From Holden Lewis @www.bankrate.com:

“The Federal Reserve raised a key short-term interest rate today, reassuring investors that major combat operations against inflation are not over.

The Fed’s Open Market Committee increased the target for the federal funds rate a quarter point, to 2.5 percent. The prime rate will rise to 5.5 percent. Consumer loans based on the prime rate—variable-rate credit cards and home equity lines of credit, for the most part—can be expected to rise in the coming days and weeks.

Short-term rates have gone up 1.5 percentage points since the end of June. In that time, the Fed’s rate-setting committee has met six times, and each time it raised the federal funds rate by a quarter of a percentage point. In today’s after-meeting statement, the committee hinted that more rate increases are in store.”

What does this mean to you in a nutshell?

• Credit Cards:
  Credit cards with variable rates will raise their rates.
  Note: Folks with credit problems will be seeing higher interest rates!
• Money market mutual funds:
  Yields will increase.
• Money market accounts:
  Banks may reward depositors...but don’t count on it.
• Certificates of deposit:
  Yields on CDs may vary depending on the length of maturity
• Auto loans:
  Not affected
• Home equity lines of credit:
  A modest increase in the early years of a HELOC
• Home equity loans:
  Long term rates will not be affected
• Adjustable-rate mortgages:
  Interest payments could definitely increase
• Fixed-rate mortgages:
  Tied to long term rates, should not be affected

source: http://www.bankrate.com/nltrack/news/fed/how-soon.asp

there seems to be a bit of confusion over the social security issue.  is it a “problem”, a “crisis”, or neither?  and, honestly, i’m not sure that i know myself.

here are two places to start:

from kathleen hays @ cnn: Straight talk on Social Security

Tired of partisan rhetoric, Hays turned to Government Accountability Office chief David Walker.

NEW YORK (CNN/Money) - Separating the spin from the substance in the Social Security debate can be challenging. So, I went looking for an honest broker, someone who could give me the facts, figures and fundamentals without the thread of a political agenda running through it.

read the story here.

from the social security administration: About Social Security’s Future

read their faq here.

based on these *two* articles, there is a problem with social security...but not a crisis.  as i find other articles on the issue, i’ll post them as well.

This published on Wednesday, February 2, 2005 by Reuters:

Half of Bankruptcy Due to Medical Bills—U.S. Study

By Maggie Fox, Health and Science Correspondent

WASHINGTON (Reuters) - Half of all U.S. bankruptcies are caused by soaring medical bills and most people sent into debt by illness are middle-class workers with health insurance, researchers said on Wednesday.

The study, published in the journal Health Affairs, estimated that medical bankruptcies affect about 2 million Americans every year, if both debtors and their dependents, including about 700,000 children, are counted.

“Our study is frightening. Unless you’re Bill Gates you’re just one serious illness away from bankruptcy,” said Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School who led the study.

“Most of the medically bankrupt were average Americans who happened to get sick. Health insurance offered little protection.”

The researchers got the permission of bankruptcy judges in California, Illinois, Pennsylvania, Tennessee and Texas to survey 931 people who filed for bankruptcy.

“About half cited medical causes, which indicates that 1.9 to 2.2 million Americans (filers plus dependents) experienced medical bankruptcy,” they wrote.

“Among those whose illnesses led to bankruptcy, out-of-pocket costs averaged $11,854 since the start of illness; 75.7 percent had insurance at the onset of illness.”

The average bankrupt person surveyed had spent $13,460 on co-payments, deductibles and uncovered services if they had private insurance. People with no insurance spent an average of $10,893 for such out-of-pocket expenses.

“Even middle-class insured families often fall prey to financial catastrophe when sick,” the researchers wrote.

Bankruptcy specialists said the numbers seemed sound.

“From 1982 to 1989, I reviewed every bankruptcy petition filed in South Carolina, and during that period I came to the conclusion that there were two major causes of bankruptcy: medical bills and divorce,” said George Cauthen, a lawyer at Columbia-based law firm Nelson Mullins Riley & Scarborough LLP.

“Each accounted, roughly, for about a third of all individual filings in South Carolina.”

He said fewer than 1 percent of all bankruptcy filings were due to credit card debt. “That truly is a myth,” Cauthen said in a telephone interview.

Cauthen said he was not surprised to hear that so many of the bankrupt people in the study were middle-class.

“Usually people who have something to protect file bankruptcy,” he said. “The truly indigent—people that we see on the street—there is no relief that we can give them.”

Dr. Steffie Woolhandler, a Harvard associate professor and physician who advocates for universal health coverage, said the study supported demands for health reform.

“Covering the uninsured isn’t enough. We must also upgrade and guarantee continuous coverage for those who have insurance,” Woolhandler said in a statement.

She said many employers and politicians were pressing for what she called “stripped-down plans so riddled with co-payments, deductibles and exclusions that serious illness leads straight to bankruptcy.”

© Reuters 2005

yet another link on social security:

Commentary: “Economic Scene: A Weekly Column” from the December 27, 2004 edition

One man’s retirement math: Social Security wins
By David R. Francis | Staff writer of The Christian Science Monitor

At the heart of President Bush’s plan to sell Social Security private accounts is a simple notion: You’re always better off investing your retirement money than letting the government do it.

By doing it yourself, you can stow some money in the stock market, and over the long run will get a better return on that investment than today’s Social Security system offers.

The idea is broadly accepted. That’s why the administration’s plan to partially privatize the system sounds appealing to many. But that better return won’t always happen.

read the story here.

House Passes Bankruptcy Bill; Overhaul Now Awaits President’s Signature
By STEPHEN LABATON / Published: April 15, 2005

WASHINGTON, April 14 - The House overwhelmingly approved a major overhaul of the nation’s bankruptcy laws on Thursday, completing Congressional action on the measure and sending it to President Bush.

