one monthly payment. These days, its bound to be astronomical. Finally, be wary of the “minimum amount due”. This does not go to pay off your debt, only the interest.

It would also be great if you understand your credit card habits as well. For instance, if you are something of an impulse buyer, keep your credit cards out of your pocket and, maybe keep it in your desk at home. The convenience of purchasing via plastic has sunk many a cardholder into debt because of impulse buying.

When paying off your debts, if you have many, try to avoid your “extras”. “Extras” meaning the money you have left over after paying off a debt. Instead of using it for purchases, use it to pay off another debt instead. Keep doing this until your debts are paid and you will be pleasantly surprised of the results, and of the “extras” that you will have available once your debts are gone.

June 3, 2009

Credit Card Spending Will Never Be The Same

The economic crash caught many American consumers in surprise. However, financial analysts and watchers have said that it was a long time in coming.

For several years, American consumers had gone on a spending spree with their credit cards without really taking into account what the final costs would be. When the financial crash happened, credit industry experts saw that the soaring credit card debt played a large role in it.

Credit Card Spending Will Never Be The Same The Federal Reserve maintains a survey of the total revolving debt that American consumers carry. Estimates put 90% of this amount to credit card balances. According to their figures, American consumers had $177 billion in revolving debt in September of 1988. 20 years later, in September 2008, figure was $977 billion, an increase of more than five times the 1988 value. However, in the current economical climate, consumers are drastically cutting back and current survey, dating back to last October, show a continuous drop in revolving debt, a rare occurrence.

Originally, credit cards came out as a perk for a bank’s valued customers. However, by the time credit scoring became popular, credit companies began mass marketing credit cards, claiming that they could uniquely tailor the card’s rates and penalties according to the consumer’s financial score. This resulted in a huge expansion of the credit card market. Credit cards became available even to people who had very low credit scores. This will soon come to end once the credit card bill comes into play.

Making credit cards available to people with low credit scores may seem to be a generous move by credit card companies. However, the reality is not so reassuring. People have found out that these credit cards, while seemingly helpful, actually carry high interest rates and high fees which will ultimately bury the cardholder in debt. The credit card bill will put a stop to this by tightening restrictions on how credit cards are issued. It will muzzle many other practices of credit card companies as well.

The credit card industry is, of course not pleased with this. They argue that the credit card bill will cut down their profits. To make up for their losses, they will have to lower available credit, increase initial interest rates and cut down on awards and perks programs. These industry warnings carry little threat to American consumers who are now realizing just how dangerous credit card spending can be. The drop in revolving debt may just be the first indication of a growing change among American consumers’ spending habits. A change which will hopefully lead to smarter, more efficient credit cardholders.

June 1, 2009

Parent Empowering Credit Card Legislation to Curb College Student Debt

Signed a few days before Memorial Day, the credit card bill provides wide ranging legislation to curb the rampant “profit-is-the-bottom-line” practice of credit card companies. Among the many areas the credit card bill will touch is the debt laden, below 21-year old credit cardholders. This particular population of credit cardholders is largely composed of college students.

Parent Empowering Credit Card Legislation to Curb College Student Debt Credit card debt problem among college students is well known within the credit industry and its observers. A survey recently released by Sallie Mae shows that 84% of the college student population carry at least one type of credit card. Surprisingly, on the average, a college student carries four credit cards. With their credit lines, the average college student has a debt balance of $3,173. This figure is three times that of four years ago. Considering that the average student does not have the income to pay off their balance, the debt problem among college students is a very serious one. A lot of college students actually graduate college already loaded with credit card debt.

College freshmen are perfect targets for credit card companies. Fresh out of high school and seeking to establish independence, especially in terms of money, college freshmen are easy prey for credit card sellers. Since most of them are also first time credit cardholders, credit card companies are also anxious to lure them in order to build up brand loyalty. So far, credit card companies have been very successful in their efforts, based on the increase of credit card ownership and debt among college students.

