Alabama Consumer Law Blog

Yahoo Finance has posted a helpful article that provides 6 tips about how you can pay off credit card debt.

1. The first tip makes the very important point that paying off your credit card debt is more so about behavior modification and not just math. Dave Ramsey, author of "Total Money Makeover", suggests paying off smaller debts first, regardless of interest rates, so you will feel motivated to keep paying off more debts, which he calls the "snowball" effect. He also says that you should only pay off a large debt first if it's to stop a foreclosure or if you owe the IRS.

2. However, if you're a numbers person, paying off a large debt with a high interest rate first could be more motivating for you.

"Also, if the account with the highest interest is utilizing more than 30 percent of that credit line, focus on paying that one off first to get it under that threshold," she says. Doing so will improve your credit score since debt utilization, which is how much you owe compared to how much available credit you have, is an important factor in determining your score. The lower your utilization is, the better.

3. It's very important for you to figure out exactly what the charges are if you're planning to transfer a balance from one credit card to another. You have to have a plan of action to ensure that the transfer fees will be offset by the lower interest rate on the card you're transferring debt to. It's also important that you fight the temptation to use your newly cleared credit card and undo all the progress you've made.

4. You have to be careful when moving debts around, though, as it can only be a temporary solution to a long term problem. "The danger of moving credit card balances is that it's easy to start thinking you've actually done something to address the problem," Ramsey says.You still have to pay the debt off, no matter how many times you move it around.

5. Even if you're focused on paying off debts, it's also very crucial to remember to still save money for emergencies. You should have a savings cushion of at least 1 month's income so if an emergency were to happen it wouldn't add to the debt you're trying to pay off.

6. If you have a huge amount of debt, using some of your savings to pay it off can seem like a good idea, but it's important to not drain your savings. "I always recommend having a $1,000 emergency fund while you get out of debt. Emergencies will happen," says Ramsey. Once your debt is paid off you can then shift your focus to saving money to cover a few months' worth of expenses.

If you have had problems with a credit card or a credit report and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Yahoo Finance has posted an article that gives some pointers on how you can get your finances organized and raise your credit score.

1. Check your credit report.
The best way to start trying to improve your credit score is to examine your credit report. Check it carefully to be certain that all the debts listed on it are actually yours. If you see any debts or accounts listed that aren't yours you need to report the error to the credit bureau so you won't be penalized for it. You can obtain a free copy of your credit report every 12 months from each of the credit bureaus- Experian, TransUnion, and Equifax.

2. Learn the details of your credit card debt.
To create a plan to pay off your credit card debt you need to first asses which cards you carry the most debt on. Make a list of the balance on each card and the corresponding interest rate and plan to pay off the cards with the highest interest rates first. If you're using your credit cards as a means to get by because you're unemployed, then you need to decipher which cards have a lower interest rate and use those for daily purchases, if possible.

3. "Improve Your Interest-Rate Situation"
If your credit score is too low, you probably won't qualify for any new credit cards that boast a lower interest rate but it certainly wouldn't hurt to look into it. Applying for a new credit card temporarily knocks down your credit score a little, but if the interest rate is significantly lower then it's worth it. If you are approved for a new card, be sure you fully understand the balance transfer fees before swapping your high interest debt over to that card. Make sure the swap financially benefits you in the long run. You could also call your creditors to ask about a lower interest rate or if they can waive the card's annual fee.

4. Pay off the highest interest debt first.
It will benefit your finances in the long run if you pay off the cards with the highest interest rates first. Keep sending in your payments for the lower interest cards on time, but put any extra aside for the high interest cards. The sooner your high interest debt is paid off, the easier it will become for you to pay off remaining debts.

5. Create a payment system.
A whopping 35% of your credit score is determined by on time payments, so one of the easiest ways to substantially improve your score is to simply pay on time. Add the payment due dates to a calendar and remind yourself to check the calendar regularly. Using an online bill payment system through your bank account can also be a good way to keep track of when things are due. Some online bill payment systems can be synched up with other accounts to send you reminders of when payments are due.

6. Budget.
Figure out exactly how much money you have coming in every month and hold yourself accountable for your spending. Holding yourself accountable will also help you figure out exactly how much of your income can be put toward paying off your credit card debt each month.

If you have had problems with a credit card or a credit report and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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The New York Times has posted an article that gives some helpful tips on how to repair your credit score. So many people have lost their jobs, are overwhelmed by bills piling up, or were hurt by the housing crisis or filed for bankruptcy that millions of peoples' credit scores have plummeted.

The best thing you can do to improve your credit score is to focus on the information that FICO uses to determine your credit score. FICO is the most commonly used method of credit scoring by lenders to determine a consumer's "creditworthiness". A credit score ranges from 300 points up to 850 points, the higher the score the better.

The first thing you can do is to assess your situation. You need to make sure you will be able to pay your bills on time and not go further into the hole. You could call the credit card company and explain your situation and see if the two of you can work out a payment that you can afford. But if you do so, be sure to ask how the credit card company is going to report it to credit reporting agencies. Even though you're paying an amount agreed on by the credit card company, they could still report it as you aren't paying as agreed, which will further damage your credit score. Be sure and get the agreement in writing.

