New Financial Laws & You

How Do the New Financing Laws Affect You?

As of February 22, 2010, the new rules of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 were in effect. These laws were passed to limit some of the outrageous fees being charged by credit card issuers.

In many ways, the new rules will make your life easier. However, there are still places where the fees have room to grow, and grow they will, to make up for the limits in the other fees. The trick is to know where the limits are (and aren't), so you can avoid being charged excessive fees and save some money.

Here are some key changes of the new laws:

1.   Tired of your interest rate randomly increasing again and again? Existing balances can’t have the interest rate raised, except in these situations:

•    Expiration of a promotional interest rate

•    If your credit card has a variable interest rate

•    Hardship programs: you just finished or cancelled one

•    Late payment: more than 60 days late

2.   New accounts: No rate increases for 12 months! However, if the above situations apply in your first year, you can still be subject to a rate increase.

3.   Prior notice for rate increases. Your credit card issuer is required to give you a 45-day notice for any rate increases. This means no more surprises!

4.   Rate increases are reviewed every 6 months. After a rate increase, has been made, it may not be final. Every six months, the credit card issuer is required to reevaluate the plan and rates. In doing this, the issuer must lower the rate if the circumstances that caused the rate increase (such as late payments) have been resolved.

5.   Payments received immediately after a weekend or holiday due date are on time. So, if your due date is on a Saturday, and they receive it on Monday, it's still on time. The card issuer must also now process your payment as of the day it's received, if before 5 pm.

6.   Statements must now clarify the cost of your credit. They must clearly show you how long it will take you to pay off your balance if you only make the minimum payment. Plus, they must detail how much you'll pay in interest charges during this time. They must also show you the figures for if you'd like to pay off your balance within 3 years, instead.

•    This is likely to be one of the most beneficial parts of this law. When you see how much this credit really costs you, it will encourage you to pay more than the minimum payment to avoid adding these charges to your debt.

7.   New accounts cannot be charged more than 50% of your credit limit, and some of the initial fees must be spread out over a few months. This is good news if you have less than stellar credit, as you're in the target market for the highest-fee cards.

8.   Over-the-limit-fees are optional. This is a two-edged sword: if you don't opt-in to receive over limit fees, they will deny charges that will put you over your limit. If you don't want your charges denied, then you agree to over limit fees.

Some repercussions of the new laws mean that credit may now be harder for you to get. Also, you cannot get a credit card if you're under age 21. In addition, even with all the new rate increase rules, there isn't a limit in many states as to how high rate increases can go.

Teaching Kids to Earn Money & Save

If you’ve been thinking about how to help your kids understand the importance of earning money and saving, try this system of using job lists at home.

These steps will help your kids learn these valuable life concepts:

1.     Establish a list of jobs and how much you’ll pay your kids to complete each job. Assign prices you’re comfortable with.

2.     Focus on coming up with age-appropriate jobs for each child. Make separate lists for children if there’s more than 2 or 3 years’ difference in their ages.

·       Consider these examples for a 10-year-old child’s job list:

ü  Sweep the kitchen, $1.00

ü  Load the dishwasher, $1.00

ü  Dust the living room tables, $1.00

·       Examples for 12 to 14-year-old children are:

ü  Clean the bathroom, $3.00

ü  Mop the kitchen, $3.00

ü  Polish the silver tea set, $2.00

3.     Conduct a family meeting to explain to the kids about how the job list works.

4.     When the children choose to complete a task on the list, they must first ask permission to do the task.

·       This step is to avoid children doing a task just after someone else completed it, thus not really doing the work necessary to earn the money.

5.     Require the children saves a certain percentage of their earnings. A reasonable amount is 20 to 50 per cent.

·       Have them either place their savings in a separate piggy bank or take the kids to the bank to open their own savings accounts.

·       Explain that as they mature, they can buy almost anything they want, if they save for it. Mention it’s also important to save for “a rainy day.”

6.     Compensation can be paid immediately or at the end of the week.

·       If you select the “pay day” method at the end of the week, keep in mind you’ll need to keep a record of each child’s completed jobs and amounts earned during the week.

