Two Unsettling Articles You Should Read

There are a couple of articles you should check out - both unsettling.

One is from Market Watch about the IRS and some states that are watching Social Media sites - "Taxman Turns to Social-Network Sites" http://bit.ly/dDmQX You better be careful what you Twitter or post to Facebook, and not just because it might embarrass you someday!

The other is about the details of the Credit Card Legislation that was passed in May. A recent blog post of mine gave you a link to read about the new rules credit card companies will have to abide by, but this link listed a provision in the bill that I hadn't noticed anywhere else:

-- Includes unrelated provision that would allow people to carry loaded guns in national parks and wildlife refuges. http://bit.ly/EQZIz


Sure enough, H.R. 627: Credit Card Accountability Responsibility and Disclosure Act of 2009 was signed into law by the President with this provision in it:

(8) The Federal laws should make it clear that the second amendment rights of an individual at a unit of the National Park System or the National Wildlife Refuge System should not be infringed.

(b) Protecting the Right of Individuals To Bear arms in Units of the National Park System and the National Wildlife Refuge System- The Secretary of the Interior shall not promulgate or enforce any regulation that prohibits an individual from possessing a firearm including an assembled or functional firearm in any unit of the National Park System or the National Wildlife Refuge System if--

(1) the individual is not otherwise prohibited by law from possessing the firearm; and

(2) the possession of the firearm is in compliance with the law of the State in which the unit of the National Park System or the National Wildlife Refuge System is located.

Now, I don't want to debate here whether one should be allowed to carry a loaded gun in a National Park, but I sure as heck want to debate whether these totally unrelated provisions should be allowed to be attached to bills in the first place.

Chase Upping Minimum Payments on Credit Cards

If you haven't had some credit card limits reduced or interest rates increased you're in the minority. But now the credit card companies (at least Chase Bank credit cards) have a new tactic.

It happened to me last month and to a friend this month. Now they are raising the minimum payment - mine went from 2% to 5% and since this is a card with one of those (long gone!) "2.9% interest until paid off" deals I long ago max'd it out by transferring higher balance cards to it. But now the minimum payment almost tripled!

Exactly the same thing happened to my friend, and they are both Chase issued credit cards. Interestingly they are reacting to objections differently...I was offered a 5-year payoff at my existing interest rate if I closed the account but my friend was not given that option.

A new law was passed regarding what a credit card company can and can't do, but a lot of the rules don't take effect until 2010 - so you can bet they will try to make whatever changes they can to your accounts before then. Click here for information: Credit Card Legislation

So read all of those pesky "Change in Terms" inserts or mailings from your credit cards and don't be taken off-guard.

Credit Cards Changing Terms and Interest Rates

Watch your mail very carefully for information sent by your credit cards. Not only are many (AMEX, Citibank, Wells Fargo to name a few that I have personal knowledge of) reducing your overall credit limits but they are beginning to aggressively circumvent your use of credit by changing the terms.

I just got a letter from Citibank giving me the right to opt out of new terms on my existing credit card. The interest rate will go from 14% to 24.99% and can go as high as 29.99% for any new purchases after tomorrow. If I don't agree to that change in terms then I can continue with the current rate on the existing balance (as long as I don't miss a payment or am late with a payment) until the end of the card membership year or the expiration date on the card, whichever is later. At that poing the account will be closed, making any balance remaining payable under the new, higher interest rate.

Thankfully I just had a new card issued with an expiration date of mid-2011 - so I have until then to whittle away at the balance. Others may not be so lucky. You could find your card is expiring soon in which case you'll be paying exhorbitant interest rates.

Don't overlook these letters...I have a feeling we'll be seeing lots more of them being sent out.

