This Degree Will Cost Me How Much?!

For decades, conventional wisdom told us that you needed to go to college if you wanted to have a professional career and make a high salary. If you wanted to be the boss, college was a must. Any money spent on a college degree would be recouped by the earning power gained from that degree.

Today, things are different. High school graduates are faced with the dilemma of having no money to pay for college because their parents were unable to save. Part time jobs and seasonal employment, which used to help college students pay their tuition bills, are now hard to come by with the unemployed workforce vying for positions that used to be reserved for teenagers and college students.

What are college students to do? Rather than forgo an education, students take out student loans. But at what cost? How much student loan debt will these students be saddled with upon graduation?

Let’s use a medical student as an example. A medical student needs a four year degree just to get into medical school, and will then be required to complete four years of medical school for a total of eight years. Here is a typical breakdown of the financial burden incurred by a medical student attending a private university:

Undergraduate school: Four years at an average tuition rate of $32,000 per year = $128,000

Medical school: Four years at an average tuition rate of $45,000 per year = $180,000

Total Bill: $308,000

Keep in mind that these are just the averages for tuition and do not include fees and housing. Typically, medical students will be assessed fees for their labs, using computers and other on-campus technology, health services, and the library. Grants may cover a portion of the tuition and fees, but medical students on average graduate with student loan debt of nearly $200,000.

Even if the student decides to stop at a 4-year degree and try to find a job based just on that education, they will be graduating with financial burden of $128,000 if no other financial aid options were available to them and they decided to pursue a degree at a private university. Regardless of the subject, a 4-year degree at a private university will run you approximately the same amount, meaning college will cause a debt burden that will be hard to remedy in a sputtering economy.

So, what’s a graduating high school student to do? It may be wise to consider the cost of a college before sending in the deposit to hold your spot at the school. Grants are available, but are limited and usually based on income, including parental income. Graduating with debt may seem like no big deal due to the perceived marketability of a degree, but it’s best to weigh the pros and cons before signing up for debt.


Visa Digital Wallet Just A Click Away

Visa Inc. is getting closer to launching its new digital wallet whereby people can make purchases online without having to pull out their credit or debit card to finalize payment. Visa is also working on solutions for people to use their smartphones to pay for in-store purchases at retailers. Visa’s digital wallet is set to launch in the U.S. and Canada this fall and may be looking to expand the technology to other countries in the future.

Mobile Payments

Visa isn’t the only company focused on expanding mobile payments. Other credit card companies, including MasterCard Inc., American Express Co. and Discover Financial Services have all been active in the field of mobile payments in the U.S. and overseas where debit and credit card use is not as prevalent. (read more about American Express mobile payment options). Mobile payments have offered convenience to both vendors and consumers, in that it enables businesses to process credit cards that do not otherwise accept them. And through the popularity of smartphones and browsing capabilities, mobile payments are becoming more available, according to Visa’s head of global products, Jim McCarthy, in an interview with Reuters.

The Digital Wallet

Visa recently announced its partnership with several large U.S. and international banks for the creation of the VISA Digital Wallet, which uses near field communications (NFC) and other technologies. Its partners include Barclay Card US, BB&T Corp., Pentagon Federal Credit Union, PNC Bank, Regions Bank, Royal Bank of Canada, US Bank, TD Bank Group and Scotiabank. Customers of these banks will have a digital wallet which securely stores credit and debit card information so the information doesn’t have to be typed in for every online or in-store purchase. This will include information for both Visa cards and other cards.

Visa is hoping merchants will revamp their websites to enable customers to pay for purchases with simply the click of a button. That should help reduce the number of abandoned shopping carts on websites and expedite customer payments.


Best Time for DIY Debt Settlement is Early

When you begin to realize your debts are mounting and you are about to lose control of your finances, it is in your best interest to begin the process of debt settlement on your own right away. Debt settlement sounds like a complicated process average consumers cannot handle on their own. Actually, it is this myth that often perpetuates the vicious cycle of debt.

