Understanding the July 2012 Credit Card Reform in Five Simple Steps

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This is a guest post by financial writer Paul Groberts. His post is about big changes going on with financial reform in Australia. 

We’re living in a day and age in which an increasing number of consumers are choosing to liquidate their debt and do away with their credit cards. However, recent developments in local credit card policies and regulations are heralding a new age in the use of plastic. Authorities have had the credit card reform in the making for quite some time and it eventually came into force on July 1, 2012. Official information on the precise prescriptions and implications on the reform can be easily accessed online, at BankingReforms.gov.au. However, no matter how clear-cut and straightforward it all may appear there, further explanations are always in order and welcome, for the day-to-day credit card user. If you want to learn what this recent development entails and how it will affect you, the regular holder of a banking credit card, read on, to understand the reform in three simple points.

First off, the much-touted reform is essentially geared at improving handling conditions and transparency on the part of the end-user. This means that the key fact sheet you receive when you sign up for a new credit card will have to use a standard format, making essential information easier to follow, grasp and understand. No more fine-print, no more tricky wording, in a nutshell.

Secondly, there are major changes afoot with respect to going over your credit card limit. Specifically, the lending institution will have to receive your expressed agreement on being charged a fee for over-limit services. What is more, the bank or financial service provider will be mandated by law from now on to inform you when you surpass your credit limit. At that point, you will be presented with two options: either continue to use the card or pay off a part of the debt first.

The third point is perhaps the most hotly debated, since it refers to direct repayments. According to the new rules, these will be directed to the most expensive part of your credit card debt. The Government website states that this will make it easier for users to reduce their debt and it will allow them to do so at a speedier pace. It’s worth noting that this particular rule strictly applies to new users, who have had their cards issued post-July 1. Check the issuing date on your card, to make sure whether or not this applies to you as well.

Fourth on the list, control over the credit limit has now been entirely turned over to the user. You can decide for yourself what that limit is and then inform the bank of it. We searched for various types of credit cards online, in order to understand this change and ran an online comparison on those types at BankWest.com.au (http://www.bankwest.com.au/personal/credit-cards/compare-credit-cards). What has changed since July 1, is that providers now have to inform you of the exact workings of their interest-free initial offer, making the whole process of signing up for a credit card much more transparent and unpleasant surprise-free down the line.

Finally, one of the most welcome changes in credit card regulations refer to one’s monthly statements. From now on, these statements will include the period of time required to repay your current debt, if you only continue to make minimum payments. The main consequence of this change is that you’ll have an easier time planning your debt reduction, as well as balancing the rest of your expenses.

All in all, credit card ownership seems to have gotten a whole lot more user-friendly and easier to handle. As with anything, transparency and clarity are surefire ways to improve on an existing situation. Besides, since credit is one of the fueling forces of any economy, this might just spell better times for Australia’s personal finance sector.

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What Can Credit Repair Services Do For You?

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In today's world your credit report is so integral to your financial life. It used to be that your credit report was only used to see if you credit worthy to take on new debt. Today, your credit report is reviewed when you sign up for car insurance. If your credit report is bad you will definitely pay a higher rate on your car insurance. When you sign a lease for a new apartment or start a new cell phone plan, your credit is checked and if it is bad you will be denied your apartment lease or new cell phone plan.

If your credit is bad, is it possible for someone do credit repair on your report? There are many companies who can help you fix your credit report and improve it for you. 

Most people think that magically you can just remove the negative items. No one can erase negative information if it’s accurate. Only incorrect information can be removed. Accurate information stays on your record for 7 years from the time it’s reported (10 years for bankruptcy). Even information about bills you fell behind on but now are paid will remain on your report for these time periods.

Remember only incorrect entries in your credit report can be removed. If you have legitimate negative marks on your report, the only thing that will remove them is settling with those creditors. After that's done the settlement will be reflected on your report. In time your credit score will climb to a more appropriate level.

By law you have the right to dispute inaccurate, misleading, biased, incomplete, unverifiable, and questionable listings on your credit report. With a little time and energy you can work on getting these blemishes off your credit report. If it is too time consuming or confusing for you to do the credit repair yourself there are good companies that can do it for you. 

The Bucket Approach for Retirement Income

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For many people the worst part of investing is short term volatility of the market. Going through that stomach turning rollercoaster can keep you up at night. You worry if you are going to have enough money to cover daily expenses. Staying invested during these trying times is very hard to do if you are worried about your life savings going down everyday. 

The solution is to find a way to keep you afloat during these frightful time. You need to find a way to insulate yourself from the storm until your through it. The "Bucket Approach" is a possible way to help you through these tough times.

Harold Evensky, President of Evensky & Katz Wealth Management, has come up with the "Bucket Approach" as a strategy for solving this problem. Back in the eighties Harold developed this approach which includes his five-year mantra. It simply means do not invest money you are going to use within 5 years.

