December 2011 - Posts - Dollar Stretcher Guest Bloggers
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December 2011 - Posts

  • Top 10 Debit and Credit Card Stories of 2011

    by Bill Hardekopf

    This past year was a very eventful one in the debit and credit card industry. Here is a review of the top ten stories of 2011:

    1. Debit Card Interchange Fee

    The government regulation of the debit card interchange fee was the most controversial issue of the year. The Durbin Amendment to the Dodd-Frank financial overhaul bill went into effect on October 1. Before the legislation, the interchange fee averaged 44 cents per transaction. Now, the reduced fee is 21 cents plus an additional amount to cover losses from fraud. This cost the banks billions of dollars in lost revenue. The interchange fee was intended to resolve a bitter issue for merchants, but it also ignited unintended consequences for consumers, such as banks dropping rewards for debit card purchases in the spring and proposing to add fees for debit card usage in the fall.

    2. Banks Add, Then Rescind, Debit Card Fees

    A number of banks introduced a debit card fee of $3 to $5 each month that the debit card was used for a purchase in order to make up for the revenue lost from the reduced interchange fee. But the public rebelled when Bank of America added the $5 fee in September. This fee received condemnations from consumers, Congress, and President Obama. Some consumers even declared a "Bank Transfer Day" on November 5. Banks quickly backed down and dropped the fee at the end of October.

    3. Greater Rewards for Credit Card Consumers

    After the credit crash in 2008, credit card issuers cut back on the rewards offered to new cardholders. But in 2011, nearly every issuer ramped up the rewards, trying to attract new customers with good or excellent credit scores. Rewards are used to compete for new cardholders, as well as to encourage credit card spending and regular usage.

    Some cards now offer very attractive bonuses based on usage. The Chase Freedom card began offering a $200 cash back bonus once a new cardholder spent $500 during the first three months. Capital One Cash was introduced during the year and offers a 50% cash back bonus on all you earn each year, plus an additional $100 bonus for spending $500 on the card during the first 90 days.

    Earlier in the year, there were extremely attractive airline rewards. In March, Capital One created a buzz with the heavily promoted "Match My Miles Challenge" where consumers could earn up to 100,000 miles by switching and spending on the Venture Card. Chase followed with a promotion on the British Airways card where cardholders could receive an extra 100,000 miles by becoming a customer and reaching a certain spending level.

    4. More Attractive Balance Transfer Offers

    Balance transfer offers were also strong throughout the year. Issuers used very attractive offers to lure credit card customers to transfer their existing balance from a competitive card. Nearly every major issuer currently has a card where consumers can receive 0% APR for an extended period of time, including Slate from Chase for 12 months, Capital One Platinum Prestige for 15 months, Discover More for 18 months, and Citi Platinum Select for 21 months.

    5. Mobile Payments

    Google Wallet debuted in September and mobile payments became a payment option for some smartphone users. Mobile payments allow consumers to make purchases or transfer money with a quick application downloaded to a mobile phone. Even though mobile payment systems are now available, plastic cards and cash won't vanish tomorrow. Consumers and retailers will need convincing and incentives to make the switch. Consumers won't save money by paying with a mobile phone. The same fees and interest rates for consumers and interchange fees for retailers will apply to mobile payments. Retailers are also reluctant to spend the money to buy the equipment necessary to link your cell phone to their cash registers.

    6. Defaults and Delinquency Rates Decline

    It is a much healthier environment for credit card issuers in 2011. Credit card defaults and delinquencies declined during most months this year. Credit cardholders and issuers both made changes over the past couple years that brought an excessive system of credit card borrowing and lending back under control. Many of the borrowers who could not pay off their debt had already defaulted, while others have diligently paid down their balances and used other forms of payment to avoid the high interest rate penalties. Credit card issuers closed risky accounts, cut credit limits on millions of accounts, and tightened lending standards to cut their risk of defaults and late payments.

    7. Credit Card Issuers Drop Some Fees

    Some banks tried to polish their tarnished image by dropping some credit card fees. Chase is now offering a Slate card that for a limited time does not charge a 3% fee for balances transferred during the first 30 days that the card is open. Other issuers have eliminated the foreign transaction fee on certain cards. Discover dropped its 2% foreign transaction fee. Chase eliminated its 3% foreign transaction fee on the Sapphire Preferred card, and Citi dropped its 3% fee from the ThankYou Premier and ThankYou Prestige cards. Avoiding the foreign transaction fee is a significant savings for travelers, but also for consumers who makes a purchase from another country or even a purchase that is routed through a foreign bank.

