Credit Card Jungle was how Mike Hogan described the situation in a Barrons article earlier in the year. Even though there are some good business credit card deals to be found, it is very much a case of Buyer Beware.

If you’re among the two-thirds of credit-card holders who carry an outstanding balance, you might have noticed that your interest rate was hiked recently, or your billing cycle shortened. Failure to navigate card providers’ labyrinthine payment terms successfully can earn you one of several consumer-unfriendly fees.  These aren’t really new gambits. But they are being pursued with such gusto lately that they’ve generated a record number of consumer complaints.

That word jungle conjures up phrases like Nature Red In Tooth And Claw or Survival of the Fittest.  You have got to keep your wits about you, if you wish to stay ahead of those claws.  Hogan was describing the situation in the US but you will find similar discontent with the credit card suppliers in the UK and in Canada.

Consumers are often riled by two key hot button issues in most cases:

1. The way the interest is calculated on their balance owing often creates lots of surprises for consumers
2. The way any money that is paid is then applied to interest-bearing amounts owed is another cause for concern

It all comes down to the small print that is added to credit card contracts and it is not surprising that many feel there are hidden ‘gotchas’ in these contracts.

There is a popular wish for action so it is not surprising that you will find that politicians are now taking up this cause not only in the US but also in the UK and in Canada.

Even if tighter regulations are instituted they will never cover all problem issues. The wise user of credit cards will always do a detailed comparison of what the different credit cards are offering and what may be in the small print.

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Post from: Senior Money Memos

Credit Card Jungle

Technorati Tags: Canada, Credit card, Fine print, interest rate, UK, US

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Many will remember that card from that much-loved Monopoly game,  which was often so welcome particularly when running the risk of landing on those high-rent properties.  Advance to go and collect $200.  What could be better?  Unfortunately it was only Monopoly money so it did not do much for you in the real world.

Perhaps even more unreal for many of us is Advance to Go, Collect $1 Million by Kirsty Dunphey.

This is the story of a young, successful business woman operating a real estate office in Tasmania. Anything is Possible is a catch phrase that accurately describes this true story showing how a young girl can pull herself and her family out of a situation that almost destroyed them financially and emotionally. From absolutely nothing to owning over $3 million dollars worth of property in under four years, Kirsty’s story shows how it can be achieved.

That is certainly inspiring but may represent too large and long-term a challenge for any senior who may be in need of a quick cash advance.

Given this ongoing recession, many who have been extremely prudent throughout their lives are now finding their resources are stretched.  If an unexpected emergency comes up, be it a medical problem or a house maintenance issue that must be fixed immediately, then there are no funds available.  In some cases money may be tied up in longer term arrangements and there may be penalties involved in withdrawing it early or delays in receiving withdrawals. 

In such cases, what is often known as a payday loan may well provide the answer.  In the US, provided one works with a domestic-based payday advance lending company and exercises extreme caution in entering into such arrangements, then this may give a very rapid solution to a cash deficiency.

This is Advance To Go with real and tangible meaning.

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Post from: Senior Money Memos

Advance To Go

Technorati Tags: advance, emergency, Payday loan

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It is good to be on-guard against Get-Rich Schemers and Their “Money Making Programs”. They usually claim to have the secret to making money fast with very little effort or time. Usually there is a catch if you look closely.

One get-rich scheme for seniors that was somewhat curious but did not have an obvious catch appeared some three years ago. Terry Savage in the Chicago Sun Times is describing how those seniors are now facing a devastating future. His article describes how a Risky insurance plan has seniors spinning with many now on the hook for huge loans – and taxes.

The arrangement was called “Spin Life”. Agents encouraged older people to take out huge life insurance policies on themselves, even though they didn’t need the insurance and couldn’t afford to pay the premiums. Investors would lend them the money to pay the premiums for the first two years, until the policy was past the “contestability period.” Then the policy would be sold to an investor, who would continue to pay the premiums, hoping to collect on this “bet” on the senior’s longevity.

Somewhat macabre but the senior citizen was tempted by an upfront “bonus” – ranging from thousands of dollars to expensive cruises — just for letting the investor bet against the insurance industry’s mortality tables and eventually collect the policy proceeds when the senior died. They were promised more money when the policy was sold after two years to investors. In some cases, the insurance companies decided that the insured should guarantee at least 25 percent of the premium loan but the seniors were assured there was no risk since well-known names in financial services were raising money to buy these policies.

