Wisdom of Rich Dad

This past weekend I was dillegently reviewing the week’s transactions on Quicken, when I noticed two charges made to Newegg.com on my Chase Freedom Card. I’m a huge fan of Newegg and have purchased items from there before, but I was pretty sure that I didn’t buy anything from them last week.

Coincidentally, I was reseraching computer parts and wondered if I accidentally added stuff to my cart and then went through with the purchase. I checked my account on Newegg and confirmed that I hadn’t bought anything from them, at least not since February 2009.

I called Chase to talk to a customer service representative, and was transferred to their Disputes department. They asked if I called Newegg to ask why I was being charged. I told them that I hadn’t, but I should maybe do that. The person transferred me again to another guy, who offered to call Newegg on my behalf. He did and conferenced me into the call since Newegg needed my permission to get more information. I confirmed that I did not buy the items in question, and also learned that the fraudsters were able to input my home address to actually use the card but have the items shipped somewhere else.

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More than 2 million people have used credit cards to pay their mortgage or rent, an increase of almost 50% in a year, according to the housing and homelessness charity Shelter.

Research for Shelter conducted in August found that 6% of the 2,200 questioned had used credit cards to meet their housing costs in the previous 12 months. This compares to 4% in November 2009, and suggests a national figure of more than 2 million people who are making desperate last attempts to keep a roof over their heads.

With an increased threat of unemployment and rising interest rates, the charity warns that many people will be starting the new year with the threat of homelessness hanging over them once they have exhausted the limited and expensive credit available to them through cards.

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We’ve all heard warnings about getting too deeply into debt. It seems that lately every other commercial is about credit counseling or debt reduction. Telemarketers call and ask us if we’d like to eliminate high paying bills and before we answer, they’re extolling the virtues of second mortgages and refinancing our house.
 
This column would like to share the benefits as well as the methods of eliminating debt without risk. Without disguising what you owe as a single payment stretched over 30 years. What you’ll find here are some easy to follow tips regarding credit, debt, and the elimination of monthly payments from your life.
 
For example, how long would it take to pay for a set of furniture costing $2,000 if you charged it using a store credit card making just the minimum payments? Some of you would be shocked to learn that it would take over 30 years. Others would shrug it off as the cost of getting what you want. However, let me share what you probably wouldn’t know.
 
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NEW YORK (AP) — More than 8 million consumers stopped using credit cards over the past year. The decline stems from a combination of consumer choices and bank actions.

An analysis by credit reporting agency TransUnion found that use of general purpose credit cards bearing MasterCard or Visa logos, or issued by Discover or American Express, fell more than 11 percent in the third quarter, compared with the July to September period last year.

About 62 million people now have an active card, compared with 70 million a year ago.

The Chicago company found that consumers in the subprime category, or those with low credit ratings, were believed to be without cards mostly because they were shut down by banks after payments fell behind or balances were written off.

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The bankruptcy statistics in America are alarming. The past few decades have seen a dramatic rise in the number of people that are unable to pay off their debts, and Congress has recently addressed the issue with legislation that makes it harder to qualify for this status. Following is a list of the most common causes of bankruptcy in America today.

1. Medical Expenses

A study done at Harvard University indicates that this is the biggest cause of bankruptcy, representing 62% of all personal bankruptcies. One of the interesting caveats of this study shows that 78% of filers had some form of health insurance, thus bucking the myth that medical bills affect only the uninsured.

Rare or serious diseases or injuries can easily result in hundreds of thousands of dollars in medical bills – bills that can quickly wipe out savings and retirement accounts, college education funds and home equity. Once these have been exhausted, bankruptcy may be the only shelter left, regardless of whether the patient or his or her family was able to apply health coverage to a portion of the bill or not.

2. Job Loss

Whether due to layoff, termination or resignation, the loss of income from a job can be equally devastating. Some are lucky enough to receive severance packages, but many find pink slips on their desks or lockers with little or no prior notice. Not having an emergency fund to draw from only worsens this situation, and using credit cards to pay bills can be disastrous.

The loss of insurance coverage and the cost of COBRA insurance also drain the job seeker’s already limited resources. Those who are unable to find similar gainful employment for an extended period of time may not be able to recover from the lack of income in time to keep the creditors at bay.

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As soon as word got out, it didn’t take long for lawmakers to seize upon the highest credit card rate around — an offer being tested by First Premier Bank, a subprime card issuer, with a mind-boggling APR of 79.99 percent.

Moreover, much to the disdain of House Democrats pushing for a rate cap, the action by First Premier takes advantage of an apparently unforeseen loophole in credit card reform laws set to take full effect in February. 

The First Premier card normally offers a minimum of $256 in fees for the first year for a credit line of $250.  When the Credit CARD Act of 2009 becomes enforceable Feb. 22, the cap on such fees will be 25 percent of a card’s credit line.  In recently mailed notices for its pre-approved card, First Premier offers a fee matching that same limit – $75 in the first year for a credit line of $300.

Along with the fee, a 79.99 percent interest rate is offered.
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