Funny Money Friday: Currency Devaluation Travel Tips

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'm in the middle of planning a vacation for next fall...and the timing could not be worse. The dollar has fallen to a 3-year low against the yen and the weakest ever point against the Euro. If this continues, it won't be long until a dollar will get you twenty cents and a smirk. So, savvy travelers need to start thinking of creative alternatives to that trip to Paris:

Turkmenistan - The average hotel room in this dessert oasis is around $50 a night. Pay no attention to the reports that it serves as a "transit country for Afghan narcotics bound for Russian and Western European markets" and that border areas may present an "unstable security situation and the presence of landmines."

Bulgaria - Croatia was the new Greece last year. Now Bulgaria could be the next Croatia. Some former Soviet quirks and elements of "social and economic chaos." But very affordable!

South Dakota - What the heck. America is one of the best travel bargains in the world right now. And South Dakota? Well...Mount Rushmore is there? And they've got buffalo?

Have a great weekend!

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

Foreclosure Update

A couple of years ago when I started writing about the potential effects of profligate lending, everyone was caught up in the hoopla about "expanding homeownership opportunities."  Home values were soaring and everyone associated with subprime lending was making obscene amounts of money. No one wanted to hear negative news.  Even my letters to HUD never got a response.

Let's be charitable and say that their attention was elsewhere, but regardless, I know how the operators of the radar station on Oahu felt on the morning of December 7th when they called headquarters to warn of the incoming Japanese planes and no one paid any attention to them.

What is bizarre is that even people in positions of regulatory power like the Comptroller of the Currency whose agency regulates the Nationally Chartered banks, the ones with N.A. after their names, didn't do anything even after they recognized the problem. For example, in December 2006 John C. Dugan, head of the Office of the Comptroller of the Currency, gave a speech where he warned that Option ARMs, the time-bomb loans with the artificially low payment rates, were dangerous for consumers.

Well, they were dangerous for lenders too, as we have now found out. The question is, "Why didn't he use his regulatory power to stop or slow it?" Indeed, what's the purpose of having power if you don't use it?

Today, we have a different situation. Every day the papers have articles on one aspect or another of the subprime mortgage-credit crisis-foreclosure problem.  Now it's hot news.

The government has come up with several programs to help rescue people in trouble, yet after a little time has passed, it seems as if each program helps only a disappointingly small percentage them.  They are not solving the problems!

There are a couple of new proposals on the table and we'll see how they go through Congress.  One would be a revision of the Bankruptcy Act that would allow judges to modify mortgage loan terms, a power they do not now have.

Another one which I particularly like would provide relief to otherwise creditworthy people whose homes have gone down in value to the point where the loan balance is higher than the value of the home. These people are "untouchable" in the current market.  They can't get a normal loan even though by every measure other than LTV, they are excellent borrowers.

We'll just have to watch to see how this unfolds but I sure hope that people move more quickly in implementing programs.  There is no sense coming up with a solution after everyone is dead!

You might be interested in seeing a map that shows the concentration of subprime loans.  When you look at it you are likely to note a strong resemblance to bomb craters.  Many borrowers and lenders will agree with you.   CLICK HERE

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.

Share Your Story: Burned by Convenience Checks or Credit Card Marketing?

Have you been burned by accepting an unsolicited credit card or loan offer through the mail?  Or have you used a credit card convenience check only to be shocked by the rates?  Annoyed by receiving phone calls from mortgage lenders as soon as you applied for a refinance?

If so, contact us right away. We're working on a story about the intrusive and sometimes damaging ways that financial services companies market to consumers. Email your story, post it in the comments below or give us a call at 415-901-1559. We want to hear from you!

PS: If you're still having this problem, remember that you can dramatically reduce the number of unsolicited credit card and loan offers you receive by opting-out from the bureau marketing lists here.

There’s Gold in Them Thar Drawers

With the price of gold at $958 an ounce (as I type) you can get some much needed cash by selling broken jewelry, gold cuff links from the back of a drawer, or, for me, my long forgotten high school ring . . . if I could find it. It's not an heirloom to anyone and I HATED high school.

Before you run off to sell your "scrap gold," here's what you need to know:

The price of gold rises and falls, much like the stock market does. Right now, it's hovering around record levels. Will it be better in a month? I have no clue! If I could predict commodity futures, I'd be walking along a beach, far away from the snows of upstate New York. But it's safe to say that now's a very good time to sell, and it's certainly a good time to get yourself educated about selling scrap gold.

Who wants your old gold?
Maybe you've seen the ads online or in your local newspaper – for example: "The Highest Prices Possible,""We Buy It ALL$," "Have Gold? Want Cash?" While some of these dealers may be reputable, as always, it's much better if you work with a well-established dealer. Get recommendations from local reputable jewelers (some of whom may offer to buy your scraps), then check with the Better Business Bureau. Be very leary of fly-by-night dealers who advertise that they'll be at a local motel for the weekend.

