Trick or Treating with Bernanke

Update: It's official!  The Fed rate is now at 4.5% after a not-unanimous vote.

The Federal Reserve board is meeting today and assessing the state of the economy. Many economists and fed-watchers expect Ben Bernanke to announce another rate cut this afternoon. The last rate cut, on September 18, was a half a percent drop to 4.75%. The change was intended to "promote the restoration of orderly conditions in financial markets."

Six weeks later and the market is still looking shaky and the credit crunch hasn't gone away. Investors are really pushing for the rate to drop another quarter percent, to 4.5%, this afternoon. Stocks have already jumped in anticipation of this rate change.

What will another rate drop mean to you?

• Slightly lower credit card rates - Most credit card APR's are tied directly to the prime rate, which is impacted by Fed Rate. You might see a .25% drop in your credit card rate, although it's unlike to have an impact on other credit card trends such as lowered credit limits and aggressive marketing.
• Slightly lower home equity & auto loan rates - Only a quarter of a percent, but it can help if you're trying to get a good deal on a loan.
• Mortgage rates - Expect some instability here. After the September rate cut, mortgage rates actually spiked and have just now settled down again.
• Savings rates - It's a pretty good time to have a high-yield savings account. The rates aren't rising that fast, but they're decently high.   
• Inflation - It's a real possibility but being very closely watched.
• Stocks - The stock market is loving these rate decreases and will probably have a very good day after the announcement is made.

We'll keep you posted as the announcement comes in at 2:15 PST. In the meantime: what would you do if you were Bernanke? Cut the rates? Leave them alone?

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Where’s Your Deed and Other Vital Papers?

The fires in California reminded me how important it is to keep copies of all key documents together, so if you need to get out in a hurry, you can quickly locate and grab them. They also reminded me of a warning I recently received from the Federal Citizen Information Center (FCIC).

Yet Another Scam
It seems that there’s a nationwide scam underway, trying to get people to buy certified copies of their deeds. The letters cite the FCIC’s useful article, “Managing Household Records,” as a reason for buying a certified deed. The FCIC wants everyone to know there’s no need to use a private company to obtain a copy of a deed. You can easily get one from your local Register of Deeds for free or at a low cost.

Where to Keep What
Ideally, your original deed is best kept in a safe deposit box, along with the following: birth, marriage, and death certificates, car titles, passports, mortgage and other loan agreements, insurance policies, a list of credit card numbers, assorted passwords, codes, and account information, and Social Security cards.

The originals of health-related documents, such as advance directives, health care proxies, and burial wishes, don’t belong in a safe deposit box. The people you put in charge might need the documents before they can get access to the box. Experts recommend that the person who will be carrying out your wishes should have the originals, and copies should be in your doctor’s files as well as given to family and close friends, if you’d like.

As for wills and financial powers of attorney, they don’t belong in a safe deposit box, either. My attorney has the original of my will, and my partner, Marc, the person I’ve chosen to be in charge if I can’t sign for things, has the original of my power of attorney – as well as all those health papers -- buried somewhere in the chaos that is known as our new home. Ditto for his important papers.

Marc and I can’t really use our move as an excuse. Our records were just as chaotic before we moved. I am going to take the fires in California and this blog as a challenge: To get our important papers where they should be! Want to do likewise?

Looks like a good place to start is by reading Nolo.com’s "Keeping Track of Secured Places and Passwords," which will help us focus on the records we ought to organize. Hope you’ll join me!

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Free Is a Great Price! Get It TODAY!

CreditBloggers.com is all about saving money, and there's no price better than free – if there are no strings attached and if it doesn't entice you to over-spend. To wit:

Taco Bell ran a promotion, where if anyone stole a base in the World Series, everyone in the U.S. could  get a free taco. Boston Red Sox centerfielder Jacoby Ellsbury stole one in Game #2, so Taco Bell will give away one free Crunchy Seasoned Beef Taco to every customer from 2 - 5 PM on Oct. 30 – that's today!

The only strings seem to be the date and time. Of course, Taco Bell would be delighted to have you buy more food and drinks while you're there. Just don't let it bust your budget!

Will you take Taco Bell up on its offer for a light late lunch or an early dinner? Please let us know if you did, how you liked it, and whether it led you to spend more on fast food today than you would have without the freebie.

Bon appetit!

