Recording machines across the nation are being clogged with prerecorded phone calls from companies that claim to be able to negotiate significantly lower interest rates with your credit card issuers, if you just pay them a fee first. According to The Federal Trade Commission (FTC), the nation’s consumer protection agency, consumers who get these interest rate reduction robocalls should listen to them with extreme skepticism, and delete them. Many are scams.

The companies behind the sales pitches claim to have special relationships with credit card issuers. They guarantee that the reduced rates they offer will save you thousands of dollars in interest and finance charges, and will allow you to pay off your credit card debt three to five times faster. They claim that the lower interest rates are available for a limited time and that you need to act now. Some even use money-back guarantees as further enticement. (The FTC frowns heavily on guarantees) read more »

Citigroup mailed 346 million pre-approved credit card offers in third quarter 2011, according to Mail Monitor, a unit of research firm Synovate.  This is more than the population of the U.S., which is currently 310.6 million.  According to FICO, 200 million adults have enough credit information to generate a credit score.  Obviously, consumers are receiving more than one offer, since not all 200 million have credit scores that would qualify them for the credit card. In addition, Citigroup is also being more selective credit-wise of who receives the offer, which is usually the segment that doesn’t need any additional credit.

According to Synovate, credit card issuers are beginning to increase their solicitations after hitting their lowest volume in 2009 – the lowest in 17 years.  The proportion of households receiving the mailings has decreased and the credit qualifications have changed drastically, only those with good to excellent credit are receiving the offers. In 2011, 59% of households are receiving at least one credit card solicitation mailing a month, which is below the 10-year high of 75% and decade average of 65%. read more »

I want to clarify the myth about credit utilization percentages and credit scores.  I have heard and read inaccurate advice regarding charging everything on one credit card verses dividing it up among many cards.

First, what is credit utilization? Credit utilization is how much of your available credit limits on credit cards you currently have used up, expressed as a percentage.  Credit utilization is calculated for two categories, revolving and installment.  Revolving accounts are credit cards that don’t require payment in full and installment accounts are mortgages, auto loans and student loans.  For credit cards, utilization is how close you are to your credit limit.  For installment accounts, it is based on how much of your loan you have paid off.

Indebtedness represents 30% of your credit score, which is the second most important factor.  Both installment and revolving utilization are included in the score, along with individual account utilization. read more »

TSYS, a global payments processor, and Mercator Advisory Group, a research firm, conducted an online survey of more than 1,000 debit card users whose cards were issued by a financial institution. They were asked about their payment choices, debit card usage and feedback on being charged fees for debt card usage.

These questions were asked to determine how consumers will react to banks charging for debit cards.  Some financial institutions plan to charge for debit card usage in reaction to the Durbin Amendment to the Dodd-Frank Act, which becomes effective on October 1, 2011.  This amendment sets a cap on the fees banks can charge merchants for swiping debit cards issued by the bank.   The fee is half of the amount the banks received previously, and some banks are charging consumers for debit card usage to make up for the loss.

Those surveyed preferred to use debit cards for purchases and credit cards were a distant second. If they stopped using their debit card, most would use cash instead of credit cards.  More than half would close their checking account or stop using their debit card, if they had to pay fees to use it. There was no difference in responses by age, income or gender. read more »

In September 2011, FICO released a comparison of nationwide FICO scores from the years 2005 to 2011.  FICO’s scores, the credit industry standard, range from 300 to 850, with a high score representing low risk.  According to FICO, the score distribution remained basically stable nationwide because most consumers manage their credit well.  FICO estimated that 200 million U.S. consumers have enough credit information on their credit reports to calculate a FICO score.

Prior to recession

Comparing the score distributions from 2005 and 2008, there was an increase in the lowest or most risky score ranges (300 to 499) and the highest score ranges or least risky (800 to 850).  This occurs when the economy declines, which coincides with 2008 as the beginning of the recession. Most of the other score ranges decreased, and the largest decrease was the 650 to 699 score range decreasing by -.8 percent or approximately 1.6 million consumers. read more »

Debit cards are being used more and more by everyone, especially the 18 to 24 age group (although with banks charging fees for debit card use, we’ll see if this changes).  This makes sense, because this age group doesn’t have as much credit. Others just want to stay out of debt and pay off their credit cards.

When should you use your debit card versus credit card? First, what is the difference between them? A debit card is connected to your checking account and is considered cash. A credit card is not connected to your checking account and you pay at a later time.

Debit cards are more convenient to carry than cash. You need to make sure you record everything you spend, so you don’t bounce checks and incur fees.  Since debit transactions are taken out of your banking account almost immediately, there is no float period.  If you have a dispute on merchandise, it is much more difficult to negotiate because the merchant has received your money, and debit cards don’t have dispute processes like credit cards. read more »

The housing market hasn’t recovered from the recession and CoreLogic tracts this market through its propriety databases. CoreLogic recently released a study of negative residential equity covering the second quarter of 2011.  CoreLogic provides consumer, financial and property information to businesses.

Negative equity exists if your mortgage balance is higher than the home’s value. This is usually because market value decreased or mortgage debt increased or a combination of both.

There are approximately 48.5 million residential properties with a mortgage in the U.S.; 10.9 million or 22.5 percent of mortgages had negative equity in second quarter of 2011, down from 22.7 percent in first quarter of 2011. An additional 2.4 million had less than five percent equity, which is considered “near-negative equity”. The combined group with negative and near-negative equity are called “below water”. The combined total of the “below water” group was 13.3 million or 27.5 percent. read more »

Layaway, a blast from the past, is making a comeback. Layaway was popular before credit cards were readily available. It was a way to pay for something over time and then take possession f the item when you paid for it, in full. You had a payment schedule and normally a one-time fee for setting up the layaway account.

As it became easier to get credit cards, layaway lost its appeal. By charging it, you could take the item home immediately instead of waiting for several months. Who wants to delay taking possession of the latest gadget or trend? We are spoiled and want instant gratification. read more »

Auriemma Consulting Group conducted a study in June 2011of 502 U.S. credit cardholders regarding credit card habits among the three generations – Baby Boomers (ages 48 to 65), GenXers (ages 31 to 47) and Millennials or GenYers (ages 20 to 30). The study revealed that economic conditions have impacted balances, credit limits, interest rates and card fees.

All three generations paid down balances and charged less over the past two years, resulting in a decrease in the proportion carrying balances and the balance amount. In addition, all experienced a decline in credit limits and an increase in interest rates. The Millennials, which is the youngest group, had the largest increase in annual fees and credit line changes. The proportion of Millennials paying an annual fee doubled in two years from 13 percent in 2009 to 27 percent in 2011. read more »

According to an identity theft study conducted by Javelin Research, it takes young people 18 to 24 years old, twice as long to detect that they have been a victim of identity theft. Their average detection time was 132 days and cost approximately five times more than other age groups. This age group is usually students that are around large groups of people where thieves can easily come and go undetected. Compared to older age groups, students don’t safeguard their personal information as much and don’t check their statements as often.

Students’ social security numbers are listed on many college documents, such as student ID’s, report cards, and loans. Students need to be very careful and aware of their surroundings because methods of identity theft range from taking information out of the trash to cyber-crimes. College campuses are a more open environment with many people wandering around, who may not be students. Students are more prone to having friends coming in and out of dorm rooms, fraternity houses, etc. In addition, universities and colleges databases have been hacked, which shows that thieves find value in that information. read more »