New Credit Card Rules Effective August 22. What you need to know

Credit card companies have done their fair share of making sure they make money at your expense. Before now, they had really come up with their own set of rules. Well, there are new consumer credit card protection rules that are set to begin August 22, 2010.

This set of rules is the latest in a series of regulations that implement the Credit Card Accountability, Responsibility, and Disclosure Act (the Credit Card Act). For other credit card rules that already went into effect February 22, although you can go the the website here. You can see some of the provision below. Here’s what you can expect from these new protections:

Reasonable penalty fees

• Today: Your late payment fee may be as high as $39, and you likely pay the same fee whether you are late with a $20 minimum payment or a $100 minimum payment.
• Under the new rules: Your credit card company cannot charge you a fee of more than $25 unless:

1. One of your last six payments was late, in which case your fee may be up to $35; or
2. Your credit card company can show that the costs it incurs as a result of late payments justify a higher fee.

What’s even better, your credit card company cannot charge a late payment fee that is greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can't be more than $20. Similarly, if you exceed your credit limit by $5, you can't be charged an over-the-limit fee of more than $5.

Additional fee protections

• No inactivity fees. Your credit card company can't charge you inactivity fees, such as fees for not using your card.
• One-fee limit. Your credit card company can't charge you more than one fee for a single event or transaction that violates your cardholder agreement. For example, you cannot be charged more than one fee for a single late payment.

Explanation of rate increase

• If your credit card company increases your card's Annual Percentage Rate (APR), it must tell you why.

Plus a Re-evaluation of recent rate increases

• Today: Your credit card company can increase your card's APR with no obligation to re-evaluate your rate increase.
• Under the new rules: If your credit card company increases your APR, it must re-evaluate that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.

Top Credit Score Misconceptions

Many Americans are mystified when it comes to their credit score. Do you sometimes wonder who’s really keeping track and what is it exactly that affects your score? There are many misconceptions when it comes to what really affects our credit scores. I thought I’d share an article from BudgetsAreSexy.com. This article lists and debunks the top credit score myths and misconceptions. Such as:

• When I get married, we get a joint credit score: Not so. Each person has their own credit score ’til death do you part—from your credit score that is. However, when you open accounts jointly, that information will be reflected on each of your credit reports, for better or for worse.
• My job/income impacts my credit score: Sorry, but making six figures, winning the lottery, or inheriting a fortune will not give you a good credit score. Your net worth and income are not factored into your score.
• Paying off credit card debt will boost my credit score 50 points: Depending on how much credit card debt you had, you may see some increase. However, credit card utilization is an important component of your credit score and those with the highest credit scores have about 10% utilization. This means if you are using your card (and of course paying off the balances on time) you should see an increase in your credit score.
• Being an authorized user on a credit card will impact my credit score: Co-signing for a credit card can have an effect on your credit score, but unfortunately just being an authorized user won’t change your credit score one point.
• I only have one credit score: There are different credit score providers and each credit bureau provides their own credit score. However, these companies all use the same criteria to judge your credit worthiness and the scores basically fall within the same range of each other (good, ok, or poor).
• Checking my credit score will lower my credit score: False. When you check your credit score at sites such as Credit Karma, it’s a soft pull so it won’t lower your credit score at all. Only hard inquiries by lenders impact your credit.

Want to read more? Click here.

Is Your Spouse Overspending?

Managing your own finances can be hard enough, without having to worry about whether your spouse or partner is overspending. Liz Pulliam Weston of MSN Money.com put together a helpful article with advice on what to do if you are married to a “financial basket case”. You can find a segment of her article below.

Can this financial marriage be saved?

Few couples are on exactly the same page when it comes to money, as I wrote in "9 ways to rein in a spendthrift spouse." Smoothing out the conflicts takes work but usually can be done with communication, compassion and commitment.

Some partners are so far over the edge, however, that their destructive habits can sabotage the family finances.

How can you tell whether your partner just needs a little persuading or is a total financial basket case? You're facing an uphill battle if:

There's an underlying addiction. If your partner has problems with alcohol, drugs or gambling, he or she literally can't think straight. Financial progress takes a back seat to feeding the addiction. Recovery is always possible, of course, but you'd be smart to get counseling (even if your partner won't go) and attend a support group such as Al-Anon, Nar-Anon or Gam-Anon.

There's a mental disorder. Overspending can be a symptom of a number of mental illnesses, including depression, bipolar disorder and attention-deficit disorder, as I wrote in "How the brain busts the budget." Again, progress is possible, but the underlying disorder must first be properly diagnosed and treated.