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Reader Question: Scoring Impact of the Macy's & Citibank Promo

The Macy's & Citibank credit card marketing story continues to get a lot of attention. Our previous post deciphering the situation is littered with angry customer comments and experiences. If you're not familiar with the story, inactive Macy's cardholders recently had their accounts closed and a new Citibank credit card sent to their homes. Pretty messy stuff.

Readers and personal finance reporters have been asking about the impact of this Macy's Citibank switcheroo on credit scores. We've learned a bit more about the case and have new score-impact details to report:

• Inquiry - Citibank is claiming that the credit report inquiry for the new account was "soft" not "hard." This means that they checked the customer's credit as an account review and that the credit check will not hurt the consumers credit score. If you check your credit report through www.annualcreditreport.com, make sure that the inquiry is listed in the correct category. Soft inquiries are recorded on this disclosure report, but not on a credit report you purchase.
• Closing the Macy's Account - Originally, we were unsure if the new account would just take over the old tradeline. Now, we know that the original Macy's account was fully closed by the issuer. This closure can have a negative credit score impact. The damage will be worse if the Macy's card was one of the oldest on the consumer's credit report, had one of the highest credit limits or was one of only a few cards.
• Opening the New Account - We were also unsure if the new account would start reporting to the credit bureaus before it was activated by the user. It appears that the new Citibank accounts are being reported to the bureaus right away. Even if the user calls and closes the Citibank account without activating it, this record will remain on their credit report for 7 years. Having a newly opened account can hurt your score by changing the average age of accounts on your report.

How much could these changes impact your credit score? Potentially, quite a bit. We got an email from one customer who reported that her score dropped from 657 to 635 cause of the Macy's/Citibank card in the middle of trying to buy a home. Because of the score drop, she wasn't able to get a loan and had to abandon the purchase.

Keep the emails and comments coming! We're here to help.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.                        

Funny Money Friday: Downsizing

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

Has the mortgage crisis got you down? Unable to refinance your McMansion? Shocked at all the Bank-Owned for sale signs in your neighborhood? Stressing over the next Fed announcement? Worried about heating your five bedrooms this winter? Tumbleweed Tiny House Corporation has a solution.

This company specializes in tiny, often portable, homes. For just $21,000, you can have a pre-made 120 square foot Epu cabin complete with front porch delivered to your door. It was featured on Oprah! Or, if you're feeling industrious, you can built it yourself for about $9,000 worth of supplies.

Or, if you have kids, you can choose the Enesti 700 square foot model for approximately $100,000. Four bedrooms, an office, a laundry room, dining nook and porch.

Channel your inner Thoreau! Leave the city and the credit crunch behind! It's tempting isn't it?

Have a great weekend!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.                                        

Wiggle Room Abounds! When in Doubt, Ask for a Lower Price

The November issue of Consumer Reports shares the findings of an important study: 90% of the people who tried to negotiate a better deal got it – whether they were shopping for furniture, electronics, appliances, or just trying to make their medical bills more affordable!

You might think that the survey was of savvy Consumer Reports readers, and that explains their incredible success rate. You’d be wrong. It was a national, representative survey of 2,167 U.S. households. As someone who has long encouraged dickering, I was delighted to see that 61% of the respondents had bargained for something, at least once during the last three years.

People who negotiated for a lower price on furniture did the best – 94% were successful at getting a better deal at least once. Almost as many got their medical bills lowered and bought cheaper home electronics products, 93% and 92%, respectively. So if you invariably go for the ticket price or whatever the doctor’s bill says, you may be spending a lot more than you have to, compared to people willing to ask a few questions, some of the time.

If you’re looking for a good place to start to dicker a bit, consider floor and demo models, since 65% of people had tried to get lower prices on those items  – with a 91% success rate! Close behind were the 57% of people who contacted their lenders about fees. If you haven’t called your credit card issuer yet to get a lower interest rate or a nuisance fee removed, consider this: 87 percent of people who bargained with their lenders over fees were successful. Why not give it a try?

Next time you shop, find a way to negotiate, whether you’re buying furniture, home electronics, appliances (both small and large), floor and demo models, bank or credit card fees, jewelry, cell phone plans, antiques and collectibles. The worst thing that can happen is the merchant will say, “No!” We’ve all dealt with much more difficult rejections in life, so don’t let that hold you back.

Consumer Reports' first piece of advice is it’s “How to Haggle” section is the most important: Try not to by shy. “You won't be forcing merchants to negotiate: If they give you a bargain, it's because they can afford it.” Click here for other tips from the magazine.