There are many reasons why your financial status will fall into disrepair. Job loss, expensive medical treatments, investments gone wrong, overspending, and even fraud can throw your financial affairs into a spin, leaving you with creditor calls demanding money and dwindling funds in your savings accounts. Making a move as soon as you realize where your financial affairs are headed will serve you well.

How to Start the DIY Settlement Process

Settling debts on your own may sound ominous and overwhelming but that is simply not the case. All consumers have the power to settle their debts but many fear the process.

To start out you should make a list of your financial outlook. Use your existing budget or create one if you haven’t used a budget before. (Incidentally, not having a budget is the trigger that leads many into the downfall of debt.) Find out exactly how much you owe to each creditor and then figure out how much of your income or savings goes out to monthly financial obligations. Money left over should be noted.

Next, make a list of your creditors and their contact information. Decide who the priority is in the debt settlement process. Perhaps you need to contact your highest-interest credit card provider before you contact your medical provider’s office. There is no definitive answer as to who should come first so you’ll have to figure out which debts need settlement first.

The Negotiations

Once you have established your creditor list, contact the highest priority creditor. It may be wise to ask for a manager as soon as the phone is answered to ensure you are speaking with someone who has the authority to give you the answers you need. Be upfront with the company representative and briefly relate your current or impending financial hardship.

For instance, if you have just been laid off from work, let the company know the situation and how long you expect the hardship to last. Ask if there is an acceptable amount of money less than the balance you owe that you could pay to settle the debt in full since you anticipate being unable to fulfill your monthly obligation for long. If the manager can not accept a one-time payment, they may be able to suggest alternatives such as lowered monthly payments for a period of time. If you do not have the amount of cash necessary to settle the debt, ask if they will rework your payment obligations on a monthly basis.

Whatever arrangements can be made with your first creditor, be sure to request the details in writing from the company. In some cases, consumers have neglected to get a copy of the arrangements in writing and therefore were later unable to prove their deal, making them responsible once again for the total balance due regardless of previous payments being made on the account. Most creditors will not go back on their word but the written confirmation is the only proof you have on your side as a consumer.

Once you have settled the debt with the first creditor, you’ll need to re-evaluate your finances to see what debt to tackle next. In the situation where one creditor refuses to settle your debt for a lesser amount, move on to the next and do your best to keep your monthly payments going, even if you are only paying the minimum due.

Why Waiting Is Devastating

If you wait too long to contact your creditors to keep an open line of communication, your debt problems will only grow and compound financially. The added fees, penalties, and interest charges only mean you’ll have a bigger balance to fork over. As soon as you know that times will be tough for you financially, reach out to your creditors for help.

Realize you are not the only debtor with financial hardships. In most cases, creditors will be open-minded and flexible if you give them the opportunity. They are not blind to the state of the current economy and may have resources and options you do not even realize that can significantly help you pay off owed balances. Until you open up and admit where you are heading, you will get nowhere in your pursuit of your debt relief goals.

Don’t wait for collection calls to start or for someone else to step in. You are responsible for your debts and the earlier you are able to reach your debt elimination goals, the faster you can get back on the right financial track.


Credit Card Companies Ease Standards

Banks took a softer view toward consumers seeking new credit cards in the first three months of the year, according to the Federal Reserve’s April 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices.

The survey, which addresses the market of loans for businesses and households during the first quarter of 2011, found that lending standards used by credit card companies had eased, which means it was easier for consumers to get approved for new plastic. Ironically, though, the demand for new credit cards has been lethargic.

The Survey

Every three months the Fed requests feedback from banking executives in order to zero in on changes in the supply and demand of loans to businesses and households during the previous quarter. The Fed’s April Survey included responses from 55 domestic banks, plus 22 U.S. branches and agencies of foreign banks. According to the survey, 20% of banks reported easing their approval standards for consumers seeking new credit cards in the first quarter of 2011.

This is a dramatic improvement from the fourth quarter of 2010, when less than 10 percent reported a loosening of credit standards.. Additionally, about 6% of banks lowered the minimum credit score needed to get approved for a card, while no bank reported increasing the required score. Although 9% of banks reported increasing interest rates on new or existing accounts, this was equal to the percentage of banks that decreased them.