    8. Additional Protections for Cardholders

    The Federal Reserve Board approved a rule designed to provide additional protections for credit card consumers. The Board's rule amended Regulation Z (Truth in Lending) to clarify prior rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act).

    The CARD Act required issuers to consider a consumer's ability to make payments before opening a new credit card account or increasing the credit limit on an existing account. Issuers must consider the consumer's individual income or salary. The application can no longer request "household income" because that term is too vague. As a result, stay-at-home parents now find it much more difficult to be approved for a credit card.

    It also clarified that promotional programs, like introductory rates that waive interest charges for a specified period of time, must follow the same rules as promotional programs that apply a reduced rate for a specified period. Offers that waive interest charges during an intro period cannot revoke the waiver and charge interest during the intro period, unless the account becomes more than 60 days delinquent.

    9. Consumer Financial Protection Bureau Opens

    Credit cardholders now have a place to file a complaint against their credit card issuer. The new Consumer Financial Protection Bureau (CFPB) was created by Congress through the Dodd-Frank Act. While it still does not have a director, it opened in July. It offers consumers webpage just for credit card complaints. During its first three months of operation (July 21 through October 21), the agency received 5,074 complaints. The most common complaints involved billing disputes (13.4%), interest rates (11.0%), and identity theft or fraud (10.8%). Most of the complaints (84%) were sent to credit card issuers for review and response. Issuers reported either full or partial resolution of 74% of the forwarded complaints, and 71 percent of these consumers did not dispute the responses provided.

    10. Government Issues Debit Cards for Tax Refunds

    The U.S. Treasury started issuing debit cards (MyAccountCard Visa Prepaid Debit Card) instead of paper checks for tax refunds to low income individuals. The Treasury Department is converting to debit cards for several reasons. For the government, they are less costly to mail than checks. For the recipient, they provide a safer, faster and more convenient way to distribute money than checks. Many low income individuals do not have bank accounts and the cashing of these refund checks can be costly. Ideally, these cards reach consumers six weeks earlier than a check. The government hopes the distribution of these cards cuts down on the costly refund anticipation loans than many low income consumers receive.

    Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

  • Overdraft Fees on the Rise

    by Bill Hardekopf

    Overdraft fees are again taking a larger bite out of our pocketbooks.

    In July 2010, new regulations from the Federal Reserve required consumer consent for overdraft protection for ATM and debit card transactions. These overdraft regulations cost the banks billions of dollars in revenue, but the overdraft fees are increasing once again.

    Overdraft revenue fell for six quarters, but have now risen by $700 million in the second quarter of 2011, according to Moebs Services. In addition, the average number of overdrafts per household increased during the same period. Moebs found that 26 percent of consumer checking account holders intentionally overdraw their checking account.

    New research by the Pew Charitable Trust found that overdraft fee will cost Americans an estimated $38 billion in 2011.

    The Pew Charitable Trust found that banks can still maximize the number of times an account goes negative by processing deposits and withdrawals in an order that reduces the account balance as quickly as possible. They suggested the posting should be neutral.

    Overdraft protection is not a necessity and opting out is an easy way for consumers to avoid an expensive fee. If you don't have enough money in your account and you don't have overdraft protection, then the transaction will be declined. That would seem to be a much better alternative than these costly overdraft fees.

    Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

  • Jobless Execs: It’s Time to Dump the Old School

    by Colleen Aylward

    The nation’s unemployment rate may be inching downward, but the out-of-work figures have remained in the 9.0 to 9.2 percent range since April 2011, according to Bureau of Labor statistics.

    An estimated 32,000 job seekers found work in October, but that still leaves 13.9 million reported unemployed, which means a lot of people are competing for the same job.

    So how do you stand out in that crowd?

    “It used to be that executives could network their way onto the CEO’s schedule, maybe on the golf course or a chance meeting at lunch or a ball game,” says Colleen Aylward, a recruitment strategy expert and author of, From Bedlam to Boardroom: How to Get a Derailed Executive Career Back on Track! (http://devonjames.net/the-book/). ”It’s now up to you to gather your data, polish it up and position it where people will find you -- and that’s one of the biggest shocks in the executive job seeker’s world right now.”

