Your 3 worst debt consolidation moves

The phrase "debt consolidation" has always had a magical ring to me.

As if somehow, someone would have the power to mush my debt into one neat little package, which by some incredible financial alchemy would also then shrink the debt itself -- and I'd only owe a hundred bucks or so.

I know I'm not the only idiot who's had this fantasy, because an entire industry has sprung up to support it: The Debt Consolidation Industry and Covert Sting Operation. Every day, I get at least one piece of regular mail offering me low-interest balance-transfer deals for credit-card debt, or arm-twisting e-mail from unknown credit organizations that scream things like:

• "DEBT RELIEF IS JUST A CLICK AWAY!"
• "CUT YOUR MINIMUM MONTHLY PAYMENTS BY 50% OR MORE!"
• "SLASH YOUR INTEREST RATES DOWN TO ZERO!"

These promises are incredibly alluring to anyone who is caught in the quicksand of having too much consumer debt, and who will believe anything, do anything -- click her ruby slippers (bought on sale for just $400!) three times -- to make it go away. But before you start skipping down some financial yellow brick road to see the Wizard of Debt Consolidation, remember this: Watch out for those flying monkeys.

Three bad debt-consolidation moves:

1) The Hard-Money Loan
"The biggest myth about debt-consolidation loans is that they're easy to get," says Scott Kays, president of Kays Financial Advisory Corp. and author of "Achieving Your Financial Potential." If you really need a loan, it's probably because you've already missed a few payments and your credit history has more dings in it than a '74 Ford Pinto.

And that's the problem. Kays says that if you are a credit risk, the consolidator may entice you with promises of an easy-does-it loan, and end up charging you higher interest rates than you're paying now -- as high as 21% or 22%. "Your monthly payment may be lower" with one of these loans, "but you'll end up paying more," says Kays.

2) Debt Consolidators Who Promise to Take Care of Everything
This is the fairy godmother fantasy. This Nice Big Debt Consolidation company comes along and swears they'll make your life soooo much easier. They'll negotiate lower interest rates, reduce your monthly payments -- and all you have to do is make "one EZ payment."

In reality, many debt consolidators build in a fee as part of the monthly payment you make to them. It's usually about 10% of the payment (i.e. about $40 on a $400 monthly payment). They pass along your payments to the creditor -- some debit directly from your checking account -- and get back a 10% to 15% slice that the relieved creditor is only too happy to rebate to the consolidator.

Is it worth paying someone else to do what you can do on your own, i.e. negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first?

To desperate ears, this might sound like an ideal solution, especially when you talk to these people and they scare the bejeezus out of you. I interviewed two, Cambridge Credit and Counseling Services and Integrated Credit Solutions. Each offered similar services, and I don't recommend either of them. The senior credit counselor I spoke to at Integrated told me, in grave tones, that it would take me 379 months -- or 32 years -- to pay off my debt. With their services, however, they would "save me 27 years," and I could pay off my debt in just 53 months, or about 4 1/2 years.

Thats funny, because when I plugged my debt into the MSN Money Debt Consolidator -- a less biased source, since they ain't getting no fee from me -- they said I could pay off my debt in 41 months, providing I make slightly higher minimum payments to each card: a total of just $60 extra per card.

Here's another risk with consolidators you should know about: they have been known, in some cases, to make late payments or even miss payments, thus worsening your plight (and your credit record).

After I got off the phone with Integrated, I had to ask myself: Is it worth paying someone else to do what you can do on your own? That is, negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first? I don't think so.

3) The Balance Transfer Trap
Low-interest balance-transfer cards are a dime a dozen these days, but remember that those rates only last a few months -- and then you have to switch cards again. The danger is that at some point all this activity begins to show up on your credit report, and you start to look like a bad risk. Then if you get turned down, "you could be left holding the high-interest card you were hoping to dump," says Kays.

If you think you can swing from the balance-transfer vines for a few months, just make sure you formally close all your accounts yourself, and then notify the credit-card company to mark the account "closed at customer's request." "Otherwise, on your credit report, it will look like the creditor closed your account," says David Mooney, PR director of Equifax, one of the biggest credit reporting agencies. Thus making you look like an even worse risk, even when you're doing your best not to be.

Your best debt-consolidation moves
If you own a home and have some equity in it, you have a couple of options that are relatively low in cost. These are pretty straightforward:

Take out a home equity loan. A home equity loan has the advantage of carrying a fairly low interest rate, currently in the high single digits, and what interest you do pay is tax-deductible, Kays points out. Most fixed-rate loans carry a 15-year term and require that borrowers pay an origination fee of $75 to several hundred dollars, plus the cost of an appraisal and title insurance.

Do a "cash-out" refinancing. Another option for those with home equity is refinancing your property for greater than the amount you owe and using the extra cash to pay off debt. You get very low interest rates this way, but you're stretching payments out over 15 or 30 years. The total interest cost over three decades can wind up being pretty huge, so think of this as a one-time-only (if ever) option.

Refinance your car. "Most people don't think of it, but it is a secured loan and you can borrow against it," Kays says. The danger there is that you may run out of car before you run out of debt. It's tough to buy a new car when you owe more than it's worth.

Get a personal loan. If you have reasonably undamaged credit, you may qualify for an unsecured loan. Credit unions (see link to the left) typically offer lower rates than banks, but even there you can expect a rate of 11% or more. Still, that may be a whole lot less than the 20%-plus you're now paying to the credit-card company.

Negotiate better terms. You can do this for yourself easily. Just call your credit-card company and ask them to do it (many customer service people are authorized to reduce rates right there on the phone).

Another alternative. Or you can get help from an organization like National Foundation for Credit Counseling (see link to left). NFCC has branches throughout the country; they are a non-profit, community organization that provides free and confidential debt management advice to anyone who needs it. You can even consult with them over the phone, like I did (see below).

Like other debt consolidators, NFCC gets paid by creditors, so it's in their best interest to work out a repayment plan rather than advise you to declare bankruptcy. Not that you want to be advised to declare bankruptcy, but in certain cases it may be your best option.

NFCC makes no outlandish promises beyond the prospect of a saner financial life, and the possibility of qualifying for their low-rate mortgage program. They also offer low-cost financial planning -- a resource I'm definitely going to look into for a future column. Once I have some finances again, I will need someone to tell me what to do with them!

So whatever happened to 
Since writing about my struggles with debt, Ive become religious about paying as much money as I could every month. (Thing was: I still carried my credit cards in my wallet. So my new get-out-of-debt tip would be: Take the cards out of the wallet. Otherwise, you will use them.)

