Wednesday, August 26, 2009

Suze Orman's Point of View

Hi Everyone,

This week, I decided to feature the opinion of someone who has been in the financial industry for almost 30 years and is well-known to tv viewers and book readers. Suze Orman has a weekly show on CNBC and she has also written several books on personal finance.

Last weekend, Ms. Orman featured a segment called "Suze Orman's Debt Loyalty List."
She listed, in descending order, how she feels certain debts should be paid off.

Here is the list:

1) IRS
2) Student Loan
3) Personal Loan
4) Mortgage
5) Car Loan
6) Credit Cards

Of the credit cards, Suze said, "Credit card debt is unsecured debt." That means, the banks and credit card companies CANNOT repossess anything that you own because you are behind on your card payment. Also, they cannot seize your accounts and rarely does it get to the point where they garnish your wages.

Personally, I address this list because I want you to see that the credit card companies are
NOT the bullies that they pretend to be. They do NOT have any more power over you than you allow them to have.

Think of it this way - with the new credit card legislation that the president has signed into law and all that you are learning from this blog, YOU are the one with the POWER, not the banks and not the credit card companies.

Good job, Suze! Good job, Readers!! Stay tuned.

Thursday, August 20, 2009

Some Changes to Credit Cards Effective Today

Back in May, President Obama signed "The Credit Card Accountability, Responsibility and Disclosure Act of 2009" which will require the issuers of credit cards to present their rules and fees "in plain English" instead of in the convoluted legalise that they have gotten away with for so many years. In addition, they are forced to drop some of their misleading practices, such as delaying the posting of payments that arrive on time so that issuers can charge a late fee.

While the majority of the provisions don't take effect until February 22, 2010, some significant (and empowering) changes become effective today (August 20, 2009). These include that the fact that issuers must mail statements to customers at least 21 days before the payment is due. Also, issuers are required to provide 45 days notice before increasing annual percentage rates or changing terms of agreement on the account - this is a big deal! Up to now, the issuers had to provide just 15 days before these increases and changes took effect.

Not surprisingly, credit card issuers were not happy with the president's decision to help consumers and immediately tried to make financial lives tougher while they could. According to Adam Levin, chairman and co-founder of, "several card companies have been increasing fees, reducing credit limits, raising rates, boosting minimum payments and dropping customers with high balances."

Personally, I had an experience a few months ago where one of the card companies cut my available credit in half, largely because I don't use the card very often and when I do, I pay it in full. They don't like that - they call those of us who pay off our balances "deadbeats." So, I called them right away and told them that I wanted my available credit reinstated at its full amount and because I have an excellent payment history, they had no option but to do what I wanted. Basically, they did not want to risk me leaving them and going elsewhere. Hey, I may not use the card a lot, but they figured it's better that they get some money from me sometimes than no money ever!

Come mid-February of next year, the other changes in the law will take effect, namely

*If a card has a balance at varying rates, payments must go towards the higher rate first.

*If the interest rate on the card goes up, it cannot be applied to an existing balance. It can only
be applied to new purchases.

*Double cycle billing will be prohibited. In the past, companies would take the average daily
balance from both the current month and the previous month and calculate finance charges.

*Also, and I like this one A LOT, marketers cannot hawk students who are less than 21
years of age without a parent's signature of unless the card company can PROVE that
the student earns enough money to pay the bill.

These are some of the main things to be aware of. As we move closer to the full
implementation of the law on February 22, 2010, I'll keep you posted on other significant changes and happenings.

For now, my advice is to follow the tips and pointers I've provided in the posts written to date and check back weekly for more valuable advice as together we get you OUT OF CREDIT CARD DEBT!!

Wednesday, August 19, 2009

Protect Yourself

These days, it seems that identity theft is all too common. Part of being responsible with credit cards is being aware of where they are at all times and being aware of where we are using them.