Next, focus on paying off credit cards, which will give your score almost an instant boost. Next pay off other loans, like car loans, student loans, or mortgages.

You also want to get your so-called debt utilization rate into good shape. FICO considers how the total amount of debt on each of your credit cards compares with your total available credit. The credit score “elite” — that is, people with FICO scores above 760 — typically don’t have debts that exceed 7 percent of their available credit. But if you are at 50 percent and can get the rate down to 30 percent, that will help.

You can also "leave a note" through FICO's website that allows you to give a brief explanation of your situation- like a job loss. It doesn't affect your credit score and probably won't change lender's minds, but at least you're able to explain yourself.

Getting a secured credit card is a good alternative to a traditional credit card for people with poor credit. A secured credit card works by requiring you to have a set amount of money in your bank account to use as collateral. That amount of money determines the amount of credit you get on the card. Be sure to read the fine print and make sure the required deposit amount won't change and that your payments will be reported to the credit reporting agencies.

“What is the most predictive and powerful in your score are the things you’ve done most recently,” Mr. Ulzheimer said. “That cuts both ways. If you add a secured card and you pay it religiously and the balance is low, it will help your score a lot more quickly than if you do nothing.”

Talking to a credit union is a good idea because they are more likely to work with someone who has less than ideal credit. Different credit unions offer different options, but some offer things like free credit counseling, have products designed for people with poor credit, or are willing to look at alternative credit scores.

For a monthly fee (sometimes a large one) you can sign up for "alternative verification." Other credit reporting agencies or companies will collect your payment history from things that aren't included on the traditional FICO credit report. Banks are becoming more willing to look at these alternative verification reports, however, the traditional FICO report is still the main decision maker, but things are slowly changing. Lenders may soon start looking at things such as rental payment history or alternative credit scores.

It' a good idea to avoid credit repair offers.

“We really tell our clients to stay away,” said Ms. Glass, of CredAbility. One re-emerging scam, she says, involves companies that claim they can clean up your credit. Some companies manage to do this for a limited time by disputing all of your accounts, sending letters to the bureaus claiming the accounts aren’t valid. But after the credit bureaus validate the accounts and debts, they reappear on your report and your score will plummet again.

Legitimate credit repair companies exist, and they can assist in disputes. But there’s nothing they can do that you can’t do yourself at little cost. Besides, these companies often besiege the bureaus with letters, and the bureaus are allowed to ignore what they believe are frivolous disputes. Be wary of companies that do not disclose in writing that you can do these tasks free on your own, that guarantee results or that try to charge you before they perform any services.

To repair your credit score, you should also avoid certain credit cards that are designed to improve peoples' credit scores, yet charge so much in fees that the purpose is defeated. Before you sign up for any credit cards be sure to read the fine print.

If you have had problems with a credit card or a credit report and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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CNN Money has posted an article that discusses a credit card offer from First Premier Bank with a huge 79.9% interest rate. The card is geared toward people with little credit or bad credit and starts out with a $300 limit and a 29.9% interest rate. Six months after opening the account, the interest has been known to jump from 29.9% to 79.9%, but the card was still popular with consumers, nearly 700,000 people have signed up for it and about half of them carry a monthly balance.

Because so many cardholders were defaulting due to the high interest, First Premier dropped the interest rate down to 59.9%.

"We also tested it at 23%, 33%, 45%, but 59.9% is the one that shows the best performance and where the organization can market the product," said First Premier Bankcard CEO Miles Beacom.

And yes, that rate is completely legal. The Card Act, which was passed in late 2009 to protect consumers from predatory lenders, only prevents issuers from raising rates retroactively. Credit card issuers are free to charge whatever rate they want at the front end.

First Premier doesn't deny that they have high fees for everything:

First Premier charges a total of $135 per year in fees. It starts with a $45 processing fee to open the account. Then there's an annual fee of $30 for the first year -- $45 for every subsequent year. Plus, there's a monthly servicing fee of $6.25 (or $75 a year).

Cash advances will cost you $5 or 3%, whichever is greater; late payments ring up at $35. The bank will also charge you $35 if a payment on your account is returned due to insufficient funds or any other reason.

But Beacom said the bank used to charge $175 for just the processing fee and annual fee alone.

The fees don't seem to be scaring consumers off- First Premier receives 200,000 to 300,000 applications monthly because of the demand for a credit card for people with "less than perfect credit." But because of the new Credit Act, the company is being cautious and only opening around 50,000 accounts a month.

If you have had problems with a credit card and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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The New York Times has posted an article about new regulations the FDIC, which monitors 4800 banks, has put on banks to monitor the debit card industry. Congress set an excellent example in 2009 with the new credit card law that the FDIC could have followed to address the outrageous overdraft fees some banks charge on their debit cards.

