If you only had enough money to pay your credit card bills or your mortgage, but not both, which would you pay? Having grown up in a home that we almost lost to foreclosure and bankruptcy, the answer for me would be easy–you pay the mortgage first. But more and more people are coming to the opposite conclusion. According to a report by Trans Union, 6.6% of consumers are delinquent on the mortgages, but current on the credit card bills.
So what’s going on here? According to some, many folks have given up on trying to keep their homes. Recognizing that the value of real estate has fallen so much, the urge to save the home at any expense is no longer there. In contrast, many people rely on their credit cards to handle monthly expenses. If they lost their cards, they’d have a hard time feeding their families.
So if you are faced with this dilemma, which should you pay first? While the answer to that question will certainly differ from one family to the next, here are some factors to consider.
First, is keeping your home realistic? If a foreclosure is inevitable, putting more money toward the mortgage may not be the best idea. Before making this decision, however, it’s worth contacting your mortgage company. While there is no guarantee that accommodations will be made, more and more mortgages are being modified to keep homeowners in their home. And even if you do end up losing your home, the transition can be better if you work with your bank.
For example, CitiMortgage is piloting a program that would allow you to stay in your home for 6 months to ease the transition. They’ll provide counselors to help in the move and even up to $1,000 in cash. And the U.S. Treasury Department will soon be launching a similar program, called the Affordable Foreclosure Alternatives Program (HAFA).
Second, talk to your credit card companies. In some instances, they are willing to lower the minimum monthly payment and or interest rates. While there is no guarantee of help, the point is that sticking your head in the sand and wishing the financial problems away won’t help.
So what’s your take–would you pay your mortgage or credit cards first?
The Saints bested the Colts 31 to 17 last night in a Super Bowl that didn’t really feel like the big game to me. Maybe that’s because the Steelers weren’t in it. Anyway, congrats to the Saints and the city of New Orleans. Stories are a powerful way to communicate a message, and the Saints are no exception. Here’s their story, as told by ESPN’s Wright Thompson (hat tip to Copyblogger):
The soul of the city is in a football game three seasons ago, the return to the Superdome, on a Monday night when those of us who love New Orleans first realized the city would be back. It was Sept. 25, 2006 — Payton’s and Brees’ first home game.
The Friday night before, Payton gathered his team in the empty stadium. People had died there, just 13 months before. The bodies were stored in a catering freezer. The building seemed unfixable, and now the Saints stood at midfield. On the video board, Payton played a movie about the hurricane. It showed it all, the dark, dark water, the archipelago of rooftops, the fear on the faces of an abandoned city, the slow pan of the Humanity Street sign barely visible above the current. It showed the Superdome with its roof almost torn off. It showed a city that looked as though it would never return. Then the video ended. The players, standing at the center of a rebuilt stadium, all shiny and new, talked about what they had seen and how important they were to the people who would fill these seats the next night.
They understood.
The game began and, less than two minutes in, the Saints blocked a punt and recovered for a touchdown. One of my best friends, a chef who grew up in the city, sat on his couch in Mississippi and wept. So did thousands of people in the Dome. For 37 seconds, an eternity on television, the announcers stayed quiet, the only noise coming from the screaming of the crowd. Thirty-seven seconds, while a city went completely and totally insane with joy.
Now let’s turn to some stories of the pecuniary variety.
Super Bowl Fact: The first Super Bowl was played in 1967 between the champions of the National Football League (NFL) and American Football League (AFL). The two leagues merged in 1970, and the leagues became conferences.
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Super Bowl Fact: The Pittsburgh Steelers have won a league-leading six Super Bowls. The Cowboys and 49ers come in second with 5 wins each. At the other end, four teams have yet to make it to the Super Bowl–Lions, Browns, Jaquars, and Texans.
Super Bowl Fact: After the Packers won the first two Super Bowls, some feared that the AFL was no match for the NFL. Then along came Joe. The Jets lead by Joe Namath defeated the Colts in Super Bowl III and the Chiefs, an AFL team, bested the Vikings in Super Bowl IV.
Super Bowl Fact: The Vikings, Broncos, and Bills have lost the Super Bowl more times than any other team in the league–4. The Bills’ losses are the most painful, having occurred four years in a row.
As regular readings know, we track very closely 0% APR introductory offers from most major credit card issuers. Today Chase announced a change in the no interest offer on its Chase Freedom credit card, and we want to pass this important change along to you. Here’s the deal.