In some cases, unfortunately, identities and credit card information can be stolen, even if we have done everything possible to be protected. Such is the case with a Florida man who was just indicted (for the third time) for allegedly stealing data from over 130 million credit and debit cards. He has hacked into computer networks of stores and restaurants, such as T.J. Maxx, Marshalls, Barnes and Noble, 7-Eleven, and Dave and Buster's, among others.

It is highly advisable to check your accounts regularly, like once per week, to make sure that no illegal activities have occurred. If something unethical has happened, contact your credit cards immediately, put a freeze on your credit reports, and contact the authorities immediately.

We have to be proactive in ALL ways when it comes to our credit...and our identity.

Friday, August 14, 2009

Parents and Kids, LISTEN UP!!

While this post is not exclusively about credit card debt, it does play a role in what you are about to read.

On a couple of occasions, I have addressed the problem of instant gratification, of the "I want it and I want it NOW" mentality. The main problem is that we don't develop patience nor do we establish a work ethic in order to provide for the "want." This is an issue for adults and children. To make matters worse is that undisciplined (financially) parents cannot teach constructive money habits to their kids.

Recently, Dr. Phil had what I consider to be one of his best television programs called
"How To Talk To Your Kids About Money." The primary guests were parents named Lori and Chris and their 15 year old daughter, Kati. I'll start by saying that the parents admitted that they "have trouble saying no" to their daughter and she admitted that she "likes to manipulate the situation" in order to get what she wants. This is a recipe for DISASTER!! To put it in numbers, the parents spent $27,289 in just 2 years to satisfy their daughters' materialistic desires.

The financial mess is easy to recognize. But on a deeper (rational) level, the problem is that neither the parents (especially the mother) nor the daughter take full responsibility for this situation. Lori (mother) makes excuses for this wasteful spending, claiming that Kati "makes good grades," as though As and Bs should equate to thousands of dollars. If that were true, I would have been a millionaire by the time I got out of high school. Then, ironically, Lori says that Kati "spends too much money." DUH! From whom does she get the money?!?

Dr. Phil addressed the issue directly, as he often does, when he said, "The parents are not willing to step up" and that "Overindulgence is the most insidious form of child abuse." Simply put, the parents have trained their daughter to beleive that if she simply puts her hand out, she will eventually get what she wants. I pity her future spouse, significant other, etc. This habit is hard to break.

Ultimately, it was determined that the father brings home $6,000/month (net), but by the time that the bills are paid and Kati's "stuff" is bought, there is only $240 left.

There are so many things wrong with this situation. To make matters worse, this is not an isolated situation. There are MANY American families that are living in debt (largely credit card) because parents cannot say NO to their kids. And it's really NOT that hard....
kids frequently say no to their parents!! So maybe parents can learn from their kids!

Monday, August 10, 2009

It's Off To School We Go!

It's August. That means that by the end of the month, most or all students will be back in the classroom, starting another year of education. Especially for college students, this means trips to the bookstore to buy texts and other course necessities.

As a college instructor for the last 13 years, I have seen first-hand how many students are undisciplined when it comes to spending. This is particularly true when it comes to the use of credit cards. Some students have cards in their own name; others use their parents' cards. Either way, this can be a dangerous situation and a bad spending habit that can last a lifetime, without careful consideration and advice.

Many credit card companies and banks are aware of the naivete of these young men and women as well as their desire for instant gratification. For several years, representatives of these companies would show up at campus student centers and "invite" students to sign up for their cards. In many cases, this led to hundreds, and in some cases thousands, of dollars of debt, on top of student loans. Sadly, many parents were not aware of this excessive debt until it was "too late."

So my advice to students is to avoid these salespeople should you see them on campus. Also, if the cashier happens to throw a credit card application into the bag along with your books, tear it up and throw it out ASAP.

Parents, be aware of your child's spending habits, especially if he or she is away at school. Monitor this very carefully. Don't be afraid to ask how they are buying things, what they are buying, etc. In this case, ignorance is NOT bliss - it can lead to pain: in the wallet!

I wish students and teachers a successful academic year!