This past week, I accepted the challenge of hiking Mount Timpanogas, one of the highest peaks in the Wasatch Mountains (Utah). It was a breathtaking experience! During the hike, it got me thinking about goals and the purpose of goals, specifically financial goals... Here are just a few of my random thoughts about goal setting that struck me.
WHY HAVE GOALS?
- Assist in organization
- Define priorities
- Encourage self-understanding
- Enhance self-confidence
- Feed determination/motivate
- Guide behavior
- Guide decision-making
- Identify needed changes
- Improve planning
- Increase probability of success
- Keep us focused
- Provide purpose and direction
"Goals are not just the destination you're driving toward, they're also the painted white lines that keep you on the road."
Most of you are familiar with S.M.A.R.T. goals - some have suggested expanding the definition of a SMART goal...
S - Specific -- consider stretching, synergistic, and systematic.
M - Measurable -- add meaningful, memorable, and motivating.
A - Achievable -- and action plans, accountability, agreed-upon.
R - Relevant -- also realistic, reasonable, resonating, and rewarding.
T - Time-based -- timely, tangible, and thoughtful.
This quote from Alice in Wonderland (conversation between Alice and the Cheshire Cat) has always been a favorite of mine ...
"Would you tell me, please, which way I ought to go from here?"
"That depends a good deal on where you want to get to," said the cat.
"I don't much care where ..." said Alice.
"Then it doesn't matter which way you go," said the cat.
August 09, 2009
July 27, 2009
DEBT MANAGEMENT STRATEGIES
While the current economy has admittedly impacted people differently, one common theme has been that getting out of debt is now "in vogue." It used to be that insomniacs were the ones bombarded with all of the get out of debt "goodies" during late night TV ads; with the economic downturn, debt elimination ads now seemingly target everyone ... Debt negotiation, Foreclosure relief, Debt settlement, Bankruptcy relief, Credit repair ... the list goes on and on. Rather than focusing on the legitimacy (or lack of) with many of these types of services (which I've done in previous tips), my objective this week is to focus on debt management strategies that you can put to practice quickly, easily, and on your own.
DEBT MANAGEMENT STRATEGIES.
Ultimately, most efforts aimed at eliminating debt can be summed up in two primary goals: (1) Time (getting out of debt as quickly as possible); and (2) Saving Money (paying as little in interest as possible). While there are numerous ways to work on these goals, I want to focus on just a couple simple steps that can be taken that will provide dramatic results.
1. LEVEL PAYMENTS.
Think of this as the anti-credit card payment ... credit card companies allow you to reduce your required payment as your balance decreases. A level payment suggests that you pay your current monthly payment (whatever that is) steadily until the debt is paid off.
EXAMPLE OF DECREASING MINIMUM PAYMENT:
Balance of $5,000; Minimum payment of $150; 15% interest
(Payment = 3% of balance --decreasing with $10 minimum)
REPAYMENT = 16 years 5 months, $3,400+ in interest paid
EXAMPLE OF LEVEL PAYMENT PLAN:
Balance of $5,000; Level payment of $150; 15% interest
(Payment of $150 until debt is completely repaid)
REPAYMENT = 3 years 8 months, $1,500 in interest paid
2. 'Power Payments'.
PowerPay, a systematic way of repaying debts that was developed over 15 years ago by Utah State University Extension. I've since heard this system of debt reduction commonly referred to as a "snowball method" of repaying debt.
PowerPay Assumption #1 - Make level payments on all debts
PowerPay Assumption #2 - Accumulate no new debts
PowerPay Assumption #3 - As one debt is paid off, that money is used to roll over to a new debt; that 'cycle' is continued until the debt "snowball" is ultimately focused on paying down the final debt.
A benefit of this program is the flexibility for you to decide how to apply the extra payments (as debts are paid off) ... should you pay the highest interest rate (to save the most money)? Or should you pay off the lowest balance which may enable you to "stick with" your debt reduction plan better (ala weight loss)? You may want to review my debt elimination post from a while ago where I addressed these issues.
The time and money saved using this system of repayment is often breathtaking. Utah State has made their PowerPay calculator available for free on their website - https://powerpay.org.
Take a look at how much time and money you could save by implementing a couple of simple debt reduction strategies that don't require assistance from others or cost you a dime!
DEBT MANAGEMENT STRATEGIES.
Ultimately, most efforts aimed at eliminating debt can be summed up in two primary goals: (1) Time (getting out of debt as quickly as possible); and (2) Saving Money (paying as little in interest as possible). While there are numerous ways to work on these goals, I want to focus on just a couple simple steps that can be taken that will provide dramatic results.
1. LEVEL PAYMENTS.
Think of this as the anti-credit card payment ... credit card companies allow you to reduce your required payment as your balance decreases. A level payment suggests that you pay your current monthly payment (whatever that is) steadily until the debt is paid off.
EXAMPLE OF DECREASING MINIMUM PAYMENT:
Balance of $5,000; Minimum payment of $150; 15% interest
(Payment = 3% of balance --decreasing with $10 minimum)
REPAYMENT = 16 years 5 months, $3,400+ in interest paid
EXAMPLE OF LEVEL PAYMENT PLAN:
Balance of $5,000; Level payment of $150; 15% interest
(Payment of $150 until debt is completely repaid)
REPAYMENT = 3 years 8 months, $1,500 in interest paid
2. 'Power Payments'.
PowerPay, a systematic way of repaying debts that was developed over 15 years ago by Utah State University Extension. I've since heard this system of debt reduction commonly referred to as a "snowball method" of repaying debt.
PowerPay Assumption #1 - Make level payments on all debts
PowerPay Assumption #2 - Accumulate no new debts
PowerPay Assumption #3 - As one debt is paid off, that money is used to roll over to a new debt; that 'cycle' is continued until the debt "snowball" is ultimately focused on paying down the final debt.
A benefit of this program is the flexibility for you to decide how to apply the extra payments (as debts are paid off) ... should you pay the highest interest rate (to save the most money)? Or should you pay off the lowest balance which may enable you to "stick with" your debt reduction plan better (ala weight loss)? You may want to review my debt elimination post from a while ago where I addressed these issues.
The time and money saved using this system of repayment is often breathtaking. Utah State has made their PowerPay calculator available for free on their website - https://powerpay.org.
Take a look at how much time and money you could save by implementing a couple of simple debt reduction strategies that don't require assistance from others or cost you a dime!
July 13, 2009
CONSUMER ACTION HANDBOOK
The Consumer Action Handbook, first published in 1979, is a helpful and popular consumer resource. The free guide is designed to help people find the best and most direct sources for assistance with their consumer problems and questions. Tips are offered on such topics as banking, making large purchases, protecting against fraud, insurance, and resolving marketplace problems. Thousands of contacts for Better Business Bureaus; federal, state, county, and city government consumer protection offices are also provided. Some of the resources provided are also geared toward specific audiences such as teachers and the military ...
NAVIGATING THE SITE.
Consumer Topics. This list of consumer topics allows you to access tips for purchasing specific goods and services, like cars, home improvement, insurance, and more. It also includes handy information about spam, identity theft, credit, travel, utilities and more.
How to File a Complaint. This is a great place to start if you have a problem with a recent purchase. This section includes helpful information about legal issues and dispute resolution.
Where to File a Complaint. This section lists addresses, phone numbers and websites that can be helpful when filing a consumer complaint.
Specific Audiences. Look here to find the most useful consumer resources for specific audiences, such as military personnel, teachers, and persons with disabilities.
Order Publications. Use this tab to order the Consumer Action Handbook and many other free and low-cost publications from the federal government.
Want More Help. If you still haven't found what you need, try these links for more great resources from the federal government and others.
Consumer News. This side box includes links to timely consumer news pieces, such as recall announcements, scam and fraud alerts and more. Each consumer topic area has its own Consumer News box. Updated often.
Feature Links. This side box contains helpful links for each of the consumer topic areas.
ORDERING INFORMATION.
- Order by phone: 1-888-878-3256
- Order the booklet online
- View booklet in pdf format
- View the booklet online
NAVIGATING THE SITE.
Consumer Topics. This list of consumer topics allows you to access tips for purchasing specific goods and services, like cars, home improvement, insurance, and more. It also includes handy information about spam, identity theft, credit, travel, utilities and more.
How to File a Complaint. This is a great place to start if you have a problem with a recent purchase. This section includes helpful information about legal issues and dispute resolution.
Where to File a Complaint. This section lists addresses, phone numbers and websites that can be helpful when filing a consumer complaint.
Specific Audiences. Look here to find the most useful consumer resources for specific audiences, such as military personnel, teachers, and persons with disabilities.
Order Publications. Use this tab to order the Consumer Action Handbook and many other free and low-cost publications from the federal government.
Want More Help. If you still haven't found what you need, try these links for more great resources from the federal government and others.
Consumer News. This side box includes links to timely consumer news pieces, such as recall announcements, scam and fraud alerts and more. Each consumer topic area has its own Consumer News box. Updated often.
Feature Links. This side box contains helpful links for each of the consumer topic areas.
ORDERING INFORMATION.
- Order by phone: 1-888-878-3256
- Order the booklet online
- View booklet in pdf format
- View the booklet online
July 06, 2009
CONSOLIDATING PRIVATE STUDENT LOANS ...
This month, as student loan rates have adjusted and new legislation taken effect, issues impacting college students have taken center stage and lots of questions have surfaced (many of these issues were addressed in a blog post a couple weeks ago). Common among them are questions surrounding private student loans, particularly the issue of consolidating them [for recent graduates].
