As credit card market deteriorates, American Express is offering selected cardholders a $300 Amex prepaid gift card if they pay off their balances and close their accounts. Selected retail credit-card holders began receiving letters with the voluntary offer earlier February. Customers who received the offer have until Feb. 28 to respond.

There is growing concern that credit-card defaults will soar into the stratosphere as have been happening with mortgage. Consumer credit card delinquencies jumped to a record 5.6 percent in the fourth quarter 2008 from 4.8 percent in the third quarter. As the economic crisis widens and unemployment climbs, the concern about growing default ascends. Unemployment rate rose to 7.2 percent in December 2008, the highest level in 16 years.

As soon as eligible Amex customers sign up for the offer, their card and reward points accumulated while they were customers will be immediately canceled. Members have from March 1 to April 30 to pay off their balances and receive the prepaid card. During that time, the balance is subject to the same interest rates and fees that it would be if they chose to keep their card. If customers don’t pay off their balance by April 30, they will not get the gift card and their accounts will still be closed, says Ms. Faust.

Closing a credit card generally hurts customer credit scores, even if the customers do it themselves.

Federal regulators on Thursday approved sweeping new rules for the credit card industry that will protect consumers from increases in interest rates on existing account balances. The rules, which take effect in July 2010, will allow credit card companies to raise interest rates only on new credit cards and future purchases or advances, rather than on current balances.

The changes mark the most sweeping clampdown on the credit card industry in decades and are aimed at protecting consumers from arbitrary hikes in interest rates or inadequate time provided to pay the bills.

The new rules also restrict such lender practices as allocating all payments to balances with lower interest rates when a borrower has balances with different rates. Credit card lenders will be required to apply any payment above the minimum to the part of the balance with the highest interest rate.

In addition, consumers will have to be given 45 days notice before any changes are made to the terms of an account, including slapping on a higher penalty rate for missing payments or paying bills late. Under current rules, companies in most cases give 15 days notice before making certain changes to the terms of an account.

The rules cap upfront fee of sub-prime cards at 50 percent of the credit limit and allow the cardholder to pay off the initial balance over a year, not immediately. The sub-prime cards for people with low credit scores typically have no more than a $500 credit limit but require a large upfront fee. The changes could also make it more difficult for millions of people with bad credit to get the sub-prime card carrying higher interest rates.

• The new rules prohibit:
• Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay.
• Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account.
• Unfairly computing balances in a computing tactic known as double-cycle billing.
• Unfairly adding security deposits and fees for issuing credit or making it available.
• Making deceptive offers of credit.

Credit card debt held by U.S. consumers is about $850 billion, some four times what it was in 1990, according to an estimate by the Consumer Federation.

In the U.S. approximately 16,000 companies issue credit cards. The largest lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings.

Discover had filed a lawsuit against MasterCard and Visa in 2004,  seeking roughly $6 billion in damages, as it contended the card networks had harmed its business by preventing their member banks from issuing credit cards for Discover’s network.

U.S. courts have ruled that efforts by Visa and MasterCard, the world’s two biggest credit card companies, to restrict banks from working with rivals was anti-competitive and broke antitrust law.

A similar lawsuit by American Express Co against Visa and MasterCard had already agreed to settle for about $3.9 billion.

Credit-card issuers have been decreasing credit limits, hiking rates, and tightening credit card standards in the current credit crunch following the sub-prime meltdown.

Card issuers began tightening standards in January, when 10 percent reported some form of credit tightening. The pace picked up in April, tripling to 30 percent, before doubling once more in July.

Lenders have lowered credit limits on credit card accounts and increased interest rate spreads on consumer loans other than credit card loans over the past four months.

Those who have bad credit or are looking to establish credit have to face the fact that terms will be worse than they were at the start of the year. Folks with good credit scores and solid credit histories are now getting caught in the fray as they may see their limits trimmed or rates raised.

Smaller credit lines spell trouble for consumers on several fronts. Lower credit limits shrink consumers’ ability to spend. And should an emergency arise, consumers will have less credit to cover those costs. Consumers also could trigger penalties for going over a newly lower limit.

