Variable Rate Credit Cards Expected to Fall in Light of Recent Fed Rate Cuts

The Federal Open Market Committee cut short term interest rates again yesterday by one-half of a percentage point to 3.0%. The Fed's rate cut was in response to the economy's current financial state.

According to the Fed,

"The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."

The good news for cardholders is that this means that the Prime Rate will fall by half of a point as well to 6%. Over the coming weeks and months, interest rates will fall .50% on variable rate credit cards. About 90% of all cards issued today have variable rates that typically move up and down in response to the Prime Rate.

Jessica Austin of CardRatings.com, notes:

"Given the recent rate cuts, if you are paying over 10% on your current credit card and you have a credit score above 700, then I would strongly suggest that you search for a new low rate credit card. Simmons Bank, for example, offers a 7.25% fixed rate card."

The rate cut should have an immediate impact on consumers that are revolving credit card debt. The current average rate based on all the cards listed in our comprehensive database is 12.82%. Those applying for a credit card with a variable rate should benefit as well.

Finally, it is also worth noting that the Federal Open Market Committee also cut rates unexpectedly earlier this month by .75% or 75 basis points. Bottom line is that we've had two rate cuts this month that total 1.25%. Can't wait from my own card to reflect these cuts!

Curtis Arnold - Curtis is the CEO/Founder of CardRatings.com, a website that provides credit card ratings and reviews of over 20,000 offers.

Are You Over-Paying for Homeowner's Insurance?

If home values are really tanking where you live, you may be tempted to reduce the amount of coverage on your homeowner's policy. Even when real estate was still going strong, you probably felt you were over-paying. And according to the Consumer Federation of America (CFA), you were!

Along with a dozen other consumer advocacy organizations, CFA just released a white paper on the insurance industry. The report concludes that insurers "continued in 2007 to systematically overcharge consumers and reduce the value of home and automobile insurance policies, leading to profits, reserves, and surplus that are at or near record levels. The study estimates that insurer overcharges over the last four years amount to an average of $870 per household."

I was surprised by the report's findings, which describe record profits in 2004 and 2005, even though there were a lot of hurricanes, as well as unprecedented profits in 2006. Of course, the industry has another point of view! I'll delve into these industry issues in a future blog, but for now, I want to focus on us, and our costs. 

As a new homeowner, I was certainly shocked by how much we had to pay for homeowner's insurance. It'd sure be great to save money on that bill, wouldn't it? But please don't scrimp because you think the value of you home has diminished or your insurer is ripping you off! It's still going to cost the same … or maybe more … to rebuild your home.

We have to think about how much it would cost to replace our homes, not how much we'll get if we sell them.

According to a piece in the February issue of Consumer Reports, most homes are underinsured - on average by 28% - which could cost you between $16,000 to $194,000 if disaster strikes.

You can still save a lot on homeowner's insurance
There are many proven ways to save on homeowner's insurance. Here are some of my favorites that together, can cut your premium in half:

• Shop around. You will be amazed by the difference in the quotes you get.
• Get a "multiple policy" discount by having the same company write your car and home policies.
• Go for the highest deductible you can afford.
• Put smoke and carbon monoxide detectors on every floor.
• Ask about all other possible discounts, which might be available because:
  
  • Your home has additional safety features, was built with fire-resistant and/or state-of-the-art construction materials.
  • You are retired, don't smoke, and/or are eligible for a discount because you belong to AARP, AAA, a labor union, or an alumni group.

For more ideas on how to save on homeowner's insurance, click here. Let us know your tips on cutting these costs ... as well as your horror stories about dealing with the insurers.

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.

A Proposal For Real Economic Stimulus

I am no economist, but seeing the proposed economic stimulus package coming out of Washington, I feel just as well qualified the "experts" to suggest a couple of alternatives:

A national freeze on credit card interest rates at no more than 14%. It's time to put an end to this 27% and 30% loan sharking nonsense by major credit card companies like Bank of America and Chase. The Fed cuts interest rates, yet credit card rates skyrocket, even for consumers who have never missed a payment.

When a credit card rate jumps from say 14% to 27.99%, not only does the debt become more expensive, but the minimum payment also increases significantly. For those who are getting hit with these high rates, any tax rebate they get will quickly be gobbled up by higher interest charges and larger minimum payments.

Because credit card companies have used their leverage to wipe out consumer protection at the state level, a nationwide cap is the only way to return some sanity to the credit card industry. Make it temporary if we must, but a credit card interest rate cap would give millions of Americans much needed breathing room so they can spend money -- on things like gasoline and groceries.

Allow home loans to be modified in bankruptcy. "Bankruptcy law is wildly off-kilter in how it treats homeownership," warned former HUD Secretary Jack Kemp in an LA Times editorial. He echoes the opinions of many consumer advocates who have been supporting this legislative change. Virtually any type of loan – except the loan for the home you live in  -- can be modified when necessary in a Chapter 13 bankruptcy plan. This gives consumers time to work things out and get back on track, and helps ensure their Chapter 13 plans succeed. Flexibility for bankruptcy judges to modify mortgages (including ones with abusive terms) means fewer foreclosures, and helps in the effort to stabilize home prices. We can't let the "success" of purely voluntary industry initiatives derail this sane proposal.

