Categories
credit

Bank of America Implementing New Credit Card Annual Fee

With the CARD Act enforcing credit card regulation, banks have begun fishing for money in a sea of consumer pockets. Bank of America, one of the most popular banks in the United States will be adding a $59 annual fee to consumers’ credit cards. The new changes are set to take place April 11, and set to affect 5% of credit card holders, or approximately 2 million out of 40 million customers.

According to a Bank of America representative, consumers that would not be able to qualify for the card if they were to apply for the credit card today will be the ones being charged in April. The Credit Card Accountability Act, also known as the CARD Act has put some pressure on banks to limit the reasons they change interest rates and fees. In the Act, it states that credit card issuers cannot increase interest rates on an existing credit card unless the card holder is 60 or more days late in making a payment. The act also dictates when credit card issuers can make these moves. By providing consumers with cards that the banks know consumers can’t afford, it effectively allows banks to collect more money from consumers through higher interest rates. If a consumer is using a credit card they can’t afford, they are more likely to be late on payments, and late payments are profitable for banks.

The restrictions laid out in the CARD Act are proving costly to banks, as they must think of new ways to pocket consumer money. It is estimated that the loss of revenues due to the CARD Act will total $25 billion annually for banks across the nation. In order to circumvent this, banks are charging consumers for previously free services, such as new fees for calling customer service representatives and transaction fees. Financial experts agree that the $59 annual fee is driven to increase bank profit. Implementing the annual fee will generate approximately $118 million for Bank of America.

Categories
credit

Why Debt Settlement May NOT Be The Best for You

You’re overwhelmed with credit cards.   You make your minimum monthly payments.  Your balances never decrease.  And you feel trapped in a hole with no end in sight.  Sound familiar?  You’re not alone.  Many people in this situation are looking for the fastest way out.  As they surf the web to look for debt relief options, they will most likely stumble across on an advertisement that says something along the lines of, “Reduce your debt by over 50%, cut your monthly payments in half!”  On the surface, it sounds almost too good to be true.  You decide to call a debt settlement company, and can’t turn down an offer to pay your creditors a fraction of what you actually owe!

Here’s the catch.  Most debt settlement companies fail to tell you in detail all the pitfalls that are associated with the program.  Don’t get me wrong, a debt settlement program is great for those who are suited for it.  I’ve personally seen some creditors negotiate a settlement for as low as .20 on the dollar!  Before you enroll in this type of program, it’s crucial to know what the downsides are.

What you need to know about a Debt Collection Settlement

  1. Collection Calls – Most debt settlement companies will tell you that they can stop creditor calls just by sending them a cease and desist letter.  This is half true.  According to the FDCPA (Fair Debt Collection Practices Act), a collection company must cease communication with the consumer if they sent a cease and desist letter.  However, this only applies to 3rd party collection agencies.  No one can stop the original creditor from calling you.
  2. Increase in balances- I’ve heard this statement way too often.  A debt settlement company will tell you that they will negotiate on the balance at the time of your enrollment.  However, many consumers fail to realize that once you stop making payments, late fees and penalties will be assessed.  If you enroll an account that has a $2,000 balance, don’t be surprised if you see a balance as high as $3,000 at the time of settlement.
  3. Possible Legal Action- This is perhaps the scariest thing a consumer can go through.  A sheriff delivers a court summons to their front door step, and now the creditor wants to sue the consumer.  If a creditor wins a judgment, the court can order wages to be garnished or a lien attached to any personal property.
  4. Taxed on $$ Forgiven- Let’s say you owe $10,000 on a credit card.  Your debt settlement servicer successfully negotiates a settlement at 35%.  The amount saved ($6,500) may be taxable income.  Any debt forgiven above $600 must be reported to the IRS.
  5. Credit Score– I thought I’d throw in the obvious as well.  Enrolling in a debt settlement program will literally destroy your credit.  You will have delinquencies on your credit as well as potential collection accounts.

