SBA More Stringent on the Little Guy Than on Multibillion Dollar Failures?

I read an article the other day that struck me as unfair, and almost anti small business, because of it’s obvious inequalities between the small business owner, which the SBA (Small Business Administration) was set up to help, and the large, “too big to fail” multibillion dollar juggernauts that seems to be given a free pass and forgiven within a year or causing the greatest economic collapse of perhaps our entire lifetime (let’s hope).

I don’t know about you, but as a taxpayer I am outraged that this already seems to have blown over. I remember thinking that they deserved a lot more grilling than they got about their practices, mostly lending practices, which is what got us in this mess, and how they invested in instruments that were high risk, but it seemed that as soon as the spotlight was off, things went back to normal.

Let me explain myself. Have you been reading about how most of the SAME companies that needed taxpayer bailout just a short year and a half ago are now back to giving millions and millions of dollars in bonuses to their employees and top executives? That’s unacceptable when the companies and the small business men that rely on consumers, have to suffer and cut back and not give bonuses, and this whole mess was the banking system’s fault. Shouldn’t they be the ones cutting back on bonuses?

It especially struck me that there seems to be a much larger burden on the small business owner to prove how they are going to return to profitability before they get “bailed out” for severe financial hardship, while these big companies seem to skate by, providing little solid proof or plan of how they plan to turn things around – safely and sustainably.

Warren Buffett even vented his frustrations recently by saying these fat cat banks and financial institution heads should put some of their own money on the line with their business plans, then let’s see how careful they’ll be. We are all suffering now because of the careless greed of people at the top who just wanted to inflate their numbers, get bigger bonus checks, and further their companies without any considerations for how the chips could fall.

New Credit Card Laws Have Too Many Loopholes?

Where there’s a will, there’s a way, and there’s most definitely a will to maintain profits as much as they can, for their shareholders and of course for themselves, for the credit card companies, which were a huge cash machine for so many years because they basically had the run of how to do business,and few limitations on them. For instance, they really did not have any limits imposed on how much might be too much for a late fee.

Or take for example, how they really had a lot of leeway on the reasons they could just jack up someone’s interest rate without a lot of notice, or their monthly payment, without much notice at all, putting severe hardship on some people, or digging themselves into such deep debt that it was nearly hopeless to get out except for paying off the balances with other low interest cards, or resorting to a credit agency that specializes in getting people out of hot water with credit cards.

Let’s face it, credit cards are probably the biggest reason that people get themselves into debt over their heads. Debt that they truly can’t afford, and debt that they really had no business incurring in the first place because it was way more than what they should have been s pending based on the money they bring in.

And don’t get me wrong, I’m not getting up on my soapbox here, I was in exactly that position starting in college, and it took me years to dig out, and to finally pay it off. Now, with these new credit card laws, we are going to start to learn the painful lesson that the laws have many loopholes (the laws were meant to protect consumers), which are going to become more and more apparent as time goes on.

The scary part is, we already know some of the loopholes, and this law has been in effect less than two weeks! One of the examples is that credit card companies are now coming up with new fees to charge, and new ways to help recoup their eventual losses that are inevitably going to result from the crack down on abusive practices.

One example I saw of this already on one of my credit cards was a previously uncharged “foreign transaction fee”. My creditor had never charged this fee before, and now it does. They also may even charge something called “inactivity fees”. Yep, that’s right, even if you haven’t used your card in a long time, they may charge you upwards of thirty bucks just because you haven’t used the darn thing.

That’s probably one of the most egregious of them all!

There are also loopholes in the random, and sudden shutdown of accounts at the credit card companies will. They can also increase you minimum payment without much notice, and they can decide to lower your credit limit with virtually no notice at all either. So, even thought this new credit card law is going to protect people in some ways, it also leaves a lot of holes open for creditors to take advantage of consumers.

However, if you are smart with your money, you can still use good, low interest credit cards to your advantage, it’s just knowing how to use them without getting carried away, and that’s the tough part for most people.

Consumer Sales Better Than Expected in January

In welcome, but not overly exuberant news, for the floundering financials of our country as of late, we found out that we actually had better than expected retail sales in the month of January. This is good news, because it means that consumer spending is somewhat on the mend, although it still of course has a very long way to go since most consumers, including me admittedly, are holding onto their money for dear life, just hoping that their jobs aren’t in jeopardy or some financial disaster will strike their family or they might lose their retirement savings in another market dip.

