SPENDonLIFE

SmartyPig Review: My Two Cents

Carrie Davis — Thu, 05 Nov 2009 13:02:50 -0500

I learned about SmartyPig at the Finovate conference, and wanted to try the online savings account for myself. I currently have an ING savings account and think I do a pretty good job socking some funds away each month for a rainy day, but you can always save more, right?

Based on the demonstration at the conference, SmartyPig seemed like a fun way to save cash for specific goals. Here's how it works, and why it's different from other online saving tools.

The sign-up process

When you sign-up with SmartyPig, you are also really signing up for a new savings account through their banking partner, West Bank. This West Bank savings account is currently yielding a 2.01% interest rate (better than the 1.30% ING is currently offering)!

Once you have a SmartyPig account, you'll need to link it to an existing checking account. SmartyPig requires that you transfer a minimum of $25 from your checking account to your new savings account right away, so you have at least a small balance to start.

You can modify your security and account settings, including choosing an avatar for yourself. SmartyPig has plenty of piggy personalities to select from, or you can upload your own.

Setting goals

At SmartyPig, you list out your savings goals and it tells you how much you need to put aside each month to reach those goals. Sure, anyone who passed a high school math class can calculate the same thing, but can they give you the cute piggy graphics and visual motivation you need to actually follow through? And more importantly, will they autodraft that necessary amount from your checking account each month?

I decided my first goal on SmartyPig would be to save up for a Vegas trip I'm taking next June (safely assuming my winnings from the blackjack table won't cover the costs of the weekend). I figure to really go in style I'll need two grand. Smarty Pig reminded me that a $2000 trip means saving $245 each month. Yikes! Somehow, $245 drafted from my checking account for the next eight months seems like a heck of a lot more than just putting $2000 on my credit card and worrying about it later. This might be Smarty Pig's biggest strength: it forced me to re-evaluate how much something is really worth to me. If I'm not willing to part with the funds each month ahead of time, maybe I should reconsider my purchasing decisions.

I decided to lower my Vegas goal to $1000, and chose the day of the month I want the $125 autodrafted from my checking account each month. I'll also start looking for ways to cut my trip's costs (cheaper airfare and luck at the slots will certainly help).

Going public

Perhaps the most unique thing about SmartyPig is that it can interact with your Facebook and Twitter account, if you want it to. The SmartyPig Share tool alerts your friends and family to your savings progress and even solicits funds from them. You can create a widget to place on 28 various social networks of your choosing. This widget can either ask for friends and family to donate money to your savings goals or (if you think that's kind of tacky) simply show them your progress. Sharing your goals with others is a great way to help you stay motivated enough to reach them.

The payout

Once you've reached your goals, SmartyPig has a few options for sending your savings back to you. You can opt for a MasterCard with your savings on it, choose a gift card from a list of retailers (this option will add 6% to your amount), or simply transfer your savings back into your checking account.

Site security

Don't let the cuteness and simplicity of the website's design fool you: it has thorough, no-nonsense security in place to keep your account secure. SmartyPig will ask for a strong password, answers to five security questions, and other personal information like your Social Security number when you sign up. In truth, the security seems almost like overkill. Each time I visit the site it wants me to answer security questions, and my sessions time out faster than other online accounts I have with ING, BofA, and Chase. I actually locked myself out of my SmartyPig account by entering the wrong password too many times. Luckily, the customer service was efficient and friendly, and I was back in my account in no time.

Other features

I haven't explored everything yet in SmartyPig, but I did notice the ability to connect your SmartyPig account with other online personal finance managers like Mint and Wesabe. You can also purchase SmartyPig gift cards for friends to get them started on the savings site, too.

Overall, SmartyPig is perfect for those looking for some fun motivation to save towards goals. It is especially great for people who enjoy social networking, but can also just be used as a basic savings account that autodrafts monthly from your checking account. Plus, you can edit or cancel your savings goals at any time, so it really is as flexible as you want it to be. A worthwhile site to check out for long-time penny pinchers and savings newbies alike!

Credit Unions vs. Banks

Carrie Davis — Tue, 03 Nov 2009 11:18:31 -0500

We've gotten a few questions from readers asking about credit unions and how they compare to traditional banks. I personally don't have any accounts with a credit union, probably because I've been so marketed to by major banks that I never thought to approach one. I've heard some credit union customers say the interest rates they get from their credit unions are lower than other places, and some say they are comparable or even higher. Nonetheless, it seems like credit unions deserve a closer look. I asked Paul Brucker from Alliant Credit Union to share his expertise on the subject. Here's what Paul had to say:

"A bank is a for-profit business owned by shareholder investors. A measure of a bank’s success is how much profit it makes from its customers and distributes to its shareholders. To maximize profits, banks pay lower rates on deposits, charge higher rates on loans, and assess more and higher fees. Credit unions operate on a totally different principle.

For one thing, when you join a credit union, you’re not a customer – you’re a member and an owner. Credit unions are not-for-profit organizations owned and operated for the benefit of their members. In a credit union, all income after expenses and capital reserves is distributed to its members. In fact, a credit union’s mission is to maximize the returns to its members through high savings dividends, low loan rates and low fees.

In short, while banks take money from their customers, credit unions, like Alliant, make money for their members."

Sounds good to me. What do you think? Do you prefer a credit union over a bank?