After reading this, you might think that no one in their right mind should enroll in a debt settlement program.  That’s not necessarily the case.  Potential candidates for this program will have these characteristics:

  1. Judgment Proof- Just because you are judgment proof doesn’t mean a creditor can’t sue you.  Being judgment proof simply means that a creditor cannot garnish your wages due to federal or state guideline and you have no assets.
  2. Insolvency- People who are insolvent (owing more than what they are worth) are good clients for debt settlement because they won’t be liable for the amount forgiven.
  3. Access to Emergency Funds- In case a creditor is willing to give a substantial discount on a card, you should have some kind of emergency funds (friends, relatives, family, etc) who will be able to help you out.
  4. Ability to complete program under 36 months- Anyone who cannot complete a program within 36 months in a debt settlement plan probably shouldn’t enroll.  If it takes you more than 36 months, bankruptcy is probably the best option.

To summarize, each debt relief option has its pros & cons.  It’s important to fully understand the ramifications of each program before you commit yourself.  Debt settlement is a wonderful option for those who need to get out of debt, but only a certain percentage of people are good candidates for this type of program.

Categories
credit

A Guide for How to Handle Student Loan Debt for Recent Graduates

If you’re one of the many recent college graduates having trouble securing work right now, don’t be too alarmed because it’s happening to a lot of people right now. One thing you definitely don’t want to do though is go into default on your student loans. Many companies will check your credit score during the hiring process, and if you haven’t taken care of your student loan debt it could cost you the job. The good news is that there are plenty of resources available to help you manage your student loan debt and prevent you from going into default.

That’s not to say it’s a completely rosy picture though, many of us are more than just a little in debt from college, and dealing with your loans can add tons of stress to an already stressful situation. If you choose to ignore it though, you will be facing much more stress in the future. American Education Services (AES), who handles most of the Federal student loan programs doesn’t have a reputation for being the easiest people to deal with. It is important that you follow up on everything with them, and don’t take someone’s word for granted over the phone. It’s not official until you have it in writing.

Finally, this guide is written with the repayment of Federal student loans in mind. If you have a private loan you will have less options available to you, and the information here will be of no use.

Student Loan Debt Relief Guide

Repayment Options

  • Postpone Repayment by Forbearance and/or Deferment
  • Adjust your repayment options
  • Cancel the loan if you have a qualifying job
  • Discharge the loan in bankruptcy

Forbearance and Deferment Options

Although forbearance and deferment are closely related in that they give you more time to find work (Up to 3 years), deferment is preferred because the federal government will continue to pay off your interest. There are a number of qualifying factors for each of these options. Although a forbearance is easier to obtain than a deferment, and is sometimes still available even after a loan has gone into default, the interest on your loans will continue to accrue. Please note that deferments will not pay off the interest on unsubsidized loans.

Deferment Qualifying Factors

  • At least half-time enrollment in a qualifying school – This does not necessarily mean that re-enrolling into school is a good idea just to postpone repaying your student loans. Having clear minded and realistic career goals is much better.
  • Graduate or Post–Graduate Fellowship Program – If you are lucky enough to land yourself a fellowship then you will be qualified to defer your student loans.
  • Physical Disability or Rehabilitation – If you have a disability that is currently preventing you from working, or are enrolled in either a drug or alcohol rehabilitation program you qualify for a deferment.
  • Unemployed – If you are unemployed and seeking full time employment you qualify for a deferment.
  • Economic Hardship/Underemployed – You will have to fill out a Statement of Financial Status in order to prove your eligibility and receive a deferment.
  • Family Leave – If you are pregnant you qualify for a deferment.
  • Public Service – For military personnel, if you are called to active duty to serve in a hostile zone while attending school you qualify for a deferment on your student loans. Other types of public service that qualify for deferment are The Peace Corps, Public Health Workers, National Oceanic and Atmospheric Administration Workers, and Volunteers for Tax Exempt Organizations like the U.S. Department of Education.

Adjust Your Student Loan Repayment Schedule

There are several different plans available to make your transition into your professional life easier. If you’ve run out of forbearance and deferment options, then these programs can make repayment of your student loans more affordable.