The 302-to-126 vote adopted the first significant revision of the bankruptcy laws in 27 years and is the culmination of years of intensive lobbying by the nation’s largest banks, credit card companies and retailers, who have complained about what they say is a rising tide of abusive bankruptcy filings.

It is a victory for Mr. Bush, who supported the measure, and a setback for civil rights, labor and consumer organizations.

read more here

Bankruptcy bill bad for debtors
Boomer Bucks by Barbara Whelehan • Bankrate.com

Editor’s note: On the afternoon of April 14, 2005, the House passed the bankruptcy bill, clearing the way for President Bush to sign it into law.

The bankruptcy bill that the Senate passed earlier this month is a good news/bad news bill. It’s good news for big business, and mostly bad news for financially troubled consumers.

read more here

provisions in new law (in a nutshell):

ONE: a “means test”: consumers with income greater than the median level in their state (us median income level is $65,093) with a disposable income of $100 that can be used to repay $6,000 in 5 years *MUST* file chapter 13.  these are the same guidelines used by the IRS for tax evaders.  severely limits allowable expenses: $200/month for food, $800/month for housing and utilities.

TWO: money contributed to 529 college savings plans more than 2 years prior to filing are exempt.  money contributed to 529 college savings plan more than 1 year but less than 2 years is subject to a $5,000 limit on assets that the credit card companies can access.

THREE: 40 months of home ownership, even in states where homesteads were exempt, is required to exempt your home from assets available to creditors.

FOUR: up to $1 million in retirement savings can be shielded

FIVE:  unlimited money can be protected by placing it in state-sponsored asset protection funds.  (available in 5 states)

hmm, i wonder who’d benefit from all of those provisions.  how many of the individuals filing for bankruptcy have access to millions of dollars they can stash in funds?  and if they did...wouldn’t they then have enough money to pay back their debts?  just a thought.

their stance on the law (in a nutshell):

proponents of the new bill say:
people should be responsible and not charge more than they can afford to pay back.

opponents of the new bill say:
yes, people should be responsible with their debt; however sometimes life throws you unforeseen curves, such as high medical costs, lost jobs, divorces, etc. a harvard study found that over half of all bankrupcties were due to medical bills.  (see previous entry here) the new law may remove a safety net for folks who find themselves in this situation and could mire them in debt for life.

proponents of the new bill say:
the number of bankruptcies has dramatically risen in the past 10 years.  over 1 million people filed for chapter 7 bankruptcy relief last year.  half of that in 1994. some 70% of filers currently go with chapter 7 because it essentially wipes the slate clean, even though it does remain on their credit reports for 10 years.

opponents of the new bill say:
the most basic change in the past 10 years has been in the marketing to consumers: credit is being offered to more high-risk consumers, so higher default numbers are no surprise.  (think of how many credit offers you get in the mail...then think of how much those companies are spending to send these mass mailiings out.  with discover card, i get an offer by mail at least 3 to 4 times a week.)

proponents of the new bill say:
the new law will lower costs for consumers, because currently they are forced to pick up the difference on unpaid debts

opponents of the new bill say:
the stance that the new law will lower costs for consumers is false.  the average interest rate has declined over the past 10 years.  between 92 and 95, the spread between credit card interest rates and risk-free six-month treasury bills declined and has remained constant through 2001.  at the same time, profitability of credit card issuing banks has remained at near-record levels.  banks are not losing money.

from the FTC:

For Release: June 4 , 2004

FTC Issues Final Rule on Free Annual Credit Reports

The Federal Trade Commission has issued its final rule regarding free annual credit reports under the Fair and Accurate Credit Transactions Act (FACTA) and the Fair Credit Reporting Act (FCRA). FACTA, which was enacted on December 4, 2003, amends the FCRA and requires, among other things, that the three nationwide consumer reporting agencies (CRAs) – Equifax, Experian, and Trans Union – provide to consumers, upon request, a free copy of their credit report once every 12 months.

woohoo!  good move by the FTC.  so what does this mean to you?  once a year, you are entitled to a *free* credit report, so you can find out what information has been gathered about you.  eligibility for these free reports is based on the FTC’s rollout schedule:

december 2004: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming

march 2005: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin

june 2005: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas

september 2005: Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia, Puerto Rico, and all U.S. territories.

currently, there are three ways to get these reports:

• online: www.annualcreditreport.com
• by phone: 1-877-322-8228
• by mail: download the request form at www.annualcreditreport.com and mail to:
  
  Annual Credit Report Request Service
  
  P.O. Box 105281
  
  Atlanta, GA 30348-5281
  

please note:  only www.annualcreditreport.com (and experian, transunion and equifax) has been authorized by law to provide these free annual credit reports. be leery of anyone else who states they can do so.

This study out from the General Accountability Office, concerning Credit Card Companies....  you can read the report (PDF) or highlights (PDF) from the GAO.  Read further articles below…

US says credit card late fees up, disclosure poor
Wed Oct 11, 2006 4:22 PM ET

By Susan Cornwell

WASHINGTON, Oct 11 (Reuters) - Penalties for late credit card payments in the United States have more than doubled in a decade, but disclosures of such fees are written in language too complicated for many consumers to understand, a U.S. government report said on Wednesday.

The General Accountability Office (GAO), the investigative arm of Congress, said in its report that the average penalty in 2005 for making a late credit card payment was $34, up from $13 in 1995. Levin noted this was a 115 percent increase.

The highest late fee was $39. Last year, over a third of active U.S. accounts were assessed a late fee at least once, the report said.

Cardholders also could be charged a higher interest rate—sometimes over 30 percent—as a penalty for riskier payment behavior, the GAO said.

The report said fees for going over a credit limit had also more than doubled to about $31 in 2005 from $13 in 1995.

