Outcry from bankers wins them a break, but fees will still be halved

By Connie Prater

Debit card swipe fees paid by merchants and retailers to large banks will be capped at 21 cents, according to rules finalized Wednesday by the Federal Reserve Board.

The decision on the fees, paid indirectly by consumers each time they swipe a debit card at a cash register, was a win for bankers and a loss for retailers and sent bank stock prices up slightly in afternoon trading. The caps — as originally proposed — would have been much worse for bankers, dropping the fee all the way from its current average of 44 cents down to 12 cents. The fight over the fee has pitted banks and credit unions against retailers in a political battle that has raged for months.

The Fed “has taken a significant step in reducing the harm that could have resulted from the proposed rule,” Frank Keating, president of the American Bankers Association trade group, said in a statement. Even so, he added, the cap will take 45 percent of the revenue banks now receive from swipe fees, which will force them to charge “higher fees for basic banking services.”

Retailers, however, were not pleased with what they called watered down reforms: “We are extremely disappointed that the Federal Reserve chose to be influenced by special interests,” Matthew Shay, president of the National Retail Federation, said in a statement.”While the rate will provide modest relief, it does not go far enough.”

Cap delayed until Oct. 1
The Fed also pushed back the start of the debit card limits to Oct. 1, 2011, giving banks and credit unions nearly three additional months to implement the new debit card rules. Under the Fed’s initial proposal, the debit card restrictions would have begun on July 21, 2011.

“I think this is the best available solution that implements the will of Congress,” Fed Chairman Ben Bernanke said before board members voted 4-1, with Elizabeth Duke dissenting, to approve the rules. In the massive Wall Street reform law that passed in 2010, Congress mandated that the Fed create rules to limit how much banks and payment card networks could charge merchants for the swipe fees, more formally called interchange fees.

The fees are borne by retailers each time customers swipe their debit cards to make purchases, and are passed along as part of the price consumers pay for goods and services. The fees are set by VISA and M/C and generate an estimated $1.8 billion a month in revenues for banks. Convenience store and gas station owners, grocers, large retailers and restaurant owners have long complained that the fees have skyrocketed in recent years and added to their cost of doing business.

Merchants currently pay interchange fees of about 1 to 2 percent of each transaction — or about 44 cents on the average purchase. The Fed’s original proposal called for caps of 7 cents to 12 cents per transactions. However, banks and credit unions complained that regulators had not taken all of the costs of processing debit card transactions into consideration when setting such low amounts. Their arguments were persuasive because, in addition to the higher 21-cent transaction fee, the Fed is also allowing banks to charge an additional 1 cent per transaction to cover costs for fraud prevention. Because of this and a few pennies for other adjustments, “A covered issuer could receive up to 24 cents for the average transaction,” Mark Manuszak, who heads research and statistics for the Fed, told board members.

Dennis Lane, a 7-Eleven franchise owner and spokesman for a national swipe fee reform group, said the Fed had weakened the swipe fee rules to the detriment of merchants like him. “It is beyond disappointing that after fighting for months to bring fairness and transparency to debit card swipe fees in order to give hard-working Americans a much-needed break, the Fed has given in to the pandering of Wall Street,” Lane said in a statement.

He added: “For a merchant like me, who sees high debit use for small ticket items, today’s rule will likely increase my interchange bill. This is not the relief that Congress intended when it passed swipe fee reform last year … Wall Street should expect that small business owners are going to continue to fight until we see that the relief that Congress intended — meaningful reform that will provide important savings to small businesses and consumers across the country that are struggling to make ends meet — is implemented once and for all.”

Small banks exempt
Fed board members expressed concerns that the final rules will do nothing to help small banks and credit unions. Banks with less than $10 billion in assets are exempt from the debit card swipe fee limits. That means those small banks can charge higher interchange fees for use of their cards. However, as Bernanke and others have pointed out, merchants may not accept cards that carry these higher swipe fees and small banks may not reap the benefits of an exemption.