  • Graduated Repayment Plan – Starts your payment off small and increases them incrementally, typically every 2 years.
  • Extended Repayment Plan – If you have more than $30,000 in student loan debt you may qualify for a long term plan of up to 25 years.
  • Income Based Repayment Plan – If you have unstable work conditions, these types of repayment plans adjust the amount you owe each month based on how much income you are earning.

Canceling Your Student Loan

Certain professions are able to cancel either part or all of their student debt. If you are in a qualifying profession this is certainly a great opportunity.

Professions That Qualify for Student Loan Cancellation

  • Teachers
  • Peace Corp
  • Active Duty Military Serving in Hostile Zones
  • Nurse or Medical Technician
  • Law Enforcement and Corrections Officers
  • Head Start Employees
  • Child or Family Services Agents
  • Professional Providers of Early Intervention Services

Bankruptcy

Although it is certainly not the best option available, if you do find yourself in this unfortunate circumstance you may be able to discharge your student debt. It is not easy however, and you will have to show that you are likely to continue having financial difficulties if the debt is not removed and prove that you have tried to repay the loan in good faith.

Categories
taxes

Tax Tips for Parents

Since raising children can come with a heavy tab, the government offers certain financial benefits for parents.  The IRS recently laid out some ways you can save money come tax time if you are a parent.  These benefits come in the form of various tax deductions and credits.

In most cases, your children depend on you for all their basic needs.  Since they are “dependents,” you can receive a slew of tax breaks.  Though there are certain criteria your children must meet to be considered dependents, they are not very restrictive.  As a result, most people raising children will qualify for the benefits.  There are several other instances where your children can reduce your tax bill as well.  For instance, if your child is under the age of 17, you may qualify for a $1,000 Child Tax Credit.  However, you have to fall within a certain income bracket.

Anyone who has worked while raising a child knows it can be a challenge.  The government tries to make that task a little easier by reducing the tax bill for parents who work.  If you are a low to moderate income earner, you may be able to get the Earned Income Tax Credit by filing a W-5 Form.  The credit rewards earning an income while parenting.  Parents sometimes have to hire a helping hand to care for their children while they work.  The government tries to reduce that cost by offering a tax credit if your child is less than 13 years old and you had to hire someone to care for him or her.

As children grow older, parents frequently pay for higher education.  If your child is a student at a college or university, you may be able to receive the American Opportunity Tax Credit.  This is a credit for undergraduate college expenses.  The Lifetime Learning Credit also provides a credit for higher education expenses.  If your child took out a student loan and you pay interest on that loan, you may qualify for an additional tax deduction.

There are other less common instances where parents can save money on taxes due to their kids.  If you adopted a child, you may qualify to receive a credit of $12,150.  This credit is provided to help cover expenses related to the adoption process.  The government also tries to help self-employed parents pay for health insurance.  If your child is under the age of 27, you may be able to deduct premiums you paid for health care coverage.

Lastly, you should be aware that your child might have to file their own tax return in certain circumstances even if they are listed as a dependent.   If your child earned more than $5,700 in income the past year, they will have to file a tax return.  Similarly, if your child earned income from investments, interest, and dividends in excess of $1,900, it may be taxed at your rate.

Sorting through these various tax breaks, credits, and deductions can get confusing.  However, if you are a parent, it might be worth your time to look into the details of these benefits because they can significantly reduce your tax bill.

Categories
insurance

Car Accidents – The Perfect Driving Storm?

Car accidents are the principle cause of unnecessary deaths across the majority of major countries of the world and is fast becoming the driving force behind the enormous increase in the number of personal injury compensation claims being filed.

The Perfect Storm for car accident injuries

Many of these car accidents typically involve drunk drivers and are as a result, often fast impact accidents which unfortunately involve a high level of serious injuries as well as fatalities. Most of us are aware that the consumption of excessive amounts of alcohol seriously degrades our reaction times and reasoning capacity all helping to contribute to a serious road traffic problem. The combination of these attributes makes for a “perfect driving storm.”

