Credit Card Laws Change this Month

This is a heads up for people with credit cards. On the 22nd of this month (February) credit card laws will undergo major changes. Thanks to the Credit Card Act passed by Congress last year, credit card laws have been drastically changed. Credit card companies have been forced by the congressional act to change their lending practices and the manner in which they can charge fees, and the due date is the 22nd. Here are a few ways that you might be impacted by the Act.



The Good News:

Banks have lost some of their proverbial teeth. Thanks to the passage of the bill, credit card companies can no longer:

• Charge interest on fees due


• Limit the amount that banks can charge on specific fees (such as late fees and over limit fees)


• If you get pre-approved by a company for a new credit card but you don't want to open a new account for it, you now have the ability to "reject the card" up until you activate the card


• Banks must give you 45 days notice in advance if they want either raise the APR on your accounts


• And more

The Bad News:

Credit Card Companies are trying to grow new teeth to replace the ones that they have lost. Companies are looking to charge new fees for their services to make up for any lost revenue. Here are a few known tricks that will soon be making an appearance:

• Annual fees are on the rise


• The interest rates placed on cards are expected to rise as card companies try to find new ways to make up for their lost revenue


• Chase changed balance transfer fees from 3% interest to 5%


• Bank of America instituted a great deal of changes, including the ability to raise the APR on future accounts if you miss a payment (go here for a more in-depth review of BoA's changes)

Keep A Watch Out:

The most important thing to get out of this is that you, the consumer, are now more protected than ever before. Banks now have to give you a heads up on policy changes, rate increases, etc... something that they did not have to do in all cases before. As long as you pay attention to your monthly statements released by your credit card companies and any email notification that you recieve from then, you should be well ahead of the curve. Good luck!

Related Links:

The Credit Card Act in PDF format is linked here

A Forbes article changes that you can expect to see as a result of the Credit Card Act: Forbes Article

Don't Get Scammed - Choose Your Credit Agency Wisely

Scams are everywhere and a fast growing problem in the current recession is a con scheme involving the impersonation of debt consolidation, negotiation, and elimination agency. Such plans represent a last hope for many people to get out of debt; they are effective and time proven to help you get out of debt. And thanks to the rising levels of unemployment (over 10% in some states) more people are using them than ever before, and some of them have fallen victim to the scammers.

If you are in a situation where you are looking at these debt plans in order to free yourself from debt, here are a few tips/methods for spotting which are legitimate agencies and which ones are scams.

Talk To A Credit Counseling Agency:

Credit Counseling Agency's exist to help people in debt figure out the financial options that are best for them. Agencies base it on peoples specific problems and resources. They are often non-profit agencies, and their services are either free or provided when you pay a small fee ($75 is average). Different agencies can offer different services (such as reverse mortgages, debt consolidation plans, and more) which means that it is important to figure out which agency will be able to help you the most.

If you are in a situation where you are looking at debt plans and credit agencies in order to free yourself from debt, here are a few general tips/methods for figuring which are legitimate and which ones are scams.

• If you are working with a lawyer or a paralegal concerning your debt, ask if they can refer a debt help agency. Most will either have lists containing reliable and certified credit agencies on hand or they will be able to find one for you fairly quickly.
• States usually require credit agencies to be accredited and to have certified counselors in order to operate within specific states. Always ask an agency if this is true for them - while not all agencies have certified counselors the best ones usually do. Agencies with counselors who are certified by an outside group (one that you can research for yourself) often have websites and phone lines that you can research and call.
• Understand what you are getting yourself into. If you feel confused at any point during your conversation with the agency, always ask them to go over the information again. Most agencies will be happy to do so and will give you as much time as you need to figure out the options being offered to you. However, agencies that offer their counselors a commission for each customer gained are less likely to do this than companies who offer their counselors a flat rate.
• Make sure that you have been walked through the agencies entire privacy agreement. If an agency refuses to do so, or you do not feel that their privacy agreement is tough enough, then don't use that agency! Your financial information has to be protected, and if one agency can't do it then another one can.
• Get things down in writing. Most legitimate credit agencies will offer written contracts, certificates, or other legally binding agreements. These written promises are in place to protect you; they often contain the name of the counselor who helped you and the entire agreement in physical writing. Make sure that you read through the agreement and that the writing is straightforward and simple. If it isn't or you find yourself confused by something on it, call the agency back and ask them to go over it with you. You can often get written agreements emailed to you by the agency in question.
• Check for them with your states Better Business Bureau (BBB). If they are legitimate, then the BBB will be able to tell you how helpful they are and whether or not the BBB has received complaints about the agency.

