Credit Card Co Offers Fixed-Rate to Lure Consumers; Is This a Good Deal?

Banks are hurting with the economy and are looking for ways to lure back consumers who have increasingly turned to debit cards and cash-only payments.

New Bank of America card sheds variable interest rate

This October, Bank of America rolled out its “Basic” card, which establishes for the life of the card one interest rate for all purchases, transactions and cash advances.

“For those consumers who just want the basics, our goal is to offer products with features that are predictable, easy to understand and help them manage their finances responsibly,” says Ric Struthers, president of Bank of America Global Card Services.

Other features of the card are:

• One interest rate — U.S. Prime plus a margin of 14 percent — that never changes for the life of the account. Rate increases and decreases will only occur if the Prime Rate changes.
• No over-the-limit fee.
• Easy- to-understand, single-page disclosure explains terms and conditions.
• One flat fee of $39 for late payments

Is this card a good deal?

The interest rate. At 14% plus prime, you’re looking at a 17% interest rate. There are some consumers out there with interest rates of 9.99% and 13.99%. If you have good credit, you could obtain a lower interest rate than this offer. However, if you typically have interest rates over 20% then this card could be a good deal for you…..if you qualify.

The late fees. Some cards, especially ones issued from community banks, have $15 late payment penalties. The $39 late fee on the Bank of America Basic card is one of the highest fees charged by banks.

Remember banks are in the business of making money, not losing money. Whatever card they issue, it is meant to be done in their best interests, not yours. The best thing you can do for yourself is either pay your cards off every month, at least make the minimum payment, or opt for cash. There’s nothing wrong with using your debit card if you have money in the bank to cover the purchases

10 Ways to Tell If You Have FDD — Financial Deficit Disorder

By Lynnette Khalfani-Cox, The Money Coach

It’s not unusual to make the occasional late payment on a bill, or treat yourself to a frivolous purchase every now and then — We all have done it at some point in our lifetime, and perhaps even a few times too many. However, there are some people out there with FDD —Financial Deficit Disorder, who just can’t seem to break the cycle of making a tangled mess of their finances. Maybe you know who you are, maybe you don’t.

Here are 10 signs that indicate if you might suffer from Financial Deficit Disorder.

1. You are living paycheck to paycheck.
2. You’re constantly late paying your bills, from your car note to your rent or mortgage, and store charge cards.
3. You borrow money from your family, friends, or even mere acquaintances.
4. You’re paying service fees on your checking account because it is constantly dropping below the minimum balance, or you’re bouncing checks — or both!
5. You’ve taken out credit in the name of your children and your pet.
6. You park your car away from your home in an attempt to avoid repossession.
7. You change your phone number at least once in a year, screen your calls, or keep a separate number just for close friends and family so that you can avoid calls from bill collectors.
8. You and the pawn shop clerk are on a first-name basis.
9. You’re more familiar with the inside of the payday loan store than you are with your local bank.
10. You don’t have an emergency fund and a very low, or no savings account.

If three or more of the above apply to you, you probably have Financial Deficit Disorder. But don’t worry, there is still hope for you!

Next week I’ll give tips to help you straighten up your financial disorder!

6 Guidelines to Help You Maximize Your Credit Score

By Lynnette Khalfani-Cox, The Money Coach

Anyone living in today’s society knows that it can be a drag to be turned down for credit. It’s no fun when your application for a car loan, a student loan, a mortgage, or even just a credit card is denied.

Learn how to boost your credit standing by knowing the ins and outs of how your score is determined by Fair Isaac Corp., the company that calculates your FICO credit score.

Here are 6 guidelines to help you maximize your credit score:

1. Pay Your Bills on Time
Since the single-biggest component (35%) of your credit score is based on your payment track record, the best way to boost your credit score is to simply pay your bills on time. Not some of them; all of them. Even if you can only make minimum payments, that’s better than being late with a bill because late payments of 30 days or longer can drop your FICO score by 50 points or more.

2. Don’t Max Out Your Credit Cards
Some people mistakenly think that simply paying their bills on time each month will give them a stellar credit rating, but that’s not true. Your FICO score also considers how much credit you use on a regular basis.

Having a lot of debt signals that you are a potential risk for getting into financial trouble and not paying bills on time. If your credit cards are at or near their limits, you can raise your credit score by knocking down your balances.

In general, try to keep your balances to no more than 25% of your available credit limit. For instance, if you have a card with a $10,000 credit line, make sure you don’t carry a balance of more than $2,500 on that card. If you can pay off your credit cards each month, that’s even better. But if you can’t, it’s better to spread out debt over a few cards, to maintain lower balances, rather than max out any one card.

3. Get financial help with debt
Having lots of credit card debt lowers your credit score. So if you’re struggling to pay off debt or are living paycheck to paycheck, consider getting help from a trustworthy credit counseling agency.

One reputable resource is the National Foundation for Debt Management, a non-profit agency that negotiates with creditors, gets your interest rates lowered, and creates a plan to quickly get you out of debt.

For speedy help, contact NFDM at: http://enroll.nfdm.org/ or call them toll-free at 866-409-6336, and a HUD-approved credit counselor from NFDM will get back to you within 24-48 hours for a free, no-obligation assessment of your situation.

4. Keep Older, Established Accounts Open
It feels good to pay off a credit card and finally get that statement showing a zero balance. However, if you pay off a creditor, don’t make the mistake of closing that account because 15% of your FICO score is based on the length of your credit history. The longer a credit history you have, the better it is for your score.