Credit card companies should “clean up their act and eliminate unfair, excessive, and hidden charges,” said Michigan Democrat Carl Levin, who requested the report.

Levin complained that some banks were charging a $15 fee to pay a credit card bill over the phone before the late fee kicks in, “actually charging families money to pay their bill. That’s outrageous.”

“Although penalty interest and fees have likely increased as a portion of issuer revenues, the largest issuers have not experienced greatly increased profitability over the last 20 years,” the report said.

The GAO report examined 28 cards issued by the six largest issuers of 2004: Citibank (South Dakota) N.A.; Chase Bank USA, N.A.; Bank of America; MBNA America Bank, N.A.; Capital One Bank; and Discover Financial Services. The accounts of these issuers make up 80 percent of credit card lending in the United States, where there are over 691 million cards.

A spokeswoman for the Bank of America had not read the report and had no immediate comment. Spokesmen for other issuers could not immediately be reached for comment.

But the GAO said that card issuers argued that using risk-based pricing structures with multiple interest rates and fees had allowed them to offer credit cards to more people, including some who could not get cards before.

It said consumers needed clearer disclosures of these penalties, especially since there were no regulatory or legal limits on the interest rates or fees that cards can impose.

“For example, although about half of adults in the United States read at or below the eighth-grade level, most of the credit card materials were written at a tenth- to twelfth-grade level,” the GAO report said.

Separately, in New York on Wednesday Visa, the world’s largest credit card payment system, said it planned an initial public offering to fund its expansion.

© Reuters 2006. All rights reserved.

GAO study slams credit card fees, disclosures
Posted: Oct. 11, 2006

By Ellen Cannon • Bankrate.com

It’s not just the consumers’ fault that they don’t understand the terms of their credit cards, the Government Accountability Office said in a report issued Oct. 11.

The 114-page GAO study said that because credit cards now have a range of interest rates and fees, the disclosure needs to be expressed in a clear and more understandable manner. The report was requested by Sen. Carl Levin, D-Mich., in response to the complex fees and rates that credit card issuers charge.

“Millions of Americans depend on credit cards to pay their bills and buy essentials like groceries or gas,” Levin said in a press release. “Unfair or confusing credit card practices take advantage of working families. This report shines a needed spotlight on excessive credit card fees, unfair interest rates and inadequate disclosure practices that ought to be stopped.”

For the study, six large credit card issuers provided data on interest rates and fees paid. Their data showed that in 2005 nearly 80 percent of their accounts were assessed interest rates of less than 20 percent, and more than 40 percent had rates below 15 percent. However, they also reported 35 percent of their accounts paid late fees and 13 percent paid over-the-limit fees.

Complex wording

The GAO employed a usability study to analyze credit card disclosure, and it concluded that “disclosures from the largest credit card issuers were often written well above the eighth-grade level at which about half of U.S. adults read.”

In addition, the GAO interviewed 112 cardholders and said they were unaware of key aspects of their credit cards, including what the late-payment fee would be and why the issuer could raise their rates.

The report also cites various practices that consumer groups have sought to have banned, such as universal default (where a cardholder’s interest rate can be changed based on behavior with another creditor, such as a utility company), payment allocation (where the payment is applied to the low-interest balance before the higher-rate balance) and “trailing” or “residual” interest (where cardholders are charged interest on balances they’ve paid the previous month).

Another finding in the GAO study was that issuers are moving away from charging over-limit fees. In 2003, 85 percent of the cards surveyed charged over-limit fees, while only 73 percent did in 2005. Issuers said that they are pursuing “competitive strategies that seek to increase the amount of spending that their existing cardholders do on their cards as a way to generate revenue.” Usually, if cardholders were near their credit limits, they would be more likely to stop using those cards.

Fees, fees, more fees

If issuers were not enforcing over-limit fees, though, there are certainly enough new fees being charged, according to the report. The majority of the most popular cards now charge fees for cash advances, balance transfers, foreign transactions, telephone payments and duplicate copies of statements.

“There are so many credit card fees and penalties these days that consumers need a score card to keep track,” Levin said in a release. “Inadequate disclosure compounds the problem. I hope (the report) will also serve notice to credit card issuers that they need to clean up their act and eliminate unfair, excessive, and hidden charges.”

“Every day, people’s lives are ruined when credit card companies triple or even quadruple the interest rates on their existing credit card balances,” said Linda Sherry, director of National Priorities for Consumer Action, which provided historical data for the study. “If people are having a little trouble paying on time, how does it help to suddenly hit them with 30-plus percent interest rates and steep increases in minimum monthly payments?”

Consumer groups’ reactions

Consumer Action, Consumers Union, Consumers Federation of America and U.S. Public Interest Research Group issued a joint press release in which they welcomed the report, but said they hoped the government would go further and ban some of the anti-consumer practices. “Consumer Action is hopeful that this excellent report will be a wake-up call to Congress and federal bank regulators that things need to be changed to protect consumers from abusive industry practices,” said Sherry in an e-mail message.

“We are pleased Sen. Levin requested the report, although we are disappointed that it contains very little new or privileged information,” said Sherry. “We had expected the GAO to use its power to get at real behind-the-scenes information, such as the exact amount of money the banks make off fees and the relation of those fees to the actual costs borne by the banks and the current market shares of each national bank. Some of the information appeared to us to be rehashed.

“Nonetheless, we welcome any opportunity to shine light on the industry’s anti-consumer practices.”

Some things leave you speechless…

Insurers expect record profits
Consumers, hit with rate hikes after last year’s storms, not likely to get any relief
Oct. 13, 2006, 11:27PM

By JOSEPH B. TREASTER
New York Times

Insurance companies are expecting record profits in 2006 after predictions of another year of devastating hurricanes have so far come to naught.

