ACCI May Newsletter

Reclaim the American Dream!

The ACCI Advisor

Vol. II, Issue 1

May 2009

Our Mission

American Credit Counselors, Inc. is a national non-profit 501(c)(3) credit counseling organization dedicated to assisting clients improve the condition of their personal finances with professional money management services and financial education. We are committed to providing the highest level of customer service and financial accountability. We are dedicated to client satisfaction and the development of our employees.

Welcome!

Our monthly e-newsletter has a new look! In addition to the revised format, we hope you enjoy the information we’re presenting in this issue on the new credit card law, teaching kids about money, and avoiding debt pitfalls. ACCI’s goal is to provide you with timely, useful information that will help you to manage your money successfully and pave the way toward a debt-free tomorrow.

Thank you for choosing American Credit Counselors, Inc. as your credit counseling organization. We welcome your comments and suggestions for future issues.

Please email: education@acchelp.org with your ideas. Is there someone you know that would benefit from money management information? Simply forward this email and they can click on “Join our Mailing List” to receive future issues.

For more tips and information on budgeting, savings, and the responsible use of credit, please call a Certified Credit Counselor toll-free at 1 800 708-1335 or visit www.acchelp.org.

The Credit Cardholder’s Bill of Rights is Signed into Law

On May 22nd, President Obama signed into law the credit cardholder’s “Bill of Rights” that limits fees and curbs contract changes, saying it will give Americans “the strong and reliable protections they deserve.” This new credit card legislation puts new reins on the credit card industry and will end many abusive practices that afflict millions of families across the nation. Among its key features, the new law now requires credit card companies to give cardholders 45 days notice of any rate increases, prevent credit card firms from retroactively increasing interest rates, and prevent card issuers from using misleading terms. In addition, the bill prohibits credit card companies from “double-cycle” billing (calculating interest not only on the current balance but also on the average daily balance from the previous billing cycle) which resulted in the consumer paying more interest on the current outstanding balance on the card. This law also adds restrictions for credit cards for college students. This law was engineered to give power back to the cardholders, who, in recent years have become furious about tricks and traps in credit card contracts and have been unable to block unfair interest rate hikes and fees. These new credit card regulation reforms are expected to take effect by 2010.

According to figures from the White House, US credit card debt has jumped 25% in the past 10 years, reaching $963 billion in January 2009. The average outstanding credit card debt for households that have a card was $10,679 at the end of 2009, according to CreditCard.com.

Thanks for the “Thank you”!

“I would like to thank you from the bottom of my heart for helping me. My bills were really making me sick with worry. I was having headaches and stomach problems. I was trying to pay as much as I could, but it wasn’t good enough. They wanted it all. Thanks to your program, I feel like a new person.”

“N.D.”, ACCI Client, April 2009

Why Good Credit Matters

Today, good credit is used for more than just getting a credit card or a loan. More and more businesses are making the case that your credit should be used to make decisions about extending goods or services to you.

Shelter When it comes to where you live, your credit is important. Mortgage lenders want to know that you won’t default on your mortgage. If you don’t have good credit, the lender will consider it risky to give you a mortgage loan. This could result in a higher cost of borrowing or worse, a denial of the loan. And don’t think that because you’re not in the market to buy a home that your credit won’t be called into question. Your credit is used for rental decisions, too. Landlords consider your lease as a loan. If you have bad credit, you can get denied for an apartment.

Transportation Unless you have the cash to purchase a car outright, you’ll have to get a loan. Your credit not only affects whether or not you qualify for a loan, but also the amount and interest rate of the loan. Generally, loan applicants with good credit qualify for larger loan amounts with lower interest rates, resulting in lower monthly payments.

Employment Many employers now conduct credit checks as a part of the hiring process. If you haven’t demonstrated financial responsibility, a prospective employer might be hesitant to hire you.

A new business venture Most new business startups require a substantial amount of cash that you might not have available. If you don’t have it, you’ll need to get a small business loan. And to qualify for this, you’ll need to have good credit.

Insurance Are you in the market for insurance? Whether you’re shopping for health or car insurance, your premiums will be determined in part by your credit score. If your credit rating is poor, expect to pay a higher premium than you would if you had a healthier score.

Utility services Did you know that your credit is needed to establish cable, telephone, water, and even cell phone service? Before “turning on” your service, these companies will check your credit.

Since your credit is defined by how you’ve paid (or not paid) your bills in the past, landlords, mortgage lenders, utility providers, and even employers use your credit to predict your future financial responsibility. Anytime you need to borrow money, or use services, your credit is called into question. This is why maintaining good credit is so important!

www.acchelp.org

1 800 708-1335

5 Money Lessons for the New College Grad

AppleMark Opening bank accounts, choosing health insurance, financing an apartment, lining up transportation – and a job! It’s not easy to master money management during the best of times and it’s especially hard to navigate the challenges of a recession, but still many basic money principles apply. Here are 5 financial lessons that can pay big dividends for a lifetime:

Savings matter. Reserves, rainy day money, emergency fund, mad money – whatever you call it having cash in the bank is important at any time, but it’s especially crucial these days. If you aim to have six months of living expenses socked away, you can probably weather a period of unemployment or a medical emergency. If you save more, you can take advantage of the downturn in home prices, or buy a car without getting into a hole.