The credit card law says that late charges or other penalties have to be "reasonable and proportional," which would have been a good place for the FDIC to start with overdraft fees. Some banks charge as much as $35 per transaction, sometimes several times a day, for overdraft fees. This only succeeds in driving the consumer even further in the hole over a purchase that can be as small as a newspaper.

An analysis issued last year by the Center for Responsible Lending found that it was “common policy among banks” to process the largest transactions first, regardless of when purchases were made, to increase overdrafts.

Last year the Federal Reserve began to require that banks customers to opt in to overdraft protection plans before overdrawing, but it wasn't successful. Some banks aren't honest about overdraft protection plans and don't tell consumers all the details such as how much it costs or even how the system works. This means that debit card holders are being exposed to false offers or "predations" that credit card holders are protected from.

The new F.D.I.C. rules require banks to clearly explain overdraft costs. Most important, if a customer is charged a fee for overdrawing his account more than 6 times in a 12-month period, the bank must offer a less costly alternative, like a reasonably priced line of credit or linking the card to a savings account.

Banks are starting to worry about their profits, and some are even threatening to change from the FDIC to another, less strict regulator.

If you have had similar problems and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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The Arizona Bankruptcy Lawyer Blog has posted an article about the Credit Card Accountability Act that President Obama signed back in May 2009. The Act changes several credit card stipulations, and might even save people with serious credit card debt from bankruptcy, as suggested by Michael S. Anderson, writer of the article.

Here are a few of the changes:

- Credit card companies cannot charge a penalty fee that is more than the amount associated with the violation.

- Penalty fees are required to be "reasonable and proportional to the omission or violation".

- Late fees or fees for other violations can't be more than $25, unless it's a repeated violation or it costs the credit card company more than $25 to handle the problem.

- Credit card companies are barred from charging inactivity fees on gift cards and gift cards must be valid for 5 years.

- "Credit card companies must show the consequences of negative actions, including the release of periodic statements concerning the time it would take to pay off the balance and the total cost."

- Contracts and terms of conditions must be written "clear in language."

- Terms and conditions can't change for the first year.

- Promotions must be clearly and plainly disclosed.

- "Consumers must not approve transactions that would place balances over limit instead of incurring an over limit penalty."

- Fees would be restricted on bad or low limit credit cards.

These changes could certainly benefit consumers struggling with credit card debt and considering bankruptcy.

If you have had credit card or bankruptcy issues and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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USNews has posted an article that discusses how your credit cards can actually be hurting your credit score. If you have a credit card, such as a Visa Signature, World MasterCard or Amex Charge Card, that is set to No Preset Spending Limit (NPSL) it sounds like you can charge as much as you want to. Although not advertised by credit card companies, NPSL cards do have a limit and since most consumers don't know this it can hurt them in several ways.

There are two kinds of NPSL cards: charge and credit/charge "hybrid" cards. Most NPSL charge cards allow consumers to charge up to an undisclosed amount and require the balance to be paid in full each month. The charge/credit "hybrid" card has a set limit but encourages consumers to surpass the limit as long as they pay off the excess at the end of the month.

Even spending with credit cards like Visa and MasterCard is capped off at an undisclosed amount and if a consumer hits the limit their card will be declined. The same is true with NPSL cards, although credit card companies make it sound like there isn't a limit.

However, this does not represent the extent of the prospective danger for consumers inherent within current NPSL credit card offerings. The way in which NPSL cards are reported to credit bureaus can prove very detrimental to consumer credit scores as well. FICO -- the largest credit scoring agency in the United States -- calculates credit scores by considering numerous factors about people's credit history and current credit usage. One such factor is a balance-to-available credit ratio called credit utilization to which one's credit limit is obviously very important. But if the credit limits for NPSL cards are unknown, how is credit utilization calculated?

NPSL cards don't report the card's true limit to credit bureaus. Doing so would allow the limit to become public information and would then shatter the idea of not having a limit on the card. NPSL cards either report proxy limits, which is a changing credit limit or the highest balance held over a time period, or they don't report a limit at all. If the proxy limit is reported then credit utilization could reach 100% due to the credit card companies encouraging consumers to surpass the monthly limit.

If a high balance is reported then utilization will still be around 100% because spending doesn't normally fluctuate too much.

For instance, if you consistently spend around $2,000 each month, your highest balance will be close to that amount -- say $2500 -- and typical spending will exhaust most of your "available" credit and lead to your credit utilization being around 80 percent every month.

Theoretically, a consumer can mitigate the negative effects of credit utilization by adjusting spending to account for the way in which his or her card's limit is reported. If an NPSL card is reported as an open line of credit, credit utilization is left out of the credit scoring process and is therefore not a concern; if a card's revolving credit limit is reported, one could simply make sure to stay well below this amount; and if the high balance is reported, one could cease using an NPSL card altogether and move spending to a regular credit card. However, making such an adjustment would require knowing which type of proxy limit is reported for a given credit card, and according to the Card Hub study, no uniformity exists in how credit card companies report their NPSL options. Similarly, many issuers refuse to be transparent in disclosing their particular reporting methods.

NPSL cards can seriously damage your credit score. If you have had issues with your credit score or credit reporting errors, feel free to contact us through our website or by calling 205-879-2447.