About Alliant Credit Union: Alliant was founded in 1935, shortly after Franklin D. Roosevelt signed the Federal Credit Union Act into law. It serves more than 250,000 members and manages over $6.7 bilion in assets, making it the seventh largest credit union in the nation based on asset size. To learn more about Alliant, their rates, or to apply for membership, visit www.alliantcreditunion.org.

Guide to Secured vs. Unsecured Debt

LaToya Irby — Mon, 02 Nov 2009 12:01:15 -0500

Many people don’t realize it, but not all debts are the same. There are two basic types of debt – secured debt and unsecured debt. At the most basic level, the difference between the two is that one type of debt is tied to a piece of property while the other type is not.

Secured debt

Secured debt is debt that is "secured" by an asset. The asset is used as collateral for the debt and can be seized by the lender if you default on the terms. Common types of secured debt are mortgage loans, which are secured by houses, and auto loans, which are secured by cars. If you fall behind on your mortgage or auto loan payments, your lender can foreclose on your home or repossess your car.

Unsecured debt

Unsecured debt is the opposite of secured debt. It’s debt that isn’t secured by an asset. With an unsecured loan, the lender’s only guarantee of loan repayment is your signature on the loan agreement. Most credit cards are a type of unsecured debt.

If you fall behind on unsecured loan payments, the lender has fewer choices for recourse. It can report your delinquent payments to the credit bureaus, thereby damaging your credit record. It can also turn your debt over to a debt collector or sue you for the amount owed. But there is no collateral that can be automatically seized to cover any of the loan losses.

Is one better than the other?

Secured and unsecured debts have different purposes, so it’s nearly impossible to say that one is better than the other. Because there is no collateral associated with unsecured debt, lenders rely on your credit history to approve you for an unsecured loan. If you have a poor credit history, you’ll have a hard time qualifying for an unsecured loan. If you are approved, you’ll likely have a higher interest rate than a secured loan for the same amount. Not only that, unsecured loan amounts are typically limited. Many lenders will lend up to $25,000 on an unsecured loan.

In some ways, an unsecured loan is more attractive since the lender can’t (easily) take your property if you fall behind on your loan payments. On the other hand, when you default on a secured loan, you’ll lose the property, get a bad credit rating, and could even end up owing the lender a deficiency judgment. A deficiency judgment is the difference between the amount you owed on your loan and the amount your lender recovered from your repossessed asset.

Secured and unsecured credit cards

When it comes to credit cards, there are secured and unsecured versions. Unsecured credit cards are more prevalent. In fact, many people don’t know there’s such a thing as a secured credit card. Secured credit cards, which require a security deposit to be made against the card’s credit limit, are less common.

A secured credit card is a good option for people who don’t qualify for unsecured credit cards either because they don’t have sufficient credit history or they have a bad credit history. Having a secured credit card can help build a credit and even rebuild a bad credit history because it offers a chance to gain positive credit history. That’s if the secured credit card issuer reports your account to at least one of the three major credit bureaus. So, if you want to use a secured credit card to help rebuild your credit, make sure you get one that will be included on your credit report. Make sure to not carry a balance from month to month on a secured credit card, though, because the interest rates tend to be higher than on an unsecured card.

The Haunting of Credit Mistakes Past

Carrie Davis — Fri, 30 Oct 2009 08:45:16 -0500

Oh the horrors! Credit card balances that make you want to run screaming, debt collectors that call late into the night when you're home alone, identity thieves that are able to suck the very soul right out of you...It's Halloween folks, and at SpendOnLife, that means sharing some classic (and financially horrifying) ghost stories.

The Lady of the Lake...who couldn't stop shopping

It's true, she exists. You may see her walking that desolate stretch of road along the lake late at night, weighed down with shopping bags so heavy they could sink her to the bottom of the water. She's on foot because her car was repossessed (she spent all her money on clothes instead of car payments). But did she have a choice? No! Not when Nordstrom was having THE sale of the year, and deals abounded in every corner of the store. She may be walking in a torn chiffon wedding dress now, but just wait until she changes into the Therapy outfits she bought! Of course, she has nowhere to change into them...her house was foreclosed on long ago. And so she walks from the mall to the lake each night, purchases as heavy as iron-forged chains hanging from her ghostly arms.

The Tell-Tale Debt

He thought ignoring the bills would make them go away. The past due notices piled up, and yet he did not pay. No, instead he cleverly peeled back the floorboards and placed the bills inside, where no one could ever find them. The debt collectors came to the door. He thought he could tell a convincing enough tale to make them disappear. But the planks of the floor kept creaking, something tapping at them from below. He could stand it no more! Like a desperate man, he began ripping at the wooden boards, until he revealed the past-due debts that weighed so heavy on his heart and would not simply disappear. They continue to haunt his credit report to this day.

The Possessed Identity

Something beyond comprehension is happening to Regan. She's not feeling quite like herself lately. She's receiving notices of past-due payments on loans and credit cards of which she has no recollection of applying. A Bowflex listed on her credit card statement? She has no need for one of those, especially considering the newfound flexibility in her neck and levitation abilities. It's as though demons have invaded her identity and are using her good credit for their own devices. How can she exorcise these evil spirits once they've gotten a hold of her Social Security number, date of birth, and mother's maiden name?! If you listen close enough, you can still hear her cries: "Be gone, identity thieves! I command you!"