WHAT YOU NEED TO KNOW ABOUT PL CONSOLIDATION...
PL CONSOLIDATION CONSIDERATIONS.
HOW DO I KNOW IF PL CONSOLIDATION MAKES SENSE FOR ME?
Contrary to popular belief, you can consolidate private loans (PLs). The primary question you will need to answer is whether or not doing so is in your best interest. In most cases, it’s not …
June 25, 2009
INCOME-BASED REPAYMENT & PUBLIC SERVICE LOAN FORGIVENESS
A couple weeks ago I wrote about upcoming student loan changes (to take effect on July 1st). One of the important changes that will become available is Income-Based Repayment (IBR), an option that may provide financial relief to over a million federal student loan borrowers (according to estimates by The Project on Student Debt).
What is the new IBR?
A new repayment option for federal student loans. IBR payments will take into consideration factors impacting payment affordability (i.e., family size, income, and state of residence). All Stafford, Grad PLUS, and Federal Consolidation Loans will be eligible for IBR (Loans in default, Parent PLUS Loans, and Consolidation Loans that repaid a Parent PLUS Loan WILL NOT be eligible for IBR).
Calculation of IBR Payments.
While your lender will perform the actual calculations, several calculators exist to assist you in estimating the benefits of IBR. Ultimately, if your payment (given the factors mentioned above - i.e., family size and income) would be lower than a standard repayment (10-year repayment plan), then you will be eligible for IBR. The following calculator is provided by the Department of Education. After the initial determination of eligibility, your payment can be adjusted annually (up or down) based upon changes in family size and income, however, your payment will never exceed the standard monthly payment amount (10-year plan) unless you choose to switch to a different repayment plan. As with any repayment option, it is there to serve you in addressing your repayment needs - you can always switch to a different plan if your needs change or if another option is/becomes more suitable.
PROS/CONS.
(+) IBR may allow you to pay less than other repayment options allowing more monthly discretionary income, adding flexibility to your budget.
(-) Be careful - while smaller payments can provide short-term relief, lower payments can also result in a longer repayment period and higher interest costs.
(+) If you repay for 25 years and meet certain other requirements, the remaining balance will be cancelled.
(-) 25 years is a long time! This could, however, be a potential scenario for an individual with a high level of debt in a 'low-paying' career field.
(+) Public Service Loan Forgiveness after 10 years (not 25). If you work in public service and opt for IBR, your remaining debt (if any) would be cancelled if: (a) Your 120 payments were made in the IBR program. (b) Available only if your payments were made through the Direct Loan program (an option available to you even if you have already consolidated prior with another lender - you can "reconsolidate" with the Dept of Ed (Direct Loan Program) if you'd like). More information is available at the Dept of Ed website.
(-) If there is a negative to this program it's news to me, please share.
IBRINFO.ORG.
More information on Income-Based Repayment is available on the IBR Info Website - http://www.ibrinfo.org ... The site also lists webinar and other free 'events' providing opportunities to learn more about IBR and public loan forgiveness.
What is the new IBR?
A new repayment option for federal student loans. IBR payments will take into consideration factors impacting payment affordability (i.e., family size, income, and state of residence). All Stafford, Grad PLUS, and Federal Consolidation Loans will be eligible for IBR (Loans in default, Parent PLUS Loans, and Consolidation Loans that repaid a Parent PLUS Loan WILL NOT be eligible for IBR).
Calculation of IBR Payments.
While your lender will perform the actual calculations, several calculators exist to assist you in estimating the benefits of IBR. Ultimately, if your payment (given the factors mentioned above - i.e., family size and income) would be lower than a standard repayment (10-year repayment plan), then you will be eligible for IBR. The following calculator is provided by the Department of Education. After the initial determination of eligibility, your payment can be adjusted annually (up or down) based upon changes in family size and income, however, your payment will never exceed the standard monthly payment amount (10-year plan) unless you choose to switch to a different repayment plan. As with any repayment option, it is there to serve you in addressing your repayment needs - you can always switch to a different plan if your needs change or if another option is/becomes more suitable.
PROS/CONS.
(+) IBR may allow you to pay less than other repayment options allowing more monthly discretionary income, adding flexibility to your budget.
(-) Be careful - while smaller payments can provide short-term relief, lower payments can also result in a longer repayment period and higher interest costs.
(+) If you repay for 25 years and meet certain other requirements, the remaining balance will be cancelled.
(-) 25 years is a long time! This could, however, be a potential scenario for an individual with a high level of debt in a 'low-paying' career field.
(+) Public Service Loan Forgiveness after 10 years (not 25). If you work in public service and opt for IBR, your remaining debt (if any) would be cancelled if: (a) Your 120 payments were made in the IBR program. (b) Available only if your payments were made through the Direct Loan program (an option available to you even if you have already consolidated prior with another lender - you can "reconsolidate" with the Dept of Ed (Direct Loan Program) if you'd like). More information is available at the Dept of Ed website.
(-) If there is a negative to this program it's news to me, please share.
IBRINFO.ORG.
More information on Income-Based Repayment is available on the IBR Info Website - http://www.ibrinfo.org ... The site also lists webinar and other free 'events' providing opportunities to learn more about IBR and public loan forgiveness.
June 20, 2009
GAP INSURANCE
GAP (Guaranteed Auto Protection) Insurance -- is a term commonly used to represent the coverage 'gap' between the amount you owe for your car and what your car is actually worth. Even if you carry full coverage (comprehensive and collision), in the event of an accident, insurance will only cover the market value of your vehicle. The market value of a vehicle in many instances is less than the amount owed [for a number of potential reasons]: vehicle depreciation; little or no down payment made; extended term loans; rolling negative equity into a purchase; leasing a vehicle; borrowing more than the purchase price (rolling tax, title, and loan fees into the loan), etc. This negative equity scenario is often referred to as being "upside down" in a loan. In this situation, you will ultimately be responsible for the loan deficiency. Unfortunately, in this difficult economy, these types of upside down situations are very common. According to Edmunds, 1 in 5 cars financed in February 2009 included debt from a prior vehicle. The amount of that negative equity rolled over? $4,676!
Not all insurance companies will offer Gap Insurance. Not all situations will warrant having Gap Insurance. If you will never be in a negative equity situation, you will never have a need for gap protection. Before buying gap protection, make sure you're not already covered ... lease companies commonly include gap coverage in the lease agreement for their own protection. Some auto insurance policies will also include gap protection as part of their standard coverage. So read the policy and ask questions first!
Gap Insurance can be purchased as an additional coverage on your existing policy or can be purchased as a separate policy with a different company. You should price this insurance the same way you would any other insurance product to find the best deal for your situation. Gap coverage is available in most, but not all states (not available in CT, LA, NY, VA, and WA).
If purchased through a dealer or vendor (these are typically the most costly options), the coverage is typically a one-time charge (a few hundred dollars - often $300 - $500). If purchased through an auto insurance company, it will typically be a small add-on to your monthly premium (that you will continue to pay as long as you have the policy). Before purchasing, make sure the product would cover you in the event of any loss (i.e., natural disaster, theft, etc.) - not just an auto accident. As with any insurance, do your homework first. MSN Money recently wrote an article on gap insurance, "What a car wreck could cost you," that offers helpful information and advice.
Not all insurance companies will offer Gap Insurance. Not all situations will warrant having Gap Insurance. If you will never be in a negative equity situation, you will never have a need for gap protection. Before buying gap protection, make sure you're not already covered ... lease companies commonly include gap coverage in the lease agreement for their own protection. Some auto insurance policies will also include gap protection as part of their standard coverage. So read the policy and ask questions first!
Gap Insurance can be purchased as an additional coverage on your existing policy or can be purchased as a separate policy with a different company. You should price this insurance the same way you would any other insurance product to find the best deal for your situation. Gap coverage is available in most, but not all states (not available in CT, LA, NY, VA, and WA).
If purchased through a dealer or vendor (these are typically the most costly options), the coverage is typically a one-time charge (a few hundred dollars - often $300 - $500). If purchased through an auto insurance company, it will typically be a small add-on to your monthly premium (that you will continue to pay as long as you have the policy). Before purchasing, make sure the product would cover you in the event of any loss (i.e., natural disaster, theft, etc.) - not just an auto accident. As with any insurance, do your homework first. MSN Money recently wrote an article on gap insurance, "What a car wreck could cost you," that offers helpful information and advice.
June 12, 2009
JULY 1 - SCHEDULED STUDENT LOAN CHANGES ...
July 1st is always a momentous time for anyone with a student loan ... this year will be no different. There will be some important loan changes you should be aware of.
RATE CHANGE ON VARIABLE RATE [STAFFORD] LOANS.
Historically, July 1st marks the time each year when variable interest rates on Federal (Stafford) Loans are reset. This year, the rate will drop to an astonishingly low 2.48% (which you can lock into by consolidating); 1.88% if you graduate this coming academic year and consolidate during your grace period! Before you get too excited, keep in mind this is more likely to impact individuals that have already graduated and have been hiding under a rock and have yet to consolidate their loans ... for almost everyone else... remember that the legislation passed on July 1, 2006 locked all Stafford Loans taken out after that date at a fixed 6.8% rate (with some exceptions for undergrads - see next section). Thus, it is only the Stafford Loans [that have not been consolidated] that were taken out prior to 7/1/2006 that are impacted by this rate change.
NOTE. If this rate drop does impact you, you will be wise to wait until AFTER July 1 to consolidate to take advantage of the new, lower rate. The current rate (available rate through June 30) is 4.21%.