5. Avoid “Bad” Forms of Credit
You’ve probably walked into a department store and been offered 10% off, or some other discount, just for opening up a credit card with that retailer, right? Did you take the bait? If so, realize that you might have hurt your credit score. Here’s why:

The FICO scoring model rates some forms of credit more favorably than others. For instance, the presence of a mortgage on your credit report will help your score, but too many consumer finance cards (i.e., the cards issued by department stores and retailers) can hurt it. For this reason, do yourself a favor and say “No” to those credit card offers from stores you patronize. Just use a major credit card, such as a Visa, MasterCard, American Express, or Discover Card, if you need to use credit to make your purchases.

6. Only Apply for Credit When You Truly Need It
Just because you get a pre-approved offer in the mail, or some telemarketer calls you to solicit for a credit card, doesn’t mean you should accept it.

You should only seek out credit when you absolutely need it because taking on too much new credit – or even just applying for it – will lower your credit score. Each time you apply for a loan, whether it is a credit card, an auto loan, a mortgage, or a student loan, the lender pulls your credit report and generates an “inquiry” on your credit file. That inquiry remains there for two years. One inquiry can drop your score as much as 35 points.

Also, beware that you may sometimes generate an inquiry without even knowing it! That happened to me, when I recently rented a car with Avis, using my debit card. Rental car companies frequently run your credit report if you use a debit card instead of a credit card. That single inquiry lowered my FICO score by 16 points.

Do You Qualify to Refinance Your Mortgage Under Obama’s Making Home Affordable Programs?

By Lynnette Khalfani-Cox, The Money Coach

If you are a homeowner in good standing with your mortgage, but you can’t seem to get refinancing because your home has lost equity in this declining economy, you might instead qualify to refinance your mortgage to something more affordable under the Home Affordable Refinance plan if you can answer yes to all of the following questions:

1. Current on your mortgage? If you haven’t been more than 30-days late on your mortgage payment in the last 12 months prior to applying to the program, then yes, you are considered current on your mortgage.
2. Owner-Occupant? If you live in the home as your primary residence or at least in one of the units of a property you own with four or less units, then yes, you are an owner-occupant.
3. You owe about what your property is worth? If you owe on your current mortgage close to the appraised value of your property, but not more than 105% of the current market value of the property, then yes, you owe about what your property is worth. The current value of your property will be determined after you apply to refinance, but as an example, if you think your property is worth $200,000 but you owe $210,000 or less on your first mortgage you may qualify.
4. Fannie Mae or Freddie Mac own your loan? If your loan is owned by or has been securitized by Fannie Mae or Freddie Mac, you should qualify. To find out if either organization backs your loan, call 1-800-7FANNIE or 1-800-FREDDIE or enter your address online at the lookup tool here at Fannie Mae or here at Freddie Mac. Please double check the ownership with your lender or loan servicer. If you do not have a Fannie Mae or Freddie Mac loan, you will not qualify. Note, if your monthly statements come from say, CitiMortgage or Wells Fargo, your loan still could be backed by Fannie or Freddie, so be sure to check.

If You Answered Yes to All
If you were able to answer “Yes” to all of the above questions, you may qualify to have your loan refinanced under the Making Home Affordable — Refinance program and are ready for the next step, which is to call your lender or mortgage servicer at the number listed on your monthly statement. You can also apply through any Fannie Mae approved lender if your loan is backed by Fannie Mae.

If You Answered No to Some
If you could not answer “Yes” to all of the questions, don’t despair. You might qualify for the “loan modification” section of the Making Home Affordable program. To see if you qualify for that option, read my piece, “6 Steps to Determine If You Qualify to Modify Your Mortgage Loan to Lower Monthly Payments.”

Note: You have until June 6, 2010 to apply for and close on this refinance option.

Tip: To learn more about keeping your home, read my book, “Your First Home: The Smart Way To Get It and Keep It.” It has plenty of tips to suit even homeowners who are in their second or third home. See the table of contents and an excerpt in this downloadable PDF.

6 Steps to Determine If You Qualify to Modify Your Mortgage Loan to Lower Monthly Payments

By Lynnette Khalfani-Cox, The Money Coach

Under Obama’s “Making Home Affordable” loan modification program, owners who are in risk of losing their home or are on the verge of not being able to make their monthly mortgage payments may be eligible to have their monthly mortgage payments reduced down to as much as a 2% interest rate to help them meet their obligations.

To determine if you qualify for the program you must answer yes to ALL of the following questions:

1. Loan Date: Was your loan taken out (originated) prior to January 1, 2009?
2. Primary Residence: Is the property where you want the mortgage modified your primary residence? (If it is a vacation home or rental property where you don’t live, you will not qualify).
3. Number of Units: Do you own a single-unit property or one with four-units or less? (If you live in one unit of the building and rent out one or more units in the same building, up to three units, then you will still qualify).
4. Mortgage Balance: Do you have an unpaid principal balance that is equal to or less than $729,750? (This limit can be higher for four-unit properties.)
5. Monthly Payments: Do you have a mortgage payment (including property taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax) monthly income? If you’re not sure, use this tool to determine the percentage.
6. Cash-Strapped: Are you having trouble paying your mortgage or are on the verge of doing so? (Answer yes if you are 31 days or more late on your mortgage payments, have had a major reduction in your income since taking out your loan, or have suffered some major financial hardship such as mounting medical bills, financial issues related to divorce, or just had or are expecting a balloon payment coming due or mortgage rate increase from an ARM.)

If you answered yes to all of the questions above, you may qualify for the loan modification program and can move on to the next step, as outlined by the government at Making Home Affordable site.

If you are not in financial hardship and are current on your mortgage, but would like to take advantage of current low interest rates and can’t because there is not enough equity in your home, you might qualify for the Refinance plan under Making Home Affordable program. Check here for my article about the Refinance plan.