American automotive credit

When the situation occurs where the government has to inject cash into some of the world’s biggest economy source institutions are begging for a charity of billions, is there a real opportunity for regular working citizens to get a possibility to obtain a new vehicle in lease? I guess not.

The answer to this question can be surprising to you as that matter is causing trouble to the car market at the moment.

It is fair to say that the big US car moguls are having problems with cash. With automobile sales reducing with 27 percent within just a month, the situation is critical. It was officially recognized as the most significant percentage fall in history. But it is not all. America is at the lowest unit sales level at the moment in 15 years. There are lenders that are resisting inventory financing, forcing a few of the nation’s biggest partnership deal chains to turn their backs, not being able to afford the automobile stock in lots they have anymore.
News can be disappointing as well. Think about outer-space sums for gas and job security and it could not be clearer that the new shiny sports car you have been craving for so long is not momentarily possible.

No matter what is going on in the world car dealers will still try to win you out. Ford, Chrysler, and General Motors are reducing their financing deal to zero percent at the moment and GM is giving away its 10 percent employee discount to outside customers. Even Toyota, the Japanese maker that doesn’t do sales incentives too often, is not getting hold of customers and therefore is extending zero auto loan percentage to their potential buyers.

To win the customer they are all trying to come out with best possible, even when they can’t really afford them. Nevertheless the financial institution keeps the last word in the story. It was much easier to receive a loan for the automobile.

The fact that those low-interest loans exist proves that you can still hope for an automobile loan if you need it. You just need to be aware of the down payment, more significant and harsh punishments, and more tough credit deal requirements. It is so because of the past four year risky bank loans that causes the system the state it is in right now. Today many of them are turning into nightmares for the banks and many of the vehicles that happen to be repossessed.

There isn’t anything that won’t be over. When the credit deal crisis is gone, it will be less problematic to get car loans under a good deal as before, be it from a dealer through a favorite bank of yours. If you are in urge to get a new car before then, think well and take notice of your credit history. It takes a desperate dealer or an automaker with some huge financial problems to get a good deal today. The authorities are trying to keep Detroit prosperous, and local authorities reportedly have already invested billions for new more fuel-efficient car models.

Author: Robert M Carter
Article Source: EzineArticles.com
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The nation’s debt is said to be the handiwork of the president, the political parties and the politicians alike. The frightening statistics throw a pointer in this direction. But are they or the Wall Street only responsible for the mess that we are in? I guess, not. Instead of the blame game, we need to analyze the core problem and seek the appropriate solutions.

After the deregulation and elimination of the state usury ceiling by the Congress during 1980-82, Credit Card debt is in perpetual rise in America. This steady rise can be observed since the 1990s. If we look at the credit card debt statistics, you’ll be surprised to find the results:

$ 238 Billion in 1990

$ 445 Billion in 1995

$ 663 Billion in 2000

$ 832 Billion in 2005 and will be over a Trillion by 2010

$1,091,000,000 Trillion projection by 2010 (US Census Bureau site)

Ah! Well! Now you can readily blame the American consumer! They are found to spend a lot through their credit cards. It is rather a fact that a certain section of the society does spend exorbitantly, maybe to cure their depression. But the problem is much deeper than that.

Here is an instance of one of the real reasons which is not often mentioned.

A professor of Law at Harvard University, Elizabeth Warren presented an amazing fact in one of her researches. She says that the life-style of the Americans has undergone a change since the 1970s. The average American today is not spending more on clothing (which is actually 32% less compared to the expenditure during the 70s), food (here it is less by 18%), appliances (it’s less by 52%) and cars (less by 24% per vehicle). These statistics are contrary to the popular claims. Rather, the expenditure is incurred more on the essentials like house (76% more, this is taking into account the inflation rate for the same size home that would have cost during the 70s), healthcare expenditure has risen by 174%, car by 54%(we need more than one), childcare by 100% and taxes by 25%.

So, what does this finding actually say? Elizabeth Warren summarizes in her research that the fixed expenses of the average American has actually increased from half to ¾ of their respective earnings.

Therefore, where can we allow letting the axe fall in order to curtail our expenses? Is it childcare, car, healthcare or taxes? We can surely shift into a smaller house and lead a lifestyle which is less comfortable in comparison to our parents but may be not the other essentials. So, naturally people started to use their credit cards in order to pay for these essential expenses. According to research findings, majority of the families who were found to end up in bankruptcy had used their credit cards to meet the expenditure for gas and food.