It appears, though, that our government is going to let us go further into hock to give us back some of our own money, in the hopes that we all go on a shopping spree and forget our money worries for a few moments. If it takes us the next thirty years to pay back our debts at 25%, so what? This is America, after all.

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

Portraits in Credit Crisis

I have received some really interesting emails from readers this past few days. It would seem that the credit/mortgage crisis is starting to hit home for many Americans. Last week, a couple with $31,000 in credit card debt, two mortgages on their home and two mortgages on their investment property emailed me. When I did the math, they were spending $40 a month more than they were earning with just their minimum expenses. What a nightmare!

Susan wrote in over the weekend with a similar story:

Our situation is what I would call almost dire. After 10 years as a writer and freelancing on the side, I started a freelance writing business in 2006 to stay home with our 2 young daughters for a year. Unfortunately, while I was emotionally happier, we couldn't make ends meet that way. I went back to a full-time job in January of 2007 after I actually had to declare a loss on my business, but we of course still owed taxes for 2006. My husband made a career change last year as well, and is much happier in his job, but making about $7000 less per year. Between the salary decrease, the tax debt and 3 unexpected surgeries for my youngest daughter last year (she is fine now), that was all it took to push us over the edge financially.

Now we are happy in our jobs and are paid well, but even with gross annual income over $100K, we are falling short every month.

After I pay bills each month (daycare, insurance, 2 mortgages, car, school loans, and minimum payments only on credit cards), I have $400 left over to pay utilities, groceries and anything else for the whole month. Pretty horrible, I know. I feel even worse because we have nothing in terms of savings, retirement, or college funds for our two children. Silly, when we should have plenty for our monthly expenses plus enough to put into savings and retirement by now.

I just checked last week and our credit scores have sunk to 519 and 529, respectively. We were near 700 just 2 years ago.

I recently read two financial advise books. I learned some things in both, but I'm still looking for ways to get us out of this situation this year. My husband and I have made "Financial Overhaul" our #1 goal for 2008 and I'm trying to find experts and advice to dig ourselves out without bankruptcy or credit counseling, if possible.

Susan's case is unfortunately not that uncommon. If she continues to only pay the minimum on her credit cards each month, it could take her as much as 33 years and $29,000 in interest to be debt free. And they certainly aren't doing well in the areas of emergency funds and long term savings right now. There are four potential solutions to consider:

1. Make more money. This one isn't always simple. Asking for a raise, taking on a second job or switching careers could help. Also, simple things like having a garage sale or setting up an online shop could earn extra income.
2. Spend less. Most of Susan's expenses can't be cut out. But she could save money by finding cheaper daycare, cutting off cable, making meals from scratch, etc. These penny pinching methods can seem silly but can really add up to some big savings.
3. Save the house and sacrifice your credit. Since their credit scores are already pretty damaged, Susan could be a good candidate for a debt settlement program or even bankruptcy. Debt settlement isn't right for everyone but can be a lifesaver in cases where people have large balances and low credit scores. With this type of program, they'll could cut the amount they owe in half and be debt free much sooner.
4. Sell the house and save your credit. With the housing markets these days, it can be really hard to sell. Moving to a more modest house or a rental could free up a lot of money toward becoming debt free. With this plan, you'll focus on paying off the debts and boosting your credit score.

Susan's goal should be to somehow free up a few hundred dollars each month to put toward debt repayment.  She emailed back to say that she's going to have $620/month starting in May because her daughter is going to school instead of daycare . This will make a big difference!

With $30,000 in credit card debt, her minimum payments are around $750 a month. Estimating that her APR's are around 15% on average. lets see how her debt could be repaid:

• If she pays only the minimum each month, her debt repayment could stretch out to 33 years and cost her $29,000 in interest.
• If she paid $750 each month (her current minimum), it would be more like 5 years and $11,000.
• But, if she could put the extra $625 toward her debts each month she could be debt free in a little over two years and would pay about $5,000 in interest.

The faster she gets her debts paid off, the more money she'll save and faster she can build up some savings. All bonuses and extra funds should go straight toward debt repayment.  In a couple years, Susan's finances could be much, much better off.

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

Light at the End of the Tunnel, for Some Homeowners

With all the nasty economic news around these days, it's hard to be optimistic.  Foreclosures are at all time  highs, default rates are up, home sales figures are in the tank, and more and more areas are showing year-to-year declines in housing values. So what's the good news?

Short-term rates are down which means that ARM loans, which are all tied to some kind of short-term index, are down too. These changes in rates were started in the marketplace before the Fed took its most recent With its .75% cut in the Discount Rate, all it is doing is acknowledging that rates are dropping and they are going along with it.  It may be conventional wisdom to think that what the Fed affects mortgage rates, but it just isn't true. The man in the street doen't know what is going on in the market, but he can read the newspaper, so he thinks that it is because the Fed lowered rates. Whatever, the bottom line is that this is good news for people with ARMs. Here's how.