Consumer Credit Card Demand

According to the survey, it seems consumer demand has not increased along with the easing of credit approval standards, at least the demand for new plastic. On net, banks reported little change in credit card loans. However, when asked about new credit card accounts and credit increases for existing accounts, banks reported the demand rose by 16%. While only a net fraction of banks reported an increase in the number of credit card applications in the first quarter, it seems consumers are looking for higher credit limits on existing cards rather than opting for new ones.

The Good News

The good news for consumers is that this is a good time to shop around and check out various credit card offers with one in three major banks reporting an easing of credit standards. However, part of the reason the number of consumers seeking new credit cards has not increased might be due to the fact that companies are targeting low-risk borrowers, or people who are in a better overall financial position. Yet these consumers probably already have multiple cards and are not necessarily looking to add to their collection.


Mobile Payment Wars: Credit Card Companies Arming for Battle

Payments are going mobile, and credit card companies do not want to be left behind. The big players are arming themselves to make sure that wherever the mobile payment field is headed, they get a little piece of the action.

Visa Invests in Square

Square is a mobile payment system that launched last May and allows anyone to accept payment through their mobile device. Square appeals to merchants who otherwise do not accept credit cards through a merchant account, such as small businesses, artists, or other vendors that want to avoid paying monthly fees to credit card companies. In the first three months of 2011 alone, Square processed $66 million in transactions. Not bad for a start-up company. But things are getting even better for Square as Visa announced this week plans to invest an undisclosed amount of money. In return, Visa gets a small piece of the action and has joined Square’s Board of Advisors.

Visa’s recent move will also open up new doors for the credit card company, as more merchants will be accepting credit cards for payment. According to the Central Penn Business Journal, this market includes some 27 million small businesses.

MasterCard in the Mobile Field

Visa isn’t the only company aiming to go big in the mobile payment field. MasterCard has been working its game since 2002 when it developed its PayPass system. PayPass-enabled cards contain a chip that allows shoppers to wave the card in front of a terminal in order to make charges. This takes advantage of a technology called radio-frequency identification, or RFID. The company now has 88 million PayPass cards and devices in use at nearly 300,000 merchant locations.

MasterCard is also teaming up with Google to allow Android users to make mobile payments. The Android device would contain everything a consumer needs, from being able to make payments to receiving offers and discounts after they make a transaction.

American Express Won’t Be Left Behind

As for American Express, it just launched Serve, a new payment network that lets people pay each other online through mobile phones or at merchant locations. Serve users manage their accounts through a smart phone app or with a prepaid card. Users can transfer funds from their debit cards, bank accounts or credit cards.

American Express also plans to partner with the start-up mobile payment company called Payfone, which also enables users to pay through their mobile phones.


Americans Shopping for Credit Cards — Again

According to the results of a recent survey by comScore, the findings reveal that Americans are feeling more optimistic about the economy. The optimism seems to be leading Americans to take on more debt. According to the comScore study of almost 2,000 Internet users and a research panel of 1 million U.S. consumers, 34% percent of respondents said they were feeling more confident about the economy. About 20% of survey respondents shopped around for a new credit card last year. There were several important factors consumers looked for most frequently when credit card shopping.

Primary Feature

According to survey respondents, the primary importance was a low interest rate. It seems to indicate that while consumers are once again looking to take on debt, they want to do so at the lowest interest rate possible. About 38% stated a low interest rate as the most important factor in choosing a credit card.

Second and Third in Importance

After a low interest rate, the next most significant feature credit card consumers are seeking is a card without an annual fee. Approximately 25% of survey takers said that they are looking for credit cards that come without an annual fee associated with it. Coming in third as the most important factor for choosing a credit card is a rewards program. About 16% of the survey respondents cited this as the most important factor when deciding on a credit card.