This astounding co-relation between the staggering credit card debt and the denomination in the standard of American living during the past two decades ought to move us to seek people solutions.

Firstly, we need to control our finances and the credit card companies.

If you happen to pay off your credit regularly, you should note that according to the present market situation, you can be also in a great danger. As the banks are cutting on their limits, your credit scores are getting reduced in the manner akin to a snowball effect. According to the Universal Default Law, as your credit score goes down, the other credit card companies are further lowering your limits and your interest is increasing as a result. I had a client who lost 120 point rather rapidly because he had lost some old unused credit cards. He was a regular payer with the best financial spreadsheet! It took me a couple of month’s hard work to get his credit back in shape. So, even you could be in his position.

If you belong to the 25% community who happen to keep a credit card balance, you need to be proactive.

1. Know your interest rate.64% of the Americans belonging to the age group 18-24 are unaware of the interest rates. The adults too are much the same. You need to know your rate and negotiate for a better rate with your bank. Even if they refuse, you need to repeat your request.

If you find out your interest rate is high, you need to find out the state where your credit card company is based. The usury law of the state governs the credit card operations; you can easily find the details online.

2. Find Credit Unions in your state. If you find that they do not belong to the usury law state, seek out a bank or a credit union in your state.

If your state has an acceptable usury rate get a credit card with a local bank or credit union. If you are in one of those which have no caps like South Dakota, New Hampshire, etc you need to acquire a personal loan for a fixed interest.

Basically, ‘We Americans’ need to change and be vigilant. If the entire nation moves our money to a fixed loan we will be able to pay our obligations back and spend our hard earned money not on 33% interest and fees, but on the essentials where we need to spend it. Big banks do not care about us, they care about their profits. You need to be prepared to defend your finances. Educate yourself, read about it in my book or others, just learn how to defend yourself from the next Tsunami (as Mr. Greenspan said).

Author: Monika Nagy
Article Source: EzineArticles.com
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Importing a truck from Japan surely should be one thing that you should staying in America. And with a good reason! People in Japan use these trucks made out of a new technology and they use it by paying less money. There are some people who have imported trucks from this country and thus you would not be alone for sure.

You would find that importing vehicles from Japan does attract a fair share of taxes, but in the end, the deal works far cheaper if you decide to buy a car made in the United States of America. This is your best opportunity to buy a car with cutting edge high quality technology.

The Japanese are known for their speed, and this you would find translating to their manufacturing practices. Not only do they manufacture cars in double quick time, they also add a lot of horsepower to their cars. This makes these cars way different from their US counterparts. So, if you are going shopping for a car, you know what you should be buying.

Buy a car in Japan and import it from Japan – This should be the simple two-step strategy if you wish to save on some money. Sure, you could also look at buying Japanese import cars in the USA but would you want to pay 20-30 % more than what you would have done had you imported the cars from Japan? Surely, you would not. Thus, buy the car from Japan and import it. Add some credits to it, and the car is anyways for top billing in the local market.

Importing cars from Japan was not so popular until a few years ago. It is only the onset of globalization that you find a lot of people importing cars from this country. In importing cars from Japan, you would also need to think of the lowest importing cost in addition to the vehicle cost and the registration costs. Knowing these costs that you would find in many websites, you would surely be in a position to make an informed decision.

Learn how to make freight arrangements for your car once you’ve found the right vehicle. Obviously, this is the piece you just cannot stay without. Thinking in this direction, you would be able to save some money in looking for freight arrangements. In arranging your cars from this country, you would find that you have saved some money for sure.

Surely, you cannot resist the deal of buying and importing cars from Japan. After all, they give you high horsepower in their cars at low prices. With that being said, not many people are put up with the idea of looking for arranging the freight arrangements to get their car to the US. In this case, you could choose the services of middlemen who are specialized in dealing with this kind of job.

Author: Jimmy Warren
Article Source: EzineArticles.com
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It’s been said, that real hatred is only possible when it is derived from something you love; and America loves credit cards. The problem is, credit cards are simply a one night stand that fulfilled our lustful desire during a moment of weakness, and now we’re stuck with them. To quote the movie Wedding Crashers, they’re a “Stage Five Clinger”. Now we are faced with the unavoidable task of kicking them out of our lives, unless we go back for seconds, which cements the relationship.