"NEW" STAFFORD SUBSIDIZED LOAN RATES FOR UNDERGRADS.
The fixed rate for new subsidized Stafford Loans will drop from 6% to 5.6% for this coming year (7/1/2009 to 6/30/2010). This cut only impacts undergrad students (not grad students) and only subsidized Stafford Loans (not unsubsidized Staffords). Unsubsidized Stafford Loans remain at 6.8%.
PELL GRANT MAX AWARD AVAILABILITY INCREASES.
For 2009-2010, the maximum Pell Grant (Federal Government need-based grants) award has been raised to $5,350 (from $4,731).
INCOME BASED REPAYMENT PLAN.
I'll write about this topic separately in the next week or two ... if interested, you can read more about it and public service loan forgiveness at IBRinfo.org.
ADDITIONAL VALUABLE LOAN TOOLS/RESOURCES.
* Calculate your 'weighted' rate (if you have loans with multiple rates)
* Extensive battery of useful student/college calculators
* Federal Loan Info (Limits & Terms, 2009-10)
* Look up your Federal Loans (Need a PIN?)
* Military - New GI Bill (in effect 8/1/09)
RATE CHANGE ON VARIABLE RATE [STAFFORD] LOANS.
Historically, July 1st marks the time each year when variable interest rates on Federal (Stafford) Loans are reset. This year, the rate will drop to an astonishingly low 2.48% (which you can lock into by consolidating); 1.88% if you graduate this coming academic year and consolidate during your grace period! Before you get too excited, keep in mind this is more likely to impact individuals that have already graduated and have been hiding under a rock and have yet to consolidate their loans ... for almost everyone else... remember that the legislation passed on July 1, 2006 locked all Stafford Loans taken out after that date at a fixed 6.8% rate (with some exceptions for undergrads - see next section). Thus, it is only the Stafford Loans [that have not been consolidated] that were taken out prior to 7/1/2006 that are impacted by this rate change.
NOTE. If this rate drop does impact you, you will be wise to wait until AFTER July 1 to consolidate to take advantage of the new, lower rate. The current rate (available rate through June 30) is 4.21%.
"NEW" STAFFORD SUBSIDIZED LOAN RATES FOR UNDERGRADS.
The fixed rate for new subsidized Stafford Loans will drop from 6% to 5.6% for this coming year (7/1/2009 to 6/30/2010). This cut only impacts undergrad students (not grad students) and only subsidized Stafford Loans (not unsubsidized Staffords). Unsubsidized Stafford Loans remain at 6.8%.
PELL GRANT MAX AWARD AVAILABILITY INCREASES.
For 2009-2010, the maximum Pell Grant (Federal Government need-based grants) award has been raised to $5,350 (from $4,731).
INCOME BASED REPAYMENT PLAN.
I'll write about this topic separately in the next week or two ... if interested, you can read more about it and public service loan forgiveness at IBRinfo.org.
ADDITIONAL VALUABLE LOAN TOOLS/RESOURCES.
* Calculate your 'weighted' rate (if you have loans with multiple rates)
* Extensive battery of useful student/college calculators
* Federal Loan Info (Limits & Terms, 2009-10)
* Look up your Federal Loans (Need a PIN?)
* Military - New GI Bill (in effect 8/1/09)
June 06, 2009
DISCOUNT TRAVEL RESOURCES
In this rough economy, everyone is trying to save a buck. Finding the best deals on travel (i.e., airfare, hotels, rental cars, etc.) is something that has become easier for consumers thanks to the internet. Expedia, Hotwire, Orbitz, Priceline, and Travelocity are a few of the more popular travel comparison sites. Numerous other online resources [perhaps less familiar] are available - here are just a sampling for you to peruse ...
FREE ONLINE TRAVEL RESOURCES.
* AIRFARE WATCHDOG. Register to receive alerts [as regularly as you'd like] for air deals from your selected airport(s).
* BIDDING FOR TRAVEL. A rookie to online travel bidding? Will help you understand the process and become an 'informed bidder.'
* KAYAK and MOBISSIMO. Searches hundreds of travel sites, providing a larger array of options (Mobissimo includes int'l travel).
* LAST MINUTE TRAVEL. Have some flexibility in your travel dates? Some of the best deals are available to 'last minute' travelers.
* SKYSCANNER and WHICH BUDGET. International discount flights.
* STUDENT UNIVERSE. Discounted travel options for students.
HONORABLE MENTION RESOURCES.
* FARE COMPARE
* SIDE STEP
* TRAVELZOO
* YAPTA
Hopefully you'll find some of my favorite travel resources helpful. I'd also be interested in learning about your favorite travel sites as well.
E-mail me at doctormoneyman@gmail.com.
FREE ONLINE TRAVEL RESOURCES.
* AIRFARE WATCHDOG. Register to receive alerts [as regularly as you'd like] for air deals from your selected airport(s).
* BIDDING FOR TRAVEL. A rookie to online travel bidding? Will help you understand the process and become an 'informed bidder.'
* KAYAK and MOBISSIMO. Searches hundreds of travel sites, providing a larger array of options (Mobissimo includes int'l travel).
* LAST MINUTE TRAVEL. Have some flexibility in your travel dates? Some of the best deals are available to 'last minute' travelers.
* SKYSCANNER and WHICH BUDGET. International discount flights.
* STUDENT UNIVERSE. Discounted travel options for students.
HONORABLE MENTION RESOURCES.
* FARE COMPARE
* SIDE STEP
* TRAVELZOO
* YAPTA
Hopefully you'll find some of my favorite travel resources helpful. I'd also be interested in learning about your favorite travel sites as well.
E-mail me at doctormoneyman@gmail.com.
May 29, 2009
SHOULD I REFINANCE?
With interest rates near historically low levels, the recurring question homeowners are asking - 'Should I refinance my mortgage?' Answers will vary depending upon individual factors. A few common reasons to consider include available interest rates (potential rate relative to current loan rate), current loan (i.e., Adjustable Rate Mortgage), how long you anticipate remaining in the home, direct costs associated with refinancing (i.e., fees/closing costs), etc.
BREAK-EVEN ANALYSIS.
The most common method of assessing the potential benefits of refinancing is a break-even analysis. This is a process that estimates the amount of time it will take (through interest savings) to "break even" on the upfront costs associated with refinancing the loan. Obviously, in order to justify refinancing, the benefits need to outweigh the costs. Several [free] online calculators are available to assist you in breaking down (and simplifying) this analysis - Dinkytown, Fair Isaac, and Zillow are popular examples.
CURRENT INTEREST RATES.
Although interest rates have crept up in the past couple of weeks, interest rates are still very favorable (under 5% on 15-year mortgages). Bankrate.com is a great tool for finding current rate information. The rate available to you will depend upon your creditworthiness/credit score (a score over 740 will get you the best rate).
COSTS.
Many consumers view loan costs as fixed. If you go in with this mindset, you will wind up overpaying for your loan. Some simple tips: (1) Get a quote from your current lender, they will obviously have less "work" to do to qualify you than a company with which you've never done business; (2) Get quotes from multiple companies - you will be amazed at the variability in fees from company to company; the information you'll obtain will provide leverage in working with your ultimate "choice," and; (3) Get a quote from an online company; see #2 above. Information is power, but in this instance, the difference in fees is often amplified as online companies can typically offer lower fees because they don't have the same costs that a brick and mortar lender would have. Use this leverage to your advantage!
GOVERNMENT ASSISTANCE.
If you are in a situation where you may not meet ideal refinancing conditions as defined by a lender (owe more on the home than it is worth), you may still be able to benefit from the current interest rate environment. Pres. Obama has passed "Homeowner Affordability" initiatives to aid homeowners in refinancing unaffordable mortgages. If you are not eligible for a government-assisted refinance, you may be eligible for a loan modification. Information on the current government programs is available at:
-- Government Refinance Assistance
-- Making Home Affordable (eligibility requirements)
BREAK-EVEN ANALYSIS.
The most common method of assessing the potential benefits of refinancing is a break-even analysis. This is a process that estimates the amount of time it will take (through interest savings) to "break even" on the upfront costs associated with refinancing the loan. Obviously, in order to justify refinancing, the benefits need to outweigh the costs. Several [free] online calculators are available to assist you in breaking down (and simplifying) this analysis - Dinkytown, Fair Isaac, and Zillow are popular examples.
CURRENT INTEREST RATES.
Although interest rates have crept up in the past couple of weeks, interest rates are still very favorable (under 5% on 15-year mortgages). Bankrate.com is a great tool for finding current rate information. The rate available to you will depend upon your creditworthiness/credit score (a score over 740 will get you the best rate).
COSTS.
Many consumers view loan costs as fixed. If you go in with this mindset, you will wind up overpaying for your loan. Some simple tips: (1) Get a quote from your current lender, they will obviously have less "work" to do to qualify you than a company with which you've never done business; (2) Get quotes from multiple companies - you will be amazed at the variability in fees from company to company; the information you'll obtain will provide leverage in working with your ultimate "choice," and; (3) Get a quote from an online company; see #2 above. Information is power, but in this instance, the difference in fees is often amplified as online companies can typically offer lower fees because they don't have the same costs that a brick and mortar lender would have. Use this leverage to your advantage!
GOVERNMENT ASSISTANCE.