For more Halloween money stories (treats only, no tricks, we promise!) check out PT Money's comprehensive list. Have a Happy Hallow's Eve from all of us at SpendOnLife!!

BillShrink.com: My Two Cents

Ashley Baxter — Wed, 28 Oct 2009 10:57:41 -0500

George from Seinfeld would likely disagree, but I'm with BillShrink.com: Shrinkage is good! Who wouldn’t like finding new ways to spend less and save more in their financial endeavors?

I gave their product a test drive this past week. After entering in some personal information, I was able to identify a few ways to save with the click of a button. BillShrink has software to help you save money in four categories: wireless service, credit cards, gas purchases, and CDs and savings.

Wireless / Cellphone

I haven’t had a landline in over three years which means I live and die by my cell. I currently spend $180 a month on three lines and was thrilled to see what I could do to save a few bucks. BillShrink took into consideration every issue I would encounter in switching plans, down to factoring in early termination fees with my current provider. Impressive! All I did was supply my account information for my providers website and they did the rest. I also got a detailed analysis of my usage and found out that 36% of my phone calls the previous month were to my best friend…yipes!

I did notice that the amount shown for my monthly bill was incorrect, and my only option was to manually enter my usage information myself (aka, reverse the gloriousness of having them aggregate that for me). I was still able to get a rough guess on how much money I could save by switching my plan by doing some simple math on my trusty calculator, though.

Credit Cards

I’m a firm believer of staying away from credit at all costs, but have been lured into using rewards cards for my bills and paying off the balance every month. It’s a nice way to collect on some great cash bonuses. After entering information regarding my current card and spending habits, BillShrink offered me a list of cards that would offer much better returns. I was not able to compare my current card and the cards BillShrink suggested side-by-side, but I could easily compare the cards they suggested and quickly found one I could use to earn an additional $700 a year. Applying for the card was as easy as clicking a button and entering a little more information. Mint.com, an online money management program, has a similar section on their site, but the card offers on BillShrink were much better.

Gas Stations

When I was in high school I could fill the tank of my Mazda Protégé with $10 and still have enough change to buy a soda. Things have changed a bit since that time and I had no problems letting BillShrink show me the way to budget-friendly fuel. After they factored my typical daily route, asked some important questions (like how far I’d drive for a deal), and determined my mpg by asking what type of car I drive, BillShrink found multiple stations where I could save a pretty penny. To be exact, I could save nine cents more than I paid the week before without driving very far out of the way.

Savings / CDs

Savings and I have a love / hate relationship: I love saving but my money hates to be saved. So I was very interested to see if there were any accounts that could drum up additional interest earnings than the ones I currently use. I was delighted to see that BillShrink offered options based on sole CD use, sole savings-account use, or both of those combined. That’s worth a gold star in my book! I toyed around with the various options and found a combination where I could earn an additional 7% over my current interest earnings.

BillShrink: My Two Cents

BillShrink is free and easy to use. They do 99.99% of the work for you unlike most sites that require you to come up with your own estimates. It’s not something I would use daily, but definitely a site I’ll check up on from time to time. If you’ve got a spare 10 minutes, you should test it out as well to see how much you can save.

Plus, they have this great infographic on their site that highlights consumer rights under the new CARD Act, and tells which banks are already in compliance. Bookmarking the site solely for this info is worthwhile, and will help you make sure your creditors are playing by the new rules.

People Capital Offers a New Student Score to Rival FICO

Carrie Davis — Tue, 27 Oct 2009 10:31:07 -0500

FICO schmico. Credit scores have long proven an obstacle for students trying to get private loans. But now, there's a new score in town specifically designed for students.

The Human Capital Score from People Capital doesn't assess students based on their credit history (which is often non-existent), but rather on factors like their school, major, and GPA. Your Human Capital Score can hook you up with good loans from quality lenders to cover expenses that government funding and part-time jobs just aren't covering.

I first heard about People Capital at Finovate, and wanted to get more information about this new student lending service. So I followed up with Alan Samuels, Chief Product Officer at People Capital, to get some specific questions answered. If you're a high school, college, or graduate student (or a parent of a student), I think you'll find what Alan has to say about this new lending option very interesting.

SpendOnLife: So Alan, People Capital helps students who often have little or no credit history by pairing them up with lenders. How do you do this? What’s required of students to sign up with you?

PeopleCapital: When you apply for a private student loan, lenders want to assess the risk they would take by making the loan to you, so they can know what amount they should lend and at what interest rates. The most common form of determining risk is the FICO score. FICO scores are based upon your credit history (how much money you've borrowed and repaid, whether you've made timely payments and for how long). Based on this, most students will fare poorly, as they do not have a long (or even medium) positive history of payments.

People Capital is revolutionizing student lending with a new credit risk methodology. Our Human Capital Score calculates future income potential by including variables such as GPA, standardized test scores, college, and major.

The idea behind the Human Capital Score (HCS) is that there is a way to assess the relative riskiness of students by looking in part at a different set of standardized and verifiable attributes than the traditional credit score. These attributes help predict students' future income, and hence their ability to pay back loans. The HCS uses these to create a score (click on the thumbnail at right to see a sample).