The proposal had unleashed a flood of lobbyists on lawmakers, as financial institutions sought to have the restrictions rolled back and retailers and consumer groups rallied behind them. That lobbying effort culminated in a U.S. Senate vote June 8 that would have delayed the restrictions to allow a study of their impact on small banks and credit unions. The effort to delay the swipe fees failed by six votes.

Debbie Matz, chairman of the National Credit Union Administration, applauded the Fed for taking small financial institutions’ concerns into consideration.

“NCUA had strong concerns about the initial interchange fee proposal,” Matz said in a statement. “The final regulation adopted today, however, addresses concerns raised by NCUA during the rulemaking process … The higher interchange fee amounts included in today’s rule are a step in the right direction.”

How many times can a creditor sell my old debt to other businesses? I have an old debt from 1989 and different companies “buy” my old bill, so that it stays on my credit reports. It just goes on and on and on.

Negative credit information stays on a report for seven years. You would surely think a bill from 1989 would be long gone by now.

It’s not always that simple, however. When you say “from 1989,” is that when you took out the loan? Or is that when you made your last payment, or possibly when you talked to the creditor? It makes a difference.

Rod Griffin, Experian’s director of public education, says, “The original delinquency date delinquency date, or date of first delinquency, is the date from which the seven-year period is measured. The seven-year period is measured from the original delinquency date after which the account was never again current. That is what causes the confusion.”

People often ask if the seven-year period resets if they make a payment. It does not reset, per se. It’s a separate delinquency and date. Griffin explains: “It is possible for an account to have more than one original delinquency date” if the consumer restarted payments and then defaulted again. “For example, if a person is late this month, they would have an original delinquency date in June. If in July they made two payments, the account would become current. If they then missed a payment in August, they would have a second original delinquency date because the account was current between the two missed payments. The first late payment would be deleted seven years from June; the second would be deleted seven years from August.”

If it were shown in a grid it would look something like this (C=Current, L=Late):

If the account were never again brought current after the August missed payment, the account would eventually be charged off and sent to collections. Because it was never again current, seven years from the August missed payment, the original account and any subsequent collection would be deleted.

Neither interest charges nor your account being sold to another collection agency has anything to do with your delinquency date. “Again, there would likely be a new ‘date of last activity’ each month, but it has no bearing whatsoever on when negative information is deleted,” says Griffin. “Federal law requires that lenders report the original delinquency date of the account, and that collection agencies carry over that date so that any collection account can be deleted at the same time. A collection account is considered a continuation of the original debt.”

It is a violation of law for a collection agency to report old past-due amounts as if they are new again when the debts are sold. If an agency persists in reporting old debts with “updated” activity dates, you may have a legal case against them. Georg Finder, an independent credit evaluator, knows of plaintiffs who have been awarded damages in cases where collection agencies have willfully disregarded the rules and caused financial harm to the plaintiffs. He says, “It is very important that good records of the account charge-off, and of subsequent collection activity, be kept by the consumer to document the abuse and violation to her.”

Here’s what you should do with an old debt still showing up on your credit report:

1. Check your Credit report and make sure the old debt — not some more recent one — is actually showing on your report.

2. If it’s still being reported, send a letter to the collection agency, that currently holds the debt, and tell them to stop reporting this to the credit reporting agencies or you will protect your rights.

3. Send letters to all three credit reporting agencies and tell them why the debt should not be on your report.

4. If that does not correct the problem, seek legal help. Contact your bar association or a low-cost legal help organization.

Take care of your credit!

If you need assitance Premier Credit & Debt solutions offers a free consultation to reveiw your status.

www.pcm-credit.com or www.primodebt.com

Some financial truisms have a kernel of truth, others axioms should get the ax

By Dana Dratch

There are many money “truisms” that can keep you in the poorhouse.