Hate to Bargain?
If you just hate to haggle, try to “hondle,” instead. This Yiddish word suggests a gentler, kinder, more humorous approach to getting what you want for less. “Hondling” can turn even the most timid into stress-free super-savers. Here are some of my top hondling tips, which I share in my "Painless Penny Pinching" series for Credit.com:

• Ask for help. People like to help, so try something like, “Money’s so tight these days, can you help me out on the price?” However you put it, say it with a smile.
• Play “Let’s Make a Deal!” For a chuckle, if not a special combo price, say  “Let’s make a deal,” when you want to buy a few items at once.
• Have patience for the process. You won’t get the best price if you’re in a hurry. “Hondling” takes time.
• Know when to walk. Can’t get the price down? Start to stroll. Hopefully, the salesperson will follow ... and meet your price. If not, think of all the money you just saved!

Have you gotten a lower price on something you really wanted? Please share your bargaining successes with us!

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Free Ways to Manage Your Money Online

Some of the best things on the internet really are free! Including free money management and budgeting programs.  Websites such as Wesabe.com and Mint.com are allowing users around the country to manage their money online in innovative new ways.

CreditBloggers.com personal finance guru, Gerri Detweiler, was quoted yesterday in a Smart Money article comparing different free money management services. Click here to read "Budgeting Software: A Free Way to Manage Your Finances." Included in the article was this helpful chart comparing features of four top providers (click to enlarge) :

Yodlee's Money Center was one of the first free personal finance services online. The company develops their software for resale to banks and other institutions and also allows customers to sign up for a free account independently. I've been a Yodlee user for about three years now and love the convenience of seeing all my checking accounts, savings accounts, credit cards and investments with one login.

Are you a Clear Checkbook, Mint, Wesabe or Yodlee customer? If so, share your opinions about the free services in the comments section below.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Reader Question: Getting Off the Debt Treadmill

Here is a question I received from a reader:

I was listening to one of your interviews on the wsradio archives. What does the person that has a moderate amount of debt, $19,000 in credit card debt in my case, but is current on all accounts, do?  I've been able to stay current, but am afraid I will not be able to much longer.  I've eliminated every discretionary expense I can such as cable TV, the newspaper…  and am on a budget.  I'm trying to sell one of our cars to get out of that payment but have not been successful as yet.  My income barely meets our basic monthly expenses, food, mortgage, gas… and credit card minimums.  Any extras or emergencies go on the card.  Would debt settlement be an option?

A: First of all, you should be applauded for trying to do everything you can to stick to a budget and control your spending. I know that is not easy to do. It sounds, though, that you have come to the conclusion that your income is not enough to pay living expenses and cut your debt, much less save for emergencies.

At this point, then, you have a couple of options to look at: increasing your income, reducing your debt, or both.

I don't know enough about your situation to suggest ways to increase your income, but from your email it sounds like you have a job and may have a spouse. If either of you can generate some extra income, it might be enough to help you accelerate your debt payments. I would encourage you to really think about this, even if an answer doesn't come immediately. (I am going to send you a complimentary copy of Invest In Yourself: Six Secrets to a Rich Life, the book I wrote with Marc Eisenson and Nancy Castleman, which talks about how important it is to have an "Ace In The Hole.")

At the same time, $19,000 is a good chunk of credit card debt, and you'll need to find a way to get it paid off. I would like to recommend you get a free debt consultation and find out whether credit counseling will work for you. If it won't, then debt settlement may be another option for you to consider. Either way, the consultation is free and confidential, and won't affect your credit.

I realize that because you are current right now, you're probably not anxious to do anything that would affect your credit rating. But don't let that cloud your decision. The most important thing to focus on right now is getting out of debt so you can start saving for the future. You can always rebuild your credit when you are debt-free. While your credit is important, also think about what that debt is costing you each month, and how much you will be able to save and invest when it is paid off.

Let us know how things turn out for you!

Gerri Detweiler – Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online.

One Thing I Love About America

In analyzing the subprime mess I think that it is important to look beyond all the statistics, beyond the politicians' babble, beyond the finger-pointing as to who is at fault.  We should not lose sight of the fact that it comes down to individual families getting the boot from their homes.

Where the rubber meets the road it means children moving to another school district and having to make new friends.  It means dislocation, added commute time, money invested in improvements that can't be recouped, and the psychological pain of humiliation at having suffered a financial defeat. 