Industry experts are estimating that profits may reach $60 billion, on a combination of higher premiums along the coasts, no major payouts for natural disasters and strong investment returns. The insurers also had high profits on other lines of coverage such as auto insurance, workers compensation and general liability.

The record profits expected this year come after a year when insurers paid out $61 billion for damage from Hurricane Katrina and other storms.

Even so, the insurers ended up with a profit of $43 billion for 2005 because of exceptionally good results on investments, declining claims on policies on homes away from the coast, and profits on other lines of coverage.

Homeowners and businesses along the coasts, hit with much higher insurance costs after the barrage of hurricanes, probably will not get any relief, industry experts and consumer advocates said.

The hurricane season lasts another seven weeks, until Nov. 30, but no one is expecting any costly storms.

“We’re fairly confident that the chances of a cataclysmic hurricane this year are behind us,” said Robert Hartwig, the chief economist of the Insurance Information Institute. “And we think we’re going to have some good numbers.”

The expected record profit this year will add momentum to a decades-long earnings streak, interrupted by only one annual loss — $7 billion in 2001, when the Sept. 11 attacks staggered the insurers.

Stock prices come alive

Reinsurance companies — the sometimes obscure insurers that back up the most familiar name brands in insurance by selling them coverage to share the risks — are also expected to do exceptionally well in 2006. So will investors such as hedge funds that began providing capital directly to insurers when they saw premiums along the coast climbing.

As the hurricane season began in June, the price of insurance stocks dipped. But the stocks began to come alive in August as some investors sensed that “this season was not going to be a disaster, nothing like last year,” said Adam Klauber, an analyst at Cochran, Caronia, Waller, a brokerage in Chicago.

The stocks are up an average 12 percent since mid-August, Klauber said. Shares of Allstate, one of the biggest home insurers along the coasts, have jumped 14 percent in that period, closing at $62.93 on Friday. Shares of Renaissance Re, one of the largest companies providing catastrophe coverage for big insurers such as Allstate and Chubb, have risen 17 percent to close at $56.03 on Friday.

Insurers raised premiums on homes and businesses along the coasts by 10 times or more in some cases compared with last year’s rates in the wake of a series of powerful hurricanes last year and in 2004 and forecasts of perhaps a half dozen major storms this year.

Complete industry results for 2006 will not be available until early next year. But based on data so far, Hartwig is estimating profits of $55 billion to $60 billion. Jim Auden, who helps direct research and analysis of the industry at Fitch Ratings, a company that tracks financial strength of insurers, estimated profits at $60 billion.

The industry’s optimism stems from an updated forecast this month from the University of Colorado that predicts no more than one mild hurricane in October and no hurricanes at all in November.

However, owners of coastal homes and businesses should not expect any easing of their insurance costs. “Just because there wasn’t a major storm this year, doesn’t mean there won’t be one next year or the year after,” Auden said. “Certain coastal markets are probably still underpriced.”

Consumers cry foul

Consumer advocates, on the other hand, are crying foul. “It’s unfair,” said J. Robert Hunter, the director of insurance at the Consumer Federation of American. “They have overestimated their losses and vastly overpriced. And now, when the money rolls in, there is no relief for consumers.”

Hunter, a former insurance commissioner in Texas, said he and other regulators agreed to sharp price increases after Hurricane Andrew devastated a swath of Florida south of Miami in 1992. The insurers agreed then, he said, to base their prices on long-term averages for damage. After the powerful storms in 2004 and 2005, the industry shortened its projections to five years. “If you’re going to use a shorter time frame,” Hunter said, “you’ve got to lower rates when profits are good. You can’t just go up when it’s bad and stay there.”

http://www.chron.com/disp/story.mpl/business/4258659.html

What’s a ‘mortgage accelerator’?
Here’s how to shrink your mortgage and save — all by yourself
COMMENTARY

By John W. Schoen
Senior Producer
MSNBC

With higher interest rates putting the squeeze on borrowers, a number of readers, including Linda in Tampa, have heard from a new crop of companies offering a plan to “accelerate” their mortgages and save them a bundle-- for a fee.  Here’s what the people who are selling this product won’t tell you.

I recently found out about a financial product called a mortgage accelerator. This is not a bimonthly payoff of a 30-year mortgage; it’s a line of credit tied to an account with direct deposit that works like a checking account to pay out regular living expenses as well as paydown the balance of the house cost. The high average daily balance allows you to pay off the home loan much faster than a traditional mortgage. There is a fee, but the costs still seem so much lower than the accumulated interest of a 30 year mortgage. It sounds great, but could you investigate the good and bad points of this for me?
-- Linda R., Tampa, Fla.

There’s nothing illegal about these plans; they’re simply charging you a fee for something you can do on your own. They belong in the same category of services as “credit monitoring” companies that charge $50 a year to send you the same credit reports you can get on own for nothing. It’s kind of like someone asking to borrow your watch, telling you the time and then sending you a bill.

There are a number of flavors of “mortgage accelerators,” but they work the same way. The pitch goes like this: We’ll collect money from your checking account and make a mortgage payment on your behalf every two weeks, which works out to 13 monthly payments instead of 12. By making that extra payment, you’ll pay down your principal faster and save tens of thousands of dollars in interest payments over the life of the loan.

We called one of the more popular purveyors of this plan to get the details. To sign up, you’ll pay a one-time fee of $295 and then $5.42 a month (or about $65 a year). If the “accelerator” gets you out from under a 30-year mortgage five years early, the total cost of this plan comes to about $1,900. When you compare that to the tens of thousands of dollars in interest you’ll save, it sounds like a great deal.

Here’s the problem: you almost certainly can do the same thing yourself — for free. (Some mortgages specifically carry a “pre-payment penalty” — something to ask about, and avoid, when you’re shopping for a new loan). If yours doesn’t penalize pre-payment, you can send extra payments to reduce the principal any time you want — without paying anyone a fee.

