The WSJ created a little video outlining how this wonderful invention that can spur consumer spending has created $2.5 Trillion in debt with 640 million card in issuance, which as you can calculate is over 2 cards per person (yes, even babies use credit cards).

 Watch the WSJ video here.

…and many more…

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56,000!!?!@?!

That’s larger than the entire population of Canada!

Will the government listen?  Yes… Maybe…. Not really…. only a little….

With the Democrats in power, we’ve basically seen some sidestepping, but they’ve put out a Credit Card Bill of Rights that will attempt to allow consumers to :

• Pay off higher interest rates first
• Raising interest rates on balances incurred under lower rates
• Eliminate the practice of Universal Default (i.e. raising interest rates after a late payment on an unrelated bill)

Not a bad start I guess, but what is the most amusing are the credit card companies that argue that most cardholders are happy and that the complaints are just “anecdotal.”

Well… If 56,000 people are wrong and companies refuse to acknowledge it then, we’ve got alot of work to do!

What are your thoughts on this?  I know it’s a bit of both consumer idiocy and unfair practices, but what are you readers opinions on the subject?

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Well apparently according to NYT this is more of a trend than just a thought:

As the credit shakeout continues, and more lenders consolidating, it seems that our promotional offers aren’t knocking as hard anymore.  I see this as only a temporary trend, they’ll be back like a cheap hooker at TGIF’s.  They always come running back!

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With the recent bailout of Fannie Mae and Freddie Mac, it’s a good look and discussion of how we got ourselves into this situation, and what the corporate lenders have done to help us into this situation of debt, mainly through the use of home equity loans, and credit cards.

In a nutshell, it discusses how credit card companies have taken one of our favorite past-times of accumulating debt, and faster than a liberal to a gay-pride, pro-choice rally, spread it to other nations.  The authors of the piece also have the wherewithal to speak with enough honesty to tell it like it is.  They stop short of saying that it’s a bad move but essentially describe it as a Hurricane Ike in the making… It’s fast and wet at first, but it’ll eventually take your house and car.

I’m all for a credit industry in burgeoning markets (as it buys daddy his new shoes),  but only so long as it is done responsibly, and corporate America in all honesty has done nothing to reassure us that this is the case.

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So, what is the difference between balance transfer checks and convenience checks asides from the fact that they eat into your credit card line?

Purchase Checks:

• Deducts from your purchase credit line on your credit card up to your entire limit
• Tied to exact same Annual Percentage Rate (APR) as for your regular purchases
• Checks can be deposited into your bank account or cashed as regular checks
• Usually no grace period - finance charges begin accruing immediately after use

Balance Transfer Checks:

• Deducts from your regular purchase credit line
• Typically tied to a lower promotion interest rate from 3 months to 18 months
• The best rates are given when you sign up for a new card
• Usually no grace period - finance charges begin accruing immediately after use

Convenience Checks:

• Beware! Convenience Checks are tied to your Cash interest rate which is almost alway above 22% APR
• These look exactly like the checks issued for Purchase and Balance Transfers and intermittently mailed to confuse cardholders
• Usually no grace period - finance charges begin accruing immediately after use

As opposed to how it’s named, convenience checks are no more convenient than balance transfer checks except maybe for the banks.

Do yourself a favor next time before you sign on the dotted line, read the credit card mailing very carefully to determine what type of check you are signing. The text always makes it sound like a great deal; however, as always, when treating communications from credit card issuers, be skeptical.

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 After a lot of talk and interest rate cuts the Fed will finally fight for the rights of consumer…particulary those in debt.  In the US where saveings rate ranges from the negatives to 2% (China is at 35% for comparison) most households are living in debt and many in the form of credit card debt.  The article states that credit card debt in the US exceed $850 billion with average rates around 18%.  That’s a lot of interest payments.