Here are some stories I know about.

A family thought that they would never be able to own a home. With a low teaser rate, they got into the home but due to a greedy agent, it's more expensive than they can reasonably afford. Now the payment is about to jump.  So what are they doing? They are doing just what their parents and grand-parents did to ratchet themselves up the ladder. They are working harder and have gotten second jobs. 

Another family with poor credit was able to get into a home because of lax lending standards. Before their loan adjusted they were supposed to use that two year period to adopt more disciplined financial habits, like paying down debt and paying bills on time.  Yet here they are, two years later and their scores are still under 600 and they are stuck with a lousy loan.  Another family in a similar situation boosted their scores and were able to refinance into a good loan.

A fourth family has owned their home for years but became serial refinance artists who got a new loan every year. Each time they converted some of the equity in their home until they now own more than the house is worth. The loan is resetting and, although they have $50,000 in stripped equity sitting in the bank from the last refinance, they will probably walk away.

And then there was the gal who called me last week. She lost her job last spring when her industry contracted. The employment outlook is grim so she needs to find a new career. In the meantime, with no income she hasn't made her mortgage payments and is headed for foreclosure. Her house is now worth a good bit less than the loan balance so she can't sell it. Frankly, I don't think that there is much she can do.

As discouraging as this is, do you know what she told me? 

"One thing I love about America is that you always get a second chance.  It's only a house.  I'm sure we'll be homeowners again in the future."

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles. Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Funny Money Friday: Financial Halloween Costume Ideas

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

Halloween is only two weeks away! Time to start planning this year's costume. Here at CreditBloggers.com, we've come up with some timely, financial themed costume ideas. Take your pick:

Bankrupt Mortgage Broker
Wear your best suit with the pockets turned inside out. Carry papers marked with big red foreclosure stamps or a "bank owned" for sale sign. Look disheveled and sad. Maybe buy one of those Countrywide bracelets.

Ben Bernanke
Sport a white beard and a blue suit. Carry a fed rate chart with you. Have your friends dress up as an angry mob of torch and pitchfork wielding investment bankers.

Jim Cramer
Relive the glory days of Jim Cramer's stock market meltdown. Tie and blue collared shirt, with the sleeves rolled up. Goatee. Button sound effect mechanism. Repeatedly scream "They have NO idea. NO idea!"

Suze Orman
Bleach your teeth, part your hair, apply copious amounts of eyeliner and put on the brightest outfit. Bring a microphone and a copy of one of her books.

Scam Lender
Monster mask combined with a polo shirt marked with some terrible made up lender name like "Cash One USA Best Loans Financial Inc."  Offer to lend money to people if they give you a piece of candy. When given said candy, quickly eat it and run away.

Identity Thief
Print out color photos of your friends and relatives and make them into masks. Dress all in black and look nefarious. Carry around credit cards, checks and "stolen" mail.

Any other financial costume ideas to add to our list? Share them in the comments section below. Have a great weekend!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Reader Question: Why Did Paying Off my Credit Card Drop my Score?

Reading and responding to email credit questions can sometimes be like playing detective. A little reading between the lines can be required to decipher exactly what is really going on. Here's a question we received from Carolina:

I read an answer online from someone, and I wanted to know if it was true. If one owes $2,000.00 dollars on a credit card and was only late once, and then pays it all off in full after a year and a month,  is it true that instead of increasing your score it lowers it? If so why is that? Shouldn't it be the opposite? So is it bad to pay in full? Why?

This a classic example of someone getting not quite the full story about how credit works. There are too many factors in Carolina's email. Most of which don't hurt credit scores and one which does. Let's break it down:

Things that don't hurt credit scores
- Owing $2,000 on a credit card
- Paying off a credit card balance in full
- Having a card open for a year and a month

Things that can hurt credit scores
- Owing $2,000 a credit card that has a low limit or if you don't have more than $20,000 in total credit limits
- One late payment, although the damage only lasts for one month if it was under 90 days late

The culprit:
- Closing the account

In Carolina's situation, it was only the fact that she closed the credit card that really mattered. The balances, late payment and payment in full doesn't really have a negative impact on her credit score.

Closing a credit card, in any scenario, will always be a negative for your credit. The damage is worse if the account was one of the oldest on your credit report, the only account you had or the account with the highest credit limit.

Closing a credit card account will never help to improve your credit score.

