In these financially difficult times it is very important to know where you stand. Many people have lost their jobs, and many more are experiencing huge pay decreases. The people that have lost their jobs are finding it very hard to get new ones because of company downsizing. All of these things, along with the surmounting credit card debts that many people have taken on, are an equation for financial disaster. What's worse is that people are not able to pay bills and keep up with their loan payments, which can be a disaster for somebody who does not know how they are doing.
Many people do not know where they are financially, and that is a huge problem. These people will be surprised when they enter a bank to get a loan and they find out that they cannot have one because they have bad credit. This happens to many more people than it should, and if everybody knew where they were financially this problem could be easily avoided.
The easiest way to know where you stand is to get a credit report. This report has a complete list of all transactions that have been affecting your credit, and it also shows how good you are at paying people back for loans and bills. It also has a rating that many banks and other financial agencies look at to find out if you will be a risk to lend to.
Many people do not know where they can get these reports, and it is important to know your options. A credit report can not only help you to keep track of where you are, but it can also help you to see if you are becoming a victim of identity theft and stop it immediately. One place that you can get a free score once a year is from the government. By law, they have to provide you an updated report once a year per your request.
Another place to get these reports is from online sites. Many financial companies give out free reports to potential customers to try to get them to use their business for their financial needs. These reports are just as complete as the government reports, and many of these are also free. Getting a free report is very easy and only requires a computer with internet access. Knowing where you stand has never been easier than it is today.
Wednesday, June 23, 2010
Check a Credit Report Government Option - Any Governmental Alternative?
One of the benefits that came about due to the Fair Credit Reporting Act (FCRA) was the ability and right of all consumers to see their credit report once a year for free. All agencies that collect and sell certain information about consumers must allow this, and it cannot affect the score assigned to these consumers. This is as opposed to all other requests for information, each of which reduces a credit score by a small amount.
Today, the government has set up a website at which consumers can access this information from all three major bureaus simultaneously. This website, Annual Credit Report, is the authority that most people use when they wish to check up on their information. However, while it gives a decent amount of information, the government option is definitely not the best option. An excellent alternative, which gives far more information than the government options, is such sites as freecreditreport.com and creditreport.com.
These options are superior to using the government-sponsored website for a number of reasons. First, one can see his or her score in addition to the report itself. While there is cost involved, seeing the report alone does not tell somebody nearly enough to know what to expect when he or she takes out a loan. Unfortunately, the FCRA does not entitle a person to see his or her score for free, so a small fee is required. Most such sites charge between 5 and 25 dollars a month, and allow one to see his or her report once a month or more often.
Furthermore, these sites offer an excellent layer of protection from identity theft. Just seeing one's credit once a year is not enough. Identity theft can happen at any time, and one needs to stay on top of his or her accounts to ensure that it is not happening. The only way to do that is to see one's information. However, when the government passed FCRA, they were expecting people to use the free report to check for errors. It was never expected that identity theft would become a big enough concern that people would use the report to watch for that. Therefore, today one needs to pay. But the benefits fainted from a strong preventative measure against identity theft far outweigh the costs. It is worth it to sign up at the above sites just for that and many other benefits too.
Today, the government has set up a website at which consumers can access this information from all three major bureaus simultaneously. This website, Annual Credit Report, is the authority that most people use when they wish to check up on their information. However, while it gives a decent amount of information, the government option is definitely not the best option. An excellent alternative, which gives far more information than the government options, is such sites as freecreditreport.com and creditreport.com.
These options are superior to using the government-sponsored website for a number of reasons. First, one can see his or her score in addition to the report itself. While there is cost involved, seeing the report alone does not tell somebody nearly enough to know what to expect when he or she takes out a loan. Unfortunately, the FCRA does not entitle a person to see his or her score for free, so a small fee is required. Most such sites charge between 5 and 25 dollars a month, and allow one to see his or her report once a month or more often.