The hardest thing about being a writer is the daily task of developing interesting ideas to write about. If you factor in the fact that I’m a financial writer, which usually generates a yawn while reading the title, it’s really hard. Before I begin to write, I get most of my ideas by scanning the financial headlines on Google to see what topics are hot and which are not. While looking for ideas today, one article in particular stood out to me; and this seems to be the consensus among writers on the subject:

“Are you unhappy with the credit card that the bank pushed down your throat recently”?

Okay, that’s a snappy headline, but how many of us actually cough up a credit card when clearing our throat? I may be wrong, but I believe that most American consumers are pretty smart. Furthermore, I believe that most consumers enter into a credit card agreement knowing that they are making a deal with the devil. We all know about the “fine print”, which we usually glaze over in hopes of getting approved for that new card. So why do we do it? In one word, LUST.

Granted, some of Americans are relying on credit cards now to help get the through the financial crisis of higher food and energy prices. However, most consumers have had to resort to credit cards as a result of the car or house payment that’s too high which was chosen out of lust for things they could not afford in the first place. Let’s face it, we are a credit-addicted society, thus our love-hate relationship. We know the drug is bad, and the drug dealer is a thug; we’re addicted, not stupid. So the question is: Do we arrest the drug dealer or cure the habit?

This question has been floating around ever since Nancy Reagan’s war on drugs was launched in the ’80s. Do we cure the addict and dry them out, or do we squeeze the dealer (credit card issuers) and dry up the supply? Each strategy will bring huge consequences on our economy. If we make the credit addicts go “cold turkey” by drying up the supply we will see repossessions and foreclosures skyrocket, driving an already ailing economy even deeper into recession. If we cripple the credit card companies with over the top regulations, we run the risk of further slowing the flow of money, which will do the same thing.

So, how can this cycle be broken without further harming the economy? In my humble opinion, we shouldn’t do anything right now pertaining to credit cards. Banks are already reeling from their losses from the mortgage side of their business. Slapping restrictions on the other side (credit cards) will cause a lot of bank closings and effectively dry up credit sources for consumers.

Consumers need to be weaned off of their addiction, and mortgages are a good start. Mortgages are no longer easy to qualify for, which effectively cuts off this avenue to the credit-addicted consumer. After the market recovers from the mortgage fiasco, we can begin to tighten the noose on the credit card companies. In the meantime, you can bet the credit card issuers are going to do some belt tightening without having to be told to do so. If you ask me, that’s a good thing.

Author: Aubrey Clark
Article Source: EzineArticles.com
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Puerto Rico that is officially known as commonwealth of Puerto Rico is an autonomously governed body of the United States of America situated in the northeastern Caribbean Sea. Puerto Rico is an archipelago consisted of main island of Puerto Rico and a number of smaller islands and Keys.

The island is rich in a number of beautiful locations around it. Its central mountain range goes as high as 1,338 meter at Cerro de Punta and it is the only tropical rainforest in the United States. El Yunque in Puerto Rico is quite popular for its beaches, turquoise waters and soft yellow sand. It is a great tourist center and a number of cultures get merges here and nightlife here is exceptional beyond the expectation of a person to enjoy it.

Now in order to visit the island of Puerto Rico either you can reach there either on your own public transport that can be sometimes become cumbersome as against the traffic jams and stops where it would drop you. To get car on rent you can hire service of a car rental agency which may provide an affordable car rental service on a very reasonable price and rate. There are many methods to get a convenient car rental to be booked for a tour in Puerto Rico. You can get it booked it either from a next door car rental agency or do it online where you will get a plethora of car renting ideas even with many discounted offers.

It is now your turn to pick up the model of the car that you will use while traveling Puerto Rico. You can have car in economy, sub economy or in budget range. If you wish your tour to be great full of fun and frolic you in the category of car models can choose convertible cars which are great fun to be enjoyed. A convertible car is known as one that can be folded or removed; some popular convertible cars are Mini Cooper, BMW 330ci, BMW Z4, Audi and Quattro. These cars are great as for the travelers who love enjoy sunlight, rainfall or snow fall.

You can have these convertible cars on rent from a number of car rental agencies in America which also ensures the safety of travelers. It is better to book the convertible car quite well in advance to avoid instant botheration at the time of picking car at the rental agency. Any person above the age of 25 years with a valid driving license can have a car on rent. A person above the age of 30 years can have driving license for the convertible models of the cars such as Bentley, Lamborghini Viper and Ferrari. Car rental services as in Puerto Rico for convertible cars deliver services straight to all the important centers in the city. As payment for hiring convertible cars can be paid through credit card, debit card, checks, cash and traveler’s check. Traveling in convertible cars is a great fun.

