Sweeping new laws to govern the credit card industry, making cards easier to understand for consumers!

Its official President Obama has signed a federal law to protect millions of consumers from credit card company abuse; we are in a new era for managing credit.  This new law contains the most far-reaching changes we have seen in the credit card industry in decades. 

But what does it actually mean for you, the card holders?

There will be a new “normal” with credit cards becoming more transparent, easier to understand, slightly more expensive for most and less accessible for low-income families.  Experts also believe we could see a return of routine annual fees, less rewards cards and many bills being due immediately without the traditional month long grace period. 

For millions of credit card users it means avoiding retroactive interest rate increases on existing card balances, more advanced notice of account changes and fewer penalties, late fees and high interest payments. 

The method of advertising/enticing new users has been tightened up as well…good for all new credit card seekers!

Here are some highlights:

1.   There will be limits to the amount of interest rate hikes on all credit cards, such as when a promotional rate ends, a card has a variable rate or if someone pays an account late.  Interest rates on new transactions can only be increased after the first year.  Any “significant” changes to an account cannot occur without a 45 day advance notice to the consumer.

Universal default, the practice of raising interest rates on customers based on their payment records with other unrelated credit issuers (utility companies and other creditors) will no longer be allowed.

2.   Consumers will have more time to pay their credit card bills.  Card issuers are required to give account holders a “reasonable” amount of time to make payments on their accounts.  What that means for you is a minimum of 21 days to make a payment.  Card issuers can no longer set early morning or other arbitrary deadlines for payments.  Any deadline set before 5pm on the payment due date will be illegal under the new law.   Payments due at those times, on weekends, holidays or when the card issuer is closed for business will no longer be subject to late fees.

3.   Your highest paid balances will always be paid first when you make a payment greater than your minimum required payment.  Current industry practice has always been to apply all amounts over the minimum payment to the lowest interest balances first, thus extending the time it will take you to pay your account off.

4.   No more automatic over-the-limit fees on accounts.  All consumers must “opt in” to the card issuers’ over-the-limit services.  Those who opt out will have their transactions rejected if they attempt to exceed their credit limits.  Also the law mandates that any fees charged for going over the limit must be reasonable.

5.   Now for the one that we found most interesting.  Card issuers must now disclose to consumers the consequences of making only the minimum payment required on their monthly statements, namely how long it will take them to pay off their entire balance if they make only the minimum payment each month…years to payoff is a real “shocker” to most consumers.  Issuers must also provide information to the consumer outlining how much the consumer must pay in order to pay off their balances within 12, 24 or 36 months, including all interest and annual fees on their account.

For more information, or if you find yourself drowning in debt, please contact AmeriFree to discuss how our Debt Management Plans (Credit Counseling & Debt Settlement) may be able to help reduce your payment and eliminate stress from your life!

Please check back often as information is continually being added...

Matthew

Debt Blogger

Rather than babble about something that I'm not as up to speed on as other topics I thought today I would share a link to an expert on the subject of "Mortgage and Government".  I hope this is useful information to some and educational for others...

If you’re like most of us your mortgage is worth less than you owe and you are having trouble keeping up with the payments. 

After reading please feel free to express your opinion on this subject.  We understand that this is a hot topic in the news right now so please share...

Please click on the link below and it will take you directly to the article.

http://www.msnbc.msn.com/id/32479139/ns/business-reinventing_america

If you would like additional information, or would like to discuss your financial situation in greater detail, please contact one of our AmeriFree experts and they will be happy to assist you!

Matthew

Debt Blogger

I’m going to start off with an interesting statement.

Many of the personal finance problems people face today are due to confusion between things they want and things they actually need.

It’s true, distinguishing between a want and need can be very difficult, especially when we are being persuaded by outside influences, i.e. salespeople, friends, co-workers. 

There have been times in my life where this particular subject was very, very blurry.  Like the time I needed a $15k car but bought a $30k one instead or the 36” new TV that would have been just fine but the 60” one was more impressive.  I’d use that “blurry area” to justify some of my purchases. These things were “needed” in some way, so I would just define them as needs and not think about them critically.

But what happens when I step back from that for a moment and think about these things with a seriously critical eye?