    It’s a message that unemployed execs in their later years may not want to hear, but it’s one they need to get their collective arms around as the economy tries to rebound. The old-school train has left the station -- permanently -- and if 40- and 50-something prospects want to compete for top-flight executive positions it’ll mean breaking old habits and exiting their comfort zones.

    Two words: digital brand.

    Aylward says that it’s time to become an authority on-line and to create a virtual network of business connections so that you can easily be found.

    “Just when they thought their golden years entitled them to being 'served' by recruiters,  members of that older generation now have to do homework and market themselves,” says Aylward, who interviewed thousands of  jobless executives over 20 years.“They don’t want to hear it, or believe it, but it’s reality.”

    According to surveys, 89 percent of employers use a form of social media to identify job candidates, with LinkedIn, Facebook and Twitter the most popular. LinkedIn, with its more than 135 million members, dominates the competition, with 86 percent usage compared to just 50 percent for Facebook and 45 percent for Twitter.

    Sounds like a good place to start.

    After embracing social media (even building a personal website), Aylward has these tips:

    • Streamline your strengths with specific examples. It’s not the interviewer’s job to figure out what your strengths might be; it’s the candidate’s job. The days of clever cover letters opening doors are gone. Those resumes and on-line profiles better be stronger than ever and packed with data and specific accomplishments.

    • Don’t waste time with external executive recruiters. They don’t find jobs for people. You need to get in front of the internal corporate recruiters who are searching for you online. So help them do their job by researching companies online yourself, as well as locating jobs yourself, introducing yourself to a prospective employer and conversing directly with hiring managers online.

    • It’s all about them, not you. Get out of the mindset that matching yourself for a job or interviewing for a job is about you. It’s all about what you can do for them. That means defining your strengths and determining specific areas where you can solve their business problems. And be prepared to demonstrate that you have kept up with technology, industry changes, and how the economy has affected them.

    "Embrace change,” Aylward says. “You are still very valuable and worth money for a long time, but you need to make yourself visible and viable to those who need your expertise.”

    Colleen Aylward has led the executive search firm Devon James Associates, Inc. for 19 years and is founder of Recruitment, Inc., a spinoff software product company in the Human Resources & Recruitment market. She currently resides in Bellevue, Wash.

  • Taxing Troubles for the Unemployed

    by Lee Isaacson

    Spending time on the unemployment line can be discouraging, stressful and nerve-wracking. Those feelings are heightened when unexpected expenses arise. To avoid encountering additional distress, the unemployed should remember Benjamin Franklin’s immortal words, "In this world nothing can be said to be certain, except death and taxes." Yes, taxes. Even for the unemployed.

    With more people filing into the unemployment line every day, it’s critical we examine the major tax issues facing the unemployed. These include: the often misunderstood fact that unemployment benefits are taxable; the tax implications of taking part-time or subcontract work or making withdrawals from retirement accounts; issues related to the restructuring of debt; the dangers that arise from a failure to file; and misunderstanding what is and is not tax deductible. While understanding each of these issues will not make unemployment stress-free, it will help relieve some of the anxiety associated with unemployment and allow the jobless to focus more of their energy where it should be and that's on finding a new job.

    Many recently unemployed people don’t realize that unemployment benefits are taxable. They think that because the money comes from the government, taxes have already been accounted for and removed. This belief is reinforced by formerly unemployed friends and family who think they did not pay taxes on their unemployment benefits. In all probability, they actually paid enough in income taxes during the part of the year for which they were employed that it made up for the portion of the year for which they were not. To avoid an unpleasant surprise on April 15th, unemployed Americans should consider filling out a Voluntary Withholding Request (W-4V).

    To make ends meet, the unemployed often search for temporary work, including part-time and subcontract work. While this can be beneficial both financially and professionally, they will be required to file a tax return for any income over the minimum income level.

    Another way the unemployed often try to get by is by making withdrawals from their retirement accounts. Not only are most early withdrawals from IRAs and 401(k)s saddled with a 10 percent penalty, the amount withdrawn is subject to taxation. That being said, there are ways to withdraw from these accounts without penalty. Depending on the type of account, these can include using the funds to pay for certain medical or education expenses, or setting up annuity withdrawals.