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Investopedia.com has posted an article that discusses exactly what your credit score means. A credit score is one of the most important numbers attached to a person's life and can affect everything. For example, landlords are more likely to rent to tenants with good credit scores, companies hire workers whose credit scores are better because it means they're dependable, and it determines if you can be approved for a loan for a major purchase like a house or car.

The recession has forced lenders to be more particular about who they approve for loans so that their risk is minimized. Credit scores range from 330-830. 680 was considered a "good" credit score back in 2008, but currently a "good" credit score is 720 and up. The average score in the US, according to Porcshe Moran, author of the article, is 698. This means that most Americans are paying more for large purchases because of their credit score.

Lenders evaluate FICO scores based on a tiered system that divides credit scores into five ranges. Scores below 620 are often considered subprime, and borrowers in this range will either be denied loans or be offered higher interest rates and lower loan limits. For example, a non-profit state loan agency set 770 or higher as the top tier of FICO scores. Borrowers in this range received the lowest interest rates. In previous years, the same agency ranked 680 in the lowest tier in which borrowers were subject to interest rates that were 4.15% higher than those with scores in the top tier.

Borrowers with a FICO score of 689 were placed in the lowest tier. A score only one point higher, 690, was enough to be bumped up to the next tier and amounted to an interest rate that was 2.5% lower. These same dramatic jumps in interest rates can be seen in other industries such as home mortgages and car loans. Borrowers are encouraged to shop around for loans because each lender has their own "break point" between tiers. If you can find a lender that places your score in a higher tier, it could result in significant savings over the term of your loan. Another option is to find a co-signer with a higher credit score who would be able to get you placed in a higher tier.

It's possible that lenders will lower the definition of the average credit score as the economy improves. Until then, it's a good idea for consumers in the lower tiers of credit scores to hold off on applying for loans and try to improve their score by paying bills on time and checking their credit reports. If you must apply for a loan, be sure to shop around for the best rates because lenders can, and will, base the rate they give you on your credit score.

If you have had credit issues and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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The California Credit Law Blog has posted an article, originally from the Wall Street Journal, that discusses how credit bureaus are collecting extra information on consumers with the intent to sell the information to banks and/or other potential lenders.

Lenders are still leery of approving new loans and are using information from the credit bureaus to look at several aspects of a person's financial history before approving a loan. It's about much more than your credit score, although that's still an important factor.

Some of the things lenders are looking at are:

-Income Estimations:
Credit bureaus plug your credit-record information into a model to generate your estimated income. Things they plug in are the size of credit lines and the payment amount of your mortgage and how long you've had it. They also use this method to double-check the income you list on credit applications to decide if you should be approved or not. You can't see their estimates, however, if you're denied credit then you have to be granted another chance to provide more information.

-Rent Payments:
Some people don't have enough credit experience to have a "useful" credit score. However, they still pay rent and utility bills and this helps credit bureaus determine "credit-worthiness."

Even if those consumers don't want credit, that information could help them win better rates from insurers, which may use insurance scores based on credit records, and fatten up thin credit files, which some employers check before making hiring decisions.

Credit bureaus say they also would like to offer data on cellphone payments, but have run into concerns over privacy issues, which may require legislation to untangle.

-Collection Triggers:

If you owe money, you can run, but you can't hide. Credit bureaus can now send daily reports to collection companies when a debtor's financial status changes—say, if new employment information appears or if a debt starts to decline. A drop in credit use would indicate that the consumer has more capacity to pay and a better chance of repaying other outstanding debts.

-Home Value:
Since home values have fallen sharply and foreclosures have risen, lenders have become much more wary or new loans. Using home value as a decided credit factor isn't very widespread, but could affect someone in states such as California or Nevada. This could definitely work in your favor if you're one of the 25 million Americans who own their own home.

-Wealth.
Assets other than your car or home aren't part of your credit score but may play a role in your financial future. If lenders have a bigger grasp of a consumer's "balance sheet" they might be more likely to approve loans and be able to more fully assess their risks.

As lenders are beginning to look at all aspects of your financial capability, being careful and timely with all payments and bills can definitely work in your favor should you apply for a loan.

If you have had credit issues and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Yahoo! Finance has posted an article about common habits that really damage your credit score. Credit scores range from 300 to 850 and the higher your score the better.

One of the easiest ways to destroy your credit score is not to pay your bills. It seems obvious, but one of the most important parts to your credit report is your repayment history. If you don't pay your bills, even the minimum monthly payment, then eventually all the bills you haven't paid in 90+ days will go into collections, dragging your score down even more. Eventually, if you don't pay any credit card bills or mortgage payments, you could get so behind that you have to declare bankruptcy which damages your credit for both the short and long term.

Maxing out all your credit cards, or spending past the limit, also ruins your score. Applying for new cards also affects it. Ten percent of your credit score is based on how many new accounts you've applied for recently. Applying for every credit card you hear about or see will definitely help destroy your credit.

