Looking At Your Money In 2010
When it comes to debt, combine a strong offense (grab a mortgage or refinance) with a powerhouse defense (beat back rising credit card rates and fees). Mortgage rates are at historic lows – 5% for 30-year fixed – and home buyers will be able to capitalize on a special tax credit until July. So early 2010 will be a great time to refinance a mortgage or apply for a new home loan. But credit card issuers will continue to turn the screws on customers in 2010, raising rates and hiking or inventing fees. Because the new credit card law taking effect in February will restrict lenders from punishing riskier customers many good-citizen cardholders will be forced to pay more in interest.
Here are some good strategies to consider in 2010:
- Refinance a mortgage
Low mortgage rates will make refinancing tempting as the year begins, especially for people who have an adjustable-rate mortgage resetting in 2010 or 2011. There are many who feel that rates will go higher in the latter part of 2010, so waiting too long may be costly. People who don’t expect to stay in their homes long enough to recoup the closing costs, however, should not refinance.
- Buy a house
For potential homeowners who’ve been sitting on the sidelines waiting for the “right” moment to make an offer, 2010 will be the time. Those who qualify for the $6500 home-buyer tax credit (current owner) or the $8000 credit (first-time buyers) should submit an offer before winter ends. Buyers need to be under contract by April 30th to get the tax break.
- Keep an eye on your credit score
A good credit score is more important than ever for anyone trying to get approved for loans or credit cards in 2010 and qualifying for the lowest rates. Lenders consider a credit score above 720 to be good. To learn an individual score, order the free credit reports from annualcreditreport.com and then spend the additional $8 charge to also receive “the magic number” (credit score).
- Charge every card you have – sensibly
In 2010, credit card companies will be looking for any excuse to lower credit limits, raise interest rates or nix people as customers. Banks are dealing with a serious increase in uncollectible accounts and defaults. Bank of America, for example, wrote off 76% more in uncollectible loans in 2009 than they did the previous year. Anyone not charging on a credit card and not carrying a balance is not making the company any money. Those customers are creating a target on their credit lines. So charge at least a little on every card most months.
- Fight higher rates and fees
No matter how good a customer a person is, he/she may get hit with higher rates or new fees in the coming year. If that happens, the person should call the card issuer and politely, but firmly, ask the representative to reverse the move. Longstanding customers on good terms with the company have a decent chance of getting satisfaction, especially if they threaten to walk. Many card issuers toughen up on a “batch basis” without paying much attention to the particular cardholder’s history. Sometimes they rely on customers not noticing any changes in their account statuses. A phone call can go a long way.
- Consider a Credit Union
Interest rates on credit cards from credit unions are about 20% lower than banks, according to a 2009 study by the Pew Charitable Trusts. One reason is that federally chartered credit unions can’t charge more than 18% (whereas banks can slap on sky-high rates). State chartered credit unions are also capped at about that rate, but state laws vary. A person must become a member of the credit union to apply for and obtain a credit card.
- Add a college-age child to the parents’ card account
Starting in February, anyone under the age of 21 will not be able to obtain a card without a parent or legal guardian as a co-signer unless he/she has proof of sufficient income to afford the monthly payments. This will protect some kids from predatory credit card practices and getting hooked on credit before they’re old enough to drink (which is a good thing!). That’s where you come in. Parents who have a responsible teen and want to help him/her build credit should add the child as an authorized user to one of their cards. But don’t cosign for plastic with a child. Cosigning means equal liability for both parties. A poorly managed account with a child can create real problems for parents and their own future credit scores.
Review these points and put into practice some of what is provided here, and 2010 could be a much brighter year as a result!