New Credit Card Rules Effective August 22

Image via WikipediaLast week, new rules kicked in concerning the Credit Card Accountability, Responsibility, and Disclosure Act of 2009. These new rules, that the credit card companies are balking at, are finally here and you should be seeing them take affect on your next credit card bill.

New rules from the Federal Reserve mean more new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on August 22, 2010:

Reasonable penalty fees

Let's say you are late making your minimum payment.

• Today: Your late payment fee may be as high as $39, and you likely pay the same fee whether you are late with a $20 minimum payment or a $100 minimum payment.
• Under the new rules: Your credit card company cannot charge you a fee of more than $25 unless:
• One of your last six payments was late, in which case your fee may be up to $35; or
• Your credit card company can show that the costs it incurs as a result of late payments justify a higher fee.

In addition, your credit card company cannot charge a late payment fee that is greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can't be more than $20. Similarly, if you exceed your credit limit by $5, you can't be charged an over-the-limit fee of more than $5.


Additional fee protections

• No inactivity fees. Your credit card company can't charge you inactivity fees, such as fees for not using your card.
• One-fee limit. Your credit card company can't charge you more than one fee for a single event or transaction that violates your cardholder agreement. For example, you cannot be charged more than one fee for a single late payment.

Explanation of rate increase

• If your credit card company increases your card's Annual Percentage Rate (APR), it must tell you why.

Re-evaluation of recent rate increases

• Today: Your credit card company can increase your card's APR with no obligation to re-evaluate your rate increase.
• Under the new rules: If your credit card company increases your APR, it must re-evaluate that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.

These are simple changes that will streamline the rules across all credit card companies. There won't be different rules across different companies anymore. 

Debt and Marriage: When Do I Owe My Ex-Spouse's Debts?

Image via WikipediaWhile researching this article, I Googled the words "debt" and "divorce", I got over 14 million results. In our society, debt and divorce go hand in hand. With money problems the leading cause of divorce in our country I can see why. Even with many intact marriages money is a big point of contention. The bills are continually rising, it costs a lot to raise children and many other factors contribute to the problem. Sadly the strain, of money problems, can be devastating and many marriages end up in divorce.

In a divorce, the marriage you entered into with such high hopes, can be ended with the signature of a judge. The only problem is that debts are not eliminated so easily. If your in the pre-stages of divorce you may want to learn how the debts of the marriage are going to be looked at by the creditors. You may agree with your spouse or the judge may decide for you who is to pay the debts but your debtors don't look at it the same way you are.

With all forms of debt entered into you will find two ways the responsible parties are listed:

Individual Account:
Your income, assets, and credit history are considered by the creditor. Whether you are married or single, you alone are responsible for paying off the debt. The account will appear on your credit report, and may appear on the credit report of any "authorized" user. However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your spouse may be responsible for debts incurred during the marriage, and the individual debts of one spouse may appear on the credit report of the other.

Pro's and Con's:
If you're not employed outside the home, work part-time, or have a low-paying job, it may be difficult to demonstrate a strong financial picture without your spouse's income. But if you open an account in your name and are responsible, no one can negatively affect your credit record.

Joint Account:
Your income, financial assets, and credit history - and your spouse's - are considerations for a joint account. No matter who handles the household bills, you and your spouse are responsible for seeing that debts are paid. A creditor who reports the credit history of a joint account to credit bureaus must report it in both names (if the account was opened after June 1, 1977).

Pro's and Con's:
An application combining the financial resources of two people may present a stronger case to a creditor who is granting a loan or credit card. But because two people applied together for the credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to each spouse. Former spouses who run up bills and don't pay them can hurt their ex-partner's credit histories on jointly-held accounts.

Authorized Users:
If you open an individual account, you may authorize another person to use it. If you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must report it in your spouse's name as well as in your's (if the account was opened after June 1, 1977). A creditor also may report the credit history in the name of any other authorized user.

Pro's and Con's:
User accounts often are opened for convenience. They benefit people who might not qualify for credit on their own, such as students or homemakers. While these people may use the account, you - not they - are contractually liable for paying the debt.