Before you trade-in your high school ring or old gold tooth for cash, "comparison sell" by looking up the price of gold. Then call around to find out what dealers are paying. While there are many places on the 'Net that will buy gold, I think it makes a lot of sense to eyeball someone. Chose a dealer who you'd be comfortable asking to match or beat the best prices being paid nearby.

What will you get?
If your collection of old jewelry weighs an ounce, will you get $958? Sorry to bust your balloon, but the answer is no – for two main reasons:

1. Gold jewelry isn't pure gold. It's mixed with other metals, usually copper. You'll only be paid for the portion of your scrap jewelry that's actually gold.

Gold quality is expressed in "karats." Pure gold is 24 karats or 24K. Here is the purity of other common grades of gold.

Karats            % Pure

18k                    75%

16k                    67%

14k                    58%

12K                    50%

10K                    42%

2. There are many mouths to feed. Once the dealer buys the gold from you, it will be sold to other dealers or directly to refiners who will melt it down and remove the impurities. This process costs money, and there has to be a little something in it for everyone who will handle your gold along the way to the refinery and then off to whatever it will become next.

The upshot is that you can expect to be paid around 50% or 60% of the day's gold price – assuming we are talking about something that's 24K gold.

How does it work?
Precious metals are bought and sold by weight. Your gold will be weighed by the dealer in "Troy" ounces, which are 10% heavier than what we think of as ounces – 31.1 grams as opposed to 28.3 grams. So if you weigh your gold on a weight-watchers' or postal scale, deduct 10% to find the number of Troy ounces.

Troy ounces are further broken down into pennyweights (PWT). There are 20PWT in each Troy ounce of gold.

Let's say you know where your high school ring is, you're thinking of selling it, and want a sense of what you'd be paid for it. Here's how to figure that out:

• Check inside the ring for a "gold mark." It may say 10K, which means your ring is about 42% pure. (Some rings are 14K, 18K or not gold at all.)
•  Weigh your ring. Using your kitchen scale, it might weigh 0.5 ounces (half an ounce), which translates to 9PWT if you do the math (.0.5 x 0.9 = 0.45 x 20 = 9PWT).
• Check the gold price. We'll use today's $958 price for a Troy ounce.
• Divide the price by 20 to get the PWT price: $47.90 for each pennyweight of pure 24K gold. Assuming your ring is 10K, the top price for each pennyweight is $20.12. If  you get 60% of that from the dealer, or $12.07 per PWT, your ring would fetch $108.64. (If there's a stone, it'd be a little less.)

Not bad for something you no longer care about, huh? So gather up all the scrap gold in your life, sell it, and use the money to pay down some pricey credit card debt – it's a "golden" investment opportunity!

Please let us know if you sell off some scrap gold . . . and what you do with the money.

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.

Don't Sell Your Identity for a Box of Girl Scout Cookies

It's Girl Scout cookie time again.

I love their cookies (Thin Mints and Tagalongs in particular), and the Girl Scout organization. Between my daughter's friends and the sales at the local supermarket, I usually end up with a freezer full of cookies.

But I was appalled recently when I went to write a check for the cookies I ordered and was told in no uncertain terms that I had to write my Driver's License number on my check! When I refused, I was told I couldn't pay by check.

What are they thinking??

My good friend is a Girl Scout troop leader, and the training she receives is rigorous. She's been through many hours of classes -- many designed to ensure the girls who participate are safe. Yet the same organization is putting their supporters at risk by insisting that driver's license numbers be recorded on checks.

How many hands do those checks go through? How are they secured before they reach the bank where they are cashed? What happens if even one identity is stolen as a result of this policy?

Maybe along with the cookies, Girl Scouts should also sell identity theft resolution services.

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

Mark Your Calendar: Women's Financial Conference in San Francisco

Join me on April 12, 2008 for a day full of money and credit education! I'll be presenting two sessions on credit management at the Money Wi$e Women Conference in downtown San Francisco. Other keynote speakers include:

• Marcia Brixey, author of Becoming a Money Wi$e Woman: Getting your Financial House in Order
• Ann Tardy, author of LifeMoxie! Ambition on a Mission: 9 Strategies for Taking Life by the Horns
  
• Mikelann Valterra, author of Why Women Earn Less: How to Make What You're Really Worth

Your $79 registration include sessions from 9 to 5pm, materials and lunch. Click here to register.

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

Maybe, Maybe Not

I was chatting with a client the other day and he tried to get me to make some predictions about where interest rates were headed. Of course, I don't have any more ability to predict the future than you do, but he didn't want to accept my protestations. He wanted answers. So I told him that what was going on was a case of "maybe, maybe not." Here's what I meant by that.

In Ye Olden Days I think that it was easier to predict interest rates because you only had to keep track of a few of variables, the most important of which was the anticipated rate of inflation. When the inflation rate was rising, the model everyone used said that interest rates would rise too. That meant that the interest rate you could get on an investment minus the rate of inflation still yielded an acceptable return.