With the credit crunch, the pools of investor money predicted to buy these policies has dried up and there is no money to complete the deal. Even if the insurance companies forgive the loan, the senior is liable for taxes on the forgiven loan.

To simply walk away from this deal, the policy buyer would owe huge sums – half in guarantees to the lender, half in taxes to the IRS. Or the senior could keep paying the large premiums hoping to find a buyer who would pay something for the policy with a large payout when the senior died. That’s a no-win situation.

Post from: Senior Money Memos

Beware Get-Rich Schemes That Are Too Good To Be True

Technorati Tags: bonus, credit crunch, Life insurance, senior

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The latest findings on personal debt in Canada are very alarming as you can see from the headlines:

• Canadians dragging around too much debt  Toronto Star
• CGA report: Canadians on the brink of debt spiral  News1130
• Canadian household debt reaches $1.3 trillion  St. John’s Telegram
• New survey shows Canadians are in record-setting debt  660 News
• A MOUNTAIN OF DEBT  ReportonBusiness.com
• Debt levels ‘alarming,’ study says  The Gazette (Montreal)

The CGA (Certified General Accountants) survey of 2,013 Canadians in November highlights the following situation:

Current household debt is at a "highly disturbing" level, especially considering the prospects are slim that financial security will improve in the recession. Canadian household debt is at an all-time high, reaching $1.3-trillion at the end of 2008, up dramatically from $1-trillion in 2007. That means household debt levels have climbed to $39,597 per Canadian from $23,885 in 2000 – an increase of 66 per cent in nine years.

A growing portion of household debt comes from credit cards and personal lines of credit, reflecting a rising use of credit for discretionary spending and non-durable goods. This means debt is increasingly used for consumption rather than for assets such as homes and vehicles. A CGA survey of 2,013 Canadians in November found that 58 per cent said their day-to-day living expenses are the main cause of their increasing debt, and that 21 per cent of people in debt said they can no longer manage the load.

Given that Jim Flaherty, Minister of Finance, confirms that Canada is still in a deep recession this does not bode well for the coming months.

Post from: Senior Money Memos

Alarming Debt For Canadians

Technorati Tags: Canada, CGA, Credit card, household debt, survey

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In doing research on the previous post titled, Making Money Go Further, I was struck by the title, Knee Deep in Debt.  This is actually a most useful article from the Federal Trade Commission in the US.  It is very straight advice for those who perhaps are struggling and feel they are mired in debt.

As it mentions, many people face a financial crisis at some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn’t have to go from bad to worse.

They then discuss a number of options that may be helpful depending on the level of debt, the amount of personal discipline, and  the prospects for the future.  The options that they cover in some detail are:

• Realistic Budgeting -  The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.
• Credit Counseling from a reputable organization -  If you’re not disciplined enough to create a workable budget and stick to it, can’t work out a repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting a credit counseling organization.
• Debt Management Plans – A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money.
• Debt Consolidation – You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. These loans require you to put up your home as collateral. If payments are not made on time you could lose your home.
• Bankruptcy – The debt management option of last resort because the results are long-lasting and far reaching.

As they caution, if you’re thinking about getting help to stabilize your financial situation, do some homework first. Find out what services a business provides and what it costs, and don’t rely on verbal promises. Get everything in writing, and read your contracts carefully.

A good agency will cover not only debt counseling, but will review the family budget and advise on the best way to manage personal finances and pay off credit card debts.  It provides detailed financial education on money management, household budgeting and other issues that affect credit ratings.

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Knee Deep in Debt

Technorati Tags: Bankruptcy, Credit card, Credit counseling, Federal Trade Commission, Personal Finance

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Given the difficult economic conditions, everyone is eager to get any income tax refund they may be due from the Canada Revenue Agency as quickly as possible.  Knowing that, the scam artists try to phish, or in other words get unwary people to give personal information that will allow them to be defrauded.  That is why last August, the Canada Revenue Agency warned Canadians of a mail scam.