With the credit card bill in place, this will soon end. Legislation in the credit card bill strongly prohibits credit card marketing to consumers below 21 years old. Credit card companies will also be disallowed from marketing credit cards inside or near college campuses. Aggressive marketing strategies, which include giving away T-shirts, water bottles, and other items to lure in young consumers to apply for credit cards will also be put to an end.

However, credit card ownership will not be beyond consumers below 21 years old. In order to obtain a credit card, they only have to prove that they are capable of paying their credit or they can get a co-signer for the account. Co-signers are usually either one of the parents or a guardian. Credit card companies are also prohibited from increasing the cardholder’s credit limits without written approval from the co-signer of the credit card.

Because the problem of credit card debt basically hangs on the responsibility of the credit cardholders, responsible credit and debt management will also be part of the orientation program of colleges for their new enrollees.

May 31, 2009

Debt Settlement Programs are Hurting Rather than Helping

The credit card problem has reached an all time high and many cardholders are currently delinquent in their bill payments.

Debt Settlement Programs are Hurting Rather than Helping The figures get much worse when considering the current unemployment rate in the U.S, which is, according to Fitch Ratings, at 8.9%. It is the highest unemployment rate of the country since 1983. With little in the way of available cash, consumers are turning to credit cards. Unfortunately, many are not keeping up with their bills and the credit card crisis just gets worse and worse.

Most consumers mired in credit card debt would like to get out of it as quickly as possible. Inevitably, some are caught in the latest of scams to hit consumers, the debt settlement companies.

Debt settlement companies are not scams per se. However, a large number of companies are taking advantage of the desperation among credit cardholders so that those legit companies end up getting bad press as well. These unscrupulous debt settlement companies often charge high amounts, take advantage of people’s ignorance of credit card practices, and ultimately end up increasing the debtors’ debts rather than lowering them. The debtor’s credit score is also inevitably affected negatively by the debt settlement company’s actions.

The unscrupulous actions of debt settlement companies are not going unnoticed. There have been some media coverage about debt settlement companies that scammed their customers and Andre Cuomo, Attorney General of New York, launched a national investigation on debt settlement companies. He has also had two credit card companies sued for false advertising and fraud. Lisa Madigan, Attorney General of Illinois, has also had some debt settlement companies sued, alleging that the companies “do little or nothing to improve consumers’ financial standings” and “engage in deceptive marketing practices”. In Texas, Greg Abbott, Attorney General, filed a lawsuit in March against a debt settlement company, alleging that the company was involved in “deceptive and misleading acts”.

Legislative director of Association of Settlement Companies, Wesley Young says that estimates place the number of debt settlement company customers at around 500,000 spread across around 1,000 companies. This makes for a huge market for debt settlement companies and Young’s group is trying its best to maintain the credibility of the debt settlement industry. Their association requires total disclosure of credit score risks and payment plans from members upfront.

Lobbyists for the debt settlement industry are also pushing for legislation for the regulation of the industry. However, it will be some time before these actually have some effect. Meanwhile, credit cardholders are learning about the high risk of debt settlement companies and are avoiding them. Some have even gone as far as avoiding credit card use altogether.

May 29, 2009

College Students and Credit Cards

According to a recent study, college students comprise one of the many groups of cardholders that have been hit the hardest by credit card debt.

College Students and Credit Cards According to a survey by Sallie Mae, a lender focusing on student borrowers, this April of 2009, college students on the average own four credit cards or more. Most college cardholders are also not very good at keeping up with their monthly payments. A majority of college cardholders regularly get hit by large monthly finance charges because they can’t pay their monthly credit card bills, according to the survey.

Most worrying of all is the steep rise in the median credit card debt amount of freshmen college students. Whereas the median amount was at $373 during 2004, now it is at $939. This means that even while they are still starting out in college, students are already getting buried in debt. If they are not able to recover, these college students will most likely carry large debts once they graduate. This could be a heavy burden for them, especially when they are just starting out with their careers.