If you are in a situation where you may not meet ideal refinancing conditions as defined by a lender (owe more on the home than it is worth), you may still be able to benefit from the current interest rate environment. Pres. Obama has passed "Homeowner Affordability" initiatives to aid homeowners in refinancing unaffordable mortgages. If you are not eligible for a government-assisted refinance, you may be eligible for a loan modification. Information on the current government programs is available at:
-- Government Refinance Assistance
-- Making Home Affordable (eligibility requirements)
May 20, 2009
CREDIT C.A.R.D. REFORM
Changes to current credit card practices are imminent. On Tuesday, the Senate approved CARD (the Credit Card Accountability, Responsibility, and Disclosure bill) by a 90-5 vote; today (Wednesday), the House voted 361-64 in favor of the legislation which would alter many of the credit card practices that have commonly come under fire. President Obama has said that he'd like to sign the bill by Memorial Day to "protect consumers and to bring some commonsense rationality to our financial system."
While most consumer advocates are in favor of the legislation, some have questioned the delay in implementation (9 months for many of the changes). Others have begun theorizing about potential unintended consequences to "responsible cardholders" (those who pay their balances in full each month). To compensate for lost revenue, some have predicted a resurrection of annual fees and an end to many card reward programs.
Summary of the CARD bill.
* Some of the changes are already on track to take effect in July 2010 under the Federal Reserve regulations that were established last year. The CARD legislation would uphold the outlined Fed changes and provide additional restrictions on card policies.
- 45 day notice on rate hikes and certain contract changes (15 prior).
- Eliminates fees charged for processing payments.
- Eliminates over-the-limit fees.
- Eliminates universal default.
- End to double-cycle billing.
- Mandatory 5 year life for gift cards.
- Rates cannot be raised for the first year after an account is opened.
- Reasonable payment allocation (Apply payments to highest rates).
- Restrictions on interest rate increases of existing debt.
- Restrictions on late fees.
- Statements must go out 21 calendar days in advance of the due date.
- Tighten issuance of credit cards to those under age 21:
--> Must have a proven capacity to repay OR
--> Complete a financial literacy course OR
--> Have a cosigner.
** Unfortunately, an amendment initiated by Senator Sanders of Vermont which would have also capped credit card interest rates at 15% was defeated in the Senate (60-33).
While most consumer advocates are in favor of the legislation, some have questioned the delay in implementation (9 months for many of the changes). Others have begun theorizing about potential unintended consequences to "responsible cardholders" (those who pay their balances in full each month). To compensate for lost revenue, some have predicted a resurrection of annual fees and an end to many card reward programs.
Summary of the CARD bill.
* Some of the changes are already on track to take effect in July 2010 under the Federal Reserve regulations that were established last year. The CARD legislation would uphold the outlined Fed changes and provide additional restrictions on card policies.
- 45 day notice on rate hikes and certain contract changes (15 prior).
- Eliminates fees charged for processing payments.
- Eliminates over-the-limit fees.
- Eliminates universal default.
- End to double-cycle billing.
- Mandatory 5 year life for gift cards.
- Rates cannot be raised for the first year after an account is opened.
- Reasonable payment allocation (Apply payments to highest rates).
- Restrictions on interest rate increases of existing debt.
- Restrictions on late fees.
- Statements must go out 21 calendar days in advance of the due date.
- Tighten issuance of credit cards to those under age 21:
--> Must have a proven capacity to repay OR
--> Complete a financial literacy course OR
--> Have a cosigner.
** Unfortunately, an amendment initiated by Senator Sanders of Vermont which would have also capped credit card interest rates at 15% was defeated in the Senate (60-33).
May 14, 2009
INDEX VS ACTIVE FUND MANAGEMENT
Every day we're faced with choices -- PC or Mac? Pepsi or Coke? Boxers or Briefs? Kobe or Lebron? Active or Passive [mutual fund management]? Ok, so most of our daily decisions are not life or death, but many decisions will have a direct bearing on our overall financial well-being.
Active vs. Passive (Index) Fund Management.
Active Management.
Accompanying a typical [active] mutual fund are high costs/ maintenance fees (i.e., expense ratio). Why? You're paying a fund manager to select the investments (stocks, bonds, etc.) that will comprise the fund. Is it worth it? Ultimately, only you can decide the answer to that. In the final analysis, you will need to determine if the higher fund costs are yielding higher fund returns ...
According to Morningstar Principia, a database of over 15,000 mutual funds, the median annual fund expense was 1.42%. (In addition, more than 10,000 of these funds also levy a sales charge or "load" - a topic for another day ...)
- 42% of funds had expenses over 1.5%
- 52% of funds had expenses between .5% and 1.5%
- 6% of funds had expenses less than .5%
Passive Management.
The most common example of passive fund management is an index fund. A fund designed to track the activity/return of its underlying index (i.e., S&P 500, Nasdaq, Dow, etc.). The S&P 500, a broad market index of 500 of the largest companies in the U.S., is one of the most common types of index funds. Since the listing of those 500 companies is readily available (not stocks that would need to be 'handpicked' like an actively managed fund), you can typically purchase this type of passive management at a fraction of the cost of active management. In the listing of expenses above, index funds are going to be the prominent group with expenses under .5% ...
While most mutual fund companies are strong advocates of actively managed funds (for obvious business reasons), more and more people are moving to passive management. In fact, some fund companies actually cater specifically to index investors - most notably, Vanguard and DFA Funds.
The Winner.
Every year, Standard and Poors publishes a scorecard that declares the "winner" of the Index vs. Active Management "battle" ...
The winner? If you've done any reading in this area, you already know the answer. The winner this time around is consistently the winner [and not who most people would assume] ... PASSIVE MANAGEMENT! Over the five year market cycle from 2004 to 2008, the S&P 500 outperformed 71.9% of actively managed large cap funds, the S&P MidCap 400 outperformed 79.1% of actively managed mid cap funds and the S&P SmallCap 600 outperformed 85.5% of actively managed small cap funds! These results are similar to that of the previous five year cycle from 1999 to 2003. International stock funds? Same results - indices outperformed the majority of actively managed funds. In addition, S&P did not factor in the sales fees that "loaded funds" charge investors, which would have made the contrast even more startling. (Click here for an archive of past scorecards).
According to Princeton University's Burton Malkiel, the average actively managed mutual fund has returned 1.8% per year less than the S&P 500. 1.8% per year may not sound like a big deal, but it is a HUGE deal over time. A pretty compelling argument for passive management.
NOTE. Although index funds typically carry lower costs (and should), don't jump in without knowing what the specific costs are. While some index funds will charge as little as .1% or .2% in expenses, I am aware of a couple index funds (nothing special, just 'plain vanilla' S&P 500 funds) whose expense ratios are 1.06% and 1.50% respectively! So never assume the costs will be low merely because it is passively managed. It obviously would not make a lot of sense to pay “active management fees” for an index fund.
Active vs. Passive (Index) Fund Management.
Active Management.
Accompanying a typical [active] mutual fund are high costs/ maintenance fees (i.e., expense ratio). Why? You're paying a fund manager to select the investments (stocks, bonds, etc.) that will comprise the fund. Is it worth it? Ultimately, only you can decide the answer to that. In the final analysis, you will need to determine if the higher fund costs are yielding higher fund returns ...
According to Morningstar Principia, a database of over 15,000 mutual funds, the median annual fund expense was 1.42%. (In addition, more than 10,000 of these funds also levy a sales charge or "load" - a topic for another day ...)
- 42% of funds had expenses over 1.5%
- 52% of funds had expenses between .5% and 1.5%
- 6% of funds had expenses less than .5%
Passive Management.
The most common example of passive fund management is an index fund. A fund designed to track the activity/return of its underlying index (i.e., S&P 500, Nasdaq, Dow, etc.). The S&P 500, a broad market index of 500 of the largest companies in the U.S., is one of the most common types of index funds. Since the listing of those 500 companies is readily available (not stocks that would need to be 'handpicked' like an actively managed fund), you can typically purchase this type of passive management at a fraction of the cost of active management. In the listing of expenses above, index funds are going to be the prominent group with expenses under .5% ...
While most mutual fund companies are strong advocates of actively managed funds (for obvious business reasons), more and more people are moving to passive management. In fact, some fund companies actually cater specifically to index investors - most notably, Vanguard and DFA Funds.
The Winner.
Every year, Standard and Poors publishes a scorecard that declares the "winner" of the Index vs. Active Management "battle" ...
The winner? If you've done any reading in this area, you already know the answer. The winner this time around is consistently the winner [and not who most people would assume] ... PASSIVE MANAGEMENT! Over the five year market cycle from 2004 to 2008, the S&P 500 outperformed 71.9% of actively managed large cap funds, the S&P MidCap 400 outperformed 79.1% of actively managed mid cap funds and the S&P SmallCap 600 outperformed 85.5% of actively managed small cap funds! These results are similar to that of the previous five year cycle from 1999 to 2003. International stock funds? Same results - indices outperformed the majority of actively managed funds. In addition, S&P did not factor in the sales fees that "loaded funds" charge investors, which would have made the contrast even more startling. (Click here for an archive of past scorecards).
According to Princeton University's Burton Malkiel, the average actively managed mutual fund has returned 1.8% per year less than the S&P 500. 1.8% per year may not sound like a big deal, but it is a HUGE deal over time. A pretty compelling argument for passive management.
NOTE. Although index funds typically carry lower costs (and should), don't jump in without knowing what the specific costs are. While some index funds will charge as little as .1% or .2% in expenses, I am aware of a couple index funds (nothing special, just 'plain vanilla' S&P 500 funds) whose expense ratios are 1.06% and 1.50% respectively! So never assume the costs will be low merely because it is passively managed. It obviously would not make a lot of sense to pay “active management fees” for an index fund.
