A friend called me up recently and said “OK, Ms. Personal Finance, what are these people doing? I have been paying down my credit card balance, but all the card company keeps doing is reducing my available credit.” I said, “Welcome to the new credit card world, if you can, you should try to find a new card company. Not only is the practice inconvenient, but it may even be hurting your credit score.”
The credit card companies are attempting to make as much hay as they can while the sun shines. They are scrambling to ensure they can eke out the maximum revenues possible from you, their “clients” before the new credit card reform goes into action full-force.
As I was doing some research to help my friend find a new card company, I stumbled upon Rob Lieber’s article in the New York Times “It May be Time to Find a New Credit Card” and since I agreed with him for the most part, I’ll let you read it yourself, via a link at the bottom of this article.
I do believe that this moment in our economic life, gives us the space to put better financial practices into place. One practice I would definitely suggest is reducing the grip of credit cards.
Folks who are considered “good credit card customers” by the credit card companies, are generally folks who have “bad credit card practices,” they make late payments, go over their credit limit, pay minimum balances – all the things that provide lots of revenues for the card companies. Yet, the card companies are clamping down on both good and bad customers alike. For instance, they are reducing the available credit on cards and they are closing down cards that you use infrequently. They are also hiking up your interest rates – putting into effect that “universal clause” that allows them to hike the rate on your credit card, even if you have never missed a payment on that card. The universal clause allows the card companies to raise your interest rate, if you are late on any other bill that is reported to a credit reporting agency. Sneaky, huh!
So why are the card companies clamping down on these people? Well, in a good economic climate, these folks would keep on paying their minimum payments, their late fees, their over the limit fees etc., while the credit card companies continued raking in big bucks, but in a more murky economic climate, there is a real possibility and lets say probability that many of these users may not be able to continue paying these extra charges, because with fewer dollars all around, who can keep up this practice long term. The card companies certainly do not want to be left holding the bag. Even for folks who do not abuse credit cards, by necessity, credit cards may become more of a life-line and less of a convenience, until this meager period passes on.
So lets get back to basics. Make a plan to get out of the grip of those credit cards. Pay those balances down, but also think about which card company you want to do business with. Make these changes work for you.
Ron Lieber's article: It May be Time to Find a New Credit Card.
Showing posts with label credit cards. Show all posts
Showing posts with label credit cards. Show all posts
4.22.2009
Tax Planning for 2009 Tip 422
New Car on the Brain?
If you purchased a new vehicle* after Feb 16th of this year, 2009 -- or if you plan to purchase one before January 1st, 2010 - you may qualify for a deduction of the state and local sales taxes paid on the vehicle, with a purchase price of up to $49,500.
You qualify for the deduction even if you do not itemize.
The deduction is phased out between $125,000 and $135,000** if you are an individual, and between $250,000 and $260,000** if you are filing a joint return.
You'll claim the deduction on your 2009 return.
This may be as good a time as any to satisfy your desire and help the economy out at the same time. Can you say win-win?
* car, light truck, motor-home, motor-cycle.
** your modified adjusted gross income (MAGI).
5.28.2008
Were You Better Off Than Your Parents? Will Your Kids Be Better Off Than You?
While you may feel that you are better off than your parents, and I hope you do, our kids will have a definitely more difficult time making this statement. Much has changed. Our national economy has been impacted by a number of things, a war, not yet concluded; much increased fuel prices with expectations they will continue to rise, lower job creation, and increased competition globally. While we as Americans have had a much lower savings rate than most of the rest of the world, we are now in the realm of having a negative savings rate. Retirement benefits have decreased, and health care costs have risen. Social Security in all probability will not be around in the way we know it today, for our children. With all these factors that impact wealth creation, what can we do to ensure that our kids have a fair chance at being better off?
While some things are outside of our individual control, there are some areas where we can direct and guide our kids of all ages.
Understand money. Help your kids really understand money. Online payments, debit cards, credit cards and check books, may give children the impression that there is an unending supply of money. Teach your children that these are payment tools, and that you have to earn the money and have it in the bank, before you can use them. Help them understand interest rates and the cost of money. Help them understand how much money you make, and how it is spent. This will give children a good idea of the cost of living and also make indelible the fact that they will need to start saving early.
Wean yourself off of credit cards. There is no better education than the one observed. If your children observe your saving habits and not using credit cards and payday loans for regular expense items, they will be more likely to prevent the credit monkey from climbing on their backs.