Then those big payments started to have an impact. But I was on a mission. I wanted my debt gone. I turned to debt calculators, talked with friends, and ultimately came up with a two-pronged plan of merciless debt destruction. Operation Enduring Freedom from Debt. First, I took on some extra freelance work that, eventually, would pay me a little bit more than my debt in four big chunks. While I was waiting and working, I decided to consolidate my debt and turned to NFCC as my resource.

Here's the best part of NFCC: 1) They give you a one-hour consultation, by phone or in person, to help you decide if you need a Debt Management Plan. 2) In order to do the consultation, they make you fill out a form that details all your expenses.


Writing down my daily expenses is Personal Finance 101, and I've always found it mildly useful. NFCC advisor Nina Reiss, on the other hand, walked me through an entire year of expenditures. Now THAT was eye-opening. She asked me what I paid per month for things I'd forgotten even were expenses: subscriptions, holiday gifts, underwear, new socks, groceries, birthday gifts, movies (even rentals), my yoga classes, banking fees -- you'd be amazed what you pay just to live a semi-civilized life.

Ultimately, Reiss felt that I was living about $100 a month beyond my means, but that I was paying as much as I could toward the debt on my own. We did the numbers and figured that even with their interest-rate reductions, I could still pay off my debt without their help -- as long as I cut back my expenses so that I was living within my means. So in the end, dear reader, getting out debt boils down to one thing and one thing only (which you and I already knew): elbow grease, peanut butter lunches and living like a more reasonable human being.

5 Ways Credit Cards Can Protect Purchases

A sweater you buy for Christmas goes on sale for half price the next day. You might be able to get the difference back if you paid with a credit card.

The fine print in cardholder agreements often includes a number of protections overlooked by shoppers. Taking a minute to understand them could help you decide when to use credit instead of cash or debit.

If you can't locate a copy of your cardholder agreement or find the language too dense, call customer service to ask about the benefits that interest you. Be sure to get a full rundown on the terms and conditions too, since they can be extensive. There are usually deadlines for making claims and caps on how much money you can recover per claim.

Here are five relatively common protections:

———

1. EXTENDED WARRANTY

How It Works: It's tempting to pay for an extended warranty when making a big purchase. But you may already have comparable coverage through your credit card.

Card companies often extend coverage on purchases for up to one year depending on the terms of the original warranty. American Express gives an extra 90 days of coverage on a 90-day warranty. For a four-year warranty, the extension is for a year. The cardholder generally has to make the claim. Some banks let gift recipients make claims as long as they have all the necessary documentation, such as the store receipt, a copy of the appropriate credit card statement and the original warranty.

Watch For: The extended warranty provided by the store or manufacturer may be more comprehensive or last longer than the one offered by your card issuer, notes Bill Hardekopf, CEO of LowCards.com.

2. PRICE PROTECTION

How It Works: You splurge on an expensive gift for your spouse, only to see it heavily discounted a week or two later. Even if the store won't credit back the difference to you, your card company might. With the Chase Sapphire card, shoppers can get the price difference back for up to 90 days. That's far more than most retailers allow. In addition to the original receipt, however, you'll need proof of the lower price, such as a sales circular or printed advertisement.

Watch For: The protection usually doesn't apply toward close-out sales and other special discounts.

3. PURCHASE PROTECTION

How It Works: This is protection for customers if an item that doesn't come with a warranty breaks or is stolen. It typically lasts for a couple months after the purchase is made.

Depending on the situation, your bank might offer to replace an item, pay for its repair, or credit the amount of the purchase back to your account. There's usually a cap on the amount you can be reimbursed for.

A police report may be needed to file claims for stolen items. Lost items generally aren't covered. Antiques and collectibles usually aren't covered either.

Watch For: If the theft or damage can be covered by your homeowner's or auto insurance, the card issuer might require you to file a claim with those places first. 4. RETURN PROTECTION

How It Works: If the deadline to return a purchase to the store passes, your credit card issuer might give you some extra time.

Many card issuers accept returns for 90 days after purchase as long as the item is still in new condition. There are generally caps on the value. American Express refunds up to $300 per purchase and cardholders are capped to $1,000 a year. Card holders generally need to ship the item to the card issuer, which then sells it online or elsewhere through a third party.

Refunds are generally credited to the account within two weeks or less if all the information is provided.

Watch For: You may need to pay to ship the item to your card issuer.

5. CAR RENTAL INSURANCE

How It Works: The cost of renting a car is often far higher than advertised because of all the add-ons at the counter. You may be able to knock at least one of those off extras off the bill. If you have a trip planned soon, it's worth calling your bank to see if you're covered in case of an accident. It's one of the more common protections offered on credit cards. 

Student loan debt now exceeds credit cards

Eight thousand dollars and climbing. The debt counter keeps on turning for college freshman Allison Clevlend.


The 18-year-old University of Wisconsin-Oshkosh student has started her higher education under a new reality where debt sometimes has the final say over where she goes and what she does.


"Oshkosh was my last choice of school, but I didn't get the financial aid I need," said Clevlend, who lives at home and works part time to limit her need to borrow.

"I'm looking beyond college," she said.

Total student loan debt now exceeds total credit card debt in this country, according to Mark Kantrowitz, publisher of FinAid.org, a website that provides information about student aid and scholarships.

College graduates owe more than $850 billion in student loans, according to FinAid.org. The Federal Reserve estimates Americans owe about $828 billion in revolving credit, including credit card debt.

The change, which first happened in June, reflects the culmination of multiple trends: Consumers are paying down their credit cards, more students are going to college than ever and tuition continues to outpace financial aid.

"We have students who are living off their loans. When you get to that point, it's no wonder students are having to borrow the maximum," said Beatriz Contreras, director of financial aid at UWO. "That was not the intention of financial aid when it was started."

Loan critics say the ballooning rate of student borrowing has been largely overlooked while people focused on problems associated with credit card use.

"Like everything that I've been shouting for the past five years, no one really listened. The people who you would think would be up in arms were just not there," said Alan Collinge, who runs a Web site called StudentLoanJustice.org, where students can share stories about loan troubles.

Even some students don't know how much they owe.

"I guess it doesn't really bother me too much at this time," said William Durfee, 21, a math major at the University of Wisconsin-Oshkosh. He said he knows he borrowed in the range of $6,000 to $7,000 for the current semester, and he's taken similar sized loans for three previous years of college.

The way he sees it, "I'm going to find a higher paying job after finishing school, and that will help to pay it off," he said.


That sentiment has been echoed for years: Hard work in school should pay off with a college diploma and a good job.


A 2010 report from the College Board Advocacy and Policy Center estimates college begins to pay off for the average graduate by age 33. Compared with a high school graduate, the typical four-year college graduate who enrolled in a public university at age 18 has earned enough by then to compensate for being out of the labor force for four years and for borrowing enough to pay tuition and fees without grant aid.

