Since the passage of last week’s credit card legislation, it seems that everyone has an opinion as to how consumers will be affected and how the “new credit cards” will compare to the old.  Previously, I provided my opinion on each of the main components of this new credit card legislation. Now let’s talk specifically about how different consumer segments will be affected.

First let me start by saying that credit card companies are perhaps the most sophisticated entities when it comes to consumer financial products.  They have and use a lot of data when making decisions, and therefore their response to the new legislation will not be uniform across consumer segments.  In addition, it is important to point out that we are going to go through a transition period, during which credit card companies will experiment with different structures.  Once everything has settled, here is my expectation of how the “new credit cards” will compare to the old (i.e. the ones from a year ago):

At the beginning of its trouble, AIG held $2.7 Trillion dollars worth of exposure on the derivative market.  Now that the United States Government has given the company $180 Billion dollars of bailout money, they still have $1.5 Trillion in exposure.  To make matters worse, AIG’s fourth quarter loss of $61.7 Billion was the worst corporate loss in U.S. history.  

We believe that AIG needs to go into prepackaged bankruptcy for three reasons: 

The most infamous offshoot of the derivative market, the Credit Default Swap (CDS), is continuing to operate in an unregulated manner.  This despite the various collapses that this $60 Trillion unregulated market has caused, and the resulting government bailouts that have forced all of us to become financially responsible for lumbering economic giants such as AIG – a company which was deemed too big for the government to allow its collapse. 

Surely, given the damage caused by this unregulated market, the first order of business for lawmakers should be, and should have been, to put laws into place which would end derivative trading in its current form.  In short, we would expect that the current recession would inspire lawmakers to make laws that would prevent another recession of this kind in the future…but they haven’t.  They’re now trying, and that’s admirable, but those laws haven’t been passed as of yet. As recently as May 13th, Treasury Secretary Timothy Geithner sent a two-page letter to congressional leaders urging them into action.

As the name suggests, a university credit card is one in which the college or university has allowed one particular credit card company to offer a card in their name and to advertise on campus.  The deal is exclusive; only one credit card company gets these benefits.  Furthermore, the credit card company gets access to lists of students and alumni to whom they can advertise.  In return for this exclusive relationship, the college receives a fraction of each purchase made with that card.  Thus, if Bank of America has a deal with, say, Brown University, only Bank of America can advertise on campus, Brown University will give out contact information to Bank of America on its current and former students, and in return, Brown University will get some money every time someone uses the Brown University credit card.

If the relationship between universities and credit card companies was structured differently we would not be against school sponsored credit cards, but a school’s first responsibility should be to its students.  More specifically, the university should not encourage its students to accrue unwanted debt, and instead it should educate them and help them reach the best decisions for themselves.

Both houses of Congress have now signed off on a bill to amend the Truth in Lending Act, and now it’s off to the President’s desk where the legislation is anticipated to be signed into law.  At Wallet Blog, we have been covering the news on this bill for as it has evolved.  Now that it’s headed to President Obama for approval, we’d like to provide an in-depth analysis on the bill’s major features.  They are as follows:

APR Changes on Your Existing Balances:  Credit card companies won’t be allowed to raise interest rates on your existing credit card balance unless you are more than 60 days behind on your payments to them. If you get an APR hike because you were 60 days late, you will be able to get back your original rate, by making  payments on time for 6 months in a row.

College, the key to a better paying career, is not without its financial burden.  The price of tuition around the country is going up.  Plummeting stocks have hurt university portfolios as well as the portfolios of alumni and professors.  Because of this, American universities are receiving fewer contributions from private sources even as they continue to pay for tenured senior professors who, having lost their nest-egg, are stalling their retirement.  Public universities face these dilemmas as well as a dwindling slice of the state budget that funds them.

Of course, students still need to go to school during these hard times, but the rising price of tuition and the absence of job opportunities for graduates just entering the work force has made the once viable option of student loans less and less attractive as there is little guarantee that a job will be waiting after graduation.  Today’s graduating senior can expect to acquire $22,000 in student loans by the time they graduate and have no guarantee of entering into a career just out of school that will help them to pay off this debt.

As the temperature rises, so do energy bills. Here are some simple tips that will help you limit your energy costs this summer.

DIY Energy Audits: No need to hire an expert for this one. Visit the Department of Energy’s Web site  and do a critical walk-through of the energy demons in your home.

Right now, as the country demands tougher restrictions on the credit card industry, and as the House has passed a much needed bill to that effect, the Senate has stalled the bill so as to piggyback amendments onto it.  Now, we understand that that grouping together related laws saves time and allows for the deal making that is part and parcel to cooperation across the aisles.  However, when the laws are totally unrelated, we are at odds to figure out just how this congressional procedure aids anyone.

The success of the credit card reform bill has prompted senators to attach their own pet projects to it.  In one case, the senate is attempting to piggyback an amendment that allows people to carry firearms into national parks – sponsored by Tom Coburn (R-OK).  Thus, this much needed credit card bill is being stalled because of something completely unrelated to it.  Why is the Senate wasting time on irrelevant amendments when we are in the middle of an economic crisis which demands immediate legislative action? 

Currently, a credit card reform bill is making its way through Capital Hill as law makers attempt to stem the tide of consumer complaints against credit card companies.  Having already passed through the House of Representatives (gaining 357 votes for the bill with only 70 votes against it), the popular bill entered the Senate floor nearly assured of success there.

As so often befalls popular bills, unrelated amendments have stalled the proposed bill which reached the floor of the Senate on Wednesday May 13th.  Some of the credit card proposals within the original bill would:

Looking for a checking account that handsomely pays you back? Focus Bank of Missouri and Arkansas is offering a “MAXimum Free Checking Account” with no monthly service charges, no minimum balance requirements, and no direct deposit required.