A concern has been that non-subprime ARM loans that are resetting in 2008 will add to the problems of resetting subprime loans and Option ARMs. This is now less of a problem.  For example, the 1 year CMT index that is commonly used in ARMs has fallen from 5% a year ago to 3.26% today.  Here is what that means to borrowers.

A borrower with a 5/1 ARM taken out 6 years ago that reset in January 2007 was faced with a dramatic increase. The original note rate in 2002 would have been in about 5% with a margin of 2.75%. So when it adjusted a year ago, the note rate would have been 5% + 2.75% = 7.75%. That would require a much higher payment, almost 40% higher than the initial rate. And that’s for an A-paper loan to borrowers with good credit.

Today, however, with the index having fallen to 3.26, the note rate would only be 6%. That's still an increase of 18% but more manageable.  6% has always been an excellent rate for mortgages and, frankly, if a borrower can't afford that, he shouldn't have bought in the first place.

You can see that the millions of these loans that will be resetting are not going to pose additional threats to the economy. But this news affects only borrowers whose loans are tied to the 1-year Treasury index.  Many other loans are tied to 6 month LIBOR and the 11th District Cost-of-Funds indices.

These are stubbornly higher because rate in Europe where the LIBOR (London Interbank Offered Rate) is not directly tied to the U.S. interest rate market. That index is 4.6% but even with a lower margin, typically 2.25%, the resulting note rate would be 6.85%. The COFI index, always a slow moving index, will come down slowly too. It is now at 4.17% so with a margin of 2.25% the note rate would be 6.42%

Regardless of which index is used, you can see that the end result is still an interest rate that starts with a 6, much better than one that starts with an 8. 

What does this mean for subprime and Option ARM borrowers?  The margins on these loans is higher than the ones we have just discussed, but still the rates will be lower. And it makes it easier for a lender to negotiate something that is better for the borrower and yet which is in line with what the investors who own the loan are seeing in terms of general market rates.

The problems caused by profligate lending aren't going to go away any time soon, but at least it solves a potential problem for some borrowers and makes renegotiation more likely for others.

A final word of advice. Fixed rate mortgage rates are as low too. 15-year fixed Conforming loans are actually below 5%, almost as good as they were back in 2002 and 2003 when the refinance boom was on. It's shaping up to be another banner year for refinancing and it always makes sense to get out of any ARM and into a fixed rate loan when rates are down. If you have an ARM, I would take this opportunity to get off the roller-coaster.

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.

Is that Extra Cup of Coffee Worth $64,000?

I just read an interesting article on Reuters’ site about how Starbucks is testing $1 coffee and free refills in its Seattle locations. I love it when prices go down and/or you can get more for your money!

It’s sure an interesting sign of the times. I wonder, is Starbucks testing cheaper coffee because people are spending less on pricey brews? I hope so – not that I have anything in particular against Starbucks. I feel the same way about all designer waters and the other beverages we buy at fast food joints, vending machines, and convenience stores.

Why spend a fortune if you can just as easily save one?
If Starbucks will cut the cost of your caffeine habit in half, that's great. Go for it! But you can easily do it yourself, without totally depriving yourself of your favorite drink. For example, making that second cup of coffee at the office or bringing coffee from home could easily save you a few hundred dollars a year on beverages that come in disposable take-out containers, cans, and bottles. A cup of coffee or a can of soda here or there may seem like a small thing, but over time, the money really adds up.

However you do it, let’s say that in the course of the work-week, you spend a dollar or two a day less on drinks, and save yourself $300 a year. If you work from when you’re 22 to 62, that’s a 40-year career. Put that $300 a year under your mattress, and at the end of those four decades, you’d have $12,000.

Invested at 6% a year, that $300 would amount to $46,429 when you’re ready to retire. But remember ...  you would have paid for those beverages with after-tax dollars. To have $46,429 after taxes, someone in the 28% bracket would have to earn nearly $64,500.

I'd much rather have the $64,500. How about you? Interested in other painless ways to save? Click here.

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.

It's Baaack! Bank of America Credit Card Rate Increases Strike Again

At the start of 2007, we posted an alert on the blog about Bank of America customers receiving significant rate increases. Usually, these were customers who had a low 9% fixed rate for years and were carrying balances on the accounts when their rates shot up above 20%. We received over 20 comments from readers at the time reporting the same increase had happened to them.

Now, at the beginning of 2008, it looks like the Bank of America rate increases have returned. Apparently BofA makes a New Year's resolution each year to scrub out customers with low rates. One reader reported that Bank of America said they've just sent 1.5 million of these rate increase letters.