But American's may have crossed a line where borrowing for school does more harm than good.

The number of students defaulting on their loans has been rising since 2003. According to the most recent federal Department of Education figures, 7 percent of students defaulted in 2008.

That number could be even worse. The Chronicle of Higher Education reported in July that one in every five government loans that entered repayment since 1995 went into default.

UWO Chancellor Richard Wells said responsibility for reducing student debt lies on everyone's shoulders. He said university officials must control costs, governments should reasonably subsidize higher education and students must work hard to graduate on time.

"It challenges us all in fundamental ways if we intend to improve the educational experience and control the costs," he said.

Contreras said she advises students to learn as much as they can about their loans to avoid problems, and she suggests families begin planning years in advance by saving money and pursuing scholarships to minimize the need to borrow.

"Awareness, awareness, awareness. Ask questions, and it's never too early to look into this," she said.

Debt-relief plans may surprise you

He lost his construction job in November 2009, and hasn’t found steady employment since, picking up handyman work and odd jobs wherever possible. His wife Emily took a job recently, mostly so they could get benefits.

Mike headed back to school during his unemployment, hoping to pick up trade skills that will either make him more valuable to an employer or help him branch out on his own. Then, the couple’s young child required some medical care, which the couple really couldn’t afford. They paid for it with their credit cards, and a small revolving debt suddenly became a big one.


Now they are struggling to pay off the debt. Mike and Emily have kept current on the bills, but mostly with minimum payments, and Mike lives in fear that he will spend the next decade or more paying off debt, rather than saving for his daughter’s college costs or his and Emily’s retirement.

So Mike and Emily are considering debt relief. They were getting phone calls about debt settlement, promising to cut outstanding payments and ease their paycheck-to-paycheck pressure. Mike knows that bankruptcy may also be an option if he doesn’t find regular employment soon. But his hope is that he can get through the rough patch, reducing the debt all the while, and come out the other end of the downturn with a new skill set, a new job and a fresh financial start.


“I’ve never picked a debt-counseling company before, but I talked to two companies and they had different plans, different amounts I’d have to pay every month,” Mike wrote me. “I know there are some bad stories about credit counseling. I know it’s not the same as picking a financial adviser, but how do I decide who can help me pay off my debts?”

It’s a great question, especially now that new laws aimed at protecting consumers from debt-settlement companies’ steep fees are set to go into effect — but which some service providers are likely to ignore — at the end of this month.

Debt relief takes many forms

While “debt management” and “debt settlement” may seem like the same thing, nothing could be further from the truth. Debt management typically involves a plan that slows or stops the interest clock but results in the consumer paying his debt in full. Debt settlement generally is about convincing creditors to settle for less money than is owed.

Credit counselors say many consumers are not nearly as far down the debt hole as they think, and that some budgeting and careful planning — along with a payment plan — is sufficient to dig out.

Christopher Viale, president of Cambridge Credit Counseling, says that roughly half of the consumers who seek his non-profit firm’s help can handle the debt problem on their own, after an assessment and plan. Between 15% and 20% of the people seeking services need counseling, including an intervention with creditors, with another 20% to 25% so deep in trouble that bankruptcy is obviously the best course of action. For the remaining group, some 5% to 15% of his customers, some form of debt settlement may be a compromise.

A debt counselor — particularly if he’s from a not-for-profit firm — is typically offering free help, a no-charge chance to develop a plan. A good counselor will need an hour or more just to get a full assessment of the problem, including a full look at what’s coming in, what’s going out and the challenges facing the family, so they can develop an action plan.

If they offer debt management, the counselor will be contact the credit-card companies, reducing interest rates, lowering monthly payments, getting fees waived, stopping the interest clock — whatever they can do to stem the bleeding. Then, they will take all of that unsecured debt and wrap it into one payment, taking the consumer’s money each month and distributing it to creditors. There are no late fees, and all accounts are current; the consumer’s credit score takes a hit at first, but tends to recover as the payment plan proceeds.

In the end, the consumer pays what they owe, but over a longer time frame and at reduced interest rates.

Unexpected consequences


By comparison, for-profit debt-settlement companies will reduce debt, but the consumer may not be thrilled with the process.

The for-profit firms, typically, are the ones doing the heavy voice-mail and email campaigns, and their salespeople are paid on commission. Those salespeople don’t always care to know much about the consumer’s situation; they know they can make money by getting the consumer to sign up for their more radical approach, whether it’s necessary or not.

Typically, credit-card companies won’t settle accounts for less than is owed. That only happens when the card company writes off the account, and sells it to debt collectors or attorneys who buy the debt at a discount and who then accept less than the full amount from the consumer.

With that in mind, debt-settlement companies effectively tell lenders to stop contact with the consumer, and work instead through them. The consumer makes a monthly payment, but the settlement firm takes out the sales commission and any upfront fees. The remaining amount sits in an account until the consumer has defaulted, with late fees and other charges mounting all the while.

When the account is four to six months in arrears and the lender must get it off the books, the debt-settlement firm works to get the best deal from whoever takes over the debt, using the war chest of payments made to that point as a carrot. Collectors willing to forego a big chunk of what the consumer owed to get a piece of that pie will cut a deal; others will go to a payment plan, knowing that the consumer is at least putting money on account every month.

Card issuers, not amused by these tactics, are increasingly turning the accounts over to attorneys, who sue the delinquent customers. That’s why the strategy is particularly risky; for many debt-settlement customers, bankruptcy would be cheaper and easier.

The government has been trying to clean up the collections and counseling arena for years now; the latest change will go into effect next month. It basically eliminates the commissions and upfront fees that eat into the debt-settlement payments, holding costs down to a small application fee and processing fee.

That said, debt-settlement firms will still be allowed to charge a “success fee” when they strike a deal with a lender, and those fees have no limit. You could wind up paying much of your savings to the agency.

Further, many people in the business believe the new rule doesn’t apply to debt-reduction attorneys, but only to credit-counseling firms. As a result, some settlement firms appear to be taking on figurehead attorney leaders, so they can do business as usual, no matter what the Federal Trade Commission says.

“People who have debt problems tend to be too focused on the monthly payment, and tend to pick the lowest payment they can get, because it gives them the most breathing room,” said Viale. “It may be cheaper and easier every month, but it may be very costly over time. Take the time to get a plan, to understand how it works and to focus on doing what’s right for you. If someone says they can get you out of debt ‘right now,’ they may hurt you as much as they help you.”

Protect Yourself From Harassing Credit Card Debt Collectors

Now more than ever, Americans are forced to face the repercussions of the ongoing economic crisis. With lenders extending more credit to drowning consumers, and families taking out high risk secondary loans on their homes, consumers scatters to find optimal solutions for their newly acquired financial burdens. With the lack of jobs increasing, more people are turning to Debt Settlement, Debt Relief and Debt Mediation as a means to alleviate some of their debt load.