Start saving now. Mandate that 10-25% of all the money that comes through your children’s hands be saved. During a regular year, kids rack up money from allowances, jobs – part-time or full-time, gifts, contest winnings, etc. Saving a percentage on a consistent basis is a good life lesson. Help your child monitor the growth of their savings, and eventually move those savings into investments. Having a real savings goal helps this process, for younger kids it may be some toy or electronic purchase, for older kids, it may be spending money on a trip, or even a partial payment on a car, for young adults, among other things it will be saving for retirement. Savings also means looking for bargains on the items that must be purchased.
Learn to budget. Introduce your children to budgeting as early as possible, but it is never too late to implement this most important wealth building tool. Also referred to as a spending plan, a budget simply puts you in control of your money so that you spend your money on the most important things to you and avoid frittering it away on impulse items. Help them create written budgets and set up a regular monitoring process. A budget must be written down and followed to be useful. Budgets in your head are not reliable.
Help your children understand that a budget is a dynamic document as income and expenses change. Help them understand the power of directing their money where they want it to go, to what is really important to them, and not frivolous impulse purchase that often generate buyer’s remorse.
Help them understand that the celebrity lifestyle that is conveyed unendingly on television and in magazines apply to a very small part of American society. Understanding that trying to rival the designer shoes or purses in a celebrity’s closet on a non-celebrity’s budget, will almost certainly lead to financial ruin, or at the very least the inability to obtain some things that may be higher on their personal goal list.
Keep good records. Along with budgeting, good record keeping is important. Learning to do this at an early age, will keep this habit throughout life. Good budget records show where you are overspending and allow you to make changes. Later on good record keeping will help you make sure you are able to claim all the tax-deductions legally allowed. Good records are also key when you have to make credit card or other purchase disputes.
Learn to give back. Being better off doesn’t begin and end with money, helping your kids learn to help ones less privileged than themselves at all levels, this is one way to fill their lives with meaning.
Get as much education as possible. Gone are the days of working a lifetime in one company. Investing in education throughout their life-time will keep your child ahead of the trends and be able to participate in the workforce as changes occur.
Get a career in an area that will support their desired lifestyle. Help your child examine the lifestyle that they may want to lead and guide them towards jobs and careers that can make that happen, based on the remuneration available for those jobs. Help them connect with people who are currently in similar jobs to determine whether salary or income expectations are valid.
As parents our job on guiding our children in financial matters really never ends, but if we start teaching them about money when they are young, the skills will be a lifelong asset. If your kids are teenagers or young adults and you fear that you may not have done a good job of guiding them, remember it is never too late to start.
While some things are outside of our individual control, there are some areas where we can direct and guide our kids of all ages.
Understand money. Help your kids really understand money. Online payments, debit cards, credit cards and check books, may give children the impression that there is an unending supply of money. Teach your children that these are payment tools, and that you have to earn the money and have it in the bank, before you can use them. Help them understand interest rates and the cost of money. Help them understand how much money you make, and how it is spent. This will give children a good idea of the cost of living and also make indelible the fact that they will need to start saving early.
Wean yourself off of credit cards. There is no better education than the one observed. If your children observe your saving habits and not using credit cards and payday loans for regular expense items, they will be more likely to prevent the credit monkey from climbing on their backs.
Start saving now. Mandate that 10-25% of all the money that comes through your children’s hands be saved. During a regular year, kids rack up money from allowances, jobs – part-time or full-time, gifts, contest winnings, etc. Saving a percentage on a consistent basis is a good life lesson. Help your child monitor the growth of their savings, and eventually move those savings into investments. Having a real savings goal helps this process, for younger kids it may be some toy or electronic purchase, for older kids, it may be spending money on a trip, or even a partial payment on a car, for young adults, among other things it will be saving for retirement. Savings also means looking for bargains on the items that must be purchased.
Learn to budget. Introduce your children to budgeting as early as possible, but it is never too late to implement this most important wealth building tool. Also referred to as a spending plan, a budget simply puts you in control of your money so that you spend your money on the most important things to you and avoid frittering it away on impulse items. Help them create written budgets and set up a regular monitoring process. A budget must be written down and followed to be useful. Budgets in your head are not reliable.
Help your children understand that a budget is a dynamic document as income and expenses change. Help them understand the power of directing their money where they want it to go, to what is really important to them, and not frivolous impulse purchase that often generate buyer’s remorse.
