Do Not Wait to Refinance

by Brian Johnson on December 10, 2009

mortgage-refinanceIn order “to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally,” (according to their own FAQ on the subject) the Federal Reserve Bank has been buying up $1.25 trillion in fixed rate Mortgage-Backed Securities otherwise guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae.  The result has been a drop in the mortgage rate for 30 year mortgages.  The duration of this program is limited, however, and is set to expire by the end of the first quarter, 2010.

At the end of the Fed’s purchase program next Spring, the market will be ripe for a mortgage rate increase and a reduction in purchasing power for consumers looking for low monthly mortgage payments.  Experts are estimating that when the Fed steps out of its current purchasing position, 30 year mortgage rates are likely to rise to 6% despite government incentives for first time home buyers as well as current homeowners.

Do Not Lose Your Remaining FSA Funds

by Lynn B. Johnson on December 7, 2009

fsa-fundsHere at Wallet Blog, we get lots of PR pitches. It’s flattering, really. But one company I never expected to hear from, especially in November, is Coppertone. Nevertheless, it’s fun to be surprised (especially as I just winter-proofed my double-paned windows against the encroaching Nor’easters).

Their pitch was helpful and informative, and I live to be helpful and informative, so let’s talk about some little-known ways to maximize your FSA spending.

Why Buy the Steak when You can Get the Cow for Less?

by Lynn B. Johnson on December 5, 2009

SteakSo, my husband and I have been delighted with our choice to buy a CSA farmshare. Our summer has been chock-full of mostly local, mostly organic vegetables, and it’s pushed me to become a more adventurous cook and eater (yes, I ate the beets. Call the press).

But now, there’s a new buy-local buzzword in town. It’s called “cowpooling.” This is where neighbors pool their money to purchase all of the meat from one local cow.

Pay for Health Care NOT with Taxes but by Engendering Competition

by Odysseas Papadimitriou on December 4, 2009

TaxesThe latest version of the health care reform bill, sponsored by congressional Democrats, offers a mixture of both productive and counterproductive methods of gaining the necessary revenue to make affordable national health care a possibility. However, by-in-large, the bill ignores the fact that we operate in a free market capitalist society, in which competition exists in order to keep costs down. Instead, the bill proposes a funding solution that will cause a trickle-down effect, with the costs of reform being passed back to the consumer at the end of the day.

The bill does have a few provisions that would encourage competition and thereby drive down costs. For instance, it includes a provision that would allow the government to negotiate prescription drug prices for beneficiaries. However, in large part it targets the medical industry as a funding source for the suggested overhaul, by levying fees and taxes on medical device manufacturers and drug companies, among others.

Card Hub Eliminates the Guesswork from the Gift-Giving Process

by Alexandra McDougald on December 3, 2009

gift-cardsAccording to the National Retail Federation, consumers are expected to spend nearly $24 billion on gift cards this holiday season. Additionally, gift cards are the most requested gift for the third year in a row – over half of adults said they would like to receive a gift card and almost 80 percent of people plan to buy one this holiday season. However, given these statistics, how do consumers know which gift cards to choose for their friends and loved ones this season and beyond? To answer this question, Card Hub® is pleased to announce the launch of its Gift Card application for Facebook – a completely free, first-of-its-kind gift-giving tool. The Gift Card application from Card Hub® removes the hassle from the process for gift givers and ensures that the receivers will be happy with the gift card they’ve gotten.

The primary feature of the Gift Card application is the Gift Card Wish List. In less than 60 seconds, it allows users to pick their favorite stores and share their selections with their friends, giving them potential spending power at places they actually like. Currently, there are hundreds of stores to choose from including restaurants, department stores and e-retailers, and that list is constantly growing. What’s more is that users with niche or special interests can add stores to the application that wouldn’t be top-of-mind to most consumers, simply by keying in the associated URL.

