…other than not pay your taxes today on your credit card!!

There are tools that can help you determine which bill to pay off and there are many different opinions from industry experts on which card you should pay off first.  Some consumers want to pay off the card with the lowest balance, so they can feel accomplishment in paying off the bill.  Others want to pay off the one with the highest interest rate and others the one with highest balance. I have addressed paying those with the highest interest rate and those with the highest balance.

Pay off those with highest interest rate first

The fastest way to pay off your debt is pay at least the minimums and put any extra toward the cards with the highest interest rates first. Take all of your credit cards, list them on an excel spread sheet, rank by interest rate and then attack the most expensive debt first. You don’t have to use a fancy tool developed by a company to do this. You still have to use the same information in your spread sheet such as the interest rate and balance, as you do for the fancy tool. Either way you have to provide this data, because you are the only one that has this data. When you pay off one card, take that payment and put it toward the next highest interest rate card along with the minimum payment and so on until everything’s paid off. read more »

Another outcome of the Dodd-Frank Wall Street Reform and Consumer Protection Act,  effective July 2011, was permitting merchants to set a minimum credit card purchase of up to $10.   It required merchants to treat all credit cards the same. In addition, the Federal Reserve was allowed to review and increase the minimum amount.

Prior to the law, Visa, MasterCard and Discover Card didn’t permit merchants to set transaction minimums. American Express allowed merchants to set minimums, as long as it applied to all credit cards.

Cost to merchants

The key reasons the merchants pushed this law was based upon the fees they pay for credit card transactions.  The fee runs from 1 to 3.5 percent of the transaction plus a per-transaction cost of 5 to 10 cents. read more »

How did consumers use the extra two percent they received in their paychecks in 2011?  The National Foundation for Credit Counseling (NFCC) conducted an online poll of 1,800 in January 2012 to determine if the objective of the tax cut is being realized.  It is sad that 66 percent were unaware that their paychecks were larger in 2011.

“Even if the dollar increase is small, consumers should be aware of it,” said Gail Cunningham, spokesperson for the NFCC. “Not recognizing that the paycheck was larger begs the question of how the additional money was spent. Knowing how much you make and consciously determining how to spend it are basic building blocks of financial stability. This poll provides another example of the need for increased financial education.” read more »

There are two primary attributes to consider when shopping for a — its value to you financially and its value to you credit-wise.  Is it helping you save money and boost your credit score?  Here are seven things to consider when you shop for a credit card:

1. Be wary of store cards. The main advantage you get with a retail card is discounts and special sales. If you carry a balance, the interest rate is higher on retail cards and can only be used at that particular merchant. If you have cards that can only be used at one place, you have to have a lot of them. If you open many new accounts in a short period of time, it can hurt your credit score.

2. Pick a flexible offering. You want a card that is convenient and can be used anywhere such as gas stations, grocery stores, department stores, restaurants, hotels and airlines. In addition, you want cards that offer the best terms including interest rates. read more »

This is the last year tax filers will be able to get a refund anticipation loan (RAL) offered by banks.  As of 2012, the Internal Revenue Service (IRS) will no longer provide tax preparers, banks or lenders with the “debt indicator”, which lists any outstanding debts that will be deducted from the refund, such as delinquent student loans and child support. This information was the basis used to approve refund anticipation loans.   Because of a lawsuit, only one bank, Republic Bank and Trust Company of Louisville, Kentucky can offer these loans until April 15, 2012.  After that, no bank will be able to offer this loan.

What are Refund anticipation loans?

These loans are right up there (or down there) on my list with prepaid debit cards…they’re poor choices.  These loans are secured by the taxpayer’s expected tax refund. These loans are offered by one bank now through a few tax preparers.  The loan is usually for a short period of 7 to 14 days, until the Internal Revenue Service pays the refund. The tax payer is charged very high Interest rates and additional fees.  Since this loan is offered through a tax preparer, there is a tax preparation fee, interest on the loan and fee to open a temporary bank account. There may be additional fees such as application, administrative, e-filing, transmission, or “processing.” read more »

Now that the banks have stopped charging for debit cards, they are finding other ways to make up for the loss of revenue from the decrease in swipe fees that merchants pay for debit card transactions.   Some banks have increased fees for checking accounts and other services.

Additional fees charged

Here are some examples:

Fees charged to close account too soon, which can be 90 or 180 days. This is a new fee.

Fees charged for paper statements, which were free previously. read more »

Experian Automotive, a division of Experian (one of the three major credit bureaus), released their fourth quarter 2011 automotive credit analysis. The overall dollar volume of loans at risk dropped to $18.5 billion, which was a $1.862 billion drop from fourth quarter 2010.  Total auto loan volume increased by $23.9 billion in fourth quarter 2011 to $658 billion.  There was continued improvement in this market – interest rates were the lowest since 2008; there was an increase in lending to consumers with lower scores; longer loan terms were offered; repossession rates dropped; and average charge-off rates dropped.

Interest rates, scores and loan amounts
Average interest rates for new vehicle loans were 4.52 percent in fourth quarter 2011, compared to 4.84 percent in fourth quarter 2010. Average interest rates for used vehicle loans were 8.68 percent in fourth quarter 2011, compared to 8.71 percent fourth quarter 2010. read more »

I think I could write about the Consumer Financial Protection Bureau (CFPB) every week.  This agency was set up to protect consumers against unfair practices by banks and nonbanks.  It has been given a nickname of the “consumer watchdog agency”.  It recently was looking at credit payment protection products and is now targeting overdraft fees charged by big banks.

This agency plans to ask the big banks how overdraft fees affect consumers, how overdraft fees are marketed and what information consumers receive.  The purpose is to determine if consumer laws are being violated; new rules and or law suits could result.

If you have overdraft protection on your checking account and you don’t have enough funds to cover the checks you have written, you are charged a fee per check that the bank covered for you. The average overdraft fee per check is $35.00, which is similar to a short term loan.

In 2010, the banks were prohibited from automatically signing up customers for overdraft programs for debit card and ATM transactions. This didn’t apply to checks, online bill payments or recurring debits and didn’t limit how much the banks could charge. As a result, the banks were very aggressive in marketing overdraft protection. read more »

In part one of this blog on the top twelve scams or the “Dirty Dozen” identified by the Internal Revenue Service (IRS),  I talked about the first six -  identity theft, phishing,  return preparer fraud, hiding income offshore, “free money” and Social Security scams, and false/inflated income and expenses. This blog discusses the next six scams: false form 1099 refund claims, frivolous arguments, falsely claiming zero wages, abuse of charitable organizations and deductions, disguised corporate ownership, and misuse of trusts.

7. False Form 1099 Refund Claims – The taxpayer files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. They believe that the federal government maintains secret accounts for U.S. citizens and taxpayers can gain access by using this form. read more »

FICO conducts a quarterly survey of U.S. bank risk professionals and the latest report covers fourth quarter 2011.  FICO conducted it with Professional Risk Managers’ International Association (PRMIA) and the Columbia Business School. The survey asked risk managers about consumer credit supply and demand, credit standards, delinquencies and other issues related to consumer credit.

The bankers expected delinquencies on student loans, mortgage and credit cards to increase and the global economy will put more pressure on the U.S. economy. Student loan delinquencies were the top concern and 67 percent expected them to continue to rise; which was a 40 percent increase from last quarter.   Student loan debt has surpassed credit card debt.  The next category, mortgage delinquencies, trailed behind at 47 percent predicting that delinquencies would continue to increase. read more »