Balances up to $25,000 earn a whopping 4.51% Annual Percentage Yield (APY). MAXimum Free Checking account holders also enjoy ATM fee refunds up to $25 per statement cycle, free wallet-style checks, free ATM/debit card, free 24-hour telephone banking, free online banking, free bill pay (with eStatement sign-up), and free direct deposit/automatic drafts. Additionally, qualified customers receive a $500 overdraft privilege, though if you’re earning 4.51% APY, I’d say that it behooves you to maintain the largest account balance possible.

Obama has four major issues on the agenda for his presidency:  three he wants to deal with and one he inherited.   Those issues are: the current economic recession, education, health care, and energy.  All of these issues are pressing.  Massive government spending needs to happen to keep this recession from spiralling into a full blown depression.  We must maintain high standards in education so as to make sure that the next generation of American worker will be as competitive in the world stage as the previous one.  We must refigure health care for moral reasons as it is unacceptable that one of the richest nations in the world should leave millions of its citizens without health care.  Energy innovation is an issue of  both national security and economic prosperity in that it keeps America’s money at home instead of sending it abroad.

All of these projects will significantly drain the nation’s finances in the short term.  We agree that these plans are necessary but the money to pay for them must come from somewhere.  As we see it, of the four agenda items, the development of a more efficient energy source is the most likely to produce the money needed to fuel the other initiatives. 

Are you interested in saving money, while promoting your local economy and eating delicious, even organic food? Me, too. I’ve found a way that my family will get garden-fresh organic produce for half of what I spend at the  grocery store for non-organic fruits, veggies, and herbs. The answer? Purchasing a CSA FarmShare. Read on…

Look: I’m no hippie and I wear leather shoes – this was a purely economic and gastronomic decision. I want to eat good food that hasn’t traveled across the country to get to me, because when you can buy strawberries in Massachusetts in March, that’s a pretty good sign that they’re non-native.  As such, my requirements were stringent:  I needed local, weekly pickups of a box of food manageable to the size of my small family.

On April 30th, the Senate defeated the “cram down” bill that would have allowed bankruptcy judges to adjust mortgages so as to allow those people going through bankruptcy to keep their homes.  The defeat came as some democrats sided with the bill’s opposition, mirroring a general weariness from within the banking community towards this piece of legislation.

The media balked at this defeat with claims that echoed the bill’s sponsor Richard Durbin (D-Illinois) that the banks essentially controlled congress and that senators needed to vote along with the needs of the American people rather than according to the desires of the banking and mortgage lobbies.  The accusation from Durbin, and from the media following the defeat, was that these senators (particularly the 12 democrats who voted against the bill) were essentially bought out.  The media portrayed the senate as under bank control.

By July 2010, credit card companies will have to play by a new set of rules.  This new set of Fed regulations will curb abusive credit card practices and will fuel transparency within the credit card industry, thereby making it easier for consumers to understand the real costs of a credit card. Specifically, one of the new rules that will take effect in July will prohibit credit card companies from raising the interest rates on existing balances for consumers that pay on time.

On May 4th, the Federal Reserve rejected a request by Senators Schumer and Dodd that would force credit card companies to immediately halt interest rate increases on existing balances.  “We believe that issuers must be afforded sufficient time for implementation to allow for an orderly transition process that avoids unintended consequences, compliance difficulties and potential liabilities,” Fed Chairman Ben Bernanke wrote in a May 4 letter.

Term life insurance is temporary protection for people with limited budgets. You can get a great deal of coverage for a relatively low premium rate. It’s particularly appropriate for situations where your beneficiaries would need additional help – say, to pay off a loan or provide for the needs of your children – in the event of your death.

My husband and I signed up for term life insurance upon the birth of our first child and that was pretty much the first day I ever felt like a grown-up. He’d just quit smoking and I hadn’t lost my baby weight yet, so our rates were higher than I expected but worthwhile for the million bucks he or I would get if the other partner kicked the bucket.

I’m crazy about books. Certifiably crazy. So when I realized I hadn’t completed my six-volume set of William Blake: The Illuminated Books, I feverishly scoured ABE Books and Amazon for the best book vendors for the cost. The winner was a bookseller in London, so I went to their secured Web site, entered my credit card number, and then squealed delightedly when book six of six arrived on my doorstep.

Imagine my surprise when I got my credit card bill that month and learned that my bargain shopping came with a 3-percent foreign transaction fee!

Chrysler has been in deep financial trouble for months and the President has been trying to save it.  In order to keep the iconic American company afloat, President Obama had asked that various groups make concessions.  First through the government bailout, he asked tax payers to make concessions.  We were willing.  Second he asked the banks to whom Chrysler owes money to make concessions; they would have to forgive the majority of the loans awarded.  They were willing.  Then he asked the auto workers themselves to make concessions; for Chrysler to stay afloat they would have to accept pay cuts and a restructuring of employee benefits.  They were willing.  The hope was that all of these concessions would make the company attractive to Fiat who would then swoop in and save Chrysler from economic oblivion.  It was this plan that had ultimately guided the government’s attempt to rescue Chrysler.

Unfortunately, Chrysler also owed money to hedge funds who were also asked to make concessions; they were not willing.  Because of these hedge funds, Chrysler is now going into what is called either surgical or pre-packaged bankruptcy:  bankruptcy in which the government steps in after the debts have been sorted out and provides funding to allow the company to emerge in shape to continue doing business.  By going into pre-packaged bankruptcy, Chrysler and the U.S. government are basically forcing the hand of the hedge fund investors who would not play ball.  They will have to get in line with Chrysler’s other creditors.