New credit card law provisions
May 27, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
The key provisions of the credit card law that Obama signed last Friday, May 22 are below. But first, my two cents …
I’ve heard a lot of talk about how these changes might make it more difficult to get credit and could result in higher fees in general and annual fees in particular for people who are using credit responsibly right now. It’s possible, but I tend to think that these issues were more a result of lobbying by the credit card companies than anything that will come to fruition. There will still be competition for credit card usage, and providers will need to make their cards attractive — especially to those that are the best credit risk. So while it may be harder to find cards with no annual fees, my guess is that a year from now there will still be options available to those with a solid credit history. We’ll have to wait and see, and in the meantime enjoy the increased communication and more reasonable policies from the credit card companies.
On May 22, 2009, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the Credit CARD Act of 2009).
Amending the Truth in Lending Act, the Credit CARD Act of 2009 requires a creditor on an open end consumer credit plan (credit card) to notify a consumer in writing of any change in the annual percentage rate (APR) on the account at least 45 days prior to the change. The notification shall also inform the consumer of the right to cancel the account before the effective date of the rate increase. If the consumer cancels the account, this action shall not constitute a default on the account, and shall not trigger an obligation to repay the account in full.
Creditors are further prohibited from increasing the annual percentage rate (APR) applicable to an existing balance on an open end consumer credit card account unless specific conditions apply. The APR may be increased only if: (1) the index on which the rate is based changes, (2) it is a promotional rate that has expired, (3) a consumer fails to comply with a hardship workout plan, or (4) the account falls 60 days past due.
What’s more, if a rate increase is due to the consumer falling 60 days past due on the account, the creditor must inform the consumer that the rate increase will be terminated (and the rate restored to what it was before the increase) once the creditor receives the minimum payments due in a timely fashion for six months.
Other features of the Credit CARD Act of 2009 include:
- If different APRs apply to separate portions of an outstanding balance, the amount of any payment beyond the minimum payment due must be applied to that portion of the balance with the highest APR.
- Creditors are required to send statements to consumers at least 21 calendar days before the due date of the next payment.
- Creditors must provide on each billing statement a written disclosure indicating how many months it will take to repay the existing balance if only the minimum payment due is made each month, and what the total cost (principal and interest) of doing so will be. The disclosure must also indicate the total cost of repaying the existing balance due, including principal and interest costs, over 36 months.
- Payment due dates shall be the same day of each month. If the due date is a date when a creditor does not receive or accept payments by mail (e.g., weekends and holidays), the creditor must not treat a payment received on the next business date as a late payment.
- Creditors are prohibited from charging a consumer an over-the-limit fee unless the consumer authorizes the creditor to complete the transaction that causes the balance to go over the limit (opt-in). The creditor is further prohibited from imposing an over-the-limit fee in a subsequent billing cycle unless the consumer obtains an additional extension of credit in excess of the credit limit during that subsequent cycle.
- Extension of credit to consumers under age 21 is prohibited, unless the consumer demonstrates the independent means of repaying the debt or has a cosigner over 21 capable of repaying the debt. The creditor is required to obtain the approval of any cosigner to increase the credit line of an account for which the cosigner is jointly liable.
- Creditors are prohibited from charging a fee based on the manner in which a payment is made (e.g., on line, by telephone).
- Gift cards and certificates must disclose in writing on the card or certificate any dormancy or inactivity fee information, including the amount of the fee and how often it may be imposed (not more than once a month). What’s more, the issuers of such cards or certificates must inform the purchaser of these fees before the purchase. Such fees may not be imposed for the first 12 months after issuance. Such cards or certificates may not have an expiration date before five years after the card or certificate is issued.
The sections of the Credit CARD Act of 2009 about notification requirements concerning rate increases take effect 90 days after the date of enactment. The remaining portions of the Act take effect nine months after enactment.
April 2009 Newsletter
April 6, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
The April 2009 newsletter is now available online. It includes an update on market conditions, plus information on the Cobra subsidy, writing off worthless securities on your taxes, an estate planning pitfall to avoid, a conversation for parents about saving for retirement vs. college, and a how-to on budgeting. Click here to read the newsletter.
