This month on our two credit card statements are notices informing us that as of Oct. 1st we may be charged "more than two" late fees or over the limit fees" per month. What's going on?
It's estimated that Americans charged $1.8 trillion in 2005 on the 690 million credit cards outstanding. According to a Government Accountability Office study released in September, 2006, 13% of credit card users were assessed over-limit fees and 35% were assessed late fees in 2005. So Gwen has a lot of company.
Let's try to do three things. First, understand what these fees are. Next, see how fees are changing. And, finally, what Gwen can do to keep from being hurt.
Credit cards have always had fees. Some, like for a late payment, are understandable. Others came along as credit cards took on new capabilities. Think cash advance and balance transfer fees. Still others, like over-limit fees, seem like they shouldn't be possible. You would think that they wouldn't allow you to borrow more than your limit.
There are also 'penalty interest rates'. If you're late with a payment or go over your credit limit you could see your rate bumped to 30% or more.
The 2006 GAO study looked at fees and penalties. It said that not only were fees increasing, but the credit card companies were doing a lousy job of informing consumers about those fees.
The credit card companies are obligated to tell you about any fees or penalties and how they're triggered. Some fees, like paying your credit card bill by phone, are sometimes not clearly disclosed. What Gwen received with her statement was a notice of a change in how fees would be charged. And, as long as she's notified they can get by with almost anything.
Late fees have nearly tripled in the last 11 years. And many cards have adopted a 'universal default clause' that says a late payment on any card will trigger the penalty interest rate.
Credit card companies say that the higher interest rates and fees are appropriate based on risk factors. If it weren't for the higher fees, they claim that they wouldn't be able to offer credit to riskier consumers.
In fairness, the GAO's survey found that (at least among 6 of the largest card issuers) 80% of accounts paid interest rates of less than 20%. So the vast majority of card users are not paying penalty rates.
But the study also found that the disclosures were written well above the eighth grade reading level and (surprise!) featured small print. They recommended that the Federal Reserve Board revise rules on credit card disclosures.
Now that we understand what's going on we can try to help Gwen avoid problems. The first thing is to recognize that the card issuers get to make most of the rules. And, whether those rules are fair or not isn't relevant. The best she can do is to avoid getting hurt by those rules.
Get familiar with each account. The only way to know exactly what's allowed is to read and understand the "Card Member Agreement." Tough duty. But necessary.
Watch out for unexpected fees. Like for balance transfers or increasing your credit limit. Know what could trigger fees or penalty rates.
Know exactly when your payment is due. Keep a list of due dates for your credit card accounts. If you don't get the bill, it's your responsibility to contact the company and still make a timely payment.
If possible, the best thing to do is to join nearly half of the cardholders who paid little or no interest. That's because they do not carry a balance.
Obviously, for many people that's not immediately possible. Then it's important to send in your payment as soon as possible. Being seven days early is better than being one day late.
If you find it difficult to get your payment in on time, you might want to authorize the credit card company to automatically debit your checking account for the minimum payment each month. You'll probably pay for the service, but that way the payment can't be late.
Talk to your card issuer. If your due date falls at a bad time of the month, they'll move it.
If Gwen is near or over the limit on any card, she should try to shift part of the debt to a different card. Some fees are even being assessed when an account is merely getting too close to the limit. Your best bet is to keep balances to less than half the available credit.
Although the higher late fees are infuriating, they do minimal damage. The real problem is in the universal default clause. Most credit card accounts now have a universal default clause.
Suppose your rate went from 15% to 30% on every open credit account. For every $1,000 you owe, an extra $150 interest would be charged each year. So if you're the type of person carrying a $10,000 balance, that one late payment could cost you $1,500 per year. For as long as you have the balance!
Gwen is right to pay close attention to her credit card accounts. With newer fees and penalty rates in place, it becomes more important to manage your credit. In fact, it's critical to your financial wellbeing.
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Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website . If you'd like to stretch your day or your dollar visit today! You'll find hundreds of articles to help you "live better...for less".
Kredit Card Fee Increases
ForexTrading
Defination of FOREX (Foreign Exchange) Market
The foreign exchange (currency or forex) market exists wherever one currency is traded for another. Forex market is the largest market in the world, in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. Retail traders (small speculators) are a small part of this market may only participate indirectly through forex brokers or market maker like MoneyForex Financial or banks.
The Foreign Exchange Market
With international trade, the currency of one country must be exchanged for that of another for settlement of a transaction. Institutions and corporations in the international market place oftentimes need a certain currency to complete a deal, or to guard themselves from the effects of currency swings and rate changes. This system involving the exchange of different currencies has created the Foreign Exchange market, or FOREX, or FX. and more correctly known as the Global Interbank Currency Exchange Market.