So, as a service to our readers, try out our very own Answer Desk mortgage accelerator (at no charge).  Here’s how it works:

Let’s say you just took out a $100,000, 30-year fixed mortgage at 6 percent. Your monthly payment comes to $599.55 and you’ll be fully paid off in 2036. During those 30 years you will have paid the bank $115,338.50 in interest. (Ouch.)

If you choose to go with the Answer Desk Accelerator “$50 Plan,” add $50 to each monthly mortgage payment. You’ll be paid off in just 24.5 years, with a total interest payment of $90,035.83 – or a savings of $25,302.67. For our “$100 Plan,” add $100 to your monthly payment, which will pay you off in full in 21 years. Total interest: $75,936.94. Savings: $39,401.56.

If all those extra payments are a hassle, you could also try our once-a-year Extra Monthly Payment Plan. You’ll be paid off in 25.5 years Total interest: $92,197.05 Savings: $23,141.45.

One caveat (which fee-based “accelerator” plans will forget to tell you): Our savings figures will be reduced somewhat by the tax deduction you’ll lose by paying less in mortgage interest, assuming you itemize. (To estimate your net savings, reduce the total by 10 to 35 percent, depending on your tax bracket.)

One of the pitches by mortgage accelerator purveyors is that most people “don’t have the discipline” to do this on their own. By having them deduct money from your checking account, they argue, they’ll help you stick with your early payoff plan. (On the other hand, if they screw up a monthly payment to your mortgage lender, you’re still responsible.)

The Answer Desk Accelerator has a feature to help you there, too. Try this: Open a checking account with an online bill payment feature, and then set it to churn out mortgage checks each month for $100 more than your monthly payment. Yes, things will be tight until you get used to it. But here’s one more number to help keep you on track. If you go with our $100 Plan, for example, the interest saved works out to $152.36 per payment. Though you’ll be out $100 in cash each month, over the (shortened) life of the loan, you’ll save $152.36 a month and keep it out of the bank’s hands. So our $100 Plan is really a $52.56 monthly raise.

Fee-based accelerator plans also promise to customize your plan to your specific mortgage terms and budget. The Answer Desk Accelerator has that covered, too. But you’ll need the help of a calculator to tailor your payments to your mortgage. There are a number of good ones out there; our favorite is at Bankrate.com

And it’s free.

We bought a house last year .. (and took out) a home equity line of credit at 7 percent, but it has climbed since to 8.5 percent.  We have been paying for our HELOC for almost one year now, and I just realized that we barely paid the principal of the loan - almost 98 percent goes to interest rate or finance charge. What’s the best way to pay off the HELOC, where a big chunk can go to its principal rather than interest rate?  What would you suggest to pay off our loans quicker?
-- Francis F., East Meadow, N.Y.

You could give the Answer Desk HELOC Accelerator a try. But as you’ve found, the math on home equity loan’s is a little different than on your conventional first mortgage — it’s even more heavily weighted in the bank’s favor. (Which is why it probably wasn’t explained to you properly when you applied for it.)

Unlike a mortgage or a home equity loan, most HELOCs are divided into two phases: the drawdown phase when you take money out, and the payback phase when you have to pay back the principal. In the drawdown phase, which can last as long as 10 years, you pay little, if any, principal (unless, of course, you come up with a lump sum to pay it off).

This is what makes HELOCs more difficult to get out from under. By limiting the monthly payments in the drawdown phases to interest only, the lender makes it much easier to borrow more than you otherwise could afford. And even though the monthly payments seem low, the drawdown costs you more in interest — because you’re carrying the original principal balance for years without paying it down.

HELOCs have also rapidly become more burdensome as short-term interest rates have risen. Three years ago, you could get a HELOC for 4 percent — very cheap money by historical standards. But as holders of HELOCs have discovered, the recent run-up in interest rates has roughly doubled the cost of these loans in three years. And unlike adjustable rate mortgages, which reset at a fixed schedule, HELOCs can — and do — change any time short-term interest rates change.

Even if rates go back down, you still face sharply higher payments when the credit line hits the payback phase. When they market these loans, most lenders reassure borrowers by pointing out that you can always just roll over your HELOC into a new one, putting you back in the “interest only” drawdown phase. Which is another way of saying you’re can be “interest slave” for the rest of your life.

The Answer Desk Accelerator HELOC plan can help. After paying off your monthly interest, send another check, and it will applied to pay down your principal. But if you’re carrying a big balance on your HELOC, you may want to tap any savings you’ve got to pay it off faster —especially if you’re paying 8 percent interest on a HELOC and getting 2 percent interest on those savings.

© 2006 MSNBC Interactive
URL: http://www.msnbc.msn.com/id/15145783/

Boosting your post-bankruptcy credit score
Posted: Oct. 10, 2006

The Bankruptcy Adviser by Justin Harelik • Bankrate.com

Dear Bankruptcy Adviser,
Why should I care about a bankruptcy on my credit report? Six years after being discharged, my credit score is 736. Does it still make a difference?
-- Sharon

Dear Sharon,
This is a great question. You may have “ghost credit,” and I’ll get more into that in a minute, but first things first: Congratulations! I have no doubt your improved credit score is the result of hard work. There is more you can do to improve your credit and I hope this article will give you, and everyone else in similar situations, a few ideas.

You should always care about every mark on your credit report. When a lender is deciding whether to give you access to their money, they rarely make a mistake by saying, “No.” “No” is their default answer and anything that leads them down the path to saying “no” is worthy of concern.

However, once you’ve done everything you can do, let it go. Because bankruptcy information stays on your credit report for 10 years, you have four years to go before the bankruptcy mark can be removed.

During those 10 years, there are negative consequences to having this mark on your report.