The Canada Revenue Agency (CRA) is warning taxpayers to beware of a recent scam where some Canadians are receiving a letter fraudulently identified as coming from the CRA and asking for personal information. The letter is not from the CRA. A PDF version of the letter is available on the CRA Web site at www.cra.gc.ca/alert.

The letter claims that there is “insufficient information” for the individual’s tax return and that in order to receive any “claims,” they will have to update their records. The letter attaches a form specifically requesting the individual’s personal information in writing, via fax or email, including information on bank accounts and passports. This letter is not from the CRA and Canadians should not provide their personal information to the sender.

All taxpayers should be vigilant when divulging any confidential information to third parties. The CRA has well established practices to protect the confidentiality of taxpayers’ information.

It appears that the scammers have moved online according to a former CRA employee, who warns all to beware of online tax scams.

Robert Day says taxpayers should be wary of the information they’re willing to give up online during tax season. Even though he worked for the Canada Revenue Agency for 30 years, he fell for the scam.

When Day clicked on a link inside an official looking email that appeared to be from the Canada Revenue Agency, it took him to an official looking website that asked for some personal information.  “I don’t know whether I had a short circuit between the earlobes or something,” said Day. “But, I went into this darn site and it had you type in your social insurance number to get into the site.”

If someone with such experience can fall for it, everyone should be doubly cautious when they receive e-mail messages that appear to come from the Canada Revenue Agency.

Today I received the following e-mail message, that purports to come from the Canada Revenue Agency.  However unless some staff members at the CRA have inferior spelling skills, this should not fool too many people.

Worm Regards, indeed.  It is so ludicrous that one wonders if it is a deliberate spoof.  Nevertheless it can serve to warn all that more insidious e-mail scam messages from the Canada Revenue Agency are making the rounds.  Remember the CRA will not be contacting you this way and nor will the security departments of your bank or your credit card company.

Post from: Senior Money Memos

Canada Revenue Agency E-mail Scam

Technorati Tags: Canada Revenue Agency, Income tax, Phishing, scam

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Predatory Credit Card Practices seem to be a hot topic at the moment.  A CBC story suggests that Canadians want a credit card ‘bill of rights’.

Canadians feel powerless when it comes to their credit cards — whether the problem is high interest rates, confusing fine print or hidden fees — and they want a consumers’ “bill of rights” to protect them, according to an EKOS poll conducted for CBC’s Marketplace.  At this time of widespread financial uncertainty, respondents to a four-day survey conducted Feb. 12-16 were asked, “Would you support a credit card bill of rights that would provide legal protections for consumers in their dealings with companies that issue credit cards?”  Eighty-two per cent of respondents answered yes.

The poll was done as part of a larger investigation by the CBC’s investigative consumer program Marketplace (Friday, 8:30 p.m.) into hidden charges lurking on some credit card bills.

There are many causes for concern, with a major one being the credit card loan-insurance schemes.  What is often not mentioned in the promotional literature is how expensive credit card balance insurance can be and how little it often pays off. Fully 51 per cent of those polled in the CBC survey who have the insurance said they did not know it only covers the minimum monthly payments if you lose your job or get sick.

The Financial Consumer Agency of Canada is the government’s watchdog over financial institutions.  It informs Canadians of their rights and responsibilities when dealing with financial institutions and ensures compliance with the federal consumer protection laws that apply to banks and federally incorporated trust, loan and insurance companies.

In the United Kingdom, this type of credit card balance or loan insurance has caused a huge outcry and investigation. It is often called Payment protection insurance (PPI). A BBC article indicates the UK government has cracked down and Loan insurance is to be restricted

Payment protection insurance (PPI) sales will be banned while customers take out a loan.  Such insurance cost borrowers more than £4bn in 2007 and is supposed to repay borrowers’ loans if they fall ill or lose their jobs. Leading providers had faced little competition for PPI and, as a result, had charged persistently high prices.  The Competition Commission’s final set of proposals on PPI is the culmination of a four-year campaign by consumer organisations, and then regulators, against the mis-selling of the insurance by banks and other lenders.

This seems to be a topic that is coming up in a number of countries at the same time.  President Obama is also promising to Address Predatory Credit Card Practices.

