Wall Street is hopeful that policymakers will continue to prop up the big companies, and focus on helping the banking system retain its stability. Investors will also be waiting to see what sorts of the things the Fed is mind for ensuring that the economic growth seen in the third quarter will be sustainable. Also of interest is how Bernanke and the rest of the Federal Reserve members plan to withdraw from the stimulus.

Withdrawing from economic stimulus is an important consideration for many, since it will be a delicate maneuver. If the stimulus measures are in place for too long, we could end up with hyper inflation and a number of other distressing economic problems. On the other hand, if economic stimulus is withdrawn too soon or too quickly, the economic recovery could be in danger, and the chances of a double-dip recession increase. With employment still an issue, and the housing market still reliant on the first time home buyer tax credit, though, it is unlikely that an exit from the stimulus will begin until sometime next year.

Image source: Daylife

Post from: EveryJoe

Stocks Heading Higher Ahead of Fed

I received an email from A New Horizon, a credit counseling and debt solutions company, pointing out that some credit card issuers have loosened their requirements for hardship repayment plans. This could mean that you have a better chance at qualifying for a debt hardship plan if you are looking to repay your debt. However, it is important to consider the following things when going for financial hardship debt plans:

1. You may have to close your account: Many issuers will require that you close your account to take advantage of the lower interest rates or waived fees that come with a hardship debt repayment plan.
2. Your credit score could drop: Depending on the program you end up with, and if your credit account is closed, you may end up with a lower credit score, resulting in difficulties if you plan to apply for new credit anytime soon.
3. Be aware of fees charged by third parties: While some people benefit from having a third party help arrange matters for them, the fact of the matter is that many credit counseling and debt solutions companies charge high fees. It is possible to go directly to your credit card issuer and attempt to negotiate a lower interest rate or access to a hardship program.

In the end, it is nice that these hardship programs exist, but you should be careful before entering one. Read the fine print, and carefully consider your options before committing.

Image source: Daylife

Post from: EveryJoe

Credit Card Issuers Offer Hardship Programs

1. Credit card statements must be mailed 21 days before the bill is due (instead of the current 14 days).
2. APR changes must be given to the customer 45 days in advance.

As you might guess, a rash of increased credit card fees and rising interest rates has been seen as issuers scramble to make sure they can get what they can.

The rest of the changes (including an end to universal default and double billing, as well as provisions to pay balances with the highest rates first) will have to wait. Unless you are with some of the credit card issuers that are adopting the new rules early — or have had them in place for years. BillShrink offers a rather helpful illustration of which credit card issuers are doing what with regard to the cardholders’ bill of rights:

While most credit card issuers are unlikely to start applying payments to the highest rate balances until they absolutely have to, it is possible for you to find credit cards without universal default and double billing. For those who are working on a credit card debt reduction plan, these burdens can be quite difficult to bear; having them removed should be helpful.

For those who do not carry balances on their credit cards, this legislation will have very little effect. After all, if you pay off your credit card every month, none of these are issues that really affect you. But it is nice to have a credit card that does keep its interest rates low and doesn’t engage in questionable billing practices. After all, you never know when your situation might change and you may need to carry a balance.

Post from: EveryJoe

Cardholders’ Bill of Rights: Who Complies?

1. Those in debt are interested in interest rates, since as short-term rates rise, the variable consumer debt based upon them also rise. This means that less money goes toward principal reduction, and more goes to making interest payments. As a result, those who are in debt should be interested in paying off as much as they can before short-term interest rates rise.
2. Those with cash investments are also interested in short-term interest rates. CDs, savings accounts and money market accounts are connected to short-term interest rates. Right now, cash investments have been yielding rather low returns, since short-term rates are so low. When interest rates head higher, so do returns on cash investments. It is a good idea to invest when interest rates are higher, and lock in rates on CDs before they drop.

Ben Bernanke has already said that he does not expect to raise interest rates until sometime next year. However, many are waiting to see if the Fed decides to expand its quantitative easing program (with rates near 0%, there is no way for a rate cut). If this happens, the threat of inflation grows, and the chance of higher interest rates — in order to combat inflation — kicks in. While Bernanke doesn’t expect to raise rates til next year, conditions could change if the economic recovery picks up quickly in the near future.

Image source: quaziefoto via Flickr

Post from: EveryJoe

When Will Interest Rates Rise Again?

Will credit card issuers rush to take what they can get?

The recession has seen a number of changes to credit card accounts. Credit lines have been cut, fees and interest rates have been rising, and rewards have been slashed (and even discontinued). So it is nice that credit card companies will now have to notify you 45 days in advance if they plan to increase rates or change rewards programs. It gives you time to do what you need to do in order to cash in rewards. Additionally, the fact that credit card companies won’t be able to retroactively hike rates — unless you are 60 days delinquent — is a nice touch. But none of this takes effect for 9 months. Until then, we are naked before the storm.

Because credit card companies have never been overly nice about balances and interest rates, it is quite likely that you could see your interest rates rise. Your rewards values may be cut. I would be very surprised if credit card issuers don’t try to get whatever they can out of you before the new rules take effect. So be on the look out. And be aware that they don’t have to give you any notice. Consumer protections aren’t in place yet.

Do you think that credit card companies will go on a rampage over the next 9 months?

image source: larrybobsf via Flickr

Post from: EveryJoe

Credit Card: It’s About to Get Ugly for You

“Would you like to 15% today?”

“Uh, no thanks.”

“It’s 15%!”

“Thanks, that’s okay.”