Your credit score will be higher if you have a combination of credit cards, mortgage and car payments, and store accounts. Just having credit cards makes your credit report look bad. Also, assuming your situation is hopeless and making no move to drag yourself out of debt will annihilate your score.

There are some habits that won't impact your credit score. For instance, overdrawing your checking account will be very expensive, but won't impact your score. Receiving unemployment checks or food stamps, getting divorced, or losing your job also won't impact your credit score.

If you have problems with your credit report, such as errors, and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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The Wall Street Journal has posted an article about the unexpected dangers of "professional" credit cards, which are typically used by small businesses or corporations. It's a little known fact that professional cards aren't covered under the Credit Card Accountability and Responsibility and Disclosure Act of 2009. The Card Act bars billing practices such as the raising of interest rates at random, inactivity fees and shortened billing cycles.

Professional cards used to only be used by corporate executives and small business owners, but then the Card Act passed in March 2009. Since then, credit card companies have been sending professional card offers and applications to normal consumers. The research firm Synovate found that there was a 256% increase, about 47 million, in professional card offers that were sent out in the first quarter of this year. The Card Act has drastically cut banks' profits and they are attempting to regain some of that loss by bribing consumers with professional cards, and thus bypassing the regulations of the Card Act.

While the Card Act bars issuers from raising rates on existing balances unless a cardholder is at least 60 days late with a payment, there isn't any such prohibition on the Ink From Chase card, one of several business cards offered by the bank. The card agreement says Chase is free to implement a default rate of 29.99% if a customer is late by just one day on a payment.

Chase's Ms. Rossi says its small-business credit cards have "added benefits and features designed specifically for small-business owners."

Holders of Capital One Financial's Business Platinum Card, meanwhile, can see their low introductory interest rates spike if they are just three days late with payment twice in a 12-month period, far less than the 60-day notice period required under the Card Act.

Credit card companies have also simplified their applications for professional cards. For example, in January, Chase sent out applications for their Ink From Chase Cash Business Card that required information such as the name of the cardholder's company, type of business, federal employer ID number, and address. On the July applications there was just a box to check that said Yes, I am a business owner" or "Yes, I am a business professional with business expenses."

Some consumer advocates say the increased mailings, coupled with offers requiring only minimal business information, will lead to more customers ending up unprotected and unaware. "A lot of consumers really don't know the difference, and some of the wording on the offers can be ambiguous," says Beverly Harzog of Cardratings.com, a consumer-education website.

Most consumers don't realize that professional cards aren't covered by the Card Act until they don't get the full 21 days between when the statement was mailed and the payment due date. Despite the significant differences, credit card companies still pitch professional cards as normal credit cards.

If you have had problems with credit card companies and have further questions and concerns, feel free to contact us through our website or by calling 205-879-2447.

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USA Today has posted an article that discusses how you can help your college-age child to build a healthy credit score. Thanks to a new law that was put into effect last year, credit card companies are barred from issuing cards to people under 21 unless they can prove they are able to make the monthly payment. This is designed to prevent college students from going so far into debt that they won't be able to pay it back and will be penalized by having difficulty with things like getting an apartment or qualifying for a car loan...and even getting a job.

Even if your child is under 21, you as a parent can still help them build a positive credit history. Here are some of the ideas Sandra Block, the author of the article, mentions:

-You add your child to your current credit card as an authorized user.

By doing this, you are still responsible for the card's payments, but your child can use the card. If your child misuses the card you can have them removed as a user before too much damage is done. When you make payments, it will show up in the child's name too, and help them build a good credit score.

However, there are some downsides. If your child racks up a massive bill, or you lose your job, and you can't possibly afford to pay the bill, both of your credit scores will suffer. Another problem is the limit of available credit. If you have had your card for awhile you can have close to $10,000 for your credit card limit. Parents need to consider if their child is responsible enough to wisely handle that much of a credit limit before adding them as an authorized user.

-You can co-sign a credit card with your child.

The card will be in the child's name, but you will also receive monthly statements and the credit limit cannot be raised without your approval. Because the card is in your child's name the limit will most likely be a good bit lower than your credit card, limiting the damage they can do.

But if your child can't make the payments, as a co-signer, you are responsible for paying. If there is a late or missed payment, or if your child goes over the credit limit, it will also reflect negatively on your own score. Also, you and your child would share control of the account...meaning that you can't close it without your child's permission. Because of this, it's generally a much better idea to add your child as an authorized user to your own card.

"If you put your student on your existing credit card as an authorized user, you have full control of that card," she says. "If Junior doesn't abide by the rules, I don't want to be asking his permission to close the card."

-Find out if your child can qualify for a credit card.

The card may have a very low limit, but sometimes students with part time jobs may be able to qualify for a credit card without a co-signer.

-Get a debit card for your child.

Debit cards won't help your child develop credit but it will help you monitor their spending and teach them how to handle money responsibly. Teaching money management is a good first step to assure that when your child won't go crazy when they get a credit card.

If you have had problems with your credit score, such as reporting errors, and have further questions and concerns, feel free to contact us through our website or by calling 205-879-2447.