Help them understand that the celebrity lifestyle that is conveyed unendingly on television and in magazines apply to a very small part of American society. Understanding that trying to rival the designer shoes or purses in a celebrity’s closet on a non-celebrity’s budget, will almost certainly lead to financial ruin, or at the very least the inability to obtain some things that may be higher on their personal goal list.
Keep good records. Along with budgeting, good record keeping is important. Learning to do this at an early age, will keep this habit throughout life. Good budget records show where you are overspending and allow you to make changes. Later on good record keeping will help you make sure you are able to claim all the tax-deductions legally allowed. Good records are also key when you have to make credit card or other purchase disputes.
Learn to give back. Being better off doesn’t begin and end with money, helping your kids learn to help ones less privileged than themselves at all levels, this is one way to fill their lives with meaning.
Get as much education as possible. Gone are the days of working a lifetime in one company. Investing in education throughout their life-time will keep your child ahead of the trends and be able to participate in the workforce as changes occur.
Get a career in an area that will support their desired lifestyle. Help your child examine the lifestyle that they may want to lead and guide them towards jobs and careers that can make that happen, based on the remuneration available for those jobs. Help them connect with people who are currently in similar jobs to determine whether salary or income expectations are valid.
As parents our job on guiding our children in financial matters really never ends, but if we start teaching them about money when they are young, the skills will be a lifelong asset. If your kids are teenagers or young adults and you fear that you may not have done a good job of guiding them, remember it is never too late to start.
4.07.2008
Money Tip:Credit Cards - Universal Default Clause
If you use credit cards, get out your contractual agreement with the credit card company. Does your agreement have a "universal default clause?" Of course the best option is not to have to use any credit card company at all, but if you do - try to find one that doesn't burden you with a "universal default clause."
The "universal default clause" allows your card company (we'll call it Company X) to raise your credit card interest rate, if it determines from your credit report that you have been late on another bill, (that bill could be another credit card, or say your utility bill, or your mortgage, among others), even if you are making timely payments on Company X's credit card. Company X now has the go-ahead to hike your rate into the interest rate stratosphere - often hiking rates as high as 24.99% and even 31%.
Check your interest rate each and every month, so if they have exercised their right, you can exercise yours and move to another credit card company, or better yet pay off the offending debt.
Let us know of your experiences with the "universal default clause."
The "universal default clause" allows your card company (we'll call it Company X) to raise your credit card interest rate, if it determines from your credit report that you have been late on another bill, (that bill could be another credit card, or say your utility bill, or your mortgage, among others), even if you are making timely payments on Company X's credit card. Company X now has the go-ahead to hike your rate into the interest rate stratosphere - often hiking rates as high as 24.99% and even 31%.
Check your interest rate each and every month, so if they have exercised their right, you can exercise yours and move to another credit card company, or better yet pay off the offending debt.
Let us know of your experiences with the "universal default clause."
3.08.2008
Should I Pay My Taxes With Plastic?
Source: SmartMoney.com
By Bill Bischoff
March 5, 2008
WORRIED ABOUT HOW you're going to pay your tax bill? It might be tempting to slap it on plastic. After all, you've probably heard you can charge taxes due on your 2007 federal income-tax return on your Visa, MasterCard, Discover Card or American Express. What if you want a filing extension? No problem. You can just charge what you expect to owe the IRS. And if you owe estimated taxes for tax-year 2008, you can charge those, too. In fact, in many states, credit-card payments are available for your state income-tax bill as well.
Clearly, charging your taxes is convenient. And with the right card, you can even rack up some extra frequent-flier miles or other goodies to boot. So what's wrong with this picture?
The "convenience fee," that's what. It amounts to a hefty 2.49% of the amount you charge. This is in lieu of the fee that merchants pay credit-card companies when you charge your purchases. Only in this case, the "merchant" is the Internal Revenue Service, and Uncle Sam isn't interested in turning 2.49% of his revenues over to the card companies, which means you have to pay it. Until now, you may have been blissfully ignorant of these merchant fees, but you will become painfully aware of their bite when they come directly out of your own hide. The money is collected by one of the two vendors that facilitate these transactions (Official Payments Corp. and Link2Gov Corp.), and split with the card issuers.