Here are some of the reports from consumers we've received today:

I just received the letter wanting to jack me from 11.99% to 19.99% - My minimum payment is $143 a month and I pay $702 every month! Way over my minimum. I have never been late. My balance is a little high, but not that high. Barely over 1/2, which I guess is why they "only" want to raise mine to 19.99% instead of 25%, like others. I too am writing to reject the terms and if anyone starts a class action suit, I would be happy to add my name to the list. They also told me not to use my card after February 29th, if I reject the terms or they will automatically go into effect. This thing is getting paid off and then they can pay to send me a paper statement each month on a $0 balance!
- Mary Lee - 1/22/08

Just had the same letter up from 14% to 27.99%, over 6 years of no late payments and because my balance went up they are screwing me!!!
- Matt - 1/22/08
 
Just got info today. Mine was going up to 27.99%. No lates, I am even getting other b of a offers on platinum business. See ya later b of a
- Paul - 1/22/08

Same thing happened to me with Bank of America. 9.9% to 24.9%, but am sending a letter rejecting it. Screw all the credit card companies. Beware of Chase/JP Morgan, they will take your intro rate of 5% or so and put it to 29.99% then claim you sent one payment in late.
- TS - 1/22/08

This just happened to me. I had a MBNA card that was purchased by BofA and today received an amendment letter stating my rate would increase from 14% to 27.99%!! Doubling. I haven't been late on this card in over 5 years and the customer service rep said it was due to a high balance. How the hell can they do this? I can choose to reject, but then lose the use of the card and a 10 year history with them. I am going to transfer the balance to god knows where I guess. One thing he said was that I was not alone and that over 1.5 million customers were sent these letters today.
- Saluki - 1/22/08

Same here. 9.9 to 23.99%. Getting screwed like everyone else. I'm onboard with signing a class action lawsuit.
- HK - 1/22/08

Wow, I'm not alone. I thought I was a good, responsible customer of BoA who made their payment on time. I guess that's just not enough for BoA. Same as everyone else, I recieved one of these letters today, saying that my 9.99% APR was going to be changed to 23.99% (if you're reading this you probably have the letter). This is highway robbery. Either you close your account (and still pay off the balance at 9.99%, boa wins) or you transfer the account (BoA still get the balance and makes money of past interest) or you pay the outrageous APR and continue to get screwed. I wonder if this has something to do with the laws trying to be passed stating that banks can no longer raise interest rates for missed payments, and too many people filing bankruptcy due to credit card debt. Sounds like this is BoA's last effort to suck money out of their customers. Sad, really. Wish I had known!
- Mark - 1/22/08

Have you received a rate increase notice from your credit card issuer? If so, think twice before retaliating and closing your account. Credit card account closure can have a major negative impact on your credit scores. It is better to leave the account open and unused if you can.

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

Hold on to Your Hats: Fed Cuts Rate by .75%

Well...this is one way to jump start a short week! Investment news from around the world was bad while we were on vacation Monday. And things got harrier when we returned to work today.

The Federal Reserve board announced an emergency rate drop this morning, the largest single cut in rates since 1982. The new overnight lending rate is now 3.50%, back to 2005 lows. The stock market today opened with a  huge 460-point drop but appears to be recovering a bit with news of the Fed's announcement. In a survey we ran last week, 64% of CreditBloggers.com readers supported a rate cut.

Let's talk about what this dramatic rate cut could mean to you:

• Credit Card Rates - Your credit card APR's could be dropping back down to those lows you enjoyed a couple years ago. Although, the recent trend of lower credit limits, higher fees and stricter underwriting rules will likely still remain.
• Home Equity Loan & Auto Loan Rates - Both of these loan types are keyed off the Fed Rate and should drop pretty quickly. If you got an auto loan with a very high rate this year, you might want to consider refinancing.
• Home Loan Rates - Mortgage rates aren't necessarily tied to the Fed Rate but do tend to follow big changes. Desperate mortgage brokers abound offering good refinance deals. Many have also offered programs where they'll refinance you again with no closing costs if rates drop even lower. If you haven't locked in a low rate FRM, now may be the time.
• Savings Rates - Your high-yield savings account should be taking another APY hit. Look for your savings rates to drop below the 4-5% range.
• Housing Market - It's too early to tell how the Fed's rate cut will help with the mortgage crisis. Many are saying it is too little, too late. Foreclosure rates will likely continue to increase. But lower Fed Rates could mean that banks will start lending and it will easier for new buyers with good credit to snatch up some of those properties on the market. Subprime borrowers are still going to have trouble finding loans.
• Stock Market - The Fed Rate cut is a move designed to increase market stability. Although, some see the move as a warning sign that the economy is getting into deep trouble. More up and down days are likely ahead as we weather the storm.

What do you think about today's news? Share your feedback in the comments section below.

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

Capital One Says, "Create Your Own Credit Card"

Capital One just came out with Card Lab, a do-it-yourself site, where you can design a credit card that floats your boat. For starters, you have to indicate what your "credit level" is. Then you can pick and choose among basic and additional rewards, interest rates on new purchases and balance transfers, as well as whether or not you want an annual fee.

