How The Credit CARD Act Of 2009 Might Be A Bad Deal.

The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 has received much favorable press since it was enacted, and rightfully so in many cases.

There have been cases where unethical credit card companies have attempted to skirt the new regulations, but here’s another why in which the new regulations may negatively impact credit card users.

Part of the CARD Act is meant to put an end to unfair rate hikes and interest billing cycles, but it also aims to end the age of giving a credit card to anyone with a pulse.

Don’t get me wrong, I think that’s a worthy and noble intent. But there are destined to be people who get caught in the middle – who need access to credit, but really shouldn’t have it. I say they’re in the middle because they are in between qualifying for a credit card and not having to depend on one.

Many of these people are those who have simple not put aside savings in an emergency savings account. The result is that they are caught without access to cash or credit when their income suddenly drops or ends completely.

As John Ulzheimer, president of consumer education for Credit.com, says:

“We’re headed down the road where if you can’t verify your income, you can’t get a credit card. It’s going to affect the unemployed and the ability of small businesses to hire people and fund capital purchases. That all has a trickle-down effect to the economy.”

Again, I think this is true but it’s also part of a necessary pain. If you can’t afford to pay off your credit card balance every month, then you can’t afford the credit card. It’s that simple. And shouldn’t we only be giving credit (or loans in general) to those who can afford to pay it back? Doing otherwise is what got the economy in the mess it’s in – the push for “affordable housing” led to sub-prime lending, which has brought us to trillions of dollars in loans that can’t be repaid.

The sad truth is that too many people have become accustomed to thinking that credit cards are their emergency savings plan.

Consider that, according to a Consumer Reports survey conducted in 2009, 30% of consumers had credit card debt of $10,000 or more, and that 44% of them responded that they would need their credit cards to meet monthly expenses over a six-month period if their income became disrupted.

So, when the new CARD Act goes into effect on February 22nd, there are going to be a lot of people caught in lower available credit limits, or no access to credit cards, all of which will probably lead to further hobbling the economy at least in the near term. But I think it’s a good thing in the long term if we can get people to create and fund their own emergency savings, say in a high yield savings account like ING (click here for a free $25 referral code), and stop relying solely on credit cards as a financial life line.

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Related Posts:

• Are Banks Using Business Cards to Pay for Loss of Consumer Card Fees?
• 10 Credit Card Tips for 2010 and Beyond.
• Which is Larger: Your Credit Card Debt or Your Savings Account?
• Banks React to the CARD Act.
• Don’t Let Credit Card Bonus Offers Turn Into Debt!

Anna Nicole Smith’s Bizarre Bankruptcy Claim.

I don’t usually post about celebrity news, but occasionally a “celebrity in debt” kind of story catches my attention.

Today, I came across this story about Anna Nicole Smith’s bankruptcy that was about the strangest thing I’d read since… well, since Michael Jackson was in the news.

For starters, we have the classic celebrity in debt quote:

In a 1996 bankruptcy filing, an examiner notes that Smith “did not know why she was in bankruptcy.”

She didn’t know she was bankrupt?

I wish I had the kind of money that would allow me to live the kind of life where you’re suddenly bankrupt and never saw it coming. (I wouldn’t actually go bankrupt though because I keep tabs on my money, but that’s just between you and me. I’d love the chance to show it.)

Anyway, onto the bizarre…

As part of the bankruptcy filing in 1996, it was disclosed that Smith’s assets included:

… such non-essentials as a Russian lynx coated worth $43,343.75, six pot-bellied pigs and a doll collection estimated to be worth $12,000, according to the report.

Six pot-bellied pigs?!

Really?

I mean, the Russian lynx coat, is the kind of thing that’s par for the course in the life of a celebrity, even a doll collection is understandable… but pot-bellied pigs?! 6 of them!?

Also disclosed in that bankruptcy filing is this little nugget:

Smith “lost” $2.7 million in jewelry, though no information is given as to whether the items — including a three-diamond ring and a platinum necklace with 226 diamonds, valued at half a million dollars each — were misplaced or stolen.

How does one lose $2.7 million in jewelry?!

Honestly, these people have more money than brains… it just ain’t fair.

Related Posts:

• This is Why Most American Millionaires Did *Not* Inherit their Fortunes…
• Money as a Debt Magnifier.
• 8 Tips to Reduce Your Debt This Holiday Season.
• Older Americans Are 47 Times Richer Than Young – So What Or Injustice?
• Participatory Economics and Why The Occupy Movement Was Destined To Fail From The Start.

How Important Is Your Credit Score, Really?

A lot has been written about the importance of your credit score, but how important is it really?

It all depends on what you’re doing in your life at any given time. For example, if you’re thinking of buying a home in the next few months, then your credit score is extremely important because it will be a major factor in how much it will cost you to borrow the money for a mortgage. Likewise if you’re looking to buy a new car.

But if you aren’t applying for a new loan or credit card soon, is it really important?

It could also be important if you’re looking for a new job or shopping around for car or homeowner’s insurance. Prospective employers and insurance companies have been known to use credit scores as one of the criteria for judging new hires and new customers.

So, clearly having a good credit score is important, but sometimes people just get too carried away with monitoring it. It’s important, but is it worth the money to check it unless you’re applying for a loan?

I don’t think so. In fact, I don’t even think it’s important to check your credit score even if you’re applying for a loan. Here’s why:

1. Your credit score is based on the information in your credit report.
2. You can get a basic idea of your credit score for free.
3. You can’t really do anything about your credit score that you wouldn’t do about your credit report.

You can get your free credit report from AnnualCreditReport.com and see if your financial history is good, bad or just plain ugly. You can use BankRate.com’s FICO® Score Estimator to get a general idea of how you rate. But consider this – If you paid to find out your credit score was low, you’d have to get your credit report anyway to find out why, and refute any erroneous information. Why not just check your credit report and leave it at that?

Related Posts:

• Does Paying Old Debts Actually Hurt Your Credit Score?
• Five Common Debt Solutions.
• Participatory Economics and Why The Occupy Movement Was Destined To Fail From The Start.
• Is 25 Credit Cards Too Many?
• Tax Me More! (We Need a Guilt Tax)

Frightening U.S. Credit Card Debt Graphic!

Here’s an absolutely frightening graphic showing the growth of credit card debt in the U.S. from 1970 to today (and beyond).

The graphic is courtesy of Man vs. Debt.

I think it really hammers home two points:

1. How much the American consumer has become dependent on credit cards over the past 40 years.
2. That the increase in the amount of debt has great outpaced the increase in households getting credit cards.

What do you think?

Related Posts:

• Balance Transfers – Simple Solution or Debt Enhancer?
• Which is Larger: Your Credit Card Debt or Your Savings Account?
• Don’t Let Credit Card Bonus Offers Turn Into Debt!
• How to Settle Debts On Your Own.
• What kind of Spender Are You?