CCCS: How to Survive the Economic Storm

This piece from Consumer Credit Counseling Service is excellent:

"As the debate goes on as to whether or not we are in a recession, most consumers agree that they are feeling the impact of our current economic conditions. As the number of available jobs diminishes and the number of foreclosures skyrockets, families are looking for ways to reduce spending and increase income just to make ends meet.

"No one is immune to the effects of this financial crisis," said Jessica Cecere, president of Consumer Credit Counseling Serviceof Palm BeachCounty and the Treasure Coast (CCCS). "What we can all do is take simple steps to minimize the impact and prepare ourselves for the
future."

CCCS offers tips to help consumers weather the storm and survive the turbulent economic times ahead.

• Expect changes in lending standards The days of "no money down" and "zero percent interest rates" are probably behind us. Consumers with questionable credit histories will find it more difficult to borrow money. Some other changes we can expect:
  Borrowers will need to demonstrate an ability to repay the money borrowed;
  *Job histories of five years or more in the same company or industry may become standard requirements for borrowing money;
  *Credit scores will be more closely scrutinized by lenders;
  *Larger down payments may be required for major purchases for things like cars and homes
  *Banks may require collateral from borrowers-something they can use to recoup their money if the borrower defaults.
• Prepare for increasing prices While current market conditions may have had a positive impact on fuel prices, paying at the pump is still taking a major hit on most budgets. The average family budget has not been prepared to absorb the rising cost of groceries, higher utility bills, and climbing insurance premiums and health care costs.
• Make adjustments By making small changes, such as substituting store brand products for the higher-priced name brands, increasing (or lowering) the thermostats in your house just a couple of degrees, or participating in a car pool to get the kids to school, you can save significantly. Look for things you can cut out of your budget-even small savings can add up quickly.
• Keep some cash on hand Separate from your emergency fund, it is always a good idea to have a small amount of cash on hand for emergencies. You may even be able to use cash to save money, as some gasoline stations offer a discounted price for customers paying cash. In addition to cash on hand, you should have, or work toward, having 6 months of living expenses in a savings account that you can access quickly if you need it. If you have large amounts of cash in savings, make sure you understand FDIC guidelines so that your money is safe. Getting credit will be more difficult. If you currently have home equity lines of credit or credit cards, you may find that limits are lowered or unused accounts are closed because creditors want to minimize their chance of loss.
• Know you are not alone Many consumers are struggling to make their mortgage or rent payment, buy groceries and gasoline, and make the minimum payments on credit card bills. Your friends, neighbors and family are all feeling the effects. While you may not be able to address every challenge immediately, take active steps to improve your financial outlook wherever you can.
• Remain calm and be patient If you had your heart set on a new car or a luxury vacation, you may need to put those plans on hold. Resist the urge to buy things with credit and wait until you have saved enough money before making purchases. If you have been saving for a specific item, now might be a great time to make a purchase, as many retailers are reducing prices in order to stimulate sales.
• Live by basic money management principles Practicing sound financial management is always a good idea, and it can ease the burden when times get tough. A few key things to consider:
  *Spend less than you earn.
  *Have an emergency fund that covers six months of living expenses in an account you can access if you need it.
  *Pay off and stop using your credit cards.
• Be prepared for the unexpected - have in place the following:

Insurance - to protect your home and other large assets.-

Savings - to cope with a loss of income until you can replace those dollars.-

Employment - Keep your resume up to date. You can't always plan for a job loss, and good preparation will help make the search for a new job easier.-

Retirement - Contribute to your financial future, even if it is just a few dollars per pay period.- A Will - protect your loved ones

Health care - If at all possible, ensure that you have medical coverage for yourself and your family at all times."

source: www.cccsinc.orgor www.cccsenespanol.org.

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6 Tips to Detour Around Car Loan Problems

This item from Citibank offered good tips about reducing car loan headaches.

