Changes being proposed by new legislation could force credit card companies to play fair with their customers. Though the credit card companies vehemently contend their practices are fair and necessary, their customers and, apparently, lawmakers disagree. Some of the more controversial practices of the credit card companies are under fire. Interest rate hikes, customer notification of changes, and billing cycles are being targeted by proposed legislation and may have to be adjusted if the changes are successfully passed.

Currently, if a credit card customer’s credit score is lowered, the company has a right to increase their interest rate. This is known as universal default. The cause of the lowered credit score doesn’t matter. So if a person is late on a mortgage payment and their credit score goes down, the interest rates on the individual’s credit cards are increased. Not only will your interest rate increase, but the increased rate is retroactively applied to the entire balance on the credit card. So purchases you made six months ago will now be subject to the higher interest rate charges.

Credit card customers are all too familiar with the notice of term change mailings the credit card companies send out. How many times have you received a perforated notice informing you of new credit card term changes? By the time you receive the notice, the changes are practically already in effect. The mailing you receive is covered in fine print that would require some time to review in order to even understand how the new terms differ from the old. Once you are notified, you don’t have much time to decide how you want to handle the changes.

The billing notices are another point of contention. Since your payments are due every month, it is important to have sufficient time to budget for them. Credit card payment amounts can vary every month. New purchases, added finance charges, increased interest rates, and of course new credit card terms can all have an impact on the minimum payment due. The current billing process provides only about two weeks notice to the customer. If the customer isn’t able to pay timely based on the two weeks billing notice, the credit cards interest rate is subject to increase and the account can be charged fees.

Law changes affecting current credit card practices could provide relief. A ban on retroactive interest assessment could help alleviate unmanageable debt. Limiting what the credit card company can assess the interest on will benefit credit card holders. Term change notices are usually sent extremely close to the date the new terms will go into affect. Proposed changes would increase the notification time to one month. The extra time would give the card holders time to read the terms and make decisions. Billing notices could be mandated to be sent at least 25 days in advance. The additional time could help prevent unwanted interest and fees.

One of the most embarrassing aspects of shopping, second only to being wrongly accused of theft, is having your card refused.

It’s bad enough when it is refused because you have no credit limit left (it happens), but when it happens for no reason it is more frustrating.

You feel like shouting out loud “My credit is good! I have money, see! It’s a technical glitch!” as if the rest of the queue are quietly judging you and tutting under their breath. Of course, the rest of the shoppers have likely had the same thing happen in their lives and know exactly what it is like.

One of the issues that crops up occasionally is shops asking for additional ID. Now, in the UK, some of us carry around drivers licenses, and I know in other countries it is sometimes common to have ID, but what do you do if you have nothing on you, or if the ID you have is not good enough for them?

It turns out the only time they can ask for ID is if your card is not signed!

In fact in some parts of the United States, it’s actually illegal to record the additional information (your drivers license or passport number for example) while processing a credit card transaction unless the details are required to complete the order (for example, your delivery address).

Mastercard has this to say:

A merchant must not refuse to complete a MasterCard card transaction solely because a cardholder who has complied with the conditions for presentment of a card at the POI  [point of interaction] refuses to provide additional identification information

So next time a store clerk pushes you for ID, you might still be embarrassed, but at least now you know your rights.

Many people when they received their credit cards in the post either forget or refuse to sign them. Only the other day, my nephew said he wasn’t going to sign his brand new plastic friend because of “security reasons”.

His rationale was if he signed it, whoever stole it would know how to sign it.

I know, work that out if you can.

Thing is, if you don’t sign your card, even if you use chip and pin, stores are quite within their rights to refuse it.

You can try to explain, but in fact, you probably are breaking the terms of use. Check the back of your card now, does it say “Not Valid Unless Signed”, or something along those lines?

I know some people are in the habit of writing “Ask for identification”, which might fly with some merchants, but they are still well within their rights to say “no”.

Here’s what VISA says should happen when you present an unsigned card:

According to VISA …

“Ask for ID” is not a valid substitute for a signature. The customer must sign the card in your presence

Now you know.

You can try it, and you will likely find few problems, but don’t be upset if eventually you get your card rejected!

Do you know anyone using “Ask for ID” or a blank signature box on their card?