Your credit level choices are: excellent, above average, needs improvement, and limited history. Capital One defines these categories more generously than I would, but for purposes of coming up with an example I can share with you, I chose "above average," which Capital One defines as:

• I have had a loan or credit card for three years or more


• I have had a credit card with a limit above $5,000


• I have not been more than 60 days late on any credit card, medical bill, or loan payment in the last year

Once you choose your level, you are given an array of choices. Under Basic Rewards, you have to decide if you want 1% or 1.25% back on all purchases -- or would you prefer points or miles on each dollar you charge? Once you make a choice on the basic rewards, various other options change. For example, if you choose 2 miles per dollar charged, many possible additional features immediately disappear. There’s no longer a choice of an introductory APR on new purchases, and you are no longer entitled to choose among additional rewards. Plus, your only option as far as the interest rate is concerned is 16.9% and you must pay a $39 annual fee.

Not too appealing? Fortunately, it’s really easy to start over and see what happens if you make another choice. Choose one mile per dollar charged instead, and you still have lots of other possible benefits to choose – for example, how about a 25% annual bonus? That would entitle you to receive 25% more miles a year, so if you’ve racked up 4,000 miles, you would get an additional 1,000 miles. The card would come with a 0% APR on new purchases until August, 2008, with no annual fee and your choice of a variable rate of 14.9% or 16.9%. (Who would choose 16.9%?!)

It’s easy to play around with the basic and additional rewards options, and you can quickly see what happens if you choose one or another of them, be it double rewards on gas and groceries, double rewards on travel and entertainment, double rewards on all purchases for a year, bonus rewards with every purchase (10 miles, 10 points, or a dime on every purchase), or the 25% bonus I mentioned earlier.

Once you’ve settled on a rewards card, you can choose how it will look. You can go with the original Capital One logo, or you can choose something different – an eagle, flag, tropical sunset, roses, a mountain scene, and more. Once you make that choice, Capital One shows you all your choices and then makes it easy for you to read the fine print.

The Better Your Credit, the More Choices You Have

Say you have excellent credit, which Capital One describes as:

• I have had a loan or credit card for at least 5 years


• I have a credit card with a limit greater than $10,000


• I have NEVER been more than 60 days late on a credit card, medical bill or loan payment


• I have never declared bankruptcy

In this circumstance, you can choose a 0% APR on balance transfers, with a fee ranging from 0 to 2% or 3%. Or perhaps you’d like 6.9% for life on any balance you transfer now.

There are many choices, and looking at what happens when you make one or two of them is fascinating! Take a spin over to Capital One’s Card Lab, and check it out for yourself. Please let us know what you think.

Curtis Arnold - Curtis is the CEO/Founder of CardRatings.com, a website that provides credit card ratings and reviews of over 20,000 offers.

Last Man Standing

When you look at my industry today you might think everyone was playing a game of Last Man Standing. I started thinking about this when I found a several year old list of the top lenders in the country.  Four of them are gone, either having shut down or been absorbed by others and that doesn't include the two I'm about to mention The count of companies that have either shut down, have dramatically cut back operations, or have been acquired now totals 217. That goes well beyond the subprime area and affects many companies that never went near subprime.

Of perhaps more interest is the fact that it affects so many companies that would have thought to have been bullet-proof.  The obvious one is Countrywide which having seen their market value plummet by about $30 billion became an attractive take-over candidate.  Bank of America, which previously had bought some convertible preferred stock, bought the company for 15 cents on the dollar if you assume that the stock market valued its stock rationally last year.

Or maybe it wasn't rational given that the SEC is currently investigating the CEO unloading his shares as the stock was sinking. Is it reasonable to think that perhaps he had better information about the state of affairs in the industry and his company than the average guy?

The question about whether this was a good buy or not will not be known for a few years until the true extent of the liabilities becomes apparent. For example, Countrywide has $11 billion of loans in its portfolio that it would love to sell but for which there are no buyers. They are madly working trying to take those borrowers and get them into normal loans.  At that point they can sell the loans. But until they sell them, who knows what they are worth. 

The latest rumor involves Washington Mutual which arguably was the number two lender in the country.  It is in what have been described as "very preliminary" talks with JP Morgan Chase.  That's not much to hang your hat on but it look at it this way:  Six months ago the company was worth $35 billion and probably will again someday.  If you could buy the company today for $10 billion, that would be a pretty deal, wouldn't it?

If you want to see an ugly stock chart, check WaMu's using the ticker symbol WM.

Stay tuned.

Funny Money Friday: Weekend at Bernie's Check Cashing Caper

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.

In 1989, George Bush was in office, unemployment rates were rising and the country was entering a recession after federal fund rates peaked at almost 6%. Sound familiar?

1989 was also the year that Weekend at Bernie's came out in theaters. In a sign that the economy is getting bad these days, history appears to be repeating itself and cheesy 80's movies are coming to life:

Last week, two men attempted to cash their roommate's $400 Social Security check. The only problem was that their roommate had passed away. So they did what any die-hard 80's movie fan would do: they dressed him up and rolled him down to the check cashing store in an office chair. Unfortunately, real life isn't like the movies and a crowd of people quickly noticed the ruse. A detective across the street called in the authorities and put an end to the caper.