Free Financial Advice Bus Tour in D-FW
February 6, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Mark your calendars for February 23 from 11:30 to 1:30. The national Your Money Bus tour will be making a stop at a place near and dear to my heart – Southlake Central Market. Local financial advisors, including me, will be there to answer your financial questions at no charge.
We’re all keenly aware of the economic challenges our country and many individuals are facing right now. An unstable economy, rising unemployment rates and home foreclosures continue to impact residents throughout our area.
To help individuals address these issues, we’ll be delivering complimentary financial advice from independent registered investment advisors along with free educational materials focusing on savings and debt reduction.
Central Market has generously agreed to host the bus, and will be providing space in their cooking school for the complimentary financial sessions. It will be a great opportunity to get your questions answered in a fun, upbeat atmosphere. Thanks to Central Market’s Community Relations Manager Ren Knight for arranging the stop!
The bus tour itself is presented by the National Association of Personal Financial Advisors Foundation, Kiplingers, and TD Ameritrade. The bus will also be making stops at UT Arlington and in Dallas. Here’s the full schedule:
9:00 am to 11:00 am – Free advice event at the Center for Continuing Education and Workforce Development at the University of Texas at Arlington (140 W. Mitchell Street, Arlington, TX). Bring your financial questions and get them answered by a financial advisor.
11:30 am to 1:30 pm – Free advice event at the Central Market Southlake (1425 E. Southlake Blvd, Southlake, TX). Bring your financial questions and get them answered by a financial advisor.
2:00 pm to 5:00 pm – Free advice event at the J Erik Jonsson Central Library (1515 Young Street, Dallas, TX). Bring your financial questions and get them answered by a financial advisor.
IOUSA on CNN this weekend
January 8, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
I just learned that IOUSA will be airing on CNN this weekend. I plan to set the DVR to make sure I get to watch it. It’s a documentary about America’s addiction to debt that’s received outstanding reviews. Here’s the info:
The public has spoken, and we’ve listened. In response to demand for information about our country’s financial challenges, CNN/U.S. will air the broadcast premiere of the acclaimed documentary I.O.U.S.A. on on Saturday, January 10 at 2:00 p.m. EST and on Sunday, January 11 at 3:00 p.m. EST. Accompanying the documentary will be an unscripted panel discussion with policy leaders about various economic solutions currently under consideration.
|
|
This exclusive televised event will air only on CNN, and will be hosted by Ali Velshi and Christine Romans, co-anchors of CNN’s Your $$$$$, the network’s weekend business roundtable program. |
Throughout I.O.U.S.A.’s broadcast premiere, Velshi and Romans will engage a distinguished group of panelists, including Pete Peterson, Chairman of the Peter G. Peterson Foundation and former U.S. Commerce Secretary; Dave Walker, President and CEO of the Peter G. Peterson Foundation and former U.S. Comptroller General; Alice Rivlin, noted economist and former Director of the Office of Management and Budget; and Bill Bradley, a Managing Director of Allen & Company and former U.S. Senator and Democratic presidential candidate, in discussions about issues raised in the film and their ties to current economic events.
Learn more about the film at www.IOUSAtheMovie.com. And be sure to spread the word about the U.S. broadcast premiere!
Silver Lining in the Market Downturn
November 6, 2008 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
When you look at your retirement plan statement and it’s down 30% or more from a couple months ago, it’s hard to believe there might be a silver lining there somewhere. While the market downturn has created a tremendous amount of anxiety and it’s caused a significant change in plans for some who planned to retire in the next couple of years or who had recently retired, there are still some potential opportunities created depending on your situation and stage in life. This list isn’t exhaustive, but hopefully it gets you thinking a bit more optimistically about these economically challenging times.Buying Opportunity
First, we’ve all heard that the downturn is a “buying opportunity.” That’s easy to say, much harder to do. But I would encourage you to give it serious consideration if you have money sitting in cash that you’re not going to need for the next 5-10 years. Warren Buffet writes eloquently on this topic in his op-ed column “Buy American. I am.” in the NY Times on October 17. Click on the article title to link to the NY Times website and read the article.