Typical Car Accident Injuries

Typical injuries caused specifically from car accident involving drunk drivers tend to range in severity according to the location of the incident. Built up areas tend to involve lower speeds due to the makeup of the roads whereas incidents upon highways and motorways often result in many more injuries and quite often multiple victims. If you have ever suffered a car accident then you will understand that injuries can vary in severity some of which may require medical attention (and resultant medical bills and possible lost wages/income) not to mention the physical and psychological trauma associated with any accident.

Car accident injury claims – get it right

It is crucial that any car accident claim is filed as soon as is practically possible following the accident. This will very much depend upon the severity of the incident. Should the incident be a small one the following the wreckage being cleared off the road, insurance documents and personal information will need to be exchanged. If you find you do not have (or recollect) your insurers details, do not worry, simply take as much identifying information from the other party (including contact telephone numbers) and after you have returned home locate the information and telephone it through remembering to inform your insurer of the problem as soon as possible.

Many insurers typically do not require initial claim forms to be competed; most of the details can be relayed over the telephone making the claims process much quicker and streamlined. This will of course not be the case should an accident compensation claim be affected, in these cases a detailed report will be required for the insurer to undertake investigations of your case.

Should you admit liability?

Regardless of who is responsible for the accident and assuming everyone involved escaped safely, admitting liability (even if you knew it was your fault) is not a great strategy. This is something which your insurers will battle out and is not something you need to concern yourself with. Simply avoid any admission at the scene; this will help the insurer later down the line of the claim.

Categories
taxes

Pad Your Wallet: Receipt Storage Can Help

Most of us have resorted to storing receipts in bulky filing cabinets, envelopes, and folders in futile attempt to stay organized and make filing taxes a little easier. However, updating to a paperless filing method will end up saving you time, money, space, and the environment. Receipt scanners are one of the most practical and economically sound purchases you can make. Whether you’re filing receipts for your personal tax records or for your business, receipt scanners will help you stay organized and efficient.

Scan Receipts to Make Tax Filing Easier

Scanning receipts right away prevents you from spending hours wading through lots of barely-distinguishable papers with ambiguous fine print. Scanning your receipts regularly means you can ditch your filing cabinet and shoe boxes full of paper and take back the functional space in your home or office. Receipt scanners are widely available in office supply stores and there are even several different apps for iPhones and other mobile phones that can read the data from receipts and keep records for you.

The software that comes with your receipt scanner can sort your receipts for you by category or venue. When it comes time to write off donations or groceries, this can save hours of work you would otherwise spend shuffling through piles of receipts.

After scanning your receipts, most receipt scanner software will let you upload the file to any storage unit, including USB drives, cell phones, and other nifty gadgets you can bring with you and access from anywhere. When sending in the receipts, being able to send the file to the IRS is much handier than sending bulky envelopes as proof for tax credit. Regularly scanning receipts means you run less of a risk of losing them between now and when you file for your tax refund – and it optimizes the amount of money you can get back.

With this convenient and efficient scanning system, Turbo Tax and other tax programs can help you qualify for tax credits payment discounts you may not even know you had. Staying organized can make sure your annual expenditures are well-documented and give you back everything they can.

Categories
credit

Declining Credit Card Delinquencies Suggest Financial Crisis Recovery

Financial experts and economists have been suggesting that the U.S. economy is in recovery, and now the proof may be in the numbers. American consumers have been making more timely payments to their credit card issuers. In February, the number of delinquent and charged off credit loans and accounts were down. In addition to making their payments on time, consumers are still spending less, which in turn means that credit card companies are earning less money. Have consumers finally learned to live within their means, or is this a temporary trend?

Financial recovery in the works?

Credit Card Spending

The February data for credit card and other consuming spending is not out yet. You can, however, make some observations from January data. For example, credit card balances declined by $4.25 billion in January. This was a 4% decrease when comparing it to the $2.02 increase in spending that took place in December of 2010. Most financial experts attribute the December increase to holiday shopping, however this was the first month that spending had increased since the summer of 2008.