7.     Praise your kids’ efforts to do the jobs. Compliment your kids’ cheerfulness while they’re working and focus on any positive behaviors and attitudes they demonstrate.

·       Talk about how being responsible is a wonderful “grown-up” characteristic for them to have.

·       Reinforce the children’s independence and perseverance in completing jobs.

8.     Adjust and additions to job lists as your kids get older so tasks fit their ages.

Using job lists at home is very effective in teaching kids the values of working, earning money, and saving.

When children learn these concepts as youngsters, they’ll grow up to enjoy work and value saving as well.

Teaching Teens Financial Responsibility

Help your teen enjoy a bright future by teaching them financial responsibility. Knowing the basics of money management will help your child to plan and achieve their life goals.

If you feel a little awkward talking about money, these steps make it easy to explain budgeting, shopping, saving, and using credit wisely.

Budget Wisely

1.     Learn the basics of budgeting. Explain budgeting in simple terms as a plan for income and expenses. Discuss examples of trade-offs and the concept of needing to earn more or spend less to remain financially secure.

2.     Get familiar with ordinary household expenses. Give your teen an early start on knowing the cost of typical goods and services. Let them see the cable TV bill and your monthly car payment.

3.     Monitor your spending. Ask your teen to keep track of their spending for a month or more. Your kids may be surprised by how much they really spend on eating out or clothing.

4.     Manage your income. If school remains the top priority, encourage your teen to have some income of their own to manage. You can provide an allowance or support their efforts to find a summer job.

Shop Carefully

1.     Shop together. Go shopping together to demonstrate how to get the best value. Compare prices for generic and brand name products at the grocery store. Look for special sales at the local mall.

2.     Research major purchases. Assign your teen some research when they want to make a major purchase such as a cell phone. Let them compare plans and help decide what features they really need.

3.     Analyze materialism. Advertising bombards people with messages to consume more. Discuss the importance of moderation and basing your happiness on sources other than your possessions.

Save More

1.     Establish goals. Help your teen to set short and long term goals that will motivate them to build up some savings. They may want to buy a car or put away money for college.

2.     Understand interest. Introduce the power of interest. Your child may want to save more if they realize how much money they can earn by starting a savings account when they're young.

3.     Develop a savings strategy. Help your teen find a plan that works for them. They may want to set aside a small percentage of their allowance or half the money they get for their birthday. If possible, you can provide an extra incentive by offering to match whatever amount they save.

Use Credit Wisely

1.     Select the right instrument for you. There are many kinds of cards to choose from now so you can find the level of parental control that's comfortable for you. Debit cards give you the peace of mind of enforcing a pre-established spending limit, and many cards give you the option to review all statements.

2.     Pay your balance off monthly. Let your teen know that interest works against them when borrowing. Show them how paying off a credit card balance each month protects you from paying much more than the original price for the goods and services you charged.

3.     Know the significance of good credit. Talk with your teens about the importance of good credit. Explain how being responsible about paying off bills helps people to qualify for financing when they need student loans or want to buy a house.

With a little information and guidance, your teen can master the basics of money management. By encouraging them to be responsible, you'll protect your family's financial security while you help your child pursue their dreams for college and beyond.

Money Matters Q&A

Q. Is a Rent-To-Own program a good way to purchase a TV?

A. Now days you can purchase almost anything Rent-To-Own, such as TV's, furniture, appliances, and even tires for your vehicle. The catch with Rent-To-Own is often you will pay way more than the actual value of the item.

For example, perhaps you'd like to purchase a $500 TV. You can get this TV for only $30 a week at the Rent-To-Own store. $30 a week is $120 a month. However, you'll pay this rate for 6 months. So, in the end that equals $720.

It would be better for you to save $20 a week for a little over 6 months and then purchase the TV you desire in cash. Plus, if you wait until Black Friday or right after Christmas, New Year’s, or on big holiday weekends, you'll often find TV's on special.

Q. I am in my mid-twenties and flunked out of college as a teenager. Is there a way I can go back to school? Can I qualify for loans?

A. YES! It's never too late to go back to school. Your first step would be to choose a school you'd like to attend. Call the school and make an appointment with a school advisor/counselor. Explain that you understand there were issues with your grades and that you are now 100% focused on completing your degree.

