The series of bad news aren’t yet over for consumers with bad credit. The changes in the credit card lending laws would now allow a bank to charge as much as 80% APR on its subprime credit cards.

It may sound impossible but it is true. Recently one of the premier national banks has decided to issue cards with interest rate of 79.9%. This is how the credit card issuers are exploiting the gaps within the new credit card law.

The new law is particularly silent on how much the lender can charge. It hasn’t placed an upper limit on the interest rate that a lender can charge.

Subprime credit cards for poor credit score customers

These high rate credit cards are targeted to customers with poor credit score. The banks are justifying these extraordinary rates by stating that they are exposing themselves to greater amount of risk by lending to consumers with poor credit.

Why the rates are so high on subprime cards

These subprime cards are especially designed for people with no or bad credit history, who can’t otherwise qualify for a standard rate credit card. Initially the issuers used to place several charges on these cards to cover the risk of lending to these customers. These cards were, therefore, known as ‘fee harvesting’ cards. But since the new law has restricted the fees on a card to 25% of its limit, the lenders have increased the rates to mitigate the risk of lending to subprime customers.

According to the creditors, people with credit score of 640 and lower are twice more likely to default on loans than customers with higher scores.

When the average rate of interest on credit cards is around 12%, issuers are charging 50% and 80% rates on subprime credit cards. The First Premier Bank, a subprime credit card lender, is sending mailers to customers for credit cards with 59.9% and 79.9% annual interest rate to observe market reaction. According to them, the consumer should be aware of the cost of obtaining credit when applying for one.

Alternatives to high interest rate credit cards

With the growing number of people affected by the credit crunch, more and more would find themselves having hard time in securing a credit card with conventional lenders following stricter lending rules and subprime lenders charging enormous rates.

However, there are alternatives available to customers in the forms of debit cards and secured cards. Consumers, who want to improve their credit and also those who want to build credit history, are encouraged to stick to their debit cards as it would limit their spending and also help them to stay out of debt.

The situation of identity theft can be very distressing for the victim. Your identity has been stolen and used by a scammer and you’re now left with the job of clearing off the mess after him; your credit is shattered, you start receiving bills and often harassing calls from creditors.

Studies have shown that identity theft crimes are on rise. According to a recent survey,

• Around 10 million Americans were victim of identity theft in 2008.
• 1 in every 10 American consumers becomes a victim of identity theft of some form or the other.
• People at higher income bracket are twice more likely to fall prey to identity thieves.
• Most damages are done within the first week of stealing information.
• Identity theft crimes have cost the economy $45 billion in 2007.

However, identity theft can be prevented by adopting few simple techniques.

Guard your information: It is of utmost importance to protect your personal and sensitive information from others. Always assert the risk of disclosing sensitive information before giving it out. A bank employee might not ask you information like, your account details, PIN, social security number (SSN) and mother’s maiden name as he may already have this information on file. Be apprehensive of anyone who would request such information on phone.

Monitor your credit reports: Many Americans are now using credit monitoring services to keep watch on their personal information. The credit monitoring company would keep sending you daily/ weekly alerts on your credit report. This way you can immediately come to know about activities which you haven’t authorized and take steps accordingly.

You must also personally check all your financial reports periodically. You can receive your credit reports from Annualcreditreport.com.

Preserve your financial documents: You must maintain a file for your financial documents. It would help you in comparing past data with the present one. It’d also help you in identifying any wrong or false information in the report.

Carrying identity theft insurance: Carrying identity theft insurance can be another way to prevent losses arising from identity theft. Many may consider this as redundant but with the increase in the number of identity theft incidents, carrying identity theft insurance can be worthwhile.

Most of the victims of identity theft don’t come to know about it till it’s too late. Some of these crimes can go undetected for years. Though most of the banks and credit card companies now have adopted the ‘zero liability policy’, which frees the victim of identity theft from financial liabilities when his identity was used fraudulently if the incident is reported on time but you may become responsible for the entire amount if you fail to report it in a timely fashion. Moreover, you can be denied of credit, mortgage or even job till it is fixed.

It is time to take your identity seriously. Awareness is very important in fighting off these scammers. Hence, stay alert and stay protected!

Credit card accounts are extremely valuable in determining your financial performance. They contribute to a great extent in calculating your FICO score. Hence, you need to exercise caution before closing a credit card account.

Determining whether or not to close the account can be extremely difficult for the consumer since too many closed accounts may affect the credit score adversely. It can make prospective lenders reluctant to offer you a loan. When too many open accounts raise your debt-to-income ratio, too many closed accounts are also likely have the same effect on your score. Closed accounts reduce the volume of credit available to you and thus would push your debt-to-income ratio up.

When you start falling behind on your bills, in an impetus, closing all the CC accounts may seem the only right idea. But before you take the decision, find out below when closing a credit card account is a bad idea.