Credit Card Offer - Reduce Your Balance and Get a Reward

I got an interesting offer in the mail the other day from one of my credit cards. This is one that had already reduced my credit line down to just what I owed a few weeks ago. I had taken advantage of a previous offer to get a low interest rate if I transferred other balances to it. Since it was pretty max'd out it the credit line only went down $1,240 - strange number, huh? Basically the computer looked at what I owed and added enough for the next interest accumulation and that became my new credit line. I figured that if I pay-off any more of it they would probably reduce my credit line even further. So that that card has been getting the minimum payment, until the special interest rate offer expires.

The new offer from them is interesting...for the next 4 months they will match 20% of the amount over the minimum payment I make, up to $550. Sounds good, but the catch is that they will temporarily suspend the ability to charge on the account and at the end of the 4 months they will reduce the credit line by what I paid over the minimum plus the 20% they give me.

In my opinion this is a more reasonable way to get people to pay down their credit balances - give them a financial incentive and tell them up-front that they will also be lowering their available credit line. The other way, just lowering credit lines arbitrarily, leaves people without credit they may have been counting on to pay college tuition, etc. And many, like me, will quickly max out their available credit with a cash advance in order to make certain that money is available for upcoming expenses or "buffer money" for those unanticipated expenses.

For example this past spring our beloved dog unexpectedly collapsed while we were 3,000 miles away and was diagnosed with a very aggressive blood vessel cancer; they didn't expect her to survive the night. We put several thousand dollars on our credit card for transfusions, surgery, etc. in order to buy (literally) time for us to return home and spend a few weeks with her before she passed. For us, not having had that credit available would have been tragic emotionally.

The availability of credit in our society provides for flexibility; yes, it has gotten out of control and some people have used it to live beyond their means, but the random reduction of credit lines without any reason (late payments, etc.) puts more of a strain on people that are managing their credit. And in many cases it will have a backlash when people who have been paying down debt begin to save that money instead and pay only minimum payments so that they retain their ability to respond to unforseen needs.

Cash for Points - Check Your Options!

Not long ago I remembered that American Express used to allow you to exchange Membership Rewards Points into cash. So I investigated and although they don't give you "cash" you can turn them into American Express Travelers Cheques that you can use anywhere. You really have to look to find it - just keep looking for "more rewards."

I checked all the other cards I accumulate points on and what do you know several of them allowed you to exchange points for cash...a real, honest to goodness check. I had enough points spread out over several cards that allowed me to get over $1,000.00 - yes, you read that right!

So if you need a little extra cash start looking at the Rewards Programs you have with your credit cards and look at ALL the options. You may have a nice surprise waiting for you!

More On Credit Lines Being Reduced and The Ramifications

I've been on a Forum talking about this subject and got some interesting thoughts and comments.

A while ago I saw an article on this issue and here's a quote - the bigger (??) issue is what all of this does to your credit score, so take heed:

"Here's how that happens: Let's say a cardholder has a credit limit of $10,000 and a balance on the card of $4,000. The card company worries that large balance may increase the prospects for default, so it lowers the credit line to $5,000.

But in doing that, it completely changes what is known as the credit utilization rate, raising it from 40 percent to 80 percent. That is then factored into the calculation of one's so-called FICO credit score, which measures creditworthiness, according to Craig Watts, a spokesman for FICO-creator Fair Isaac Corp. "

Here's the link to the full article:
http://channels.isp.netscape.com/pf/story.jsp?flok=FF-APO-1310&idq=/ff/s..

So this situation is going to have far-reaching effects - and on people with good credit, not just people in over their heads. When everyone's FICO scores start dropping are they going to revise the scoring range????

And it may have an effect on businesses as well. If people's credit is shrinking they may not be able to buy the stuff they would have if they could have put it on their credit card and paid it off over a few months.

That also brings up questions as to what impact this will have on businesses? Someone brought up the question of what will happen to the Automatic Recurring Payments a lot of us have set up to pay for various monthly charges. I know I put a lot on my credit cards because I get mileage points. Plus if it's an internet vendor I think most people are more comfortable giving them a credit card to bill to than their banking information. And most aren't even set-up to do an Electronic Funds Transfer (EFT) from a checking account anyway.

What else can you think of that will be affected?