You’ve probably heard them all, from anciefnt admonishments against any borrowing, to modern urban legends such as “you have to carry a balance to build credit.”

So while some money rules should be taken with a grain of salt, others just need to be thrown out with the trash.

“A lot of times there’s that kernel of truth in there,” says Bill Druliner, financial counselor and group manager for GreenPath Debt Solutions. “Or it’s true in some situations and not in all in others.”

Check out these five rules you might want to start breaking:

Rule 1: Pay off your mortgage as soon as you can.
“Sometimes it’s true, many times it’s not true,” says Wayne Bogosian, president of the PFE Group, and co-author of “The Complete Idiot’s Guide to 401(k) Plans.” “It all depends on the interest rate you’re paying.” If you have a relatively low interest rate around 3.5 percent, “after taxes, it’s closer to 2.5 or 2 percent,” he says. “That’s pretty cheap money.”

So if you were to take that “extra” money you’re thinking of putting toward the mortgage, and invest it into your 401(k), could you get better than the rate you’re paying on your home loan? “In most cases, yes,” says Bogosian. “Use the money to build wealth.”

Paying down the mortgage doesn’t lower your monthly payment,” he says. “It takes a highly liquid asset — cash — and converts it into a highly illiquid asset — home equity.”

“Once you bury your cash inside the equity in your house, the only way you can get it is to take out a home equity loan,” says Bogosian. “And the bank’s going to charge you to get at it.”

His advice: If you have maxed out your 401(k) contributions or need to build an emergency fund, put the extra cash into a Roth IRA. That way, you have an easy tax-efficient way to save for that rainy day, and if it goes unused, it goes toward building your wealth.

“Most people we’ve met don’t have enough cash in their emergency fund, anyway,” he says.

Rule 2: Don’t charge if you can pay cash.
“That’s not necessarily true, particularly if you can get a benefit from using your credit card,” says Bogosian. “If you are the person who is morally committed to not paying interest, go ahead and use that card for everything. You will get points or cash back or both. The caveat here: When that credit card bill comes due, you pay it.”

“You’ve got to know what you’re doing,” says Bogosian. “If you forget along the way, you’re in trouble.”

For most of us, that means the money is already in the bank. But if you’re in an iffy financial situation (waiting on a bonus check that might not come, in a shaky job situation), you might want to either use cash or spend only what you already have.

Related to the “never use cash” rule is the “pay off the balance every month” corollary. But there are a few lucky souls for whom this might not apply.

The exception is if you have one of those no-interest credit cards or loans, says Bogosian.

He recently took out a 12-month, no-interest loan for $5,000. For 11 1/2 months, Bogosian will leave the repayment cash in an interest-bearing account.

When it comes due, “I’ll write them a check for $5,000 and keep the interest,” he says.

Rule 3: College kids need to build credit to get a job.
Not necessarily. “It really depends on the individual,” says Doug Borkowski, director of Iowa State University’s Financial Counseling Clinic.

A couple of years ago, an Iowa State student got a credit card with an $8,200 limit to build credit. She applied for a second one with the same bank. “By the time I saw her four months later, she had $16,000 worth of credit card debt,” says Borkowski.

Another student he saw came in with $52,000 in credit card debt as a senior. The student’s biggest expense? Meals for friends.

A lot of personal financial textbooks insist students must get a credit card to build credit in order to get a job, because an increasing number of employers check your credit.

While building credit is important for other reasons, “As far as what I hear from employers, that’s not necessarily true.” No credit is vastly different from bad credit, he says. And while good credit’s a plus, “they would rather be dealing with someone who didn’t screw up and has baggage.”

One test Borkowski recommends: Look at how you’ve managed your debit card.

Do you overdraft? Do you run out of money before you run out of month? Spend on wants versus needs?

Bottom line: You have the same amount of money, whether you pay by cash or credit card. If you can’t manage a debit card, you’re probably not ready for a credit card.