When you have only one card: Closing the account is particularly a bad idea when you have only one account. Even when the rate on the card keeps mounting, you shouldn’t consider closing it. In fact it is advised that the consumer should diversify his credit base and may maintain cards from different lenders.

For your safety, you may avoid transacting on all the cards at a time and use them alternatively.

Don’t cancel old accounts: Old accounts are given greater weight while computing credit score. Closing old accounts would shorten the length of your available credit history. Hence, you mustn’t consider closing an account that is sufficiently old.

Closing an account with balance: It is another bad credit move. Closing an account with balance may give a wrong idea to the credit bureaus. It would look like as if you have maxed out on the card. It is better to reduce the outstanding balance on the card to zero and then close it.

Credit card with balance left: If you still have available credit on a card, you might not want to close it. Not only would it cause you inconvenience but as it would reduce the amount of available credit to you, it’d be detrimental for your score.

When trying to pay off your debt, you should try to minimize the damage caused to your credit score. The above steps can help you in protecting your credit score when you fight off the debt.

Despite the best efforts from the Obama Government, more and more homeowners are embracing the idea of foreclosure over paying their mortgage. This action of the homeowners is called strategic foreclosure, i.e. the homeowners are walking away from their mortgages even when they can afford to pay. Their logic for doing so is simple- it suits their best financial interest.

Strategic foreclosure is an emerging trend and with its emergence the number of mortgage foreclosures has almost doubled since the housing bubble has burst. Now, one out of every four foreclosed property is a strategic foreclosure.

The overall decline in the property value has been determined as the main cause behind this consumer behavior. For many homeowners, the values of their homes have plummeted since the time of purchase, resulting in negative equity. But they’d still have to repay the entire mortgage amount. Given the situation, many are finding solution in foreclosing the property.

For example: a three bedroom house which would have cost around $500, 000 back in 2006 may fetch only $200k if you sell it now. Homeowners are finding it hard to continue paying the mortgage when there is no visible gain for them. By foreclosing the property the borrower can instantly save $300k along with a reduction in his monthly mortgage installment.

Foreclosure would ruin your credit report and you may get denied for another mortgage in the future because of it. But in spite of these negative aspects, more and more homeowners are deliberately falling behind their mortgage payments, allowing the lenders to foreclose on their homes.

According to the experts, neighbors can also influence the decision of foreclosing since it’s easier to bear the shame when there are many foreclosures in the neighborhood.

Whatever be the reason, the impact of foreclosures would be far reaching in the economy. Experts fear this trend to continue even in the coming days. If this continues unabated then the economy would soon fall into the spiral of declining home values. Major changes in the lending policies can only save the economy from a complete breakdown.

Insurance is an expensive yet necessary financial tool that we need to carry in the modern time. Insurance protects us from contingent financial losses from unforeseen events. Hence, insurance premium consumes a large portion of our budget. But there are ways that can help you in lowering the cost of coverage without sacrificing the protection and the money thus saved can be used in repaying debt.

This write up would discuss few such tips that can help you in reducing your insurance expenses successfully.

Reducing auto insurance costs

If you are driving, you must have auto insurance. Most of the states have mandated auto insurance for the drivers and so there are no ways you can avoid buying it. Now here is how you can reduce the premium you pay on the policy without compromising on the coverage.

• Check your policy for unnecessary coverage. Ask yourself whether you really need the windshield and towing coverage on your car.
• If you’re driving an old paid off car, you may forgo collision coverage on it. Check the car’s value in the blue book and decide if it would really worth after paying the premium and deductible.
• Ask the insurer about all sorts of discounts. Teen drivers are expensive but most insurers also offer discounts on teen drivers based on their grades. Also there are incentives of good drivers.
• High deductible lowers the premium. Hence, check out for higher deductible. But at the same time remember that you would need to come up with the deductible amount when needed.
• If you already have health insurance you might not need PIP and/or Medpay on your auto policy. But you must consult your state laws before dropping them.
• If your carrier is charging high, shop around for lower rates. Its competitive market and you may get rates that would suit your pocket.

Reducing life insurance costs

Life insurance expenses can also be reduced and the saving can be put towards debt repayment. Check out the following tips.

• Shopping around applies even for life insurance policies. So, get quotes from different life insurance carriers before buying.
• Start early since life insurance premium depends on your age. The older you are, higher would be your premium. Also your lifestyle and health would affect the premium rate. Quit smoking, stay in shape and follow a healthy lifestyle for better rates.
• Assess you life insurance need. Both underinsurance and overinsurance can upset your financial future. Cut costs on the riders that are redundant. Accidental death and dismemberment rider is one such example.
• Your mode of premium payment can also help you in reducing cost. Try to opt for annual mode of paying premium. This way you can cut the cost of paying administrative fees every time. Also, chose a longer tenure for the policy as it’d help you in lowering premium.

Getting out of debt means scrapping money from every possible source to pay down the debt burden. The steps taken towards reducing insurance expenses would allow one to save money which then can be put towards repaying debts.