There were some other variables here too, like the current growth rate for the Gross National Product, the projected government surplus or deficit, and the level of the national debt. But in a way these all tracked back to their potential impact on the rate of inflation.

Today things are a lot more complicated. For openers, we have a world economy where the economies of all the other countries are all intertwined with ours.  So it isn't just our rate of inflation, still an important variable, but how our rate of inflation compares with that of other countries. Is that important? Maybe, maybe not.

And then there is the old National Debt issue. Today, Japan and China own more than a trillion dollars of our Treasury securities.  Indeed the $159 billion economic stimulus package just enacted will largely be financed by Japan and China so American consumers can go out and buy more of their toys and electronics. Is that important? Maybe, maybe not.

This is also related to the trade balance or, more properly, the trade imbalance.  In the early 1970s our balance of trade went from positive to negative and I used to worry about that.  Of course, the imbalance was only a couple of billion dollars a year. Now, it's a couple of billion dollars every day!  Is that important? Maybe, maybe not.

Another factor is the exchange rate between the dollar and the currencies of our trading partners. It used to be that our dollar was worth a lot more than the Euro, the British Pound, and the Yen, for example.  Today it's just the opposite.   That is obvious to anyone who has traveled to Europe where everything is horribly expensive. When you whip out a bunch of dollars, they don't buy much. Is that important? Maybe, maybe not.

And then there is the fact that we still have to import a gazillion barrels of oil every day.  It isn't $3 per barrel oil either, or $10, or even $50 oil.  It's $100 per barrel. Of course, that's probably related to the fact that the oil producers aren't all that keen on collecting a bunch of devalued dollars any more. They want something that is worth something and although the price of oil is commonly traded on the basis of dollars per barrel, you can bet that when the value of the dollar declines, the price of oil in dollars goes up. Is that important? Maybe, maybe not.

The only reason why the rates are jumping around and why the stock market is going up and down by 200 or 300 points every day is that no one, especially all the experts in New York and Washington and London and Paris and Singapore Hong Kong and Tokyo has any more of an idea about what it all means than I do.

This is going to come as bitter medicine to some who have particularly strong feelings about something they think is going to happen in the future.  In spite of how strongly you feel about something, no matter how thorough your analysis, you simply do not have any ability to predict what might happen tomorrow or next week or next month.  The more that people think that they have found a pattern and can predict the future, the more expensive the lesson will be when reality finally rears its head.

Still think I'm wrong?  Who gave Barack Obama or John McCain a chance just a couple of months ago?

All of us, you included, have to get used to the idea that today is today and you have some options available today. If you have to make a decision today, look at the facts as you see them today and go for it.  Good advice?  Well, I hope it's better than, "Maybe, maybe not."

Funny Money Friday: Taking a Break from the Credit Crisis

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 can't be the only one suffering from a case of credit crisis burnout. Since we've been predicting trouble with the housing market since 2005 here at CreditBloggers.com, this is our third year of playing economic gloom watchdog. 

It's old news that housing, lending and credit card markets are feeling the pinch. Now student loans are in trouble and who knows who will be next. I'm frankly getting tired of reporting bad news day after day. So I've decided to use Funny Money Friday this week to highlight a couple good things about the credit world. Here we go:

• The credit system doesn't consider income or net worth. This alone is a good reason to feel optimistic. I love that our credit system doesn't know the difference between Bill Gates (Microsoft Founder) and Bill Jones (average-joe handyman). In fact, the handyman is likely to have a better credit score than the billionaire.
• You can't buy your way to good credit. This ties into the last one. The credit system is all about actions and personal responsibility. No amount of money can buy you a good credit score.
• Lending works. It is all too easy to blame lenders right now, but the American lending system really is amazing. There are few other countries in the world where you can fairly easily and affordably borrow in order to start a business or buy a home.
• The system is all about second chances. You can absolutely destroy your credit with a bankruptcy, foreclosure, etc, etc. and still get a completely clean slate once the records expire in 7-10 years.
• We have options in a financial crisis. Credit cards and other financial tools allow us to manage a money emergency without having to pawn off valuables or take other dramatic measures.
• There aren't debtors prisons in the US. Yes,  recent bankruptcy reforms haven't been kind to consumers. But we're still lucky to live in a country where your financial troubles won't land you in jail.

Whew! I don't know about you, but I feel better. Is there something in the financial world that you're thankful for that I've missed? Share your appreciation in the comments section below. Have a great weekend!

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

 

Three New Reports on Identity Theft: Same Problems & Old Twists

1. The FTC just released “Consumer Fraud and Identity Theft Complaint Data January-December 2007,” its run-down on the 813,899 consumer fraud complaints received in 2007. The key findings are:

• The total number of complaints is up considerably, with the FTC receiving almost 140,000 more last year than in 2006.
• Fraud cost these people over $1.2 billion, with their median expense being $349 each.
• Identity theft is in the number one spot for the seventh year in a row, accounting for almost a third of the 813,899 fraud complaints received in 2007 by the FTC, Better Business Bureaus, and over 100 other agencies.
• Credit card fraud was the most common form of identity theft that was reported, accounting for 23%.