Related Links:

New York Times Scam Article: Is a brief expose on scams targeting people who have been hit hard by the recession.
BBB1: Tips from the better business bureau on how to find a good credit counseling agency.
BBB2: An article detailing the difference between debt consolidation, debt negotiation and debt elimination plans.

Why People File for Bankruptcy

If you're struggling with debt, you may sometimes find yourself wondering if you should file for bankruptcy. If you're like most people who wonder about doing this, then you don't - but why? Well, one reason that many people don't file for bankruptcy is because they don't know if they are in a position to do so.

There are actually many different reasons that people file for bankruptcy, most of which involve common sense like the loss of ones job or overwhelming medical bills - and not laziness. Other reasons may surprise you, with one being that you may actually be able to improve your credit score by doing so! In any case, if you feel like one of the reasons below could apply to you, you may want to consider filing for bankruptcy yourself.

Reason #1: Loss of a job

One of the most common causes for why people choose to go bankrupt is because of a job loss. It is hard to find a job in today's market, and if you are already struggling with debt, the loss of your job can come as a major blow. Not only will you lose the money provided by the job, but other things as well. This includes things such as medical benefits, insurance, bonuses (such as access to a company vehicle), or discounts which also came with the job.

Reason #2: Preventing repossession of properties

If you file for a Chapter 13 bankruptcy, you might be able to force creditors to return property (such as your car) back to you. Your past missed payments will be consolidated into your bankruptcy plan, and you will give monthly payments to the trustee of your bankruptcy plan, and who will in turn pay the finance company on your behalf.

It is important to remember that repossession of properties is only possible under a Chapter 13 bankruptcy and NOT a Chapter 7 bankruptcy.

Reason #3: Improving your credit score

There are actually some cases where filing for bankruptcy can help you improve your credit score. To use an example, it is possible for someone with a credit score of 450 to raise their credit score as high as 700 if they meet certain requirements.

This is because when you file for bankruptcy your score is determined based on how you well you do compared to other bankruptcy filers. In other words, your score is matched against people in similar situations as you, not against people with perfect credit scores and zero debt.

As long as you manage your bankruptcy plan well and manage to meet its minimum payment obligations, then it is possible to raise your credit score. Keep in mind, though, that you cannot raise your score to an 850 (or close to it) so long as you are registered as being bankrupt.

Also, if you file for bankruptcy when you have a high credit score (which is not advisable, because doing so would indicate that you have other options available to you) then doing so may in fact harm your credit score. It is also advisable consider other means of raising your credit score before filing for bankruptcy.

Reason #4: Stop home foreclosure and catch up on missed mortgage payments

Filing for Chapter 13 Bankruptcy will stop foreclosure before bidding or sales will occur. This gives you time to repay mortgage arrears or your remaining mortgage balance. It does not eliminate your property mortgage.

Reason #5: Put a halt to creditor harassment

It doesn't sound like a major reason, but if you're struggling with debt and receiving rude and harassing calls on a daily basis, the pressure can sometimes be too much. People can only deal with so much stress before something gives way. Sometimes the best option to get rid of the calls and the stress is to file for bankruptcy.

If you are in this situation please remember that if there are other options available to you, take them! Bankruptcy can get rid of the creditors, but don't file for it unless your debt, credit score, and overall financial situation seems hopeless and impossible to work off.

Reason #6: Medical bills

Medical expenses have caused many families to file for bankruptcy. Whether you are middle-class, low-class, or somewhere in-between, the cost of medical treatment is steep and scary. One of my own close friends is currently struggling to pay a bill that her insurance didn't cover, and she only had a doctor remove a piece of food that had gotten lodged in her throat.

If you're in a situation where you're being crushed by paying a medical bill off and your financial state is in ruins, then filing for Chapter 7 bankruptcy can help you to reduce or possibly even eliminate your medical bill.

Reason #7: A new start

After you have filed filed for bankruptcy and completed the payments that you are responsible for under it, some people have found that it gives them a fresh start. This is not to say that your slate gets wiped clean - you can have the fact that you filed for bankruptcy on your credit report for ten or more years.

However, you will be: out of debt, free of creditor harassment, and (hopefully) have a higher credit score than you did before you filed for bankruptcy. All of these things can help you to feel better about yourself, and provide you with a figurative goal or 'light at the end of the tunnel'.


At the end

Hopefully these reasons will help you should you be in the position where bankruptcy seems like a possibility. Remember though... Filing for bankruptcy should be your last resort. If you have any other option (such as cutting your budget) you should definitely take it.

Also, before you file for bankruptcy, you should consult with a credit counselor to determine whether or not it would be in your best interests.


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