Although these methods allow for a fairly noble solution with confronting debt, in most cases, creditors fail to call off their collection agencies once notified of a consumer’s intent. Whether this is due to the creditor’s decision to ignore notification or whether they simply failed to alert their collectors, the continuing collection process can be very upsetting and demeaning to the person who is genuinely attempting to pay off their debts. In some cases, creditors take on an agitated approach and begin massive campaign of harassment toward the consumer. The world of bill collection can be particularly cut-throat and unscrupulous, and many consumers are quietly enduring harassment because they do not know their rights.

The Federal Fair Debt Collection Practices Act was enacted to stop abusive, deceptive, and unfair debt collection practices by debt collectors. It is vitally important for consumers to understand the laws protecting them against unfair and coercive debt collection methods. According to FDCPA, a debt collector cannot; Telephone you an unreasonable number of times; Telephone you at an unusual time/ unusual place; Disclose information of your debts to third parties; Use profane or other abusive language; contact you after written notification that you do not want to be contacted any further; Claim to be affiliated with any governmental organization; Misrepresent the character, amount or legal status of a debt; Threaten to take any action that cannot be taken legally; Accuse you having committed a crime; Threaten or communicate false credit information; Attempt to collect, until he honors your request to validate; Use deceptive methods to collect debts; Call you before 8:00 a.m. or after 9:00 p.m.; Call you, but not announce who he/she is.

If you feel you are victim of an abusive or harassing debt collector you should:

(1) Find out if the collector is violating the FDCPA or your state’s laws. If so, send the collector a certified letter, return receipt requested, telling them that you believe he is in violation of the FDCPA or your state’s laws; and, if you want:

(2) Tell the debt collector that he must stop calling you at home and at work.

(3) You can file a complaint online at www.ftc.gov. The FTC is the body in charge of regulating debt collection agencies. They will not handle your case personally, but you should report the agency anyway, since they will sanction the agency if it receives enough complaints from consumers.

(4) Report the activity to your State Attorney General’s office. They will investigate the matter.

(5) You can also gather evidence by recording phone conversations with the debt collection agency. This way you’ll be able to prove the debt collector used illegal tactics, you can sue for damages under the FDCPA.

Finally, always remember – Knowledge Is Power. The more you know about your rights, the less your creditors will be able to take advantage of you and your money.

How to avoid paying hidden credit card fees in UK

Paying by credit card can be a convenient and safe way of making big purchases, but increasingly this peace of mind comes at a cost. A number of retailers, from airlines to local authorities, levy surcharges on customers making credit card payments. These can add significantly to a total cost. Budget travel company Monarch Airlines, for example, levies 5pc surcharges on credit card payments and a 3.5pc charge on those paying by debit card, while buying a £1.70 train ticket from trainline.com on a credit card will incur a £3.50 processing fee.

Such charges are rarely advertised, making it difficult to compare the true cost of goods and services. Some are flat charges applied on each transaction, others are a percentage fee.




A report by the consumer organisation Which? found that not only were these charges becoming more common, but they have risen in the past two years. According to Which?, 80pc of its members disagreed with the practice of levying such surcharges, with only 1pc thinking they were a fair reflection of costs incurred by the retailer.



Even the banking industry agrees that the charges incurred often bear little resemblance to the cost of processing the payments. All banks charge retailers a “merchant fee” for processing payments by debit and credit cards. Most are reluctant to divulge the fee size. Large supermarkets, for example, will be able to negotiate smaller merchant fees due to the number of transactions processed. Plus, credit card payments cost more to process than debit card payments, due to the costs associated with borrowing. There may also be extra security costs borne by the retailer in processing online card transactions.



The UK Payments Administration (UKPA) said the typical charge to process a credit card payment would be between 1pc and 2.5pc. For debit cards the actual cost is likely to be closer to 10p. It said that there seemed little justification for companies charging a credit card fee “per item” bought, rather than per transaction. Ryanair and bmibaby charge card fees per passenger per flight, even if all these seats are made in one credit card booking. Likewise, most ticket agencies levy a card charge per ticket.



A spokesman for the UKPA said: “The credit card costs are per transaction. If you are booking six tickets at once, or one ticket in one credit card booking, the processing costs would be the same. It’s hard to see how companies can charge per item.”



These surcharges are common in the travel industry. Train companies, ferries, airlines, tour operators and travel agents are all likely to levy extra fees if booking with a credit or debit card.



Bob Atkinson of travelsupermarket.com said: “Many travel providers are not only passing the bank charges to customers, they are actually increasing them to generate extra revenue. The fact that some holiday companies also charge for debit card payments is a worrying development.”



Given the state of many travel firms’ finances this is probably one area where you should consider paying on credit card where possible, because of the protection given under Section 75 of the Consumer Credit Act.



This means that should the firm go bankrupt, you will be able to claim a refund from your credit card company. Those paying on a Visa debit card get similar protection.



Action points

Although it can be a laborious task, take all fees into account when comparing costs. Don’t assume the cheapest airline seat advertised, or the lowest ticket price, means this will be the cheapest deal overall.



Factor in all additional costs and see how a deal compares. Not all companies add these surcharges: Which? found a handful of travel companies that followed a “what you see is what you get” pricing policy. These included SeaFrance and Trailfinders.



Once you have found the cheapest deal, look at whether you can reduce costs more with a different payment method. By using a Visa debit card, for example, you may pay a lower debit card fee, but still get the consumer protection. Alternatively some companies do not charge for particular cards: such as a Visa Electron card, or prepaid card, such as the prepaid MasterCard. Weigh up possible savings against any potential loss in consumer protection.

Credit Card Debt Drops to Lowest Level in 8 Years

he amount consumers owed on their credit cards in this year's second quarter dropped to the lowest level in more than eight years as cardholders continued to pay off balances in the uncertain economy.

The average combined debt for bank-issued credit cards — like those with a MasterCard or Visa logo — fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion.

The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.

Credit card debt remained the highest in Alaska, but slid 7 percent there to $7,148. A total of 22 states recorded debt higher than the national average.

Residents of Alabama paid off the most debt, dropping their average balance by 27 percent to $4,753.

More borrowers also made payments on time. The rate of cardholders past due by 90 days or more fell to 0.92 percent in the second quarter, from 1.17 percent last year.

That's the first time the delinquency rate has been below 1 percent since the second quarter of 2007, before the recession, said Ezra Becker, director of consulting and strategy in TransUnion's financial services unit. The rate fluctuates during the year, he said, but the improvement is more evidence that consumers are working to make sure their credit cards remain in good standing.