May 06, 2009
"MY MONEY" RESOURCES
The federal government has taken several stabs at reviving the economy in the past several months. As an educator, one move I support one hundred percent is the pooling of resources to help consumers better understand and more wisely use their money.
As consumers, we are involved in money-related activities/decisions every day. Paying bills, balancing the checkbook, shopping for loans, reviewing credit card statements, saving, investing, viewing a credit report, and simply deciding whether to use cash or to charge a purchase are some common examples of these regular activities. To aid in this daily battle, 20 government agencies (in response to the Fair & Accurate Credit Transactions Act mandate) formed a Financial Literacy & Education Commission and created a very easy to use resource with links to tools that can benefit anyone at any stage of life to manage money more effectively. Website resources include:
- Budgeting & Taxes
- Credit
- Financial Planning
- Home Ownership
- Kids
- Paying for Education
- Privacy, Fraud, & Scams
- Responding to Life Events
- Retirement Planning
- Saving & Investing
- Starting a Small Business
In addition to these "always useful" topical areas, time-sensitive resources are also provided (i.e., recent market events, foreclosure avoidance, health benefits after job loss, smart borrowing, etc.). Are you financially smart? Take the quiz to test your smarts... Do you know what our national strategy for financial literacy is? Did you know there was a national strategy??
TOOL KIT.
In addition to the online resources, you can order a free “My Money tool kit" containing information to help you choose and use credit cards, get out of debt, protect your credit record, understand Social Security benefits, insure bank deposits, and start a savings and investment plan. Simply complete the online form and they’ll send the tool kit materials at no cost or by calling toll free 1-888-MYMONEY.
CHECK IT OUT ... WWW.MYMONEY.GOV
As consumers, we are involved in money-related activities/decisions every day. Paying bills, balancing the checkbook, shopping for loans, reviewing credit card statements, saving, investing, viewing a credit report, and simply deciding whether to use cash or to charge a purchase are some common examples of these regular activities. To aid in this daily battle, 20 government agencies (in response to the Fair & Accurate Credit Transactions Act mandate) formed a Financial Literacy & Education Commission and created a very easy to use resource with links to tools that can benefit anyone at any stage of life to manage money more effectively. Website resources include:
- Budgeting & Taxes
- Credit
- Financial Planning
- Home Ownership
- Kids
- Paying for Education
- Privacy, Fraud, & Scams
- Responding to Life Events
- Retirement Planning
- Saving & Investing
- Starting a Small Business
In addition to these "always useful" topical areas, time-sensitive resources are also provided (i.e., recent market events, foreclosure avoidance, health benefits after job loss, smart borrowing, etc.). Are you financially smart? Take the quiz to test your smarts... Do you know what our national strategy for financial literacy is? Did you know there was a national strategy??
TOOL KIT.
In addition to the online resources, you can order a free “My Money tool kit" containing information to help you choose and use credit cards, get out of debt, protect your credit record, understand Social Security benefits, insure bank deposits, and start a savings and investment plan. Simply complete the online form and they’ll send the tool kit materials at no cost or by calling toll free 1-888-MYMONEY.
CHECK IT OUT ... WWW.MYMONEY.GOV
April 30, 2009
HIGH YIELD CHECKING?
You've likely heard of high yield online savings accounts. The best of these "high yield" accounts are currently only paying about 2% (according to Bankrate.com, an online resource that provides aggregate interest rate data) -- pretty tough to get excited about 2%. Ironically, one of the best [high yield] alternatives currently is an option that until recently would never even have been a remote consideration - a checking account...
These accounts, High Yield Reward Checking Accounts, are readily available through insured (e.g., FDIC, NCUA) banks and credit unions across the country and are paying upwards of 6% interest! Many of the financial institutions are small, available to local/state residents. Using a directory will help narrow the field of potential options (see list of resources that follow the tip) ... some accounts are not restrictive and are available nationwide.
Some of these accounts require certain 'activity' in order to be eligible for the higher rates - a certain number of debit transactions, direct deposit, electronic statements - these are common examples of potential requirements. The resources below will help you navigate these "hurdles." Unlike many checking accounts, most reward checking accounts don't have monthly fees or minimum balance requirements. In an economic environment where savings accounts and CDs offer paltry yields, reward checking accounts hold a viable solution!
HIGH YIELD CHECKING RESOURCES.
- Article - 'Reward Checking Pays High Yields'
- Bank Deals -- Best Rates & Deals
- Checking Finder
- High Yield Checking Deals
These accounts, High Yield Reward Checking Accounts, are readily available through insured (e.g., FDIC, NCUA) banks and credit unions across the country and are paying upwards of 6% interest! Many of the financial institutions are small, available to local/state residents. Using a directory will help narrow the field of potential options (see list of resources that follow the tip) ... some accounts are not restrictive and are available nationwide.
Some of these accounts require certain 'activity' in order to be eligible for the higher rates - a certain number of debit transactions, direct deposit, electronic statements - these are common examples of potential requirements. The resources below will help you navigate these "hurdles." Unlike many checking accounts, most reward checking accounts don't have monthly fees or minimum balance requirements. In an economic environment where savings accounts and CDs offer paltry yields, reward checking accounts hold a viable solution!
HIGH YIELD CHECKING RESOURCES.
- Article - 'Reward Checking Pays High Yields'
- Bank Deals -- Best Rates & Deals
- Checking Finder
- High Yield Checking Deals
April 22, 2009
FAIR CREDIT BILLING ACT
Several posts during the past couple of months have focused on consumer protection issues: Fair Debt Collection, Fair Credit Reporting, and Truth in Lending. Today I want to share some basic information about another important piece of consumer legislation -- The Fair Credit Billing Act.
FAIR CREDIT BILLING ACT.
This act is designed to protect consumer rights regarding billing errors on “open ended” credit accounts (such as credit cards).
Summary of FCBA provisions:
* Consumer is given 60 days after statement delivery to report a billing
error in writing. Common types of billing errors include: Unauthorized charges; charges listing wrong date or amount; charges for goods/ services that weren’t received or were defective; merchants failing to properly credit returned merchandise; charges being posted multiple times for a single purchase; mathematical errors; failure to post payment; or failure to send bill to correct address.
* If your bill contains an error, the creditor must explain (in writing) the corrections that will be made to your account and must remove any late fees, finance charges, or other charges related to the error.
* Consumer may withhold payment on disputed amount during the investigation (it can [and likely will] count against your credit limit). [Be certain to pay the portion of balance (if any) that is not being disputed].
* Consumer must be provided a statement each billing period in which more than $1 is owed.
* Consumer must be provided written notice when a new account is open detailing the right to dispute billing errors.
* Creditor must resolve a dispute within two billing cycles (not more than 90 days) after receiving your letter.
* Creditor cannot threaten your credit rating or report you as delinquent during a dispute.
* Creditor must send bill at least 14 days before payment due date.
** Although the quality of goods is obviously not a “billing error,” if you use your credit or charge card to make the purchase, you can go through the same dispute process with the card as long as the purchase was at least $50, was in your home state, within 100 miles of your current billing address, and you had made a “good faith” effort to resolve the dispute with the seller first.
** Any violations of your FCBA rights can be filed online via the Federal Trade Commission Complaint Assistant Form.
Consumer credit is such a vital thing for most consumers – the ability to have protections in place to help consumers protect the credit they work so hard to build and develop is critical. They are only helpful, however, if you are aware of them!
FAIR CREDIT BILLING ACT.
This act is designed to protect consumer rights regarding billing errors on “open ended” credit accounts (such as credit cards).
Summary of FCBA provisions:
* Consumer is given 60 days after statement delivery to report a billing
error in writing. Common types of billing errors include: Unauthorized charges; charges listing wrong date or amount; charges for goods/ services that weren’t received or were defective; merchants failing to properly credit returned merchandise; charges being posted multiple times for a single purchase; mathematical errors; failure to post payment; or failure to send bill to correct address.
* If your bill contains an error, the creditor must explain (in writing) the corrections that will be made to your account and must remove any late fees, finance charges, or other charges related to the error.
* Consumer may withhold payment on disputed amount during the investigation (it can [and likely will] count against your credit limit). [Be certain to pay the portion of balance (if any) that is not being disputed].
* Consumer must be provided a statement each billing period in which more than $1 is owed.
* Consumer must be provided written notice when a new account is open detailing the right to dispute billing errors.
* Creditor must resolve a dispute within two billing cycles (not more than 90 days) after receiving your letter.
* Creditor cannot threaten your credit rating or report you as delinquent during a dispute.
* Creditor must send bill at least 14 days before payment due date.
** Although the quality of goods is obviously not a “billing error,” if you use your credit or charge card to make the purchase, you can go through the same dispute process with the card as long as the purchase was at least $50, was in your home state, within 100 miles of your current billing address, and you had made a “good faith” effort to resolve the dispute with the seller first.
** Any violations of your FCBA rights can be filed online via the Federal Trade Commission Complaint Assistant Form.
Consumer credit is such a vital thing for most consumers – the ability to have protections in place to help consumers protect the credit they work so hard to build and develop is critical. They are only helpful, however, if you are aware of them!
April 15, 2009
TRUTH IN LENDING
Awareness is pivotal in the ability to make informed decisions as a consumer. This week I wanted to post information about one of the earliest consumer laws enacted -- The Truth in Lending Act (TILA).
