Credit Card changes

As we are seeing in the news over the past couple of weeks, the credit card companies such a Citibank and Chase are posting record profits. How can this be? Congress passed new legislation for the credit card companies in the spring and some of the changes are slowly being put into place. Some the the changes that the card companies are putting in place are things like raising minimum payment from 2% to 5% with no warning or for no other reason than they feel like it. The next time you get your bill in the mail or a credit card offer in the mail, read the back of it once. I have an offer on my desk that says "we reserve the right to change the account terms (including apr's) at any time for any reason." Who would do business with anyone under these terms? Here are some of the changes that are going to be taking place and when.

August 2009:

• Statements must be mailed 21 days before bill is due (up from the current 14)
• Issuers have to give 45 days notice (vs. 45) before increasing rates and fees.

February 2010

• Issuers can no longer raise rates on an existing balance, unless payment is more than 60 days late or a teaser rate.
• Teaser rates must be in effect for at least six months.
• Except for expiring teasers, the rate on new purchases can't be hiked in the first year.
• Payments in excess of the minimum owed must first be applied to the balance with the highest interest rate, and then to other balances in descending order
• Applicants under the age of 21 must have an adult co-signer or show proof of income for approval.
• Issuers can not longer practice "universal default" that is, raise your rates if they feel they learn that you were late on another account.
• Issuers must indicate in statements how long it will take to pay off a balance (and the total cost) if you make only minimum payments.
• In calculating finance charges, issuers cannot average in daily balances from previous billing cycles. (huh)

August 2010

• Cardholders assessed a penalty APR for late payments can reclaim the lower rate if they pay on time for six consecutive months.

What does this mean to us, higher late charges, new costs for extra cards, extra charge for paper statements, charges for cash advances and more. If it were me, I would close all of these credit card accounts and use cash and a debit card. Did you know that in most cases, if you only pay the minimum on a credit card payment, it takes almost 20 years to pay it off. Oh, I did close all my accounts. I went from one of those people who paid off their balance every month to someone who uses cash and the debit card and I do travel and buy plane tickets and rent cards and I do get bonus point for "free stuff". My biggest savings is that I spend so much less using a written budget and pulling dollar bills out of my goofy envelopes for stuff.

Time to Refinance

Wow are the rates low. Some even below 5%. This could be a great time to refinance your home. If you are like me, I have only done this once or twice in my life. So at our last Financial Peace class at First Friends Church. www.firstfriends.org  Jessie Pachan of Fearon Financial www.fearonfinancial.com shared some great tips with us about getting your home refinances. 

Always get a good faith estimate with all of the fees and rates from more than one mortgage broker.

Get a Truth in Lending form

Shop around for title insurace

Many fees are negotiable.

If you are buying a new home never buy a  home that is more that 25 to31 % of your take home pay.

Always see if you can take out a 15 year vs 30 year mortgage.

Don't just buy the points to get a lower rate. Do some calculations to see how long it will take to recover your higher price for a lower interest rate.

If you would be interested in more information about buying a new home or refinancing an existing home contact us at www.lighthousefinancialcounseling.com

Handling Money God's Way

Today I got a phone call from a friend who I have been working with concerning his finances. He shared with me that they made $990 at their garage sale last week. This week he received a couple of large orders at work and made some nice commissions. They are using this money to pay down some outstanding debt. They also had to make a tough choice not enroll their daughter in a private school this upcoming year because of the expense. This week an administrator contacted them and told them that the tuition would be taken care of. Wow. Look how things work when we handle things God's way. His ways are so much better than our way and His plan are higher than our plans. 

God is so cool