That concern reflects several economic factors, from the fear of unemployment to the fact that the collapsed housing market means it's harder to cash in on home equity when money gets tight. "You can't buy groceries with your house anymore," Becker said.

Reflecting the weak economies in the states hardest hit by the housing crisis, the delinquency rate was highest in Nevada, at 1.5 percent of cardholders, followed by Florida, 1.24 percent, Arizona, 1.11 percent and California, 1.08 percent. In all, 16 states fared worse than the national average for delinquencies.

The lowest delinquency rates remained in North Dakota, at 0.54 percent, and South Dakota, at 0.55 percent.

In a twist, Becker said the foreclosure crisis could be helping to improve the timeliness of credit card payments and lower balances. When people don't make mortgage payments, he suggested, they have a short-term cash boost.

"That can provide extra money to pay down credit cards," he said.

Besides paying down debt, consumers are getting fewer new cards. Nationwide, the number of new accounts opened dropped almost 6.5 percent from last year.

TransUnion predicts that the national delinquency rate will remain below 1 percent for the rest of the year. However, on the high end, the Nevada rate is forecast to edge up to 1.6 percent.

Destitute in Dubai: One man's story

Nicholas Warner: "This place changes people"
It was six o'clock in the morning when I met Nicholas Warner down by the Dubai Creek and already the temperature was 35C. We both knew that in a few hours it would climb to nearer 50C.
He eagerly showed me to a bench shaded by a palm tree that faced the waterfront so we could talk without getting burnt.
"Is this where you're sleeping at the moment?" I asked.
"Oh no," he replied. "It's not like England. You can't lie down on a bench and just sleep. You have to prop yourself upright and nod off or you'll attract unwanted attention or get moved on. I sleep on the ground behind that hedge, when I'm here."
And when he's not there?
"I started off in my car - but it's too hot for that now - you'd bake. Obviously, I can't afford petrol to keep the air con running.
"Then I was under a bridge. There's been a few days in a car park at a hotel. The manager there kindly took my clothes off me sometimes and washed them. He also let me use the shower after a guest checked out of a room."
But that all stopped when the hotel manager lost his job.
"So now I'll be back to washing in the public toilets."
'Debt skipper'
Nicholas Warner is British and sleeping on the street in Dubai. He got into a dispute with his bank, Emirates NBD, initially over whether his credit card repayments had been made.
He went on holiday at Christmas and the bank says that by leaving the country without its permission while they were in a dispute, he got reclassified as a so-called "debt skipper" - one of the many expats who left Dubai in a hurry with large debts, never to return.
Of course, Nicholas did return. When he arrived back at Dubai airport, he was arrested. His passport was seized by police on the authority of the bank.
Although he was released and tried to negotiate with the bank he got into further difficulties.
Brushes with the authorities are frowned upon in Dubai.
He had been working as a strategy adviser for an alternative medicine company, but his employer decided it was safer to let him go while he sorted everything out.
Now he had no job, no way to pay the debt the bank was demanding and no passport - leaving him with no way home.

'Without my wife'
The complex ins and outs of what happened next would fill a book. Emirates NBD - the largest bank in the Middle East by assets - says it tried to negotiate a settlement with him that he reneged on.
Nicholas says what was orally agreed was not what the bank wrote down on paper.
Either way, Emirates NBD is refusing to let his passport be released until the debts are paid. Nicholas has no way of paying them without a job. And he cannot get a job without being able to show he's in the country legally. For that, he needs his passport.
"I've said to them, I've not got that sort of money that I just do that," he says, clicking his fingers.
"Because if I did, I would. There is no way I would not want to be with my wife for four months and be living rough, hoping that someone gives me their sofa and that the bank or the embassy come up with something.
"If I had that money, I would pay it."
Emirates NBD was unwilling to discuss the specifics of the case with the BBC.
In a statement it said: "All actions by the bank in this matter have been in accordance with prevailing UAE laws, and in line with the contractual agreement signed by the customer who was unable to meet his commitments and approach the bank for appropriate settlement of his dues."
Rising temperatures
Four months ago, Nicholas sold all the furniture in his house and took the money to the bank. It was just enough to cover the £6,000 the bank said he owed at that time.
The offer was rejected. Nicholas says he was told that with interest and charges, he now needed to pay nearer £11,500.
With no furniture in their rented house, Nicholas told his wife it would be safest for her to leave the country while she still could. She returned to her native Spain.
For a while, Nicholas was able to rely on friends letting him stay in their spare rooms or on their sofas.
But as time dragged on, they became worried that they might get embroiled in his predicament.
Which is how he ended up sleeping rough. As summer moves on, temperatures are set to rise still higher in the Emirate.
Nicholas hopes desperately that he won't still be on the streets in August. With no job, he has no medical insurance. If he gets ill, he's on his own.

Brits waste £150m on credit card fees

Every year British consumers waste £150 million on late payment credit card charges, Confused.com has revealed.
Research by the price comparison site found one in four (26%) credit card holders have been charged at least once in the last 12 months for missing a late payment.
Nearly one in 11 (8.5%) have been charged three or more times in the same period.
At an average of £12, late payment charges can quickly stack up.
Meanwhile, over half (57%) of credit card holders do not have a direct debit set up to pay off the minimum amount. Confused.com encouraged credit card holders to rectify this.
“Collectively we’re wasting millions of pounds each year on these charges, money which would be better spent elsewhere in these tough financial times,” said Alex Higgs, spokesperson for the price comparison site.
“Setting up a direct debit to make a minimum payment on a credit card is such a simple thing to do, yet well over half of credit card holders haven’t done it,” he added.
“We would encourage anyone without a direct debit set up to get one in place.
“Not only will this save money on charges and help contribute to a healthy credit profile, it will allow money that would have been spent on charges to be used to repay more than the minimum amount, saving more money as interest charges are reduced.”