SPL: If I’m a business major at Harvard, I assume my Human Capital Score would be sky-high. But what if I’m a History major from a small school that's not ivy league? Are there loans out there for me?

PC: Your HCS is not solely based upon college and major. Other factors, such as achievements on standardized tests, GPA, as well as publically available information affect the results.

While the student borrowers on People Capital will run the gamut of Human Capital Scores, it is not the case that only the highest HCS scores will receive loans. The interest rate for any particular loan will be set by an auction methodology that processes different bids from different potential lenders. Depending on an individual lender’s risk-return profile, some will seek low risk/low return (i.e. High HCS) students, while others will seek higher risk/higher return (i.e. lower HCS) students. Our platform matches lenders with the students that fit their lending objectives.

SPL: How do the rates offered on People Capital compare to those offered by the federal government? Can I use the money for other expenses like rent, food, and books?

PC: The interest rate for any particular loan will be set by an auction methodology that processes different bids from different potential lenders. Some of our lenders are philanthropic or other benevolent organizations. As such, some loans will be lower than those offered by the federal government and some above.

People Capital strongly recommends that students apply for federal loans and all other sources of financial aid — including grants, scholarships, and Work-Study — before applying for private student loans. But even with funding from all those sources of capital, students will most likely require additional funding to meet the costs of attending college.

The loans originated on the People Capital platform can be used for generally acceptable educational expenses, such as tuition and fees, room and board, books, school supplies, and transportation.

SPL: Can graduate students sign up with People Capital as well?

PC: Yes.

SPL: Will I see my credit score if I sign up with People Capital?

PC: Yes. People Capital will provide a traditional credit score (i.e. your Vantage Score from Experian) as well as the People Capital Human Capital Score.

SPL: Unlike many federal loans, People Capital requires that student borrowers begin paying back the loan while they’re still in school. Why is this a good thing and how will it help students in the long run?

PC: It is an important part of the loan payment process that the student gets into the discipline of making regularly scheduled payments, however small. Lenders find it very attractive to see the positive actions of the borrower from an early stage. One of the biggest failures of traditional student loans is the period when the student is first expected to make a payment – when it may have been three or more years since they last had contact with the loan company. In addition, these monthly repayment streams allow People Capital to continuously enhance and improve the Human Capital Score credit analytic, and are reported to the credit bureaus, thereby enabling the student to build a traditional credit profile.

SPL: You’ve just launched an income projector that tells students what they are likely to earn if they graduate from a certain school with a certain degree. How does this work?

PC: Currently, we are providing free access to the Human Capital Score. In addition, we have just launched the Human Capital Score College Planning Tool for students (and college planning consultants) who want to use the Human Capital Score to compare multiple projected income scenarios based on colleges they are considering attending.

The Human Capital Score College Planning Tool is a web-based college scenario planner that is targeted for students who are planning to go to college and need help measuring the economic value of various schools they are considering. Namely, the tool can help students decide whether it is worth the money spent to go to one school as compared to another, based on the income potential from the academic choices they make.

The planning tool works when a user inputs key data about themselves (GPA, SAT scores, planned college major) and the various schools they are considering. The tool then calculates the data and presents a graph and chart documenting results of several scenarios (up to five maximum) of the user’s potential income 10 years after graduation, allowing the user to compare the results between colleges she is considering. This tool can also be used by college planning consultants and high school guidance counselors with a professional version available for their consulting needs.

If you are interested in learning more about People Capital and how they will help you to find quality loans to cover the cost of school, visit them at their website at People2Capital.com.

A Guide to Credit for Twenty-somethings

Carrie Davis — Mon, 26 Oct 2009 12:18:19 -0500

In your twenties? If you’re like most twentysomethings, you’re probably working hard to finish your education, get your career started on the right foot, and launch your life in the “real world.” Whatever stage of the game you’re in, don’t forget about credit!

Although you may not be thinking about credit — that little file that can help or hinder your ability to borrow money — the sooner you start to build and maintain good credit, the more easily you can take important steps like financing a new car or buying your first home.

Why Credit Matters

Let’s face it: cash is king. When you pay for things you want and need with cash, you don’t go into debt. With cash, you never buy anything you can’t afford. If you already spend money this way: congratulations! You’re smarter with your money than most Americans.

But fast forward five, ten, or fifteen years from now. Will you want to buy a home? Do you think you’ll have saved enough cash to buy a property that costs hundreds of thousands of dollars? Today, most people simply can’t pay cash for their first home. Even if you never want to borrow money for any other reason, you’ll probably want to borrow for a home.

Trouble is, you’ll have a difficult time getting a mortgage if you’ve never borrowed money before.

And that’s why it’s so important to build credit early in life…even if you don’t think you need it yet.

How Credit Works

In a nutshell, your credit report is nothing more than a record of all your debts and how you repay them. From that seemingly basic information, credit bureaus (the companies that collect, store, and distribute your credit report) make calculations (like credit scores) that tell lenders how risky it would be to lend you money.

You get points for borrowing money responsibly and paying it back on time. Take out a credit card and a loan or two and pay each loan on time (every time) for a year or two to build good credit. If, however, you miss a payment or two or take on more credit that you can afford to pay back, your credit score won’t look so hot.

Where Do You Start?