His plan says to carve out a lump sum that you will be needing, short term. These needs can be a second home you may want to purchase in 3 years. You take that chunk of money and put it in short-term bonds or cash. Also, that goes for your retirement money that you need to live on for the next five years. But in this instance, you would be losing to much in potential growth so through experience Harold says to only take out two years worth of living expenses. The rest of your retirement money stays in your total return portfolio.

What you do is take that cash and set it up to pay yourself a check once a month like a payroll check. The market can be volatile, but you know where your grocery money is coming from, so you are not going to be panicked when the market is going down. As you manage your investment portfolio you need to rebalance as necessary.

This helps you be much more cost and tax efficient in managing that portfolio. You are not going to have to sell at the wrong time. You can sleep through volatile times. Your worry level should be way down during the tough times. Your portfolio may be down but you have money to live on for two years. This relieves any need to sell off your investments at the wrong time.

How Many Buckets Do You Need?

The amount of buckets you need can be as many goals you need to finance within a five year period. But for the small investor two buckets will do. One bucket with two years of expenses and the other holding your retirement portfolio. The most important thing is you have your short term cash in a bucket available to spend. Having other buckets for a trip or college expense, or a car is also good to do if you have the funds available. There is no reasonable limit to how many buckets you can have. 

The problem with multiple buckets is there more to keep track of but you are in a more organized position. Plus you are able to borrow and move around cash between buckets as you see fit. This system gives more control over your finances

My Take.

I believe this plan can work and solve the number one problem of retirement investors which is selling at the low. It would of worked in the last deep decline. You would of been able to hold on till the market began to rise again. I can imagine the freedom having two years of expenses put aside. Not having to worry about paying the bills and knowing you are able to ride out the storm. What's your take?

Technology Invades the World of Finance

In the world of finance, there have been a number of innovations that have changed the way people conduct their business. Thanks to technology, there have been a number of different advances in the finance arena. Here are a few examples of ways that technology has changed finance:

Smartphone Apps

Smartphone use has been growing rapidly in the last few years, with millions of people using these devices. With so many smart phones, there are also millions of apps being made. Many of these apps make it easy to manage your finances. Banks like Discover Bank offer apps so that you can check your account balances, transfer money, or make payments from your phone. Investment companies offer apps so that you can check your trades while on-the-go.

Investing Software

If you are an investor, there are a number of software programs out there that can help you do your job easier. For example, there are programs out there that can actually automate your trading based on algorithms. With these programs, you simply upload them to your trading platform, and then they start trading your account for you. This makes it possible for you to go do something else while the software is trading your account for you.

Peer to Peer Lending

In the past, when you needed to borrow money, about the only option available to you was to go to a bank and ask for a loan. In today's world, you can borrow money from other a regular people who have a little bit extra to loan. Thanks to peer-to-peer lending networks, you can get connected with people who want to lend. The peer-to-peer lending site handles the details like transferring the money and checking the credit of the borrowers. This has made it possible for many people to borrow money when they need it.

Virtual Wallet

Virtual wallets have made it possible to make payments with your smartphone. Using near-field communication technology, you only have to get your phone close to a scanner and the payment is charged to your account. This makes it easier and faster to make a payment.

Technology has completely changed the way that people handle their finances. In the future, there will be many more technological advancements that have an impact on the area of finance. By taking advantage of some of these advancements, you can save time, protect your money, and get some more peace of mind in the process.

529 Plans Diversifying with ETFs

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Diversification is the backbone to any investment plan. 529 plans are going to give investors more diversification by adding ETFs. They need to attract more investors and give them a larger choice of investments to purchase for their college savings plan. 

The 529 savings plans are a tax-advantage method for saving toward future college expenses. Parents can build a college savings fund that pays for a person’s room, board, mandatory fees, books, computer and tuition. Contributions in the 529 savings plan are not subject to federal tax as long as the money is used for college expenses. Today, mutual funds make up the largest share of the college-savings 529 industry.

Last year, on average, 529 plans lost almost 1% while the S & P 500 stock index returned about 2%. This caused a pull back in contributions. This addition of ETFs will not only hopefully attract more investors but also will give savers a more positive growth. 

Recently, Nebraska introduced four ETFs in three of its 529 plans. One of New York's plans recently added six ETFs, while Nevada's Upromise 529 moved almost exclusively to ETFs and away from mutual funds, which still dominate the college-savings industry. The addition of ETFs by 529 plans will give investors choices that will satisfy views that 529 investment choices are to risky.

What do the critics say?

The positive news is that they like the lower expenses ETFs offer. 529 plans with ETFs have an average expense of 0.61%, compared to the industry average of 1.12%. They claim 529 plan investment managers are adding ETFs in an attempt to make quick and easy changes to portfolio allocations at a fraction of the cost. ETF products can be traded throughout the trading day while mutual funds can only be reconstituted at the end of the day. 

Don't worry, the addition of ETFs are not changing the rules, you won't be allowed to buy and sell your investments in your 529 plan. 

These changes will attract more money in to the plans. You will have more choices in your investments. Diversification will benefit your 529 plans overall growth and help to minimize any market fluctuations. 

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