As you all know, I’ve been trying to pay down my debtand discussing the results here.  After a bit of saving and some savvy business deals, I got my hands on enough money to pay off my Chase Sony credit card.  I broke down the almost $6,000 pay off into two payments spread out about a week apart.

The first payment I made was $3,000.  The reason why I broke down the payments was that I didn’t want my bank to tilt by paying over $5000 in one swoop.  The day that my payment went through, I logged into my account online to check it - and I’ll be damned if they did not lower my credit limit from $6,200 down to $3,300!  I didn’t really understand this - so I immediately paid the remaining $2,900 and then called the company to see what the deal was.

After getting transferred a couple of times, I’m told that accounts can be reviewed at any time and my credit limit was reduced due to a high number of accounts with high balances (true), a late payment on one of my cards, not this card (not true), inactivitiy (not true).  I didn’t dispute any of this with the operator - she wouldn’t have been able to fix anything anyway.

So effectively, it just so happened that the exact moment that I pay a huge payment to Chase, they decide to review my account (I’m sure I hit some computerized trigger).  They deem that I’m so uncreditworthy that they ding me by - get this - lowering my credit score!  Yep, because lowering my credit limit made my balance on that card go from 50% back to 90% (they didn’t know I was going to pay it off later this month).  And further, they reduced the base of my total credit available - only by about 8%, but it’s still a hit.

This after President Obama and Congress pass a sweeping bill keeping the credit card companies from taking such action.  She tried to make me feel better by telling me that they didn’t touch my APR - and that they only do that when one defaults.  Hell, my APR is still at 27.7%. When will they review that?

This is great for me though.  In the month of May, I’ve paid off 5 cards freeing up $375 in cash flow to be applied to my other cards.  I’m back on the road to paying off my debt.  Stay with me for the great ride.

The news wires are burning with talk of the Obama administration forcing credit card companies to be more transparent with their rules and stop pushing rates up all willy-nilly.

This got me thinking -> as someone with a love/hate relationship with credit cards, what does the fine print tell me about the types of companies I send my hard-earned money to every month?

The Home Depot Consumer Credit Card issued by Citibank - 22% APR

The fine print shows 6 ways of calculating the finance charges on this card o- no wonder the government is getting involved!  The worse is the Daily Compounding - which could more than double the time it would take you to pay off your card if you paid the minimum payment.

Grace Period

How long do you think your grace period is?  When you buy something using your credit card - how long do you have before you have to start paying the finance charges?  Well, with the Home Depot credit card, you only have “at least” 20 days.  I still don’t know what “at least” means, but I’m puzzled.  So, if I make a purchase the day after the billing cycle ends, when I see it on my statement, I will have already been assessed some finance charges?  This is total crap!  I should at least have a billing cycle to pay off what I charged.

Creeping APR

I also learned that my APR could go up to 26.99% or default to 29.99%.  At least they are up front about what will lead to a default.  “All APRs my automatically increase to the default APR if you do not make the minimum payment when due, go over the credit line, or make a payment to us that is not honored.”  However, they also remind me that they make the rules - and the first rule is “We can change the rates, fees, and terms of this agreement at any time for any reason.  These reasons may be based on information in your credit report or general market conditions.”  At least they’ll send me a notice and an option to opt out.  Oh, thanks!

John Chow dot Com, a blog that helps you make money is giving away more cash through another wild radio contest. They are giving away up to $4,000 cash! The contest is sponsored by OnlineRadioStations.com. I’ve checked out their site and they are an online radio streaming site with a number of distinct types of stations covering just every genre of music.  The layout is pretty cool and they keep the lights on by showing a video ad when you select your radio station and showing ads around the music player.  Really nice touch!  

It would be cool if they had the name of the song while it played - but I’m sure that’s a kink that will get worked out over time. 

I browsed around their listings and my favorite station is Big R Radio 108.1 JAMZ.  Love my R&B music!

Amazon.com sent out an email today to  members of their Amazon Associates Program announcing they they will no longer pay referral fees for sales generated from paid search on Google, Yahoo, MSN or other search engines. 

So what does this mean for you and I?  Well, for one, our advertising spend just got a massive cut.  Truthfully, sending paid traffic to Amazon never really amounted to much in terms of conversion rates.  However, I did find a few niche products that did ok with paid search.

This mostly hurts the search engines.  It will hurt Google a lot - since most PPCers start out with Google.  However, since Amazon already spends money on damn near every word in the dictionary on Google, the impact may not be so great. This decision will also really hurt the smaller search engines that PPCers use to buy traffic very cheaply.

How can you continue to make money using the Amazon Associates Program?  Amazon will continue to pay referral fees for traffic  that comes directly from a website you own.  This means you can send paid traffic to your site - then get paid with visitors click on Amazon links on your web page.  Or just add links in with your content on your own site.  This means your sites or landing pages need  to get stronger at converting traffic.