Consequences of bankruptcy:

• Some banks may refuse your credit card application or demand a higher rate.
• Some credit underwriters may discriminate against you if you apply for a home mortgage or car loan.
• Many unsecured credit card companies may not increase your credit limit as rapidly as you might like.
• Prospective employers may discriminate against your employment application.

Now, let’s talk about “ghost credit.” You may have it and there’s not much you can do about it, but you should at least know what it is. Four years from now, Sharon, your credit report will be squeaky clean, but it won’t go back before your bankruptcy. In other words, your credit history will only be 10 years old. Negative but accurate information comes off credit reports, but positive accurate information stays on forever, so people who have not declared bankruptcy have credit reports that look different than yours.

Underwriters looking at your loan application may take into account your “ghost credit.” That is, the underwriters will ask themselves, “what happened to Sharon before these 10 years?” Of course, it’s none of their business, and in the scheme of things, it’s not nearly as important as what has happened recently (which is reflected in your credit score). However, underwriters are careful people and they would prefer a positive credit history of long standing over a positive credit history of comparatively short standings and ghost credit. This is not something to worry about, because you cannot go back in time, but it is worth understanding.

Here are some ideas for how you can accelerate the restoration of your credit and squeeze some extra advantages out of the system:

If you haven’t already done so, make sure you have accounts with major banks. Many times after bankruptcy, people must get credit cards and loans from less well know financial institutions. Once you’ve held some of these cards for a while, if possible, switch over to accounts with big banks. The reason is when they say “yes,” their affirmations carry more weight. 

If you have a car loan, consider refinancing it. If you bought a car with a four- to six-year payment plan and your credit score has improved at all, you could qualify for interest rate and payment decreases.

If you haven’t asked for an increase of your credit limit in a while, do so. The formula for determining your credit score depends on how much credit you have available. For example, you may be eligible to have your credit limit extended from $3,000 to $8,000. That extra $5,000 increases your credit availability, and that could help your credit score.

If you know how, take a look at your report at least once a year or work with someone who can. Improving and maintaining your credit is a lifelong endeavor and every detail counts.

Justin Harelik is a practicing attorney in Los Angeles. To ask a question of the Bankruptcy Adviser, go to the “Ask the Experts” page and select “bankruptcy” as the topic.

Eight great year-end moves
These financial steps will help you save more money, get better insurance coverage and pay less tax.
October 12 2006: 7:23 PM EDT

By Ellen McGirt, Fortune senior writer

(Fortune Magazine)—Nathaniel Hawthorne understood the temptations of the season. “I cannot endure to waste anything as precious as autumn sunshine,” he wrote. “So I spend almost all daylight hours in the open air.” Nice work if you can get it.

These days fall is also an ideal time to assess your financial security - before the inevitable ramping up of workplace pressures and in time to affect this year’s tax filings.

Here’s a painless eight-step program - from retirement and insurance planning to health care and philanthropy - that not only protects your future but also helps you take advantage of new tax twists (kiddie tax trap; see No. 8) that can save money and reduce anxiety. Getting your financial house in order casts its own warm glow, freeing you to enjoy falling leaves with the peace of mind Hawthorne sought long ago.

1. Rebalance your 401(k)

2. Revisit your estate plan

3. Sock it away

4. Give smarter

5. Review your health plan

6. Clean up your taxable account

7. Do a property insurance checkup

8. Check the new credits and taxes

alternet reviews the documentary “in debt we trust”, by veteran TV journalist and media critic Danny Schechter.

If you wonder why borrowed money fuels the lifestyles of all ages, turn on a new documentary, “In Debt We Trust,” by the veteran dissenting TV journalist and media critic, Danny Schechter. “In Debt We Trust” vividly shows how Americans get ensnared in a web of debt spun by a “credit industrial complex” that almost seems to function like a conspiracy to drive people into financial servitude. Schechter’s central insight is bold, provocative and timely. As he quotes a Brooklyn consumer activist, “Debt is profitable.”

Zachary: What can be done?

Schechter: The first step is raising awareness. People don’t usually talk about this problem. It’s a point of embarrassment to be overwhelmed by debt. When you give people permission to talk about this, they pour out. We also need grassroots political action to promote responsible lending. We have to roll back the bankruptcy law changes. We have to fund counseling and advice. We need to make financial literacy part of our educational system.

read the story here: young borrowers face a life of debt and, if you’re interested in the documentary, see in debt we trust.

A recent study on identity theft by the center for identity management and information protection focused on identity theft offenders rather than victims, as in previous studies.  The purpose of the study, funded by the Dept of Justice, was to assist both public and private sectors in order to combat identity theft crimes.

The Secret Service cases (517 cases, 933 defendents) that were reviewed included only those where personal information was used to commit fraud.  “Personal information includes name, address, social security number, and date of birth, but excludes credit cards, debit cards, and other bank cards.”

The results of the study included some interesting findings:

The Cases

• Most cases were from the northeastern United States
• About half of the defendents were sentenced to incarceration
• Median dollar loss was $31,356

The Offenders

• By Age:
• 42.5% were 25 to 34 years of age
• 33% were 35 to 49 years of age
• 18.5% were 18 to 24 years of age
• 6% were 50 years or older
• 53.8% were black, 38.3% were white, 4.8% were hispanic
• 1/3 were female, of which almost 2/3 were black
• 24.1% were born outside of the United States – the top 5 countries represented were Mexico, Nigeria, the UK, Cuba, and Israel
• 71% had no prior arrests
• The most common motivation was personal gain (obtain and use credit, procure cash, conceal actual identity, apply for auto loans)

The Crime

• Fraud was the leading crime committed by identity theft - larceny was the next most frequent
• 42.4% of the cases involved 2 to 45 offenders
• 50% of cases involved the use of the internet and/or other technological devices
• 20% of cases involved change of address forwarding and dumpster diving
• Of 274 cases, a business (service, retail, financial industry, corporation) was the point of compromise in 50% of the cases – a family member was the point of compromise in 16%
• 1/3 of the cases involved identity theft through employment – 43.8% were in the retail industry (stores, car dealerships, gas stations, casinos, restaurants, hotels, hospitals, doctors offices) and 20% were private corporations