During this meeting, also discuss how the only thing holding you back might be money and ask what types of aid might be available. Some schools have programs that award grant money (that you don't have to pay back) to students who left on academic probation but are trying to go back after several years.

Ask for the number (and directions) to the financial aid office, as well as the business card of the person you spoke with. Be persistent! They want to ensure that you're determined to go back to school.

Going back to school may seem difficult, but it’ll be worth it once you're enjoying the many benefits of your degree!

Q. My friends talk about investing money. How can I invest money when I'm not in a great financial situation?

A. It used to be the only people who had money to invest were the people who already had money. Nowadays, there are many ways for you to invest your money, even when you don't have much to invest.

You can always go with a traditional stock broker, but keep in mind you'll most likely need over $1,000 to start. Some companies, however, may be able to help you start investing in stocks for as little as $25 a month such as ShareBuilder.com.

Many financial institutions now offer interest-bearing savings accounts or money market accounts that require very little money to open.

As your invested funds grow, you can switch to investments that pay a higher interest. With more money to invest, you may feel more comfortable with assuming a bit higher risk for a greater return on your money.

Improving Your Credit Score

Whether you have a poor, fair, good, or excellent score, there's almost always room for improvement. Working to improve your score can be a lengthy process, but taking these steps can help you significantly!

Strive to be responsible by paying bills on time and maintaining a low debt to income ratio (monthly debt payments vs. your monthly income) and a debt to available credit ratio of less than 25%.

Improving Your Credit

Your credit report paints a picture of your financial history by detailing your experience with credit cards, loans, and other financial vehicles.

Your credit score is a number that comes from the information in your credit report. Three different credit scores are available through Experian, Equifax, and Trans Union. Combined, they make up your FICO credit score.

What Does It All Mean?

Your credit score will come into play when you try to buy a car or a home, take out a loan, apply for a credit card, or apply for some jobs. Credit also plays a role in determining eligibility for renting a home or apartment. Your credit score must be "up to par" for you to get by in life.

If your credit score is lower than required by a lender, bank, apartment complex or employer, you may miss out on important opportunities. Luckily, there are ways to repair your credit in big ways with simple steps.

Use these strategies to improve your credit score:

1.     Obtain your credit reports. You're entitled to a free copy of each credit report once per year. You can obtain them through each of the credit bureaus individually or through their official website, annualcreditreport.com. Your credit reports offer a lengthy explanation of what is impacting your credit score so that you can make the necessary changes.

·       Your credit report will give you the information you need on each account you owe on, including who you owe, how much you owe, and a snapshot of your payment history. Past credit accounts may also be included.

2.     Obtain your credit scores. Your credit scores are numerical values placed on your credit history and can range between 350 and 850. Each credit bureau can have a unique score, but they're combined to create a single FICO credit score. Obtain your credit score at least every six months to keep track of how it changes over time.

·       Obtaining your credit scores typically costs money, but can be done through each credit bureau individually.

3.     Create a plan. Once you know what you're up against, create a plan to help you deal with each record on your credit report. Address each record individually and develop a plan for repayment or dispute depending on the legitimacy of the debt.

4.     Dispute incorrect information. If there are incorrect records in your credit report, dispute them. Dispute each one individually through the credit bureau or contact the creditor for more information on the debt. If the information really is wrong, the credit bureau will make the necessary changes or removals.

5.     Pay off your debts. Pay each debt off one by one. You may wish to quickly eliminate your smallest debts first and then focus on the larger ones. Contact each creditor individually to come up with a plan for repayment.

6.     Follow up. Continue to check on your credit scores and reports, and follow up with creditors to keep track of your progress.

7.     Pay your bills on time. This is one of the most significant ways you can improve your credit. Plus, you can start building good credit right away by paying this month's bills on time. Make a plan and budget appropriately so you have the funds in order to pay them before the due date.

Take small steps toward improving your credit for a big impact. The longer you have a positive credit experience, the higher your score will go. Work on repaying your debts over time and you'll see your credit score rise along with your progress.