Wise card shopping means quick card shopping. Stretched-out card shopping, where you apply for one card after another, is seen as an act of desperation by credit score formulas and will take points off on your credit score, making matters worse.

The regulator of mortgage finance firms Fannie Mae and Freddie Mac said on Friday that it had directed the companies to buy mortgage-backed securities immediately.

James Lockhart, director of the Federal Housing Finance Agency, said as part of a federal financial rescue plan unveiled on Friday, the government-sponsored housing finance companies were asked to “provide additional funding to mortgage markets through the purchase of mortgage-backed securities.

“As conservator of Fannie Mae and Freddie Mac, FHFA has directed each company to implement such a purchase program immediately,” he said in a statement.

Reuters

Treasury Secretary Henry Paulson and James Lockhart, director of the Federal Housing Finance Agency on Sunday unveiled an extraordinary takeover of twin mortgage buyers, Fannie Mae and Freddie Mac, putting the government in charge of the twin mortgage giants and the $5 trillion in home loans they back. The sweeping plan places the two companies into a “conservatorship” to be overseen by the Federal Housing Finance Agency. Under the plan, the FHFA will assume the power of the board, and the two firms’ cheif executives will resign after a transitional period.

Fannie and Freddie, which were created by the U.S. government, have been badly hurt in the last year by the sharp decline in home prices as well as rising mortgage delinquencies and foreclosures.

The move marks Washington’s most dramatic attempt yet to shore up the nation’s housing market, which is suffering from record foreclosures and falling prices. Paulson said that the cost to taxpayers would largely depend on the future financial performance of Fannie and Freddie.

For more than a decade Fannie Mae and Freddie Mac have attracted overseas investors with a simple pitch: the securities they issue are just as good as the United States government’s, and they usually pay better. The trillions in securities issued by Fannie and Freddie and backed by American mortgages were never explicitly guaranteed by the U.S government, but foreign and domestic investors alike have always believed that the guarantee would be backed up if it were tested.

About one-fifth of securities issued by Fannie, Freddie and a handful of much smaller quasi-governmental agencies, some $1.5 trillion worth, were held by foreign investors at the end of March. One out of 10 American mortgages is, in effect, in the hands of institutions and governments outside the United States. Asian institutions and investors hold some $800 billion in securities issued by Fannie and Freddie, the bulk of that in China and Japan. China held $376 billion and Japan $228 billion as of June 2007, the most recent country-specific Treasury figures.

The bulk of investments related to Fannie and Freddie are in the form of mortgage-backed securities, often called agency securities or agency paper. This agency paper is considered of much higher quality than securities backed by sub-prime loans because Fannie and Freddie generally lend to borrowers with good credit histories and require higher down payments.

Myvoiceoflife

Eight out of ten Americans think their country is heading in the wrong direction. American house prices are falling faster than during the Depression, petrol is more expensive than in the 1970s, banks are collapsing, the euro is kicking sand in the dollar’s face, credit is scarce, recession and inflation both threaten the economy, and consumer confidence is an oxymoron.

Abroad, America has spent vast amounts of blood and treasure, to little purpose. In Iraq, finding an acceptable exit will look like success; Afghanistan is slipping. America’s claim to be a beacon of freedom in a dark world has been dimmed by Guantánamo, Abu Ghraib and the flouting of the Geneva Conventions amid the panicky “unipolar” posturing in the aftermath of September 11th.

Politicians seeking a scapegoat for America’s self-made problems too often point the finger at the growing power of once-poor countries.

Everybody goes through bad times. Some learn from the problems they have caused themselves, and come back stronger. Some blame others, lash out and damage themselves further. America has had the wisdom to take the first course many times before. Let’s hope it does so again.

500 million-note

 Zimbabwe’s central bank governor Gideon Gonosays is knocking 10 zeros off the country’s hyper-inflated currency to make 10 billion dollars become one dollar. Gono said on Aug. 1, 2008 the bank will issue a 500-dollar bill equivalent to 5 trillion dollars at the current rate. The central bank introduced Z$500 million-note (picture) in May 2008. Just last week Gono introduced a new Z$100 billion-dollar note that is not enough to buy a loaf of bread.