If the 80's really are back, I need to go dig up my crimping iron now. Have a "bodacious " weekend, "dudes!"

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

URGENT: Are You a Couple with Debt Issues?

Are you in a relationship and struggling with high balances? Or do you know of a couple in debt? We need someone interested in appearing on CNBC's The Millionaire Inside television special to contact us right away!

Show participants will receive a custom financial plan from the team of experts, including our own credit score guru, John Ulzheimer. This opportunity is very urgent.

Where There’s a Will … Do You Have One?

It drives me nuts, but many of my favorite people, including family members, don’t have wills. No matter how many times I bring it up, or how many helpful articles I send their way, they just won’t deal with the fact that some day, their day will come, if you know what I mean.

I understand denial, and know this isn’t a cheery subject, but it’s so important, especially if you have kids. If you don’t have a will, you’re intestate in legal jargon, and a court will appoint a guardian for them. One couple I know says they can’t decide who should take care of the kids, so that’s why they don’t have a will. To me, that’s nuts. Certainly, there’s no the benefit to putting the kids through the process of finding out what will happen to them in that strange land known as probate court, which is where such matters are resolved … by a bunch of strangers

You’re bound to make a better choice about who should take care of your children than some judge, who doesn’t know any of the possible players, how they get along (or don’t get along) with the kids as well as who will be best at child-rearing, and who is the most responsible with money. They don’t have to be the same person.

I could go on and on about the other reasons why a will and other basic estate planning is crucial … and already have. LOL! Here’s an article I wrote for Credit.com that covers all the basics. If you haven’t dealt with these issues yet, do it now for the ones you love. If your parents are still alive, talk to them about the key estate issues. (I give hints in the article for how to broach such subjects with the old folks.)

Wouldn’t you be the better judge? For example, if you have a will, you can make sure your hard-earned money goes to the people you want to get it. You can lay out the conditions and the timing – maybe Junior shouldn’t have complete access to his inheritance until he’s 25.

Without a will, a lot of money may be eaten up in the process of deciding who gets what. That’s what happened to Marilyn Monroe’s estate after she died without a will. Her heirs got around $100,000, while $1.5 million was consumed during the 18 years of probate fights.

Show Me the Money
I came across a site the other day that I think will finally make the will-less see the light. It's called MyStateWill.com, and it makes it easy to see what will happen if you go toward those golden gates without leaving a will behind. At the bottom of the home page, click on your state. You'll be taken to a calculator designed for your state – they all have different rules about the details of intestacy. Answer a few questions, and you'll soon see who would get how much of what you leave behind, if you die without a will.

If that doesn't motivate you, consider this: Some of the intestate rules are nuts and way behind the times, especially given how complicated families are these days. For example, I learned on this site that if you've never had children, in 29 states your spouse has to split your estate with one or both of your parents. If your spouse isn't the parent of all your kids, s/he doesn't inherit as much in 27 states. And if your spouse has kids with someone else, in nine states, your spouse would get less, even if you have children together.

Don’t get me started on “together” – even if you have been living together for decades – blood relations inherit, whether you’re on speaking terms, or not. But do check out MyStateWill.com and let us know if you’re surprised about who would inherit from you. I was amazed to see who would get my worldly goods, but fortunately, I have a will. How about 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.

Reader Questions: What Happens When Limits Aren't Reported?

Consumer credit law states doesn't have any provision requiring creditors and lenders to report data to the credit bureaus. The only specification is that if a business chooses to report, the information they provide has to be accurate. The can be frustrating for consumers. Especially, in the event where a major account (such as a mortgage) isn't reported or when a creditor chooses to only report partial information. Here is Sarah's question:

When your credit utilization score is calculated, what happens if you have credit cards with no limit? Does this somehow help you in that category by making it impossible for you to be over the recommended 10% utilization percentage?

As you may know, credit utilization (the ratio between your total credit card debts and total credit card limits) counts for 30% of your credit score points. It is a significant factor in your credit score. Unfortunately, it is also a common area where creditors choose to under-report account information.

There are a couple different ways that creditors may incompletely report credit limits. Some report the limit as $0 or simply don't report any number at all. In this case, the debt-to-limit ratio could be calculated as your balance vs. a $0 limit, or 100% utilization for the card. Not good.

Others report the limit as the highest balance the card ever had. This can be good if you once had a high balance and now only use 10% of that amount each month. Bad if the highest balance wasn't that much higher than you standard monthly use.

Credit utilization is largely evaluated as a total for all the card on your credit report. So, if you have one card with a $0 limit and another with a $40,000 limit, you'll probably fare well.  You can also lose points for having a single card "maxed out." This could occur in the first example we presented.

Unfortunately, there isn't much you can do to resolve this situation. Calling your creditor to complain or filing a dispute with the credit bureaus won't likely result in the credit limit being reported to your account. Your best move is probably to avoid using the card that has no reported limit and to have other cards listed on your report with posted limits.

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

Vote: Do You Think the Feds Should Drop Rates Again?