The TILA is a major cornerstone of consumer credit legislation. At its heart, it is designed to guarantee accurate and meaningful disclosure of the costs of consumer credit - enabling consumers to make informed choices in the "credit marketplace." Prior to its enactment, consumers had no easy way to determine how much credit would really cost, or how to compare credit offers from various lenders. To their defense, creditors didn't have a uniform or standardized way of calculating interest or defining what additional charges would be added (which wouldn't show up in the interest rate).
Prior to TILA enactment, a survey asking families to estimate the average interest rate on their consumer debt resulted in an average response that underestimated their interest charges by 300%! An initial reaction would likely be "what a bunch of dummies." In actuality, look at this example to see how confusing things really were at that time ...
Three theoretical offers for a 3-year car loan:
1. Dealer financing with a 6% add-on rate
2. Dealer financing with a 6% discount rate
3. Credit union financing with a 10% actuarial rate
#2 was the option most consumers thought would be the best financial option. Seems logical, right? Remember that prior to the TILA, fees commonly weren't disclosed as part of the assessment of the "true cost" of a loan. In the example provided, the actual APRs ('true cost of the loan') were:
3. 10.00% APR
1. 11.08% APR
2. 13.38% APR
How easy would it have been to "dupe" (whether intentionally or not) consumers into an inferior loan because it was so simple to mask costs? It was for these types of reasons that the Truth in Lending Act was passed. Originally adopted in 1968, Truth in Lending recognizes "the right of the consumer to be informed - to be protected against fraudulent, deceitful, or grossly misleading information, advertising, labeling, or other practices, and to be given the facts he/she needs to make an informed choice." The act specifically states that...
- Creditors must provide detailed information about accounts (i.e., balance, interest rate, and fees for current accounts) and must disclose conditions and terms up front (APR, dollar amount of fees, etc).
- Creditors can't send a credit card if the consumer did not apply for it.
- Regulates how credit terms can be advertised.
- Sets card liability to no more than the first $50 of fraudulent charges.
The apparent benefits of this legislation shine through for consumers during the home buying process. How much easier is it to compare apples with apples on various offers from different lenders given the fact that they are required to disclose the APR (the true cost of the loan), not just the interest rate? It allows people to much more easily shop and compare loan costs/terms and ultimately make the best, most informed consumer decision. It’s scary to think where we’d be without this consumer protection law!
Since the original legislation became effective July 1, 1969, several amendments have been made to account for new and increasingly complex loan products (i.e., home equity loans, adjustable rate mortgages, etc.). If interested, you can view the complete TILA here.
The TILA is a major cornerstone of consumer credit legislation. At its heart, it is designed to guarantee accurate and meaningful disclosure of the costs of consumer credit - enabling consumers to make informed choices in the "credit marketplace." Prior to its enactment, consumers had no easy way to determine how much credit would really cost, or how to compare credit offers from various lenders. To their defense, creditors didn't have a uniform or standardized way of calculating interest or defining what additional charges would be added (which wouldn't show up in the interest rate).
Prior to TILA enactment, a survey asking families to estimate the average interest rate on their consumer debt resulted in an average response that underestimated their interest charges by 300%! An initial reaction would likely be "what a bunch of dummies." In actuality, look at this example to see how confusing things really were at that time ...
Three theoretical offers for a 3-year car loan:
1. Dealer financing with a 6% add-on rate
2. Dealer financing with a 6% discount rate
3. Credit union financing with a 10% actuarial rate
#2 was the option most consumers thought would be the best financial option. Seems logical, right? Remember that prior to the TILA, fees commonly weren't disclosed as part of the assessment of the "true cost" of a loan. In the example provided, the actual APRs ('true cost of the loan') were:
3. 10.00% APR
1. 11.08% APR
2. 13.38% APR
How easy would it have been to "dupe" (whether intentionally or not) consumers into an inferior loan because it was so simple to mask costs? It was for these types of reasons that the Truth in Lending Act was passed. Originally adopted in 1968, Truth in Lending recognizes "the right of the consumer to be informed - to be protected against fraudulent, deceitful, or grossly misleading information, advertising, labeling, or other practices, and to be given the facts he/she needs to make an informed choice." The act specifically states that...
- Creditors must provide detailed information about accounts (i.e., balance, interest rate, and fees for current accounts) and must disclose conditions and terms up front (APR, dollar amount of fees, etc).
- Creditors can't send a credit card if the consumer did not apply for it.
- Regulates how credit terms can be advertised.
- Sets card liability to no more than the first $50 of fraudulent charges.
The apparent benefits of this legislation shine through for consumers during the home buying process. How much easier is it to compare apples with apples on various offers from different lenders given the fact that they are required to disclose the APR (the true cost of the loan), not just the interest rate? It allows people to much more easily shop and compare loan costs/terms and ultimately make the best, most informed consumer decision. It’s scary to think where we’d be without this consumer protection law!
Since the original legislation became effective July 1, 1969, several amendments have been made to account for new and increasingly complex loan products (i.e., home equity loans, adjustable rate mortgages, etc.). If interested, you can view the complete TILA here.
April 08, 2009
'SPECIALTY' CREDIT REPORTS
Hopefully by now, the idea of getting a copy of your credit report annually for free isn’t a foreign one - hint, ALWAYS use the government sanctioned website (ANNUALCREDITREPORT.COM).
Did you also know that FACTA (the same legislation that allowed you to get the free credit reports) also enables you to obtain free "specialty reports." These are reports that relate to such issues as medical records or payments, check writing history, residential or tenant history, and insurance claims (to name a few). Specialty reports have been available to all consumers since December 1st, 2004. FTC regulations require companies that prepare reports on consumers for employment, insurance claims, rental, check writing, and medical records history, as a minimum establish a toll free telephone number for ordering the free file disclosures. Many companies also provide information for ordering the file online. As is the case with credit reports, you are eligible for one free report per year (i.e., one insurance report, one tenancy report, etc.).
Not everyone has a need to obtain each specialty report. It makes sense to order a specialty report before shopping for new insurance, opening a new checking account, and prior to renting (or after being turned down when applying for any of the following). Consumers who find errors in a specialty report have the same rights to dispute as with errors found in a credit report.
Keep in mind these are "for profit" businesses – they provide the free specialty report to be in compliance with government regulations, but other items/products on their website are "for sale." You are under no obligation to order anything to get your free specialty reports (it is the exact same thing that occurs if you have used the government site to order your free credit report(s) where they attempt to sell you a credit score and other financial products) …
Examples of available specialty reports and how to order them:
- Insurance Underwriting History - Life, Health, Disability
- Property & Auto Claims History – (C.L.U.E. Report)
- Tenancy Consumer File
o To request a copy of your Check Writing History, (800-428-9623)
o To request a copy of your Employment History, (866-312-8075)
o To request a copy of your Tenant History, (877-448-5732)
Did you also know that FACTA (the same legislation that allowed you to get the free credit reports) also enables you to obtain free "specialty reports." These are reports that relate to such issues as medical records or payments, check writing history, residential or tenant history, and insurance claims (to name a few). Specialty reports have been available to all consumers since December 1st, 2004. FTC regulations require companies that prepare reports on consumers for employment, insurance claims, rental, check writing, and medical records history, as a minimum establish a toll free telephone number for ordering the free file disclosures. Many companies also provide information for ordering the file online. As is the case with credit reports, you are eligible for one free report per year (i.e., one insurance report, one tenancy report, etc.).
Not everyone has a need to obtain each specialty report. It makes sense to order a specialty report before shopping for new insurance, opening a new checking account, and prior to renting (or after being turned down when applying for any of the following). Consumers who find errors in a specialty report have the same rights to dispute as with errors found in a credit report.
Keep in mind these are "for profit" businesses – they provide the free specialty report to be in compliance with government regulations, but other items/products on their website are "for sale." You are under no obligation to order anything to get your free specialty reports (it is the exact same thing that occurs if you have used the government site to order your free credit report(s) where they attempt to sell you a credit score and other financial products) …
Examples of available specialty reports and how to order them:
- Insurance Underwriting History - Life, Health, Disability
- Property & Auto Claims History – (C.L.U.E. Report)
- Tenancy Consumer File
o To request a copy of your Check Writing History, (800-428-9623)
o To request a copy of your Employment History, (866-312-8075)
o To request a copy of your Tenant History, (877-448-5732)
April 01, 2009
CREATING A HOME INVENTORY
It’s always interesting to see what drives people to take action... Often, catastrophic or tragic events are 'triggers' that motivate introspection (this also regularly includes a monitoring of ones personal finances). The recent flooding in Fargo got me thinking about the significance of having a home inventory ...
WHY CREATE A HOME INVENTORY?
Obviously the threat of property loss from fire, theft, etc. is very real. FBI statistics report that burglaries occur nearly every 15 seconds; in addition, in a "normal" year, there are typically 400,000+ home fires, 1,000 reported tornadoes, and $2 billion in flood damages.
Another reason to develop a home inventory is "stuff" ... Even if you aren't a pack rat, if you were to inventory your possessions, you'd quickly realize that you have a lot of stuff! This exercise may lead you to realize that your insurance (renters or homeowners) coverage is inadequate or may lead you to investigate other areas of your financial life that need to be explored.
HOW TO CREATE A HOME INVENTORY?
You'll be relieved that there are numerous tools available to assist you in the process of creating a home inventory. In addition to a general inventory, many resources do much more - i.e., provide a record keeping system to help you document what you have and a way to manage receipts and other cost information. What would you do if you were to wake up in the morning to an empty house or apartment? Would you be able to document your possessions? Just as critical, could you substantiate the costs for those items??