Roth Conversions On Sale
The second silver lining created by this situation is an opportunity to do Roth conversions “on sale.” This opportunity isn’t available to everyone this year, only those with incomes under $100K. But if you are eligible, this could be a great time to convert traditional IRAs to Roths. You will need to pay the income taxes when you do the conversion, but you’ll 
bepaying taxes on a much-reduced amount verses last year at this time or what your account may have recovered to in a couple of years. For example, if you had a traditional IRA worth $100,000 last year and it’s worth $65,000 now and you’re in the 28% tax bracket, converting it now would only cost you $18,200 in federal income taxes vs. the $28,000 it would have cost you a year ago — a savings of almost $10,000. There are some nuances to this strategy and it’s not right for everyone, so make sure you research the details or talk with a financial planner (preferably me) before moving forward.
Using Losses to Offset Capital Gains
The third opportunity is to “harvest losses” to offset capital gains. If you have long-term property you’ve held that’s appreciated in value and you plan to sell it in the future, you may want to consider acting now because of potential tax savings. If you sell the capital-gain property along with investments that have significant losses, they could offset each other and you would avoid paying capital gains taxes on the property that increased in value. There’s also a significant chance that capital gains tax rates may be higher in the future. Again, there are nuances to this strategy as well … so do your homework before jumping in.
Opportunity to Re-Examine
The last opportunity really applies to everyone. We go through life every day and it’s very easy to get into routines and habits where we basically stop thinking. But then something major happens that makes us feel less secure and makes us more willing to re-examine our lives and consider making changes. I believe this economic downturn is one of those things. The positive that can come out of this loss of a sense of security is that we may be willing to make that hard choice that we weren’t willing to make before.
It could be something small like committing to only 1 Starbucks a week instead of 5 and saving the other $14 — over a year that would mean $728 in the bank. Earning a 4% interest rate on your Starbucks savings, you would have saved $8,740 in 10 years. Not chump change.
Or it could be something big like really wanting to simplify your life. Downsizing a house. Making a decision to get out of credit card debt once and for all. Driving a car you can pay cash for. Big actions with big pay-offs.
So if you’re so inclined, I encourage you to take a moment and use this economic insecurity to do something positive for yourself. If you’ve already done this, I’d love to hear about it. You can post a comment to my website if you want it to be public, or just send me an e-mail.
Emergency Fund
November 2, 2008 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
In times of crisis, you don’t want to be shaking pennies out of a piggy bank. Having a financial safety net in place can ensure that you’re protected when a financial emergency arises. One way to accomplish this is by setting up a cash reserve, a pool of readily available funds that can help you meet emergency or highly urgent short-term needs.
How much is enough?
You need to have three to six months’ worth of living expenses in your cash reserve. The actual amount, however, should be based on your particular circumstances. Do you have a mortgage? Do you have short-term and long-term disability protection? Are you paying for your child’s orthodontics? Are you making car payments? Other factors you need to consider include your job security, health, and income. The bottom line: Without an emergency fund, a period of crisis (e.g., unemployment, disability) could be financially devastating.
Building your cash reserve
If you haven’t established a cash reserve, or if the one you have is inadequate, you can take several steps to eliminate the shortfall:
- Save aggressively: If available, use payroll deduction at work; budget your savings as part of regular household expenses
- Reduce your discretionary spending (e.g., eating out, movies, lottery tickets)
- Use current or liquid assets (those that are cash or are convertible to cash within a year, such as a short-term certificate of deposit)
- Use earnings from other investments (e.g.,stocks, bonds, or mutual funds)
A final note: Your credit line can be a secondary source of funds in a time of crisis. Borrowed money, however, has to be paid back (often at high interest rates). As a result, you shouldn’t consider lenders as a primary source for your cash reserve.
Where to keep your cash reserve
You’ll want to make sure that your cash reserve is readily available when you need it. However, an FDIC-insured, low-interest savings account isn’t your only option. There are several excellent alternatives, each with unique advantages. For example, money market accounts and short-term CDs typically offer higher interest rates than savings accounts, with little (if any) increased risk.