Economists and investors are eagerly waiting for the outcome of the next Federal Reserve Board meeting on January 30. With the stock market running wild and increased talk of recession, many are calling for another interest rate cut. This would potentially bring the federal funds rate down to 3.75%, the lowest it has been since September 2005.

Some are even asking that a half point rate cut happen before the next scheduled meeting. Others are worried about what a rate cut would do for inflation and don't think that it would help much with the existing credit crunch and mortgage crisis. What do you think?

Opinion Polls & Market Research

Reader Question: Bankruptcy Expiration Made my Score go Down?

Credit scores are mysterious and tricky beings. Their favorite hobby is doing exactly the opposite of what you would think logical. Bill wrote in with this question:

Why would my credit score drop by 25-30 points on all three credit reports when my bankruptcy cleared after 10 years?

There are a couple factors potentially at work in Bill's credit score: 

1. Switching Scorecards - Credit scores have models within the model called "scorecards." Customers matching specific criteria are scored within certain scorecards. When you switch scorecards (ie: going from a bankruptcy to a no bankruptcy consumer) your score may jump in adjustment.

2. Credit Age - When your bankruptcy record expires, all the other accounts marked as "Included in BK" may also fall off your credit report. This sudden drop credit history can cause your score to change.

3. Thin File - This doesn't sound to be the case for Bill, but it is fairly common for consumers to go from having a score with their bankruptcy records to having no score when they expire. This is due to the consumer not rebuilding their credit after a filing by establishing new accounts and using them responsibly.

With a few more months of using his credit responsibly, Bill's credit scores should rise beyond his pre-bankruptcy-expiration mark.

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

Funny Money Friday: Top 10 Worst Financial Resolutions for 2008

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.

Do you have a financial resolution on your to-do list for 2008? Planning to improve your credit? Get out of debt? Increase your savings? We've heard them all! Here's a list of the top 10 worst financial resolutions people might have for 2008:

10. Buy a new Jeep Grand Cherokee! Not only is it expensive and likely to depreciate fast, but you'll also have the benefit of one of the worst fuel efficiencies around with a terrible 11 MPG.

9. Close all your credit cards to get a clean slate. You'll end up destroying your credit scores and having to start from scratch.

8. Work on improving your credit score from 800 to 850. I talked to a reporter about this earlier in the week. Odds are that you'll actually do more harm than good trying to achieve the perfect score. Plus, there's not really an interest rate difference between the two scores.

7. Subscribe to LifeLock. There's nothing that this service offers that you can't do for free yourself. Save your $10 a month and call 888-5-OPT-OUT, go to annualcreditreport.com, and request your own fraud alerts.

6. Stop contributing to your 401(k) and IRA. The tax benefit of these easy retirement savings accounts is a no-brainer.

5. Keep your money in a traditional savings account. Why earn over 4% APY on your savings when you could rake in a health 0.04% from a savings account with your bank?

4. Don't check in on your credit cards. Do you know what rates and fees your credit cards are charging you? If they're not to your liking, call and negotiate a reduction.

3. Don't shred anything. Who cares if identity thieves can easily grab full credit card applications and other sensitive documents out of your trash.

2. Carry credit card balances. Be charged copious amounts of interest from your creditors and destroy your credit scores while you're at it.

1. Never check your credit. Your credit reports and credit scores have a huge impact on the rates you'll receive on insurance, credit cards, loans, utilities, cell phones and more. Check your credit once or twice a year at least to look for inaccuracies and signs of identity theft.

I hope none of these are on your list for 2008! Have a great weekend.

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

When the Debt Collector Is Not Wrong

Here is a reader question about debt collectors we received this week:

Back in 03, I purchased a computer for $1500.  A week later the same computer was advertised at $499.00 (what a difference huh?) so i tried to get in touch with any sales rep to bring the price down.  I got no where, I sent them letters and nothing. In 2004, I contacted corporate office and they plain and simple told me that they could not help me. I never made a payment on it. 

So just yesterday some attorneys called my cell to get payment. I answered no questions. I am going through a background investigation process for a job and they checked my credit and requested information from the collection agency, and that collection agency gave my information to the attorneys.

I do not want to make a false move and get myself caught up.  Now they want me to pay $2300.  I live in San Diego. Can you help?

A: You have discovered an unfortunate and expensive lesson -- when it comes to disputed bills, lenders often have the upper hand. I've talked to many consumers over the years who refused to pay a bill for one reason or the other, only to discover that it was turned over to collections and their credit scores took a gigantic nosedive.

In your case, I am not aware of any consumer protection rules that would require the computer company to adjust your price after you bought your system. If your contract allowed for returns, your best bet would have been to return the computer, then repurchase it at a lower cost. But unless the company advertised some type of "lowest price" guarantee, my guess is you were out of luck. (There are situations under the Fair Credit Billing Act where you can refuse to pay a charge on a credit card bill, and I am assuming those rules didn't apply here.)