Tip: If you are having an identity theft emergency now, click here for Credit.com's advice. Also, click here to file a complaint with the FTC or call 877-382-4357.

2. The second new study out this week is the “2008 Identity Fraud Survey Report” from Javelin Strategy & Research, which includes the latest findings from its long-running study of identity fraud in the US. This time, phone interviews were conducted with over 5,000 people.

On the good news front, there was a drop of 12% in the incidence of identity theft, which Javelin says represents a $6 billion reduction in cost to consumers, from $51 billion in 2006 to $45 billion in 2007. The bad news is especially bad if you live in California, Illinois, Idaho, West Virginia, and Delaware, where Javelin found the highest incidence of ID fraud. And while the overall incidence may be down, the average cost to people who do have to deal with the theft of their identity rose 25% over 2006, from $554 to $691 each.

Plus there was what Javelin calls “a sharp increase in ‘old-fashioned’ mail and telephone fraud, including Vishing.” These methods grew from 3% of the cases in 2006 to 40% in 2007. In case you’re not familiar with it, vishing occurs when fraudsters call you up, saying they’re from your bank, for example, and there’s a problem. They need your account number to straighten things out. Or you might be instructed to call “the bank’s security department,” and leave a message “verifying” your account info.

3. Out just today is a warning to computer users of a vishing twist, from Sophos, the IT security and control firm. Sophos is urging us “to be extra vigilant” in responding to emails from financial institutions, “no matter how genuine the correspondence appears.”

Sophos’ warning highlights the experiences of the customers of a small credit union, who are being targeted with phishing emails that actually attempt to cash in on warnings about phishing posted on the credit union's own Web site! These fake emails look very legit and even include correct links for departments at the credit union – as well as the correct email address for reporting abuse! The email ends with the vish – a fake phone number where customers should call to verify their details.

As Soppos explains it, if you were to call this number, an automated voice would assue you that you won't be asked for any personal information, like your Social Security number. Then the recording asks for your bank card number and PIN. Once they have that info, ID thieves can access your bank account at an ATM - or they can transfer your balance to an account in the Caymans.

Top Tips Based on Today’s Trifecta of Identity Theft News

• Don’t respond to emails or calls that you get from lenders – or from anyone else asking for personal or financial information over the phone or the Internet. Call the customer service number for your credit card or the number for your bank’s local branch . . . yourself.
• Make sure your computer has anti-virus and anti-spyware software, as well as a firewall. Be certain to regularly update them, along with your browser and operating system.
• Check your bills monthly and credit reports regularly. Look for unusual charges and accounts you didn’t open. In particular, keep your eyes out for wireless accounts. Javelin found that ID thieves opened them the most frequently – even more than new credit card accounts.
• Don’t carry your Social Security with you. Put it somewhere safe.
• Shred or otherwise destroy all sensitive documents, receipts, and mail.
• Only use passwords that combine numbers and letters, for example, jc9ae7q. Memorize them, as well as any PIN numbers, which should be equally complicated. Don’t write them down.
• Leave your Social Security number and driver's license number off of your checks. And watch out what you do with those checks. Getting ahold of them is one of the most common ways ID crooks steal information.
• Consider using online banking and bill paying to prevent ID fraud.
• For more of Credit.com's advice on what you can do to keep your identity safe, click here.
• Share all! The sneakier the scammers get, the more important it is that we let each other know their latest schemes. Have you had a recent experience with phishing, vishing, or identity theft? Let us know here, and report it to the FTC!

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: How Long Does it Take for my Credit Report to be Updated?

Debbi recently wrote in with this question:

My New Year's resolution is to get my credit score to a 780 or higher. I have paid off most of my outstanding debts. May 24, 2008 is my last outstanding bill be to paid off.  I would like to know when should I order my credit reports to assure that the outstanding debts are reported correctly on my credit reports, and how long before I see some improvement in my credit score?

This is a great New Year's resolution! Reducing your debt balances can often help increase your credit score. It's all about that magic 10% debt-to-limit ratio we talked about last week.

Debbi's credit score should improve incrementally as she pays down her debts and reduces her debt-to-limit ratio. She'd see an improvement when her ratio went from 50% to 40%, 40% to 30%, etc. When she breaks through below the 10% mark, she should get another boost.

Credit card companies report to the credit bureaus on their own schedules. Usually, once every 30-days per customer. This could be 30-days from the 1st of the month or any other day of the month. If she paid off her bills, it should take 30-60 days for the new balance to be reported to the credit bureaus.