Credit card defaults, late payments dip in June

Consumers are getting a handle on their credit card payments, data on defaults and late payments shows.
Five of the top six U.S. credit card issuers on Thursday reported declines in June charge-off rates, the unpaid balances they gave up on collecting.
Only Citibank, the nation's second largest issuer with roughly 90 million cards in circulation, said writedowns and late payments increased last month. Citi's charge-off rate rose to 11.46 percent of balances, up from 11.16 percent in May. Delinquencies, or payments that are 30 days or more past due, reached 8.58 percent at Citi, up from 8.42 percent in May.
Citi has the highest delinquency rate and second-highest default rate of the six banks.
The biggest improvement was reported by Chase, which has about 120 million cards in circulation, making it the top issuer in the U.S.
Chase posted a greater than 1 percent drop in charge-offs, to 8.3 percent of balances, and a more modest decline in delinquencies to 4.3 percent in June, from 4.38 percent in May.
JPMorgan Chase CEO Jamie Dimon said in a conference call to discuss the bank's second-quarter results earlier Thursday that the charge-off rate is expected to keep improving. But he added it will take some time because of the sluggish economy.
Credit card defaults are improving, even given the sluggish economic recovery, for several reasons.
One reason is that much of the bad debt has already been written off — the Federal Reserve said the industry's charge-off rate was just short of 10 percent of balances for the first three months of the year. That came after banks wrote off about $35 billion in unpaid balances last year.
Removing the debt that won't likely be collected has helped make the remaining balances more resilient, said Jeff Hibbs, an analyst with Moody's. "A lot of weaker borrowers are charged off, leaving behind pools of stronger borrowers," he said.
Tighter lending standards also play a factor in keeping defaults down. Banks stopped lending to a broad swath of riskier customers in 2007, Moody's analysts noted earlier this week. Consequently, the cards that are in circulation have been given to people who are more likely to keep up with their payments.
Banks also slashed credit limits on existing cards last year, in part as a response to new regulations that restricted interest rate increases. That means there's less money available to borrow.
Credit reporting agency Experian on Thursday said available credit on revolving accounts — mostly credit cards — dropped to $3.28 trillion in the first quarter, significantly lower than the $4.46 trillion available in the first quarter 2008.
Experian business consultant Kelly Kent said the lower level reflected all of these elements: tighter standards, limit cuts and charge-offs. It's notable that balances have declined at a slower rate than available limits, he said.
Still, Moody's analyst Matias Langer said the improvements seen in the second quarter were not as large as they had forecast. The agency expects charge-offs to remain higher than delinquency rates through the end of the year, staying at about 10 percent industrywide.
Discover said its charge-off rate fell to 8 percent of total balances, in June, from 8.82 percent in May.
Bank of America's charge-off rate dropped to 11.98 percent, from 12.7 percent the month earlier. American Express said its rate dropped to 5.7 percent in June, from 6.3 percent in July.
The smallest improvement was posted by Capital One, which said its charge-offs fell to 9.3 percent of balances in June, from 9.5 percent in May.

Bank of America credit write-offs drop in June

Bank of America on Thursday said the credit card balances it wrote off as uncollectable in June fell for the third straight month. Like other companies that offer credit cards, the bank also said past-due payments dropped to their lowest point of the year.
In a regulatory filing, Bank of America said its charge-off rate dropped to 11.98 percent of balances, from 12.7 percent in May.
Card companies typically write off loans after they're 180 days past due, the point at which it's assumed the balances won't be collected.
In the past year, banks have written off a record amount of loans as customers struggled to pay. By the first three months of this year, the charge-off rate was just short of 10 percent of balances. That compares with a rate of 3.8 percent in the second quarter of 2007, before the recession began.
Bank of America is the among the top three U.S. banks for credit cards, with about 80 million cards in circulation, according to the Nilson Report, an industry newsletter.
Bank of America said the rate of late payments has fallen to its lowest point of the year, 6.16 percent in June, from 6.39 percent in May. That's a sign that the debt burdens felt by card holders over the past two years is beginning to ease.
In afternoon trading, Bank of America shares fell 56 cents, or 3.6 percent, to $15.11.

US Fed Restricts Two Banks, One Of Which Received Bailout Funds

WASHINGTON -(Dow Jones)- A New York bank that received $7.5 million in government bailout funds has been ordered not to pay dividends or incur new debt without the Federal Reserve's approval.
The Fed on Monday released a written agreement imposing the restrictions on BNB Financial Services Corp. (BNBF). The agreement also requires BNB, which runs BNB Bank in Fort Lee, N.J., to provide the central bank with regular progress and cash flow reports.
BNB is among dozens of so-called healthy banks that received money from the government's Troubled Asset Relief Program and are the subject of enforcement actions by banking regulators. Enforcement actions typically signal regulators' growing concern about a bank's health or management.
BNB received its $7.5 million in April 2009.In a separate enforcement action released Monday, the Fed placed similar restrictions on Smithtown Bancorp Inc. (SMTB), based in Hauppauge, N.Y.
Smithtown, which bills itself as the largest independent commercial bank headquarted on Long Island, is not a recipient of TARP funds. It has, however, been struggling against a growing volume of soured real-estate loans

Credit Card Debt Relief Now Widely Available

Bankruptcy filings surged 14% during the first half of 2010, according to the American Bankruptcy Institute. Filings totaled 770,117 through June, compared to 675,351 during the same period last year. Much of personal debt today is caused by credit card debt. Yet credit card debt relief and credit card debt relief programs can reduce up to 50% of credit card debt in many cases. How to apply and how to get started? Read on.


Get Started With Credit Card Debt Relief Today:


http://www.federaldebtreliefprogram.com/


Other sobering statistics: Total U.S. revolving debt (98 percent of which is made up of credit card debt): $852.6 billion, as of March 2010 (Source: Federal Reserve's G.19 report on consumer credit, March 2010). Total U.S. consumer debt: $2.45 trillion, as of March 2010 (Source: Federal Reserve's G.19 report on consumer credit, May 2010).


98% of total U.S. revolving debt is credit card debt. The numbers don't lie: credit card debt is a HUGE problem today, and credit card debt relief is needed now more than ever. Fortunately, credit card debt relief is easily and readily available today and offered by debt relief firms nationwide. With the best of these credit card debt relief programs, up to 50% or more of credit card debt can reduced in many cases. This is credit card debt that through a credit card debt relief program can be negotiated away, and forgiven.


Credit card debt relief works fast, is proven to be effective, and can work for you. To learn more about credit card debt relief and how to get started, please visit Federal Debt Relief Program at:


www.federaldebtreliefprogram.com

Build Credit History With The Public Savings Bank Secured Visa

For individuals with no credit or those who have experienced a negative credit event like divorce or foreclosure, establishing credit history can be a real challenge. Without proper credit, everything from a car loan to an apartment or even a job can be denied.

When faced with problem credit, many people rely on prepaid cards to manage their daily expenses. However, prepaid cards simply provide access to your own money, not credit from a lender. These cards do not report to credit bureaus and do not help re-establish credit history. People need to demonstrate on-time monthly payments on a credit card in order to rebuild that important credit history.

So how can someone who cannot get a credit card rebuild their credit?

The Public Savings Bank Secured Visa offers people with low credit or no credit the opportunity to re-establish their credit history and work towards improving their credit score. Individuals make a deposit into an FDIC-insured account that acts as a security deposit. They can then make purchases anywhere Visa is accepted or take cash advances up to the deposited credit line amount, currently between $300-$2000. Payments are reported to all three major credit bureaus (TransUnion, Experian and Equifax) so customers can begin to establish credit immediately.