Rule 4: There’s a set percentage you should spend on items, such as home, car, food, or entertainment.
Big fallacy, says Druliner. It’s “my personal pet peeve,” he says.

Guidelines and rules of thumb are fun watercooler conversation, but they wrongly assume that everyone is the same, with the identical tastes and similar lifestyles and money goals.

“It really depends what your goals are, and what’s important to you,” says Druliner.

“Those percentages, if you don’t take them as gospel truth, can be OK,” he says. “But you have to look at what’s important to you in your situation and what you value.”

In the same way that some people will fill their homes with ultra-modern furniture and bright colors, while others prefer classic pieces or a background of neutrals. Neither is “right” or “wrong.” But each expresses the person living there.

Some folks may decide to live with friends and split the rent so that they can devote their cash elsewhere. Others may live frugally, putting money toward homeownership or a trip abroad.

The healthy take-away from spending guidelines: It’s fine to be aware of the rules of thumb. That way, breaking away from those money norms is a conscious decision. You’re actively directing your money toward those things that are important to you, rather than passively spending until it’s mysteriously gone.

Rule 5: To build credit, you have to carry a balance.
Totally wrong! But this is one urban legend that Durliner hears frequently, especially from people who are getting secured cards to build or rebuild their credit.

Getting a secured card can help you establish or re-establish credit by helping you compile a record of good behavior: using the card, getting bills and paying them on time. But you shouldn’t carry a balance if your aim is to build good credit.

Carrying a balance is bad for your credit rating. Instead, he recommends, use the card for small purchases “and pay it in full every month.”

“You don’t have to pay interest to rebuild your credit,” Durliner says.

First, if you’re rebuilding bad credit, make sure you’re addressing the mistakes that damaged your credit in the first place..

Then, if you want a secured card, shop the fees carefully before you apply, says Durliner. Often, the best deals are with a local bank or credit union. But you’ll usually have to approach them. Conversely, the companies that are soliciting you uninvited with flashy offers may be more expensive once you do the math, he says.

Says Durliner, “Sometimes the best deal is the one that’s not as noisy and in-your-face.”

Here are the facts behind three common myths:

Myth 1: When we marry, our credit histories merge.
There is no joint credit report or credit score. Your credit reports and scores remain separate, even after you change your last name.

Myth 2: I’ll be affected by his bad credit, or vice versa.
Marriage, in itself, can’t impact your credit. But, if you co-sign for your spouse, or if you open a joint account like a mortgage, credit card, or loan, it shows up on both your credit reports. His bad credit may impact your chance for approval and lower interest rates (and vice versa). More important, bad credit could signal harmful habits. Also, if your mate maxes out or defaults on a joint account, it can damage both of your credit scores and you’d both held responsible for any debts incurred.

Myth 3: When we marry, we’ll share all accounts.
Getting married doesn’t automatically merge any of your financial accounts; that decision is up to you and your spouse. But be smart and discuss each other’s credit history and financial position before tying the knot. Knowing the truth helps prepare you both to tackle any future financial strain.

Experts identify five mindsets that hinder your progress toward a debt-free life

By Allie Johnson

Turning your finances around is never easy — but mental money traps can keep you mired in money woes.

Whether you’re trying to get out of debt, improve your credit score or build your savings, experts highlight five common money mindsets that can hinder your progress.

Mental money trap No. 1 — All-or-nothing thinking

“All-or-nothing thinking is an absolute — either I do everything perfectly, or I’m just going to give up,” says Mary Gresham, an Atlanta-based psychologist who specializes in financial issues. All-or-nothing thinking is especially common when it comes to creating — and sticking to — a spending plan, according to Gresham. “People can get pretty perfectionistic about this,” Gresham says.

How to free yourself from the trap: To break away from all-or-nothing thinking, Gresham recommends thinking of your goal as a target to aim for — if you get close, or even if you miss by a lot, you’re better off than if you hadn’t tried at all.