There are so many things that are holding back consumer spending right now that it’s hard to point the finger at one general cause. There are a lot of pressures including credit card reform, that are actually hurting the economy. Credit card companies are being forced to reduce limits and increase APR’s because their business has reduced in profitability thanks to new legislation that made it very hard for credit cards to be as profitable as they once were.

Sure, that’s good for the consumer in the end, as credit card companies can’t abuse those with bad credit by jacking up their rates and all that nonsense, but it also has a lot of people wary to whip the credit card out because they have had to lower people’s limits and restrict who they give credit cards to because of the economy and the new legislation.

You may have noticed that you don’t get as many credit card offers in the mail now, especially not really appealing ones that offer balance transfers and things like that. It’s because they are really retracting a lot of their credit and trying only to keep their best customers who spend a lot and keep paying their bills on time, reducing those that they bring in for fear that because of the economy and job losses, more and more new people won’t be able to pay their bills or pay them on time.

This is what has cause a lot of the credit crisis here in the US, company’s unwillingness to extend credit, and it’s gotta stop if we are ever going to recover. We are paying for years and years of credit that was ridiculously easy to get,and now we are being punished for that, in essence. The retail sales report for January though, did show about a .5% improvement over last year, which is better, sure, but it’s still not anywhere near what we need to do to dig out of this mess.

Increase Mortgage Principal, or Pay Off Credit Cards?

Many people wonder if they should increase their principal monthly payment on their home mortgage loan or not. The answer really depends on your individual financial situation. Can you afford to throw more money toward your principal, or is that money better allocated to high interest credit card debt, loan debt, or some other kind of either revolving credit or high APR credit?

Many times the answer is yes. How can you get ahead if you’re paying down your mortgage, but you’re not paying down those debts that are really high in interest, and by the way, not even tax deductible like mortgage interest at least is, then you are in fact not paying down the right debt.

You always have to consider that, although that mortgage interest amount stares you in the face every year when you go to do your taxes, and it’s usually an unearthly, staggering amount to most of us in relation to what we make, you still might be better off paying off other things with that money first.

For our personal situation, decided to not really accelerate my mortgage payments by adding more to the principal amount every month, until we really paid down some of the higher interest debt we had on credit cards. We decided to combine our balances on a few high interest credit cards that my husband had left over from his broke college student credit card abuser days when he used them for everything, and put them on a better low apr balance transfer credit card, and we also saved up to pay off some of the other smaller balances.

If you are in a situation though where you don’t owe any significant credit card debts or other higher interest debts, then you really should consider even putting down a little bit more principal on your mortgage every month, just so that you can have the peace of mind that you are going to pay your mortgage off years earlier.

The estimate is that if you can make one extra payment a year, or divide that one extra payment by twelve months, and add that much more to each monthly installment as an additional principal payment, you can usually take 7 years off your mortgage right off the bat. That’s pretty awesome.

And that’s definitely an incentive to start putting that extra cash on your mortgage every month, but remember the rule of only putting extra cash on if you do not have other higher interest debt that is not tax deductible first, that’s the key to truly getting ahead.

Colleges Even Cutting Back – on Financial Aid!

Well, when you hear about the credit crunch, which has been hounding the US economy just as badly as the predecessor to the great fall in financials such as the housing market going bust, and the massive foreclosures and job cuts and downsizing, you don’t generally about other, non private sectors of the economy cutting back as well which are actually going toward the development and improvement of our workforce – meaning our colleges and their students.

But guess what? The credit crisis has even hit colleges hard in their pocketbooks, and they are responding by cutting back once more generous financial aid. Yeah, that’s right, as if college weren’t hard enough to finance for the majority of students who had to finance much of their college education, schools are now being forced to also peel back on some of the financing in the form of student aid, which is very unfortunate.

Not only is it unfortunate because it cuts out some of the students that may have otherwise been able to go to college thanks to financial aid programs, but it may also make students resort to college student credit cards, which as we all know, can be a dangerous thing when you’re in college and always seem to be broke, when a credit card seems like your best option for keeping food on the table and a roof over your head.

Some schools are even dropping loans all together from their financial aid packages, making it even harder for would be students to enroll. This is because of all the financial turmoil in the market, and the government is not able to endow these schools as generously as they could before, forcing some schools to finance in house, and making it much more risky for them from a business stand point.