Budgeting your money is extremely important. You need to know what bills must be paid every month, when your bills are due, and where the money to pay the bills is coming from. Those that prefer to pay bills without the constraints of a budget run the risk of forgetting to pay a bill, paying a bill late, or running out of money before the bill is paid. Perhaps some of you might consider a late paid bill to be the creditor’s problems. But in reality, if you are late paying your bills you will be the one paying the price. Literally.

Credit cards companies are not flexible creditors. The terms of the credit card company that you agreed to when accepting the card include fees for late payments. Most late payment fees are $29 or more. The fee is added to the credit card balance and is subject to the same interest charge as your purchases. If you are close to the maximum limit on the card and the late payment fee pushes you over the limit, you will also be assessed an over the limit fee also. The over the limit fee then becomes part of the balance that interest is assessed on also.

Fees are not the only repercussions of paying your credit cards late. Most credit cards include a clause in their terms that allows the company to increase your interest rate if you make late payments. If you are under an introductory rate, it could take only one late payment to trigger the interest rate increase. Late payments are reported to the credit reporting agencies. The late payments will lower your credit score which allows other credit card companies to increase your interest rates also. Even the interest rates on any loans you may have could be increased.

The moral of this story is unmistakable. Make your credit card payments timely. Late payments to your credit card company results in serious financial repercussions. If you are having trouble making payments, imagine the difficulty you will have paying off the cards when the interest rates sky rocket. Let’s not forget the increased interest rates and additional assessments (fees) could result in an increase in the minimum payment due. If you cannot afford to pay your credit cards, then you cannot afford to pay your credit cards late. Always make your payments on time.

Learning to use a credit card wisely is the best financial lesson to be learned. A credit card can be your best fried in a financial crunch. Unexpected costs can unravel your monthly budget. Credit cards can help you finance those costs when necessary. But if you use a credit card as you would extra cash, you could find that your best friend has become your worst enemy.

The Golden Rule of credit cards is to pay off your entire balance every month. There are many sound reasons to follow this advice.

Interest and Finance Charges: When you pay off your balance at the end of the month, you can avoid interest and financing charges. Isn’t it bad enough you had to pay the plumber to fix the toilet because your two year old flushed a rubber rat? Do you really want to pay interest on that?

Credit Score: High balances on revolving accounts like a credit card will lower your credit score. Your credit score determines the interest rates you receive on important loans like your mortgage and car loan.

Debt: According to the Federal Reserve, almost half of the households in the United States carry debt. Credit card debt only serves to increase your financial burden and worries. You end up with a monthly payment that depletes your liquid funds.

Learning to pay off your credit card every month may require some time to adjust. But once you get into this habit, you will find you are making more financially sound and responsible decisions. Instead of making unnecessary impulse purchases, you will begin to reserve your credit cards for important purchases and emergencies; since you are going to feel it in your pocket.

You might think I am crazy, but it seems to me right now, or very soon, is a perfect time to invest.

Think about it, what is the standard advice for investing?

Buy low, sell high.

Why is it then when investments start to nosedive, everyone ducks for cover, but when investments are booming (ie. “bubble”), we all take part in a herd-like feeding frenzy?

Common sense would dictate that you don’t take part in the top of a bubble, but as I am one to say, common sense is seldom common practice.

Right now you have people leaving real estate, leaving the stock market, just when there are bargains to be had.

People are fearing a new depression. But what happens in depressions? Yes, lots of people lose everything, but some investors prosper.  They buy assets at firesale prices. They buy stocks when they are at their lowest then reap the gains when the recovery takes place.

Perhaps I am losing my mind, but right now might be just the right time to get in rather than get out.

How long before the US Dollar is worthless?

What can we even do about it?

We are used to seeing currency take a dive, such as the Zimbabwe dollar shown here where you need a large sack to carry enough money to do your groceries, but until now the US dollar has been the worlds favorite currency. Surely worries about devaluation are unfounded?

While the specter of the valueless dollar is not imminent, there are signs it could happen. For example, if the trend of the world oil suppliers towards selling oil in Euros rather than dollars continues, and if the fed keeps printing more and more paper money, while the previously stable investments keep going south.

We are even seeing USA businesses favor purchases in non-US currency.

Euros Accepted signs pop up in New York City

In the latest example that the U.S. dollar just ain’t what it used to be, some shops in New York City have begun accepting euros and other foreign currency as payment for merchandise.