Often, the hardest part to building credit is taking out that first loan or credit card. That’s because banks don’t want to lend money to somebody that doesn’t have a credit file yet.

If you’re a student, credit card companies offer student credit cards that may approve you even if you don’t have any credit history. Trick is, you must be a full-time undergrad. Also, the pending CARD Act will also restrict people under 21 from getting a credit card without a co-signer or proof that you’re financially independent.

If you’re not a student, you can always apply for a loan or a credit card with a co-signer (like a parent) who has good credit. Your co-signer will be responsible for any debt you incur if you don’t pay. Ask your bank if they will issue you a loan or a credit card with a cosigner and then release the cosigner from liability after you make a year or two of on-time payments.

If these options don’t work, ask your bank about getting a secured credit card. With a secured card, you’ll have to deposit money into a savings account (the security deposit) and will get a credit card with a credit line equal to your security deposit. You make purchases with the card just like a regular credit card and pay your bill every month. Unlike a debit card or prepaid card, however, the bank will report your timely payments to the credit bureaus (which builds your credit). After a year or two of on-time payments, most banks will upgrade your secured credit card into a regular unsecured card.

Credit Building Myths

Once you’ve gotten your credit report started with your first account, you’ll be able to apply for a couple more credit lines to help you build credit good enough to qualify you for a mortgage when you’re ready. As you build credit, avoid these two common credit myths:

You have to carry a balance (and pay interest) to build credit. Not true! If you make a few purchases (even just a tank of gas a month) on your credit card and pay the balance in full, on-time, you’ll still build good credit.
You need a ton of credit accounts to have good credit. It’s true that having a "mix" of credit accounts is a good thing. For example, at least one revolving credit line like a credit card and at least one fixed-installment loan like a student loan or car loan. That does not mean you need twenty credit accounts to have good credit. After a certain point, extra credit accounts will actually hurt your credit rather than help.

Building good credit is an important step in building your own life and financial independence. As you go, just remember to be patient and that paying your bills on time is the single most important thing you can do to ensure you’ll always have a good credit profile that can help you reach your financial goals!

This guest post comes from David Weliver. David is publisher of Money Under 30, the personal finance blog for the young and ambitious, featuring advice for twentysomethings on getting out of debt, mastering money, and getting on with life. You can learn more about David and his blog or follow David on Twitter @MoneyUnder30.

Friday Grab Bag - 10/23/2009

Carrie Davis — Fri, 23 Oct 2009 10:25:52 -0500

It's Friday again, and that means it's time for the weekly SpendOnLife grab bag! Here we share some of the week's more interesting tidbits from the world of credit, personal finance, and identity theft. Enjoy!

Step right up…79.9% APR limited-time offer!

First Premier Bank recently sent a comically horrendous credit card offer to a San Diego resident: a card boasting a 79.9% APR, plus a $75 annual fee. What I want to know is how bad was this person’s credit to qualify for an offer this insulting?? Thanks to Dual Income No Kids for sharing.

Credit scores sliced and diced by e-mail address

Congrats to everyone@bellsouth.com! You beat out Yahoo, Hotmail, and even Comcast e-mail users in the best credit score contest. I’m not sure of the point of this latest Credit Karma study (it seems as arbitrary as ranking credit scores according to consumers' hair color or favorite food), but it’s interesting nonetheless.

New bill to ban employers from checking your credit

Personal Finance by the Book offers the details of Congressman Steve Cohen’s new bill that will prohibit potential employers from poking around in our credit pasts. This could be especially helpful considering the current unemployment rate, and all those struggling to find work in part because of tattered credit histories (which could be caused from having lost their jobs in the first place). Stupid vicious cycles.

I thought BofA was supposed to be the good guy

Bank of America was standing tall above other banks who are changing terms and charging fees left and right in this critical period before the CARD Act takes effect. But now, BofA has just announced that there will be new annual fees for some cardholders come 2010. These fees will range from $29 to $99, and could be charged to those who pay back their balances in full each and every month.

Save like it’s a bill

When debt is high, and bills like the mortgage and car loan are screaming for your attention each month, it’s hard to think about putting money aside into savings. But Find Secured Cards offers an easy step-by-step calculation to figure out exactly how much you should be paying your future (hopefully retired and relaxing-on-the-beach) self.

Actor in debt alert!

I hate to follow the Hollywood drama (can we please banish the words "Jon" and "Kate" from the media forever, please?) but sometimes it’s comforting to know that even movie stars have trouble with their finances. American Express has filed a civil suit for $20,000 against Jeremy London, who you may recognize from Mallrats or 7th Heaven. (Interesting Jeremy London tidbit: he didn’t star in 1993’s Dazed and Confused, but his twin brother Jason did. Who knew?)

Smooth talker woos his way to bank account information

Miguel Bell of Philadelphia supposedly used his "considerable charms" to talk bank tellers into handing over private account information, which Bell then used to cut fraudulent checks. He and his partners in crime (at least twenty of them) stole over $1 million from customers’ checking accounts at eight different banks.

27-year old nurse steals seniors’ credit information

Erica Fowler, a nurse in Norfolk, Virginia, added her name to the credit card accounts of nine of her elderly patients and went on a $14,000 spending spree.

Texting + phishing = smishing

Now, beware fishy e-mails, phone calls, and texts. Called smishing ("sms" or "short message service" combined with phishing), identity thieves are now sending fraudulent texts to get at your personal information.