Expectations for spending in February are an increase in consumer spending, especially in the retail sector. The increase is relatively small, only about 1%. When it comes to spending on other types of purchases, though, spending is up in a big way and expected to continue that way.

Types of Purchases

The types of spending consumers seem to be gravitating to is on big-ticket items such as vehicles, boats and vacations. Hybrid vehicle purchases on the Toyota Prius increased by 69.9% in February. Overall, auto sales are up 17%. As consumers search for ways to cut back on gas consumption and to save money at the pump in the process, an increase in purchases of hybrid and good gas mileage vehicles is expected to continue.

Whether or not the U.S. economy is in full recovery mode is yet to be seem. In the meantime, there are some positive signs that this is the case. A decrease in delinquent credit card payments and charge off accounts and an increase in consumer spending are all symptoms that suggest the financial crisis is coming to an end.

Categories
credit

New Unemployment Debit Card Costing Consumers

We are a part of a debit nation. Cash and checks are becoming more and more obsolete. Now days, we turn to debit for everything from daily purchases to disability benefits, and now unemployment payments.

Over 30 states have made commitments to begin issuing debit cards for those on unemployment. Deals have been made with Bank of America Corp., JP Morgan Chase and US Bancorp.

Wyoming is one of the latest states to hop on the debit bandwagon. High unemployment states such as California and Florida are looking to implement the system by the end of this year. While it may seem like a good idea, most consumers seem to prefer the snail mail method, as transferring payment via debit card has been costing consumers more than they’d like.

Programs vary by state, but consumers are generally charged $1.50 ATM withdrawals, and 50 cents for bank calls.

In some states those receiving unemployment benefits are required to use the prepaid debit cards, while other states provide other payment options. Some banks charge overdraft fees of $20 instead of preventing charges exceeding the balance of the prepaid debit card. In Pennsylvania they charge for lost debit cards, contacting the call center, checking card balances, making withdrawals and balance inquires.

While many consumers believe that the fees are illegal. The U.S. Department of Labor allows the fees as long as the states allow consumers to get the money for free. Consumers can get the money for free if the use the debit cards for all purchases or withdrawal all the money one time, according to Suzy Bohnert, a Department of Labor spokeswoman.

Joan Evans the Workforce Service director in Wyoming encourages consumers to use the debit cards, as they are a better way to serve clients, as they don’t have to wait in line to cash their checks. “The individual decides how to manage his drawdowns using the debit card,” she said.

“If you use your card the right way, you shouldn’t have to pay fees at all,” a representative at www.Credit-Land.com said. “The goal is to make it easier for consumers to access money and give them greater ease at purchasing in an Internet world.”

But the consumer consensus is in – saving 15 minutes of their time waiting in line is not worth the penalties.

Categories
credit

Girl Scouts Now Accept Debit Cards

It’s that time of year— that time when those Girl Scouts dress up in their matching patch-adorned green vests, and go door-to-door peddling Thin Mints and Tagalongs to any one with a dollar. I know they’re little girls, but they turn from sweet to sour in a few minutes when you explain that you’ve got to pay rent, or you spend your last change on parking, or whatever it may be, they change from Priscella to Cruella.

Because who has the dollar has the power, these Buttercups have learned at an early age the benefits of having money. In an attempt to teach the Ohio chapter of the Girl Scouts financial literacy, their branch has begun taking credit cards at various booth locations in Central Ohio. This means that any one 18 and up has no excuse to not succumb to the Girl Scout cookie peer pressure.

Girl Scouts have teamed up with AppNinja’s Swipe Credit Card Terminal for the iPhone in order to accept credit cards at various booth locations in central Ohio during March. Since the beginning of March, credit cards have accounted for over $1,500 in sales.

That’s a big step for both the Girl Scouts and for my sweet tooth. “Our Cookie Program is our largest business literacy program for girls,” said Tammy Wharton, CEO of the Girl Scouts of Ohio’s Heartland Council. “They also are learning to use new technology to market cookies. Customers can use a new smart phone app — the cookie locator app — to find cookie booth sales.”