The Public Savings Bank Secured Visa does not require a credit check or even a checking account to apply. Customers can fund their account via Western Union, ACH, wire transfer, check or money order. The card has no annual or monthly fees, and offers 0% APR for 6 months. Rush shipping is available so customers can begin using their card just days after funding their account.

Building good credit is critical at a time when credit is getting harder to obtain. This card allows the customer to build good credit while enjoying all the benefits of a Visa card at very favorable terms.

National credit card rates for June 17, 2010

Credit Cards

• 13.7% (all fixed)
• 14.37% (all variable)

Here's a look at the state of credit card rates from Bankrate.com's weekly national survey of large banks and thrifts conducted June 16, 2010.

The average interest rate for variable-rate credit cards remains unchanged from last week at 14.37 percent. Also stagnant, the mean fixed rate has sat at 13.7 percent for 13 weeks.

Yesterday the Federal Reserve Board issued new rules for credit card penalty fees and charges that take effect with other Credit CARD Act protections on Aug. 22. Among the changes, the rules ban inactivity fees for not using cards, and caps penalty fees at $25 unless the cardholder demonstrates repeated offenses or if the issuer can prove that the costs resulting from the violations warrants a higher fee. Issuers must also conduct six-month reviews of interest rate hikes imposed after Jan. 1, 2009, and reduce the rates if the factors that triggered the increase have improved.

Bankrate.com makes it easier to find low-rate credit cards and credit cards with rewards. You can search by issuer, card type or credit score.

A Banker Reveals How Banks Try to Take Your Money

Greetings. I’m Dan and I’m a banker. Don’t worry, though: I quit my job at a big bank years ago.  I know how the financial system works — the details, the tricks and traps — and I’m going to let you in on some industry secrets. By the time you’re finished reading, you’ll know a lot more about the games banks play and how to beat the system — or change it.  Powerful stuff.
First up: product terms that change without notice.  You read your entire bank and credit card terms and conditions every time they’re updated? Bravo. You belong to a small group: just 3% of Americans. But even if you do, you might not realize that there are ways banks can reduce the value of what they provide without ever formally letting you know.  Here are the three most common ways banks give you the bait and switch.

Beware of Falling Interest Rates

Remember that awesome interest rate you first got with your savings account?  You’re probably not getting it now.  The practice of raising interest rates and dropping them (knowing most customers won’t notice) is so common that it has a name within the industry: pump ‘n’ dump.  Even friendly banks do it.  As the worldwide head of ING Direct was quoted in a 2002 INSEAD case study: “People are sleeping. We wake them up with very dramatic advertising, they switch their money and then they go back to sleep.”

The Onus of the Bonus

Based on my company’s research, over one quarter of Chase, American Express, and Discover customers think they’re earning 3%-5% on everything they buy with their credit cards.  How could you not be fooled when some of their marketing is so misleading.  This line is from American Express: “Earn up to 5% cash back on virtually everything you buy.”  Research shows that the phrase “virtually everything you buy” will overwrite the phrase “up to” — kind of like a mental white-out.  You’re left thinking you’re earning 5% almost all the time even though the base earning rate is a mere 0.5%.  Don’t get me wrong — “up to” rates and earning 3-5% bonuses can really boost your earning power.  But it falls to you determine exactly how much the bonuses are worth based on how you spend.

Anyone know what a mile will be worth next year?

Once upon a time, 25,000 airline miles used to get you a round trip ticket, a bag of peanuts, and space on the plane for your bags (for free).  How the world has changed.  Every year, as part of the annual budgeting process, big banks and travel companies review the costs of their rewards programs.  And every year, the goal is explicit: reduce costs without changing how customers earn rewards, so the program still feels the same.  The result?  You might still be earning the same number of miles but the majority of rewards tickets now cost twice as many miles and include a booking fee.  Over time, almost all rewards programs change.  Make sure you know if you should make a change, too.
The moral of this story?  Take a few minutes every year to see how good of a deal you’re getting from your financial services providers.  If you don’t like what you see, make a change.  Fire your bank.  Unfriend your credit card company.  They’re changing the terms of your relationship and not letting you know.  Let them know you noticed.

How to Negotiate a Lower APR

Ask and you shall receive. That used to be the case with lowering your credit-card interest rates not too long ago. Back in 2002, a survey by consumer advocacy group U.S. PIRG found that 56% of credit-card holders who had called their issuers to request a lower APR had gotten it done with a single phone call.
That’s hardly the case these days. Hit hard by the mortgage crisis and resulting credit crunch in the past few years, banks have been much more reluctant to cave into such requests.
That doesn’t mean it can’t be done. It simply means that you’ve got a lot more work to do before you make that call – and be aware of the risks associated with doing so.

The risks

The biggest risk of requesting a lower-APR request these days is that the bank may not only deny it – you could walk off that phone call with a lower credit limit. That’s been happening to quite a few consumers these days, says Gerri Detweiler, a consumer credit expert at Credit.com.
When you call your bank to discuss your credit card terms, you will trigger a deeper look into your account and credit history. Some issuers may even require you to submit additional paperwork like proof of income or tax returns in order to make a decision.
If they don’t like what they see, nothing’s to stop them from taking adverse action, such as lowering your credit limit. That move will in most cases have a negative effect on your credit score, because a lower credit limit automatically increases your utilization ratio.
Unfair? Yes. But the fact is that the bank is in its full right to lower your credit limit – a move that is not prohibited by the new credit card law. (They are not allowed to hike your APR for no reason during the first 12 months after opening an account, though. After that, any interest-rate increases will only apply to future card charges and not to your existing balance.)

Doing your homework

Before you call your bank, you’ve got to be absolutely sure your credit and financials are in pristine condition. This way, even if the bank declines your request, you could actually fight back.
1. Check your credit.
How’s your credit doing these days? Is your credit score at least 740? Is your credit history in pristine condition: no late payments, no maxed-out accounts, no recent credit applications?
Before you call your credit-card company, pull your credit report to make sure it’s clean and has no erroneous information. You can order one free copy a year from each of the three credit bureaus through http://www.annualcreditreport.com/. Some people go as far as asking the credit issuer which bureau it uses so that they can pull their report from the bureau in question.
If you find errors on your report, dispute them with the credit bureau. (Each report contains information on the steps you need to take and you can dispute errors online or via regular mail.) Keep copies of all emails, calls or other communication for your records.
2. Gather up your paperwork
The card issuer may request that you supply additional paperwork in order to consider your request for a lower interest rate. Most likely, that will be information that isn’t included on a credit report, such as proof of employment and income. Be armed with copies of paystubs or even your latest tax return.
You may not have to use these, but if requested, you can only benefit from being able to provide them at a moment’s notice. If you are in a tough financial situation (you’ve recently lost your job, for example, or have taken a cut in pay), your issuer will likely not agree to reduce your APR. You may qualify for a so-called “hardship program,” but the trade-off is you’d have to close your account while you pay it off.
3. Have a back-up plan
Even if your credit is in pristine condition, the issuer may decline your request. In that case, it pays to be prepared: have at least one other credit card with enough available credit for you to make a balance transfer without maxing it out (remember, using as little of your available credit limits as possible helps your credit score). Faced with the threat of losing your business, the customer service rep may change his or her mind.