Carnivals are not just for clowns

Our friends over at One Family's Blog have gathered some great posts in the latest edition of their ongoing roundup. It's better than a spin on the ferris wheel and full of great information to help you stay on top of your finances.

CARD Act: Credit Card Accountability, Responsibility and Dislosure Act

LaToya Irby — Wed, 21 Oct 2009 11:09:33 -0500

On May 22, 2009, President Barack Obama signed a new law that would protect consumers against predatory practices from credit card companies. The Credit Card Accountability Responsibility and Disclosure Act of 2009, better known as the CARD Act, addresses the following:

Advance notice of significant credit card term changes

Lenders can’t raise rates on existing balances

No more universal default

Payments apply to highest interest rate balances first

No finance charges on previous billing cycles

Payments must be credited on their due date

Limits on over-limit fees

No fees based on payment method

Limits on fees for subprime credit cards

Billing statements must be mailed in a timely manner

Rules on gift cards

Credit cards for young adults

Disclosure of marketing agreements with colleges

Free credit report ads

Billing statement disclosures

Online agreements

Settle estates in a timely manner

Consider cardholder’s ability to repay

Credit card issuer penalty for violating the law

Credit CARD studies

Guns allowed in national parks and refuges

Most of the credit card rules go into effect on February 22, 2010, but some rules become effective on August 20, 2009. We’ve noted which rules have already gone into effect.

Advance notice of significant credit card term changes

The new law requires credit card issuers to give sufficient notice of significant changes to your credit card terms. Credit card issuers now have to give at least 45 days advance notice before making changes to your account.

While there are not specific rules on what counts as a "significant change," we do know that interest rate increases falls in this category. That means card issuers must notify you 45 days before your interest rate increase goes into effect.

You have the right to reject the new credit card terms and close your credit card. Credit card companies can’t take certain actions against you simply because you want to avoid the changes. They can’t:

Charge a fee because you closed your account,
Default your account because you closed it with a balance, or
Demand you pay the balance in full immediately.

If your rate increases and you decide to opt-out of the changes, the lender can do one of three things:

Double your monthly payment,
Put you on a five-year repayment plan, or
Leave your repayment plan as it was when you opted-out.

An opt-out notice must be included with the 45-day advance notice of change in terms. The notice must include a toll-free number that you can call to opt-out along with the opt-out deadline. Note: cardholders who are 60 days late on their credit card payments aren’t allowed to opt-out of interest rate increases.

To prevent credit cardholders from shopping sprees in advance of the new interest rate, card issuers can start charging the higher interest rate 14 days after the notice of change in terms is mailed. Only transactions processed after 14 days will receive the newer interest rate.

The Federal Reserve Board has decided that opt-out rules don’t apply to minimum payment increases, because the increase is actually good for cardholders. An increased minimum payment may put a hardship on your wallet, but it allows you to pay off your credit card balance in less time and at a lower cost. There is no advance notice requirement for minimum payment increases.

This part of the CARD Act went into effect on August 20, 2009.

Lenders can’t raise rates on existing balances

Credit card issuers can’t raise interest rates within the first year of your credit card activation and they are no longer allowed to raise the interest rate on your existing credit card balance unless:

You had a promotional rate and were told upfront when the rate would expire and what the new rate would be when the promotional rate expired. The new law requires promotional rates to last at least six months.
You have a variable interest rate that changes with an underlying rate. Variable rates are tied to an index rate like the prime rate and can go up if the index rate goes up.
You were sixty days late on your credit card payment. If your interest rate is increased because of late payment, your card issuer has to give you a chance to go back to your old rate if you make the minimum payment on time for six months.
You were on a hardship plan that ended, was completed, or you dropped out of the plan.

No more universal default

The new law bans the universal default practice of raising a cardholder’s interest rate because of their payment history on another, unrelated account.

Payments apply to highest interest rate balances first

When a credit card has multiple balances each with different interest rates, any payment above the minimum should be allocated to the highest interest rate debt first, followed by the debt with the next highest interest rate.

If the credit card has a deferred-interest period, like a 0% interest for six months deal, the entire payment in the last two months of the period should be allocated to the balance with deferred interest. This lets the cardholder pay off the deferred-interest purchase without having to repay any other non-promotional balances first.

No finance charges on previous billing cycles

The double-billing cycle method of calculating finance charges is banned. Banks are not allowed to impose finance charges on balances from previous billing cycles unless there is an adjustment to the previous balance or the payment for the previous balance was returned.

Payments must be credited on their due date

Payment due dates must fall on the same day every month. If a payment is received by 5 p.m. on the due date, it must be credited that day. If a due date is on the weekend, holiday, or other day when the creditor doesn’t receive or accept payments by mail, then the payment must be credited on the next business day without a late penalty.

If you make a payment at a local branch, it must be credited to your account the same day.

Credit card issuers can’t charge a late fee within 60 days of changing its mailing address or payment processing procedure if the changes result in a delay in processing customer payments.

Limits on over-limit fees

Credit card issuers can’t charge over-limit fees unless the consumer has been given the opportunity to opt-in to the fee. Otherwise, any transaction that attempts to exceed the credit limit should be rejected. If a cardholder opts-in to over-limit fees, the amount of the fee must be disclosed. Cardholders should also be given the option to opt-out of the fees at any time.