AppNinjas is the developer of Swipe Credit Card Terminal for iPhone, which changes a merchant’s iPod touch, iPad or iPhone into a credit terminal that is safe and secure. “Swipe Credit Card Terminal for iPhone will teach them even more new technological skills they may likely use in the future,” explained Wharton.

Girl Scouts pride themselves on giving girls business skills that they will use for the rest of their lives. That’s why developing financial literacy is of the utmost importance. The program is designed for girls who are destined to take control of their finances in a digital future through a sustainable income, budgeting, managing credit, investing and being a loyal consumer.

Categories
credit

What Are My Debt Relief Options?

With the decline of the current economy, many people find themselves struggling to stay afloat during these tough times. Individuals find that they have mountains of debt with no end in sight, and they have debt collectors calling them at all hours of the day. Medical bills, student loans, the loss of a job, or just overspending could contribute to the financial crisis. Things just keep getting worse and worse. It can be devastating for a person to face. However, financial debt can be conquered. Here are some realistic choices to consider to help with debt relief:

What Are My Debt Relief Options?

Debt Negotiation

Sometimes people have so much credit card debt that they cannot even make the minimum payments. The credit cards are maxed out and the situation seems completely out of control. In this case, debt negotiation is one option to seriously consider. Individuals negotiate with their creditors to obtain lower payments, lower interest rates, and reduced fees, making it more manageable for them. Sometimes the negotiator can reduce the debt up to 50%. Most of the time, before creditors will negotiate, consumers will need to be more than 3 months delinquent on their accounts. However, while consumers are in debt negotiation, it can lower their credit score.

Debt Consolidation

With debt consolidation, a person usually takes out one loan to pay for many others. People can usually secure a fixed loan at a lower interest rate. Consumers will take debts from credit cards, department store cards, and other secured debt and combine them so they are easier to manage. Sometimes companies charge a lot of money for this service so consumers need to make sure that this is cost effective.

Credit Counseling

Sometimes people are not organized enough to form a budget and stick to it. Therefore, they might consider a credit counseling company to help them get out of debt. Credit counselors can direct individuals on how to manage their money and create a budget so that they can become debt free. They will inquire as to what might be the source of the problem so they can develop an understanding on how to proceed. The counselor will show consumers how to acquire a personalized solution to solve their financial burdens.

Debt Management Plan

Another debt solution is a debt management plan. A debt management plan is not for everyone, but one’s credit counselor could suggest that they sign up for a debt management plan. A person gives the credit counseling company money each month in which they pay the unsecured debt. Individuals come up with a schedule that works best for them, and a creditor might agree to lower interest rates or some fees. A plan will entail that all monthly payments are paid on time, and while in the plan, consumers may be required not to apply for more credit.

Do It Yourself Approach

A person might decide to forgo all of the counselors and negotiators and just do it by themselves. They want to take control of the situation and budget their finances on their own. They can negotiate with creditors and pay off the highest interest rates first, or they might get another job to make some extra money. They also get the scissors and cut up the credit cards. In order to do this, a person needs to have a lot of self-discipline and control and stick with it until their financial burdens are lifted.

Chapter 7 Bankruptcy

This should be the last resort for a person to take. With bankruptcy, a consumer obtains an order from a court that says that they are not required to pay their debts. It is a very long and burdensome process. Bankruptcy will greatly affect a person’s credit, as it stays on the report for 10 years, and it can make it hard to buy a home, car, get insurance, and possibly even get a job. People need to consider this option long and hard because much of the time, the long-term consequences are not worth it and it is public record for anyone to view. However, if the financial situation is completely hopeless, it can allow a person to start over and rebuild their life.

Do Nothing

Sometimes people do not want to believe that their debt is out of control. They are in denial and so the creditors keep calling. This option will result in more stress and anxiety and possibly even a lawsuit. It is advisable not to disregard the financial burdens because they will continue to pile up and only get worse.

Consumers who find themselves falling more and more behind on their debts need to take charge of the situation and find the help that they need. Consumers need to research the options and find the best solution for them so that they will become free from debt.