Consider this spending plan example. “Say you plan to spend $100 each month on clothes, but then you go and spend $200,” Gresham says. “Instead of throwing out your entire plan, just say, ‘I’ll work on hitting that target over time,’ or ‘I’ll work on hitting my grocery target this month.’”

Mental money trap No. 2 — Unexamined spending

If you’re trying to fix your finances, you’ve probably looked at your spending — but have you really looked at it? Many people spend a lot on things that don’t really add much to their lives, says Dan Ariely, professor of psychology and behavioral economics at Duke University and author of “Predictably Irrational: the Hidden Forces That Shape Our Decisions.”

That’s partly because people tend to compare similar things — such as an expensive bottle of wine to cheaper bottle of wine — rather than coming up with other items they could buy for the cost of a bottle of wine, Ariely says. Also, people tend to have trouble predicting how doing without things will actually make them feel.

How to free yourself from the trap: Scrutinize your spending. Ariely recommends using dividing cash in envelopes designated for specific expenses (groceries, gas, entertainment, etc.) to make spending feel more concrete. He also suggests that before making a purchase, you ask yourself what else you could buy with the same amount of money. And, finally, test out your options. “People should experiment — try different things and see what works,” Ariely says. “Cut your cable bill and see how you feel for the next few months. Switch from an expensive smart phone to a cheap phone and see how that works for you,” Ariely says.

Mental money trap No. 3 — Fixating on the future

Do you dream of the day you’ll get your life back — after you fix all your problems with money? Money issues can seem overwhelming if you get too far ahead of yourself, according to Gresham. “Some people start thinking too far into the future, and they end up thinking a goal is too hard, too big or will take too long,” Gresham says. “This is particularly true with credit card debt — you might start thinking, ‘It will take me five years to pay this off.’”

How to free yourself from the trap: “You want to get a plan, stay in the present and work your plan every day,” Gresham says. Also, don’t wait for tomorrow to start enjoying life, says Larry Winget, author of “You’re Broke Because You Want to Be: How to Stop Getting By and Start Getting Ahead.” Winget says: “Still have a life — still enjoy what you have even if what you have is not very much. Figure out how to enjoy where you are.”

Mental money trap No. 4 — Avoiding money

Do you shove unopened bills in a drawer, put off looking at your bank statements and never get around to asking for a raise? If so, you might be practicing money avoidance — a money belief pattern that was found, in a study published this year in the Journal of Financial Therapy, to be associated with lower income and net worth. “It’s sort of a combination of a couple of attitudes — one that money is bad, two that rich people are evil, greedy, shallow, the list goes on,” says study researcher Brad Klontz, who is a psychologist and co-author of the book “Mind Over Money.”

Money avoiders, according to Klontz, tend to sabotage themselves and believe they don’t deserve money. Klontz says: “The irony is that people who hold this belief will often tell you they wish they had more money.”

How to free yourself from the trap: Klontz recommends taking a look at your past and even your family history to find experiences that might have led to the unconscious belief that money is bad. “Become aware of your beliefs — and just that awareness applied to your current situation can help you,” Klontz says.

Mental money trap No. 5 — Punishing yourself

If you’ve gone through your budget and slashed every latte and lunch out, you might be using money to punish yourself, says Amanda Clayman, a New York-based psychotherapist who specializes in financial wellness.

“Some people automatically eliminate everything they classify as frivolous — but that I would classify as self-care — and they say, ‘I’m not going to eat in any more restaurants. I’m not going to go on any more vacations,’” Clayman says.

How to free yourself from the trap: To approach money less punitively, Clayman says she pushes her clients to get past shame over money problems, and use money in ways that make them feel good.

On a practical level, that might mean finding ways to trim monthly spending on big-ticket items such as housing and car payments. Clayman says: “These higher fixed costs can actually be a bigger problem for a budget than the small things we think of as treating ourselves.”