"After mortgages, auto financing is the most expensive loan most Americans carry. And in this uncertain economy, more consumers are finding they are unable to repay their auto loans due to unforeseen financial circumstances. In fact, auto repossession is at a 10 year high, according to economists. Furthermore, due to the housing crisis, auto loan lenders are tightening consumer credit standards.

Personal finance expert and director of Citi’s Office of Financial Education, DARA DUGUAY, offers the following advice to help consumers understand the commitment they are making when financing a car and to minimize any unexpected issues that may arise:

1. Calculate the Total Cost of Car Ownership. Make sure the loan you obtain is well within your means to pay. This means figuring out the cost of auto ownership – which is more than just the price of the car. Be sure to budget for related costs such as insurance, gas, registration fees and maintenance.

2. A Car Loan is a Contract. The inability to make timely payments can damage your credit rating or trigger even more dire consequences, such as repossession.

3. Downsize, Not Supersize. Though that SUV may have caught your eye, additional costs for gasoline, insurance, parking, even car washes incurred for a larger vehicle may steer you toward a more fuel-efficient car.

4. Keep In Touch. As soon as you face any financial difficulties, let your creditor know, so that you can explain your situation and work out a repayment schedule.

5. Repossession Does Not Relieve You Of Your Obligation to Pay for the Car.
A creditor or assignee may take the vehicle in full satisfaction of the credit agreement or may sell the vehicle and apply the proceeds from the sale to the outstanding balance on the credit agreement. If the vehicle is sold for less than what is owed, you may be responsible for the difference.

6. Getting through the bump in the road. If necessary, seek the services of a non-profit credit counseling agency that may be able to mediate between you and your lender.
For more tips on smart car shopping and auto financing, visit Avoiding Car Repossession, the latest video in the Wallet Wisdom video series by Citi’s Office of Financial Education at http://www.citigroup.com/citi/financialeducation/videos.htm"

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Extra Income & Other Strategies for Digging out of Debt in 2008

Finding a new way to get to work and tapping into extra income are a few of the strategies for eliminating debt in 2008, according to this guest post from http://www.cccsinc.org/ (Consumer Credit Counseling Service):

"Review your transportation needs. If a car is needed to get to work, be sure to stay current on your payments. Explore options such as public transportation or trading a more expensive vehicle for a cheaper one. Look for opportunities to carpool to reduce travel expenses.

Stop charging! If you don’t have the willpower to not use your credit cards, remove the temptation by removing the cards from your wallet. Secure them in a safe deposit box at your bank or other hard to reach location, or simply put them in a bowl of water and freeze them. The time it takes for them to thaw will give you plenty of time to think about your purchase.

Explore alternatives for extra income. Talk with your employer about working additional hours at your current job, or pick up a part time job to make some additional income. Use all additional income to pay down debt.

Reduce expenses everywhere possible. Cut out the morning coffee stop, bring your lunch to work, opt for dinner and a movie at home instead of going out. Look around the house for ways to cut expenses. Consider trading in your landline and using your cell phone exclusively; cut back or eliminate on your cable or satellite package; raise (or lower) your thermostat just a few degrees—these small changes can add up to big savings.

Pay off highest interest rate charge cards first. Start with the cards with the highest rate and pay more than the minimum each month. As soon as you pay off one card, apply that money to the next card. While consolidating your credit card debt into a single card with a lower interest rate can help you pay off the debt faster, be careful of higher rates at the end of an introductory period. You could end up paying more over time. Also, if you do consolidate, cut up or put away the other cards to reduce the temptation to use them.

Keep housing payments current. Pay your mortgage or rent on time every month. If you own your home, also stay current on all taxes owed. Failing to do this can result in foreclosure or eviction."

source: www.cccsinc.org

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This is Odd: Payday Loans Save Money?

Payday Loans! I've often thought of them as legalized loan-shark deals. Not so, according to this news release that cites a Federal Reserve study. The conclusion: Payday loans are helpful!?! Hmmmmm. Read this and comment. Here's the piece:




"Denying Consumers Access to Payday Loans Leads to Costlier Credit Options and Greater Financial Burdens


New staff research from the Federal Reserve Bank of New York details consumer hardships in North Carolina and Georgia after states eliminated the service


WASHINGTON, DC - Households without access to payday loans are forced to use costlier credit products and suffer greater financial difficulties, according to new research prepared by staff of the Federal Reserve Bank of New York.


