Overdraft Fees. Overdraft fees can only be charged if you have positively “opted in” and accepted the option to have overdraft protection for a fee.  If your credit card company has not already contacted you, they may contact you very soon.  Declining the option will prevent you from incurring any overdraft fees in the future, but it will also cause your credit card to be denied if you reach your credit limit.

Order of Balances Paid. Previously credit card companies applied any payments in the order that created the most interest for them by applying any payments to the balances with the lowest interest rates first.  For example, applying your payments to special balance transfer offers at low interest rates before purchase balances with higher interest rates.  Now credit card companies are required to apply payments to the highest interest rate first.

Enhanced Statement Details. Credit card issuers must now provide additional information in your monthly statements including total interest paid for the current year, potential late fees, and total time to payoff the balance by only paying the minimum payments.

Extended Notice Periods. Now credit card companies must provide 45 days notice for any significant account agreement changes including interest rate changes.  You also still have the option of declining any changes and paying off the balance at the current interest rate.

Legal Age for Credit Cards. Individuals under 21 years of age must now have an “adult” co-signer in order to obtain a credit card, unless they can prove they have the financial ability to repay their own account balances.

• Anyone who has not owned a home in the past 3 years is eligible
• Purchase a home between January 1 and November 30, 2009
• Receive a tax credit of 10% of the purchase price, up to $8000, on your 2009 tax return

For example, with a home purchase of $65000, you would receive a $6500 tax credit (meaning an additional $6500 refund on your taxes).  Any home purchase over $80000 qualifies for the full $8000 tax credit.

And you read correctly above, this credit is not just for first time homebuyers as it is generally called, but for other homebuyers as well.  If you have not owned a home in the last 3 years prior to the purchase of the house, you are eligible for the tax credit.

Since it can take 30-60 days to close on a home purchase, you will need to act quickly in order to take advantage of this opportunity.

For more information visit the IRS First-Time Homebuyer Credit page.

Some car buyers when purchasing a new (or “new” to them) car, have traded in their old car which they were still making payments on.  After all the paperwork is signed and the financing arranged, the buyer drives their new car home and the dealer keeps their trade in. Normally the dealership then pays off their old car, receives the title, and resells the car or sends it to auction.

Lately, some financially strapped auto dealers have not been able to payoff all of the cars they have been taking as trade ins.  The trouble starts when the buyer receives a late payment notice notifying them that they are late on the car payment on the car they no longer have. By then the car may be in another state going to auction, the dealer kept the trade-in amount as profit, and the buyer is left with the car payments for both cars!

Unfortunately, the consumer is not legally protected in this transaction, and there is little that can be done afterwards besides dealing with the mess.  Whether or not it is intentional, these dealerships should not be accepting trade-ins that they are not able to payoff.

Don’t Let it Happen to You

As a consumer, the best way to protect yourself is to prevent this from happening in the first place.  The easiest way to do this would be to not trade in a car until you have it paid off.  If that means driving your car for a few more months or years until its paid off, so be it; its probably better for your finances that you drive your current car as long as possible.

The Bad News: Act Quickly

If you own your house, you should seriously consider refinancing your mortgage.  With the downturn in the housing market, many homeowners are upside down in their homes and may not be able to.  But if you have any equity at all and can qualify for a refinance, ACT NOW!  Interest rates are (were) the lowest they have been in a lifetime, and we will probably never again see rates this low.

If you are thinking about buying a house consider buying as quickly as possible.  I do not mean to rush you in what will probably be the largest purchase you have ever made, but the ideal time to buy a house is at hand.  Not only are prices depressed or severely depressed in most areas of the country, but mortgage rates are extremely low.  I don’t expect the housing prices to dramatically turn around in the next year, but I would be worried about rising interest rates.  Procrastination could cost you dearly, as dramatically rising mortgage interest rates will cost you thousands of dollars over the term of your mortgage.  Don’t make a hasty decision, but if you are going to buy, act appropriately and lock in your rate as soon as possible.

The Good News: A Waiting Game

Have your recent money market account statements made you depressed?  Well look for your money market account and CD yields to begin to rise slowly over the next few years.

If you are buying CDs, be careful not to buy long term CDs as interest rates are on the rise.  Keep your money in money market accounts or very short term CDs (less than 3 months) to avoid being locked into longer term CDs at todays lower interest rates.  In addition to the rising interest rates, rising inflation is another reason not to buy long term CDs at the moment.  If you like to purchase CDs, try to hold off until the rates rise significantly.

Many economists believe that if rates continue to rise, the economic recovery will be delayed and take longer than originally thought.  Specifically, rising interest rates will have a negative effect on the housing market turnaround.  But regardless of the overall economy, I hope this article has been informative and you are now better prepared to make the best financial decisions as rates rise.

