You probably won’t hear it from your credit card company until the very last minute, but you better get ready for a shock. Your minimum monthly payment will double from 2% to 4%.
In practical terms, if you owe $10,000 in credit card debt and have been making the minimum payment of $200, you will soon pay $400 per month. In a broad effort to reduce consumer debt, the Office of the Comptroller of the Currency asked banks to increase minimum payments due. In general, this will be a good thing for most people.
A 2% minimum payment is barely enough to reduce one’s balance and can lead to incredibly long repayment terms. Make minimum payments of 2% and you can spend 40 years paying off a credit card. Increase the minimum payment to 4% and some of the balance disappears with each payment.
However, this increase will really hurt a lot people who have been struggling to make the 2% minimum payment.
A quick search of the news sites, MSNBC and CNN, yields the following numbers of individuals whose personal information has been stolen:
02/2003 - 8 million credit card account numbers stolen from Data Processors International
02/2005 - 30,000 US citizens have their names, social security number, credit reports stolen from ChoicPoint Inc.
03/2005 - 1.2 million federal employees’ social security numbers and account information is lost by Bank of America Corp.
03/2005 - 32,000 US citizens have their personal information access by intruders in databases of LexisNexis.
03/2005 - personal data of 600,000 current and former Time Warner Inc. employees is lost.
04/2005 - up to 200,000 Ameritrade customers’ account information is lost.
06/2005 - 3.9 million consumer lending customers’ personal information lost by UPS in transit to a credit bureau.
06/2005 - 40 million credit card account numbers stolen from CardSystems Solutions, Inc.
Add the numbers of affected people from these 8 events and you’ll find that 51,562,000 have had their personal information stolen or lost. Assuming no duplication of individuals in these breaches of privacy, that’s an incredible 17.4% of the US population whose personal information has come up missing! Stand with five of your friends and the odds are that one of you has been, is or will be a victim of identify theft based on only these 8 breaches listed above.
Prepare yourself for it. As time passes while Congress and Corporations refuse to act proactively about Identity Theft, the chance of becoming a victim will only increase.
On December 1, 2004, thanks to the Fair and Accurate Credit Transactions Act of 2003 [aka FACTA]), the major credit reporting agencies were required to provide consumers a free credit report once each 12 months. If you will take advantage of this provision of the Federal FACT Act, you’ll be able to stay on top of the information maintained by the credit reporting agencies. You can receive all three reports at the same time once a year or space them out so that every 4 months you get a free credit report. The major credit reporting agencies created AnnualCreditReport.com to make it easy for your to access your free credit reports as provided by the FACTA laws.
Face it, at some point in your life, your identity will be stolen. Corporate America is not going to work on your behalf. You have to protect yourself. Learn what to do before it happens and monitor your credit reports.
Remember TANSTAAFL from your college economics class? It’s an acronymn for “There ain’t no such thing as a free lunch” from Robert Heinlein’s 1966 novel, The Moon is a Harsh Mistress (which was also the title of an excellent Glen Campbell song). The acronym was also used by economist Milton Friedman and it means you can’t get something for nothing.
What does it mean in terms of software cracks? It means this: while the cracked software may be free, you’ll pay for it.
Surely you wonder why someone would crack software, pay for a web site to host it and then give it away. It doesn’t make sense. It takes time to crack an application. It costs money to distribute a cracked program. TANSTAAFL!
You’ll pay for the crack. It may be in the form of a trojan installed by the cracked software. Trojans are small pieces of code that let all the folks who distribute the cracked software access your computer without your knowledge. They may steal your financial data (think “identity theft”) and use your personal information to pretend to be you.
You’ll pay for the crack. The crack may install spyware on your computer or infect it with a virus.
At the same time mortgage interest rates for conventional loans are at historic lows, more than half of all mortgage loans are interest-only (IO) and/or adjustable rate mortgages (ARM). On the face of it, that doesn’t make a lot of sense.
Here’s what may be going on and if it is, it doesn’t bode well for the future.
An interest-only loan is one that allows a borrower to pay only the interest portion of the amortized loan for a period of time. However, IO loans are “interest only” for only an initial period of time. After that, the full monthly payment is due.
Interest-only loans encourage people to buy more house than they can afford with the hope that their income will increase before the fully payment of principal and interest is due. Others use IO loans to purchase a home with the intention of selling it before the full payment is due.
If one’s income increases to cover the full payment or one sells the home before the full payment is due, there’s probably little cause for concern. However, Interest-Only and adjustable rate mortgages still seem like risky gambles … especially when conventional rates are so low.
Another problem waiting in the future for those with interest-only mortgages is that many have an adjustable interest rate when the full payment begins. If interest rates rise during the next 3-5 years (as many believe will happen), those with IO loans will face a double-whammy: Full payments of principal and interest AND a rising interest rate. That will hurt!
While a conventional 30 year mortgage may not be as fun to brag about around the watercooler and doesn’t sound nearly as exciting as being able say, “I’m using some creative financing,” there’s a lot of wisdom in not buying more home than one can afford now AND in the future.
Takeaway Point: Don’t let an aggressive lender sweet talk you into creatively financing your home.
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