In order to extricate yourself from any of these mental money traps, it’s important to try to change your thinking — and even seek help if necessary, experts say. Klontz says you need to be able to tweak ways of thinking that are keeping you from shaping up your finances. “The key to money health is having flexibility in your thinking,” he says.

President Obama signed Credit CARD Act into law May 22, 2009

By Connie Prater

Credit card interest rates have held steady, penalties are less costly for consumers and annual fees and other charges have changed little over the past year, according to a study released Tuesday by the Pew Safe Credit Cards Project.

“The products are safer and more transparent than they were before,” says Nick Bourke, director of the nonprofit project that has tracked credit card terms, including interest rates and fees, since 2008. Pew’s report was released just ahead of the two-year anniversary of landmark credit card reforms signed into law  May 22, 2009, by President Obama. Bourke says Pew researchers want to know how the Credit Card Act of 2009 has impacted consumers and if it is doing what lawmakers intended.

Among other things, the law eliminated surprise interest rate hikes,capped late fees and banned billing and payment practices deemed unfair and deceptive by federal regulators and consumer groups. Although the law was enacted nearly two years ago, the bulk of the major consumer protections did not take effect until Feb. 22, 2010.

300 cards examined
Pew examined terms and fees for more than 300 credit cards issued by the top 12 banks and top 12 credit unions. Together, these lenders account for more than 90 percent of all outstanding credit card balances. The data is current as of January 2011 and compares that data to rates and terms advertised in credit card solicitations from March 2010. The study compared:

• Interest rates. The median advertised interest rates on bank-issued credit cards was unchanged between 2010 and 2011: 12.99 percent to 20.99 percent, depending on applicants’ creditworthiness. Rates for bank cash advances and penalty interest rates were also unchanged. Cards issued by credit unions, however, showed a slight increase in rates. The lowest advertised rates for those cards were 9.99 percent and the highest rates were 17 percent. Cash advance rates on credit union cards declined over the year.
• Penalty charges. In 2010, the Federal Reserve capped credit card late fees at $25 for occasionally late payments and $35 for repeat offenders. Because of this restriction, penalty fees have dropped from a median of $39 previously to a range of $25 to $35 for banks and just $25 for credit unions.Late Fees continue to be nearly universal, charged on more than 95 percent of the cards reviewed.
• Over-limit fees. over limit fees, charged when customers exceed their credit limits, have dropped dramatically in the past two years. The study found only 11 percent of banks still charge over-limit fees — down from 23 percent in 2010 and more than 80 percent in 2009. According to Pew, the largest credit unions no longer charge over-limit fees. The CARD Act requires lenders to get cardholders’ permission — called opting in — for over-limit fees. As a result, many lenders have abandoned the fee altogether.
• Annual fees. The percentage of bank-issued credit cards with annual fees rose slightly between 2010 and 2011, from 14 percent to 21 percent. Banks charged a median of $59 a year, which was unchanged from the previous year. Credit union cards saw no change in the prevalence of annual fees (which was 14 percent both years) or the median amount, $25. The report notes that 40 percent of all credit cards reviewed had promotions that waived the annual fee for the first year.

Bourke said that while some industry observers and banking lobbyists had predicted that the law would cause everyone’s interest rates to spike and reinstate annual fees on accounts, those outcomes have not happened. “Only one in five credit cards include an annual fee, and the size of that fee has barely moved,” Bourke notes. Advertised interest rates went up in the months following enactment of the law as banks and credit unions tried to assess the impact the regulations would have on their business models. However, rates have held steady in the past year. As for those dire predictions, “So far, that has not panned out,” Bourke says.

“What we are concluding from this is the credit card market really has stabilized,” Bourke says. ”The Credit CARD Act was very effective at changing the practices that it targeted while not shutting the credit card market down or causing serious changes.”