Preliminary findings in the November 2007 working paper, "Payday Holiday: How Households Fare after Payday Credit Bans," by Donald P. Morgan and Michael R. Strain, Research Officers with the Federal Reserve Bank of New York, conclude that payday loan bans result in increased credit problems for consumers. The study compares households in states with payday loans with households in both Georgia and North Carolina, states which eliminated payday loans in May 2004 and December 2005 respectively.


They found, "Georgians and North Carolinians do not seem better off since their states outlawed payday credit: they have bounced more checks, complained more about lenders and debt collectors, and have filed for Chapter 7 ("not asset") bankruptcy at a higher rate." The authors note that, "This negative correlation-reduced payday credit supply, increased credit problems-contradicts the debt trap critique of payday lending, but is consistent with the hypothesis that payday credit is preferable to substitutes such as the bounced-check ‘protection' sold by credit unions and banks or loans from pawnshops."


The findings in the Federal Reserve Staff Report track closely with consumer responses given in a survey by the University of North Carolina Center for Community Capital, part of a recent study to determine how North Carolina consumers fared without the option of payday loans.


"While the UNC study concluded that consumers were better off without payday loans, this conclusion does not match the actual findings," said Darrin Andersen, president of the Community Financial Services Association of America (CFSA). "In fact, respondents' answers to the survey clearly show that the elimination of payday loans in North Carolina did nothing about the demand and forced consumers to replace payday loans with costly, less desirable and sometimes even dangerous options."


The survey found that consumers most frequently "did not pay/paid late" [an expense] when faced with a financial crisis. Other frequently cited strategies were "bounced checks/used overdrafts" or "used credit card/cash advance." Some admitted to having utilities disconnected, going without a prescription medication or ending up with a damaged credit rating. Andersen added, "In each case, consumers may have been better served by payday advances, which often offer lower fees and do not negatively impact credit ratings."


An independent analysis by Bretton Woods Inc. reported that, in 2006, North Carolinians paid an estimated $652 million to banks and credit unions in non-sufficient funds or over-draft protection fees. In fact, following three straight years of losing fee income, North Carolina's credit unions had their first increase once payday loans were no longer available in the state.


"There is a growing body of evidence by objective, independent researchers that validates what we have learned from our own customers," said Andersen. "Taken together, these studies demonstrate that people need access to short-term, low-denomination loans, and deprived of these, they are forced into other less desirable alternatives. This research demonstrates that state-regulated payday advances are an important credit option."


Highlights and links to the full studies are available at: Federal Reserve of New York Report, "Payday Holiday: How Households Fare after Payday Credit Bans



University of North Carolina Study


### About the Community Financial Services Association of America The Community Financial Services Association of America (CFSA) is the only national organization dedicated solely to promoting responsible regulation of the payday advance industry and consumer protections through CFSA's Best Practices. As such, we are committed to working with policymakers, consumer advocates and CFSA member companies to ensure that the payday advance is a safe and viable credit option for consumers."



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Kiplinger Answers My Reader's Query: Bad Credit RX?

The folks at Kiplinger’s Personal Finance have provided an answer to a reader's recent question about credit-card repair, which followed a recent post on this site.

Here's the question:

In response to Kiplinger's formula for a healthy credit score, Anon wrote:

That's very nice, but sometimes people get sick and can't work and lose their income and their credit goes in the tank. How do you get your credit out of the tank?

Kim Lankford, Contributing Editor, Kiplinger’s Personal Finance magazine provided this response:

"You can't erase a bad credit history, but you can take steps to improve your credit record from this point on. Negative items generally affect your score for up to seven years, but as time goes by their impact lessens.