In addition to inventory resources that can be purchased, several free resources are available (with impressive capabilities!) - here are a few:
• Home Inventory Shareware and Freeware
• Know Your Stuff - Home Inventory
• My Stuff - Home Inventory Software
My suggestion - simply do something. Go ahead and start small; maybe start in one room or with your higher cost items. What I've learned over time is that 90% of personal finance is inertia... once momentum starts, it tends to continue rolling. Besides, Murphys Law suggests that if you take the time to create the documentation, you won't need it!
WHY CREATE A HOME INVENTORY?
Obviously the threat of property loss from fire, theft, etc. is very real. FBI statistics report that burglaries occur nearly every 15 seconds; in addition, in a "normal" year, there are typically 400,000+ home fires, 1,000 reported tornadoes, and $2 billion in flood damages.
Another reason to develop a home inventory is "stuff" ... Even if you aren't a pack rat, if you were to inventory your possessions, you'd quickly realize that you have a lot of stuff! This exercise may lead you to realize that your insurance (renters or homeowners) coverage is inadequate or may lead you to investigate other areas of your financial life that need to be explored.
HOW TO CREATE A HOME INVENTORY?
You'll be relieved that there are numerous tools available to assist you in the process of creating a home inventory. In addition to a general inventory, many resources do much more - i.e., provide a record keeping system to help you document what you have and a way to manage receipts and other cost information. What would you do if you were to wake up in the morning to an empty house or apartment? Would you be able to document your possessions? Just as critical, could you substantiate the costs for those items??
In addition to inventory resources that can be purchased, several free resources are available (with impressive capabilities!) - here are a few:
• Home Inventory Shareware and Freeware
• Know Your Stuff - Home Inventory
• My Stuff - Home Inventory Software
My suggestion - simply do something. Go ahead and start small; maybe start in one room or with your higher cost items. What I've learned over time is that 90% of personal finance is inertia... once momentum starts, it tends to continue rolling. Besides, Murphys Law suggests that if you take the time to create the documentation, you won't need it!
March 25, 2009
YOUR CREDIT -- WHAT ARE YOUR RIGHTS?
On a nearly daily basis, agencies (such as current and potential lenders, insurance companies, landlords, and employers) are viewing your credit report(s) when making decisions about you. The number of entities that rely on credit as a primary source of assessing "trust" are increasing on a regular basis. How familiar are you with your credit and your rights? The Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACTA) are the current legislation designed to protect you and your credit.
FAIR CREDIT REPORTING ACT.
Designed to promote accuracy, fairness, and privacy of information in the files of every consumer's credit report.
Major FCRA Provisions:
• You are entitled to a free report at any time if:
- You are unemployed and plan to seek employment within 60 days; Are currently on welfare; Are a fraud victim; Have been denied credit, employment, or insurance based on report information.
- You are entitled to one free report per year (from each bureau).
ALWAYS USE THE FREE GOV'T-AUTHORIZED SITE! http://annualcreditreport.com, NEVER freecreditreport.com.
• Outdated negative information may not be reported:
- 2 years for inquiries
- 7 years for “most” negative information
- 10 years for judgment liens and most bankruptcies
- 10 years [or more] for “positive” information
• Access to your file is limited (i.e., application considerations):
- Employment, Insurance, Credit, Landlord, etc.…
• You must be told if information in your file has been used against you:
- Denial of employment, credit, insurance
• You have a right to know what is in your file
• You have a right to dispute inaccurate information
• Inaccurate or unverifiable information must be corrected or deleted
• Forces identification of individuals inspecting your file
• Requires consumer consent for reports provided to employers
• You may seek damages if your FCRA rights have been violated
• You may limit the ‘pre-approved’ offers received for credit and insurance. You may opt out by calling toll free (1-888-5-OPTOUT). Additional information is available at the 'opt out' blog post. Maintaining the accuracy of your credit report is YOUR responsibility. The entire FCRA is available at: http://www.ftc.gov/os/statutes/031224fcra.pdf.
FAIR AND ACCURATE CREDIT TRANSACTIONS ACT.
Signed into law by Pres. Bush in December of 2003, the Fact Act [as it’s often called] was designed to ensure that all citizens are treated fairly when applying for credit. Specifically, the bill was designed to increase consumer protections against the growing problem of identity theft. FACTA also extends the current provisions (mentioned above) of the Fair Credit Reporting Act.
Major FACTA Provisions:
• Provide consumers with a free credit report every year (see above).
• Give consumers the right to see their credit scores (for a fee).
• Restrict access to consumers' sensitive health information.
• Allow consumers to place "fraud alerts" in their credit reports to prevent identity thieves from opening accounts in their names (includes special provisions to active duty military).
• Provide consumers with one-call-for-all protection by requiring credit bureaus to share consumer calls on identity theft, including requested fraud alert blocking.
• Allow consumers to block information from being given to a credit bureau and from being reported by a bureau if such information results from identity theft.
• Require creditors to take certain precautions before extending credit to consumers who have placed "fraud alerts" in their files.
• Ensure that consumers are notified if merchants are going to report negative information to the credit bureaus about them.
• Stop merchants from printing more than the last five digits of a payment card on an electronic receipt.
Consumer credit is such a vital part of 'consumer life' – the ability to have protections in place to help consumers safeguard the credit they have worked so hard to build and maintain is critical. Know Your Rights!
FAIR CREDIT REPORTING ACT.
Designed to promote accuracy, fairness, and privacy of information in the files of every consumer's credit report.
Major FCRA Provisions:
• You are entitled to a free report at any time if:
- You are unemployed and plan to seek employment within 60 days; Are currently on welfare; Are a fraud victim; Have been denied credit, employment, or insurance based on report information.
- You are entitled to one free report per year (from each bureau).
ALWAYS USE THE FREE GOV'T-AUTHORIZED SITE! http://annualcreditreport.com, NEVER freecreditreport.com.
• Outdated negative information may not be reported:
- 2 years for inquiries
- 7 years for “most” negative information
- 10 years for judgment liens and most bankruptcies
- 10 years [or more] for “positive” information
• Access to your file is limited (i.e., application considerations):
- Employment, Insurance, Credit, Landlord, etc.…
• You must be told if information in your file has been used against you:
- Denial of employment, credit, insurance
• You have a right to know what is in your file
• You have a right to dispute inaccurate information
• Inaccurate or unverifiable information must be corrected or deleted
• Forces identification of individuals inspecting your file
• Requires consumer consent for reports provided to employers
• You may seek damages if your FCRA rights have been violated
• You may limit the ‘pre-approved’ offers received for credit and insurance. You may opt out by calling toll free (1-888-5-OPTOUT). Additional information is available at the 'opt out' blog post. Maintaining the accuracy of your credit report is YOUR responsibility. The entire FCRA is available at: http://www.ftc.gov/os/statutes/031224fcra.pdf.
FAIR AND ACCURATE CREDIT TRANSACTIONS ACT.
Signed into law by Pres. Bush in December of 2003, the Fact Act [as it’s often called] was designed to ensure that all citizens are treated fairly when applying for credit. Specifically, the bill was designed to increase consumer protections against the growing problem of identity theft. FACTA also extends the current provisions (mentioned above) of the Fair Credit Reporting Act.
Major FACTA Provisions:
• Provide consumers with a free credit report every year (see above).
• Give consumers the right to see their credit scores (for a fee).
• Restrict access to consumers' sensitive health information.
• Allow consumers to place "fraud alerts" in their credit reports to prevent identity thieves from opening accounts in their names (includes special provisions to active duty military).
• Provide consumers with one-call-for-all protection by requiring credit bureaus to share consumer calls on identity theft, including requested fraud alert blocking.
• Allow consumers to block information from being given to a credit bureau and from being reported by a bureau if such information results from identity theft.
• Require creditors to take certain precautions before extending credit to consumers who have placed "fraud alerts" in their files.
• Ensure that consumers are notified if merchants are going to report negative information to the credit bureaus about them.
• Stop merchants from printing more than the last five digits of a payment card on an electronic receipt.
Consumer credit is such a vital part of 'consumer life' – the ability to have protections in place to help consumers safeguard the credit they have worked so hard to build and maintain is critical. Know Your Rights!
March 17, 2009
FAIR DEBT COLLECTION PRACTICES ACT
To follow up on last week's post regarding the statute of limitations on old debt, it seemed appropriate to write about the law governing the collection of debt - The Fair Debt Collection Practices Act (FDCPA).
The Federal Trade Commission receives more complaints about debt collectors than any other specific industry. The FDCPA establishes what collectors (the law applies to third party debt collectors, not 'in-house' collectors) can and cannot do, prohibiting certain methods of unfair and abusive debt collection practices.
* May not contact you at ‘inconvenient’ times (before 8am and after 9pm) as well as inconvenient places (i.e., employer - so long as they know your employer disapproves) unless you allow them.
* You can cease contact with a creditor by writing a “cease letter” – this will cease contact unless they are notifying you of a specific action (i.e., taking you to court).
* If you have an attorney, let them know. They are then required to contact you through the attorney.
* The debt collector may not contact third parties (families, friends, employer, etc.) except to attempt to locate you.
* Within 5 days of first contact, the collector must send a written notice indicating what is owed, name of creditor to whom you owe the money, and how to dispute the collection.
* Prohibited collection practices include: harassment (threats of violence or harm, publishing a list of non-paying consumers (except to credit bureaus), use obscenities, and repeatedly call on phone), false or misleading statements, hiding their identity, and any other “unfair” practices.
* Consumer has the right to file lawsuit against collector if FDCPA has been violated.
ADDITIONAL RESOURCES.