She could aim for ordering her credit reports and scores 60-days after the bill is paid off. Or she could order a credit monitoring program that will give her access to her credit all month long. Personally, I like Unlimited Credit Monitoring from TransUnion. For $14.95 a month, you can check all three of your credit reports and credit scores every day.

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

Is Paying Taxes with your Credit Card Really Rewarding?

Thinking of getting a little something back on this year’s taxes by paying with a rewards card? There are ads seemingly everywhere touting how you can quickly rack up some great rebates by doing so.

But before you jump on the bandwagon, be sure to crunch the numbers first. As tempting as it is to pile on the rewards points and air miles by charging your taxes, it is rarely as rewarding as you might think.

First off, you’ll pay for the ease of paying your taxes by credit card with a 2.49% convenience fee. This fee isn’t charged by the Internal Revenue Service. It’s charged by credit card service providers such as Pay1040.com and Official Payments.

These companies act as intermediaries between taxpayers and the IRS. They validate credit card numbers and expiration dates, obtain the authorization from card issuers and issue confirmation numbers to taxpayers.

They then forward the payment to the IRS. And a tax payment listed as “United States Treasury Tax Payment” is charged to the taxpayer’s credit card account, along with a convenience fee.

Let’s look at some examples:

If you pay a $2,000 tax bill on your favorite cash back rewards credit card, you’d wind up paying a $49.80 convenience fee. Let’s say your card pays you 1% cash rebate for every dollar you spend with the card. By charging your $2,000 tax bill, you’d earn $20 cash back, but that’s more than offset by the $49.80 convenience fee.

Paying an extra $49.80 to earn $20 doesn’t make a lot of sense does it?

And while you may earn about 50 cents cash back on the convenience fee, you’re still shelling out an almost $50 fee for roughly $20.50 in rewards. That’s a difference of $29.30. And that’s not so rewarding, is it?

What about paying your tax bill with your favorite air miles credit card?

Let’s say you have a $3,000 tax bill and you’ll earn one air mile for every dollar you charge on your taxes. Earning those 3,000 air miles might be nice, but you’ll also be charged a $74.70 convenience fee. Are you so desperate for a few thousand air miles that you would be willing to pay an almost $75 fee?

The heftier your tax payment the higher the convenience fee you’ll wind up paying.

If you’ve got a $5,000 tax bill, you’d be charged $124.50 for the convenience of paying your taxes by credit card. Use a cash back card with 1 percent rebate and you’d earn roughly $50 in rewards, $51.25, if you count cash back earned on the $124.50 convenience fee.

Once again, the rewards just don’t add up. Paying a $124.50 fee to earn $51.25 in rewards isn’t much of a deal.

Even an avid traveler eager to rack up air miles by charging a hefty tax bill may want to think twice.

Let’s say you’ve got a $10,000 tax bill, and you really like the idea of earning 10,000 air miles by charging your taxes on your favorite air mile credit card. How do you feel about paying a $249 fee? That’s the convenience fee you’ll be charged for paying a $10,000 tax bill on a credit card. For that much money, why not just book a domestic airfare yourself?

Another thing to consider when charging a tax bill with a rewards card is how quickly you’ll be able to pay the balance in full.

If you’re planning on revolving the balance from month to month, you’ll be hit with finance charges, further eroding any rewards you gain by charging your taxes.

Your best bet is to charge your taxes to a rewards card with a zero percent introductory rate for new purchases. The longer this teaser rate lasts the better – a zero percent offer for a year or more would be ideal.

Of course, the absolute best strategy is to pay off your card balance straightaway and avoid all finance charges. Also, bear in mind the IRS does offer various other payment options that may be more appealing.

This year’s tax returns are already pretty rewarding, with many Americans set to receive tax rebate checks this spring. So you may want to pass on using a not-so-rewarding rewards card to pay your taxes!

Granted, your tax rebate check could be used to offset the convenience fee and any finance charges you may pay for charging your taxes on a rewards card. But is that really how you want to spend your tax rebate money?!? I don't know about you, but I can think of a few thousand other ways that I'd rather use my check! :)

Curtis Arnold - Curtis is the CEO/Founder of CardRatings.com, a website that provides credit card ratings and reviews of over 20,000 offers. Lucy Lazarony, a freelance personal finance writer based in Florida, assisted with this article.

Lessons in Real Estate Fraud

With all the real estate messes around some tales of woe are starting to filter in.  The most recent one is where some heartless bas*&*^ sold a home in Florida as an investment property to a retired nurse in California. What's wrong?

First, in my humble opinion, people should not by rental property further than a half-hour drive from where they live unless you have someone you know and trust, like a relative, manage it for you. So she unwittingly violated this rule.

Second, she got 100% financing so just had to come up with closing costs. That might be viewed as good but that loan came at a horrible price, like 9% plus PMI. Her payment is gagging. Total mortgage payment and taxes and insurance is more than $3,500 per month.