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The Wall Street Journal has posted an article that discusses how some credit card companies are attempting to bypass The Credit Card Accountability and Responsibility Disclosure Act of 2009 (also called the Card Act). The Card Act forced credit card companies to to give customers more notice about changes in interest rates and restricts "certain controversial billing practices such as inactivity fees."

To make up for loss in revenue the Card Act has caused, some of the biggest credit card companies in the US have started to go around the new rules to slap customers with other types of fees. It's estimated that the Card Act will eliminate about $390 million in fee revenue per year. Banks are having to get more aggressive to combat such a huge loss.

According to a July 22 report from Pew Charitable Trusts, a nonpartisan research group, the industry's median annual fee on bank credit cards jumped 18% to $59 between July 2009 and March 2010. At credit unions, annual fees soared 67% to $25. During the same period, the median cash-advance and balance-transfer fees jumped by 33%.

All of these increases are perfectly legal, of course. Banks and other issuers would have a difficult time extending credit to consumers, even at high interest rates, if they couldn't augment those revenues with fee income. "We're coming out of a deep recession that issuers are still working through," says Peter Garuccio, a spokesman for the American Bankers Association.

There have been quite a few "potential violations of the Credit Card Act." For example, some credit card companies are marketing something new called "professional cards." Professional cards are like company cards but still carry the same terms as a typical consumer card. Professional cards aren't covered under the new law and companies are using this as an easy way to get around the Card Act.

In the first quarter of this year, issuers sent out 47 million professional-card offers to U.S. households, up from 13.2 million in the corresponding period last year, according to research firm Synovate.

Because of the Card Act, companies are also becoming more particular about when payments are technically considered late.

Card Act stipulates that late-payment fees shouldn't be triggered on a Sunday or holiday, when there is no mail delivery.

The rule "is clearly meant to offer cardholders some semblance of relief so that they don't get saddled with late fees for making a reasonable payment on the next business day," says Chi Chi Wu, a consumer credit lawyer at the National Consumer Law Center.

Some billing cycles are being altered, also. The Card Act dictates that the actual payment isn't due until at least 21 days after the bill is sent, however, some people have reported a shortened billing cycle.

Basic fees are also being raised. Many companies are drastically increasing their balance-transfer fee . Inactivity fees will be illegal after August 22, so companies are making alterations, as well. Some companies, like Citigroup, have started to charge an annual fee that the consumer can be exempted from if their balance exceeds a certain amount.

The Card Act says a card's total annual fees can't exceed 25% of a borrower's credit line. But some issuers may be evading the fee restrictions by charging an upfront processing fee that doesn't fall under the 25% cap.

While the credit card industry is certainly shifting to bend the rules, there are things you can do to avoid some of the worst of it. For example, the most important thing you can do is to make your payments on time. Should a dispute arise about a fee, you should discuss it directly with the card issuer.

"While the Credit Card Act did make great strides in protecting consumers, it in no way closed all avenues for cardholders to get hit with fees," says Ms. Wu, from the National Consumer Law Center. "It's a first step."

If you have had problems with unlawful credit card fees or other credit related problems and have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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The New York Times has posted an article about the end of a 30 year decline in the cost of borrowing. This is due to a combination of inflation due to the recession and the nation's "ballooning debt." Interest rates are currently as low as they'll be for quite a while.

The higher interest rates will probably be noticed first in the housing market. Each raised percentage in interest rates adds 19% to the cost of a home. The rate for a 30 year fixed rate mortgage has risen half a point since December, hitting 5.31%...which is the highest it's been since last summer.

“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School. “It’s a really big risk.” The Mortgage Bankers Association expects the rise to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 percent by the end of the year.

Credit cards will also feel the rise. The national interest rate on credit cards topped out at 14.26% last week, which is the highest it's been since 2001 and also adds $200 in interest payments alone to credit card bills. That totals to a 12.03% increase since the fourth quarter of 2008.

With losses from credit card defaults rising and with capital to back credit cards harder to come by, issuers are likely to increase rates to 16 or 17 percent by the fall, according to Dennis Moroney, a research director at the TowerGroup, a financial research company.

“The banks don’t have a lot of pricing options,” Mr. Moroney said. “They’re targeting people who carry a balance from month to month.”

Washington, too, is expecting to have to pay more to borrow the money it needs for programs. The Office of Management and Budget expects the rate on the benchmark 10-year United States Treasury note to remain close to 3.9 percent for the rest of the year, but then rise to 4.5 percent in 2011 and 5 percent in 2012.

The run-up in rates is quickening as investors steer more of their money away from bonds and as Washington unplugs the economic life support programs that kept rates low through the financial crisis. Mortgage rates and car loans are linked to the yield on long-term bonds.

Besides the inflation fears set off by the strengthening economy, Mr. Gross said he was also wary of Treasury bonds because he feared the burgeoning supply of new debt issued to finance the government’s huge budget deficits would overwhelm demand, driving interest rates higher.