Find the fine print. If you’re used to checking “I agree” every time you add software to your computer, you may take other contracts just as lightly. But you’ll learn quickly about the costs buried in the fine print once you miss a payment or find yourself on the hook for a huge termination fee like breaking a cell phone contract. To avoid future grief, read the fine print on contracts and agreements before you sign on the dotted line.

Focus on the total cost. Don’t buy a monthly payment; instead, calculate the full cost including interest and fees before taking on a new purchase. Understanding the total amount of money to be repaid makes it painfully apparent just how much money will be going out the door.

Debt is the great divide. Taking on some debt can sometimes really pay off, like when we borrow to purchase a home or invest in education. But while debt can be useful, more often than not, debt is a continuing drag on our finances that limits our choices and separates the haves from the have-nots. Lesson to be learned: treat your credit card like a powerful financial tool that has to be managed properly and safely. Sign up for email or text message alerts to remind you when a bill is due and pay as much as you can and pay on time.

There is a permanent record. Credit scores, based on how much debt you have and how well you manage it, will follow you through your adult life. Over time, that score will affect how much you can borrow, the interest rate you’ll pay, and sometimes whether you get a certain job. Pay your bills on time and keep your borrowing to 20% or less of your total credit limit, and your credit score will improve over time. A high credit score means you will have more options and that’s ultimately what a healthy financial life is all about.

Top 10 Bad Habits That Lead to Debt Disaster

Learn from these mistakes and don’t fall prey to debt again!

Bad Habit #1: Misusing balance transfers - Most people continue to make purchases and wind up with more debt once the teaser rate expires. Also, credit card issuers usually apply payments to lower interest rates first.

Bad Habit #2: Not checking credit reports – Pull your credit report at least once a year and check it for errors. Purging your report of inaccuracies proves crucial for getting better interest rates, landing the job you desire, and stopping an identify thief from destroying your credit rating.

Bad Habit #3: Failing to alert creditors about a financial hardship – Explain the problem you’re having, or about to have, and ask if they could temporarily suspend payments.

Bad Habit #4: Thinking “budget” is a dirty word – Everyone can benefit from knowing what’s coming in and what’s going out. You’ll be surprised at where your money is going and a budget will reveal areas where you could trim.

Bad Habit #5: Using retail store credit cards to take advantage of discounts – Odds are that card carries a high interest rate you’ll be forced to deal with if you don’t pay off your entire balance when it comes due.

Bad Habit #6: Procrastinating on creating an emergency fund – That rainy day will arrive and if you’re stuck with charging that unexpected large expense on a credit card, that will cause interest to accrue and more debt will pile up.

Bad Habit #7: Paying bills in no particular order – If you can’t pay all the balances each month, experts advise that you pay for living expenses first. After the house or rent payment, utilities and medical care should top the priority list. Next comes the car payment. Secured loans, unsecured loans and credit cards then follow in importance.

Bad Habit #8: Charging purchases instead of paying in cash or with a debit card – Small credit card purchases made several times over can quickly add up, particularly if you already carry a balance on your credit cards which you can’t pay off at the end of the month. Instead, make a habit of paying for purchases under $50 with cash, debit, or check. Knowing that you’ve paid for these items interest-free will go a long way towards curbing your spending habits.

Bad Habit #9: Making credit payments late – Besides wasting money on late fees that you could have put toward the balance, a late payment can throw your account into default and triple your interest rate. Try marking on a calendar upcoming paydays and payments that should come out of that paycheck and sign up for online bill pay.

Bad Habit #10: Making the minimum payment only – Paying the minimum is better than paying nothing, but it doesn’t do much to pay off most balances and forces you to pay big interest fees. If you can afford to pay more or pay in full, go ahead and pay as much of the balance as you can.

Teaching Children the Financial Facts of Life

Saving, Spending, Sharing – The 3 “S”s

We teach our kids to be safe, make smart choices, and use good manners, but teaching them the financial facts of life can be difficult. To help you raise responsible money-managers, follow these simple suggestions:

Play “show and tell”: while you manage your own money. Serve as a good example of what it means to save, spend wisely, and share with others. When shopping with your child, discuss what makes some items “too expensive” and others “good buys.” Take your child to the bank and explain the basic principles of the services provided. And, discuss your charitable contributions and why you are making them. Ask your child for input on which charities to support.

Help your child start a savings or investment account. Young children enjoy saving money in piggy banks, but at around age eight, think about helping them open a small savings account and they can learn what banking is all about. As they get older, discuss the pros and cons of owning investments, such as stocks, bonds, and mutual funds.

Give an allowance. If used as a teaching tool and not a giveaway, an allowance can be one of the best ways to teach kids about money management. Encourage them to decide in advance how much should go into savings (reinforcing the concept of “pay yourself first”), how much should go into the spending pile (“pocket money”), and how much should be set aside to share with others – for charity or birthday or holiday gifts.

Consider gifts that encourage saving. Examples include US Savings Bonds and books that reinforce financial responsibility.

Encourage older children to get work experience. Summer or part-time jobs can teach young people good business skills and how to be responsible. They also may enjoy earning and saving money.

For more information: visit www.kids.gov

(a federal government website for children, parents, and educators)

American Credit Counselors is Reaching Out

As a non-profit Credit Counseling and Financial Education organization, American Credit Counselors, Inc. is dedicated to reaching out to the community. ACCI provides free financial education seminars and workshops at community centers, local organizations, and companies.

Topics Include:

Fiscal Fitness