Some items that will be regulated are:

- Payment allocation: the art of applying payments to lowest APR balances first

- Low grace periods: the time you have to pay until interest starts accruing

- Crazy rip off fees for over limit accounts

- and “deceptive offers”:  wow, who would’ve thought that deceptive offers should be eliminated?

It’s still early to see what gets passed to law and how the monolith of an industry fights back.  Expect a prolonged and heated battle and no real changes for some time to come.

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Here’s another long awaited installment of Creditpedia.  However, it’s more of a Q&A.

Given the blooming economy (sarcasm) I have received many emails asking about the effect of foreclosures and repos on your credit bureau.

If you are one of the unlucky many that have failed to make payments given the poor economy and job losses you are not alone.  Unfortunately something like a foreclosure or repossession is with you for a very long time.  Based on the Statute of Limitations the said event will be reflected in your credit bureau for 7 years (yes, a whopping 7 years) after the date it was first delinquent.

What does this mean?  Well it basically means that even if you pay off the bad debt you are gaining nothing (except eliminating phone calls from pesky collectors).  The stain on your credit report will still be there next year, and the year after, and the year after…you get the point.

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I recently got a credit card solicitation from Washington Mutual or more “cooly” known as Wamu. Now asides from Wamu’s abysmal earnings results, I instantly thought I was a great deal due to the envelop boldly stating:

“O% FIXED APR on Purchases until January 1, 2010″

WOW! 2010! But the key word (which I missed - their intention I’m sure) was “Purchases”.

What a scam! They are blatantly trying to use fuzzy verbiage to confuse the prospect into thinking that this is a great deal. The term went on:

“when you transfer a balance now.”

So essentially Wamu is expecting you to transfer a balance and pay a rate of 8.99% while giving you 0% on additional purchases. This is very damaging to your wallet since you have essentially locked in a balance at the full rate while padding on purchases. Due to payment allocation, this transferred balance accruing high interest charges will stay until you are able to pay everything else off including the 0% purchases. So, in the end not that great of a deal.

For your sake, please please please avoid this card at all costs.

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Every credit card application has the dreaded Income Declaration field where you are supposed to state your household income. Maybe people are unsure about this field and how to answer.

Here are some common concerns:

• Will they verify my income?
• Should I lie and declare more than I make?
• WTF? It’s none of their damn @#$%#@$$ business!
• Does this field actually matter in their decision?

Well, those are all good questions and it’s like that “Do you have a criminal record?” question on job application. It’s a Catch 22…if you lie you get screwed, if you tell the truth you get screwed. Luckily, this isn’t necessarily the case for the credit card income question. Here are some truths associated with the field:

• The income is used for serious decisions like approval and credit line allocation
• NO they do not cross reference or verify what you state - income is not in your credit bureau but can be inferred through revolving balance in your credit report
• This is household income so feel free to add income from your kid’s $8/hour job at the Gap

I’m no advocate for lying, but in this case it really doesn’t hurt to stretch the truth a little given the vagueness of the question at hand. Having a higher income will ensure that you get approved and that you receive more favorable terms.

Don’t quote me on this.

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Kids, today the word is Payment Allocation (well, words).

Payment Allocation is the generic term used to say that higher interest balance get paid off first.

What this means to you:

If you frequently carry a balance on your credit card and take balance transfer offers then you will be negatively impacted. For example, if you take on of those amazing introductory balance transfer offers of 0% for 12 months you will start getting incentives to spend on purchases or to use purchase checks. Don’t be tempted. The purchases you make will be at the regular APR. What does this mean?

Essentially, when you make your minimum payment all the payment will first go to any accrued finance charge (interest rate charges) while the remaining that go on to pay of principle balance will only pay off the 0% balance. All the purchases made on the 18% APR will not get paid off until after you pay off the 0% balances. Terrible right? Get used to it. Payment allocation is a very common practice smongst credit cad issuers. All the top issuers like Chase, Citi, Bank of America, Discover, and American Express apply this tactic.

Who does this benefit?

Nobody.

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