Continue using your cards, but clean up your act. Pay your bills on time, keep your account balances low, and be sparing in opening new accounts. As long you use credit conservatively, your score can rebound surprisingly quickly, says Craig Watts of Fair Isaac. We've seen cases of bankruptcy in which borrowers have qualified for a premium mortgage in three years.'"

Here's a link to an article Kim wrote for the November issue profiling individuals who took control of their credit problems:

Special Thanks to Kim Lankford for the prompt response.


Special Thanks to Laura Stevens from the The Rosen Group for making it happen so quickly and efficiently.


And, of course, kudos to Anonymous for asking the question.
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Attn Shoppers: Credit Card Security Breach at T.J. Maxx & Marshalls

If you have shopped at Marshalls or T.J. Maxx since 2003, check your credit card and bank statements. The Wall Street Journal reports that credit-card information was stolen from the parent company of those two stores and the theft could hit the security of 40 million credit cards.

You should be concerned about this info theft if --since May of 2003-- you have:


1. Shopped with a credit card at T.J. Maxx, Marshalls and their affiliated stores.

2. Ditto for debit cards

3. Provided those stores with your license number (for a check)

4. Returned merchandise to those stores over that time period.


Here's a link to a preview of the story.

TJX said customer information was stolen from a computer network that handles a wide range of financial information, including credit cards, debit cards linked to checking accounts and transactions for returned merchandise. It didn't provide details of the breach, saying only that it discovered in December that an "unauthorized intruder" accessed its computer systems. Some drivers' license numbers also were stolen. --WSJ

I have shopped at Marshalls during that period. Therefore, I am going to take the steps recommended by the company:

The company urged customers to review their account statements for potential fraud and set up a toll-free number (866-484-6978) for those with questions about the situation. TJX also said it would provide tips on preventing credit- and debit-card fraud and steps customers can take to protect their personal information at www.tjx.com. --WSJ

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New Wallet-Busting Tricks From Credit Card Companies for 2007

Fewer awards, additional balance transfer fees and stealth kiddie-marketing attacks. Those are just a few of the budget-busting tricks that credit-card companies have planned for consumers in 2007. That's the word from the Wall Street Journal.

"The bad news is that the companies are still finding creative ways to raise fees, in part to offset shrinking profits from interest paid on balances. For example, within tiered-rate schedules, the card companies are increasing lower-tier fees without changing the top tier, says Linda Sherry, spokeswoman for advocacy group Consumer Action.

Say a credit card charges a $15 late fee for balances up to $100; $29 for balances of $100 to $250; and $39 for balances of $250 and over. It jacks up the $15 and $29 fees, but not the $39 fee. This way, Ms. Sherry says, fewer people are likely to notice it and complain." source: Wall Street Journal

The article includes some frugal tactics for evading additional credit-card tricks.

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Sluggish Home Sales But Lots of Burgers to Go

The recent spate of financial news paints a dim view of the global economy. But despite the trouble spots, large orders of fast food are taking a bite out of family budgets and a lot of stuff is being purchased on credit.

The evidence: Corporate earnings were robust at Burger King and MasterCard. Here's a quick digest of major financial news, with short pull out quotes.

This market story from Reuters targets a drop in stock prices based on concerns about a possible slowdown in economic growth.

quote:

"Stocks are now worried about growth going too slow. They should be thinking that way," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. "Anecdotally I am reading about all these problems with auto companies and seeing unsold homes -- add it all up and things are quite bad.-- From Reuters"

But somebody is chewing on lots of Burgers. Profits were hot on the grill at Burger King, according to Businessweek.com

Burger King Holdings (BKC) on Nov. 1 announced a whopping 82% surge in quarterly profit and 7% gain in revenue, boosted amid factors such as tax changes and growing sales.--Businessweek.com

123Jump.com reported on the 82 percent hike in profits from MasterCard.

MasterCard Inc. (MA: chart), owner of the nation''s second-largest credit card brand, reported 82% profit jump in Q3, due to an improved revenue and a higher number of purchases worldwide.