Furthermore, these sites offer an excellent layer of protection from identity theft. Just seeing one's credit once a year is not enough. Identity theft can happen at any time, and one needs to stay on top of his or her accounts to ensure that it is not happening. The only way to do that is to see one's information. However, when the government passed FCRA, they were expecting people to use the free report to check for errors. It was never expected that identity theft would become a big enough concern that people would use the report to watch for that. Therefore, today one needs to pay. But the benefits fainted from a strong preventative measure against identity theft far outweigh the costs. It is worth it to sign up at the above sites just for that and many other benefits too.
Debt - Credit Cards New Rules
Acting off the public and congressional outrage over lending practices, the Federal Reserve created new rules Tuesday geared to protect credit card users from getting slammed by heavy late fees and other penalties.
Late fees have been capped by the Federal Reserve at $25. Some creditors were charging up to $40 for making a late payment. These fees sometimes increased balances and those close to their limit could easily be pushed over with available credit, then incurring an over limit fee of about $35.00. Now, multiple fees for a single late payment are considered a no go for creditors.
Penalty fees cannot exceed the dollar amount associated with the customer's violation. Meaning, the charge you incur for a single transaction should not exceed the dollar amount of said transaction.
Inactivity fees, recently introduced through a loop hole in the Credit Card Act, have also been banned. Creditors created this asinine condition for consumers who do not use the account to make new purchases on a regular basis.
New rules also require creditors to reconsider high interest rates inflicted on consumers since 09. A lot of creditors took advantage of the new laws in place and created new terms and coinciding fees to apply. These may be next on the chopping block.
While the Credit Card Act was set in place to protect consumers big banks found loopholes and still created new terms and conditions to counter balance the losses from new regulations. These new rules take effect on Aug. 22. So how long before big banks dig their holes through these new policies?
Fact remains at the end of the day the Federal Reserve and big banks still run this country. With secret societies and midnight meetings on mysterious islands, big banks are not going to lose their profiting place in the consumer market. These new rules come to comfort average Joe and ease him back into spending without worry of big banks bullying them with outlandish fees.
And some things never change...
Creditors can still charge whatever they want for interest. First Premier is offering their bad credit Visa at 79.9% APR. The same creditor that goes to 0% in a debt consolidation program. I have two myself enrolled...
Interest rates remain at a variable rather than a fixed rate. Billing cycles are still between 28-32 days and are scheduled in accordance with receiving the most fees from the variable rate applied.
Creditors are still lowering available credit limits without notice or reason which lowers your FICO score. This also causes the unknowing consumer to overspend, thinking they have more than they thought they did - and then incurring an over the limit fee.
Minimum monthly payments are still at such a low percentage of the debt that its only purpose and service to the consumer is the continued maintenance of their good credit standing via timely payments. Minimum monthly amounts are still designed to keep you in debt, not get out.
Minimum monthly payments are also immediately applied to the lowest interest rate between purchase, cash advances, and balance transfers. That means in order to pay down the higher interest rates on your account you'll need to pay more the minimum monthly to even begin putting a dent in it. The fact there are different rates for different transactions in itself is mud pie BS. You're given a line of credit - why does it matter how you use that line of credit? If I cash advance it or spend it all at BP on BS, what's it really matter? What justifies charging different rates for different types of transactions? Profit. Who lets this happen? We do by playing the game.
We're repeating a cycle. To end the recession.... To stop the bleeding... we need not open any new wounds of debt against the nation that adds to our deficit. A re-learning needs to take place on how we spend and manage money. It starts with you, then your neighbor- and so forth.
There are affordable and reasonable solutions out there to get out of debt and become debt free. Nonprofit Credit counseling organizations are designed to provide free budget counseling and develop a household budget that helps manage debt to income ratios positively on a monthly basis. A nonprofit debt consolidation program can consolidate your unsecured credit and medical debts to one low monthly payment that pays back the debt at reduced FIXED interest rates, enabling a consumer to be debt free within 5 years or less and saving thousands in interest.
