As many consumers remain unemployed and are filing for bankruptcy at record rates, finding the extra cash for holiday shopping could prove difficult.
As we mentioned previously, fewer consumers will be turning to credit cards to purchase their holiday gifts this year. Financial experts say this trend will result in less spending overall, as consumers tend to spend less when they use cash than they would if they use credit. The good news is that many retailers are attempting to offset this revenue by offering sales and promotions. 
However, how will the move away from spending affect our fragile economy? Without a doubt, the decreased spending will slow economic recovery. Still, while these responsible financial habits may thwart economic recovery in the short-term, economists say the “spend less, save more” mentality will benefit the economy in the long run. For example, consumers who save often have more money to spend in retirement. This can be a good situation for both the consumer and the economy.
Still, the financial security of the future seems quite far off for some struggling families. Many will become overwhelmed with the costs associated with the holidays, including food, decorations, gifts and travel. A director of an organization which provides debt and foreclosure counseling urges these individuals to be honest about their situations. She recommends telling family and friends there is a budget for the holidays, saying most people understand the holiday season is not about money and material possessions.
Source: The Salt Lake Tribune “Retailers brace for shopping shift away from credit cards,” Lesley Mitchell, 20 November 2010
Credit
New Credit Card Laws Targeted to Protect the Consumer
After filing for bankruptcy, it’s important to remember that the day your case is closed is the day you can begin rebuilding your credit score, by adopting responsible spending habits, paying your bills on time and not applying for too much credit at once. You may think that living on a cash-only basis is a smart choice, but if you want to begin rebuilding your credit score fast, you have to take the plunge and allow yourself to open up new credit cards. A few recent laws have been enacted to protect the consumer and give you a better chance of attaining a good credit score.
On May 22, 2009 President Obama signed the Credit Card Accountability, Responsibility, and Disclosure Act to combat the unjust practices of credit card companies. This new law establishes principles necessary for consumers to get ahead, which include: bans on unfair rate increases and fee traps, plain, understandable language, accountability, and protection for students.
Additional Protections to the Consumer include:
- Consumers will no longer endure unfair and hidden spikes in interest rates.
- Consumers will have an adequate time period, at least 21 days, to pay a monthly bill.
- Deadlines, such as weekends and random monthly dates, are abolished.
- Institutions must receive the consumer’s permission when charging an account at its limit.
- Credit card companies must disclose account information in plain sight and plain language, i.e. how long it would take to pay off a balance and the total interest cost, if the minimum payment was made monthly.
- Credit card contracts are now made available online…keeping companies accountable for their terms and conditions.
- Consumer protection regulators must publish up-to-date findings and report misconduct.
As of August 22, 2010, the Federal Government is adding new rules to the Credit Card Act to create even more protection for consumers.
- Consumers can only be charge $25 in late fees, unless you have been late on payment in the past 6 months or the cost a credit card company acquires due to your tardiness justifies a higher fee.
- Late fees cannot be more than your minimum credit card payment
- No more inactivity fees, i.e. if you aren’t using your card, they cannot charge you
- No more double fees for single transactions.
- Explanation if they increase the APR.
However, even with the new laws, credit card companies continue imposing fees on consumers; labeling these “fees” by other names, now that more stringent laws are going into effect. The so-called “annual fee” is back. Companies will wave an annual fee if you purchase enough throughout the year; if not, the fee is tacked on, ultimately charging you for inactivity. Another fee to pop up is the foreign transaction fee. Anyone who has traveled abroad knows that card companies take a percentage for converting moneys. Now, regardless of what currency a transaction takes place in, if done overseas, they will charge you 2 to 3 percent. Cash advance fees are becoming larger. Additionally, companies are charging for paper statements. You can avoid this by paying your bills online.
