The Best Recovery for a Financial Hangover – Part 1 of 4
The Best Recovery for a Financial Hangover
Resolutions Can Provide Rebound in 2010
For most Americans, the New Year is a time for resolutions. Resolving to become a better person is admirable. But as we emerge from the recession, from which some of us are still reeling, it's time for changes in financial habits that are permanent and have more staying power than the average beginning-of-the-year promises.
Before the recession, spending and consumption were the way of life in America. But during more recent, leaner times, we have been forced to face the damage done by unabashed spending and financing "the good life" with high-interest credit cards. And the damage remains.
“During this recession, all of us learned something about credit, debt and how and for what reason we spend money,” says National Endowment for Financial Education® (NEFE®) president and CEO, Ted Beck. “It would be a shame if we go back to our old ways of accumulating mountains of debt and saving little if any for our futures as things get better.”
As the economy continues to rebound in 2010, it may be tempting for Americans to ebb into the bad habits that led so many of them into financial trouble. That’s why in 2010, it’s important to evaluate your financial life and take steps to be better prepared should the economy once again fall flat.
First things first, 2010 will mean significant changes in the way credit cards are provided by banks and accessed by consumers.
The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 gives consumers more control over their relationships with credit card providers. As part of the CARD Act, back in August, credit card companies were required to provide consumers with 45 days’ notice before increasing rates or changing any significant terms of the credit agreement and to mail statements at least 21 days before payment is due.
These changes will help Americans to start paying off their average $8,000 in credit card debt, or $5,612 per card, according to the credit-reporting agency, TransUnion. However, more diligence on the behalf of consumers is necessary to get the most out of the legislative changes.
"[The CARD Act legislation] will level the playing field between the credit card companies and the consumer to have a real fair shot at planning and taking action on their personal finances,” says Brent Neiser, CFP®, and NEFE director of Strategic Programs and Alliances. “Consumers will have to be proactive though to get the full benefits of the CARD legislation. This means being diligent with reading and fully understanding all correspondence that is sent from your financial institution.”
On February 22, new rules will kick in including: a ban on retroactive rate increases on existing balances, except in cases of severe default; better disclosure in credit card terms so consumers can easily understand the contract and avoid unnecessary costs; and protections for college students and marketing done on campuses. For more information, visit here.
Next up: Changing the Way We Save