It was pretty apparent that she was trying. Normally I only have to say “no” once. At any rate, I didn’t bite. Save 15% on an order of $30? That’s $4.50. Besides, I’m the Kohl’s email list. I get 15% and 20% offers all the time. I don’t need a credit card to save that money. Anyway, here are the reasons that giving in to department store credit cards may not be the best plan:

1. Your credit will be checked. That means a ding against you and a possibly lower interest rate. If you apply for multpile department store credit cards, you will see an even bigger impact.
2. Department store credit cards aren’t as “favorable” as major bank cards. A Kohl’s or Target charge card just doesn’t look as good or factor as favorably as a card from Capital One or Bank of America.
3. Do you really want to give out personal information in line? Bible Money Matters makes this point — and it’s a good one. Do you want to give your Social Security Number and other information in a public place?

Department store credit cards also normally charge higher rates of interest and do not have rewards programs. Essentially, you are using such a credit card to get a one-off savings. It might be worth it if you are getting something big, but I’d rather use my cash back rewards card for something that big and then pay off the balance the next month.

How do you feel about department store credit cards?

image source: Kohl’s Web site

Post from: EveryJoe

Avoid Department Store Credit Cards

Every month, I schedule payments online. Last month, I had need to schedule a credit card payment. Now, I must admit (sheepishly) that between Christmas and the new car and paying those dastardly state income taxes, we’ve got a balance we’re carrying on the Bank of America credit card. Not a massive balance on the card in question, and one that will soon be paid off (next month), but a balance nonetheless.

Last month, I scheduled the payment online, much as I do for my satellite TV bill and my Internet bill. For some reason, it didn’t go through. Did I forget to hit some button in a final step? Maybe. But I recorded the payment in my personal finance software, and thought no more of it. Until this month, when I checked my statement. I called Bank of America, confused, and explained the situation. They waived the fee (I’ve never, ever missed a payment on this card in six years) and I scheduled a payment for last month and this month.

Upon further inquiry a couple days ago (just making sure the payment went through this time), I discovered that this one indiscretion resulted in a default rate of 27.99%. My regular rate on this card is 9.9%. I was furious. My account is in good standing! I’ve never missed a payment! I’ve been a card member for six years! I occasionally buy things to keep the card active! So I called Bank of America to ask for my interest rate back.

After talking to three people, I got my interest rate back. They did have to do a “credit account review” before making the decision, though. I had to give them my income, my job information, and allow them to pull my credit report. Which annoyed me. It’s obvious that this in not a normal thing for me. There usually aren’t any payments to miss in the first place. But, in the end, we got there. I managed to remain calm, despite my annoyance, and my general fiscal responsibility carried the day.

Have you ever had to ask for a lower interest rate?

image credit: Brian Katt via Wikimedia Commons

Post from: EveryJoe

Getting My Credit Card Interest Rate Back

If you have seven and a half minutes, this is a better description of quantitative easing than I could ever provide.

Mortgage rates drop

Yesterday’s announcement from the Federal Reserve has resulted in lower mortgage interest rates today. Because mortgage rates are long term debt, they are connected to long-term Treasury bonds, specifically the ten-year bonds. As Treasury yields change, so do mortgage rates. Right now, mortgage rates have dropped to historic lows.

As a result, if you have good credit and if you have a reasonable amount of equity in your home, now might be a good time to refinance. Indeed, you could save tens of thousands of dollars over the life of your home mortgage loan if you refinance to these rates. Even 30-year fixed rates are below 5% right now. You can get even better rates with a 15-year fixed mortgage.

Post from: EveryJoe

Quantitative Easing and Mortgage Rates

1. A lower interest rate would mean less money paid over all.
2. If I kept a 30-year mortgage, my monthly payments would be much lower. I could invest the difference.
3. I could refinance to a 20-year mortgage or a 15-year mortgage, gaining equity faster and paying less interest overall.
4. On the down side, I might have to pay loan origination and other fees, depending on who I refinance with. (Prepayment penalties are not an issue; I won’t have any.)
5. Will I even qualify for a mortgage refinance? We did just buy a car, and we’ve only been in the house for a year and half.

Refinancing: Rule of thumb

The rule of thumb on refinancing is that you should refinance when the going mortgage rate is at least 1% below what you are currently paying. And with rates where they are at, we’re pretty close to that. Our rate is 6.02%, and last week’s rate was 5.04% for a 30-year fixed. 15-year rates are even lower. So it’s looking like it might be a good time refinance. Unfortunately, we haven’t been in our home very long (about 18 months) and we just bought a car. We may not get approval.

But I’m going through the checklist anyway. I want to see if refinancing would be a good idea, so I’m doing my research on refinancing, and on our situation. I’m really liking the 20-year mortgage thing. Using a mortgage refinancing calculator, I discovered that if we get a 15-year fixed mortgage, we would be paying about $200 more per month with a 4.86% interest rate, but save about $19,000 in interest. With a 20-year fixed mortgage, at 4.96% interest, we would actually be paying about the same amount as we are now. And we’d save more than $16,000 in interest. I’ve been leaning toward a 20-year lately, because I don’t know if I want to add another $200 obligation on top of that new-acquired car payment.

Fees and the erosion of refinancing savings

Of course, if there are fees to pay, the savings will be eroded. I think, though, if I call around (especially to the credit union we belong to), I could probably get away with avoiding loan origination fees, appraisal fees, credit check fees and documentation fees. Some of the local banks are really looking to attract business. And even with paying some of the fees, we’d still be saving thousands over the life of the mortgage.

Of course, we still have to get approved. But I think I’ll at least go talk to someone about it. After all, these rates are a once-in-a-lifetime chance.

What do you think? Is now the time to refinance?

Post from: EveryJoe

Is Now the Time to Refinance?