Prime Rate Credit

Yep, that’s right, by now, most of the big name credit card companies have doubled their minimum payments from about 2% of the total balance to 4% of the total balance. While this may send those of us who are die-hard minimum payments makers through the roof with worry (how are we going to make DOUBLE what we did before, if we could barely pay the 2% minimum before?), it is actually a good thing, in the end, for the consumer.

You see, most credit cards were previously designed to take approximately 30 years to pay off, with the 2% minimum payment ideal in place. Now, consumers will be able to pay their debts off a lot earlier, albeit not through any choice of their own, but for a greater good if you can look at it that way.

So far the biggest names in credit cards like Citibank, MBNA (housed in my alma mater of Cleveland Ohio) and Bank of America have changed their minimum payments from 2% to 4%. Other smaller credit card companies are expected to follow suit fairly soon, if they haven’t already to maintain consistency in the industry.

Some consumers may not mind this at all, because they are of the mind set that paying more than the minimum is just the best financial way to go about it. To others, who are only budgeted to pay the minimum - well, the old minimum at 2%, or for other consumers who have outrageous amounts of credit card debt, and very high balance credit cards, this new minimum could be nothing short of financially devastating.

What boat are you in? I myself try to make more than the minimum payment every month, and most of my friends, who are also thirty-somethings, seemed to have learned their credit card lessons in their twenties, and also pay their minimums. It might be my guess that the hardest hit by this newer minimum would be those that are newer to the credit card scene.

Credit card holders like college students and maybe even small business credit card holders, who put much of their expenses on credit cards, may be hardest hit by this new trend.

There are now several credit counseling agencies that are there for the thousands - no millions - of Americans who have gotten into debt that is out of their control. Millions of people now have gotten in over their heads by overspending their budgets, and spending more money than they are making.

This trend has only gotten worse as of late, and doesn’t really show too many signs of slowing, especially with the rampant cost of living.

Housing has gone up, gas prices have gone up, and heck even the cost of the food we eat every day has gone up . It seems lately that inflation is outpacing our salaries, and the out of control credit debt is just one of the many side effects of a society dependent on lenders, banks, and lines of credit to get the bare necessities, and many times to indulge in the finer things in life.

So, out of this trend there have been born many consumer credit counseling agencies, some free and some who charge, which propose to help consumers settle the score with creditors. How? Usually they will negotiate either lower, flexible payments to pay off their credit in exchange for the destruction of the credit cards, and removal of any leftover credit on the cards.

Other times they may negotiate a lower APR (interest rate), so the consumer can pay the card off in less time, and with less constraints of impending interest racking up every time they make a payment.

Here is a list of some of the more well known Credit Counseling Agencies :

CCC - Consumer Credit Counseling - Free, non-profit organization which is government and creditor subsidized.

MoneyManagement.org

FamilyCredit.org

The FCRA is the Fair Credit Reporting Act, which was enacted by an arm of the government which protects consumers, the FTC, or Federal Trade Commission. The FCRA is supposed to give us the right to learn what information is being distributed to various creditors about you and your personal credit history by credit reporting companies and bureaus.

The Fair Credit Reporting Act is designed to protect consumers and help promote accuracy, fairness, and privacy of information divulgence in the files of the nation’s consumer reporting companies.

The FTC is actually given the power to enforce these rules on independent consumer reporting agencies by regulating the distribution of the consumer information and putting certain restrictions on it and how it may be transferred.

More recent additions to the Fair Credit Reporting Act expand on consumer rights while also placing more requirements on consumer reporting agencies. Also, the businesses or creditors that provide information about individuals credit history to these agencies that use credit reports have new responsibilities and guidelines to adhere to under the law.

All in all, the FCRA is a good thing for us consumers. It basically gives us the right to access any information that anyone may have about our credit history, good or bad, at any time. It also gives us full rights to dispute any information that we have deemed is inaccurate or just 100% false.

The fourth tip I have for improving and maintaining a good credit score is to create a set spending budget for every month, considering what you plan on bringing in for that month (this usually doesn’t change for most salaried people, but may change if you are a commission employee or a salesperson of some sort).