The Pew results mirror those of other recent studies showing more transparent, consumer-friendly credit cards since the law took effect. The only official government assessment of the law’s impact was released in February 2011 by the Consumer Financial Protection Bureau. That report noted that credit card terms had improved, and the new law had helped consumers, but confusion over complex terms still lingered. In its annual report on consumer complaints, the Federal Trade Commission reported that complaints about credit cards dropped 26 percent better 2009 and 2010.

Knowing what to pay off and how much to save can be harder than you think

By Tamara E. Holmes

Few people would turn down a financial windfall, whether via an inheritance, lottery winnings or an unexpected bonus. But while a cash infusion may be welcome, it can also raise questions about the most effective ways to use it, particularly if you have credit card debt to pay off and other financial goals to reach.

“When people get a windfall, usually there are multiple demands for that money,” says Susan Bradley, author of “Sudden Money: Managing a Financial Windfall.” While the size of the inheritance determines how many goals you can satisfy, the following steps can help you ensure that your money goes the furthest, whether you’ve received an additional $10,000, $50,000 or $100,000.

Step No. 1: Take a pause

An unexpected cash infusion “can feel like it’s infinite and will always be there,” Bradley says. In fact, many people commit to spending three or four times the amount because they think they have more money than they actually do, Bradley says. To avoid spending impulsively, take some time out before making any financial decisions. ”Usually people don’t see the full range of what’s possible at the very beginning of a windfall event,” says Bradley.

If the amount seems large to you, hire a financial planner to help you prioritize your goals and a certified public accountant to help you handle the tax implications, suggests Zaneilia A. Harris, president of Harris and Harris Wealth Management Group in Upper Marlboro, Md. Also, create a prioritized list of your financial concerns “because depending upon how much money you received, there might not be enough money to solve all your problems,” Harris says.

You’ll know you’re ready to make financial decisions when you stop changing your mind about whether you’ll invest the money, go on a cruise or start a business, Bradley says. “If you’re going back and forth, it just means you’re not ready yet.”

Step No. 2: Emergencies first

While there are likely multiple ways you can improve your financial situation, emergency situations take precedence. For example, “if you don’t have a dime in savings and you’re behind on the mortgage, take care of that first,” says Mike LeClear, vice president of Consumer Credit Counseling Service of Northeastern Indiana.

Lottery winner Richard Lustig poured his entire windfall into financial emergencies that had just cropped up when he won $10,000 18 years ago. The seven-time lottery winner, who wrote, “Learn How to Increase Your Chances of Winning the Lottery,” had been recently saddled with a leaky roof and medical bills after his son was born. “I didn’t have to think twice. All my money went to the hospital bills and the roof,” he says.

Step No. 3: Cash is king

Once emergencies are handled, your strategy will differ based on the amount of the windfall. While clearing up credit card debt is definitely a smart move, “if it’s going to take all of that windfall to pay it off, I wouldn’t recommend that,” says LeClear. You can’t get out of debt if you don’t save money because inevitably the car will break down or some other unexpected expense will have you reaching for the cards again, LeClear says.

Instead, take a portion of the windfall to put toward an emergency fund. While many financial experts suggest having three to six months of savings, if you’ve amassed a lot of credit card debt, LeClear suggests making that about one month of savings before focusing on those bills.

Step No. 4: Prioritize debt

Credit card debt and other loans that are weighing you down should be your next priority. Not only should you first consider credit cards that have the highest interest rates, but you should also look to eliminate loans that have the greatest impact on your monthly cash flow, Harris says.

For example, a card with a high balance likely carries a high minimum payment. By paying that debt off, you free up the largest amount of money to go toward other financial goals.

Step No. 5: Safeguard the future

Once your emergency savings and monthly cashflow issues are addressed, it’s time to look to the future. “This is when you focus on your long-term objectives,” such as saving for retirement or taking care of a child’s education, says Harris. This is also the time when you consider financial gifts and charitable donations. Designate an amount you can afford, and be willing to say ”no” to requests that exceed what’s allotted. “You create a giving plan so you can make the money go the furthest,” Bradley says.