Credit scores give extra "points" for consumers who keep their credit cards open for a long time, who have high credit limits and who have a healthy record of using credit. You are less of a risk to lenders and creditors if you are currently showing that you can manage and pay credit cards on time.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

In the Market for a New Credit Card? New Information Will Make It Easier to Choose

J.D. Power and Associates, the same people we turn to for customer service ratings before we buy a car, just ranked credit card issuers for the first time. Based on a survey of 7,812 credit card cardholders, their “2007 Credit Card Satisfaction Study” puts American Express in first place for customer satisfaction. Discover came in a close second.

Questions were asked about how lenders handle the following:

• Benefits and features
• Rewards
• Billing and payment process
• Fees and rates
• Problem resolution

American Express, which got high marks in benefits and features as well as in problem resolution, got a score of 735 on the 1,000-point satisfaction scale J. D. Power and Associates created to analyze the findings. Discover, at 728 points, did best in rewards as well as billing and payment.

Overall, the ten card issuers in the study got a score of 658, which is much lower than the customer satisfaction scores in other financial areas: mortgage servicing (798), online investing (773) and retail banking (763). That’s not surprising to me, given all the fine print and fees card issuers hit us with, to say nothing of the way they jack up the already high interest rates.

Click here to see how your credit card company made out.

Choosing a Credit Card
Another set of findings had to do with card selection. According to J. D. Power and Associates, “rewards are key in credit card selection across the industry, and 80 percent of card holders receive some type of reward with their credit card usage.”

The survey showed that almost 65% of people who say they always or usually pay the full balance due on their credit cards – named “transactors” by J. D. Power – think that rewards programs are most important. So do 29% of “revolvers,” those who carry a balance. I sure hope you’re not in that 29%!

Tip for revolvers: What should be most important to you is a card with a low rate. Whatever the reward, it can’t make up for the effect of a higher rate, especially one that is compounded month after month. Ignore all the ads for rewards cards, and get the lowest rate you can.

Now that they’ve begun to be available, I’m sure going to take a look at the customer satisfaction rankings before applying for a new card. I encourage you to do likewise. All other things being equal – and with so many choices out there – why not choose a company that has a better track record? Over time, I expect that the rankings will get as complex as the ones issued for cars, which will only make our card choices that much clearer.

Sounds like good news to me. What do you think?

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Funny Money Friday: Buy a Piece of Housing Bubble History

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

The housing bubble, mortgage crisis drama is going mainstream. Sure, us credit geeks have been talking about the dangers for years.  The Wall Street Journal just published an article this week about how widespread bad loans are across the country calling it a "Subprime Tidal Wave."

In the meantime, an intrepid Countrywide employee has posted their "Protect Our House" bracelet on eBay.  The bracelets were distributed to employees who pledged to support the company as part of an internal communication program in the face of media criticism.

A true artifact of the current credit crisis, the bracelet's price has already soared to $167. The auction ends tomorrow. Get your bid in now or buy one of the other 10 bracelets that have now been offered for sale for substantially less. You'll need that extra $100 when you have to refinance your Countrywide mortgage.

Have a great weekend!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Selling Students into Credit-Card Debt

It's a great headline, and though I wish I could claim it, the credit goes to Jessica Silver-Greenberg, who just wrote an eye-opening piece for BusinessWeek on the lucrative "affinity" deals many universities have with credit card issuers.

Jessica reports that virtually every major university has a confidential multimillion-dollar contract with a card issuer. In exchange for big bucks – $10 million or more – card issuers get the exclusive right to market at school events (e.g., football games), plus access to student contact information for direct marketing purposes. The schools can get money for signing the contract, a fee for every student, alum, fan, or professor who sign up for the card, and a percent of charges made to the card.

These private affinity card deals are terrific for the universities and the card issuers. The schools get needed funds on a regular basis without tapping into already existing income streams. And the lenders get access to the all-important "newbies," whose parents will probably bail them out if they get into a jam now … and who will hopefully become repeat customers over the years, coming back again and again to borrow money for cars and homes … and to make money, via mutual funds and other financial products the lender may offer down the road.

But what about the students? What's in their best interest? The conflict of interest is so great, it's likely that schools are negotiating deals that are not at all in their students' interest. The higher the fees and interest rate, for example, the more the schools make from these behind-the-scenes deals, many of which are put in place by alumni associations. There's no public scrutiny and tons of money at stake, so why would a school want to protect or even educate students about the downsides of plastic?