Sit down, with your spouse or your family if you have one, or just yourself if you don’t and write down all of your earnings, after taxes, that you will definitely make for that month. If you have money that may be coming to you that month, but it is not a sure thing, do not include this at this point.

The point here is to make sure you can budget what you will spend on any line of credit or credit card, so that you may pay the balance off in it’s entirety for that month. This is important if you want to remain as debt free as possible.

There are going to be times when this just isn’t possible I realize, but the more strict you can be with your credit spending guidelines, the less stringent you have to be at the end of the month when it comes time to pay that credit card balance off. If you can’t then we all know what that leads to : Stress and Anxiety, which we can all do without.

What are secured credit cards? I found myself asking this question, although I knew what “secured” meant in general, as related to the financial and lending industry - it meant you had to put up some sort of “collateral” in oder to secure a line of credit from a bank of lending institution.

So for example, you want to secure a line of credit or a credit card for whatever purpose.

You may need to sign over your vehicle or a portion of your home equity in order for the lending institution to guarantee they would have something of value in the end if you failed to pay off your debts to them as promised.

Secured credit cards are really no different of a concept.

Here are the definitions of a secured credit card, as defined by lending institutions and authorities in the financial industry themselves :

A secured credit card is a credit card which is secured by a savings account that has been established in advance by the individual borrowing the money.

The amount of money in the account usually directly determines the lending ceiling on the credit card. These types of secured accounts are very low risk for creditors since they are guaranteed to come out with something, and are much easier to obtain because of that fact.

OR : A credit card secured by a savings account where the amount of credit extended to the borrower is equal to the amount of savings in the account.

A “low apr” or “low APR” means that you are getting a good deal basically on the amount of revolving interest your chosen credit card charges you for the privelege of using them as a line of credit. APR actually stands for “Annual Percentage Rate” which is the annual percentage that the company is bound to charge you under the terms of the agreement on new purchases you make with their credit card.

We’ll talk more about this later, but I wanted to inform you what that actually stands for, and why it is so important when you’re shopping for a credit card - or a loan.

I recently read an interesting article about the current state of the economy, and the guy that wrote it thinks that a lot of our economical problems boils down to one fact - that Americans take out more credit than they can handle. This type of get the credit now, worry about the bills later or “spend now, worry later” is what is killing a lot of American families.

I heard another ad this morning on the radio for a different kind of debt management program, or actually a debt relief program is how it was advertised, called “Credit Card Relief”. It was advertised as a complete solution to credit card debt, and is “not like Consumer Credit Counseling” or the other nonprofit organizations which help to consolidate your debt, not is it a high interest consolidation loan, and is not the filing of bankruptcy.

I did a little more research on prepaid credit cards, and here’s what I found:

They seem like a really good idea for people who either don’t like credit cards and just want to be able to buy things with a credit card ie. online purchases or something where a credit card is required. 

Prepaid credit cards also seem like a good idea for people who have been in credit card trouble before who do not want the temptation of having more credit card debt accrue, and so feel safer paying it ahead of time, when they know they have the money to pay it.

People with bad credit who can’t get a regular credit card or who can’t get a card with a decent rate due to high risk credit, also seem to like the prepaid concept.

There do seem to also be some decent deals.  Some require a certain down payment, or almost a like a charge for using it. 

Some of them you can reload online, and also help to rebuild your credit.  One I saw actually came with an automatic notification service to the credit bureau to notify how your credit is being rebuilt.

I’ll have more on this I’m sure.  This didn’t used to be as popular as it is now, but now I’m seeing tons of choices for prepaid credit.

Yep, apparently there a few places that offer prepaid credit cards, just like a prepaid phone card.  I guess Western Union offers a prepaid credit card where you pay in advance for the privelege of using the credit card, but I’m not sure who else does.  I passed a check n’go or check into cash place yesterday and saw the offer for the prepaid credit card, and thought it was an interesting concept.  I’ll look into it more and share what I find out…