Third, she can only get $950 per month rent, which probably always was the market rent. That means that she has a negative cash flow of $2,500 per month, $30,000 per year. Rule of thumb is that you want to try to breakeven cash-flow wise, at least a couple of years out. On this property rents may not get to $3,500 per month until the 22nd century.

Fourth, a modest negative is OK if the property is going up in value. But in this case the property has to go up in value at least $30,000 per year for her to break even. Do you think that is happening in Florida, one of the most over-built markets in the country?

Bottom line, she was a victim of fraud, perhaps not legal fraud because I do not know what representations were made to her, but I think that she might have been a straw buyer for some crooks who were trying to unload excess property.  I never thought I would tell someone to walk away from a property but this is an exception to that rule. Sure, it'll mess up her credit but she is a 69 year old lady and really doesn't need credit at this stage in her life.

In another case I am aware of a foolish buyer entered into a lease option agreement with a guy. She gave him $25,000 as an option fee and that and a goodly portion of each monthly payment was to apply toward her down payment when she exercised her option. There is nothing wrong with that kind of a deal and when entered into between two honest people, it can work well for both.

But in this case, the seller did a lot of these transactions, over 100 it is said. What he also did was to refinance each property, probably with fraudulent appraisals, to pull cash out of the property, thus stripping the equity.  This home now has over $575,000 in loans against it. Her option price is $470,000, probably what the home is worth today but the lender who is holding the $575,000 loan isn't going to permit a sale to her unless the entire loan is paid off.

She may get lucky and the seller might approve a "short sale" but I think it is unlikely because the creditors are all lining up against the seller hoping to get whole in Court.

She called me but, frankly, I do not want to be drawn into Court on a deal with this gal who made some dumb decisions in hte past and will probably make more.  Sorry, not with me around.

Bottom line, I wonder about scams. Buying foreclosed property, for example, is a job for professional investors, not the average guy. So I would be really wary about "get rich quick with foreclosed property" seminars. People are going to get burned.

Give a Wonderful Valentine's Day Gift

After my rant last week about Valentine's Day presents, I thought I was all done with the holiday for this year. But then I got a Valentine's Day wish from Ruth Susswein, the Deputy Director of National Priorities at Consumer Action, that I just had to pass on.

Along with Consumers Union and a few other nonprofits, Consumer Action wants us to send e-cards to our elected officials, asking them to take heart on Valentine's Day and reform the credit card industry.

Kiss Credit Card Ripoffs Goodbye
I love the holiday hook of the "Kiss Credit Card Ripoffs Goodbye" campaign! It culminates tomorrow, when some 120,000 paper cards will be delivered to Congress, asking for an end to:

• Outrageous fees.
• Unfair rate hikes.
• Hidden interest charges.
• Unjust changes in terms.
• "Gotcha" penalties.

Consumer Action has made it easy for us to jump on the bandwagon and get our messages to Washington in time for tomorrow's festivities. You guessed it – they went for the more environmentally sound route – email. So I took them up on it. Once I clicked here on Consumer Action's site, it took about a minute to send off my Valentine's Day e-cards to my legislators, and I feel better having done it.

With Love from Me to You
Please join in, and send a Valentine's Day card to your reps in Washington. Tell them it's high time they showed a little love for us, and ended the sweetheart deals for the big credit card companies. A fair credit system would be a wonderful gift to the American people – rather than the current system, where lenders are free to take advantage of us. Congress can help by putting an end to all unfair credit card practices, from unconscionable rate hikes to convenience checks.

That would be so sweet, wouldn't it? And there are no calories!

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.

Mad About a Credit Card APR Increase? Where to Send Complaints

Dramatic credit card rate increases have expanded beyond just Bank of America customers. In the past few days, we've received APR complaints from Washington Mutual, Barclay's, 5/3rds and Chase credit card customers.  Going from 9% to 27% APR isn't unheard of right now.

If you've received a letter stating that your APR is jumping 10 or 20%, I'd imagine you're fairly upset. We've shown you how you can reject the rate increase and warned you about the credit score damage that could come from closing the account.  Instead of closure, your best move is to pay off the balance or transfer it to a different account.

Your next step might be to voice your unhappiness about the rate increase to the proper authorities. We've compiled a short list of agencies that can take your credit card complaints online:

Federal Trade Commission
Federal Deposit Insurance Commission
Federal Reserve
Senate Banking Committee
House Financial Services Committee
Your State Attorney General

Sharing your complaint won't likely get your credit card rate reduced, but it could help push for larger reforms.

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator. 

Reader Question: Is 10% the Best Debt-to-Limit Ratio for My Credit Score?

Credit scoring models are full of eccentricities and minutia that can make a big difference in your final score. Debt-to-limit calculation (which accounts for 30% of your credit score) is one of those confusing areas. Here is Jed's question:

I have read several sources who recommend using only 30% of your credit limit to enhance credit scores.

I recently read TWO articles that now recommend using less than 10% of the credit to best enhance the credit score.

Which (if either) is correct?  What is the recommended credit line usage limit to help credit scores?