Will this work for Amazon?  Time will tell.  For sure they will receive less traffic and pay out fewer fees - but it may hurt them in the long run.

60 Minutes ran a story on Sunday about a small bank just outside of Chicago. The FDIC had targeted this bank to be closed. They ran the seizure like a military operation. Coming in during the cover of night to alert the employees that they no longer worked for Heritage Community Bank. But instead were now employees of the FDIC.

Watching this story gave me a lot of confidence that if an FDIC-insured bank (which most are) fails, my money will be safe.

Banks pay a premium to the FDIC to insure accounts up to $250,000. This limit was increased last year after many big-named banks (like IndyMac) went belly-up. This $250,000 is per individual, so if you have more than $250,000 in savings, checking, and CDs combined, you should move the excess dollars to another bank.

Also, if your bank fails, you do not need to take all of the money out immediately. More than likely your bank will be purchased by another bank (or in the case of Heritage Community Bank, the FDIC paid MB Financial to take over the accounts). In the story an old man showed up at the bank with his wife and a briefcase fully expecting to take all of his money out. The agents from the FDIC reassured him that his money was safer in the bank and he left with an empty briefcase.

What can you do to protect yourself? Well, there’s not much you can do to keep your bank from failing like Heritage Community Bank. But what you can do is:

• Make sure your combined accounts are less than $250,000
• Move money in excess of $250,000 to another bank (not just another branch!)

The FDIC was created to stop runs on banks like those during the great depression. Their credit is fully backed by the faith and credit of the United States Government. They insure our bank accounts with the premiums paid by banks, but if need be they can borrow money from the US Treasury to cover really huge losses.

There is a lot of fear right now about our economy.  Some of it is well placed. You don’t need to fear if your savings is in a FDIC-insured bank.

Looks like I’m not the only one being denied credit these days.  Banks are having a hard time approving loans for businesses and consumers, despite the massive bailouts provided by congress over the last few months.  What can you do to make sure that you can get the loan you need? 

It’s all in the packaging

Make your package look good.  This means get your credit scores up to snuff and provide proof that you are a good risk.  Visit your bank in person and provide documents showing proof of on-time payments.

Visit the Road Less Traveled

You community bank may not be the best place to get a loan.  Are you a member of any community organizations?  They may be associated with a local credit union that you can join.  Also, if you are a business, reach out to your local Chamber of Commerce for some referals for bank and non-bank sources of financing.

Don’t Be Needy

Even in the times of loose standards, money flows easier to those who don’t really need it.  Make sure you lose the desperation in your voice and approach the banker like you don’t really need her.

Loans are going to continue to get tight as we wade our way through these tough economic time.  At least fewer banks are failing!  I guess that’s some good news.

It’s been quite awhile since I took the time to write. The new job and growing my other websites have taken their toll on this, my first blog.

I listed some goals back in June that would keep me on track for a successful year. Let’s see how I’m doing.

Have a total of 15 niche sites by December 08
- I don’t have 15 fully flushed out sites, but I do have 21 unique URLs with 11 full sites up and running. They each need a little more TLC.

Create $5 per day income from at least 5 of my sites
- I’m behind the 8-ball on this one. I’m still earning in the sub-$1 a day range for all of my sites running adsense and getting few leads from my other campaigns. A lot of this has to do with traffic quanity and quality. I’ve spent more of my time building traffic for my consulting customers than for me.

Complete my “Special Project” by September 08
- Happy to say that this is done! I’ve started on two more special projects and will have those launched before the end of the year.

Maintain at least 2 posts per week on this blog through 08
- I was very motivated when I made this a goal - however, as you can tell, I didn’t hold up my end of the bargin on that one. I will get better. I’ve been doing some reading and understanding how to get things done by manifesting. So for the rest of the year and into 09, you’ll see much more activity - hopefully, I’ll see increased participation from my readers.

There you have it. Now I’ll be setting my 09 goals in the next month to get prepped for the new year. We should all be revisiting our goals and setting new ones and then striving to acheive them.

The recent bank failures have been hot news for the last couple of weeks.  Most of us are absolutely safe as the FDIC protects all deposits up to $100k.  I’m sure that no one in the line at IndyMac had $100k in the bank!

Much like you and me, banks operate on credit.  They have a credit score — more like a debt rating.  Where our credit score is based on our likelihood to pay our bills; the banks debt rating is based on the ability of the banks customers to pay their bills!  When a banks obligations to its depositors is above the amount it collects from its loans, the bank defaults and can be taken over by the federal government.  Usually a bank’s assets are sold to another bank before the Feds fully step in.  But in the case of IndyMac the FDIC took over the bank to reassure its customers.