Consumer Spending Behavior

Sentiments on the economy apparently are not stopping short with applying for new credit and new credit cards either. A MasterCard survey in December 2010 also revealed that 61% of customers said they had not intentions on cutting back on spending in 2011. Of shoppers earning $100,000 to $150,000, 73% said they would not cut spending. So far, consumers are keeping true to their word, which is resulting in a return to applying for credit cards.


Recent California Supreme Court Ruling Drives Lawsuits

After a ruling in February in the California Supreme Court, it is now illegal for a retailer in the state to request the zip code of customers paying with a credit card. Apparently this information was being used for marketing purposes although consumers were led to believe otherwise. The result: more than 150 class-action lawsuits have been filed in California against numerous companies. The retailers include Kohl’s, J.C. Penney, Bed Bath & Beyond and Wal-Mart.

More than 40 of these lawsuits were filed in San Francisco Superior Court but include other jurisdictions in California as well.

Consumers claim the basis for these lawsuits is they were deceived into providing personal information under the assumption it was pertinent to finalizing the credit card transaction or for fraud prevention. Instead, consumers are learning this information seems to have been used for marking purposes.

The court ruled that collecting zip codes is illegal under a law that bars stores from collecting “personal identification information” when it is not needed for a transaction. The law was originally put in place to prevent customers’ personal data from being misused. But that is the same justification stores are using for taking zip codes; they say it is an anti-fraud measure.

In the Supreme Court Case, Pineda v. Williams-Sonoma Stores, Inc., a woman sued the home store Williams-Sonoma after the company used her name and zip code to find her address and added it to a marketing database.

Clearly most consumers would not have divulged personal information, such as their zip code, if they knew what it was really being used for. Stores in California certainly won’t be asking for zip codes moving forward, but that isn’t enough for many consumers who feel they’ve been violated and deceived in a big way.

Bill Dombrowski, president of the California Retailers Association told The San Francisco Examiner: “Most of the time, it’s being used to verify the credit card is your credit card, so it’s for fraud prevention.”

But the California Supreme Court disagrees.


Consumer Spending Drives Economic Growth

The economy has been kicking back into gear, and consumer spending plays a big role in driving this upswing, as it accounts for 70% of the economy. With the recent profit increases credit card companies have seen, it seems consumers are back out there using their cards to make purchases instead of cash or debit cards. As card companies report increasing earnings, mailboxes are filling with credit card applications once again.

Increase in Consumer Spending

As mentioned in a previous article, after this past holiday season, consumers in all income brackets said they had no intention of putting a hold on their spending this year. The holiday season might remind consumers it can also be fun to shop for ourselves once in a while. Also, with unemployment rates decreasing, consumers who have kept to a strict budget might be letting loose for a change, an maybe filling out a credit card application or two, because they can finally afford to do so. Consumers have more confidence in the slowly improving economy and are less worried about keeping a tight budget and saving money. This is shown in a report by the U.S. Bureau of Economic Analysis, which reported a 4% increase in consumer spending in the fourth quarter of 2010. This is the largest percentage increase in 5 years.

Consumers Not Afraid to Use Their Credit Cards

With a decrease in credit card delinquency in the fourth quarter of 2010, it seems consumers are more confident in their financial position. Because they are making more of their payments on time, cardholders are facing fewer late payment fees and interest rate hikes. This is most likely encouraging to consumers, who feel secure to once again use their credit cards for purchases.

Credit Card Companies See Increases All Across the Board

Of course if people are spending more money, it’s no surprise they are using their credit cards more, too. Credit card companies are seeing an increase in their net income and in card member spending. For instance, American Express reported net income of $1.1 billion in the fourth quarter of 2010, compared with $716 million a year earlier. A large percentage of this gain can be attributed to cardholders charging more to their credit cards.



ABA Reports an Improvement in Most Loan Delinquencies

Consumers are doing a better job of paying their credit card bills on time. According to a recent report by the American Bankers Association, bank-issued credit card delinquencies dropped to their lowest rate of 3.28% in the last quarter of 2010, compared with the 3.64% it had been in the previous three months. A delinquency is defined by the ABA as a payment overdue by 30 days or more. This is the lowest bank-issued credit card delinquency since the first quarter of 2001, nearly ten years, and it is also below the 15-year average of 3.92%.