To learn more about how to protect yourself from incurring hidden credit card fees, visit:
http://www.walletpop.com/blog/2010/07/21/the-latest-in-sneaky-credit-card-fees/
http://www.whitehouse.gov/the_press_office/Fact-Sheet-Reforms-to-Protect-American-Credit-Card-Holders/
http://www.federalreserve.gov/consumerinfo/wyntk_creditcardrules2.htm
If you have any questions on this topic, please feel free to contact me at (305) 285-9100. You can also find useful consumer information on the Kingcade & Garcia, P.A. Web site at www.miamibankruptcy.com.
-Timothy Kingcade
Five Mistakes that can Ruin your Credit
Your credit score is one of the most vital parts of your financial life. Many people think that keeping your credit score in good standing is only important when it comes to being approved for a loan or credit card. However, it goes far beyond that. Your credit score can affect everything from insurance premiums to employment opportunities.
Below are a few mistakes that can cost you some major points:
1.) Closing old credit cards. It’s easy to assume that if you pay off your bills, cut up your credit cards and stop spending you will magically have good credit. However, good credit is built over time and with smart spending habits. When a credit report is run, points are given for the cards you have carried balances on the longest. Be strong and resist the urge to make large purchases on these cards, if you cannot afford to pay the balances off in full each month.
2.) Using up all your available credit. If a credit card company grants you a line of $5000, you should only use 20% of it. This would allow you to spend no more than $1000 on that particular card. Because the credit card companies report your balances to the credit bureaus monthly, you want the balances to be as low as possible. According to My Credit Group, the balance-to-limit ratio will ultimately have a huge effect on your credit score.
3.) Applying for too much credit. If you are filling out application after application because you are strapped for cash, keep in mind that credit card companies note all of these requests and consider them a red flag. Let there be 6 months between each credit card or loan application.
4.) Not paying late fees. When it comes to late fees, pay up. The longer you wait, the worse it looks on your credit report. Once you acquire a late fee charge, your inability to pay shows up on your credit report.
5.) Moving. Lastly, for those of you who are moving to a new location make sure you change your billing address immediately. Bills can become lost in the mail and even end up going to your old address. This can cause you to miss your payment due date, get stuck with late fees, and rack up additional charges. Paying all of your bills online can help avoid this.
Remember, it is possible to have a good credit score if you discipline yourself to spend wisely. Know your options when it comes to credit and use them to your advantage! For more information on ways to improve your credit score, visit www.mycreditgroup.com. You can also find useful consumer information on the Kingcade & Garcia, P.A. Web site at www.miamibankruptcy.info/.
-Bankruptcy Attorney Timothy Kingcade
5 Ways to Rebuild your Credit after Bankruptcy
Filing for bankruptcy can be an unfortunate blow to your credit score. However, the good news is there are ways you can rebuild this, it’s just a matter of knowing how. Nothing in credit is “forever.” Adopting responsible credit habits such as paying your bills on time, using only a small portion of your available credit and not applying for too much credit at once can rebuild your credit gradually.
1.) Learn from your mistakes. If your problem was overspending, create a budget and stick to it. If medical bills caused you to file bankruptcy, seek a job with adequate health insurance coverage.
2.) Establish an emergency fund to help get you through a job loss or other financial setback. Try to save at least 25% of your paycheck and get a second job if necessary. This also may require you to live below your means for the first 6 months to save as much as possible.
3.) Open a checking or savings account, preferably through a large bank. 
4.) Attain a secured credit card. To quickly rebuild your credit you need to establish two types of credit: Installment (i.e. – auto loans, student loans or mortgages) and Revolving (i.e. – credit cards or home equity lines of credit). Light, regular use of a credit card will help rebuild your credit.
5.) Become familiar with your credit report. The most important thing is for you to attain positive reports from your credit card issuer through Experian, TransUnion and Equifax- ALL three. Check your credit reports every 4 to 6 months, making sure all information is accurate.
If you have any questions on this topic or are in need of a financial fresh start, please contact our experienced team of bankruptcy attorneys at (305) 285-9100. You can also find useful consumer information on the Kingcade & Garcia, P.A. Web site at www.miamibankruptcy.info/.