However, the fact that you incurred this debt a little over four years ago may work in your favor. According to the very helpful guide Money Troubles, the statute of limitations for written contracts in California is generally four years. It would be a good idea to talk with a consumer law attorney in your area to learn whether that is the case in this situation. If you continue to refuse to pay, the attorney/collection firm would have to take you to court to collect and you could raise the statute of limitations as your defense and they would lose. If the debt is too old, the consumer law attorney can help you write a letter stopping their collection efforts.

Keep in mind that whether you pay or not, this debt can only be reported for seven and a half years from the date you first fell behind. The only way it should be reported longer is if the attorney/collection firm sues you and successfully obtains a court judgment against you.

However, looking at this objectively, you did buy the computer. The fact that you felt ripped off and ignored shouldn't mean you pay nothing at all. When you talk with the consumer law attorney, ask him or her whether you can settle the debt for less than you owe without jeopardizing your rights. Sometimes paying an old collection account will "toll" or revive the statute of limitations -- starting the process all over again. If you can settle the debt, it may be best to do that and move on.

If you can't settle it in a way that seems fair to both sides, or if the debt is too old, you may want to buy an inexpensive computer from the same company (pay cash this time!) and donate it to a worthy cause. Create some good debt karma to balance out the bad.

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

If You Have a Student Loan, Have I Got a Site for You

Almost two-thirds of college grads leave campus owing money on student loans. On average, their student loan tab is close to $20,000 … and growing. Student debt levels grew 8% between 2005 and 2006, while starting salaries rose by only 4%, according to the Project on Student Debt. And another 5 million or so of us take out student loans every year.

Even in good economic times, far too many people find themselves in student loan hell, with huge debts that haunt them and have them paying interest on interest for decades. With the economy tanking, lots more people just starting out are going to join them there. All it takes is a dose or two of career confusion, perhaps compounded by a job loss or an accident, and someone with a bright future can soon face a very dismal prospect: ballooning student debts and financial woes for as long as they live. (I am not exaggerating.)

If you or someone you love has a student loan, here is a site you might want to bookmark: Student Loan Borrower Assistance, which was funded by the Project on Student Debt and painstakingly researched and developed by the National Consumer Law Center. Turning to it sooner rather than later can help you save a fortune as well as untold grief.

I wish it had been there when I was trying to help a young man I'll call Jim. He was the first person in his family to go to college, and although he accumulated some debt there, most of it piled on after that. When we met, Jim was so overwhelmed by his burgeoning debt and the tactics of the debt collectors, that he was seriously thinking of suicide. Until recently, it was hard to find authoritative information on what people should do if they think they'll have … or are already having … a problem paying back their student loans. Jim had a bunch of loans and got conflicting information from people who had a vested interest in the decisions he made.

There are no fancy bells and whistles on Student Loan Borrower Assistance -- just clear information from an independent, reliable source. The focus is on making it easy for people to find answers to their questions and solutions to their student loan problems, ranging from how to figure out what kind of loan(s) you have to how to handle an aggressive debt collector.

You can read about specific loan programs, repayment options, ways to avoid and get out of default, policy issues, and legal briefs. Certainly, the site's very straightforward Find a Solution tool would have been very helpful to Jim. And we sure would have taken advantage of the site's excellent Where to Go for Help section.

If you have student loan woes, you have my deepest sympathy. I've seen how they can ruin a young person's life. Don't ignore them. They will not go away. Instead, please check out this site and let us know what 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.

 

Reader Question: Should I continue with debt settlement or just pay off my accounts?

Christina wrote in today with a tricky situation, she's between a rock and hard place when it comes to getting out of debt:

Currently, I am signed up in debt settlement, with consumer credit counseling. I still keep getting threats to be sued for the credit card bills.  When I get my income tax return should I just take the bills and pay them off to avoid totally ruining my credit history?

I am going to turn in my lease in a year and I don't want to be denied another lease/loan because of those debts. What should I do?

This is a bit of a quagmire. Usually, once you enter debt settlement, makes sense to stick with it to the end. A lot of the damage has already been done to your credit (debt settlement involves stopping your bill payment and that leads to a lot of damaging late records). You could still get a reduced settlement amount and the creditors may or may not be serious about suing (the larger the amount, the more likely they are to take action). 

It really depends if Christina feels that the counseling program is doing a good job negotiating on her behalf and her case will be resolved soon. Or if she feels that she's just wasting time.

If she does have the money to repay her debts, this can also be a good option. She may end up paying more toward her debts, but she'll stop new late payments from reporting to her credit records. If she does decide to pay, it is important to get the final agreement in writing from the creditors so they don't continue to try collecting on the accounts in the future.

Either way, her credit won't likely improve that much in the next year. Late payments over 90-days cause credit score damage for up to 7 years. It's only the 30 and 60-day late records that cause temporary harm. If she pays off her debts quickly and works really hard to rebuild healthy credit (paying her bills on time, maintaining a low debt-to-limit ratio, applying for credit in moderation), she could see some improvements before the lease turn-in next year.

In this case, it really comes down to time vs. money.  She can save time and start rebuilding earlier by paying the debts off now. Or she could save money by waiting for debt settlement to produce a reduced repayment amount. What would you do?

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