To speak to a certified credit counselor for your free financial assessment call 800.905.1563 or visit our website freedomdm.org and LIVE CHAT with a certified credit counselor. You can also complete out contact request form and a certified credit counselor will call you at a time requested to review your information and see if debt consolidation can benefit you.
Late fees have been capped by the Federal Reserve at $25. Some creditors were charging up to $40 for making a late payment. These fees sometimes increased balances and those close to their limit could easily be pushed over with available credit, then incurring an over limit fee of about $35.00. Now, multiple fees for a single late payment are considered a no go for creditors.
Penalty fees cannot exceed the dollar amount associated with the customer's violation. Meaning, the charge you incur for a single transaction should not exceed the dollar amount of said transaction.
Inactivity fees, recently introduced through a loop hole in the Credit Card Act, have also been banned. Creditors created this asinine condition for consumers who do not use the account to make new purchases on a regular basis.
New rules also require creditors to reconsider high interest rates inflicted on consumers since 09. A lot of creditors took advantage of the new laws in place and created new terms and coinciding fees to apply. These may be next on the chopping block.
While the Credit Card Act was set in place to protect consumers big banks found loopholes and still created new terms and conditions to counter balance the losses from new regulations. These new rules take effect on Aug. 22. So how long before big banks dig their holes through these new policies?
Fact remains at the end of the day the Federal Reserve and big banks still run this country. With secret societies and midnight meetings on mysterious islands, big banks are not going to lose their profiting place in the consumer market. These new rules come to comfort average Joe and ease him back into spending without worry of big banks bullying them with outlandish fees.
And some things never change...
Creditors can still charge whatever they want for interest. First Premier is offering their bad credit Visa at 79.9% APR. The same creditor that goes to 0% in a debt consolidation program. I have two myself enrolled...
Interest rates remain at a variable rather than a fixed rate. Billing cycles are still between 28-32 days and are scheduled in accordance with receiving the most fees from the variable rate applied.
Creditors are still lowering available credit limits without notice or reason which lowers your FICO score. This also causes the unknowing consumer to overspend, thinking they have more than they thought they did - and then incurring an over the limit fee.
Minimum monthly payments are still at such a low percentage of the debt that its only purpose and service to the consumer is the continued maintenance of their good credit standing via timely payments. Minimum monthly amounts are still designed to keep you in debt, not get out.
Minimum monthly payments are also immediately applied to the lowest interest rate between purchase, cash advances, and balance transfers. That means in order to pay down the higher interest rates on your account you'll need to pay more the minimum monthly to even begin putting a dent in it. The fact there are different rates for different transactions in itself is mud pie BS. You're given a line of credit - why does it matter how you use that line of credit? If I cash advance it or spend it all at BP on BS, what's it really matter? What justifies charging different rates for different types of transactions? Profit. Who lets this happen? We do by playing the game.
We're repeating a cycle. To end the recession.... To stop the bleeding... we need not open any new wounds of debt against the nation that adds to our deficit. A re-learning needs to take place on how we spend and manage money. It starts with you, then your neighbor- and so forth.
There are affordable and reasonable solutions out there to get out of debt and become debt free. Nonprofit Credit counseling organizations are designed to provide free budget counseling and develop a household budget that helps manage debt to income ratios positively on a monthly basis. A nonprofit debt consolidation program can consolidate your unsecured credit and medical debts to one low monthly payment that pays back the debt at reduced FIXED interest rates, enabling a consumer to be debt free within 5 years or less and saving thousands in interest.
To speak to a certified credit counselor for your free financial assessment call 800.905.1563 or visit our website freedomdm.org and LIVE CHAT with a certified credit counselor. You can also complete out contact request form and a certified credit counselor will call you at a time requested to review your information and see if debt consolidation can benefit you.