No Regulations
Until something gives, the universities don't have to disclose any of the particulars of their deals with lenders. Even schools primarily financed by taxpayers don't have to say:

•  What the basic provisions of the contract are.
•  Whether or not they get a kickback for each new cardholder.
•  If they rake in a percent of the charges made to the cards.
•  How they use their affinity card haul.

The universities involved in these affinity programs ought to be ashamed of themselves! Others have figured out how to make affinity programs work in ways that benefit the institution and the cardholders. For example, see "A Co-Branded Credit Card that Makes the Grade," right here on the Creditbloggers.com site, written by Gerri Detweiler. So there's no excuse, imho, for the universities. They should craft deals that benefit all, and if they can't, government will have to step in.

But the few attempts that have been made in state legislatures to get a handle on these secret deals have failed. Key passages of bills have been watered down. And while these affinity cards may be discussed in one or another Congressional hearing, it seems to me, if change is going to happen any time soon, it's up to students and alumni. They're the ones who can best pressure the schools to do the right thing, that is, to find ways to benefit both the universities and their students in affinity card contracts.

What do you think?

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

 

Chase Hiked Credit Card Interest Rates: Now What?

Here's a good question from a reader experiencing a rate hike:

My wife and I have two credit cards with Chase. We had a business card that we  "opted out" of paying a higher interest rate by effectively closing the account and then being told that for any reason they could increase the interest rate that ended up staying at 17%. The reason for increasing the rate was largely due to making payments late, according to Chase. We always pay on time, never late. That was our argument and then we were told other reasons for the increase in the rate. We have had this account for about two years. We are financially able to pay $8500.00 of the current $10,000 that is on the card and would like to pay it off and get out of this debt with Chase. From what I have read, should we close this card using the proper form for closing an account? Will it hurt our credit rating if we close it?

Also, we have another Chase card that was a rollover from another card. We just paid off the card that had a balance of $1500.00.

So, after we pay the $8500.00 on the other Chase card, would we be better off paying down the balance on the card and keeping the above card that had $1500.00 on it open? The business card was closed after we chose to opt out of the higher interest rate. We were told we could no longer use the card but could continue to pay it down with the 17% interest rate.

We are very frustrated with Chase and the way they have treated us. We both have excellent credit and we have learned that Chase has a reputation of increasing their interest rates to the extreme according to many web sites that have cardholders telling stories about Chase and their experiences with Chase. We do not want to hurt our credit rating either.

It sounds like you have been hit with one of those all-too-common Universal Default clauses. If I understand your email correctly, you will pay the business card with the $10,000 balance down to $1500 and the interest rate remaining will be 17%. It sounds like a good move to pay that off if you have the available funds since the interest rate is definitely steep. It sounds like your question is whether you should then officially close that account.

Have you checked your credit reports yet? It sounds like you already closed that account so it may already be reported as closed on your credit report. If that’s the case, there is nothing you need to do. If it is not listed as closed, I would leave it alone. A closed account with a balance can be a negative for your credit score. You made a smart move, moneywise, to close it so the interest rate wouldn’t go up. But as far as your credit is concerned, it’s better to leave an account open if possible. That's especially true if you have a balance.

It also sounds like you are going to have another Chase account that has been paid off and you want to know whether to close that account. Again, as far as your credit scores go, it’s better to leave it alone (read here to learn why) unless Chase is charging you an annual fee that it won’t waive. Even if you don’t use the card to make purchases, you can use it as leverage to negotiate a better deal with another card issuer that may charge you a higher rate. In other words, if you have other cards with balances, you can call the other issuers and ask for a better rate or tell them you’ll move your balance over to the Chase card (the one that will now have a zero balance).

Have you checked your credit scores? If they are decent, I would recommend you shop for a new low-rate business credit card. (You may want to wait until after you pay down the card with the high balance and the new balance shows up on your credit report to see where your credit stands, or sign up for credit monitoring). You can use it to transfer the balance away from the Chase card that is charging 17%. You can find business credit card ratings and offers here.

Let us know how things turn out!

Gerri Detweiler – Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online.

Real Story of Macy's & Citibank Woes

We've received some great emails in response to our post about the Macy's/Citibank credit card debacle.  Marcia's first person account was a favorite:

I just thought I'd surf the Internet to see if this happened to others.  What a scam!  My poor 27-year-old son was a victim of this.  He claims he never go a letter from Macy's and if he had, probably threw it away as junk mail.  As for getting an opt-out letter from Citi, again, he assumed it was junk mail as we all get far too many offers for credit cards in the mail. 