Step No. 6: Do something fun

While it’s important to further your financial goals, once you’ve addressed your top financial priorities, take a portion of the money and enjoy yourself. Doing so makes it less likely that you’ll splurge impulsively or squander all of the money, LeClear says. When Lustig scored a $842,000 lottery win, he paid off all of his credit card debt and loans, invested a little — and then bought a Harley-Davidson. “When you get that kind of money, you also have to have fun,” he says

Either the primary cardholder or the person ‘piggybacking’ can ask to be removed

By Connie Prater

Have you been piggybacking on another person’s credit card account and want to stop riding their credit coattails?

Being an authorized user– also known as “piggybacking” — on a credit card account means the primary account holder gives you permission to use his or her account to shop or make purchases. That primary account holder is responsible for repaying any debts you may incur with the card. (Note: This is not the same as a joint account or co-signer, where both users are jointly responsible for repaying the credit card debt.)

Besides spending privileges, the biggest advantage to piggybacking is that it can give the authorized user’s credit history and credit score an immediate boost. That’s because once you become an authorized user on an account, the primary account holder’s credit history on that specific card can appear on your credit report. The credit history will only collect data for you based on the date you became an authorized user on the account.

A person with no credit history of their own or a low credit score can benefit from this arrangement. Parents often add their children as authorized users to give them a head start in achieving good credit. However, there’s also a risk: The primary account holder’s payment history may nosedive or contain negative information. In that instance, the piggybacker’s credit score could be hurt, and the authorized user may want to be removed from the account. Once removed, the credit history of the primary account holder — either negative or positive — will eventually disappear from the authorized user’s credit reports.

The procedures vary slightly among major card issuers, but all allow either the primary cardholder or the authorized user to request removal.

Here’s a quick reference list to help steer you through the process of removing an authorized user from a credit card account:

All the statements listed below are common financial myths.  Accepting any of them as fact could lead to costly financial missteps…

See how many of these common beliefs you already recognize as flawed and which ones you have yet to unmask.

As you may discover, what we’ve been taught by mainstream money experts and well-intentioned friends and family isn’t always accurate.

The Myths:

1. Over time,the stock market has consistentlty proven the best and most reliable invest ment vechile for the vast majority of Americans
2. Investors need to accept risk and volatility in order to generate meaningful profits
3. Home ownership and appreciation is a reliable vehicle for protecting and growing your wealth
4. 401(k)s make effective investment vehicles, if only because your employer matches your own contributions
5. Your 401(k) plan administrator must be a licensed, professionally trained and carefully screened financial expert
6. the fees you pay for your IRA, 401K and other retirement funds have only a trivial impact on your ultimate returns
7. You will not require as much income when you retire as you need now, especially since you’ll qualify for a lower tax bracket
8. It is never possible to know with any certainty the value of your retirement account at intervals down the road, because market fluctuations are unpredictable
9. Wise retirement planners recommend you aim to make your retirement income last to age of the average American life expectancy, currently 77.9 years
10. Always defer taxes as far into the future as possible, especially when you wish to accumulate a larger retirement nest egg
11. People of modest income can’t possibly set aside $1 million or more for their retirement
12. Before you can begin saving for the future. first you have to dig yourself out of debt,
    
13. paying cash is the ideal methoud of purchasing big ticket items such as cars and vacations
14. Effective savings and investing strategies are too complex for amateurs.  Only professionally trained money managers consistently succeed
15. If you follow the advice of mainstream financial experts and don’t stray, your nest egg will be safe and grow large over time,
    
16. to receive quality, personalized attention from a highly trained financial advisor you have to already be wealthy, or close to it

©2011 Hayward-Yellen 100 Ltd Partnership