Nine months ago, United States government debt accounted for half of the assets in Mr. Gross’s flagship fund, Pimco Total Return. That has shrunk to 30 percent now — the lowest ever in the fund’s 23-year history — as Mr. Gross has sold American bonds in favor of debt from Europe, particularly Germany, as well as from developing countries like Brazil.

Different firms are predicting that the rate will rise as much as half a point to one and a half points.

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PaymentsSource.com has posted an article about how credit card charge-offs should reverse declining and increase to peak at 12%-13% about mid-year in 2010 if delinquencies continue to rise.

Earlier this week, Moody's reported that U.S. credit card charge-off levels eased in October for a second straight month from a record in August, while delinquencies rose for a third consecutive month. Payment rates also improved after two months of declines.

Delinquencies give the credit card companies an estimate of how much they should set aside in reserves to counteract potential losses. The rate was 6.12% in last October, up from 5.79% in August. The total percentage of six to nine month delinquencies is up 11% from September 2008.

Moody's October credit card index showed a drop to 10.04% in the charge-off rate, below the 11.49% all-time high set in August. The charge-off rate measures those credit card account balances written off as uncollectable by credit card firms.

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PBS has posted an article that discusses new credit card regulations and their immediate affects. A new credit card act was passed last year and the rules took effect in February of this year. Some of the new regulations that protect consumers include:

• no retroactive rate hikes;

• statements must be mailed 21 days before payment due date;

• payment dates can't suddenly be shifted;

• statements must say how long it will take to pay off balances and the total interest costs if paying just the monthly minimum;

• 45 days notice required for changes in terms and conditions.

For debit cards -- now more popular than credit cards -- the Federal Reserve issued new rules (effective summer 2010) on overdraft fees. So,too, have some large banks:

• card issuers can't charge fees for debit card overdrafts at stores and ATMs unless the cardholder has agreed;

• some large banks (see list) are limiting the number of debit card overdraft fees that can be charged in a day, and changing other policies.

However, issues still abound concerning several types of fees. Some of them include:

-the tricks in late fees;

• fees involving prepaid debit cards;

• inactivity fees, foreign exchange fees, gift cards, etc.

In addition, there's no ceiling on interest rates nor on penalty/service fees for debit, credit and prepaid cards. And small business credit cards aren't covered by the new regulations; their credit limits are being slashed.

You should feel free to shop around and go with the credit card company that gives you the best offer, but it's always a good idea to read the fine print about hidden fees and other charges.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Our friend Denise Richardson, of givemebackmycredit.com, has posted an article about new regulations placed on credit card companies. However, creditors aren't willing to back down so easily and are finding creative ways to bypass losses of revenue that the new rules, that came into effect on February 22 of this year, might cause.

The new regulations include:

Unfair rate increases and the universal default clause have been eliminated. This means that if you are late on one bill, a different creditor cannot use that to justify an increase in your interest rate. It also means that creditors cannot hike up the interest rate on a whim.

Limits on credit issued to the under-21 crowd are now in effect. This one protects college kids -those most sought after by creditors, from getting heavily into debt before the truly understand the repercussions and how the credit industry operates.

Fee calculations are more structured eliminating inconsistent payment cycles, over-the-limit charges without the consumer's consent, and extra interest charges due to pesky double-cycle billing practices.

Favorable interest rates must stay in effect for new credit cards for at least 12 months unless they have been issued as a promotional rate. In that case, they must stay in effect for 6 full months unless the consumer has been 60 days or more late with his payment.

Creditors are now required to use understandable language in all documentation and fine print including applications, billing, and notices. Statements must show how long it will take to pay off the debt incurred if the consumer only makes the minimum payment due.

Any changes to a consumer's credit card account cannot take place until he has been given at least 45 days notice.

To replace lost revenue because of the above revisions, many credit card companies are going to start charging $1 for paper credit card statements. To avoid this, you have to sign up for electronic statements. Creditors are also adding on "inactivity fees," increasing annual fees and reducing rewards or requiring card holders to request rewards that used to come automatically and placing expiration dates on rewards.

Creditors can also request that their customers agree to over-the-limit charges. This means consumers can exceed their monthly limit and if consumers don't read the fine print and don't pay attention, they can agree to this without realizing it. Credit cards with variable interest rates instead of fixed rates allow the creditor to raise the interest rate every time the primary rate goes up.

To protect yourself from any unwanted credit card surprises, be sure to read all documentation (including the fine print) the credit card companies send to you. Also, you can shop around for the best interest rate and other reward incentives.

If you have credit questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Our friend Denise Richardson, of givemebackmycredit.com, has posted an article with five common mistakes that consumers make when transferring debt. Transferring your debt from a high interest credit card to a new card with lower interest should raise red flags. Following these five tips will help prevent you from having to pay more money and going further in debt as well as saving your credit score.

1. Closing the Original Account:
After transferring the balance to a new card, you should refrain from completely cancelling the account. 15% of your credit score is made up of the length of time you keep accounts. Cancelling accounts will lower your credit score and change the way it's calculated.