There's no acknowledgment of the problem. This may be the hardest nut to crack. Your partner either doesn't see what you're worried about or blames the problem on you. Counseling and sessions with a financial planner may help, but if your partner takes no responsibility and instead blames others, prospects for improvement may be dim.

Continue reading at MSN Money.com…

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Shrinking Credit Threatens Almost $9 Billion in Sales

This time of year is normally a retailers dream, but according to Bloomberg.com people are spending much less than usual this holiday season. With banks tightening their lending practices before a new credit-card law is due to take effect, large retailers are expected to lose out on nearly $9 billion in lost revenue.

Sales in November and December may fall 1.2 percent to $436.7 billion from the same period in 2008, said Britt Beemer, chairman of consumer polling firm America’s Research Group. If lenders weren’t cutting customer spending limits and rejecting more credit-card applicants, sales would gain about 0.8 percent to $445.5 billion, he said in a Dec. 21 interview.

Target Chief Financial Officer Douglas Scovanner says the credit-card legislation is exacerbating a spending slump just as consumers begin to consider more discretionary purchases they would usually buy with credit. Items such as clothing, jewelry and home goods suffered steeper declines during the recession and are among the most profitable sales for retailers.

“It will mute the impact of the rebound that would have otherwise occurred,” Scovanner said. “Diminished availability of credit equals diminished spending.”

Reduced lending may shave at least half a percentage point off sales at stores open at least a year once more of the Credit Card Accountability, Responsibility and Disclosure Act goes into effect in February, Scovanner said in a Nov. 17 interview in Minneapolis, where the chain is based. In November, Target’s comparable-store sales declined 1.5 percent.

Wells Fargo Sued Over Home Equity Lines of Credit

This morning I was surprised when I came across this new Associated Press article reporting that the popular U.S. bank Wells Fargo & Co. has run into some legal trouble. According to the lawsuit, Wells Fargo has been accused of illegally reducing the size of customers’ home equity lines of credit. Check out the full story below.

The suit, which was filed in Illinois, claims Wells Fargo failed to accurately assess the value of customers' houses before deciding to cut the size of their credit lines. San Francisco-based Wells Fargo is being accused of using unreliable computer models that wrongly valued home prices too low to justify cutting the size of customers' loans.

Home equity lines of credit are similar to credit cards in that a customer has a credit limit and can continue to borrow money until the limit is reached. Once a portion is paid off, it again becomes accessible to borrow. But, home equity lines of credit are backed by a borrower's property, whereas credit cares are unsecured.

Michael Hickman, who filed the lawsuit on behalf of himself and is seeking class action status for it, claims Wells Fargo also did not provide proper notice that the bank was reducing the size of the credit lines.

The bank's notice for reducing the lines also did not specifically provide a new estimated value for the property or the method used to determine the houses value. Hickman's lawsuit said that information was needed so a customer could challenge the change in the credit limit and try and reinstate the previous limit.

Hickman is being represented by KamberEdelson LLC, a Chicago-based law firm, which is also representing clients that have filed similar suits against JPMorgan Chase & Co. and Citigroup Inc.

Continue reading here…

IRS: Credit, Debit Fees On Tax Payments Are Deductible

From the WallStreetJournal:

Taxpayers who used a credit or debit card to pay taxes last year may be eligible for an additional deduction on their 2008 return, the IRS announced Tuesday.

In a reversal of a previous position, the IRS said fees that credit or debit card processors charge on electronic income tax payments would be deductible as a miscellaneous expense, for those who itemize deductions.

The fees vary, but average 2.5% of the tax payment, the IRS said in a news release. Those fees are charged directly by the card payment processor to the taxpayer, because federal law bars the IRS from paying fees associated with the transactions.

Not everyone who pays taxes using a credit card or debit card will benefit.

First, only those who itemize may benefit from the deduction. Second, the value of miscellaneous deductions, including the credit card fees and other items such as unreimbursed employee expenses and tax preparation fees, are deductible only to the extent they exceed 2% of adjusted gross income.

Other examples of miscellaneous deductions that count toward the 2% AGI threshold include union dues, safe deposit box fees and legal fees.

"By itself, the credit-and-debit fees deduction alone won't be enough to get anyone past the 2% threshold," said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. "But for someone who has other miscellaneous deductions, it could be a nice benefit."

Taxpayers who use a credit or debit card this year to pay taxes must wait to deduct the fees on their 2009 income tax return, due April 15, 2010. Those who used a payment card to pay taxes last year have until next Wednesday, April 15, to determine whether they are eligible for an additional deduction.

Most individuals pay their taxes by check. More than 4 million taxpayers paid taxes electronically, the IRS said. That figure includes not only those who paid by credit or debit card, but also those who paid by direct debit from their bank account, which is not generally subject to a fee.