College students are often one of the most active consumers that credit cards have. Although most of them rarely charge big ticket items, smaller purchases do add up to become large debts. The availability of student loans has also recently dried up, forcing many students to use their credit cards for many college expenses. Credit cards are also readily available for college students. They also offer many attractive incentives and freebies. Some credit cards even have arrangements with a few colleges for marketing purposes.

Many observers see that the lack of essential financial education among college students is the root cause of the problem. College students are also not the only sector of the overall population of credit cardholders who need some financial education, judging by what recently happened with the economy.

Using credit cards is not problematic, per se. It only becomes a problem when cardholders do not keep up with their monthly payments. There are many reasons why this may happen. One of the most common is cardholders charging items on their credit cards without really considering if they can pay them off or not when the monthly bill comes.

Because of the bad press that credit cards are getting, some people are turning to debit cards. However, debit cards also have pitfalls. One of the worst pertains to overdraft charges. Overdraft charges happen only with debit cards that include overdraft protection, usually debit cards connected with credit cards. Banks charge $34 on the average for debit card overdrafts.

May 29, 2009

Credit Card Industry Earnings Likely to Drop

The credit card industry is in an uproar over the legislations in the recently passed credit card bill. The credit card bill is aimed at legislating many credit card industry practices that cardholders see as unfair and deceitful. For the credit card industry, the credit card bill is a disastrous piece of legislation which will destroy their profitability and, according to them, limit the available credit for American consumers.

Credit Card Industry Earnings Likely to Drop During the past few years, the credit card industry has enjoyed high profitability. Many see that this is coming to an end. Although many see the credit card bill as the main reason for this, it may only be one of many factors.

Although the credit card industry is currently preoccupied with the threat of the credit card bill legislations, it is important to remember that the profitability of the industry was already going down even before talks of the credit card bill surfaced.

With the economic crisis, credit cardholders were unable to keep up with their monthly payments. Whereas many of those who struggled with credit card debt were able to at least keep up with the minimum monthly payments, they were ultimately defaulting when the economic crash came. The increase in credit card debt defaults greatly hurt the credit industry. Aside from that, it also proved wrong one common boast in the credit card industry: their capability to analyze a borrower’s risk and balance with the right interest rate.

Credit cardholder dissatisfaction over high interest rates and large financial fees is also another factor to consider. Considered the root cause of the credit card bill and its popularity, the dissatisfaction of credit cardholders over many of the practices of the credit card industry has been going on for some time. It was only a matter of time before the issue blew up on the credit card industry.

Now, with the credit card bill in place, credit cardholders are going to get the changes that they have been clamoring for. Unfortunately, many of these changes are going to hurt the credit card companies. The legislations on full disclosure of agreements and restrictions on interest hikes and financial fees will hurt the credit card industry the most.

In the past, the credit card industry has profited greatly from credit cardholders who were unable to pay off their monthly bills but did not default, only paying off penalty fees. The impact is hard to calculate, given the credit card industry’s reluctance to release any figures. Many, however, consider the amount to be quite high.

The credit card controversies, coupled with the economic crisis, have also given American consumers a crash course on financial responsibility. Many of them are going to be more careful with their credit card purchases, limiting credit card industry’s previously large profits from subprime borrowers.

May 19, 2009

Finding Relief to Credit Card Debt

Credit card debt is a widespread problem nowadays. With the economy the way it is, the situation is bound to get worse. As a result of the credit card crisis, cardholders are turning every which way to find a way to settle their debts.

Getting out of debt is not impossible and there are many ways to do it. However, not all lead to debt resolution. Case in point – the recent controversies regarding debt settlement companies. Many cardholders have fallen victim to these companies that are big on promises and nothing else. The problem is serious enough that attorney general of New York State, Andrew M. Cuomo, announced recently that it will investigate over a dozen companies offering debt settlement.

Still, the problem remains – where can cardholders turn to for credit card debt respite?