- Reporting FDCPA Violations (State - AG / Federal - FTC)
- Summary of Most Common 2008 FDCPA Violations
* If you have been a victim of a collector that has violated your FDCPA rights, you have the right to sue in a state or federal court within one year from the date the law was violated. The judge can require the collector to pay you for any damages (i.e., lost wages, medical bills/stress, counseling, etc.) as well as require the debt collector to pay you up to an additional $1,000 (even if you can’t prove that you suffered actual damages). You also can be reimbursed for your attorney’s fees and court costs.
NOTE. Even if a debt collector violates the FDCPA while attempting to collect a debt, a 'legitimate' debt will not go away!
The Federal Trade Commission receives more complaints about debt collectors than any other specific industry. The FDCPA establishes what collectors (the law applies to third party debt collectors, not 'in-house' collectors) can and cannot do, prohibiting certain methods of unfair and abusive debt collection practices.
* May not contact you at ‘inconvenient’ times (before 8am and after 9pm) as well as inconvenient places (i.e., employer - so long as they know your employer disapproves) unless you allow them.
* You can cease contact with a creditor by writing a “cease letter” – this will cease contact unless they are notifying you of a specific action (i.e., taking you to court).
* If you have an attorney, let them know. They are then required to contact you through the attorney.
* The debt collector may not contact third parties (families, friends, employer, etc.) except to attempt to locate you.
* Within 5 days of first contact, the collector must send a written notice indicating what is owed, name of creditor to whom you owe the money, and how to dispute the collection.
* Prohibited collection practices include: harassment (threats of violence or harm, publishing a list of non-paying consumers (except to credit bureaus), use obscenities, and repeatedly call on phone), false or misleading statements, hiding their identity, and any other “unfair” practices.
* Consumer has the right to file lawsuit against collector if FDCPA has been violated.
ADDITIONAL RESOURCES.
- Reporting FDCPA Violations (State - AG / Federal - FTC)
- Summary of Most Common 2008 FDCPA Violations
* If you have been a victim of a collector that has violated your FDCPA rights, you have the right to sue in a state or federal court within one year from the date the law was violated. The judge can require the collector to pay you for any damages (i.e., lost wages, medical bills/stress, counseling, etc.) as well as require the debt collector to pay you up to an additional $1,000 (even if you can’t prove that you suffered actual damages). You also can be reimbursed for your attorney’s fees and court costs.
NOTE. Even if a debt collector violates the FDCPA while attempting to collect a debt, a 'legitimate' debt will not go away!
March 11, 2009
STATUTE OF LIMITATIONS ON DEBT
A subject of great concern to many people with damaged credit is the issue of time limits (i.e., statute of limitations). In other words, how long will negative information impact me … The statute of limitations begins to run when you have done something contrary to the terms of your agreement for which you can be sued (typically a failure to pay the bill). There are two primary areas to cover to properly address this: (1) Debt collection-related issues and (2) Credit reporting-related issues. The statute of limitations gives creditors a certain period of time (3-6 years in most states – see chart) to sue you over a debt. The impact on your credit is an entirely different thing. Many people believe [incorrectly] that when the statute runs out that the item will be removed from one’s credit report. THIS IS NOT THE CASE. These are two separate issues…
COLLECTION OF DEBTS.
Collections. Creditors or third-party collection agencies can legally demand or request payment on a debt (via letters and phone calls) forever, as long as the debt remains unpaid. An “expired” debt (one which has passed its statute of limitations) doesn’t go away simply because time has passed. You can ask them to cease communication (see the Fair Debt Collection Practices Act) which should end the routine demands from that source [unless/until they file a lawsuit] – this remedy, however, only impacts collectors (not the original creditor).
Lawsuits. When a person is seriously delinquent (late) on a debt, there is a possibility of the creditor filing a lawsuit. The time limit for them to do so is referred to as the statute of limitations (SOL), a period set by individual states. This time period starts when you become delinquent. The relevant statute is the one for the state in which you resided at the time of the delinquency (if the creditor is based in another state, however, they can choose which state to file in – typically the one with the longer SOL). The expiration of the SOL covering a debt WILL NOT necessarily prevent a lawsuit from being filed, but it does provide you an absolute defense for having the suit dismissed. If you are sued and you do not document that the SOL has expired (or you simply don't show up!), you will lose the lawsuit and a judgment will be placed against you!
Judgments. If a lawsuit has already been filed and won by a creditor, there is separate SOL for enforcing (collecting) the judgment. Here is a chart with the judgment enforcement time limits for each state.
• There is no SOL or other time limit for lawsuits or other enforcement action on defaulted federal student loans.
CREDIT REPORTING.
The credit reporting time limit is the max amount of time credit bureaus can report delinquent debts (as well as other components of your financial history) on your credit report. For most types of accounts, it's seven years from the date of delinquency. Bankruptcies and tax liens are exceptions to this. The time limits are dictated by the Federal Fair Credit Reporting Act and do not influence the statute of limitations for collecting a debt.
Reporting of Collection Accounts. The date of delinquency IS NOT reset when an account is sold to a collection agency. The date of delinquency still refers to the original delinquency with the original creditor, regardless of when the collection agency began working the debt. Collection agencies may try, but they cannot legitimately "reset the clock."
THE RE-AGING MYTH…
Contrary to popular belief, making payments (including partial payments) on bad debts DOES NOT impact the time allowed for companies to list information on your credit report. The exception to this is tax liens and federal student loans. All other types of items should expire on a “known” schedule (based on the allowances outlined in the Fair Credit Reporting Act). The report time is based on the original dates, regardless of when or whether they are paid.
There historically has been a great deal of confusion over the starting point (exactly when the clock (typically 7 years) begins ticking), which often is misinterpreted as the date of the last activity on the account. This obviously would result in the possibility of "re-setting the clock" on an old, bad debt by making a payment on it. The issue was clarified in 1996 amendments to the Fair Credit Reporting Act (FCRA), which set a specific starting date linked to the original delinquency date (see FCRA Section 605(c)(1)).
NOTE. Credit cards are generally considered Open Accounts. Auto loans and other installment agreements are typically treated as Written Contracts. Remember that if there has already been a lawsuit resulting in a judgment, that judgment has a separate Statute Of Limitations, which you can find here. You will want to check with your own state (and/or consult with an attorney) to find out how they treat these issues specifically – some states will vary in their definitions. For example, a credit card is an open account in most states, but is a written contract in others …
COLLECTION OF DEBTS.
Collections. Creditors or third-party collection agencies can legally demand or request payment on a debt (via letters and phone calls) forever, as long as the debt remains unpaid. An “expired” debt (one which has passed its statute of limitations) doesn’t go away simply because time has passed. You can ask them to cease communication (see the Fair Debt Collection Practices Act) which should end the routine demands from that source [unless/until they file a lawsuit] – this remedy, however, only impacts collectors (not the original creditor).
Lawsuits. When a person is seriously delinquent (late) on a debt, there is a possibility of the creditor filing a lawsuit. The time limit for them to do so is referred to as the statute of limitations (SOL), a period set by individual states. This time period starts when you become delinquent. The relevant statute is the one for the state in which you resided at the time of the delinquency (if the creditor is based in another state, however, they can choose which state to file in – typically the one with the longer SOL). The expiration of the SOL covering a debt WILL NOT necessarily prevent a lawsuit from being filed, but it does provide you an absolute defense for having the suit dismissed. If you are sued and you do not document that the SOL has expired (or you simply don't show up!), you will lose the lawsuit and a judgment will be placed against you!
Judgments. If a lawsuit has already been filed and won by a creditor, there is separate SOL for enforcing (collecting) the judgment. Here is a chart with the judgment enforcement time limits for each state.
• There is no SOL or other time limit for lawsuits or other enforcement action on defaulted federal student loans.
CREDIT REPORTING.
The credit reporting time limit is the max amount of time credit bureaus can report delinquent debts (as well as other components of your financial history) on your credit report. For most types of accounts, it's seven years from the date of delinquency. Bankruptcies and tax liens are exceptions to this. The time limits are dictated by the Federal Fair Credit Reporting Act and do not influence the statute of limitations for collecting a debt.
Reporting of Collection Accounts. The date of delinquency IS NOT reset when an account is sold to a collection agency. The date of delinquency still refers to the original delinquency with the original creditor, regardless of when the collection agency began working the debt. Collection agencies may try, but they cannot legitimately "reset the clock."
THE RE-AGING MYTH…
Contrary to popular belief, making payments (including partial payments) on bad debts DOES NOT impact the time allowed for companies to list information on your credit report. The exception to this is tax liens and federal student loans. All other types of items should expire on a “known” schedule (based on the allowances outlined in the Fair Credit Reporting Act). The report time is based on the original dates, regardless of when or whether they are paid.
There historically has been a great deal of confusion over the starting point (exactly when the clock (typically 7 years) begins ticking), which often is misinterpreted as the date of the last activity on the account. This obviously would result in the possibility of "re-setting the clock" on an old, bad debt by making a payment on it. The issue was clarified in 1996 amendments to the Fair Credit Reporting Act (FCRA), which set a specific starting date linked to the original delinquency date (see FCRA Section 605(c)(1)).
NOTE. Credit cards are generally considered Open Accounts. Auto loans and other installment agreements are typically treated as Written Contracts. Remember that if there has already been a lawsuit resulting in a judgment, that judgment has a separate Statute Of Limitations, which you can find here. You will want to check with your own state (and/or consult with an attorney) to find out how they treat these issues specifically – some states will vary in their definitions. For example, a credit card is an open account in most states, but is a written contract in others …
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