loans and credit

Posted on November 1, 2009 | 2 responses

Percentage of people living at or below the poverty line in each state.

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The highly publicized CARD act that passed earlier this summer as a result of credit card companies treating their customers in unfair and sometimes abusive ways have done a lot to streamline the rules governing the credit card industry. However, many cardholders seem to think that this new legislation completely handcuffs card issuers into never changing the rules, terms, or fees associated with a credit card and this simply is not the case. There are still several ways card issuers can alter terms and conditions surrounding customer credit cards. The answers can usually be found in the fine print, but here are several factors that can still be controlled by credit card companies.

– Card Companies Can Change Rewards Programs: Reward programs are a substantial cost for credit card companies and with more customers defaulting on their payments, some reward programs are going by the wayside. Chase, American Express, and Capital One have already announced changes that negatively impact their reward programs, and many companies will probably do the same in the coming months.

– Card Companies Can Demand a Larger Minimum Payment: The industry standard has been a minimum payment that is 2% of the outstanding balance, but now that many issuers of credit cards are struggling to collect payments, some companies, including Chase, have increased the minimum payment amount to 5% of the outstanding balance. Many issuers will help you with a customized payment plan if you’re having trouble making minimum payments.

– Card Companies Can Change Your Fixed Rate to a Variable Rate: One of the hooks that card companies have historically used to gather new customers has been to promise a low, fixed rate for the life of the credit line. The CARD act requires issuers to keep rates fixed for a year for new customers unless the customer fails to make a payment, but after that the company has the rate to make the interest rate variable.

– Card Companies Can Reduce Your Credit Line: It’s estimated that 58 million people had their credit limit cut between April 2008 and April 2009. Issuers are within their rights to change credit lines and as they try to rein in risk in a lagging economy, many cardholders are finding that their credit lines have been cut in half. This can have an impact on your credit score so it’s important to be aware of any changes to your available line of credit.

– Card Companies Can Close Your Account: This is basic risk management for credit card issuers. Fewer cardholders may mean less interest revenue and profit, but it also means fewer people failing to make payments. It’s a good idea to make at least one purchase with your credit card each month because inactivity is one of the leading reasons that an issuer will cancel open credit lines right now.

A new bill introduced this week will form a government agency designed with the protection of the consumer in mind. Senator Chris Dodd, the Chairman of the Senate Banking Committee, introduced the bill that would create the Consumer Financial Protection Agency, a group designed to protect consumers from fraud and abuse. The committee commented in introducing the bill that Americans already have protection in place from things like faulty appliances, contaminated food, beverages, and toys, but no protection from faulty or unfair financial products or services. This group would be charged with keeping a close eye on banks, lenders, mortgage brokers, and payday lenders.

The bill comes as a result of the observation that while big banks got protection from the Federal Reserve, there was no one there to look out for the best interest of consumers. New credit card laws and rules will help eliminate some of the abusive practices that have concerned lawmakers but the formation of the Consumer Financial Protection Agency would be beneficial to consumers in the following ways.

Consolidate Consumer Protection: Right now, there are elements of consumer protection that fall under various government agency responsibilities. Groups like the Office Of Thrift Supervision, the FDIC, the National Credit Union Association, the Federal Reserve, and the Federal Trade Commission all have certain responsibilities that protect consumers from abuse and fraud. However, many abusive and fraudulent practices fall into the gray areas between the defined responsibilities of each group and end up slipping through the cracks. This new agency would handle all areas of consumer protection. Many agencies have pointed fingers at each other in trying to determine who could have done more to protect consumers.

Create and Enforce Regulations: Currently, there is no government agency that has the ability to not only create rules to protect consumers, but also enforce those rules. The Consumer Financial Protection Agency would have the authority to create new rules, enforce the rules that they create, and investigate practices that could be unfair to consumers.

Act as a Watchdog: When credit card companies panicked and starting taking out their frustrations on their customers, it took a massive, organized effort from the government to address the abuses and many of the new rules governing credit card issuers still won’t go into effect for the next several months. This new agency would be constantly watching for business practices that harmed consumers and would have the ability to act quickly in protecting consumers.

Empower States: Another element of the bill would give states the power to create ways to protect their citizens from abusive or fraudulent practices. Currently state regulations are generally overshadowed by Federal regulations but this bill would put a great deal of protective ability back into the hands of the states.

Unite Industry Supervision: Banks have been fairly closely regulated, at least on paper, over the past several years. But other providers of financial services such as mortgage brokers and payday lenders have been under much less scrutiny. These industries that are closely tied together would all be watched by the Consumer Protection Financial Agency, putting some of these types of companies under that watchful eye of regulators for the first time.