Like stocks, gold and real estate investments, Foreign Exchange has become a very important tool for the investment community. Forex trading provides certain additional advantages:
Margin System
You can enjoy the benefits of leverage on contracts up to fifty times your margin deposit. That is, with 1% of the absolute value of contracts, you can enter the largest marketplace in the world. As long as you are able to maintain your margin requirements on the full contract value, you can remain indefinitely in the market.
Maximum Liquidity
Being the largest market in the world with over $1.6 Trillion bought and sold daily, huge volume of transactions are readily executed and cleared. Unlike futures or the stock market, there is never a lack of buyers or sellers on the forex market. Therefore, it gives the investor the prerogative to open or close a position at will.
Attractive Pricing
Forex quotes are based on spot prices regardless of the transaction size. Prices are quoted on a net basis.
Effective Execution
Forex trade orders are executed and confirmed online or manually via a recorded phone call. Customers know immediately the rate at which the order is executed. Confirmed orders will always receive a single price execution.
Flexible Settlement
Forex system contracts opened can be rolled over daily for an indefinite period subject to roll-over fees.
Hedging Tool
Investors involved in international trade can minimize their currency exposure risks by using a Forex trading system.
Operation Of The Forex Market
The International Forex Market is a non-physical market and has no central exchange. The major participants in this foreign exchange trading market are Central Banks, prime multinational banks, large corporations, brokerage houses and individual investors. Forex agents offer various services to investors, including financial analysis, information gathering and market situation updates. Most transactions are conducted via the telephone or through online forex trading systems.
The high liquidity in the forex market is due to the enormous volume of transactions generated by the primary market called the "interbank market" where banks, large financial institutions, insurance companies and other large corporations deal with each other in huge quantities to manage their own currency risks. The secondary over-the-counter market, where retail clients participate in forex transactions, has benefited from this liquidity provided by the big institutions.
The growth of the average daily volume of Forex trading has been phenomenal and is now currently trading currency to the tune of $1.6 trillion a day, having grown 50% in the last decade from an already large $1.0 trillion a day in 1992. It reached a high level in 2001 with approximately $2.2 trillion but adjusted back to the current $1.6 trillion by 2003. This was likely due to the birth of the single Euro currency in place of the then existing 12 European currencies.
The largest part of the largest financial market in the world consists overwhelmingly of speculation, in the form of spot forex trades (95%). The remaining 5% consists of companies swapping currencies back to their home currency to repatriate profits, forwards moves, and all other transactions.
The Traded Currencies
The six major currencies of Forex dominate the overall market share. 76% of all trades have both currencies in the currency pair as a major, and more than 98% of all trades involve at least one major.
Both of these figures are well beyond what would be expected if foreign currency trading were based solely on the majors' share of world GDP (74.5%), demonstrating the value the majors command abroad relative to other currencies. Another way thinking about the majors' predominance in the currency markets is to compare the rest of the world's economic output (25.5%), to the less than 2% share of Forex speculation that does not have a major on either side of the currency pair.
The most common currency pairs are EUR/USD (30%), USD/JPY (20%), GBP/USD (11%), and USD/CHF (5%), which together totals 66% (two-thirds) of all Forex spot trades.
The Dollar, Euro, Yen, and Pound are the most traded currencies. The six majors combine for a huge bulk of the trading transactions in a single day. Corporations and banks have known this for years, and have often used Forex for hedging purposes. With the increase in global trade, multinational corporations have likewise used the forex market to manage their risk in changes in currency rates.
Source: SGFS; Bank of International Settlements, Triennial Central Bank Survey.
Why Trade Forex?
The transformation of the world economy into a global dimension and the dawn of technological advancement create unprecedented opportunities particularly with the emergence of new markets with considerable growth potential. This scenario likewise underscores the fact that up-to-date information in this modern age is a valuable commodity made possible by breakthroughs in information technology. Now world events are digested in a matter of seconds providing the backbone for vital investment decision making. Among the most dynamic of the markets which is highly sensitive to political and economic changes is the Foreign Exchange Market (FOREX).
Whether we like it or not, radical changes in forex exchange rates affect an individual's or institution's overall investment portfolio. If your holdings are all in US Dollars, you have chosen to hold the dollar and give up other major currencies. Indirectly, this makes you a currency investor. By investing in, and with, the US currency, then your portfolio becomes dependent on the integrity and value of the US Dollar. Without realizing it, this may have worked against you due to the decline of the value of the US Dollar against other major currencies.
The FOREX market provides the investor a valuable tool in managing the effects of the foreign exchange risk by taking advantage of fluctuations in exchange rates. It is a means by which one can readily access this global market 24 hours a day and be able to hedge his/her outstanding US Dollar-based holdings. In a time when the speed of business increases on a daily basis, you need the ability to react swiftly. This change has created a condition that may leave investors out of the game without being aware of lost opportunities or erosion in their capital assets.