Well, thank goodness he's living at home for a few months because when I saw the Citi credit card laying on the table, I asked him what it was.  Well, again, he figured it was junk and was getting ready to shred it.  Thank GOD I looked at the letter and told him it was an active account they' opened.

Well, he gets on the phone last night with Citi and tells them to close it immediately!  He connected the dots as well and told them that now it's going to hurt his credit score because it shows an account opened and closed within a short time frame.  He has excellent credit, the high 700s-low 800s, and takes his credit score very seriously.  Citi tells him it will take seven to ten business days to close an account he never opened.  When questioned, they tell him they got his info from Macy's, including his full Social Security number!!!  Pretty interesting since he's had three different address in the past ten months, and they found him at our house.

Well, a call into Macy's was next.  First, he told them to close his account, which they tell him was already closed when they transferred his account to Citi.  Plus, they repeatedly told him, when questioned, that they had received NO CONSIDERATION from Citi to, in essence, sell his personal information.  Now, if that doesn't smell rotten, nothing does.

My son probably spent 45 minutes on the phone trying to straighten this out and is absolutely beside himself, ready to go to the attorney general.  Unfortunately, I love Macy's and have been a dedicated shopper for over 30 years. After being a faithful Macy's customer, I have closed my account with them. Perhaps if everyone sent Macy's a clear message, this type of nonsense will cease!

Do you have a story of creditor incompetence, Macy's or otherwise? Please share it with us at tidbits@credit.com.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

CreditBloggers Experts in the News

Here at CreditBloggers.com, we hope that you view us as your resource for credit insight and straight answers. We love answering reader email questions! We love it even more when we get a chance to help reporters with their credit articles. Over the weekend, our team was quoted in two great publications:

NEW - USA Today - "To Freeze or Not to Freeze Your Credit Report"

John Ulzheimer was quoted in Sandra Block's article about new credit report freezing methods and consequences.

Boston Globe - "Unexpected Cards Irk Customers"

Columnist Bruce Mohl covered the story about Macy's card customers being sent Citibank Mastercards without their approval. We weighed in about the potential impact this could have on your credit.

Kiplinger.com - "Don't Close Credit-Card Accounts"

Kimberly Lankford answers the common credit question "Would closing old credit-card accounts ever help my credit score?" in her Ask Kim column.

If you have any credit questions, feel free to send them to us at tidbits@credit.com.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Funny Money Friday: Trick-or-Treat

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

I love Halloween! The spookiness, the candy, the costumes. According to the National Retail Federation, I'm not alone in my love for this fall holiday. Consumer spending on Halloween increases 10-20% each year. The average person is planning to spend $64.82 this year, compared to $59.06 in 2006 and $48.48 in 2005. This breaks down to:

• $23.33 on Halloween costumes, including kid and pet costumes.
• $19.84 on candy.
• $17.73 on decorations.
• $3.92 on greeting cards.

An estimated $5.07 billion dollars is going to spent on Halloween in the US this year. That's a whole lot of candy corn and a nice way for retailers to launch the holiday shopping season.

If your kids are gearing up for trick-or-treating this year, you might consider a little karmic balancing by sending them out with UNICEF donation boxes as well. You can order a free Trick-or-Treat for UNICEF collection kit online today and it should arrive before the Charlie Brown special airs. Have a great weekend!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Your Money & Your Brain

I have spent over 25 years watching people make decisions about buying and financing their homes.  Having watched so many people in action, I especially enjoy writing about the way they gather information, evaluate it, and make decisions.  I used to wonder why so many people came to my office, told me what they wanted, yet ultimately settled in on some other loan.  The reason was flawed decision-making.

In fact, one of the most satisfying parts of my career has been getting my clients "straightened out." Makes me feel as if I really do some good. They had to unlearn what drove them to choose something that was usually wrong, then we'd through a process to get them what they needed, a loan that would help them achieve their goals.

It's no different with people when they make investment decisions.  A stockbroker friend told me once, "Intelligent Investing is an oxymoron." Most stockbrokers have told me that their number two job was keeping people from doing stupid things.

Over the past few years I have written a number of articles about this topic, drawing when I could on research that found links in what was happening in peoples' brains as they made decisions. I wish I had done a lot more work because if I did, I might have written Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich .  But I didn't.  Jeffrey Zweig did.