The Victims

• 37.1% of the victims were financial industry organizations (banks, credit unions, credit card companies)
• 34.3% of the victims were individuals
• 21.3% of the victims were retail businesses (stores, car dealerships, gas stations, casinos, restaurants, hotels, hospitals, doctors offices)
• 59% of the individuals victimized did not know the offenders – 10.5% were customers or clients – 5% were family members
• 20.3% of the offenders committed identity theft at their place of employment – 59.7% in retail, 22.2% in the financial services industry

Credit Freezes will be available to all consumers by November 1st, whether or not they have been victims of Identity Theft.

from bankrate:

Consumers in all 50 states already have the right to place a fraud alert, regardless of whether they are victims of ID theft. The fraud alert lasts for 90 days and alerts new creditors and other businesses checking the creditworthiness of an applicant that the consumer may be a victim of fraud.

While the fraud alert merely asks the lender to take additional precautions, a credit or security freeze prevents third parties from receiving a copy of the consumer’s credit report or credit score, making businesses less likely to grant credit or services to the applicant. Only businesses with a permissible purpose, or for whom the consumer lifts the freeze may obtain the consumer’s credit information.

--With TransUnion, you may do so by mail.  To remove the freeze permanently, you must do so in writing.  The credit freeze remains in effect until you remove it permanently in writing.  You will receive a PIN, so that you may lift the freeze temporarily by writing or calling.

--With Experian, you may do so by mail.  To remove the freeze permanently, you must do so in writing.  The credit freeze remains in effect until you remove it permanently in writing.  You will receive a PIN, so that you may lift the freeze temporarily by writing or calling or instantly online.

--With Equifax (their plan has not yet been finalized), you may do so by mail.  You may permanently remove or lift the freeze temporarily by calling the toll-free number provided to you.

All credit freezes will remain in effect until you remove it permanently or lift it temporarily, except in Kentucky, Nebraska, Pennsylvania, Rhode Island and South Dakota, where it expires after seven years.

Fees to add or remove a credit freeze will vary, so please check with each.

from www.chron.com:

Mortgage lenders are bracing for a flood of defaults as many adjustable-rate mortgages originated in 2005 and 2006 during the height of the housing market frenzy reset to higher interest rates.

The loans were initially attractive options for buyers because of their cheaper “teaser” interest rates that kept monthly payments low, but even a small percentage increase can translate into a far higher payment.

With home sales in decline and prices down or flat in many regions, more homeowners are landing in foreclosure because they can’t afford to sell their homes after falling behind on payments.

It seems they’re right.

A total of 446,726 homes nationwide were targeted by some sort of foreclosure activity from July to September, up 100.1 percent from 223,233 properties in the year-ago period, according to Irvine-based RealtyTrac Inc.

The current figure was 33.9 percent higher than the 333,731 properties in foreclosure in the second quarter of this year.

The top 10 states in foreclosure rates: Nevada, California, Florida, Michigan, Ohio, Colorado, Arizona, Georgia, Indiana and Texas.

The Federal Reserve Board cut the short-term interest rate one quarter of a percent to 4.5 percent.  The prime rate will drop to 7.5 percent. 

Don’t expect yields on CDs (especially short term CDs) to fall or for fixed-rate mortgage rates to fall, this time.  After the previous half a percentage cut in September, neither reacted as expected.

In doing so, the Feds stated that while economic growth from July through September was solid, they expected it to slow, partly reflecting the “intensification” of the housing market correcting itself, that inflation is still a risk, due to rising energy and commodity prices, and that the risks of inflation and economic slowdown are “roughly” in balance.

A further translation of What the Fed Said.

Per Bankrate:

If you have an adjustable-rate mortgage, the Fed’s decision to cut interest rates by 25 basis points will likely cause your monthly mortgage payment to dip at your next reset. Rates on new fixed-rate mortgages also may dip, but that’s much less certain.

Bankrate suggests tuning “out the talking heads on financial news programs and instead ask a simple question: The Fed just did ‘X’ - what did the bond market do?  In particular, keep an eye on the 10-year Treasury rate.  If that falls, mortgage rates will fall.”

Every three years, the Federal Reserve Board conducts a survey on finances of U.S. families.  The survey includes information on income, assets, net worth, pensions, etc.  Being curious, I decided to see what the last survey had to say.  What exactly ~is~ the status of U.S. families?  How are they faring?

First, for those who don’t know or have forgotten, let’s cover what is meant by “mean” and “median”.  “Mean” is an average, while “median” means the middle. 

You have a list of numbers: 1,2,3,4,5,6,7.  The mean (or average) would be: 4.  The median is: 4. 
But suppose you replaced the 7 with 29: 1,2,3,4,5,6,29.  The mean (or average) would be: 7.  The median is still: 4.

What does this show? 

Consider you have 10 people in the room.  The mean (average) income for those 10 people is $50,000 per year.  The median income is also $50,000 per year.  Suppose one of those people is replaced by Bill Gates.  The median income remains $50,000 per year, but the mean income goes to $50 million.  You could now say that the average income is $50 million per year, but how accurate is that?  The deviation between the median and mean give you a better glimpse of the ~reality~ of things.

The 2004 “Recent Changes in U.S. Family Finances” Summary shows:

• Family income during the 2001-2004 period
• - Median increase 1.6 percent
• - Mean decrease 2.3 percent
• Family net worth during the 2001-2004 period
• - Median increase 1.5 percent
• - Mean increase 6.3 percent
• Median wealth declined for families in the bottom 40 percent of the income distribution and rose for those higher in the distribution
• Mean wealth stayed about the same for all income groups

In the three years after the 2001 survey, interest rates moved generally lower; indexes of equity market performance trended generally downward over the early part of the period but made up the losses with gains in 2004; and residential real estate appreciated strongly.

