Credit Cards » Credit Card News » Young Credit Cardholders Up For Some Regulation
Date June 16, 2009

Young Credit Cardholders Up For Some Regulation

The Credit CARD (Card Accountability, Responsibility and Disclosure Act ) Act is going to be putting a dent on college students plannig to get some financial independence once they start college.

Young Credit Cardholders Up For Some RegulationTo date, credit card companies have been aggressively marketing their plastic to college students. College students make for great credit cardholders because, one, they are purchase-promiscuous. They are up on the latest trends and, whether it be designer coffee or designer jeans, these trends almost always means spending and purchases, something that plastic is inherently perfect for. Two, college students, once hooked on plastic (and on the ensuing debt), make for long term, if not life long, customers.

Recent data from Sallie Mae shows just how bad the credit problem among college students are. Figures show that the average college student owns more than one credit card and owes large debts they have no hope of repaying before finishing college. Most college students also graduate with large debts to their name, a bad piece of luggage to have when you are out looking for a job. Why? Because employers right now are looking at credit reports as much as academic records to determine acceptable employees.

Parents are therefore going to be much relieved when the credit card bill comes into play. Unfortunately, that won’t be for several months yet. In fact, this year’s college opening may be the last time that credit cards are going to be very easy for students to get. Still, with the credit card bill in place, students will learn some financial responsibility, whether they want to or not.

The biggest change that the credit card bill will bring is prohibiting college students to own credit cards unless they have a co-signer such as a parent, a guardian or someone older than 21 years old who will be jointly liable for the debt incurred on the credit card. This means that the co-signer will be responsible for 100% of all debts that the credit card incurs.

Students can bypass this requirement, however if they can prove that they are financially independent enough to repay any debts he or she puts on her credit card. Of course, if a college student is already at this level of financial responsibility, it is safe to say that his or her parents hardly need to worry.

With these two conditions in place, parents looking out for their children’s financial welfare can keep them away from debt for a few years more until they graduate. Hopefully, by that time, another legislation included in the bill will have sunk in enough for their children to keep away from credit card debt: educating students for financial responsibility.

Date May 8, 2009

Pull Yourself Out Of Debt

With rising credit interest rates and ever increasing credit fees, everyone desperately wants to get out and stay out of debt. Unfortunately, more than it has ever been before, this is something that is much easier said than done. Still, there is hope. With a bit of belt-tightening, some smart spending decisions and keeping an eye on the details, it is possible for you to live debt free, even with the current economic climate.

Pull Yourself Out Of DebtAccording to industry insiders, the average American family owns at least one credit card. Credit cards are very convenient when it comes to payment. They can even be lifesavers in situations where there is no cash immediately available. However, credit cards can be deceptively convenient when it comes to purchases. So much so that most credit card owners find themselves surprised by the amount that they have to pay after they’ve gone through a spending spree.
Sooner than they think, they find themselves deep in debt.

According to experts, if a person’s take home pay loses 20% to nonhousing debt, then he is overextended. Another indicator of overextension is when 30% of a person’s monthly income go directly to paying the rent or the house mortgage. Other indicators include not knowing the total amount of debt, paying only the minimum balance in credit card bills and borrowing in order to pay debts.

If you find out that you are overextended and unable to keep up with your debt payments, don’t panic. You can still get yourself out of debt, though it will require some effort.

The first step to get out of debt is to keep track of where the money is going. This is not as trivial as it sounds. Little purchases, bank fees and other small amounts that most people take for
granted often add up to a considerable amount at the end of the month. It is best if you keep a written record of the month’s expenses. This makes it easier to track where the month’s budget is going.

By keeping track of your expenses, it is then easier for you to find out where the money is going and whether some of it can be diverted to payoff your debts. This often mean that you will have to get creative. For instance, you might consider bringing lunch instead of buying lunch from the cafeteria or your favorite fastfood place. The main goal is to minimize your monthly spending. This way, you can free up money to pay off debts.

When paying of your debts, make sure to prioritize debts with higher interest rates. If at all possible, transfer your high rate debts to your low rate credit cards. Look for low rate cards and transfer to them. Try to minimize using your credit cards and, if you really have to, comparison shop. Also, limit your credit card purchases to necessities as much as possible.

Date May 7, 2009

The Credit Cardholder’s Bill of Rights Goes To the Senate

Later this week or earlier the next, the United States Senate will begin discussion over the controversial credit card legislation House bill sponsored by Rep. Carolyn Maloney.

964707_11065025The bill aims to limit fees and rate hikes of credit cards in an effort to protect debt laden consumers. The bill was first pushed and approved in the House of Representatives at the end of last month. Support for the bill in the House of Representatives was impressive, passing with a vote of 357 to 70. Furthermore, the bill also seems to have the support of President Obama who expects to sign the bill into law by the end of May.

After passing through the House of Representatives, the bill is now in the Senate where it will be further deliberated and additional measures and changes in the details of the bill are expected to be made.