The Easiest Way to Eliminate Credit Card Debt
Credit card debt is a scary reality for millions of Americans and getting out from under it can be a daunting task, but there is help and you can find a way out. There are many options when it comes to working to eliminate credit card debt. You can use such tactics as debt negotiation, pay down plans, debt consolidation and credit counseling to get back on track. For the best results, a combination of these tactics will be used together.
Debt negotiation involves contacting your credit card companies and offering them a settlement price for a lump sum payment on the account. If you are talking with the right person, someone who has the authority to make offers on your account, then you can come to an agreement. If you have the lump sums available, pay them immediately. If you are negotiating toward a debt consolidation loan, let them know a potential payment date.
Pay down plans are a method of eliminating credit card debt where you avoid using outside help and loans and instead work a smart plan to pay off the debts. This starts with a listing of all your credit card accounts with the highest interest rate account at the top and down from there. You want to pay the largest amount you can to the account with the highest interest rate, while still paying the minimums on all other accounts to avoid default. When the first account is paid off, you simply move the large payment to the next account and continue on until everything is paid off.
If you need more help than that and don't have the lump sum amounts available to pay off your credit card debt, then you will likely need to turn to debt consolidation. Debt consolidation loans are offered to people who are trying to avoid bankruptcy, but still get rid of debt. You apply for and work out a loan that is used to pay off all the debts you are including and then you are left with only one loan and one monthly payment to worry about. This can also bring instant relief from harassing phone calls and letters as well as financially on your monthly budget with a lower payment than those you were paying combined.
You want to follow any debt management plan up with credit counseling to help build the tools you need to avoid getting into the same situation in the future. There are many companies offering this service and can bring you peace of mind about your future finances and the dreams you have surrounding them. You can find a way to eliminate credit card debt and do it in way that saves your credit.
Debt negotiation involves contacting your credit card companies and offering them a settlement price for a lump sum payment on the account. If you are talking with the right person, someone who has the authority to make offers on your account, then you can come to an agreement. If you have the lump sums available, pay them immediately. If you are negotiating toward a debt consolidation loan, let them know a potential payment date.
Pay down plans are a method of eliminating credit card debt where you avoid using outside help and loans and instead work a smart plan to pay off the debts. This starts with a listing of all your credit card accounts with the highest interest rate account at the top and down from there. You want to pay the largest amount you can to the account with the highest interest rate, while still paying the minimums on all other accounts to avoid default. When the first account is paid off, you simply move the large payment to the next account and continue on until everything is paid off.
If you need more help than that and don't have the lump sum amounts available to pay off your credit card debt, then you will likely need to turn to debt consolidation. Debt consolidation loans are offered to people who are trying to avoid bankruptcy, but still get rid of debt. You apply for and work out a loan that is used to pay off all the debts you are including and then you are left with only one loan and one monthly payment to worry about. This can also bring instant relief from harassing phone calls and letters as well as financially on your monthly budget with a lower payment than those you were paying combined.
You want to follow any debt management plan up with credit counseling to help build the tools you need to avoid getting into the same situation in the future. There are many companies offering this service and can bring you peace of mind about your future finances and the dreams you have surrounding them. You can find a way to eliminate credit card debt and do it in way that saves your credit.
Monday, June 14, 2010
What is Credit Card Universal Default?
One of the most controversial and polarizing features of many credit cards is what is known as universal default. Most people are aware that if they are late with payments, they may be charged what is called a default interest rate. What they may not know is that there may be universal default language in their user agreements. What this basically means is that if the user defaults on payments with any lender, their card company can still raise the interest rate to the default level. For the average consumer, such a practice seems predatory at best; however, since the mid-1990's universal default has become a fact of credit life. Knowing the implications of this fact becomes of paramount importance to the credit card user.Regardless of whether or not one thinks universal default is right or wrong, it is important to understand what can happen if you default on a payment while carrying a balance on cards that enforce the universal default language of your agreement. Obviously, the best defense against any repercussions is to make all payments in a timely manner. Unfortunately, if through some misfortune that is not possible, the consequences can be severe, to say the least.