People can learn from others’ mistake to be able to make wise choice when they have to face the same situation. That is the purpose of sharing my story from a recent vacation.

Beautiful Dream

Living in New York, I dreamed to spend my vacation with my spouse to different atmosphere of the west cost. When the time came, we decided to go to the happiest place in the world the Disneyland, the sin city Las Vegas, and one of the wonders of the world Grand Canyon. We signed up at a travel agent, Harmony Int’l Travel, to join a six-day west cost tour operated by American Business Connection (A.B.C. Inc), located in San Gabriel, CA. The agent convinced us it would be a bilingual Chinese-English tour. We were really happy to be able to materialize the dream soon; and I was also satisfied to be able to buy a bargain tour package for the price of $368 a person, excluding airfare.

Untruthful and Rip-off

On May 19th, 2008, we left for Los Angeles airport for the long awaited vacation. When we arrived in the LAX airport after six-hour flight, we had to make several telephone calls to the tour operator, the A.B.C Inc., and wait for 45 minutes, before a man, called Mr. Chen, from the tour operator came to pick us. Next, we were dropped at a fast-food restaurant and Mr. Chen left us there to pick other people from the same airport. One hour passed, he didn’t show up; two hours passed he still didn’t show up. Again, we had to make several calls to, both the travel agent and the A.B.C. tour office before Mr. Chen showed up to bring us to the hotel. It’s unpleasant welcome gesture by the tour operator on the first day, because we had to wait for three hours since arriving in the airport before getting to a hotel.

On the third day of the tour we got a new tour leader, called Andy who would lead the group going to Las Vegas and then visiting Grand Canyon for the next three days. In the morning of May 21st, we were picked by a big tour couch, # 2009, license plate #CP83117. I had to remind the tour leader that we don’t speak Chinese because since leaving the hotel, the tour leader had spoken only in Chinese. What happened next was out of our expectation; the tour leader kept speaking Chinese regardless our request and the fact there were at least five people didn’t speak Chinese. Andy spoke English only for limited purposes, such as collecting money for optional tour, informing us where the bus would stop, and time to come back to the couch. The rest of trip to Las Vegas and Grand Canyon was the same; the guiding was only delivered in Chinese. When we asked Andy about the language problem, he took it easy and said he forgot that we didn’t understand Chinese. Complaints were also voiced by another couple who also kept asking the tour leader for guiding in English.

Arriving in Las Vegas on the May 21st the afternoon, the couch directly dropped us at Las Vega Club hotel located in old town Las Vegas. It was just 4 pm when the guided tour of the day was ended. I expected the bus would at least take us around the city because it was still too early to go to the hotel; and after all it is a Las Vegas tour. Instead, the tour leader arranged an optional tour to explore the city for extra cost $25 a person. When selling the optional tour, the tour leader convinced us that exploring the city by oneself would be more expensive because it would cost $30 a person only to reach the new city. What tuned out later, the optional tour was merely dropping the participants at one point on the Las Vegas Boulevard South and let the participant to take picture; no guiding at all, nothing. Add to the insult, it was turned out that it was easy to reach the place with only $5 bus fare valid for all day. Some participants grumbled for paying the optional tour; some of them felt that the tour leader and the tour company had cheated them. The rest of the group that didn’t join the optional tour also complained; that it was not the kind of tour they intended to join because what they got was only transportation to and accommodation service in Las Vegas, nothing to do with going around Las Vegas city.

It was still early morning on the way back to Los Angeles from Las Vegas when Andy collected $18 a person for his and the driver’s salary for the three days. He didn’t mention it as a “tip”, instead he used the term “salary”, which implicitly indicated everybody had to pay him regardless of his poor, unprofessional service. Still, some participants didn’t give him the full amount he requested. Tour members revealed disappointment with the tour because the tour leader, Andy, didn’t do his job and didn’t care what tour members concerned about, while handling complaints with unprofessional, rude manner. Some refer the tour leader as nasty rude person, while others called him as a greedy and no manner person.