Old timers in Capitol Hill say that the Senate will probably pass a bill similar to what the House passed last week. However, many details still remain up for debate and the final form of the bill to be passed by the Senate will most probably depend on a few Senators who are pushing for a compromise between proposals of the bill and what they perceive to be the needs of the credit and banking industry.

Once the bill is signed, it is expected to pass into law several guidelines newly passed by the Federal Reserve which ensures that repayment balances of debtors are credited proportionally. This will hopefully give consumers the chance to whittle down their accrued debts at the highest interest rates.

The bill being made by the Senate has been described as being tougher than the bill that the House recently passed. However, some Republicans are voicing the concerns of the banking industry that too strict legislation may lead to a shortage of available credit cards, with those having poor credit history being hardest hit.

Peter Garuccio from the American Bankers Association had this to say: “Our concern is that as policymakers move forward, that they strive to find the right balance between enhancing consumer protection and ensuring that credit cards remain available.”

One of the most active Senators working for a compromise is Chris Dodd, the Chairman of the Senate Banking Committee. He is currently working on an effective compromise with Senator Richard Shelby, the Banking Committee’s top Republican representative. It is expected that Dodd’s bill would present some major changes to what the House passed earlier.

The Credit Card Holder’s Bill of Rights is certainly a hot topic in financial circles nowadays and the final form of the bill will depend greatly on the type of compromise that the Senate will settle on. When the final form of the bill is passed, it might just be the salvation that Americans swamped in debt are looking for.

Date April 20, 2009

More Focus on Financial Knowledge

With so many consumers struggling with debt these days, there seems to be a major increase in the amount of credit-card-scanorganizations that are working to improve the financial literacy of the country at large. April is dedicated to be Financial Literacy month, with National Credit Education week being observed April 20-26 so there are many launches of new educational programs to help with debt.

Research shows that many Americans are not fully prepared to deal with their own financial issues. Many of the new programs are targeted towards students who are already struggle to pay for their education while still struggling with debt. According to research done by Sallie Mae, the largest student loan provider, more that 84% of undergraduates have at least one credit card, with nearly have of all college students having 4 or more credit cards, each with a balance.

While consumer debt is on the rise, student debt is even more so and there are several program being established to help students prevent debt from taking over their lives as well as learn how to deal with debt they have already incurred.

Programs like Student Debt Alert was launched earlier this month. It promotes the improvement of student loan programs and educates students about Grant Aid. The American Bankers Association started the Teach Children to Save Campaign, which works with younger students in teaching them the importance of financial literacy, including advice on the importance of budgeting and depositing money into a savings account regularly.

Getting an early financial education is an important part of a student’s learning process and will serve young adults well in the future. For non-student consumers, there are websites like Ask Dr. Debt, which has been referred to as the “Dear Abby of Debt” and provides users with tools to help with credit card and debt questions. A database of frequently asked questions helps consumers seek answers to popular questions concerning debt. There are also calculators and other tools to provide help with personal financial management.

Date April 16, 2009

Capital One Survey Shows Consumers Are Changing Their Spending Habits

The United States recognizes April as National Financial Literacy Month. This is in an effort to highlight the importance of financial literacy and educate consumers on the importance of developing healthy financial habits.

Capital One, in recognition of Financial Literacy Month surveyed over 1000 American consumers to learn more about their spending and saving habits. The results indicate consumers are definitely making efforts to better manage their finances and save more money. The following results from the survey give an overview of the changing spending habits of American consumers.

  • Fifty percent of those surveyed have been clipping coupons to save money.
  • Fifty percent of consumers are canceling or postponing their vacation.
  • Sixty-two percent are cutting entertainment expenses.
  • Sixty-eight percent are not dining out as often.

This news is encouraging and indicates that American consumers may finally “get it” when it comes to the excessive consumerism that has taken over our society in the past few years. Unfortunately not all survey results are as positive. While most Americans are making temporary adjustments to their spending habits to survive the current financial crisis, other results indicate consumers are not really making the long term lifestyle changes required for financial security. 

  • Forty-seven percent of respondents are putting less money in their savings account.
  • Forty-one percent have reviewed their credit report, even though most of the respondents are aware they have access to a free annual credit report.
  • Twenty percent have never reviewed their credit report.

These results indicate that there is indeed a need to focus on financial literacy in this country as consumers continue to struggle with increasing the amount of money in their savings accounts. In addition to not increasing their savings, it would seem consumers are not taking advantage of reviewing their credit report. Your credit score is important in so many areas and the information on your credit report can affect your score. By not viewing your credit report you are unable to notice and correct erroneous reports or view activity that may indicate identity theft.

Americans must not only focus on the short term benefits of altering their spending habits but also recognize how the positive changes they implement now will have long term benefits financially. To properly manage your personal finances you need to not only spend your money wisely but also save and invest in your future.