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Hi,
In this economy, we don't need the big financial institutions looking to our credit cards to make up for their losses. But right now, the credit card companies hold all the "cards," and they can hike interest rates on our balances or charge us higher fees for no reason whatsoever.
The Senate may vote on a bill that will rein in these abuses. The House has already passed its bill, so real reform is within reach. I just sent my Senators an email in support of this bill. Would you take a moment to do the same?
Among other things, the bill would prohibit credit card companies from arbitrarily hiking interest rates on your card balances, and stop 'bait and switch' clauses that let them charge fees and change interest rates for any reason whatsoever.
The bill will help level the playing field for consumers and help ensure that a deal is a deal when it comes to your credit card company. The more consumers the Senate hears from, the better chance we have at putting Main Street, not just Wall Street, first.
Scott,
Your advice on several topics lately has been about moving around debt to produce the lowest APR or the most savings to consumers. However, it does not cover anything about the hard work of actually paying off the debt. The point of this website should be to pay off your debt and not just pushing it around from one account to another.
For example, your most recent answer to a reader who wanted to charge a car purchase on a credit card was missing half of the answer. When you obtain a car loan, the loan is paid off within a period of time, say 5 years. This time period cannot be changed unless the entire loan is refinanced. This requires the buyer to pay an amount that covers interest and a significant portion of the principal. However, when you finance the purchase, say on a credit card, the payment period can be as short as 1 year or as long as 30 years. If you paid the minimum monthly payment on a credit card, you could easily pay more in interest than if you took out a car loan.
Example, if you took out a 5-year car loan for $15,000 at 6%, your total interest is $2,400. If you purchase the same car $15,000 at a special credit interest rate of 3%, but take twice as long to pay it off, it will cost you $2,402. It would be easy for someone to say, "Well, just pay it off early," but you and I know, that is easier said than done. And this is the point I want you to address in your future advice. Paying off debt is a psychological issue. The psychology of paying off your debt fast and using your credit to make money not spend it.
Joseph
U.S. consumer bankruptcy filings increased 28.6 percent nationwide in September from the same period a year ago. While representing an increase from the previous year, the overall September consumer filing total of 88,663 represented an 8 percent decline from August. Chapter 13 filings constituted 33.5 percent of all consumer cases in September, a slight increase from August.
Wake up, America! We're on the brink of a financial meltdown. I.O.U.S.A. boldly examines the rapidly growing national debt and its consequences for the United States and its citizens. Burdened with an ever-expanding government and military, increased international competition, overextended entitlement programs, and debts to foreign countries that are becoming impossible to honor, America must mend its spendthrift ways or face an economic disaster of epic proportions.
Note from Scott: I just received a link to this video. It's the short version of the movie. This video explains just how much trouble we're in as a nation. A nation of debt. It covers this history of our national debt, which we've had since the start of the country--but there was one time it was $0--amazing. I highly recommend you watch this because our future really will depend on how the nation deals with today's financial crisis.
Scott,
I received your books today. Wow, did they arrive quickly. I immediately read the section on Debt Settlement and would like your opinion. My husband worked for Bear Stearns for 32 years, and due to the JPMorgan takeover (NO - we did not get a bailout), we lost almost $500,000 and at year's end, his job. We will be going to less than half the income which will make paying our debts on a monthly basis impossible. We have a large amount of debt (over $80,000.) with no late payments at all. It is our hope to be able to pay off all our debt from a small settlement after the new year. I am wondering if you think it might be feasible, in this most horrid economy, to ask for debt settlement with the stipulation of not reporting negatives to the credit bureaus, since our credit is very good, but we just have a bit too much. Your opinion would be appreciated.
Cynthia
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Cynthia,
Yes, absolutely! Be sure that they agree to report the account as "paid as agreed." If they do agree to those terms, get them to send you something in writing before you send them payment.
Good luck and please let me know what happens!
Best,
Scott
- Why banks are boosting credit card interest rates and fees
Tommy Newsom was shocked when his bank nearly doubled his credit card interest rate this year, to 27%, for no apparent reason. A customer rep told him the law allowed the bank to do so, and that was all the justification it needed.
"I never missed a payment," says Newsom, 63, of Mesquite, Texas, who owes about $5,000 on the card. "The bank is just looking for a reason to maximize profits."
In recent years, banks have sharply raised interest rates and penalty fees on credit cards. As the economy tanks and banks' mortgage-related losses balloon, some banks are stepping up such increases to boost revenue. Bearing the brunt are consumers for whom a jump in rates and fees can make it tougher to pay their bills at a time when household budgets already are being stretched.