Self Help

A very simple yet often overlooked solution to debt settlement is by simply calling your creditor to check if they have programs for customers who are having trouble paying their bills. Experts, however, warn that such a move can negatively affect your credit score. This particular solution is also more suitable for those who have debts in a small number of credit lines.

Financial Counseling

One of the problems with having credit card debt is having to understand the intricacies of the credit card agreement between the cardholder and the creditor. The problem also multiplies as more and more credit cards are involved. Credit counseling can greatly simplify the problem for the customer.

Financial counseling or credit counseling helps the customer visualize their entire financial situation. With a clear financial picture, the counselor and the customer can find a viable plan for dealing with the debt. The ultimate aim of financial counseling would be a workable debt management plan.

For those looking for credit counselors, the reliable ones are usually members of legitimate organizations, such as the Association of Independent Consumer Credit Counseling Agencies and the National Foundation for Credit Counseling. Counseling fees are very reasonable and even people who cannot afford the fee are still entertained.

Debt Settlement

Debt settlement companies should be the last choice that anyone with debt problems should consider. Debt settlement companies are very expensive and will require a large payment at the very start. Some companies may do away with large upfront payments, but they usually get their high fees from their customers in some other way.

Experts have agreed that the business model that debt settlement companies follow is very bad for the customer in the long run. Debt settlement plans may actually increase what the customer has to offer and hurt the customer’s credit score. Some credit companies also do not deal with debt settlement outfits.

May 16, 2009

Advanta Cuts Off Borrowing, Underlines Credit Industry Woes

Credit company Advanta Corp. just recently cut off new charges on their credit cards as the economic slump continues. Advanta is a niche credit institution focusing mainly on small business borrowers. Industry analysts say what happened to Advanta was worrying but not unexpected.

The credit industry is considered one of the most affected sectors in the on-going economic crisis. According to estimates, the credit card debt of the nation is approaching the $1 trillion mark and is threatening to be the next financial collapse. According to a statement released by the federal government just last week, of the 19 major banks in the U.S., 12 may experience a loss of $82.4 billion at the end of the year if the federal government’s ‘worse-than-expected” economic scenario proves true.

The credit industry itself knows what it is facing. Jamie Dimon, chief executive of financial giant JPMorgan Chase & Co, referred to its credit-card business in Wilmington as its “biggest conundrum”. Fitch Ratings analyst Chris Wolfe considers that losses on consumer credit cards might exceed outstanding loans by 10%. Such a loss rate would be the worst in the industry ever since credit companies began reporting separately on credit cards during the 1990s.

The credit-card crunch has seemingly hit all sectors of society. Credit card debt seems to be a prevalent problem no matter what particular sector the cardholders belong in. Red Gillen, Celent senior analyst in San Francisco, recently stated that: “The credit-card industry is seeing rapidly increasing charge-offs across the board no matter who the cardholder is.”

In the case of Advanta, their focus was on the small business sector. Gillen said that Advanta’s situation is unique mainly because of its particular sector, small businesses. However, it is a problem that the entire credit industry is suffering from, although Advanta’s case is more along the extreme end.

Chris Wolfe recently said, “We have expected to see credit-card losses accelerate, and they have. I think Advanta is a bit more affected because of their niche in small business.”

Advanta stated last Monday that cutting off new charges was its attempt at preserving available capital which the company will need to absorb its losses and to help the company survive the economic crisis.

CardRatings.com founder, Curtis Arnold refers to Advanta as a bellwether for small business credit cards. Its recent troubles may therefore be warning signals of a growing crisis in the small business sector. CardRatings.com provides credit-card information online.

Referring to what is happening in Advanta, Arnold said, “I think the main thing to take away here is that the small business credit market has taken a significant step backward with this, what I would consider to be, shocking news.”

May 11, 2009

Three Ways To Win Against Credit Card Debt

Credit card debt is a fact of life. That needs to change as soon as possible, especially if you want to survive the economic crisis. To do just that, read on.