This is one of the last areas the government should think about scaling back on. This is scary to me. After all, college students are the answer for tomorrow, they are the adults of tomorrow that will be running things when we all get older, and here we are, limiting even further who can and cannot go to college. It just doesn’t seem like it’s a very “land of opportunity” mentality to me, and that’s what we’re supposed to be here in the US, is it not?

New Credit Card Act in Effect Today

Today is D Day for all credit card issuing banks. It’s the day that the credit card reform act, otherwise known as CARD, goes into effect, and the day that they stand to possibly lose millons, if not billions of dollars in lost revenue. Let’s talk a little bit about this act, what it does for consumers, what good may come of it, and what potentially may be bad from it, since it probably will adversely affect a business – the credit card business, and right now our economy may not be able to suffer another blow like that although credit card reform in some manner has definitely been needed for years now.

Much of the reason for the loss of revenue for the credit card companies though, is actually a good thing for consumers in the end. The primary reason behind the loss is that they will be very much more restricted in how and when they can raise a consumers credit card interest rate. That’s right, no more arbitrarily raising credit card interest rates any more, one of the biggest reasons people have a love/hate relationship with credit cards.

There has to be certain warnings in place and specific guidelines for them to be able to raise their rates. This is a very good thing for customers, since this is the reason that lots of people found themselves in undiggable debt that they could never seem to pay down. Many times their interest seemed to outweigh the purchases on their credit cards, especially if they were consumers with credit cards for bad credit, where raising rates instantly seemed to be a very common practice.

This part of the legislation, I applaud, and look forward to, because I myself was the victim of credit card companies raising their rates on me over and over, and it’s the main reason that, after I got out of college, I had to seek the help of a consumer credit agency to help me consolidate my debt and make it manageable so I could actually hope to get out of debt one day.

Another piece of information I read about credit card issuers trying to gain back some of the lost revenue, is that they are introducing tons of new fees to try to make up for the lost revenue in raised interest rates. I wondered why I suddenly saw a foreign transaction fee of almost eight dollars for a transaction that I do on my business card several times a month – up until now, with no fee. Chances are, you will be seeing ridiculous fees as well to make up for their loss.

I’m not sure how good this will be. Honestly, it feels like the intentions are good, but right now, with consumer spending already so restricted, is this really going to help the economy get back on it’s feet? Sounds like it may be bad timing for a long overdue reform in the credit card industry. I know it needs to be done, but it’s just going to become another weight on the tight credit market and restricted consumer spending right now.

Obama Defends Policies as Pro-Business

President Barack Obama has definitely taken some heat over his policies on business, his overall strategies to get us out of the worst economic slump in decades, and his proposed cap on executive salaries, which have become a major concern since the collapse of major companies that people felt gave their executives way too much pay and way too many fringe benefits. The problem with this, they say, is that it takes away the incentive to executives to do a great job, and it also detracts from company’s searches for top talent to make their companies run better.

I can sort of see some of their point there, but there does have to be some sort of common sense oversight of compensations that are just ridiculously disjointed when it comes to pay being directly related to how the company is doing. For example, a lot of companies that downright failed and had terrible numbers, their executives were STILL given stellar salaries and even bonuses.

That is unfathomable to be honest. They were still being rewarded for running their companies into the ground, that’s just not right, and that is certainly not incentive to make things go right when you know you’re going to be compensated at ridiculous levels no matter what you do to the company.

I do feel that this part of the Obama administrations financial policy is right, however, I think it needs to be adjustable per business and their unique circumstances. As any good business person knows, there is never a situation where a one size fits all approach is good, you have to take it case by case. If the companies numbers are terrible, no bonus, for example, if the companies sales are bad, then no bonus and less pay, common sense things like that, but you can’t just impose a broad, across the board limit on executive pay, that is boderline socialism in the end.

When You Have a Bad Experience, Fill Out the Survey

I recently had sort of a bad experience with a bank, and because I’m naturally a nice person and not willing to stir the pot or get people in trouble, I hemmed and hawed about whether to be totally honest about how the experience left me feeling, or sugar coating it, or not doing it at all, when I got a customer satisfaction survey in my email about my whole experience.

I really don’t like to give negative feedback, but sometimes when you are faced with something that can really let a company know how your experience was, and you might prevent the experience from happening to someone else, then it really may be worth your time to vent your frustrations. I gotta say, I was very relieved after filling it out. I felt that I was misled about some things with the process I went through, and then was forced to make a snap decision when we came down the final hours, not knowing for sure if this was going to truly benefit us in the long run or not.

