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Saturday, November 28th, 2009

Late Credit Card Payments Dip in Third Quarter

According to an article from the Associated Press, fewer Americans were late on their credit card payments in the third quarter of this year than in the second quarter, signaling that consumers may be getting more responsible at managing their debt.

While the decrease isn’t staggering (1.10% of payments compared to 1.17%), the statistic itself is: this is apparently the first time in a decade that late payments have decreased between the second and third quarters.

The Bigger Picture

Here’s a look at how this decrease fits into the larger context of credit card payments and debt in the United States:

  • Steady decline: The 6% drop comes after an 11% decline in late payments between the first and second quarters, suggesting that, as a nation, our debt management skills are improving.
  • Trend follower: The highest late payment levels occurred in states where the housing bust was biggest (California: 1.33%; Arizona: 1.35%; Florida: 1.47%; and Nevada: 1.98%).
  • Outstanding balance: Average amounts due have also declined from earlier quarters and last year: in Q3, the average was $5,612, down from $5,719 in Q2.
  • Savings down: The third quarter also saw a slightly lower rate of savings among U.S. consumers, suggesting we’re putting money toward debt rather than in the bank.

So What Does It Mean?

While no definitive explanation can be offered for the drop in late payments, the trend may be affected by a variety of factors, including:

  • Unemployment: Both those who have lost their jobs and those who are still working (but are perhaps more aware of the threat of layoffs) tend to cut back on discretionary spending and focus on paying down debt rather than accumulating new “stuff.”
  • Tightened credit: Many credit card issuers have pulled way back on their offerings of consumer credit and have gotten stricter about raising interest rates for late and missed payments. This may “scare” consumers into taking their debt more seriously, or into paying down balances to have more wiggle room.
  • The holidays: For many of us, a major shopping and/or traveling season is upon us. The dip in late payments could represent a sort of collective preparation for the financial stresses of the season.
  • Increased caution: The drop could also point to a more cautious American consumer – one who’s a bit less cavalier about taking on masses of revolving debt.

Additional Resources

Putting Credit Card Debt on Notice (PDF)

How Credit Card Debt Ensnares Consumers (PDF)

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Posted in Credit and Bankruptcy | No Comments »

Thursday, May 28th, 2009

Save Money on Your Credit Card Bills With Your Phone

Financially speaking, being “average” in this country means hefting around a fair amount of debt.

According to some sources, the average American household has $8,000 in credit card debt alone. And some experts warn that that figure might be misleading because many people carry no debt on their plastic, meaning that those with any debt at all may have significantly more than $8,000.

Luckily, there may be one way to save money you haven’t tried yet – and it won’t cause any serious sacrifice on your part – it won’t even require you to leave your house.

Step 1: Do a Little Digging

You’ve probably received credit card offers in the mail that offer temporary 0 percent interest rates on transfer balances or other attractive terms. Card issuers advertise in this way to encourage those carrying a balance on current credit cards to switch to their card.

Often, these offers are not as attractive as they initially seem, so actually transferring your funds may not be a good idea. But, if you can find an offer like this one, either online or in your mailbox, you could use it as a bargaining tool with your current credit card to get lower rates now.

Step 2: Dial Your Credit Card Company

Yes, we know: voluntarily contacting your creditors may sound about as appealing as eating a box of cigars. But consider this: a relatively brief phone call could save you serious money if you’re carrying a balance on your credit cards.

Before making the call, though, consider the following:

Are you current on payments? If you’ve missed or been late on several payments, your creditors may not be willing to work with you. Consider stepping up your payment efforts for a few months and then proceeding.

Do you know your current interest rates? It’s important to know exactly what your current situation is so you know what would, and what would not, be realistic to ask for. You can find this information on your latest bill.

How much money are you looking to save? If you’re currently paying 19 percent interest on a card, figure out how much you’d save if you were paying 15 percent interest, 10 percent interest, etc. If one card company is particularly difficult to deal with, you can write them off and move on to a card where you stand to save more cash.

What other offers are out there? Drop the names of other card companies and offers you’ve found. A threat to transfer your balances will seem more real if you can provide specifics.

Are you considering bankruptcy? If bankruptcy is a real option for you because of your current debts, be sure to mention this to your card issuer. The company will likely benefit more from cutting your interest rate than from having you discharge your debts by filing bankruptcy.

Step 3: Just Ask

When you’re on the phone, simply ask for a interest rate on your credit card – it’s that easy. The worst that could happen is that your interest rates will remain the same and you’ll pay what you were prepared to pay before you made the call.

And, in a best-case scenario, you could save yourself hundreds of dollars in interest payments! So go get your phone and see if you can cut your credit card bills.

How to Save Money from Your Phone

Financially speaking, being “average” in this country means hefting around a fair amount of debt. According to some sources, the average American household has $8,000 in credit card debt alone. And some experts warn that that figure might be misleading because many people carry no debt on their plastic, meaning that those with any debt at all may have significantly more than $8,000.

Luckily, there may be one way to save money you haven’t tried yet – and it won’t cause any serious sacrifice on your part – it won’t even require you to leave your house.

Step 1: Do a Little Digging

You’ve probably received credit card offers in the mail that offer temporary 0 percent interest rates on transfer balances or other attractive terms. Card issuers advertise in this way to encourage those carrying a balance on current credit cards to switch to their card.

Often, these offers are not as attractive as they initially seem, so actually transferring your funds may not be a good idea. But, if you can find an offer like this one, either online or in your mailbox, you could use it as a bargaining tool with your current credit card to get lower rates now.