2. Not Confirming the Spending Limit Ahead of Time:

A credit card company will not notify you of the spending limit you qualify for until your initial application is approved. After the application is approved, you may call to inquire about your spending limit at any time. It is vital that you know what your spending limit is on the new card before you initiate a balance transfer. If the amount of the balance transfer is greater than the spending limit on your new credit card, you may lose the low introductory rate by going over the spending limit with your transfer.

3. Not Expecting Balance Transfer Fees:
Some credit cards will charge you a substantial sum to transfer your balance, sometimes as much as 5%. For example, if your balance is $5,000 you could pay about $250 in fees.

4. Ignoring the New Card's Default Interest Rate:
Initial low interest rates on a new credit card are temporary and will default back to a higher rate. The new interest rate can be as high as your previous card that you transferred the balance from.

Should this occur, you will be left repaying your debt under the same unfavorable terms you thought you had left behind. If you know your credit score, you can call the credit card company and ask which interest rate you qualify for.

5. Losing the Introductory Rate;
Making a late payment or going over your limit on a new card can result in early termination of the low introductory interest rate. Be sure to read the fine print to determine what stipulations apply.

If you have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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MSN Money has posted an article about "secret" ways that lenders keep track of your credit score and gauge what kind of customer you would be. Credit scores aren't the only things that companies look at.

"You're being judged by the type of transactions you make, how you pay your bills, how much profit you generate for your lenders and a host of other factors."

This type of information is used to determine things like:

The kind of credit card offers you get.

-Whether your credit limits are raised or suddenly lowered.

-Whether your over-limit credit or debit transactions are approved.

-Whether your card issuer calls you about a suspicious transaction, blocks it or shuts down your account.

-How cooperative your issuer is about waiving fees or lowering your interest rate.

-How quickly your issuer calls you if your payment is late.

-Whether a collection agency contacts you about an old debt and how hard it pushes.

Several other lesser-known things are taken into consideration:

-Credit-risk scores are the most well known and show companies how big of a "risk" your account will be. A score above 700 is considered to be low risk.

-Response scores "predict the likelihood a consumer will respond to an offer of credit, such as a new card or a balance transfer offer."

-Application scores deals with data submitted to the company that's not related to your credit score. The data includes things like how long you've lived at your current address, worked for the same employer and how much you earn.

-Bankruptcy score:

Credit scores typically predict the chance you'll miss a payment in the next two years. Bankruptcy scores predict the likelihood you'll throw in the towel on your debt entirely and file for Chapter 7 liquidation or a Chapter 13 repayment plan, said David Rubinger, spokesman for credit bureau Equifax, which produces the leading Bankruptcy Navigator Index or BNI. BNIs range from 1 to 300, with the higher the score, the lower the predicted risk. Most lenders use both credit scores and bankruptcy scores, Ulzheimer said, to help assess the risk that you won't pay.

-Revenue scores try to predict how much profit your account will generate.

-Attrition-risk scores address the probability of a user no longer using a particular card. This score is often tied in with other scores. For example, if you are low-risk and your account generates large amounts of profit, the credit card company will likely lower your interest rates or raise your credit limit to keep your account.

-Behavior scores

provide a snapshot of how a consumer is handling all of his or her credit accounts. Behavior scores, by contrast, typically focus on a single account (the one you have with that particular creditor) but take in a broad view. Does the user pay off her bills every month, carry a balance occasionally or frequently pay only the minimums on her cards? That information typically isn't available on a credit report, but is contained in the issuer's databases, along with other data that helps the score describe how she handles her account. A behavior score might be used in conjunction with other scores, such as credit or bankruptcy scores, to decide whether an overdue payment is an aberration (maybe he's traveling?) or a sign of impending financial crisis (maybe we should call the consumer today and find out what's going on).

-Transaction scores are used every time you use your card to decide if the transaction will be approved. It is also used to determine if fraudulent transactions.

-Collection scores are used to assess whether or not you'll be able to pay. Collection companies watch for signs of change in your financial situation, such as other accounts being paid off.

If you have had credit card or credit report issues, feel free to contact us through our website or by calling 205-879-2447.

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The Michigan Collection Law Blog has posted an article, originally from ConsumerReports.org, about how insurance companies, creditors, employers, landlords, insurers and law enforcement agencies (and identity theft criminals) collect more information about consumers than one might expect.

Demand for your personal information has exploded in recent years. Its availability has also raised privacy concerns. When users buy and compile various pieces of information about you, “they can paint a very complete picture of your activities,” says Paul Stephens, director of policy and advocacy at the Privacy Rights Clearinghouse, a nonprofit consumer advocacy group.

For example, insurance claims you have filed are collected by a company called ChoicePoint and are used as references by insurance companies to determine home and auto insurance rates. Your health information, such as records of prescription drugs, is collected by MIB Group for similar reasons. Both of these fall under the Fair Credit Reporting Act, therefore, you can receive a free copy of your credit report annually.

Other information that is monitored and collected about you include your checking account,
returned purchases, rental history, mailing lists and credit history.

If you have any questions or concerns about this topic, feel free to contact us by calling 205-879-2447.

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