The New Credit Card Law: No Big Deal
Posted: March 5, 2010
Filed Under: Observations
There’s been a lot of talk lately about the new credit card law that went into effect on 2-22-10. In case you missed it, here are some of the highlights:
- Credit card companies are now required by law to disclose how long it will take you to pay off the balance and how much interest you’ll accrue if you just make the minimum payments.
- Credit card companies are also required to show you how much needs to be paid each month to pay off a balance within three years. NOTE: The Detroit Free Press published a really neat graphic to illustrate these first 2 points and it can be found here.
- Credit card companies cannot raise interest rates on existing credit card balances. In addition, rates can’t be raised unless the account is at least 60 days past due. If payments are made on time for six consecutive months, the original rate must be restored. In the past, if you made a late payment on even just one credit card, a loan or even a utility bill, that could trigger interest rate hikes on your other credit card accounts … also known as a “universal default”.
There are additional changes, but these are 3 of the big ones. For more complete coverage of the new credit card law, please see the links at the bottom of this article.
No Debt, No Worries
Many financial journalists and bloggers are spending a lot of time discussing the new credit card law and how it will affect you, not to mention how the credit card companies might now try to creatively (but legally) come up with new ways to charge consumers.
I don’t know about you, but modern life is complicated enough without having to learn a whole new set of rules/regulations/policies/procedures regarding my credit card or having to read credit card industry trade journals.
Therefore, if you want you want the quick and easy interpretation of the new credit card law, here it is: If you don’t have outstanding credit card debt, this new credit card law does not affect you.
Keep in mind that the new credit card law assumes that a person has an outstanding balance on their credit cards. But if you pay off your credit card bill(s) in full each month, you don’t have to concern yourself with the new credit card law. Yes, it really is that easy.
Simple Is Good
I haven’t carried a balance on my credit cards for nearly 15 years, and I know plenty of other people that live a perfectly normal life without credit card debt.
It’s all about being disciplined and not spending more than you earn, and having the courage to just say no when everyone around you is using their credit card like a drunken sailor.
When you live within your means and commit to paying off your credit card bill(s) in full each month, your life immediately becomes simpler and less stressful. You’ll gradually pull out of the system that used to own and control you. And it’ll be one of the best decisions you ever made.
For additional information on the new credit card law:
http://www.federalreserve.gov/consumerinfo/wyntk_creditcardrules.htm
http://www.federalreserve.gov/creditcardcalculator/
In Defense Of Credit Card Companies
Posted: January 7, 2010
Filed Under: Observations
Over the past several weeks there have been numerous reports slamming credit card companies for their alleged shady policies and practices. I’ve even seen where certain individuals are leading a “debtor’s revolt” against the credit card companies to “send them a message”.
Ira Rheingold, director of the National Association of Consumer Advocates, has said, “Banks have done really well figuring out ways to screw people without making themselves legally liable.” On some specific items I agree wholeheartedly with this statement.
As someone that has worked in this industry for the past 15 years helping consumers resolve their excessive credit card debt, you might be expecting me to jump on the bandwagon and further villify the credit card companies. If so, I’m sorry to dissappoint you.
The reality is that the availability of credit cards does much more good than harm. Consider the following:
Convenience
- Can you imagine trying to make a flight or hotel reservation by going to a local travel agent and writing a check? Not a chance. Nearly everyone these days makes their travel reservations online at their convenience … with their credit card.
- How about shopping? I don’t know about you but I do the majority of my shopping online, especially during the holidays to avoid long lines and crowded malls. Doesn’t matter if it’s 2am in the morning. I buy my stuff and UPS delivers everything right to my front door in a matter of days. But none of this would have happened without a credit card.
- How about something as simple as putting gas in your car? I can’t remember the last time I went inside to pay with cash. Nowadays it’s pay at the pump with your credit card. Easy peasy lemon squeezy, and I’m done.
I could go on and on with more examples, but you get the point. Credit cards absolutely do make modern living very convenient.
Commerce
- Every year hundreds of billions of dollars are spent on goods and services using credit cards. Businesses would lose a ton of money if everyone were forced to go back to the olden days of paying via cash, check or money order.