Chase shortened the 0% on purchases from 12 months down to 6 months. That means new card holders will still get interest free use of the card on purchases, but now only for the first 6 months, not 12 months. On the bright side, the Chase Freedom card now offers 0% on balance transfers for up to 12 months, which is the longest no interest balance transfer currently offered by credit card issuers. So why did Chase make this change?
The reasons aren’t exactly clear, but Discover credit cards has recently made the same move. It appears that balance transfers must be more in demand than 0% purchase offers. These changes may also be Chase preparing for the new Credit Card Act legislation which takes effect this month.
In addition, Chase has removed the $50 bonus it offered after the first purchase. It’s disappointing to see this go, but the card still pays up to 3% cash back on select purchases, and 1% cash back on everything else. As a long-time Chase Freedom card holder, it’s still one of my favorite cards.
As a quick refresher, there are two types of interest free offers–0% on purchases and 0% on balance transfers. These two types of offers are very different. With 0% on purchases, you don’t pay any interest on purchases for usually 6 or 12 months, depending on the terms of the offer. There are no fees to take advantage of this offer; just use the card for purchases as you normally would. With balance transfer offers, you can transfer high interest debt from other cards onto the new card and pay no interest for up to 12 months. There is a transfer fee involved, usually 3% of the amount transferred.
Welcome to the 86th edition of the Money Hacks Carnival–Platinum Edition. We’ve organized the carnival this week by credit card status (we are a credit card site, after all). All the articles included in this week’s carnival are worth reading and provide excellent money hacks.
Since the passage of the Credit Card Act of 2009, consumers have watched as credit card issuers have raised rates, reduced rewards, and limited credit. Designed to protect consumers from predatory lending practices in the credit card industry, the Credit Card Act of 2009 has instead done just what many predicted–made credit cards less consumer friendly.
The first casualties were higher interest rates and reduced 0% balance transfer offers. Higher fees on balance transfer offers and increased annual fees followed. And now, fixed rate credit cards have become the latest casualty of the Credit Card Act.
Before the passage of the Credit Card Act of 2009, fixed rate credit cards were common. As the name suggests, a fixed rate card has a set interest rate that does not fluctuate as interest rates go up and down. Before the Act, card issuers could raise a fixed rate card, however, if it concluded the cardholder presented an increased risk of default.
Because the Credit Card Act severely restricts a card issuer’s ability to raise rates, card issuers have been moving away from fixed rate cards and to variable rate cards. With variable rate cards, the interest rate is tied to the prime rate or some other interest rate measures. As interest rates in general go up, so will the rate on the credit card.
Many national card issuers have gone to variable interest rates, including the following:
While some have described the switch as taking advantage of a loophole in the Credit Card Act, that overstates the case. A variable rate card will not permit card issuers under the new law to raise rates at will. The card’s interest rate will still need to be tied to the prime rate or some other benchmark. Indeed, this will benefit consumers as rates fall. Given the historically low prevailing rates, however, we are unlikely to see rates fall dramatically if at all in the near term.
The Washington Post is reporting that the Obama Administration has summoned executives of the 14 largest credit card issuers to the White House next week for a meeting. Apparently, the executives plan to discuss efforts to increase transparency and help the economy. The Obama Administration is likely to discuss the advanced implementation of Fed rules designed to protect consumers.
A quick history lesson will help put this meeting in perspective. Back in December 2008, the Federal Reserve published new credit card regulations designed to protect consumers from what some view as predatory lending practices in the credit card industry. The regulations restricted a credit card company’s ability to raise interest rates, required card issuers to more fairly apply payments across all balances subject to varying interest rates, and other consumer-friendly rules. The new rules, however, don’t go into effect until July 1, 2010, which has consumer advocacy groups up in arms.
Congress has made noise about passing credit card legislation similar to the Fed’s regulations, but with an earlier effective date. Several credit card legislative bills have been introduced in both the House and Senate, but none is close to final. And that brings us back to next week’s meeting at the White House.
It’s likely that the Obama Administration will push the executives to implement many of the Fed’s rules now, rather than waiting until 2010. Earlier adoption of the new credit card rules could stave off further federal legislation, but it’s unclear whether the credit card companies are willing to play ball. Consider the meeting next week as Round 1 in what is sure to be an epic battle.