"Same Old, Same Old" is Getting Just Plain Old

by Brian Johnson on December 1, 2009

old-ideasAs Americans, you and I are part of a country with a great history of overcoming obstacles.  However, that history has always been rooted in the basic understanding that during extraordinary times, we are called to extraordinary courses of actions.  In order to overcome the problems we have faced, we have had to reinvent ourselves and the manner by which we handled our problems.  When our economy crashed in the late 1920s, we pulled ourselves up by our bootstraps, organized work projects and made our nation strong enough to engage in combat against the threat of world-wide fascism.  After decades of isolation following World War I, when America was called into action by the attack on Pearl Harbor, we rose to the occasion waging a new kind of war in Europe and the Pacific.  When it became clear that the fascist forces of Nazi Germany and Imperial Japan posed new kinds of threats to the peace and stability of the world, we met that threat by creating the atomic bomb.  When our country was faced by civil unrest, when the edifices of our nation’s governance proved unequal to its nation’s citizenry, we changed the manner of our laws and even our society to work towards civil rights and equal opportunities for all people.  We are a nation composed of people able to make drastic changes to meet our extraordinary circumstances.

It is, therefore, disheartening to hear the Thanksgiving affirmations of our nation’s leaders.  President Obama promises to extend unemployment benefits and secure national health care.  Meanwhile, we borrow money in record amounts and 1 out of every 10 Americans is unemployed.  Speaking on behalf of the GOP, Representative Mike Pence (R-Ind), offers that the answer to our economic issues is to cut taxes. Neither side provided any original answers.

Credit Card Rewards and the Fine Print

by Odysseas Papadimitriou on November 30, 2009

credit-card-fine-printThe credit card default rate in 2009 was the highest it’s been since 1991.  Also, in the last year, 15 percent of American adults, or nearly 34 million people, have been late making a credit card payment.  Due to the tough times we face, many cardholders have no other option but to miss one or more of their credit card payments.  But before they make the hard choice to do so, it’s important for them to realize that they may not only be damaging their credit score, but also sacrificing the benefits of their credit card rewards.

Though consumers are asking more questions about the ins and outs of the terms on their credit card accounts, most of the information that’s circulating around to satisfy these questions addresses finance charges and interest rates.  What about rewards?

Is the Switch from Fixed to Variable APR a Big Deal?

by Lynn B. Johnson on November 27, 2009

fixed-variable-aprIf you haven’t received a notice from your credit card company that your rates are increasing, well, you probably don’t have a credit card. What some people are missing among the fine print is that many cards are changing their rate structure from a fixed rate to a variable one. So, what’s the difference, why is this happening, and is this a big deal?

According to the OCC, a fixed-rate credit card  means that the Annual Percentage Rate on the account “is not tied to an index that may change periodically.” Variable rates are generally tied to an index rate, such as the Prime Rate.

Viva Vonage!

by Odysseas Papadimitriou on November 25, 2009

vonageGiven the upcoming holiday, I decided to do a light post about my favorite phone service. As we all know, there are plenty of heavy-hitters in the VoIP marketplace: Vonage, Skype, Google Voice, Magic Jack, Jupiter Jack, etc. But Vonage (VG) is the best of them based on my own subjective opinion. Here’s why.

First off, Vonage is different from its competitors because you do not need a PC to utilize it. Basically, you connect the Vonage box to a digital modem (either DSL or Cable), and then you unplug your regular phone from the wall and instead plug it in to the Vonage box.

Black Friday Round-Up of Deals

by Lynn B. Johnson on November 23, 2009

black-friday-salesGetting ready to shell out your hard-earned ducats for some holiday gifts? Here’s a round-up of what’ll be “in store” for the day after Thanksgiving. Click the store name to see the entire list of Black Friday incentives.

Best Buy: Twenty to 50-percent off many appliances, and a slew of digital camera offers that you can also access via eBay.

Politicians Focus on Greed Instead of Competition

by Odysseas Papadimitriou on November 23, 2009

greedLawmakers and the media seem to have dubbed greed as the primary evil responsible for the downfall of the American economy.  Insurance companies are routinely accused of greed, as are credit card companies and networks, investment banks, CEOs and so on.  In these times of economic hardship, when the nation’s economy is in desperate need of examination and revision, our federal policy makers are eager to put checks on greed in order to help fix the economy.   However, the truth is that in a capitalist economy, profits aren’t a sign of greed, they are a sign that a given company’s business tactics are successful within the competitive system in which that company operates.  If lawmakers think that specific companies are making too much money, then the problem isn’t corporate greed, it’s that there simply isn’t enough competition to keep those players from making excessive profits.  The President and Congress are determined to use their legislative powers to bail out the U.S. economy, but they ought to be concentrating their efforts not on greed, but instead on the lack of competition in the marketplace.