The first problem is that someone in dire financial straits may default on one payment. Suddenly, several balances will be subject to default rates, creating a cascade effect that will essentially make it impossible to catch up. Worst of all, even after someone turns the corner financially, the default rate applies until the balance is paid in full. Anyone making minimum payments knows how long that can take.
However, it is possible never to default on a payment and still run afoul of the rules. For example, suppose through some sort of fraud or institutional error a payment is not properly credited. Suddenly, every credit card you have starts charging the default rate. While it is possible to get the error corrected on your credit report, credit card issuers are under no obligation to normalize your interest rate.
So, while legislation has been repeatedly proposed to get rid of such perceived abuses as universal default, it still exists. The best way to deal with it is to see to it that your credit card issuers do not engage in the practice. As of now, only about half of them do; and in 2007, Citibank became the first lender to discontinue the practice voluntarily. So it seems that the day may not be too far off when universal default is a thing of the past. Until then, it is one more thing consumers need to keep in mind when choosing what credit cards to carry.
Credit Card Records Decline By Almost 50 Lac In A Year
Even as the economy is back on track and consumer confidence up, the number of credit cards in the system continues to dip. In the last one year, the total number of credit cards in use has dipped by almost 50 lakh.According to the latest data released by RBI in its monthly bulletin, the number of credit cards dipped to just about 2 crore as of end February 2010 from around 2.5 crore a year ago. The data also indicates that average monthly card spends both in terms of value as well as volume have still not touched the pre-crisis (prior to Lehman collapse) levels.
Average monthly spend in FY10 has fallen to Rs 5,100 crore against Rs 5,400 crore in FY09. While average monthly volumes in the current year has been just 1.94 crore a month compared with 2.16 crore a month in FY09. Even peak festival spending through cards in the current fiscal is less than the previous years levels. ICICI Bank, the largest card issuer had around 8.5 million cards outstanding at its peak, which has now fallen to around 5 million. While for SBI credit card, the number has dipped from 3.5 million to 2.8 million.
The fall in cards is surprising as banks have started disbursing unsecured loans like personal loans, post crisis, in the past few months. Even credit cards outstandings are treated as unsecured lending by banks. Some large credit card issuers like ICICI Bank, SBI Card, Citi and even smaller issuers like ABN Amro and Barclays have either slowed down or cut their outstanding cards. Only few players like HDFC credit Card and Standard Chartered have seen a nominal growth in their numbers.
Pralay Mondal, country head (retail assets & credit cards), HDFC Bank, said: Lot of attritions are happening in the system as loss ratios had gone up. Banks are not adding as much new customers. As new customer acquisitions are lower than attritions, the overall numbers are falling. Previously, the number of new customers were higher. We are currently doing around 80,000-90,000 new credit cards a month and our losses are much lesser than industry. Currently, HDFC Bank has close to around 5 million credit card customers while StanChart has around 1.4 million customers.
Adds Shyam Srinivasan, Country Head Consumer Banking, Standard Chartered Bank: StanChart has kept its numbers flat for a while now. We have increased our share in the business. Some of them had overdone themselves and now they are letting go of customers. Its a normal process. As they were hit by high credit losses, they are trying to clean up.
According to Abizer Diwanji, executive director of Corporate Finance, KPMG India, Today, nobody is expanding on the card portfolio except in the debit card space. The cost of merchant acquisition is tremendously high. The maintenance of delivery of credit card is high compared to a personal loans. Its a far more cumbersome job.
One of the biggest problems facing the industry has been the rise in bad debts in the past few years. However, this seems to have stopped and bankers say there has been a drop in bad debts in the past few months. Sources said the overall credit card losses for the industry have now come down to 15-16% against around 18% earlier. However, even at these rates, most issuers are still making losses.
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