Simple Answer: under 10% (and more than 0%) is the absolute best for your credit score.

For example: you would be earning the most score points in this category if you had four cards with a total credit limit of $15,000 and a total credit card balance level between $1 and $1,500.

But this is one of those "great idea, or greatest idea" sorts of things. A 30% DTL level would be a credit score improvement if you had previously been over 50%. The credit scoring model assigns fewer points toward your credit score the higher your debt-to-limit ratio is over 10%. 

And remember, this is your statement balances on the cards vs. the total credit limits. The individual balance ratio on cards has some value too, but it is really the total ratio for all cards on your credit report that is important.

Note: You can still have a high debt-to-limit ratio even if you pay your credit cards off in full each month.

Some consumers looking for a quick credit fix stop using their credit cards except for a couple very small purchases a few months before a loan application as a way to reduce their debt-to-limit ratio and improve their scores.

Next question? You can email our team of credit and finance experts at tidbits@credit.com anytime.

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.   

How to Reject Your Credit Card Rate Increase

Those of you who received rate increase notices from Bank of America or other banks recently, may have noticed something about being able to reject the rate change in the fine print. How does a rate increase rejection work? What do you have to do to reject the APR change? What's the catch? Let's break it down:

What does it say? In the Bank of America rate increase letter it states the following,

You do not have to accept this amendment. The steps you must take to reject this amendment are described below. You must act promptly to reject this amendment.
...
We must receive your written response by February 19, 2008.

What does this mean? You can write the bank within a certain amount of time to reject the increase in your credit card rates. This will not close your account or cause a negative record to appear on your credit report.

What's the catch? Rejecting the rate increase is only good until you use the card. Using the card after the stated date (in my example, Feb 19th) for a purchase is considered an "acceptance" of the new rate. Beware of automated charges or subscriptions services that could undo your rejection.

Where do you send the rejection? Rejections have to be received by the bank in writing at a specific address (not where you send your bill) before a specified date (not according to the postmark but the date they say they get the letter). For Bank of America customers, the address is

FIA Card Services, N.A.
P.O. Box 15565
Wilmington, DE 19850

Include your credit card number and full name along with your rejection request. You can't choose which term changes to reject. If you want to reject one, you have to reject them all.

If you have the rejection address for a different credit card issuer, please share it in the comments section below.

Also, we are looking for consumers in the Northeast who had their APR increase dramatically to appear on a network news program today. If you're interested, please call 415-901-1559 right away.

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.

New Loan Limits

Congress has passed and the President is expected to sign the $152 billion economic stimulus package that will give tax rebates to over 100 million people. This priming of the pump action is expected to give a modest jolt to the economy which has slowed to levels that suggest a recession is possible.

Included in the package is a one year increase in the size of loans that FannieMae and FreddieMac can buy.  For single-family homes the new number is $729,750, up substantially from the current $417,000 limit. The question is, "What is this going to do for the housing market?"

First, the limits are also not absolute. They will be keyed to the housing values in particular areas.  The limit is supposed to be 125% of the average home value in the area. In an area where the average home value is $350,000 would then have a limit of $437,500, a slight increase.  Someone living in an area of $500,000 homes would see an increase to $687,500.

How "area" is going to be defined is loose at this point, state or county most likely. So someone in an expensive home with a large mortgage in an area of less expensive homes will not be helped compared with someone in the same home with the same mortgage in an area of expensive homes.

Second, my perception is that most of the foreclosures involve borrowers with loan balances less than $417,000. Thus those people could be "rescued" from their plight under existing rules if they conform to current requirements as to income, assets, and credit. Increasing the limit will not help these people.

So what are the benefits and to whom will they accrue?

Let's remember that the housing market is made up of three main sectors, newly built homes and existing homes, the resale market, where buyers are looking for occupancy as a primary home. Another large group, it might surprise you, are those buying a second home, perhaps a weekend home in the country.

We need also to remember that the market consists of two separate groups of people, the first of which are in the "newly created homebuyer" market, first-time homebuyers. The other group consists of people who are already in a home and who want to sell that one and buy another property.

When you think about this market consider that two ingredients are necessary for success. You need to have buyers at the lower end of the market and you need to have everyone up the chain having the ability to move up a notch.  The first-time homebuyer buys a $300,000 home which allows the seller to buy a $500,000 home which allows that seller to buy a $750,000 home.

When you look at it this way, it seems to me that making more affordable mortgage financing available to that last group of people creates openings all down the chain.  Let me assure you that the Jumbo mortgage market has been ugly for about the last seven months with rate for a 30-year fixed-rate mortgage hovering around 7% compared with 5.5% for Conforming loans.  That's a big difference.

When you look at the market in an area like where I live, there are a lot of people who will be covered by the new limits. Not only that, unless FannieMae and FreddieMac tweak their Automated Underwriting engines to be more conservative, homebuyers are going to find it a lot easier to buy a home with a Conforming loan than had they had to qualify with stricter Jumbo loan standards. This will help both buyers and owners looking to refinance.