Instead, lawmakers have been continuously critiquing the profits of large companies, like those in the health insurance and credit card industries, attributing their successes to greed and greed alone.  The business practices of these companies are then regulated by numerous redundant agencies, creating enormous and costly bureaucracies that bog down the system and drive up prices.  In addition, they also create a system in which small companies cannot afford to compete with larger companies, and where companies operating within a single state are hampered by the regulatory costs and procedures that are associated with going national.

Congress Should Address Medicare Fraud Before Spending More of Our Money on Health Care Reform

by Brian Johnson on November 20, 2009

If you tuned in to “60 Minutes” on October 25th, you saw a segment detailing the extent of fraud committed against Medicare and taxpayers.  If you missed it, here it is:

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Parrallels Between Now and The Great Depression

by Brian Johnson on November 19, 2009

great-depression-dow-jonesRecently, I came across an article on Yahoo Finance detailing the similarities between our current economic market and the market of the 1929.  The author of the article, Simon Maierhofer, did a great job of summing up the ways our current economic crisis is paralleling the historical Great Depression and how our economic forecasters ought to rely more on history to help manage their expectations of buying opportunities and economic recovery.  I felt that Maierhofer’s observations were worth some commentary here at Wallet Blog and I wanted also an opportunity to point our readers over to his article for their own edification.

One of the key points that Maierhofer made that I found particularly interesting was his point that during both time periods, the economic devastation was preceded by extreme optimism, that no one (or very few experts anyway) seemed to see the imminent collapse on the horizon.  It was also interesting to me that both economic disasters seemed to be preempted by the collapse of a real estate bubble.  I, for one, had never numbered a housing boom as one of the causes of the Great Depression.  Maierhofer also points out that one of the most striking similarities between the market then and now is that trouble seems to be across the entire economy and not simply located in a few kinds of sectors.

Geithner lacks the judgement to do bailouts

by Odysseas Papadimitriou on November 18, 2009

GeithnerIf Treasury Secretary Timothy Geithner doesn’t know how to get appropriately compensated for the loans / bailouts that he keeps approving on behalf of the United States Government then he shouldn’t be giving out these loans at all.  His mismanagement of these negotiations is wasting our money.

For instance last year, when Geithner, then operating through the New York Fed, decided to bailout AIG, the ailing insurance giant was already in negotiations with banks that would have retired their Credit Default Swaps with AIG paying 40 cents on the dollar.  Once Geithner took over the negotiations, he instructed AIG to pay 100 cents on the dollar.  The flubbed negotiations cost American taxpayers at least $19 billion (i.e. 60% of the $32.5 billion that AIG paid to retire the swaps).

National Geographic for $15/year

by Lynn B. Johnson on November 17, 2009

National GeographicNational Geographic magazine is a national treasure and as such, those of us in the US should support it. At $15/year, you’ll receive the best journalistic and nature photography ever, and you’ll learn something, too.

Visit this link and subscribe all your nieces and nephews. They’ll receive 12 issues for $15. Even if they don’t read, they’ll enjoy the beautiful pictures. Also, you can repurpose them into dioramas, collages, and other art projects. National Geographic employs the best photographers worldwide and has also awarded more than 8,000 grants for exploration, research, and conservation efforts.

Bank of America Tries but Fails to Defend New Annual Fees

by Odysseas Papadimitriou on November 10, 2009

no-repricingLast week, we posted a blog entry that called out Bank of America for its plans to begin testing the introduction of annual fees on active credit card accounts. Relative to the October 6th media frenzy that occurred after BofA wrote letters to both Sen. Chris Dodd (D-CT) and Rep. Barney Frank (D-MA), pledging that it would stop re-pricing its existing credit card customer base, these new annual fees are unethical and contradictory to the promise the bank made to both lawmakers and to its customers. Additionally, it is our belief that if Bank of America moves forward with its plans to raise membership fees on existing customers into 2010, it will be breaking the laws mandated under the CARD Act, which is slated to take effect in February of next year.