The hardest part about providing feedback like this, is that the person who helped us out and initiated the whole loan process for us was a genuinely nice person. However, in the end, I felt that we were not adequately notified of the final terms of the loan, nor were we aware that we were being charged points to get a lower rate, until we literally had the closing company sitting at our dining room table explaining things to us.

It really enraged me when I thought about it, that I was forced to make a snap decision, knowing that a couple thousand dollars more had been added to our loan balance, and that the bank had made thousands off of us in closing costs and fees and points, and we are totally worthy of paying this bill every month. I realized that is how the banks make so much money through refinancing, at the expense of the consumer.

I guess I felt like I had just had enough, and wasn’t going to take it without offering my true, unapologetic feedback on how I felt about the whole experience. There really is something to be said for filling out these surveys truthfully and honestly, it took a load off my mind to express this since I never formally complained, except to the guy at the closing table, and it wasn’t his fault at all, it was really the fault of the bank and their terms and lack of communication up front.

Filling out customer satisfaction surveys serves more than the purpose of the company figuring out what they can do better, it serves as a place for you to be honest and truthful about how you were left feeling about your experience.

Consumers Blowing Off Mortgages to Pay Credit Cards

For the first time in credit card history, it seems that more and more consumers are opting to pay their credit card bills first, even before they pay their mortgage payments. The reason may be the increasing mentality and feeling of many homeowners that paying their mortgage is futile when so many other homeowners are under water.

They may feel an increased sense of camraderie, which makes it seem more “ok” to blow off the mortgage payment, or perhaps it’s just more the sense that they may be getting help from the government to pay their mortgage.

Most likely though, more and more people are finding that they are under water when it comes to their mortgage, or the other cleverly termed “upside down” in their mortgage, which means they owe more than their house is worth. This truth is actually causing a huge home abandonment rate, where people just up and leave to go rent somewhere, and letting their homes go into foreclosure. There sure are a lot of people who are going to have bad credit after the fallout is over.

This seems to be the new plight of this decade, as home prices continue to fall and people continue to default on their mortgages at record rates, and the promised government help is slow and incomplete at best.

Because of this mentality, it has been shown that a lot of homeowners who are in financial dire straits, are opting to pay credit card bills before they pay their mortgage. This may also be in part because a credit card bill may seem more affordable and doable than a mortgage bill, since usually a mortgage bill is going to cost ya a lot more than a credit card bill.

I’ve found that lately I’ve been sort of obsessed about my home’s value falling too. But I try not to think about it that way. I’m in my home for the long haul, God willing and job willing, so I try to still view it as a long term investment that will eventually go up in value again after this whole disaster is over.

Are We Just Prolonging the Inevitable with the Economy?

When you talk about the economy, there is bound to be discussion on the many infusions that the government has put into the infrastructure that supports the American economy. There is also a lot of praise for helping to stop the US from spiraling out of control into a full on depression, circa early 1900’s, where unemployment was at record highs and destitution became the new way of life for the majority of Americans.

This time, the government hoped to step in to stave off that type of scenario, and it looks like the prevented total and utter destruction fo the American economic infrastructure, but are they really just prolonging the inevitable massive collapse that is a natural byproduct of the spending beyond means and easy credit that happened for so many years?

Many people are thinking so, and they’re starting to come out of the wood work now. One politician who has been vocal about criticizing government’s actions and has been calling for reform for years, and one I happen to like and value some of his ideas, but not all, is Ron Paul. He may seem like somewhat of a curmudgeon, but this guy is bright, and he really does have some ideas that make sense not only about the economy but also about a lot of other socioeconomic issues.

He echoes the sentiment of some very prominent economists when he says that the government is going to have to stop stepping in and artificially propping up the economy with cash infusions and programs, and let us just dwindle down even further, before a true, excruciating recovery can really take place. He thinks that by throwing money at programs and businesses (mostly big corporations, another major problem I have with these programs, they are throwing money at the very institutions whose poor judgment got us into this mess in the first place).

However, since these banks and institutions, including the car industry were “too big to fail” they did not see how they had a choice in the matter, and kept throwing money at the problem.

So, are we just prolonging the inevitable? Should the government just stop putting money into the hands of banks and other big businesses and just let the chips fall where they may? What do you think? Should they take a more laissez fare approach and stop meddling, or do we still need them to step in and make business decisions for the nation?