Granted, paying $9.96 for the convenience of charging a $400 tax bill to your credit card isn't really a sin. But what about paying $124.50 on a $5,000 tax bill? And in addition to that, your friendly credit-card company steps up and starts charging you interest (often at 13% or more annually), unless you pay off your bill within the grace period. Bottom line? You can probably find a better way to dig up the money to foot the bill.
Our suggestion? Try to find other (less expensive) ways to raise the cash needed to pay your taxes. Perhaps your credit union, your parents or your rich brother-in-law. Also, don't overlook the IRS itself. You may qualify to set up an installment payment plan with the government. If so, this may be the cheapest way to go. You'll be charged a $52 setup fee (assuming you arrange for automatic payments out of your checking account) and then a monthly interest rate on the outstanding balance. Currently, that interest rate is 0.833% per month (which equates to 10% annually). However, the interest rate is subject to change every quarter. File IRS Form 9465 to get that ball rolling.
Of course, if you have a credit card with a low APR — say 5% or less — this could turn out to be the cheaper option. That is, provided you really do pay off your tab in a reasonable amount of time (i.e., before that introductory rate jumps up to something much higher). If so, visit officialpayments.com or pay1040.com to process your payment.
SmartMoney.com
Attn: Customer Service
1755 Broadway
2nd Floor
New York, NY 10019
3.06.2008
Taxes: Other Opinions
Take a Look at the article from SmartMoney.com:
Should I Pay My Taxes With Plastic?
By Bill Bischoff
March 5, 2008
WORRIED ABOUT HOW you're going to pay your tax bill? It might be tempting to slap it on plastic. After all, you've probably heard you can charge taxes due on your 2007 federal income-tax return on your Visa, MasterCard, Discover Card or American Express. What if you want a filing extension? No problem. You can just charge what you expect to owe the IRS. And if you owe estimated taxes for tax-year 2008, you can charge those, too. In fact, in many states, credit-card payments are available for your state income-tax bill as well.
Clearly, charging your taxes is convenient. And with the right card, you can even rack up some extra frequent-flier miles or other goodies to boot. So what's wrong with this picture?
The "convenience fee," that's what. It amounts to a hefty 2.49% of the amount you charge. This is in lieu of the fee that merchants pay credit-card companies when you charge your purchases. Only in this case, the "merchant" is the Internal Revenue Service, and Uncle Sam isn't interested in turning 2.49% of his revenues over to the card companies, which means you have to pay it. Until now, you may have been blissfully ignorant of these merchant fees, but you will become painfully aware of their bite when they come directly out of your own hide. The money is collected by one of the two vendors that facilitate these transactions (Official Payments Corp. and Link2Gov Corp.), and split with the card issuers.
Granted, paying $9.96 for the convenience of charging a $400 tax bill to your credit card isn't really a sin. But what about paying $124.50 on a $5,000 tax bill? And in addition to that, your friendly credit-card company steps up and starts charging you interest (often at 13% or more annually), unless you pay off your bill within the grace period. Bottom line? You can probably find a better way to dig up the money to foot the bill.
Our suggestion? Try to find other (less expensive) ways to raise the cash needed to pay your taxes. Perhaps your credit union, your parents or your rich brother-in-law. Also, don't overlook the IRS itself. You may qualify to set up an installment payment plan with the government. If so, this may be the cheapest way to go. You'll be charged a $52 setup fee (assuming you arrange for automatic payments out of your checking account) and then a monthly interest rate on the outstanding balance. Currently, that interest rate is 0.833% per month (which equates to 10% annually). However, the interest rate is subject to change every quarter. File IRS Form 9465 to get that ball rolling.
Of course, if you have a credit card with a low APR — say 5% or less — this could turn out to be the cheaper option. That is, provided you really do pay off your tab in a reasonable amount of time (i.e., before that introductory rate jumps up to something much higher). If so, visit officialpayments.com or pay1040.com to process your payment.
SmartMoney.com
Attn: Customer Service
1755 Broadway
2nd Floor
New York, NY 10019
2.27.2008
First Date: Getting to Know You.
In preparation for your first date - get yourself a pad and pencil, or open up a spreadsheet like Microsoft EXCEL, or if you use money management software such as Intuit’s Quicken or Microsoft Money – turn on your computer and open up your application.
Grab your files, your shoe boxes, or whatever your financial storage units are, and settle in for a re-acquaintance session.
Grab your files, your shoe boxes, or whatever your financial storage units are, and settle in for a re-acquaintance session.
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