Action Plan:

• If you're considering divorce or separation, it's important to make regular payments so your credit record won't suffer. As long as there's an outstanding balance on a joint account, you and your spouse are responsible for it.
• If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user. Or ask the creditor to convert these accounts to individual accounts.

Failure to do this usually leads to one spouse paying for a while but later defaulting because of lack of income or out of spite. This results in the other spouse having a ding on their personal credit report or eventually being sued by the creditor for not paying.

In a joint mortgage, the only way to get your name off the document is to have the home refinanced. Just having a judges decree for one spouse to pay the debt is not recognized by the creditor. Divorce does a good job of separating you legally from your spouse but does a bad job divorcing you from your spouses debts. It's going to be your job to divorce yourself financially from your spouse.

The 15 Best Budget, Economic, and Retirement Financial Quotes

Quotes are a great way to learn a concept in a quick and dirty way. There is a lot a wisdom in quotes and their fun too. I have listed 15 quotes from 3 interesting subjects.

Budgets

The basic foundation of personal finance is the budget. Like Dave Ramsey says, " If you don't tell money where to go, it will just leave." Budgeting is the the hardest thing to do when you are just getting started and if you want to win in the money game, it's a skill you need to learn.

"Some couples go over their budgets very carefully every month; others just go over them."

-Sally Poplin

"A budget is just a method of worrying before you spend money, as well as afterward."
-Unknown

A budget tells us what we can't afford, but it doesn't keep us from buying it.
-William Feather

The amount of money you have has got nothing to do with what you earn. People earning a million dollars a year can have no money. People earning $35,000 a year can be quite well off. It's not what you earn, it's what you spend.
- Paul Clitheroe

Never spend your money before you have it.
- Thomas Jefferson


Economists

Another of my favorite financial subjects are economists. I have to admit that I admire these guys, you have to be very smart to understand all those theories and laws. Yet there is still disagreement by economists in differing theories. The fight between the Keynes theory and the Hayek theory of economics goes on. All the stimulus we are currently living with today comes from the Keynes theory of economics. Maybe we should try Hayek's theory?

An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.
-Laurence J. Peter

An economist's guess is liable to be as good as anybody else's.
-Will Rogers

Ask five economists and you'll get five different answers - six if one went to Harvard.
-Edgar R. Fiedler

Definition of a Statistician: A man who believes figures don't lie, but admits than under analysis some of them won't stand up either.
-Evan Esar

If all the economists were laid end to end, they'd never reach a conclusion.
-George Bernard Shaw

Retirement

This is both my favorite subject and goal. Retirement is a two part process. First the accumulation of retirement funds and assets. This part takes up the better part of our lives. Followed by the retirement part that fills hopefully the latter third of our life if we are lucky. It's like a house you take 50 years to build and that you have to live in another 25 years. The problem is you don't know if you did a good job until it's to late.

Don't simply retire from something; have something to retire to.
-Harry Emerson Fosdick

Retirement is wonderful if you have two essentials — much to live on and much to live for. – Author Unknown

Retirement means doing whatever I want to do. It means choice. 

– Dianne Nahirny

When a man retires, his wife gets twice the husband but only half the income.

– Chi Chi Rodriguez

Retirement is wonderful if you have two essentials — much to live on and much to live for. – Author Unknown

Mobile Home Becomes Vacation Home Becomes Retirement Home

Image via WikipediaNear my home there are many mobile home parks filled with retiree's. It's a great place to live because the weather is great most of the time and it's a ten minute drive to the beach. Many people chose manufactured homes because of the lower costs when compared to apartments, condos, homes, and townhouses.

Friends from Illinois come down to visit us often and they stay in their manufactured home. Whenever they visited they had to pay for a hotel. Over the years spending money on a place to stay got pretty expensive. Through the grapevine we learned about a manufactured home nearby that was being sold. We went over to take a look at it and recommended it to our friends. They fell in love with it, the rest is history. For them it works out great because they save on hotel and restaurant expenses allowing them to stay with us longer. When they finally get around to retiring they will sell their Illinois home and move permanently here.

Manufactured homes are often overlooked as an answer to the affordable housing problems we have in the country. An idea like this would work out for newlyweds, students,and people just starting out in the work force. It would save them a lot of money over more expensive alternatives like apartment rentals. It's something to look into.