Best small business credit card deals and offers today – June 3, 2010 top business credit cards with no annual fee

 When many small businesses need to come up with fast funding, they often turn to small business credit cards. These small business credit cards offer many of the same benefits of a personal credit card, but have several other advantages. Small business credit cards are so popular, nearly 66% of all small business use them and 40% use these cards exclusively. Using a credit card exclusively for your business is a great way to keep your personal funds separate from your business funds. This is especially helpful when preparing your taxes.
If you are going to spend money (which you will with a small business) why not get rewarded for it? Many of these cards offer benefits such as frequent flyer miles or even office supplies. Get something back for using a credit card. In addition to receiving rewards, you are able to start building credit for your business.
When searching for a business credit card, you should look for a few things. Find a card that is widely accepted and has no annual fee. In addition, try to find one that has a promotional period such as 6 or 12 months no interest on purchases. One of the most important considerations is the interest rate. Signing up for a high interest credit card can really cause trouble for you later down the line. Keep a close watch on your interest rate after you receive your card.
Here are today’s top picks for small business credit cards:
Chase is offering the Ink card with no annual fee and a 0% introductory period of six months. In addition, you can enjoy a reasonable 11.24% variable interest rate after the intro rate expires. This card also offers a rewards system.
Capital one has ha business Platinum with preferred No hassle miles. This card has 0% on purchases for six months, no annual fee, and a variable interest rate of 14.99% after the intro period.

How to Make Sure You Get the Best Credit Card Possible

Summary: In this economic situation, it's more important than ever that you choose the best credit card possible!

We all want to pick the best credit card. Who ever says, 'yeah, I want a pretty good credit card, but not the best one I can get.' And now that it's so hard to get credit cards and maintain your economic status, that type of decision is more important than ever.

Tips on choosing the best credit card

If you want to choose the best credit card, there are some absolutely essential steps you can follow:

1. Stay informed. The credit card world is changing, and if you're not up to date, you can't make the best decision possible. Find a reliable source of information, such as Credit Card Whiz Kid, and stick with it.

2. Go for a mainstream credit card. You want a Visa, a Mastercard, an American Express -- one of the cards accepted and known throughout the world. Choosing a department store credit card, for example, can in some cases instantly lower your credit score. In this climate, you don't want to mess around with the possibility of lowering your credit score.

3. Watch the regulars above the bonuses. The best credit card is the one with a high credit limit, a low interest rate, and no annual fee. If it doesn't offer 1% cash back or something, who really cares? The bonuses aren't nearly as important as the basics. Of course, if you can find a card that offers both, more power to you -- but the basics have to be there first.

4. Only apply for a few credit cards. The very best cards require a high credit score to obtain, and if you know you can't get them, don't bother applying. If that sounds defeatist, keep in mind that every credit check makes a black mark on your credit score.

It's not a big mark, and most people won't even notice it. But if your score is already on the low side, you don't want more credit checks than necessary. And even a high credit score can suffer if you have dozens of credit checks in a short time. Only apply for a few cards, and make sure you have a good chance of getting them.

Remember, in this day and age, you have to make all decisions wisely. Find the best credit card available and do your best to make it yours!

Will Mortgage Rates Go Up or Down?

In May 2009, Interest rates were at their lowest. 4.75% was indeed a historic low.  If we look at national averages for June 2009, the interest rates are swinging around 5.75%.

Mortgage Trends for July 2009

If we look at trends, Interest rates for fixed mortgages are climbing up all over United States. This pressure on mortgage rates is mainly external.  As some news reports suggest, The major players in US Debt market , are still not satisfied with the economical and fiscal measures taken by US Govt.  This adds pressure on interest rates and liquidity situation in housing market is still very bleak. 

It’s  Still A Good Time To Get Mortgage Refinance

Those borrowers who have decided to refinance, as well as those who are passing through the process of refinancing, should take the decision keeping in view the current market conditions and interest rates, the current conditions of housing market are indicating that the borrowers should not refinance at this stage. So what should they do? Should they quit and try again later?

I don’t think so that the only solution is to quit. Here are a few things that you should take into consideration before giving up on a mortgage refinance.

We might say that the rates are higher than they were, But they have not reached their peak,they’re still relatively low.

It’s All Relative

As once said by a very smart man, in the form of a mathematical formula, “It’s all relative.” Now this statement seems to be more true in the area of mortgage interest rates. Last month a full point rise like we’ve seen has been a part of conversation among the media people, they talked about this depressing stuff like a “stillborn housing recovery.”

How Much Can You Save by Refinancing?

You can use  a loan calculator in order to compare the payment at 4.75 percent on a $300,000 mortgage to the payment at 5.75 percent on same size home loan . The monthly payment for the home loan at 4.75 percent will be $1,187. Whereas the monthly payment for the home loan at 5.75 percent will be $1,473 per month. So no doubt there is a significant difference between the two, but consider this:

Last year the average mortgage rate at this time was 6.8 percent.These days mortgage Rates are swinging on nature of news. Call it good luck or bad, there seems to be no lack of news these days. There are news going on about home price, politicians talking, Treasury auctions, stock market gyrations, number of jobless persons, government programs, and inflation fears. And nowadays, mortgage rates are moved by news.

Can Mortgage Rates Go Down Again?

Of course they can!

What type of news could move the rates towards lower values? Long-term Treasury bond rates are being watched by experts, it is the closest of anything. In the past the treasury bond rates had been at two percent, and they rise as the mortgage rates do rise, they have doubled since the mortgage rates have raised. That jump was initiated when Chinese politicians remarked  negatively about the long-term prospects for the American economy.

Two Important Factors to Watch

The two interlocked factors i.e. the Treasury bonds and world sentiments about the progress and condition of the U.S. economy might play the most effective role in moving mortgage rates. These two factors are considered to be the most viable source of good news that could pull the mortgage rates back down.

Conclusion or Confusion

Despite of these facts, I still think borrowers who have given up on a mortgage refinance will not be able to take advantage of any good news that does move rates even lower. But still the million dollar question remains; Will the good news for economy move the mortgage rates up or down?