Don’t confuse a money market mutual fund with a money market deposit account. An investment in a money market mutual fund is not insured or guaranteed by the FDIC. Although the mutual fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. However, as of September 29, 2008, a money market fund may have backing from the U.S. Treasury if it has chosen to participate in the Treasury’s temporary guarantee program. For a participating fund, the Treasury will guarantee the $1 per share value of a fund if its net asset value (NAV) drops below a certain level. You can contact your fund to find out whether it has the Treasury guarantee. Also, a fund may have arranged for private insurance, though that protection may be subject to the claims-paying ability of the insurer.
Note: When considering a money market mutual fund, be sure to obtain and read the fund’s prospectus, which is available from the fund or your financial advisor, and outlines the fund’s investment objectives, risks, fees, expenses. Carefully consider those factors before investing.
It’s important to note that certain fixed-term investment vehicles (i.e., those that pledge to return your principal plus interest on a given date), such as CDs, impose a significant penalty for early withdrawals. So, if you’re going to use fixed-term investments as part of your cash reserve, you’ll want to be sure to ladder (stagger) their maturity dates over a short period of time (e.g., two to five months). This will ensure the availability of funds, without penalty, to meet sudden financial needs.
Review your cash reserve periodically
Your personal and financial circumstances change often–a new child comes along, an aging parent becomes more dependent, or a larger home brings increased expenses. Because your cash reserve is the first line of protection against financial devastation, you should review it annually to make sure that it fits your current needs.
How to get a free copy of your credit report
November 2, 2008 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Under the Fair and Accurate Credit Transactions Act of 2003 (FACTA), every consumer is entitled to a free credit report every 12 months from each of the three credit bureaus. To get your free annual report, you can contact each of the three credit bureaus individually, or you can contact one centralized source that has been created for this purpose. Besides the annual report, you are also entitled to a free report under the following circumstances:
- A company has taken adverse action against you, such as denying you credit, insurance, or employment (you must request a copy within 60 days of the adverse action)
- You’re unemployed and plan to look for a job within the next 60 days
- You’re on welfare
- Your report is inaccurate because of fraud, including identity theft
If you are not eligible for a free report, you can buy a copy from each of the three credit bureaus. You may be charged up to $9.50 for each copy.
How do you order your free annual report?
You can order your free annual report online at www.annualcreditreport.com, by calling 877-322-8228, or by completing an Annual Report Request Form and mailing it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
Alternatively, you can contact each of the three credit bureaus:
- Experian National Consumer Assistance Center, www.experian.com, P.O. Box 2104, Allen, TX 75013-2104, (888) 397-3742
- Trans Union LLC, Consumer Disclosure Center, www.transunion.com, P.O. Box 1000, Chester, PA 19022, (800) 916-8800
- Equifax, Inc., www.equifax.com, P.O. Box 740241, Atlanta, GA 30374, (800) 685-1111
If you make your request online, you should get access to your report immediately. If you request your report by phone or mail, you should receive it within 15 days.
What information will you need?
Whether you go online, call, or write for a copy of your credit report, you will have to provide certain information so that your file can be located, and your identity can be verified. If you order by phone, you will be asked to speak, spell, or key information into the phone. Generally, the information requested includes:
- Name
- Address
- Spouse’s name (if applicable)
- Previous address
- Social Security number
- Home phone number
- Name of employer past and present
- Date of birth
Tip: If you write to a credit bureau for a copy of your credit report or for any other reason, you should include the same information in the letter.
Will you be able to ask questions about your report if you call?
When you call to order a copy of your credit report, you will not speak to a real person. You will hear a series of recorded messages. You will be given prompts and asked to respond by speaking or keying your response into the phone. It is very simple and self-explanatory. In most cases, your credit report will be processed within 48 hours.
Why would you want to get a copy of your credit report?
Your credit report is important because it can affect whether you get a mortgage or other type of loan, insurance, or employment. You should review your credit report to make sure it is accurate, complete, and up to date. Reviewing your report can also help you guard against identity theft.