My considered opinion is that the housing market problem today is that it is in a static state due largely to people sitting on their hands. People who could perfectly well afford a new home are afraid that they will buy and that values will drop further.

My sincere hope is that this move, while it might not help entry level buyers directly, will create some badly needed energy and confidence in the housing market and get those people into their cars to look for a new home.

Let's hope so.

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: Where to Spend Your Windfall

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.

With tax rebates on the horizon and the economic stimulus package pumping out big check, most Americans are in for a bit of a cash windfall in the next four months. According to our poll earlier this week, 46% of people plan to use their rebate to pay bills and 30% plan to deposit in a savings account.

For Funny Money Friday this week we've come up with our own top five list of what to do with your windfall, considering the current economic climate:

Top 5 Ways to Spend Your Windfall in 2008

5. Invest in real estate! It is a sure thing since home values will never drop.

4. Convert it to gold coins and bury it in the yard to prepare for peak-oil armageddon.

3. Beanie babies.

2.  There's this Nigerian archbishop who needs your help getting his money out of the country...

1. You'll finally have enough to pay for a bankruptcy filing!

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.

Bah Humbug, Valentine's Day!

I was heartened by the headline to the National Retail Federation’s press release about Valentine's Day: "Consumers Opt for Quality Time with Loved Ones Over Traditional Gifts This Valentine's Day."

I thought, isn't that great? We're not even in an official recession yet, and people are already cutting back. But then I read below the headlline, only to discover that the total spending for Valentine's Day 2008 is expected to be a tad over $17 billion.

That's not a typo. The National Retail Federation (NRF) says we'll buy some 17 billion dollars worth of flowers, cards, chocolate, jewelry, and similar nonsense (nonsense being my word, not the NRF's). "Average consumers," whatever that means to the NRF, are expected to spend $122.98 on the holiday, up from last year's $119.67.

Most of it will be spent on our special someones, but we'll also spend $367 million on presents for our pets. Honestly, would your pooch know if you chose to skip her this year, and put the money into your emergency fund instead? My cats surely wouldn't.

According to the Greeting Card Association, we'll send out 190 million Valentine's Day cards. At $3 a pop, that's $570 million, just for fancy pieces of paper with someone else's words on them. Why not come up with something personal to say, and use the money to pay down your debts? Maybe some people may be doing exactly that. The number of people planning to buy a card is down to 57%, compared to 63% last year.

As for how consumers are opting for quality time with loved ones: 'Almost half (48.2%) of all consumers plan to celebrate Valentine's Day with a special night out, compared to 45.3 percent last year." Not much of a change there, imho, and it sure sounds pricey to me! I went through the NRF survey, and this is the only finding that comes close to quality time.

But then we're not "average consumers," right? With even tougher times coming, my advice for quality time on Valentine's Day is to tell your beloved why you think s/he's terrific, make a great dinner at home, and get to bed early.

This year, why not do something really meaningful with the money you would have spent? Feel free to blame me! If you both chip in, you'll have almost $250.

Would it give you more peace of mind to put the money in the bank for a rainy day, or would you rather pay down a credit card bill? Already have an emergency fund and no credit card bills? How's your retirement fund doing? 

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.

Tax Refund Checks: Will You Spend or Save?

Last week on this blog I recommended that any economic stimulus proposal must include some relief on credit card rates to be effective. Now I get to say "I told you so."

A survey of Angie's List members – who, mind you, are 2-person household/ homeowners/ college-educated professionals/ with an average household income just over $100,0000 (and should have money to spend) – finds that a measly 2% plan to splurge with their tax refund this year, and a third say they will use their tax check to pay down bills.

"Our members, generally speaking, are careful with their money and like to spend it wisely," said Angie Hicks, founder of Angie's List. "But like many Americans, about half of our members see 2008 as year that will be financially difficult so they're not looking at that annual tax check as 'mad money' at all this year."

Angie's List members have the following plans for their tax refunds:

• 32 percent will pay down bills
• 25 percent will invest it in home improvement
• 13 percent will save it for a rainy day
• 16 percent are unsure or didn't specify what they'll do with the money
• 11 percent will invest in the stock market or other financial sources
• 2 percent will splurge on something

What do you plan to do with your tax rebate/tax refund check this year? Take our poll!

Opinion Polls & Market Research

Were You Offered Debt Reaffirmation After Bankruptcy?

We're looking for consumers who were offered debt reaffirmation after their bankruptcy filings to talk with a reporter. If you are interested, please email us right away.

Debt reaffirmation is the process of assuming responsibility for debts that were included in your bankruptcy filing. Creditors and debt collectors sometimes contact post-bankruptcy consumers offering debt reaffirmation as a way to rebuild their credit.

For example: you might be contacted about repaying a $5,000 balance you had on a credit card that was closed when you went into ban