Card issuers can only charge one over-limit fee to an account in a billing cycle. An over-limit fee can only be charged once in each of the next two billing cycles unless the cardholder receives a credit limit increase and exceeds the new credit limit or pays the balance below the credit limit and exceeds it again.

No fees based on payment method

Creditors can’t charge cardholders a fee to make a credit card payment, regardless of whether the payment is made by mail, telephone, electronic transfer, or any other method. There’s an exception: a fee can be charged when the cardholder requests an expedited payment. For example, you might ask your payment to be promptly on your due date to avoid a late fee.

Limits on fees for subprime credit cards

Subprime credit cards are commonly known as "fee harvester cards" and are targeted at consumers who have trouble getting credit. These cards often charge upfront fees which in the past have consumed much of the credit limit. The new law limits these fees. The upfront fees on subprime credit cards can’t consume more than 25% of the available credit. That rule excludes any over-limit fees, late fees, or returned check fees. For example, on a credit card with a $400 credit limit, the initial fees can’t be more than $100. If a payment is late, a $25 late fee can be assessed even though $100 in upfront fees have already been charged.

Billing statements must be mailed in a timely manner

Cardholders must be given enough time to make their credit card payments. Billing statements should be mailed or delivered at least 21 days before the minimum payment is due. On accounts with a grace period, the cardholder must receive the billing statement at least 21 days before the finance charges would be imposed on the balance. This part of the CARD Act became effective on August 20, 2009.

Rules on gift cards

Gift cards, gift certificates, and prepaid cards will not expire within five years unless the expiration has been previously disclosed. Issuers cannot charge dormancy fees, inactivity fees, or service fees on gift cards within a 12-month period. All fees are limited to one per month and must be disclosed before the gift card is purchased.

Credit cards for young adults

People under 21 cannot receive a credit card unless they have an adult co-signer who is over 21 or can prove they have sufficient income to repay the balance. Additionally, credit card issuers cannot send pre-approved credit card offers to consumers under 21.

Credit card issuers must have agreement from the adult co-signer before increasing the credit limit on a credit card held jointly with a cardholder under 21.

Card issuers aren’t allowed to give away free products in exchange for having students sign up for a credit card on or near campus or at an event sponsored by the college.

Disclosure of marketing agreements with colleges

Credit card companies are required to disclose any promotional agreements they have with colleges and alumni organizations. Colleges and alumni organizations also have to disclose any agreements with credit card companies that allow the companies to access student and alumni contact information. Any payments made by credit card companies to schools must be shared with the Federal Reserve Board.

Free credit report ads

Any company advertising a free credit report, must include a statement letting consumers know they are entitled by law to receive a free credit report from each of the credit bureaus each year. The advertisement must state that the only official website for getting a government-granted free credit report is annualcreditreport.com. Ads on the radio and television should include the following statement both in audio and video: "This is not the free credit report provided for by federal law."

Billing statement disclosures

Billing statements must include the date by which the payment must be received to avoid a late payment. The statement must also list the date on which a late fee will be charged to the account if minimum payment is not received on time. Credit card issuers must place a disclosure notice near the due date stating the number of missed payments that will cause the interest rate to increase and the amount of the penalty interest rate.

Credit card statements must include a statement letting cardholders know that making minimum-only payments increases the time and cost of paying off a debt. Billing statements must let cardholders know how long it will take to repay their balance if they make minimum-only payments. The statement should also list the amount of interest consumers will pay if they make the minimum payment. Finally, statements must include the monthly payment required to pay off a credit card balance in 36 months.

Credit card issuers have to set up toll-free numbers that will allow consumers to get information about non-profit credit counseling and debt management assistance and include this information on billing statements.

Online agreements

Credit card issuers are required to post credit card agreements online. The Federal Reserve will maintain a public internet site that contains all the credit card agreements.

Settle estates in a timely manner

The Federal Reserve Board will establish procedures for credit card issuers to handle estate issues. Credit card issuers are required to work with estate administrators to settle the unpaid credit card debt of a deceased person in a timely manner.

Consider cardholder’s ability to repay

Credit card issuers cannot open new credit card accounts or increase credit limits without assessing the borrower’s ability to make credit card payments.

Credit card issuer penalty for violating the law

Any card issuer who violates the Credit CARD Act can be fined between $500 and $5,000 each time it violates the law.

Credit CARD studies

With the new law, Congress requires several federal agencies to do studies and reports for credit card related issues.

The Comptroller of the Currency will look at credit card insurance to determine whether the product is predatory and should be offered to certain cardholders.
Several federal agencies are required to provide a report detailing the financial and economic literacy programs available for children and adults. The agencies should make recommendations about funding for additional programs and a plan to promote financial education.
The Federal Reserve Board will look to see whether the CARD Act has impacted the credit card market and the financial health of consumers. The first report is due May 22, 2011 and every two years following.
The Federal Reserve Board, Federal Trade Commission, and other agencies will look at whether credit card issuers use purchase information to increase interest rates or lower credit limits.
The Comptroller General of the United States will look at merchant credit card fees to determine whether these fees are disclosed to consumers, how the fees affect merchants’ ability to negotiate with banks, and whether merchants can give discounts to customers who pay with cash.
The Federal Reserve Board will give a report on the terms of small business credit cards given to businesses with 50 or fewer workers. The Credit CARD Act doesn’t current cover small business credit cards but the report will help determine whether rules are needed.
The Small Business Administration will set up a task force to decide what small businesses should do to protect credit card data. The task force will recommend a website that contains information to help small business owners protect credit card data.
The Secretary of the Treasury must look at stored value credit cards and determine what rules should be put in place to prevent money-laundering into and out of the United States.
The Federal Trade Commission should research an ATM warning system that would possibly include an emergency PIN to alert the police of potential danger.