Life, things I actually need…

Roof over head.  Does that mean I need a house as nice as the one we live in? Not really - we could make do with something much smaller and more affordable. Thus, quite honestly, probably half of our mortgage payment is a “need” and half of it is a “want.”

Food and water.  The majority of my food bill is a “need” - most of my purchases are simply covering staples and buying the basics of food for my family.

Clothing.  I’m extremely tight with my clothing. I often find myself shopping at discount stores to save a buck or two.  Even then, when I do buy clothes, I’ll still spend a little above the need.

Money.  Money is a necessary evil, without it we can’t sustain ourselves.  The question with money is how much do we need?  It’s fine to want more money but be careful not to put money ahead of things like family, friends, etc. 

Protection against demise.  For me life insurance and disability insurance are needs.  Be sure to have enough coverage here to allow for your family to get back on track should something catastrophic occur.

WANTS, everything else…

Part of my mortgage is a “want” because I want a big house. Some of my food bill is a “want” because I like to eat out. Cable (all the extras)?  Want.  Nice car?  Want.  Fancy cell phone?  Want. Wii, quads, boats (fun toys)?  Definitely wants. Traveling?  Want.  Other entertainment expenses?  Want. 

When you start looking at the small number of things in your life that are actually needs, you really begin to see how many things you buy simply because you want them, and then you start to realize just how much fat you can really cut.

What fun is life without wants?  It’s not…

The point isn’t to abandon all of the stuff you want, but to realize just how much of your monthly spending is tied to wants. It’s fine and healthy to want things, but if you’re sinking financially trying to maintain all of the things that you want, then there’s a real problem.

Recommended experiment.  Divide your spending into needs and wants.  Now for the challenge; before adding things up, make a deal with yourself that for every dollar you spend on a want you will put a dollar into savings for the future. Then add away...

If you are like me you just realized that the majority of your spending is on things that should be considered “wants”.  With the state of our economy I found myself needing to look at my wants with a more critical eye, eliminating some and putting others on hold for now.  Doing this has made big changes in my spending patterns each month, and has put some cash right back in my own pocket.

I hope this information was interesting and sparked some curiosity.  Having wants is a great thing and pushes us to reach further, work a little harder and simply dream but staying grounded also helps put everything into perspective…a need is a need and a want is just a want, nothing more!

If you have questions or would like additional information feel free to contact AmeriFree directly.  Our experts are available M-F 8am to 5pm MST to answer any questions regarding debt, budgeting, finances.

Matthew

Debt Blogger 

I understand that creating a monthly budget may not be easy but it is vital in keeping your finances in check.  However, unless you are willing to be as detailed as possible, creating a budget may not be as helpful in accounting for all of your monthly expenses.  If done properly the end result should be able to show where your money comes from, how much money there is and where it is all going…

Steps to Creating Your Budget:

1.   Gather all of your statements. Be sure to include bank statements, investment accounts, recent utility bills and any other source of income or expense.  The more information you can dig up the better.

2.   Record all sources of income. For those who are self-employed or have other sources of income be sure to record these as well.  Be sure to use your “net” income for creating your budget.

3.   Create a list of your expenses. List out all of the expected expenses for a given month. This includes mortgage/rent payments, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement and college savings.  Basically include everything you spend money on.

(for more detailed budget add this step)

Break expenses into two categories: fixed and variable. Fixed expenses are those that stay relatively the same each month and are required parts of your way of living. They included expenses such as your mortgage or rent, car payments, cable and/or internet service, trash pickup, credit card payments and so on. These expenses for the most part are essential yet not likely to change in the budget.  Variable expenses are the type that will change from month to month and include items such as groceries, gasoline, entertainment, eating out and gifts to name a few. This category will be important when making adjustments.

4.   Total everything up. If your end result shows more income than expenses you are off to a good start.  If you are showing a higher expense column than income it means some changes will have to be made.

5.   Make adjustments where needed. If you have accurately identified and listed all of your expenses the goal would be to have your income and expense columns match up! 

For those who find themselves in the situation where expenses are higher than income, be sure to look at your variable expenses to identify areas where you may be able to reduce a specific expense.