- I suppose you could make the argument that slowing things down a bit by going back to the old-fashioned methods of commerce could be good for the environment as well as curb overconsumption. But even if everyone stopped overconsuming, the lack of credit cards would still harm many legitimate businesses by removing a quick and easy form of payment.
So, yeah, credit cards definitely do help keep the economy moving.
THE REAL REASON WHY MANY PEOPLE ARE MAD AT CREDIT CARD COMPANIES
There is definitely room for improvement at many credit card companies. I’m not disputing that. However, what I have found is that a lot of peoples’ anger and resentment is not really about the interest, late fees or overlimit fees. It goes deeper than that.
The real issue for a lot of people is that they are mad at themselves because they spent beyond their means, plain and simple. And they want to make the credit card company out to be the bad guy because they overspent.
There, I said it.
Let’s remember that no one puts a gun to our head (in most cases) and forces us to make purchases with our credit card. It’s all voluntary. And if you pay off your bill in full each month you don’t incur any interest or fees. Not a penny. It’s actually a pretty good deal as long as you remain disciplined about your spending.
Yes, there are certainly situations where a person might have no other choice but to temporarily use their credit cards just get by, such as paying for unexpected medical expenses or to buy groceries for their family while they are unemployed. That’s fine. I have no problem with that.
But you have to remember that credit cards are not monopoly money. Eventually you’re going to have to pay the money back, probably with some interest. I think any reasonable person understands and accepts this.
The problem I have is when people start making bogus excuses when it comes time to pay their bills. If you owe the money, you owe the money. It doesn’t matter if your debt was incurred from a 60-inch plasma TV (that you really didn’t need) or from basic living expenses just to survive, either way you owe the money. And if you can’t pay as originally intended, then you’re going to need to explore other options for resolving your debt.
IT’S OK TO BE MAD (BUT NOT TOO LONG)
If you screwed up and spent too much, just admit it and accept responsibility.
I’ve screwed up financially. I have friends and family that have screwed up financially. I’ve had clients that have screwed up financially. It’s ok. It doesn’t mean you’re a bad person. It simply means you “miscalculated”. It happens. Move on.
What really matters, though, is how you respond to your financial mistakes. Are you going to be the “victim” and blame everyone else for what happened? Or are you going to accept responsibility for what happened and immediately begin taking corrective action to try and fix the problem? That’s what really matters.
Links to debtor’s revolt articles:
http://www.huffingtonpost.com/2009/09/14/debtors-revolt-woman-refu_n_285394.html
http://www.huffingtonpost.com/2010/01/04/ben-pavone-california-law_n_410630.html
Three Gems From Michael Moore’s 15-Point Action Plan
Posted: November 7, 2009
Filed Under: Observations
Love him or hate him, there’s no denying that Michael Moore is not afraid to speak his mind and challenge the status quo. Although I don’t agree with all of his views, I’ve always admired Mr. Moore for having the courage to ask the tough questions and keep people accountable.
His latest movie, Capitalism: A Love Story, was released last month. On his website, Michael Moore says that the number one question he is constantly asked after people see his movie is, “”OK — so NOW what can I DO?!”
Mr. Moore responded with a 15-point action plan offering real-life solutions that normal everyday people can implement. Many of the solutions encourage people to be politically active, which is fine, but we won’t cover them here. However, 3 of his 15 points have to do with personal finance and personal responsibility, and I couldn’t agree with him more. Here they are:
- Get rid of all your credit cards but one — the kind where you have to pay up at the end of the month or you lose your card.
- Do not invest in the stock market. If you have any extra cash, put it away in a savings account or, if you can, pay down on your mortgage so you can own your home as soon as possible. You can also buy very safe government savings bonds or T-bills. Or just buy your mother some flowers.
