Archive for the ‘Debtbeat News’ Category

Never one to hide their feelings, credit card companies are sending their beloved clients a hearty “F*ck You” by raising interest rates to the highest level in NINE YEARS.

While mortgage rates, T-Bill rates and oh yeah, the rates that these same banks pay on savings accounts are near historic lows, credit card issuers are having a field day pushing the average rate on existing cards to 14.7%.  This is up from 13.1% a year ago, according to research firm Synovate, a unit of Aegis Group PLC.  To put this in ever starker perspective, the gap between the benchmark prime rate and the average credit card rate is the largest in at least 22 years.

Due to the tighter regulation by the Obama administration, which caps or eliminates many popular (with banks) crap fees and rate shenanigans that banks have used to make massive credit card profits, these companies are now looking for new ways to fleece their clients without running afoul of the law.

Banks defend their policies by saying that the CARD Act and other rules prevent them from raising rates for specific borrowers who fall behind or otherwise run a higher risk, so they are raising rates across the board.  They also claim to be responding to the economic environment which includes higher joblessness and more credit delinquencies.

Americans have been responding by paying of credit card debt at a record pace.  Consumer credit dropped in June for the 21st straight month.  That means that card issuers are trying to maintain profits on a lower volume of debt.  The easiest way to do that? Raise rates, high and fast.

But if you’ve been hit by higher rates on your cards, don’t stand idly by.  Check out this step-by-step guide to lowering your interest rate with your current card company.  And if they won’t budge, look to transfer that balance or even refinance that debt into a fixed-rate installment loan through websites like Prosper.com.

While one major study suggests that The Great Recession is having less of an impact on America’s older citizens than previous economic downturns, one key indicator says shows that their retirment outlook is far from rosy.

A poll by the Pew Research Center reported that Americans over age 65 are less likely to have been forced to cut their spending by the downturn than middle-aged people.  That’s only good news when you don’t consider just how much other Americans have slashed spending.  While the recovery stalls, overall Americans’ income and spending are stagnant.

So it’s no surprise that we come to learn that the national Social Security fund is facing a shortfall this year as more seniors opt to collect payments before their full retirement age.  More people filed for Social Security in 2009 (2.74 million) than any year in history, and there was a big uptick in the number receiving reduced benefits because they filed ahead of their full retirement age which is now 66.

Over 70% of seniors filing for benefits elected for early benefits.  Age 62 is the earliest possible age for receiving retirement benefits.

It obvious how a couple factors play into this.  One, retirment plans and 401(k) accounts have been hit hard by the decline in the stock market in recent years, which is making it tougher for older Americans to rely on this income that they were expecting.  Two, with unemployment holding stubbornly north of nine percent and age descrimination still a very real problem in our society, it’s tougher for seniors to find and keep jobs.

If you are at retirment (or early retirment) age and want to know more about your options, you can visit the website of the Social Security Administation.  There are helpful tools like benefit calculators and frequently asked questions and answers.

Taking benefits early is rarely a good option if one has other sources of income, as the retirement benefits are greatly reduced when one goes this route.  Cutting spending, downsizing the home or taking on freelance work are all better choices for making ends meet.

With all of the heat on BP right now to contain the oil spill in the Gulf of Mexico and make whole the multitude of people adversely affected by their negligence, it would seem that credit card companies would get a reprieve from government scrutiny and legislative action that changed the lending landscape for the better in the past year.

Not so fast.  The federal government apparently knows how to multitask.

This week the Federal Reserve Board of Governors announced new rules that will take effect in August and severely restrict the ability of banks to continue their decades-long rape of their customers’ wallets with questionable fees and penalties.

This is the capstone to the CARD Act and more proof that the government is serious about consumer protections in the financial industry.

The main goals of the new rules are intended to:

1. Require that penalty fees are a reasonable dollar amount (by the Fed’s definition, not the credit card company’s)
2. Force banks to do away with some junk fees
3. Limit multiple fees for a single transaction and
4. Provide clear explanations for interest rate increases and re-evaluate that rate increase every six months to see if it should be lowered

Currently, late payment fees can be as high as $39 for no reason other than the bank President wants to buy a yacht.  Moving forward, late fees will be capped at $25 in most cases and can not be more than the minimum payment owed.  So no more $39 fees on a $15 minimum payment.  Card companies are also precluded from charging multiple fees for a single event (e.g. charging both a late fee and an overlimit fee for the same missed payment.) Also, inactivity fees are a thing of the past.

Perhaps the biggest impact for people who carry a balance on their credit cards (and working to pay them off ASAP) is the ruling that card companies must explain increases to a customer’s APR and subject those increases to a bi-annual review.  If appropriate, it must reduce your rate within 45 days after completing the evaluation.

Off course the banks are already looking at creative ways to keep their earnings high and their best minds are no doubt on the case.  Just like the best minds at BP have been working on getting the oil out, not on contingency plans in case of a spill.

The good news is that the administration isn’t taking its eye off the credit ball and these changes can help us all save money on our credit payments and pay off debt faster.

Read more about these changes online at the Federal Reserve web site.