# Friday, December 26, 2008
Credit Card Crisis May Replace the Mortgage Crisis in 2009
The mortgage crisis may soon be replaced by the credit card crisis and more Americans are defaulting on their credit cards. After years of flooding the mail with credit card offers and towering credit lines, lenders are now sharply curtailing both offers and lines of credit in an effort to preserve capital after writing off more than $21 billion in bad credit card loans in the first half of 2008 alone.

Many experts expect the credit card industry to write off an additional $55 billion over the next year and a half as total losses could surpass the 7.9% default rate reached after the technology bubble burst in 2001. Lenders have been quick to react by hiking fees, cutting reward programs, and decreasing their credit lines even among wealthy customers.

Credit card companies are realizing that they need to cut back sharply as there is no room for extra credit cards. People are completely maxed out with mortgages, home equity lines, and credit card debt. When forced to decide whether to pay a mortgage and lose a house or default on a credit card, it is often an easy decision for cash-strapped consumers to make.

Those that want to preserve their credit scores, however, may want to look into alternatives to simply defaulting. One of the best ways to get your bills paid reasonably is negotiating with your creditors. This can be done personally by calling them up or via professionals through so-called debt settlement companies.

Friday, December 26, 2008 6:08:47 PM UTC  #    Comments [72]  |  Trackback
# Tuesday, December 23, 2008
How to Get an Extension on Your Taxes
The United States is in one of the worst recessions in its history and its citizens are feeling the pain. With rising credit card delinquencies and bank foreclosures, taxes might be low on the list of concerns at the moment. Those that need more time to come up with their tax money may want to take a look at filing a tax extension to allow more time to pay their bills. So, how can you get an extension and how much might it cost you to delay?

Consumers can get an extension by filing Form 4868 with the IRS. Submitting Form 4868 by April 15th will give you an extension to October 15th to file your return. A late filing penalty will not be imposed if you fail to submit a payment with Form 4868, provided you make a good faith estimate of your liability based on information and paid 90%+ of the amount owed. The penalty is typically 0.5% of the unpaid tax per month.

Consumers who owe $10,000 or less and cannot pay their taxes may also want to consider filing a Form 9465 installment agreement. You must show that full payment cannot currently be made, and that in the previous five years you filed income tax returns and paid the tax, and did not enter into installment agreements during that period. The late penalty is also reduced to 0.25% from 0.5% per month. Combined, these are the options available to those who have trouble paying taxes.

Tuesday, December 23, 2008 4:39:13 PM UTC  #    Comments [10]  |  Trackback
# Thursday, December 18, 2008
Think Twice Before You Buy a Gift Card
The National Retail Foundation said that gift cards are the most requested gift again this year, which should come as no surprise given their popularity since being introduced. However, consumers thinking about purchasing these cards for their loved ones may want to reconsider. It may be convenient to give a gift that will always be the right size and color, but there is some risk involved that must be considered.

Research by the Tower Group found that gift card holders lost more than $100 million this year alone. Big stores filing for bankruptcy, including The Sharper Image and Linens ‘N Things, led to the majority of the losses while more may be on the horizon. Circuit City, which filed for bankruptcy a few weeks ago, asked and received court permission to honor its gift cards, but others may not be so lucky.

Some gift cards also have design flaws that could make them less valuable. For example, some gift cards have expiration dates where the value becomes worthless if it’s not used. Meanwhile, other cards, notably those provided by Visa and MasterCard, charge fees if they are not used that can add up to a few dollars a month. Both of these attributes make gift cards far less attractive than cash or actual gifts that do not lose value.

So, think twice before you buy your loved one a gift card this holiday season…

Thursday, December 18, 2008 7:50:54 PM UTC  #    Comments [533]  |  Trackback
# Monday, December 15, 2008
5 Ways to Reduce Your Tax Debt
The past year has been a rollercoaster ride for many U.S. citizens with markets moving up in the first half only to plummet in the second. As a result, many independently employed people, such as real estate investors, are sitting on a mountain of tax liability despite heavy losses. This tax debt can be difficult to deal with, but here are some tips on setting up payment plans and reducing the amount you owe.

There are five strategies to get out of your IRS problems:
  1. Installment agreement: The IRS lets you setup a monthly payment plan for paying off the amount that you owe.
  2. Partial payment installment agreement: The IRS recently setup a new program where you have a long-term payment plan to pay off the IRS at a reduced dollar amount.
  3. Offer in compromise: The IRS has a program where you can settle your tax debts for less than what you owe if you make a lump sum payment or accept a short-term payment plan.
  4. Not currently collectable: A program where the IRS voluntarily agrees not to collect on the tax debt for a year or so.
  5. Filings bankruptcy: Tax debt can be eliminated under the strict rules of a Chapter 7 or Chapter 13 bankruptcy petition.
It is important to consider the long-term ramifications of any actions that you take. Payment plans put a financial burden on you going forward and may involve paying interest. Meanwhile, a bankruptcy may eliminate your debt, but it will also hurt your credit rating over the long-term. This could make it more difficult to get home or car loans in the future.

Monday, December 15, 2008 5:34:03 PM UTC  #    Comments [153]  |  Trackback
# Friday, December 12, 2008
How to Save on Prescriptions

Those reaching retirement age may not have to save up for a car anymore, but they are digging deep to pay the increasing costs of prescription drugs. More than half of all insured Americans are now taking at least one so-called maintenance drug for a chronic condition, according to a recent report.