Guns allowed in national parks and refuges

Completely unrelated to credit cards, the Credit CARD Act includes a law that allows visitors in U.S. National Parks and refuges to carry licensed firearms in the parks, if state law allows it. The rule made it into the legislation during the first round of voting and was left so the rules would not be delayed.

The full text of the Credit CARD Act is available at govtrack.com.

How I Paid Off $20,000 of Debt While Still Having Fun

Ashley Baxter — Tue, 20 Oct 2009 12:33:33 -0500

This guest post was written by Jesse Michelsen. Jesse is an IT consultant with a passion for personal finance. After racking up consumer debt while courting his wife-to-be, he realized the need to eliminate debt and create savings for his family. Jesse, his wife, and their two darling daughters have made great strides in reducing their debt and he documents their journey to financial freedom on his blog, PFFirewall.

When Spend on Life asked me if I wanted to write about getting and staying out of debt as a young married couple, I thought that was an awesome idea. Interestingly enough, I haven't even told this story on my own blog, or anywhere else for that matter.

Before I get into my journey let me tell you a story about something I witnessed recently. I listen to a small Classical Music radio station. The station is run by a local college and has been for 30+ years, yet they have no commercials. I had never really thought of how they stayed on the air but I found out that they run a week-long pledge drive. They have different people, community voices, professors and local starlets come on the station and ask listeners to contribute. I would listen to the station on my commute, fifteen minutes to and from work. Everyday they would announce a few names of people who had contributed. Everyday there were two or three more, and the radio host would always say, "Every little bit helps." At the end of the week they announced the total amount that they had collected. It was a whopping $45,000! I was baffled. I couldn't fathom how they collected that amount of money just by asking for it. I now believe even stronger that every little bit really does help.

With debt, every little bit helps too.

My wife and I got married young. She was 18 and I was 19. It's safe to say we were already in debt when we got married. In the year that we dated, my savings was quickly devoured by fancy dinners and expensive gifts. On top of blowing the few thousand dollars I had saved since the tenth grade, I started spending on credit cards. I liked to spoil my girl!

I had also purchased a brand new Toyota Corolla the year before we got married. I drove that baby off the lot with three miles on her. By the time we actually got married, we had approximately $30,000 in consumer debt.

We are down to around $10,000 now, only a few years and two children later.

I'm not going to get all cliché here and say, "Just spend less than you earn!" Everyone has heard that, and if you are in serious debt, that advice isn't going to help you. What I will tell you is how we paid off $20,000 in debt in a fairly short amount of time without going to extremes.

Firstly, before 2009, I didn't know what a debt snowball was or that there were personal finance tips online. I had never even thought to look for tips on the internet, so if you are reading this you are already on the right track.

What I did have was common sense. I knew that if I paid towards the debt, it would begin to shrink. If I paid more towards the debt, it would shrink faster.

The most important thing we did was to get into a routine of paying towards our debts. We kept paying the same amount or more towards them each month, even if our minimum payments went down. Soon we were paying hundreds more a month than our minimums. If we had extra money, we would put it in our savings account. If we felt comfortable with our money situation, we would take a chunk of our savings and put it towards the debt.

This routine went on for about two years. When January 2009 rolled around and I discovered the personal finance scene, I started thinking more about money and different ways we could improve our finances.

We took a good hard look at our finances, really for the first time. I wrote down all of our outgoing bills, associated interest rates, and everything we had coming in. Then I prioritized the debts to focus on first.

I took a look at the things I didn't value as much as the amount I was paying for them. This included our internet and phone service. I felt these were too expensive, so I did some research and found less expensive solutions. I contacted our Internet Service Provider and begged for a lower rate. It was that easy. We got a rate cut of $20 a month for a year, well worth the fifteen minutes it took me to contact them. We are light cell phone users and were severely overpaying on terms of usage versus price. We switched to prepaid phone service saving us over $1000 a year.

All this and any other found money went towards credit card debt. By March of 2009, our credit card debt was gone. We could see the light at the end of the tunnel.

One thing I will tell you that we didn't do is stop having a life. We go out to eat, socialize with others, and take our kids to fun things. We enjoy ourselves and spend on things we care about, things we value.

I know that it's hard to start anything. I am one of the biggest procrastinators you will ever meet. I of all people know how hard it is to get started on something that you dread or that you simply feel is too much of a burden to deal with, but that is the key. Start dealing with it now. It won't be as bad as you think.

I leave you with this final bit of advice. You don't have to completely put your life on hold to get out of debt. What you do have to do is create a habit and stick with it. I spent some time researching and organizing and cutting back here and there but never resorted to extremes. It may seem like a long journey, but every little bit helps.