One of the retirement planning investments that is being talked about more than ever is the variable annuity. Annuities have been around for a long time but the way they work has changed dramatically over the past decade or so. The annuities people were buying in the 80’s and 90’s are vastly different from the annuities that people are buying today. An annuity is essentially an investment made through an insurance company with associated terms, conditions, and promises that make the performance of that investment predictable and stable for the investor.

There are several different types of annuities and it can be hard to distinguish the differences between fixed annuities, immediate annuities, deferred annuities, variable annuities, and others. The fastest growing category of annuities today is the variable annuity because of the following features for investors.

Tax Deferral: Any annuity is tax deferred so any gains, interest, and dividends are treated just like they are in a qualified retirement account. It’s important to note that annuities are purchased with dollars that have already been taxed, so over time the contract owner will have a principal or cost basis and a base of earnings. When money is withdrawn from any type of annuity, the earnings come out first and they are taxable as ordinary income, just like funds withdrawn from an IRA. They are a great option for people who are already maxing out their contributions to retirement accounts but who still want to save more money for retirement.

Guarantees: It’s rare to be able to use the word “guarantee” with any investment, but the terms associated with any annuity contract are guaranteed, based on the full faith and credit of the insurance company. Ratings agencies grade the financial strength of insurance companies to help investors identify carriers that have the best chance of being able to keep their promises. It’s important to remember that the guarantees are only as good as the insurance companies making them.

Living Benefits: Variable annuities offer a wide array of living benefits that can be added to any contract. For example, accumulation benefits are riders that guarantee a growth rate on the money in the contract regardless of how the underlying investments perform. Money invested in variable annuities is generally spread among a portfolio of mutual funds, giving it a chance to grow when the market cooperates but providing a guaranteed rate of return if markets act like they did in 2008. Income benefits are also available to guarantee a stream of income for life as long as the owner of the annuity stays within the prescribed withdrawal rate. For most carriers, annuity owners are guaranteed between 5 and 7 percent of their accumulated income base each year.

Death Benefits: Like any retirement account, annuities have beneficiaries that are positioned to receive any assets in the contract that the owner hasn’t collected as income. In the old days, buying an annuity was like making a bet with an insurance company and if the owner died before the funds had been collected as income, the insurer kept the difference. Today, annuities act much more like life insurance policies with defined death benefits that can take care of loved ones in the event of the owner’s passing.

Many Americans have made a conscious effort to reduce debt and increase their personal savings over the past year as the economy has struggled. Economic numbers continue to pour in supporting the fact that people are paying down debt and saving more money. Now, the government announced upcoming changes that are going to encourage even more saving in the years leading up to retirement.

The goal of these new initiatives is to encourage saving and make it as easy as possible to save, possibly to the point of providing tax incentives to savers. President Obama announced the new ideas, saying, “Tens of millions of families have been, for a variety of reasons, unable to put away enough money for a secure retirement….We cannot continue on this course.”

 Some of the proposals being considered include:

 – Savings Bonds for Tax Refunds: Most people get their tax refund each year and have every intention of either saving it or using it to reduce their debt levels. However, the majority of those dollars end up getting spent instead of saved. The IRS, beginning in 2010, will allow people receiving a tax refund to receive a US savings bond instead of a check.

 – Automatic Participation in Retirement Plans: Most employers have some type of retirement plan available, but many employees never opt in and start saving in that plan. Progress is being made on making it easier for employers to automatically enroll new employees in retirement plans. Many people intend to save money by contributing to a 401K or some other type of retirement plan, but they never get around to enrolling. This plan would allow employees to opt out of the retirement plan, but would likely lead to an increase in retirement savings for the millions of workers with 401K retirement plans.

 – Sick Days and Vacation Days Converted To Retirement Savings: Many employees pile up sick days and vacation days every year to the point where they couldn’t realistically come close to using them all up. Other companies have a policy that employees will lose any sick days or vacation days not used during a calendar year. This proposal would attach a cash value to those unused hours and that value could be deposited to the employee’s retirement account. For some employees, this savings could add up to hundreds or even thousands of dollars in savings each year.

 – Forced Retirement Plans: For employers who don’t currently offer a retirement plan to their employees, Congress is considering a bill that would force employers to at least set up an IRA with a direct deposit option for their employees. A worker would not have to contribute, but at least the option would be there.

 Nearly half of workers older than age 55 currently have less than $50,000 saved for retirement. The goal of these initiatives is to make it easier and more convenient for people to save and give more people a chance at a retirement where they don’t have to depend solely on Social Security to meet their financial needs. 

The job market as a whole is expected to remain pretty bleak for some time. A recent survey showed that 70% of companies expect their hiring plans in the fourth quarter to remain steady with their third quarter hiring. The problem is that hiring in the third quarter has been almost non-existent. In the survey, 12% of the 28,000 companies surveyed expect to increase hiring during the fourth quarter and 14% expected a decline in new hires.