We knew our blog post might spark some controversy, and that it would likely circulate quite a bit. Nonetheless, we were still surprised when we were contacted by Bank of America’s corporate communications department. The spokesperson who contacted us insisted by phone that Bank of America’s letter to Sen. Dodd and Rep. Frank referred to interest rates and interest rates only, and that it made no mention of annual fees. We found the letter. Here’s what it said:

Bank of America Readies Itself to Break the Law

by Odysseas Papadimitriou on November 3, 2009

illegalIt seems that Bank of America has already reneged on the October 6th promise it made to stop raising the interest rates on the credit cards of its existing customer base.  Just a week after making this pledge, BofA announced that it would begin introducing annual membership fees, ranging from $29 to $99, to select customers next year.  Combined, these two announcements result in a net win of zero for consumers, and in an unethical bait and switch play on the part of Bank of America.  Why?  Because, according to regulation, interest rates and annual membership fees fall under the same umbrella.  They are both considered finance charges.

While BofA postured as if was taking a step towards consumer protection in making the announcement that it would stop raising rates, the introduction of new annual fees to existing credit card accounts will still result in increased finance charges for account holders, even if those finance charges are referred to and assessed by another name.  For insight, consider that the addition of an annual fee of $50, on a credit card account with $500 balance and a ten percent interest rate, would double the overall yearly finance charges associated with that card.

Taxpayers Shouldn't Pay for Worthless Degrees

by Brian Johnson on October 30, 2009

fake-college-degreeDuring periods of unemployment, colleges generally see a surge of people who are either going back to school in order to retool for a different career, or who are attempting to wisely spend their time in gaining more education in order to better themselves.  What has changed over the years, however, is the nature of the education that is being afforded these return students.  We are required by the rise of on-line degree mills disguised as universities to ask questions about higher education—no longer are all bachelor’s degrees equal, and even a master’s degree is meaningless if it isn’t earned through graduate level work.

Perhaps we could chalk degrees from these institutions up to a kind of educational con game making students think that the MBA they’ve earned in less than a year will earn them entrance into a high paying profession.  In reality, however, the damage done by these degree mills amounts to more than just a personal tragedy for the student who believes they’ve received an education, it is a national problem.  Because much of the motivation to return to school during periods of economic downturn is related to federal grants, these return students are going back to school on the taxpayer dime.  While we may endorse paying for the retraining of someone’s obsolete or substandard skills in order to help them better fit the nation’s workforce, if, instead, we are paying for these students to receive substandard education or training for careers in an already flooded market, then we, as a nation, are quite simply throwing our money away.

Taxpayers paid once for subprime mortgages and soon they will pay again

by Odysseas Papadimitriou on October 28, 2009

Finance AnyoneThe Federal Housing Administration will be the next financial disaster to fall on the shoulders of American taxpayers.  Created in 1934 to help low income and first time buyers get housing loans, the agency was designed to guarantee a relatively small percentage of mortgages, for instance, two percent in 2005.  Since its inception, FHA’s budget and operational infrastructure have followed this low-ratio model, and have been designed to absorb losses without having to ask for money or help from the Federal Government.  However, the GAO is now projecting taxpayer funded subsidies for the FHA of half a billion dollars over the next three years, if no changes are made to the agency’s program.

With the housing and credit markets in dire straights, private lenders are asking for better credit scores and higher down payments.  This means fewer people are able to qualify for conventional loans.  According to the website for Housing and Urban Development (the parent organization for the FHA), the FHA’s restrictions on the kinds of loans it will guarantee are more lenient relative to conventional loans, and as such, the FHA is being called into service more and more frequently in this particular economic climate.  Up by over 1200 percent since 2005, the FHA is now expected to back one quarter of all new U.S. mortgages.

Deceptive bloggers watch out!

by Brian Johnson on October 26, 2009

ftc-blogsThe Federal Trade Commission (FTC) has responded to the lack of transparency in product endorsements on Internet forums and blogs by amending the guidelines it requires advertisers to follow.  Under new rules which will go into effect on December 1st of this year, bloggers will have to disclose any material relationship they have with their advertisers when offering reviews. In other words, if they receive money or products for free when they write reviews, they will have to disclose that information to their readers, or face a fine of up to $11,000.