Cities Using Special Tax Accessments To Cover Budget Shortfalls

Image via Wikipedia

More and more cities are having trouble meeting revenue requirements for the city employees pension plan. City and state employees along with firefighters and police have yearly pension obligations. They are usually funded by property tax or income tax revenues. What happens when these pension plans are not funded because of a revenue shortfall?

Pension plans are usually created by the employee unions and the city leaders. These plans have to be funded or the unions become very angry. This leaves cities no other choice but to go to where the money is: the residents of the city.

In one of our neighboring cities this problems is happening. In Lake Worth, city commissioners are working toward making a plan to levy a per-building assessment on homes and commercial buildings to cover a shortfall in firefighters pensions. Commissioners voted to take the first step in levying a fire assessment for the budget year that begins Oct. 1. The city's annual fire assessment would be $60 per residential unit, 13 cents per square foot for commercial buildings, 2 cents per square foot for industrial or warehouse buildings and 9 cents per square foot for institutional buildings.

Notices showing the amount owed will be mailed to each affected property owner on Sept. 1. A public hearing on the assessment is scheduled for 6 p.m. Sept. 22 at city hall. The commission is expected to vote on the fire assessment following the public hearing.

When the assessment is O.K.'d as proposed, the city will use most of the $1.4 million to cover part of the cost of firefighter pensions, which cost the city $1.8 million this year.

The Lake Worth city commissioners have come up with a clever plan to cover the shortfall. The only problem is the publics reaction to it is not good. Many people have voiced concerns that raising taxes in this financial environment is counter productive. Other concerns are that fulfilling the never ending pension needs of the fire fighters is representative of the Social Security shortfalls we currently experiencing in Washington. Many believe that all city and state employees should fund their own pensions with their own money. 

The current pension system is broken. The unions should see this and ween the firefighters off the taxpayers to a self supporting system. We are seeing more pension and budget shortfalls every day. Don't bleed the tax payers anymore and don't let the employees of the city and state goverment trust in a pension system that will eventually collapse under it's own weight. 

Marshmallows Can Predict If You Will Be A Saver Or A Spender

In the 1960s, Stanford psychologists conducted an experiment on a group of 4 year olds, and it yielded absolutely fascinating results. They put a group of children, one-by-one, in a room with a marshmallow. They told the children they could eat the marshmallow whenever they wanted, but if they waited till the adult came back they’d get two marshmallows. Recently, the experiment was conducted again, and filmed. So here’s what happened…

It’s pretty strange to watch their behavior. Because they are like little drug addicts. They’re sitting there, trying not to think about that marshmallow, but you can tell it’s the only thing in their whole world. One kid starts smelling it, before putting it down and putting his head in his hands, like he’s 40 instead of 4. Another looks away, trying to pass the time, but his fingers creep over and hold onto the marshmallow, as if to reassure him that his sugary prize hasn't up and vanished.

Only a small number could wait. The researchers studied both groups of children throughout their life, and discovered some fascinating patterns. The low delayers (failers)—those who could not wait until the adult came back to eat their marshmallow—were affected by a number of risk factors that did not affect high delayers (passers). Here is what they discovered:

The Ones That Couldn't wait:

• struggled more in stressful situations
• had trouble paying attention
• had greater difficulty maintaining friendships
• scored lower on the S.A.T. (by over 200 points)
• prone to a much higher body mass index
• were more likely to have drug addictions

So it turns out that this experiment is not just about a bunch of four year olds hungry for sugar. This is about all of us. This is about the power of patience. Financially, we are tested in the area of patience every day. We’re on our way home and we really want something that would be a lot cheaper at the grocery store. But the convenience store is a lot closer. And you’ll always pay for convenience. It’s closer, but it ain't cheaper.

When we delay gratification, not only does it pay off in the end, but it often pays off more substantially than if we had just gone for instant gratification. But you don’t inherit the ability to delay gratification. You develop it. You develop it by facing off against this decision over and over: do we spend more to get the thing we want now, or do we wait? What if we skipped the purchase entirely? The we’d still have the money with us later on when we needed it. And if we skipped the purchase and left it in an account, over time that money could increase through interest. Eventually we’d have two marshmallows instead of just one.