- Take care of yourself and your family. Sorry to go all Oprah on you, but she’s right: Find a place of peace in your life and make the choice to be around people who are not full of negativity and cynicism. Look for those who nurture and love. Turn off the TV and the Blackberry and go for a 30-minute walk every day. Eat fruits and vegetables and cut down on anything that has sugar, high fructose corn syrup, white flour or too much sodium (salt) in it (and, as Michael Pollan says, “Eat (real) food, not too much, mostly plants”). Get seven hours of sleep each night and take the time to read a book a month. I know this sounds like I’ve turned into your grandma, but, dammit, take a good hard look at Granny — she’s fit, she’s rested and she knows the names of both of her U.S. Senators without having to Google them. We might do well to listen to her. If we don’t put our own “oxygen mask” on first (as they say on the airplane), we will be of no use to the rest of the nation in enacting any of this action plan!
To read Michael Moore’s entire 15-point action plan please click here
Beware Of Misleading Advertising From A Few Debt Settlement Firms
Posted: October 14, 2009
Filed Under: Observations
During the past several months, a number of our clients have received very official-looking notices in the mail regarding credit card debt relief, possibly suggesting that there might be some government sponsored program to assist people with excessive credit card debt.
Upon reviewing these notices they turned out to be nothing more than cleverly disguised direct mail advertisements from debt settlement firms. They used terms like “National Council For … ” and “The Department Of … “, complete with an official-looking seal and a mailing address in Washington, DC. Some even resembled an IRS notice or a W-2 form.
Some made mention of “program eligibility” and others made reference to the “Government Economic Stimulus Act”. At the same time, however, nearly all of these direct mail pieces had a disclaimer in the fine print that indicated that they are “not affiliated with or endorsed by any government agency”.
For the record and to clear up any confusion, we are not aware of any government sponsored program to assist consumers with credit card debt relief.
An interesting question that has come up is …
“How did these firms find out that I was
even having any financial challenges at all?”
The most likely way is they purchased your name and address from one of the major credit reporting agencies (i.e. Equifax, Experian and TransUnion). It’s completely legal for them to do this. If you’re a little surprised that information about you is for sale, here are the links where you can confirm it for yourself:
Equifax / Experian / TransUnion
Note: We actually called these companies and did a little mystery shopping and asked if we could purchase a mailing list for people having financial difficulty such as drop in credit score, late payment history, etc. They said, ”Yes, no problem.”
Bankruptcy FAQs
Posted: September 24, 2009
Filed Under: Answers To FAQ
No one ever wants to file bankruptcy, that’s for sure. But if you’re having financial difficulties you owe it to yourself to educate yourself on the basics of bankruptcy because it might just end up being the best solution for you afterall.
Today I ran across an excellent resource that answers virtually any question you would want answered on the topic of personal bankruptcy. Some of the most common questions people have about bankruptcy are:
- What is the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy?
- What is the difference between a Chapter 13 and a Chapter 11 bankruptcy?
- Can I file Chapter 7 and still keep my home?
- Will I ever be able to buy a house after I file for bankruptcy?
- Are some debts non-dischargeable?
- If I file bankruptcy, is my spouse required to file with me?
- What about my IRA/retirement account – will it be protected from creditors?
Here’s the link:
http://www.acclaimlegalservices.com/faqs
It’s entirely possible that you won’t need to file bankruptcy to solve your financial predicament. But before making your final decision I believe it’s wise to at least explore all of your options before proceeding.
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What's New
- The New Credit Card Law: No Big Deal
- In Defense Of Credit Card Companies
- Three Gems From Michael Moore’s 15-Point Action Plan
- Beware Of Misleading Advertising From A Few Debt Settlement Firms
- Bankruptcy FAQs
- Cross-Collaterization: Yes, They Really Can Take Your Money
- The Credit Card Accountability, Responsibility and Disclosure (CARD) Act
- Credit Card Charge-Off vs. Credit Card Write-Off
- Back To Basics
- Credit Card Bailout … Your Lucky Day?
- Review Of I.O.U.S.A.
- I.O.U.S.A.: Live with Warren Buffett, Pete Peterson & Dave Walker
- When It’s OK To Do Nothing
- The Debt Elimination Scam … Version 2.0
- Warren Buffett: U.S. In Recession
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