Photo by kevinzhengli

What it Really Costs

The average price of a pack of cigarettes in the U.S. is approximately $5 including taxes.  On April 1 the federal excise tax on tobacco products was tripled, which is causing a rise in the price of tobacco prices, although no new figures on the average price per pack of cigarettes are available yet.

Smoking one pack a day will cost you $1825 per year.  Over a (shortened) lifetime this will cost you $478,687.  Think I’m kidding?  See for yourself using our Compound Interest Calculator (Current Principle $0, Annual Contribution $1825 (365 days * $5/pack), 47 Years (age 18 to 65), at an invested interest rate of 6%).

Play with the numbers on your own and see how much you could save.  For example, even if you only smoke one pack per week you could still save $260 per year and $68,196 over a lifetime, not pocket change!

More Financial Benefits

Beyond the obvious financial benefits of how much you can save by not smoking, there are other financial benefits as well.  Due to the rising cost of insuring tobacco users, some employers are begining to experiment with penalizing employees that use tobacco products with higher copays and/or rewarding employees that certify that they do not use tobacco products.

Today is the Day

Many employers have tobacco cessation programs designed to give you as much support as you need; take advantage of these programs, they are there to help you.  Your employer has a financial motivation to help you quit, but you have both a financial and health motivation to quit.  But whatever motivates you, I encourage you to take action to quit.

The website below is a great reference for how to quit smoking (or using other tobacco products), and includes links to many free educational resources, tips, and even  support coaches to help you quit.

CDC | How to Quit

Interest Rate Increase Limitations. Companies cannot increase your interest rates on existing balances unless you are 60 days past due.  You must also receive 45 days notice of the rate increase.

Interest Rate Reduction for On Time Payments. In addition, if your rates have been raised, making on time payments for six months would force the company to return your rate to the previous rate.

Payment Postings. Any payment amount above the minimum balance due must be applied to the account balance with the highest interest rate.  Companies will also not be allowed to charge late fees if they delayed posting a payment to intentionally generate additional fees.

Statement Notifications. Credit card companies must send your statement 21 days before your bill is due.

No Cards For Those Under 21. Companies cannot offer credit cards to individuals under  21 years of age unless they have verified their income or their parents are co-signing.

What it Really Means for You

Credit Card companies are not mean spirited and as much as some people think, they are not out to get you.  They are simply profit driven companies (as all non non-profit companies are) that report to their shareholders.  This bill was intended to protect the consumer when it comes to credit cards.  There are some good things in this bill that do protect consumers but there are also some unforeseen consequences.

Drastic Rate Increases for Everyone by February 2010. Once this bill goes into effect, the additional restrictions on credit card companies will reduce the ability of the companies to make profits.  The shareholders will not take the hit, so that profit must be “made up” somewhere, which means the credit card consumers will pay for it in another way.  Since this law does not go into effect until February 2010, look for rate increases across the board for everyone in preparation for the new regulations.

The Return of Annual Fees? Another way credit card companies could recoup their profits is enacting annual fees once again.  Today very few cards have annual fees, but don’t be surprised if annual fees are on the rise in the next few years.

College Students will have a harder time finding money for school. Yes, college students do rack up large amounts of debt on plastic while in school, but school is expensive.  After Stafford student loans are used, many credit cards offer lower interest rates than a private student loans making credit cards a viable option for many students to finance education especially when they come with even lower introductory offers.  Most private student loans start at about 12% APR or higher, while some credit worthy students can easily obtain credit cards at lower rates.

The biggest benefits for consumers. Consumers will benefit the most from having their payments posted to the balance of the highest interest rate.  Previously it was standard for credit card companies to apply your payments to the balance of the lowest interest rate, making it take longer for the consumer to pay off credit card debt.  This will help consumers pay off their credit card debt faster.  The minimum notification periods for receiving statements is also a good thing for consumers to protect them from some of the shady practices used by some credit card issuers.

I’m sorry, your card has been declined. Credit card companies have used high interest rates to reduce their risk for lending to higher risk individuals with lower credit scores in the past.  If they are not allowed to raise interest rates when your credit score drops, they the only recourse they have is to drastically lower your credit limits and/or cancel your accounts if you are a high risk borrower.

Fewer credit card rewards. Unfortunately we will probably see a reduction in the amount of reward programs being offered in an effort by companies to save money.

Who Does it Hurt the Most?

This legislation hurts those with credit scores 680 and lower and individuals under 21 the most.  For those with credit scores 680 and below, they may see the worst of the rate increases between now and February 2010.  They may also experience the worst of the account closures, credit limit reductions, and denial of credit because of the risk they now represent to credit card issuers.