The increased demand has lifted the price of such brand-name medications some 2.5x faster than the rate of inflation last year. Luckily, there are many ways to lessen the pain without resorting to shady practices like traveling to Canada or Mexico and smuggling drugs (prescription that is) back into the U.S.A.

Many discount chains have begun selling their own prescription drug programs to provide an alternative. Wal-Mart began selling 30-day supplies of generic drugs for just $4 each and recently unveiled another plan providing a 90-day supply of generics for just $10 (or your co-pay if it's less).

Another growing trend is mail order pharmaceuticals. Some employers are now requiring their workers who fill the same prescription for three months in a row or more to order 90-day supplies from an approved mail-order company. It is wise, however, to check out these companies before using them as many are sketchy.

These two alternatives are becoming increasingly popular as insurers are raising co-pays on brand-name drugs. Generics have always been cheaper than brand-name drugs, but it has been increasingly costly to insit on a brand-name. The average co-pay for a brand-name drug is now $43 compared to just $28 in 2001.

So, the next time you hit the store to fill your prescription, ask yourself if there is some way you could do it cheaper!

Friday, December 12, 2008 8:54:36 PM UTC  #    Comments [569]  |  Trackback
# Thursday, December 11, 2008
5 Tips to Save More Money
The savings rate in the United States has traditionally been negative since the Great Depression fears ended. However, consumers are now experiencing the same thoughts and feelings of their ancestors and are looking for ways to save. So, what are some good ways to boost your savings and have more cash down the road? Here's five tips that we've found to be most effective:
  1. Automate Your Savings - Setup an automatic 401(k) or IRA retirement plan, so you don't even see the money in your spending accounts. This makes it much easier to save from a psychological point of view.

  2. Use Rewards Credit Cards - Everyone has to spend money and one way to save money is to use rewards credit cards that offer you gifts in exchange for making purchases. However, be careful not to use one that has an annual fee.

  3. Search Out Deals - Getting better deals from your service providers is often as easy as asking. Competition among cable and phone companies will force them to cut your rates to compete while credit card rates and debt settlements can also be negotiated to lower rates.

  4. Drive Smoothly - Breaking and speeding can add up quickly in the cost of gas for your auto. As a result, driving with cruise control and hot speeding in the city can help you save money on your gas bill.

  5. Use Coupons or Rebates - Coupons and rebates are free ways to save money. A little extra time spent at night clipping coupons can help save a lot of money at the grocery store. Remember, $2 saved is already a gallon of gas or 20 miles or more on some cars!

Thursday, December 11, 2008 7:55:50 PM UTC  #    Comments [195]  |  Trackback
# Wednesday, December 03, 2008
Is Your Credit Limit at Risk?
Consumers aren’t the only ones feeling the credit crunch these days – credit card companies are also hurting for cash. Rising defaults and tighter debt markets have caused credit card companies to make several changes to cover themselves. The most recent: Cutting spending limits on credit cards.

Some consumers may be caught off-guard this holiday season as credit card companies slash credit card limits, often without warning their customers. American Express, Bank of America, Citibank and Discover are among the major credit card issuers taking such actions.

So, who is at risk of having their limits slashed? The first targets will likely be those who have high balances along with those who have low credit scores and are not paying their bills on time. These high-risk accounts can quickly cause problems for issuers if they default.

However, the unprecedented crisis is also causing problems for many consumers with good credit ratings. This means that credit card companies may also begin to target these consumers that they perceive as high-risk in today’s environment. As a result, consumers should keep their balance 30% lower than their limit to reduce the odds of such reductions.

The other key thing for consumers is to check these limits on a regular basis. Accidentally going over the limit on a credit card can spur a substantial amount of fees and charges. Consumers that already hit this wall may want to call up their credit card company saying that they didn’t know it was lowered.

Wednesday, December 03, 2008 6:50:49 PM UTC  #    Comments [14]  |  Trackback
# Monday, October 27, 2008
The Real Estate Market Continues to Struggle
The real estate market is the source of many problems for the U.S. economy and things aren't improving much. The U.S. Centus Bureau released new numbers today showing homes sales that inched higher over August's lows, but remained the worst since 1981 in September. Meanwhile, the prices of those houses have hit 2004 levels as sellers continue to accept lower and lower figures to unload their houses.

Home builders have reduced their production to reduce inventory and stabilize prices, but there were still around 394,000 new single family residences on the market at the end of September. At the current pace, it would take just over 10 months to sell through that inventory and turn the economy. The median selling price for a new home fell to $218,400 from $221,900 in August while the mean selling price was up from $263,900 to $275,500.

It is also worth noting that the true price declines are probably even higher than the numbers. Some 65% of homebuilders surveyed by NAHB reported offering customers free upgrades such as marble countertops. Other incentives include paying closing costs and buying down the interest rates. It is also worth noting that the additional sales occurred primarily in the West; the north-eastern US saw a 21.4% drop while the Midwest saw a 5.8% decline.

Unfortunately, the number of unsold new homes, standing at 394,000 at the end of September, remais near historic highs as the number of US home foreclosures added more properties to the market. In the end, these trends will likely take some time to reverse.

Monday, October 27, 2008 6:44:28 PM UTC  #    Comments [154]  |  Trackback