Banks are not just places where we put our money (we have piggy banks and mattresses for that!)  Banks exist to provide liquidity, meaning they make it possible for the easy exchange of currency by providing checks, credit cards, and loans.  When you deposit your money in a bank, the bank pays you a fee in the form of an interest rate.  This interest is “thanks” for allowing the bank to loan your money to other people and businesses.  The bank earns interest on the loan it makes and uses it for its overhead and interest obligations.  Often a bank doesn’t have the money to loan to a business or a home buyer, so the bank borrows this money from the government.  The trouble arises when these large home and business loans default.  The bank still owes and if it can’t find a way to collect or make up for that loss, they have to use their own (depositor) funds.  Multiply this by the hundreds and you get a blow up like IndyMac.  The problem there was that customers started to take their money out of the bank, leaving less and less for IndyMac to meet its obligations, forcing the Feds to step in.

If your bank defaults -> don’t be an idiot and stand in those long lines.  If you have less than $100k in CD’s, deposits, money markets, and checking accounts combined -> your money is safe.  Some other accounts are protected up to $250k.  This is of course if your bank is FDIC insured.  If it isn’t — better move your money today!

I’ve read countless personal finance articles on how to reduce debt.  99% of them suggest cutting up your credit cards as the first step.  This suggestion stems from the fact that most people in serous debt have trouble controlling their impulsive credit card spending.

This was probably a great idea about 3-4 years ago, but now this is a bad proposition.  With the rising costs of everything from gas to rice, cutting up your cards may not be the proper first step.

The main argument given for cutting up your cards is that you shouldn’t make any purchases that you can’t pay cash for.  And this is partly true now.  You shouldn’t make any extravagant “want&amp” purchases with your credit card without the cash to pay for it.  It’s not so bad to put budgeted expenses like groceries and gas on a credit card that gives you points, miles, or cash back.  These extra incentives make the cards work for their use.  It is important, however, to pay these charges within the grace period as not to incur additional finance charges.  With a little discipline, it can be done.

Carrying large amounts of cash is also dangerous.  Think of the purchases you make in a week.  If you commute to work you can easily fill up your car twice in a week.  At today’s prices, that’s $100.  Groceries for a family of 4 can easily be $200 a week.  Add in lunch and your in for another $50 -> and this doesn’t include the occasional Starbucks or Pinkberry -> which, if you are reducing debt you should cut out.  Add all that up and you are carrying $400 in cash -> an easy target for theft or just for losing it as you pull your keys out of your pocket or purse.  Sure you could use a debit card for most, if not all of these purchases.  But debit cards reduce the actual cash in your account, making you subject to being overdrawn -> no one tracks debit card purchases like their checkbook (they should - its the same thing!)

So don’t cut up your credit cards so quickly.  Gain some control and use your cards wisely.

John Chow listed out 4 spending habits that one could follow in response to a question about how much he spends. His answer sparked a lot of conversation and he laid out a bit of a challenge in terms of how we should think about saving vs spending.

One of the spending habits is “borrow $100 Spend $200.” This technique is the road to ruin. This is also the path I was on before I woke up. It’s very easy to fall into this trap when you see people around you enjoying all the trappings of the material world. Hot cars, hot clothes, hot vacations. I wanted it all, but I didn’t have the patience to wait for it.

As you well know, robbing Peter to pay Paul is not the way to get rich -> or to stay comfortable. It takes just one little hiccup to put your life in to a tailspin.

So what happens when you are borrowing to spend and you reach your max?

1. No Emergency Fund
This is a very bad situation to be in. If you have no emergency fund, where do you get $500 to pay your deductible? Where do you get $1000 for bail? Or worse $500 for tickets to a funeral? The best way to get out of this trap is to pay into your emergency fund like its a bill. With each paycheck, put something in there. Experts say that you should keep 6x your monthly income in your emergency fund. I say any person over 27 needs to be able to get their hands on $5000 within a day. If you can’t do that without using a credit card, then you are behind the 8-ball.

2. Stress
Being in debt is stressful. Living on the razor’s edge of your income is dangerous and may be deadly. Each day you know you debt is growing and growing and you can’t do more than pay the minimum payments. But do you have 50 years to pay these bills off? I didn’t think so. The stress starts t o harm those around you. Your job suffers as you look for other ways to create income. Your relationships suffer because you never have money to go out or you spend all of your time complaining about money. And finally you suffer because no one wants to deal with you. Time for a tune up.

3. Bill Management
One of the toughest parts of having so many debts is the sheer management of it all. If you have more than 4 credit cards, you have to remember when each is due and make sure you pay them on time so as not to incur any late payments or over the limit penalties. If you were lucky or smart enough to buy Quicken before you went broke, then management will be easier.

4. No Flexibility
The last pitfall is one of the worse. You just can’t spend when you want. Your friends are going to Miami? You are going to miss out. PlayStation 3 on sale? You miss out. If you had cooled out earlier in life and just waited a little longer to pay cash for those big expenses -> you’d be able to participate in the fun parts of life. Too bad for you that you let material things and your need to “Have it now” screw up your life. (I need to take that advice, huh?)

However, it’s not too late. Stop spending, develop a plan, stick to the plan and watch your debt disappear. Need motivation? Watch mine disappear!