A review in Publishers Weekly said it pretty well.

"Our brains are pretty self-deceptive, it turns out: we have difficulty admitting our lack of knowledge about finances; we overestimate our own wisdom and performance; and our preference for mistakes of action rather than inaction often leads us to irrational investment decisions."

A book like this will help the modest number of investors or homeowners who might read it, but I think that its impact will be greater with investment counselors and mortgage loan officers. It will be a great resource for those who want to help their clients make better decisions.

It's refreshing to see a book like this come along.  For those who want to learn more, click on the link.
http://www.amazon.com/Your-Money-Brain-Science-Neuroeconomics/dp/074327668X

Macy's and Citi Cards Cross the Line

After 6 years in the credit business, you start to get used to credit card companies occasionally burning customers by raising their rates or instituting crazy new terms. It's not often that a credit card issuer will do something so bad that it gives even a hardened credit expert pause.

If you haven't already heard: Macy's agreed to give Citi access to their inactive (24-48 months without a purchase) cardholders. Citi used this opportunity to mail out letters in July to the users notifying them  that, unless they opted out, they'd be getting a new Citi card in the mail. The cards are starting to hit now and the story is surfacing. Consumerist.com has the best details so far.

It's fairly common to see retail cards transfer to ownership with a larger bank. For example: your Nordstrom card may become a Nordstrom Visa through Chase. But in these cases, the tradeline record on your credit report is just updated. This Macy's/Citi situation doesn't follow that pattern. Instead of the card transferring, they're actually closing one account and opening a new one.

This is a particularly low blow and a very weird marketing strategy. Using an opt-out mailer as an opportunity to establish new accounts? Without verifying addresses? Sure, they can legally do it under the fine print of the consumer terms agreement but this is definitely a step too far.

From a credit score standpoint, the impact of these new accounts could be severe. Your credit score could be harmed by:

• The closure of the old Macy's card. Especially if the card was one of your oldest or one of only a few card you had open.
• The inquiry for the new Citi card. This will remain on your credit for two years.
• The opening of the new Citi card causing your average credit account age to drop.
• The new Citi card having a lower credit limit than the old card.

Even if you close the Citi card as soon as you receive it, it's possible that the account has already been reported to the credit bureaus. Closure won't delete the record, it will still remain on your credit history for 7 years.

Are you a Macy's cardholder whose account was closed and replaced with a Citi MasterCard?  If so, we'd love to hear your story. Post your comments below or send an email to emilyblog@credit.com.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Military Now Protected from the Worst of Payday Loans

Thanks to regulations that went into effect on Monday, the interest rate on payday loans to members of the military and their family cannot exceed 36% a year. That may not sound like good news, but since these loans typically carrying 400% rates, it’s definitely progress, and will save money for many members of the armed services.

Also in the good news department: Payday lenders can no longer use military members’ personal checks or electronic access to their bank accounts as collateral. This will reduce stress and make it less likely that military families will be trapped into one payday loan after another.

Payday lenders lie in wait for military folks with money troubles. To find out why they pick on people the rest of us would help if we could, I called Carol Hammerstein at the Center for Responsible Lending, one of the key nonprofits that has been exposing the excesses of payday lenders. As Carol explained it, military bases are targeted because they have a lot of “young, financially inexperienced families in a small area.”

No matter that they are willing to die for our country, they’re a captive audience of cash-strapped young people with steady paychecks. No matter that the military member of the family is about to be deployed, regardless of her views on the war. Who cares if the car breaks down, and she wants to leave her mate with a working vehicle so he can get the kids to day care?

She needs a quick loan with no credit check and is unaware of her other options. As she’s about to drive onto the base, she passes some of the payday lenders with their military-sounding names. Her emergency too soon becomes guaranteed income to a payday lender. That disgusts me.

Know Anyone in the Military?
Please make sure they know about Military OneSource, which offers them free, confidential financial guidance, toll-free, 24/7 at (800) 342-9647. Chances are, they’ll find out that there are payday loan alternatives right there on the base.

You can help them find out about other alternatives and share Credit.com’s “Truth about Payday Loans” with them.

When 36% a Year Isn’t Enough
You’d think that earning 36% a year off of military families would be enough. No way, say payday lenders in Utah, who stopped loaning to the military on Monday because of the "low" rate. Like I said, disgusting.

The nonprofits want the Pentagon to tighten the regulations and remove loopholes. Sounds like a good idea to me. What say you?   

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.