Creating a special set of regulations on individuals under 21 is an outright assault on their rights to enter into a private contract (yes, a credit card is a private contract between you and a credit card issuer).  Regulating private contracts is not going to ensure that lenders do not lend to unworthy borrowers, and that borrows will not borrow more than they can repay.

You cannot legislate personal responsibility. Delaying an individual a credit card at age 18 and making them wait until they are 21 years old will not make them responsible.  If supplying income information and/or requiring a co-signatures is such a great idea, why not implement it for all age groups?  Oh yes, credit card companies already ask for that information when you apply for a card.  They just don’t verify your employer or income, but it is still fraud to misrepresent any information on the application.

There are a few things in this law that will protect the consumer, but overall this legislation has the potential to seriously hurt consumers and their ability to obtain credit.

The prerequisite for the plan is that you actually make some purchases with cash; if you only use credit cards then you will not be able to implement the plan.  All of your purchases do not have to be made in cash, but the more purchases you make in cash, the more effective the plan will be.

The Dollar Savings Plan Details

Start by opening your wallet and taking out all of your $1 bills, leaving all $5, $10, $20, $50, and $100 bills in your wallet.  Put the $1 bills in away in a safe place.

During each day, whenever you make a cash purchase and receive change put away any $1 bills you recieve.  For example, if you purchase a $1.50 cup of coffee with a $5 bill you will receive $3.50 back in change.  Put the 3 $1 bills away and do not spend them, and keep the $.50 in your pocket.

At the end of every day, put away all of the $1 bills you have accumulated during the day.  The Dollar Savings Plan is simple, and the key is never letting yourself spend $1 bills.  If your excuse is that you cannot afford to put away $3 after buying a cup of coffee, then maybe you should not be purchasing the coffee in the first place.

At the end of the month count all of the $1 bills you have accumulated to see how much you’ve saved!

Using Pandora

After signing up you will be prompted to create your first Pandora station (you can create as many stations as you like).  To begin you type in the name of a song or artist that you like, and that artist (or something very similar) will start to play.

While the song is playing you have the option to indicate whether or not you like the song by clicking the “thumbs up” or “thumbs down”.  Clicking the thumbs down will stop the current song, and start playing a new song.  Over time (but very quickly) Pandora is able to make really good song selections for you and even suggest new artists that you might not have heard of yet.  So the more input you give to Pandora, the better Pandora is able to play music that you like.

You can make many different stations (for different genres, etc.), and even share your stations with your friends or listen to their stations.  Be sure to check out my stations on the right, and then sign up to create your own.

Take it With You

If you have an iPhone, Blackberry, or other phone with Windows Mobile you can listen to Pandora on your phone.  Pandora is also available on other phones if your service provider is AT&T or Sprint.  See if Pandora is available on your phone here.  There’s even other devices to listen to Pandora around the house without having a computer in every room.

There are 4 national moving truck rental companies for those movers who wish to move themselves, U-Haul, Budget, Penske, and Ryder.  Of course there might also be local or regional companies in your area for local moves, which I also recommend you consider as they maybe able to make you a better offer than the national chains.  Simply follow these steps to get the best deal possible on your next moving truck rental.

3 Steps to Getting a Deal on a Moving Truck

1. Go to the following websites and quote your rental online: U-Haul, Budget, Penske, and Ryder.  Be sure to align all of the options as closely as possible to obtain comparable quotes (same size truck, same amount of moving pads, hand trucks, etc.).  Print out (or save) your quotes.
   
2. Most likely U-Haul will be the cheapest but you’ll have to decide whether to seriously consider using them (see below).  Take the Budget and Penske quotes, and call the customer service department of the lower quote and ask if they can offer you a better deal.
3. Call the customer service department of the higher of Penske and Budget quotes, explain to them that you have a lower quote from the other company, and ask if they can beat the deal.  From my experience they will usually at lease match the quote and then you will have your choice of either Penske or Budget at a considerable discount from the originally quoted price.

Penske and Budget

Penske and Budget truck rentals are quite comparable in service, truck quality, and other factors.  Penske and Budget do not take U-Haul quotes into consideration because they offer a higher quality product than U-Haul does, so do not even ask either of them to beat a U-Haul quote.

The only “problem” I have ever had with Penske was on my last rental I had reserved a hand truck for moving large heavy items, and when I arrived they were all out of hand trucks.  But they immediately took care of the situation by offering to reduce my rental by $25 so that I could go and purchase my own.  I was completely satisfied at how they handled the situation, and now I have my own hand truck.

Also, AAA members save 10% on Penske truck rentals.  In my case the 10% savings more than paid for my AAA membership, so I signed up just for the Penske discount.