Obama and Biden will establish a five-star rating system so that every consumer knows the risk involved in every credit card. They also will establish a Credit Card Bill of Rights to stop credit card companies from exploiting consumers with unfair practices.  Such a Credit Card Bill of Rights will:

• Ban Unilateral Changes
• Apply Interest Rate Increases Only to Future Debt
• Prohibit Interest on Fees
• Prohibit “Universal Defaults”
• Require Prompt and Fair Crediting of Cardholder Payments

It seems clear that such a credit card Bill of Rights will be very well received both in the USA and in Canada.  Certainly it would address many of the credit card concerns expressed in that CBC Canadian survey.

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Post from: Senior Money Memos

Predatory Credit Card Practices

Technorati Tags: balance insurance, Canada, Credit card, Payment protection insurance, UK, USA

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As the Seniors World Chronicle pointed out, if you owe money it is very possible that a debt collector might call and disrupt your dinner.

With card delinquencies rising, debt collectors are jangling more Americans’ phones. Some 4.79 percent of credit card accounts, approaching one in 20, were delinquent toward the end of 2008, according to the Federal Reserve. As recently as 2006, the rate was 3.95 percent, or about one in 25. And when card accounts go delinquent, defined as being 30 days past due, that’s one of the primary triggers for a call from the credit card company.

Consumers willing to talk usually get more favorable repayment terms and, most of the time, end up paying less than the original balance. The card issuer may restructure the debt, or refer the borrower to a consumer credit counseling company to set up a debt management plan. Lenders may also forgive interest and lower interest rates.

Nevertheless you have rights and you can easily find information on the Web on how to stop debt collector calls.

It is important that you know your rights when dealing with debt collectors.

In the US, Federal law protects you from abusive practices by debt collectors. Even so, the Federal Trade Commission routinely receives more complaints about the debt collection industry than any other.

For 2007, the latest figures available, the FTC received nearly 71,000 complaints about third-party debt collectors. Put another way, one out of every five consumer complaints that the agency receives involves debt collection

In the US, debt collectors cannot:

• Call before 8 a.m. or after 9 p.m., unless you give permission.
• Contact you at work if they know your employer doesn’t want such calls.
• Harass you by using profanities, repeatedly call to annoy you or threaten violence.
• Lie about the size of your debt or threaten to take legal action against you if they have no intention of doing so.

For a specifically Canadian answer on your rights with respect to debt collectors, you may wish to consult the information that the Canadian Bar Association, British Columbia division, provides on its web page on Harassment by Debt Collectors.

Post from: Senior Money Memos

Do Debt Collectors Call At Dinner Time?

Technorati Tags: Canadian Bar Association, collection, Collection agency, collector, Federal Trade Commission

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If I could give you just six words of advice, they’d be “pay off your credit card debt.” If I could add one more word, it would be “now.”

All this week CNN.com is running excerpts from CNN chief business correspondent Ali Velshi‘s new book,”Gimme My Money Back: Your Guide to Beating the Financial Crisis,”published by Sterling & Ross.  The quotation above is the last paragraph of today’s excerpt.

Credit card debt is extremely expensive. Interest rates range up to 30 percent a year. That means for every $1,000 you carry on your balance, the credit card company could be charging you $300 each year.

That $300 can mean a lot of things — a decent TV, a car payment or new clothes for the kids. Or you could invest that $300, so it would make more money for you. The one thing none of us should do is take that hard-earned money and send it to the credit card companies just for letting us spend more than we can afford.

If you have credit card debt, then those seven words will probably be the best advice you get all day.  Make it a good one.

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Pay Off Your Credit Card Debt Now

Technorati Tags: Ali Velshi, CNN

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Any blog on money could not fail to include Paul Grignon’s 47-minute animated presentation of “Money as Debt”.  It tells in graphic terms what money is and how it is being created. The Cowichan Citizens Coalition and its Duncan Initiative received high praise from those who have previewed it.

Given the present global depression, it is particularly appropriate.  It deserves the widest distribution and use by all those who are concerned with the present unsustainable monetary system in Canada and the United States.

Footnote: If you are interested in books on Money, then why not visit the Money section of the Money Bookstore.

Post from: Senior Money Memos

Money as Debt

Technorati Tags: banks, interest

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