6.   Constant review of your monthly budget. Now that you have a budget the most important part is to use it.  Most of us think we know where we are spending our money but trust me when I say that just is not the case.  For example, who actually accounts for that extra soda in a day, extra trip to the mall or just something that comes up?  The short answer is none of us…

Very few of us are experts in accounting for our daily, weekly or monthly spending.  Therefore, my goal in putting these somewhat simple steps together was that we, at a minimum, put one more second of thought when it comes to spending the last couple of bucks in the bottom of our wallets.  Feel free to contact AmeriFree if you want assistance with putting together your monthly budget.

I hope you found this information useful in planning your monthly budget.  Please check back often as new information is added daily.

Matthew

Debt Blogger

Managing credit card debt can be tricky, if not downright impossible if left unchecked.  There are simple questions you can ask yourself to identify if you are heading in the wrong direction, or if you need to take corrective action.

1. How much have you saved in your rainy day fund?
   
   Maybe the first question to ask is if you even have an emergency fund.  Many people find they enter the downward spiral of debt, not by living the excess lifestyle, but because they did not have rainy day fund when their financial skies were clear.  All it takes is one unexpected expense, whether that be a medical emergency, loss of job, etc, and you could be stuck in a financial hurricane.  Fortunately, as you emerge from debt, you can include a "personal rainy day bill" in your budget.
2. Are you spending more than you are paying?
   
   This should go without saying, but if you are consistently spending more than you are able to pay off, you have a problem.  There is an old saying that it is easy to spoon away money faster than it is to shovel it in.  If you find yourself in a financial mess, with unsecured debt piling up, take a few minutes and speak with one of our credit counselors to see how we can make a customized plan to help you get out of debt.
3. Are you living day to day because of your credit card or special terms financing?
   
   Sure it is nice to have the monster, in-home movie theater, closet full of designer clothes, and other nice things that your friends and neighbors have, but if you don't have the means to pay for it, you are certainly headed for trouble.  Use special caution when signing up for "bargains" like zero percent interest for X months.  If you choose to utilize one of these promotions, divide the total balance by the number of months of the terms, and decide if you can make that payment (not the minimum payment the store advertises).  If you are unable to pay the bill calculated with this method, you will most likely be suprised with an overnight increase of the balance of 20-30% when the terms expire.  That $5000 deal could easily become a $6500 deal breaker, with an APR approaching 30%.
4. What is your financial plan to get out of debt?
   
   If you fail to plan, you plan to fail.  Did you know that if you are making minimum payments, you could be paying off that balance over a period of 20+ years?  AmeriFree can help you come up with a financial plan that will enable you to be debt free in 24-60 months.
5. Do you charge your day to day purchases on a credit card, rather than a debit card?
   
   If you use the available credit on your credit card, rather than paying with a debit card due to lack of funds in your checking account, this is a strong indication you are heading in the wrong direction.
6. Are you floating bills, or altogether skipping payments?
   
   If you find yourself in a situation where you are playing a sliding tile puzzle game with your cashflow, you certainly have problems with debt
7. Are you behind on your credit card bills?
   
   Being late on a credit card payment causes your previously small minimum payment to snowball into a much larger minimum payment.  It also causes your credit card interest to go up dramatically, and will cause the creditor to scrutinize your account.
8. Are you on a first name basis with those seeking to collect debts from you?
   
   Although it may begin as a casual follow up to your delinquent account, collection departments and agencies will quickly ratchet up the pressure to get paid.  Our debt solutions offer relief from the incessant calls, harrasing communications, and relentless pressure used by collection agencies.

After taking this quiz, you now have a better idea where you rank on the financial freedom barometer, and can forecast what lies ahead.  Fortunately we offer a free consultation to go over your monthly budget, unsecured debts, and living expenses to come up with a plan that can help you be debt free must faster than making token monthly payments.

In a Demos article titled The Plastic Safety Net, Tamara Draut and Jose Garcia outline how households are managing their cost of living in these hard economic times.

While the deep recession continues to threaten the financial well being of middle-income families, its become a more dramatic problem;  even before the economy tanked, millions of households were already having a hard time meeting most simple expenses, and barely making minimum payments owed to creditors.  As unsecured debt balances ballooned families are now experience declining home values and see their credit lines shrink, a lot more people are falling behind on their mortgage and credit card payments.

Now is the time to get out of debt!  Our credit counselors can help you develop a customized debt solution plan to help you get out of debt quickly.  The call is free, so act now!