It might seems strange that I am worried about this, seeing as I do not live in the USA, but unfortunately I do get paid mostly in USD because that is the defacto currency of the Internet.

If you are stuck in the depreciating dollar trap, what can be done?

Unfortunately as individuals we have little control over the currency value, but we can protect our own assets.

• Diversify investments away from those tied to US currency or economy
• Buy gold and other assets
• Reduce cash holding
• Find ways to earn in foreign currencies
• Carefully monitor your buying power and buy in bulk items that will not perish but seem to be going up in price (relatively speaking as your dollar goes down in value)
• Spread your savings so not all in one bank, preferably with at least one foreign account
• If you live in the US take in-land vacations, anyone else take advantage of the low prices

Debt has knock-on effects beyond simple and obvious financial setback. It causes stress, loss of self esteem and feelings of inadequacy. In reaction people often think all they need to do is “tighten their belts”, make some sacrifices, and all will be well.

The problem with this thinking is nowhere in this “self control” and “pay it down” concept does the person address the root causes of their debt.

When you visit your GP, you hope that as well as being given a little something for the symptoms, you also hope that the good doctor will determine what caused your illness and treat the underlying problem. It’s no good taking asprin when your leg is about to fall off!

Same with financial issues. There is no good paying down a debt only to get into debt as soon as you feel the worse is over. It can be uncomfortable but it is well worth sitting down and working out what went wrong and what you should do differently in future.

You need to pay it down, be aware of the motivations that got you to this place, and correct your behavior.

As a wise person once said, “Those who ignore the past are doomed to repeat it”.

Talking to friends and reading forums I see a popular misconception about how success, and in particular money work that I want to share with you to get your feedback on.

This way of thinking in particular I call a “Wealth Limiting Thought“, but there are of course many such beliefs that hold us back.

The reason I picked on this one is because of all of them I think people really do believe the wrong thing, it is not just something we tell ourselves but we even see it as the root idea behind advice. What is this misconception?

The mistake I see is people thinking today’s efforts create today’s results.

Success today only appears to be based on today’s efforts!

Your bank balance that you see right now is very unlikely to be just from the work you did this morning, right? No, it’s the cumulation of everything leading up to today.

Your bank account reflects the old you, not the new one!

But look around and listen out. What do you hear?

• “overnight success”
• “came from nowhere”
• “business home-run”
• “rising star”

Truth be told, what seem to be instant stars often have put in decades of effort. In fact the only overnight successes are lottery winners and we all know how likely that is.

Far worse than the fallacy of “overnight success” is people trying to emulate these current tactics rather than understanding the whole strategy.

We have to do what works, incrementally improve every day, and keep monitoring our results. Our results are always connected to our past behavior, we need to keep aware of what we did yesterday to create todays improvements.

If not, then we are just gambling and trusting luck. I would rather trust good judgment!

If you are a sports fan, you might recently have heard pundits talking about this scary quote

60 per cent of retired NBA players go broke five years after their NBA paycheques stop arriving.

Yes, those same basketball players who live millionaire lifestyles many of us could only dream of. One day they wake up and realize they have lower net-worth than members of their entourage, or even their pool boy. How does this happen?

It’s a familiar story, British football stars are often in the news for going bankrupt, even though they earn in a week more than most people in the UK can take in a year. Lottery winners lose all their money very often, even with excellent financial advice laid on by the lottery company.

In my view there are three major reasons people with money lose it as quickly as they make it.

Earning Skills

Sports people are at a disadvantage in the earning game. While they have good years where they earn fantastic amounts, this entirely depends on their youth and good health. If in the good years they don’t find alternative income sources, they are sunk.

Spending Skills

As well as earning skills, everyone must learn how to spend their income also. Buying the biggest, baddest, blinged-up, diamond encrusted doodads and widgets is not a good long term investment strategy. It doesn’t matter how much money you make, if you are buying up liabilities rather than investments and assets, don’t be surprised when the money supply dries up and you have nothing to show for it.

Vultures and Predators

A big problem is the people that are magnetized to their earnings. Next thing you know they have an entourage bigger than their team, family and friends hanging on, and “advisers” siphoning off their wages.

Conclusion

Everyone, not just sports stars, need to put away money for the future, live within their means, and buy assets not just luxuries. Most of us do not need to worry about a growing entourage but we DO need to only take the best financial advice and be careful just how generous we can afford to be!