These new guidelines promote transparency between advertisers and endorsers, which will make the Internet a more trustworthy source of relevant and neutral information.  Given the scope of the online world, it is necessary to curb the activities of scammers and hucksters and to promote a public forum where a reader can trust the material they see. The FTC’s new guidelines are a step in that direction.

The Economics of Clutter

by Lynn B. Johnson on October 24, 2009

ClutterMy clutter is costing me money. I figured this out a few days ago when, struck by the mad desire to clean my apartment, I found not one, not two, but three unopened packages of swim diapers. At about $8 apiece, that’s $24 wasted dollars.

Enough was enough. So far I’ve decluttered my office, the nursery, and half of my bedroom, and as a result I’ve taken 11 tall kitchen garbage bags worth of stuff to my local Goodwill. (Yes, I could have had a garage sale, but I wanted this stuff out of my place pronto.)

Expect More Free Minutes on Your Cell Phone Plan

by Brian Johnson on October 22, 2009

cell-phoneIn light of the imminent prospect of network neutrality rules being voted on by the FCC, AT&T has announced that it will allow Internet calling services to be placed and received over its wireless network.  The FCC’s proposed rules will likely affect the validity of exclusive relationships, like the one that exists between AT&T and Apple’s iPhone, and will ensure that broadband providers don’t abuse their power over Internet access in order to favor their own services or harm competitors.

The result of allowing products like Google Voice and Skype over wireless phone networks should be similar to the effect that Voice Over IP (VOIP) has had on land-line phone services.  As we all know, once people began to use their computers to make phone calls at significantly reduced rates or even for free, traditional phone companies were forced to significantly reduce the rates they charged for phone calls.  Then, they covered their lost revenue by developing new products and  introducing new services.

Is Wells Fargo's Credit Card Division Customer Friendly or Incompetent?

by Odysseas Papadimitriou on October 20, 2009

wells-fargo-credit-cardsCertain economic factors, like unemployment and credit card default rates are intertwined.  So it’s absolutely natural that in an economic climate where experts are predicting a ten plus percent unemployment rate before the end of the year, credit card companies will have to change the way they do business in order to remain safe and profitable.  As we all know, most issuers have been doing this by raising interest rates on both new and existing customers.

Wells Fargo has recently joined its peers in announcing that it too will raise the rates on the credit cards it offers.  According to Kevin Rhein, group head of card services at Wells Fargo, “this is something we’ve been contemplating for quite a period of time… We had just reached the point that we don’t think we can offer credit cards at the current pricing and keep credit flowing.”  Rhein’s announcement is interesting because it seems to suggest that Wells Fargo waited as long as it could before instituting these new rates.  He states that the impetus for this change was the bank’s recognition that the flow of credit was actually in danger, which is another way of saying that the profitability of Wells Fargo’s credit card department was at risk.  This, and the fact that the rate hikes are not scheduled to go into effect until November 30, one day before Congress’ new suggested enactment date for the CARD Act, suggests that Wells Fargo really has waited until the last minute before raising rates.

Is Layaway the Big Deal it's Cracked up to Be?

by Lynn B. Johnson on October 18, 2009

Layaway ProgramLast year around holiday-time, we heard a lot about layaway: “It’s coming back!” “Helloooo, 1980s, your purchase-plan just called.” In particular, Kmart earned buzz with its layaway program last year, and now offers layaway items on Sears’ purchases as well.

But is layaway really a big deal?

Is Bank of America Helping Its Customers or Just Done Raising Their Rates?

by Odysseas Papadimitriou on October 17, 2009

bank-of-americaRecently, Bank of America announced that it would stop raising interest rates on the credit cards of its existing customer base.  This news comes ahead of the February 22nd deadline mandated in the Credit CARD Act, and is certainly a step in the right direction.  However, there is an issue that hasn’t been raised that would put this announcement into better perspective.  How much of Bank of America’s existing credit card portfolio does this news really affect?

Even after the bank has already re-priced millions of credit card customers into higher interest rates, the national media seems to be treating BofA’s announcement as a sign that the North Carolina-based bank is falling in line with the spirit of consumer rights—that it has ended the practice of raising rates in the midst of this credit crunch.  Unfortunately, it is not at all clear what this announcement actually implies given that the media has toed the company line, and has not asked the necessary questions to put this announcement into perspective.

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