Step 2: Dial Your Credit Card Company

Yes, we know: voluntarily contacting your creditors may sound about as appealing as eating a box of cigars. But consider this: a relatively brief phone call could save you serious money if you’re carrying a balance on your credit cards.

Before making the call, though, consider the following:

Are you current on payments? If you’ve missed or been late on several payments, your creditors may not be willing to work with you. Consider stepping up your payment efforts for a few months and then proceeding.

Do you know your current interest rates? It’s important to know exactly what your current situation is so you know what would, and what would not, be realistic to ask for. You can find this information on your latest bill.

How much money are you looking to save? If you’re currently paying 19 percent interest on a card, figure out how much you’d save if you were paying 15 percent interest, 10 percent interest, etc. If one card company is particularly difficult to deal with, you can write them off and move on to a card where you stand to save more cash.

What other offers are out there? Drop the names of other card companies and offers you’ve found. A threat to transfer your balances will seem more real if you can provide specifics.

Are you considering bankruptcy? If bankruptcy is a real option for you because of your current debts, be sure to mention this to your card issuer. The company will likely benefit more from cutting your interest rate than from having you discharge your debts in a bankruptcy filing.

Step 3: Just Ask

When you’re on the phone, simply ask for a lower interest rate on your credit card – it’s that easy. The worst that could happen is that your interest rates will remain the same and you’ll pay what you were prepared to pay before you made the call.

And, in a best-case scenario, you could save yourself hundreds of dollars in interest payments! So go get your phone and see if you can cut your credit card bills.

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Posted in Credit and Bankruptcy | 1 Comment »

Monday, March 23rd, 2009

Warning Signs of Predatory Lending

Predatory lending can devastate consumers.

Predatory loans can come in the form of credit card agreements, mortgages, payday loans and even bank loans.

Although there’s no surefire way to make sure a loan you get is safe, but here are some warning signs that your lender is less than trustworthy.

Lack of Transparency: Any time the terms of your loan are unclear, beware. Some loans come with terms so lengthy and dense with legal jargon that the average borrower has no way of understanding them (think of your credit card agreement).

Hidden Interest: Loan-related costs with names like “fee” or “charge” are often just interest in disguise. These can take the form of “overdraft charges” from a bank, “fees” on a payday loan, or “service charges” on a credit card.

Hidden Add-ons: Some unscrupulous lenders will sneak extra services into a loan’s terms (e.g. home appraisal fees with a mortgage) without telling the borrower that such services may be available elsewhere for less money.

Outright Lies: Writing a borrower’s “stated income” and similar tricks amount only to lying on a loan form. The only way to be certain that information in your loan documents is accurate is to fill them out (or double-check them) yourself.

Redlining: Aiming loans at specific groups of people is illegal. Studies have found that subprime loans disproportionately affected women, racial minorities, less educated people and the elderly. Other groups may be targeted for other types of predatory lending.

Exorbitant Interest: Sometimes, lenders conceal how much interest they’re charging by revealing only short-term interest rates (as with credit card offers) or by disguising interest (see above). Payday loans, for example, can come with a yearly interest rate of more than 300 percent!

The Magic of Negotiation

One way to make sure you aren’t victimized by predatory loans is to know as much as you can about them – that way, you can walk away when warning signs pop up. But keep in mind, too, that part of understanding lending is understanding that almost everything is negotiable.

Asserting yourself by trying to get a lower interest rate or a discount of some kind can signal to lenders that you know what you’re doing and will not be taken in by predatory tactics. Just be sure to do some research first so you know a reasonable rate to request.

Learn more about filing bankruptcy and how it may lessen your financial stress.

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Posted in Bankruptcy and Predatory Lending, Setting the Record Straight about Bankruptcy | No Comments »

Thursday, June 26th, 2008

Five Steps to Debt Elimination

The Federal Reserve reported last month that consumer debt in March rose by $15.3 billion, which was more than double the rate predicted.

Credit card issuers are reporting record-high late payments, people continue to file bankruptcy and many Americans are searching for a way out of debt.

While there's no magical pill that will end your debt, there are key steps you can take to eliminate your financial obligations and establish a debt-free way of life. Check out the Total Bankruptcy steps for getting out of debt.

Later this week, we'll discuss and explain some specific methods for eliminating your debts (especially credit card debt!). Check back for tips on Snowballing debt and more.

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Posted in Bankruptcy News and Events | No Comments »

Wednesday, January 17th, 2007

New Study Ties Credit Card Debt to Medical Bills

Recent studies of bankruptcy petitioners have shown that medical expenses and associated lost income were a major factor in their financial problems, and consumer credit information from the federal government has confirmed that medical expenses are a primary reason for consumer borrowing, so it should come as no surprise that those without medical insurance and those who have faced major medical expenses over the past few years tend to have higher credit card debt.

A study just released by Demos reveals some interesting numbers:

  • Low and middle income households with a major medical expense in the past three years carry an average of 45.9 percent more credit card debt than similarly situtated households without a recent major medical expense.
  • The average credit card debt for families without medical insurance is 32.2% higher than that of families with medical insurance.

Although the evidence has been clear from the beginning that the vast majority of bankrutpcy filings were triggered by unforeseen trauma like job loss, serious illness, uninsured medical expenses, divorce, and death in the family, this connection between medical bills and consumer debt puts a new perspective on even those bankruptcy petitioners who list primarily credit card debt.  Credit card debt incurred to pay medical expenses hardly correlates with the picture of the "deadbeat" bankruptcy petitioner "running up" credit card bills irresponsibly and then shirking his responsibility.

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Posted in Bankruptcy and the Economy | No Comments »