However…

The overall share of financial assets in families’ portfolios… declined despite substantial gains in holdings for some groups.  Of particular note, the share of families that held stocks either directly or indirectly through an account type retirement plan or another type of managed asset account fell to about 49 percent in 2004 after having reached an SCF high of almost 52 percent in 2001.

This decline is explained due to the rise in non-financial assets; strictly, real estate.  Homeownership went up by 1.4 percent, while ownership for other residential real estate (2nd homes, investment properties) went up by 1.2 percent.  So basically, people transferred their financial assets over to real estate (home ownership).  It will be curious to see what happens in the 2007 Survey, seeing that we’ve had such a problem with the housing market recently.

To further underscore this point, the proportion of families assets offset by debt rose from about 12 percent in 2001 to 15 percent in 2004.  Banks own alot of homes :| And sadly, we’re seeing a huge climb in the number of foreclosures (See Homes Facing Foreclosure Doubles).

Hand in hand with this, the 2004 period also saw a rise in the proportion of families that had been delinquent with their debt payments, along with an increase in the median ratio of loan payments to family income.

Again, I’ll be very curious to see where we stand in the 2007 survey.  From the 2004, it would appear that the adage, “the rich get richer, while the poor get poorer” does indeed apply.

i have a pet peeve with banks.  while i sincerely appreciate the fraud prevention that many have implemented, i find it disturbing to be called at home by someone purporting to be from my bank, who asks me about my accounts and charges on those accounts.  my normal reaction is to give them absolutely no information and to request a name and phone number from them.  then i call the bank’s main number and tell them who i was contacted by.  if it’s a valid call, they’ll transfer me to the correct department.  it may seem somewhat paranoid, but with identity theft a very real issue, it’s the safest way.

this morning, i received a call from “tonya” at “imagine mastercard”.  she stated she was with the “fraud dept” and that they were trying to locate *me* to verify that i had opened an account with them in oct-2007.  when i wasn’t forthcoming with information, because i didn’t trust the phone call, she tried pumping me for information, “have you lived in missouri?” no, never been in missouri.  i continued to remain skeptical of the phone call and, since i wasn’t a willing victim, she ended the call with, “i suggest you check your credit reports, as several accounts were opened using your information.”

well.  she’s right.  i checked my credit report and i’ve had accounts opened using my information… by me.  none in october of 2007.  no entries showing ‘imagine mastercard’ or it’s 1st bank of delaware.  no suspicious activity at all.

looking up “imagine mastercard”, i see that they’re a “bad credit, no problem” credit card company.  i called them directly and, as i expected, they required my ssn to be able to verify whether they had actually called or not.  since they do not show on my credit report and since i’ve never opened an account with them, i refused to give them that information.

i’m unsure what the actual purpose of the call was, but based on the behaviour of the woman who called me and their company representatives that i spoke with later, i believe something fraudulent was afoot.  two scenarios immediately came to mind: one, they call people alerting them of “fraudulent accounts”, hoping that it scares the people bad enough that they will react by divulging personal information that can be used to open accounts.  or.  two, they have bad debts that they’re trying to hang on anyone who is scared enough to divulge information, so that they can report it to credit reporting agencies and possibly be paid by a panicked consumer.  the 2nd may seem farfetched, but i’ve had a similar experience with someone calling and claiming that i’d written a hot check and to come in and pay it immediately.  when i asked for a copy of the check before i’d pay, it mysteriously became unavailable.  (it wasn’t mine and i knew that from the start.)

whomever it was and whatever their purpose was, *something* was wrong with that phone call.  be very very careful if you receive similar calls.  do NOT ever divulge ANY personal information to someone who calls YOU.  ask them for their name and a number you can reach them at.  then look up the company and call them directly.  let them connect you to the person who called.  the same holds true with emails.  never click through a company’s email to go to a url or reply to their email, unless you KNOW that the email is trustworthy.  personally, even if i believe / know the email is trustworthy, i still refuse to click through.  i go directly to the company’s website myself.

it’s entirely possible, as a 3rd scenario, that it was just a mistake (though they did have my name) and they called the wrong person. 

it’s better to be safe than sorry, however!

the recent failure of indymac bank has brought attention to just what “fdic insured” means.  the federal deposit insurance protects the first $100,000 of deposits that you may have in a bank.  anything beyond that and, if your bank fails, it’s a loss.  in the case of indymac customers, about 5% of the total deposits were uninsured.  while i would suggest that people make sure their funds are fdic insured, the following article caught my eye....

from seeking alpha:

Can you just imagine what would happen if everyone who is above the FDIC limits listens to the media’s public service announcement and strategically positions their deposits so every penny in banks is covered? Think about it. Think what happens to banks that are relying on these uninsured deposits for cheap financing if they are reallocated to another bank down the street. Are we sure that all banks will get a perfect balance of new insured deposits in exchange for the uninsured deposits they lost? Is it impossible to imagine a run on banks caused by everyone trying to avoid the consequence of a run on banks?

so let me say…

it’s not always necessary to spread your funds across different banking institutions in order to insure that they are covered by the fdic. 

from Worried about your money after IndyMac’s failure? Don’t be.:

If you have more than $100,000 in deposits in a single bank, you may be able to structure your accounts in a way that all the money is protected.

It depends on the account’s ownership category, such as single accounts, joint accounts, certain retirement accounts and revocable trust accounts.

In addition, federal law provides for insurance coverage of up to $250,000 for certain retirement accounts per owner per insured bank.

personally, i’m longing for the day when i have to worry about my excess deposits over $100,000 :o