Lesson to Learn

Don’t be fooled and lured by a cheap tour package for your vacation. The price is not the only issue you have to concern about. Buying an inexpensive tour, you may end up paying even more costly and having unpleasant vacation because of many hidden extra costs, unprofessional service, and rude treatment from the tour leader.

Read the brochure carefully and ask questions, especially about the tour details, potential extra costs, optional tours, and admission tickets for attractions. You have to make sure the tour operator provides guided tour when visiting the tour destination mentioned on the brochure instead only arranging transportation and accommodation.

When joining a bilingual tour, get a guarantee from the agent about it. This is crucial if you want to have fun and enjoy your vacation. There is no point to purchase a guided tour conducted in foreign language that you don’t understand and only to become a stranger among the crowd.

Finally, get recommendation from friends, relatives, or others who are satisfied with the tour that your will join to.

It’s never too late to start saving for your future. You should begin set aside your cash for retirement as early as possible. You can’t rationally anticipate retiring in comfort unless you save.

When is the good time?

The market is has down significantly from the last peak in October 2007. The market may still continue going down or may be ready to take off; nobody knows. History of the Dow Jones Industrial Average index shows the longest bear market lasted for three years, which happened from 1946 to 1949. Market recovery is only a matter of time. In addition, short-term fluctuation in your investment is not relevant for long-time investment horizon, such as an investment for retirement. Nowadays should be a good time for starting invest for you retirement.

How do you start investing for retirement?

Most financial institutions and brokerage firms offer such retirement accounts as Traditional IRA and Roth IRA. You simply walk-in or sign-up online to your financial institution to open one of the retirement accounts. If your employer offers 401(k) plan, you should take the opportunity.

What are 401(k), Traditional IRA, and Roth IRA?

401(k) plan is a defined contribution plan offered by a corporation to its employees, which allows employees to set aside tax-deferred income for retirement purposes, and in some cases employers will match their contribution dollar-for-dollar. Taking a distribution of the funds before a certain specified age will trigger a penalty tax. The name 401(k) comes from the IRS section describing the program.

IRA (Individual Retirement Account), also known as traditional IRA, is a tax-deferred retirement account for an individual that permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty). The exact amount depends on the year and your age. IRAs can be established at a bank, mutual fund, or brokerage. Only those who do not participate in a pension plan at work or who do participate and meet certain income guidelines can make deductible contributions to an IRA. All others can make contributions to an IRA on a non-deductible basis. Such contributions qualify as a deduction against income earned in that year and interest accumulates tax-deferred until the funds are withdrawn. A participant is able to roll over a distribution to another IRA or withdraw funds using a special schedule of early payments made over the participant’s life expectancy.

Roth IRA is a new type of IRA, established in the Taxpayer Relief Act of 1997, which allows taxpayers, subject to certain income limits, to save for retirement while allowing the savings to grow tax-free. Taxes are paid on contributions, but withdrawals, subject to certain rules, are NOT taxed at all.

What is the golden rule of investment?

Invest your savings in a diversified blend of stock and bond funds. The key is to create a portfolio that’s aggressive enough to generate reasonable long-term growth. There’s no single “correct” mix of stocks and bonds; a typical blend of 65% stocks and 35% bonds is a good starting point. You can adjust the stock portion up or down according to your own tolerance for risk.

What is the follow up?

Your investment portfolio has to be regularly evaluated at least once a year. Changes in the financial markets or other circumstances might distort the balance of your portfolio mix. By reviewing your portfolios, you can ensure your investment mix remains aligned with your retirement objective.

your prospects will improve greatly if you save more. So look for opportunities to boost the amount you sock away, whether it’s using funds freed up from paying off credit cards, extra money you have after the kids have moved out or the mortgage is paid off or whatever.

So, why are you still waiting?

Remember that having comfortable retirement is got to start with saving. If you act now, you’ll definitely be much better off than if you procrastinate or end up doing nothing at all.

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