 The lack of planning for new hires means that the unemployment problems facing the U.S. are likely to continue for at least the rest of 2009, if not much longer. Still, there are some important tips that can help job seekers find jobs if they’re looking in the right places.

 – Be Willing To Switch Industries: If you are one of the millions of workers who lost their jobs in banking and finance related fields, your best bet is not to wait around for that industry to start hiring again. Think about the skills you developed in your former job and how they would translate to different industries. There is a great need for financially-savvy, business-minded individuals in industries that are hiring, including healthcare, education, and government-related jobs.

– Be Willing To Relocate: Most of the jobs are going to be in metropolitan areas and you have a much better chance of getting hired if you’re willing to go to where the jobs are. This isn’t always easy, but after many months of unemployment and frustrating job searches, many people are becoming more willing to relocate.

– Be Willing To Network: Some people are naturally good at networking and others dread networking events. Regardless of which end of the spectrum you fall on, you need to be willing to put yourself out there and get connected to important people in your community and industry. The more people you know, the better your chances of stumbling upon an opportunity that’s a good fit for you.

– Be Willing To Reach Out To Available Resources: There are several resources available to people looking for jobs that can help with all aspects of the job search. Contact your college career office and ask to be put on a mailing list when job listings for graduates are posted. Be aware of career fairs and other events being held in your area. Many churches also try to provide their members with employment-related resources.

– Be Willing To Work Internationally: The recovery from the global recession will not happen at the same pace in every corner of the globe. In all, 17 of the 35 countries surveyed expect hiring to increase during the 4^th quarter of 2009. Countries like India, Brazil, Columbia, China, and Peru are all expected to have a strong job market in the short term. Think of it as an adventure and a career move all at once!

LoansandCredit.com is provided in affiliation with GetSmart.com, LoanApp.com, QSpace.com, NextCard.com, CreditNow.com, ConsumerInfo.com, HomeSpace.com, PeopleFirst.com, eDebtConsolidation.com and iSyndicate.com.   Copyright 2000, All Rights Reserved.  Web design template by FreeSiteTemplates.com.

LoansandCredit.com is not a broker, a bank or a lender.   It’s a FREE service that gives you the objective, up-to-the-minute information you need to make a smart credit decision.

At LoansandCredit.com, we believe in giving you choices.  Through our affiliations with HomeSpace.com, GetSmart.com and LoanApp.com, we are able to offer you several different forms to help you submit your loan request effortlessly and efficiently to the participating lenders/brokers on the LoansandCredit.com network.

HomeSpace.com – Choose between the FastApp and StandardApp.  The FastApp is a one-page form that gives us the highlights of your financial situation and in most cases allows us to get you a loan decision quickly.  With the StandardApp you can earn a few extra dollars. We’ll give you a $150 credit at closing if you select and complete the standard application. It takes longer but because it saves us time, you can save, too!    Apply Now!

GetSmart.com – Quick 60-second application.   Find a loan in 3 easy steps.  Apply now!

LoanApp.com – Choose between the S-Form that will take you 2-3 minutes to complete or, if you are trying to get the absolute best possible rate, take the 20-30 minutes required to complete the C-Form.   Apply now!

In all of the above options, you will have lenders/brokers bidding on your loan to ensure you the best possible rate.  Be sure to use our handy mortgage calculators to assist in your financing decision.

 

Home Loans – Mortgages, Refinancing, Home Equity Loans.

Auto Loans – New or used, Cars and Motorcyles.

Debt Consolidation – Reduce your total payment and get out of debt quicker.

Credit Cards – Best interest rates available.  Credit cards available for those with good credit or less-than-perfect credit.

Credit Reports – Keep informed about your credit rating with the credit agencies and bureaus.

Business Loans – Need to grow your business with some extra capital?  Look no further.

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Calculators – Answers to your questions about how much you can borrow, what your payments will be, if it is smart to consolidate, and more.

Personal Finance Articles – Read up-to-the minute news from a variety of sources about what is happening around the globe to affect your financial situation.

Consolidate high interest Credit Card, Auto and Student Loan debt into a cheaper and potentially tax-deductible loan using the equity in your home. 

LoansandCredit.com is not a broker, a bank or a lender.   It’s a FREE service that gives you the objective, up-to-the-minute information you need to make a smart credit decision.

At LoansandCredit.com, we believe in giving you choices.  Through our affiliation with GetSmart.com and LoanApp.com, we are able to offer you several different forms to help you submit your loan request to the participating lenders/brokers on the LoansandCredit.com network.

GetSmart.com – Quick 60-second application.   Find a loan in 3 easy steps.  Apply now!

LoanApp.com – Choose between the S-Form that will take you 2-3 minutes to complete or, if you are trying to get the absolute best possible rate, take the 20-30 minutes required to complete the C-Form.   Apply now!

In all of the above options, you will have lenders/brokers bidding on your loan to ensure you the best possible rate.