Monday, June 22, 2009

New Rules!


By: Karen Saley
Extension Specialist

Have you ever wondered what all that fine print on your credit card statement says? Well, it actually says a lot, and you would be wise to read it. All that verbiage has been a source of frustration for consumers and a source of revenue for the credit card companies.

Contained in all that fine print are the terms and conditions related to your credit card. Unfortunately these terms are written in such a confusing manner that most people have a difficult time understanding them. This has made it very easy for credit card companies to implement some interesting money making strategies.

That will all be changing next year. The Federal Reserve has put a stop to some pretty shady practices on the part of the credit card industry by adopting some new rules that will help protect consumers.

What will the new rules do for consumers?

• Protect consumers from unexpected interest charges, including increases in the rate during the first year after account opening, unless it is stated up-front when the account is opened.

• Prohibit credit card companies from raising interest rates on money already borrowed unless it was borrowed on a variable rate card, or the minimum payment is made more than 30 day late.

• Forbid banks from imposing interest charges using the "two-cycle" billing method. This method charges interest on amounts already repaid.

• Require that consumers receive a reasonable amount of time to make their credit card payments. A late fee cannot be imposed if the bill was mailed less than 21 days before the due date.

• Prohibit the use of payment allocation methods that unfairly maximize interest charges. Payments must be allocated fairly among credit cards with different interest rates.

• Address subprime credit cards by limiting the fees that reduce the amount of available credit.

Remember, these rules will not be put in place until July 1, 2010. In the mean time take a few minutes and read that fine print. The credit card companies will be trying to maximize their profits while they can.

Friday, June 19, 2009

In Debt…Tips to Get Back in the Black


In Debt…Tips to Get Back in the Black

Mortgage payments, car loans, medical expenses…on and on and on…. In today's society, being in debt seems almost inevitable. Not many Americans are able to buy a house or a car outright with cash. Instead, they apply for loans in order to make their major purchases. Before they realize it, many consumers find themselves deeper and deeper in debt.
Circumstances such as job loss or accidental injury can also compound the problem. Since many consumers find themselves unable to keep up with monthly payments. They can incur even more debt from late fees and interest payments. Having debt management issues can make consumers feel helpless and stressed out—factors which can have an effect on other aspects of their lives. The good news is that there are ways to get yourself “out from under”. If you are currently in debt, educating yourself on ways to become debt-free and sticking to those methods is key to living a healthy financial life.

To determine exactly how much you owe to your creditors, check all the billing statements sent to you and then create a spreadsheet that lists balances, interest charges and minimum monthly payments. This can be useful for creating a realistic budget.
Once you determine your debt level, here are some ideas to get your debt under control.

Stop adding more debts. Cut up your credit cards, if they are the main source of debt. For emergencies, keep one credit card with low credit limit and commit to pay the full balance every month.

Develop a spending plan. Creating a budget and sticking to it is a great way to help build good spending habits. By subtracting your expenses from after tax income, you will be able to calculate how much you have left over to pay off your debt.

Save some money. If you begin by evaluating your monthly expenses you can reduce unnecessary spending and use the cash to build an emergency fund for those unexpected expenses. Remember to always pay your bills on time so you can also avoid paying unnecessary fees such as late payment fees in addition to interest charges.

Find extra money. If you have a job, try to increase your current income by looking for assignments that offer over time pay or tasks that will result in a bonus or a higher commission. Securing a part time or second job can also help create extra income.

Talk to your creditors. Contact creditor(s) and explain the situation. A plan may be worked out so that obligations are repaid.

Change your lifestyle. Live below your means and don't charge more than you can afford to repay in full the following month. If your expenses exceed your income and you are using credit cards to enhance your lifestyle, stop. Instead, explore ways to increase household income, reduce expenses, or both.

Doing it yourself. The most desirable option is to set up a debt payment plan and discipline yourself to follow it. Power Pay, a debt management program can help. All you need to run the program is information about each debt. The program will compute how long it will take you to get completely out of debt. If you only make the minimum payments it can take almost a lifetime to get out of heavy debt. Once you have paid off one debt you roll that payment onto another debt thus increasing the payment made on the second debt. This pattern continues until all the money you are paying in a month on debt is going to pay off the last debt. Power Pay will calculate which debt will be in your best interest to pay off first, and provide you with an amortization chart.

Hire debt reduction help. Sometimes it does not seem possible to manage the problem of being financially overextended. If you are unable to solve your financial problems alone, counseling services can help you set up a budget and debt payment plan. Nonprofit financial counseling agencies charge little, if anything, for their services. Military bases and industries often hire people who can help you manage your debts. Housing authorities, credit unions, churches, and universities sometimes provide financial counseling.
However, you need to be careful when selecting a credit counseling service. Here is a helpful link with questions to consider when choosing a credit counselor.

For online tools and worksheets to help you pay down debt and develop a spending plan check out the resources below.

Tuesday, June 9, 2009

Homebuyer Credit


There’s Still Time

Have you been considering purchasing a new home this year? Well now could be the perfect time to do so. The First-Time Homebuyers Credit that was started in 2008 is still available from the Federal Government until December 1, 2009 and there have been a few beneficial changes.

• The Housing and Economic Recovery Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount from $7,000 to $8,000 for homes purchased before the end of this year.

• This year the $8,000 credit does not have to be paid back unless the home ceases to be the taxpayer’s main residence within three years from the date of purchase. If the home is no longer the taxpayer’s main residence, the full amount of the credit received becomes due on the tax return for the year the home ceased being the primary residence.

• The $8,000 credit is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed. This could decrease your tax liability or increase your refund.

With home-loan interest rates declining and the First-Time Homebuyers Credit still available, it just may be the time to consider purchasing that new home.

For more information and full details regarding the Housing and Economic Recover Act and the First-Time Homebuyer Credit click on the link below.,,id=204671,00.html

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