Ryder

I found Ryder rental quotes to be higher than the others, so I have never dealt with Ryder (besides getting a quote) and as such I haven’t really discussed them in this article.  That being said, I still suggest getting quote from Ryder, if for nothing other than comparison purposes.  For my upcoming move, I will again consider them along with Penske and Budget and see what they quote me this time.

U-Haul

U-Haul trucks are notorious for being not being properly maintained and not meeting safety standards.  The last time I rented a U-Haul truck, I thought it was going to break down on my way to return it (fortunately the truck made it back).  Since then I will only consider U-Haul for trailer rentals (when I’m able to borrow someone’s reliable truck to pull a trailer), but considering whether or not you want to take your chances with U-Haul is a decision you will have to make.

Moving Expenses Deduction

Don’t forget to save your receipts, because you can deduct all of your moving expenses from your federal income taxes (as long as you were not reimbursed for them).  Read more about deducting your moving expenses.

If you are wondering “What is an 80/20 mortgage?” let me explain.  An 80/20 mortgage (also called piggyback loans, tandem loans, nothing down mortgage, etc.) is (was) a mortgage for 80% of the purchase price with an additional mortgage for the other 20% of the purchase price, for a borrowed total of 100% of the purchase price.  80/20 mortgages were popular for two reasons:

1. No Down Payment - Financing 100% of the purchase price allowed many buyers with little cash to purchase homes.
2. No PMI (Private Mortgage Insurance) - When your down payment on a home is less than 20% of the purchase price you must pay private mortgage insurance, which insures the lender in case of the borrowing defaulting on the loan.

80/20 Variations - 80/15/5, 80/10/10

There are also other variations of 80/20 loans, such as 80/15/5 and 80/10/10 loans.  With these loans you obtain one mortgage for 80% of the purchase price with an additional mortgage for 10 or 15%, while making a down payment of 5 or 10%, respectively.  The main benefit of these mortgages were not having to pay PMI without making a 20% down payment.

The Abuse of 80/20 Mortgages

80/20 loans have been blamed for contributing to the current housing crisis which in turn has led to the current recession.  There’s really no dispute that many people bought homes (primary residence or invesment) over the last 7 or so years with 100% financing, and now that their home is worth considerably less than what they still owe on it, they have stopped making the payments and abandoned the property.  This has led to many foreclosures and short sales, which is compounding the problem, continuing the fall of home prices.

As I’m currently in the market to purchase a house, I recently came across such a property.  The out of state owners actually bought it and another house in the same neighborhood as investment properties with 80/20 mortgages and nothing down.  In 2006, the owners paid $340,000 for the house I was viewing, and the properties current value is estimated at $215,000.  The owners stopped making payments on this properties last October, so its now listed on the market as a pre-foreclosure, short sale at about 66% of the price it sold for 3 years ago.  I just thought it was kind of amazing that lenders gave this owner 100% financing for two investment properties (that I know of)!

I Hope 80/20s Return

I am not sure whether or not we will ever see 80/20 mortgages return, but I sure hope we do.  Used correctly (with proper underwriting), these mortgages can be very beneficial to the lender, borrower, and the market itself.

Not all 80/20 borrowers are defaulting on their loans.  If lenders had used more discretion when making 80/20 loans would have been able to reduce their risk.   For starters, 80/20 loans should never have been given to purchase investment properties, especially in a housing bubble.  I should also note that most lenders were making loans like this because they knew if they did not make the loan, the next lender would make the loan, and Fannie Mae or Freddie Mac would purchase it, but that’s a separate issue to be dealt with at another time.

A lot of responsible first time home buyers with little cash on hand benefited from 100% financing.  For example, a lot of college graduates enter the workforce and start making substantial incomes, but usually do not have the cash on hand to make a down payment.  In this case, if the graduate’s income was substantial enough to make the payments and the borrower has very good to excellent credit, I see no reason why they should not be given 100% financing.

I consider myself to be in this category, as I graduated from college a few years ago, and I make a good income, but do not yet have $50,000 saved for a down payment on a $250,000 house.  I’m very glad I did not purchase a house a few years ago right out of school, but I’m disappointed 80/20s are no longer available for me now.  There are other options available which I’ve been looking into, such as seller financing, FHA loans (3.5% down), and having sellers pay partial down payment, etc.

Because the many potential first time homebuyers may now have to wait to purchase their first home until they can save enough for a 20% down payment, the pool of potential buyers has been reduced.  This means that the huge inventory of homes one the market will take even longer to sell, and the housing market will now take longer to recover.

After the market recovers, I hope 80/20 mortgages return and are once again available to responsible borrowers.  Although it will be too late for my first home purchase, I think everyone can benefit if they do return.  What are your thoughts?  Do you think they should return, and do you think they will?