    Cancellation of indebtedness (COD) income must be included in gross income for tax purposes. COD income can result when a lender forgives or reconfigures a borrower’s debt. Many of the unemployed are unaware of the tax implications that can result from a restructure of debt. If tax liability is not taken into consideration, restructuring can leave them far worse off than they were under the original loan specifications. 

    Among the unemployed who are aware that they may owe taxes, some make the mistake of adopting the Scarlett O’Hara “I’ll think about that tomorrow” attitude and don’t file on time, or ever. By burying their heads in the sand and filing late or not at all, the unemployed can be subjected to penalties and, in extreme cases, jail time. This only serves to make their situation worse. Instead, those who cannot immediately pay the taxes they owe should work with the IRS to set up a payment plan.

    Finally, those who do file may fail to recognize what is and is not deductible. Deductible items can include expenses related to travel, interviews, mailing and printing, and resume services, just to name a few. Getting the most deductions possible can save thousands of dollars come tax day – dollars that can be reinvested in the job hunt or used to pay bills.

    The unemployed cannot afford to be dealt another blow by falling into one of these easily avoidable pitfalls. To escape these threats, each should be taken into consideration by those dealing with joblessness. A thorough understanding of all possible dangers can help stop a bad situation from getting worse, and allow the out-of-work to keep their attention on the job search.

    Lee Isaacson is a member of the Reznick Group’s National Operating Committee and has more than 26 years’ experience working with professional services firms, closely held commercial businesses and various real estate entities. Lee has experience in accounting and tax services including financial reporting and analysis, technical support, quality assurance reviews, financial planning, cash flow planning, estate planning, deal negotiations, and transaction and deal structuring. You'll find the company’s web site at ReznickGroup.com


  • Holiday Cookie Exchange Money-Saving Tips

    by Diane R. Schmidt

    My family and I enjoy getting together once a year for our annual cookie exchange. It's a great time to spend time together during the busy holiday season and enjoy some sweet treats! Here are my best tips for having a memorable cookie exchange:

    The Basics

    Ask each guest to bring a big batch of cookies. You’ll need to estimate one dozen multiplied by the total number of guests. We typically have 8 people at our cookie exchange, so that would be 96 cookies.

    You may want to provide guidelines to each baker so that you get a good cookie assortment: rolled cookies, bar cookies, drop cookies, decorated cookies. Your friends may have family recipes they wish to share. You can also find tons of recipes online, like on Allrecipes.com, Landolakes.com and Verybestbaking.com.

    Packaging the Treats

    Each guest should also bring copies of their cookie recipe and containers to take cookies home. Heavy duty plastic freezer bags will work for sturdy cookies, but decorated cookies and more delicate shapes should be packaged in tins or resealable plastic containers. Provide waxed paper or parchment for separating layers of cookies.

    Last year, I picked up a few inexpensive bakery boxes to package the cookies. You can find bakery boxes and more cute containers at Michael’s and other craft stores. Dollar stores also have a great selection of containers to choose from. And to add extra style to your cookies, print these adorable Land o Lakes gift tags.

    Include Extras

    I picked up reusable tote bags on clearance last year at Pier One and included Glade candles (in holiday scents) with the cookies. Everyone loved getting a little something extra. You could also include an assortment of candy, stickers or another small treat.

    Tips for the Hostess

    Before the guests arrive, put on some holiday music and light a seasonal scented candle or spray a little holiday scent in your room. This will put guests in a holiday mood!

    Besides snacking on cookies, set out big bowls of popcorn and chips, serve veggies and dip, and put out an insulated server of hot chocolate and a pitcher of cider for all the cookie bakers to help themselves. Or you may want to make a quiche or tea sandwiches.

    Cookie Recipe Booklets

    Ask your guests to mail (or e-mail) their cookie recipes to you, or collect the recipes on the day of the party. Compile the recipes into a booklet for everyone to take home! Recipe booklets can be made in Microsoft Word or if you want to do something fancier, you can create a cookbook online.

    Help Others

    Have guests bring an unopened package of store-bought cookies or canned food. You can then collect the packaged food and bring them to a homeless shelter or food pantry. We also like to make extra plates of cookies for elderly relatives who couldn’t be at the party and we drop them off later.

    For great deals, freebies and more, check out Savingsmania.com. As one of the original money-saving blogs, Savingsmania.com by Diane Schmidt has been blogging and saving you money since 2003.

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