The rate of unemployment has been falling steadily and dropped to 8.8% in March. Private-sector employers added 216,000 jobs that month. Clearly, our economy is slowly but surely recovering, and consumers are better able to make their credit card payments in a timely manner.

In addition to bank-issued credit card delinquencies, the overall delinquency rate decreased in the final quarter of 2010 from 3.01% to 2.68%. In fact, 9 out of 11 loan categories that the ABA tracks decreased in the fourth quarter. In the category of home improvement loans, ABA reported a slight rise in loan delinquencies to 1.26% from 1.23%. The only other category that did not show a delinquency decrease was housing loans, but these remained unchanged at 4.05%.

ABA chief economist James Chessen believes these figures to be encouraging.  “I’m feeling hopeful about further declines in delinquencies because of continuing job growth, but the unknowns are the impact of higher gas and food prices,” he said in a statement.“The 2% reduction in federal payroll taxes that began in January was intended to boost discretionary income. Unfortunately, rising prices have dashed any chance of that.”

The Associated Press reported in March that food prices in February saw the biggest rise in 36 years. Cold weather was mostly to blame, The AP said, but prices on food commodities have risen sharply over the last year.

The national average gasoline price on April 11 was $3.77, compared with $2.86 a year ago, according to AAA. Instability in oil-producing countries like Libya pushes gas prices up, along with rising demand as Americans travel to work more and once again have money to travel on vacation.

Clothing retailers, too, are raising prices. The price of cotton has more than doubled in the last year, according to The AP, and synthetic fabrics cost nearly 50% more. As shoppers return to stores, steep discounts are no longer needed.

With recent world events and rising gas and food prices, consumers will certainly continue to face challenges. But the fact that unemployment rates are improving seems hopeful. The more money consumers make, the more they will be able to make necessary payments on time. Hopefully, we will continue to see delinquency rates drop throughout 2011.


Save Money with Credit Cards

One of the best perks to having a credit card is the rewards program many of them offer. Credit card companies use this benefit to attract new customers and keep their current ones. That doesn’t mean credit card reward programs are a free gift to you from the credit card companies; certain restrictions do apply, and it might not be worth it to participate in a rewards program depending on the circumstances. However, rewards benefits from a credit card company can really add up to some substantial benefits, if you approach them the right way. Here are some suggestions on getting the most from the best rewards credit card.

Save Money with Credit Cards

  • Most rewards credit cards require you to pay off your balance every month. If you have a balance that carries over, the benefits may be reduced or you could be ineligible for rewards at all.
  • Typically, credit cards that offer rewards will have a higher APR than ones who don’t. Make sure you shop around to get the best APR you can while still receiving rewards.
  • You might have to do a little bit of math. If you have to spend an obscene amount of money for a $30 gift card, is it really worth it? Probably not.
  • If you travel often, a credit card offering free air miles might seem like a good idea. Keep in mind you’ll have to charge and pay off a lot of purchases before you are able to redeem those miles. There may be blackout dates and expiration dates that prevent you from using earned miles – it’s important to read the fine print of any offers.
  • Speaking of expiration dates, these may occur on travel miles, lodging discounts, points, even merchandise and cash back offers.
  • Fuel rewards are very popular, especially with the soaring fuel prices today. However, most credit cards require you purchase your fuel from specific places in order to earn rewards. Generally, places like supermarkets or smaller stations are not included in the cashback plan.
  • Know the limits placed on earned rewards on credit cards by the company. For instance, some credit cards only allow you to earn up to a certain percentage and then you won’t earn any more. If your credit card company has a rewards program that gives you points up to 1% and not a penny over, you have to decide if it’s worth it.

Credit card reward programs can definitely add a lot to the credit card experience, but you have to know the ins and outs to make the most from rewards credit cards. Do a little homework and compare credit cards and what they have to offer to choose the best one for your lifestyle. Don’t forget to read the fine print, and don’t be afraid to walk away and find a better credit card that better suits you. After all, this is your money you’re spending.