Don’t Spend What You Don’t Have

Credit cards are very convenient, no argument. With credit cards, you don’t have to carry a wad of cash every time you go out, you only use a small, thin card to pay for your purchases and you get to shop even if you don’t actually have the money to pay for it. That last one is the problem.

Credit cards make it easy for you to buy something on the assumption that you can pay for it someday. Most people rationalize that they can easily pay off their credit card purchase by paying a fraction of the item’s price every month. Unfortunately, that is not always the case which is, of course why many people are finding themselves in credit card debt nowadays.

If you really want the convenience of a credit card, use a debit card. With a debit card, you are buying with your own money. Thus, you can be sure that when you buy, it is paid for then and there. You won’t have monthly payments or interest rates. It’s a win-win, unless you want to buy something which you don’t have the money for. If, you really need to spend what you don’t have, read the next one.

Pay Your Debts Right

If you read your monthly credit card bill, you’ll see some figures their labeled as “minimum amount due”. Avoid paying that as much as you can.

If you only pay the minimum amount on your bill, you’re not actually paying to lessen your debt balance. You need to remember that the longer your balance stays on your bill, the higher the interest you are getting. So what you really want to do is ignore that deceiving “minimum amount due”, calculate the highest amount you can pay towards your actual debt balance and pay that amount. That way, you avoid the high interest rates and get to congratulate yourself on playing smart.

However, if you’re in over your head already, the last one is for you.

Move To A Cheaper Card

Credit companies love to sell you credit cards. It can be annoying but it can give you a break with your credit card debt problem. If your credit card is an old one, the interest rate on that card is probably higher than that of a new card.

What you should do is to get a new card with a low or even zero interest rate and move your card balance to that. Just be aware that the low or zero interest rate is usually offered for a limited time, usually a few months. Make sure you maximize your payments during that period to get the best out of the deal.

May 4, 2009

Financial Literacy Survey Results Indicate Americans Not Taking Advantage Of Free Credit Reports

In March 2009 a financial literacy survey was conducted on behalf of The National Foundation for Credit Counseling clipboard (NCFF) by Harris Interactive. One thousand consumers age 18 and over were contacted by telephone to answer various personal finance questions. Despite the fact that lending decisions are based on credit history and score, many consumers seem unaware or uninterested in staying up to date on the information reported on their credit report. The results of this survey indicate 64 percent of respondents have not ordered their free credit report in the last 12 months. More than one-third of the people surveyed admit they do not know their credit score. Reviewing your credit report is essential in spotting inaccurate reports which may cause your score to drop or warning signs of identity theft.

The third annual survey reports the following findings:

Less than half of adults surveyed track their spending which has been proven to help improve savings and reduce debt. Seven percent, nearly 16 million adults have no idea how much money they spend on basic necessities and other expenses. Eighteen percent of adults claim the reason for not having a budget is due to not wanting to be restricted on how much money they spend.
Due to the current economy, 57 percent of adults are spending less than they were last year, although 45 percent of consumers spending less agree they would return to previous spending habits if their financial situation were to improve.
Seventy-two million adults report they have no savings. Generation Y makes up for nearly half of the adults with no savings. Twenty-three percent are saving more than they did in the previous year. If faced with an emergency those with no savings would be forced to either use a credit card or take out a loan to pay for expenses.
Fifteen percent of respondents admit to making late credit card payments in the last twelve months. More than 13 million adults have household debt (credit cards) exceeding $10,000 with balances carrying over from month to month. The same number have accounts in collection and are either considering or have filed for bankruptcy.

These results indicate what most of us already know, many American consumers have a long road ahead in establishing financial security. Increasing financial literacy is vital in saving millions of adults who currently heading down the wrong financial path. The good news however is that 70 percent of respondents report paying all their bills on time with no debts in collection. Other positive results show that 41 percent of people saving money have over three months income in savings. The spotlight often falls on consumers who are struggling with debt, however 46 percent of people surveyed do not carry any credit card debt from month to month and sixty-one percent of respondents currently live on a cash-only basis.

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