Author: Mansi Aggarwal
Article Source: EzineArticles.com
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Freedom in America is a thing of the past. America has become a land of slavery. I know that that is hard to accept but the truth is there if you are willing to listen for a few moments. I am making the bold statement that you have become a slave and basically do not even realize that it has happened. Let us first look at the word slave and explore the definition. To be a slave means that you are held in servitude of someone else. To be a slave you have to be completely subservient to a dominating influence. Now I want you to explore your relationship with the United States Government and the tax laws.

About fifteen years ago through no error of myself the company I worked for reported to the IRS that I earned $150,000.00 more than I reported. As a result I responded with certified letters (2X) and many phone calls. All my attempts were ignored as if I were ignoring the IRS. After almost one year of calling, mailing and doing everything in my power I was ransacked by the IRS. They garnished my wages, emptied my checking and put liens in the local courthouse on my home. Eventually I spoke to some “angel” in the “problem resolution office” and with the flip of a switch, I had everything reversed and returned as if it never happened. Although I did no wrong, the lien was on my credit report for ten years and it was never removed. After the ten years I had to petition the credit reporting agencies to have it removed. The IRS apologizes for nothing and to this day I have heard not even a whisper of “oops”.

Getting back to slavery I want you to think about the freedoms and things that you own. You may say there has always been taxes, but you are wrong. The Income tax was not introduced until 1862 and was not even a permanent fixture until 1913. The point to be made is that if you think you have freedom just do not pay your income taxes. See what happens to your “freedom” if you do not cough up the cash. What will happen is that the IRS will come and take everything you own and leave you in the cotton fields without food, water or shelter. Unless of course you are provided with a nice prison cell somewhere.

If you do not get the point yet just ask yourself how long you have to work to pay your taxes. Let’s just say that if the government took its cut of the cash before you received your first nickel, how long would you have to work? How far into the calendar year would you have to work before you could say this penny is mine?

Here is the answer…January, February, March, April and part of May. That’s right, you have to work almost one half of one year to just pay your taxes! If you are not appalled by that and still do not think you are nothing more than a working class slave consider one more point. Let us look at property taxes. Do you really think you own that home you are living in now? If you do, you are wrong. You are merely renting your home for a price that is determined by the government. If you disagree with this statement then I suggest you try a test to prove me wrong. This test will have you not paying your “rent” (property taxes) for three years. At the end of those years see who “owns” the home.

America is not what it once was. America is slowly creating a greater gap between the haves and the have nots. So the next time you go to work or put gas in your tank or buy some beer or register your car or apply for a hunting license or glance at your phone bill or rent a motel room or any other activity, I want you to look at the taxes that are disguised as “fees”. Maybe then you will realize that today we are nothing more than slaves to the government and working to have our money given to someone else that the government thinks it needs more.

Author: Keith Quackenbush
Article Source: EzineArticles.com
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Everyone in America has their personal financial history archived, compiled, and rated by the three major credit bureaus. These bureaus are Experian, Trans Union, and Equifax.

Lenders and creditors access these bureaus and your personal financial history for a fee, to help them understand and rate your credit worthiness. Understanding your credit worthiness is one of the most important things you need to know and be familiar with.

What is in your credit report? Your credit report contains your entire credit history as reported by your creditors. This may include renters, lenders, credit card companies, auto loans etc. It also contains a past history of the total credit you had borrowed and credit that has been paid off by you in the past.

Additionally, it will show your current creditors and outstanding balance, as well as your payment history.
Derogatory items are also included in your credit report and these items will severely and negatively impact your overall credit score.

Derogatory items include 30, 60, or 90 day late payments, collection accounts, charge offs, repossessions, foreclosures, and bankruptcies.

What is your credit score or FICO score? Your credit score is a numerical value ranging from 350 to 850. Prime credit or the best credit is typically rated at a score of 700-720 or more. Any score under 700 will typically cause the lender to charge you a higher rate of interest or extend you less credit.

Certain scores, especially those below 580 may cause lenders to deny you credit altogether. The better your payment history is the better your score. Paying off large items such as cars or mortgages will positively impact your score as creditors like to see major debt commitments paid off.

A high amount of revolving debt such as credit card debt may negatively impact your score, especially if you have a high DTI or Debt to Income ratio. Having more than 50% of the available balance on a credit card will also hurt your score, even if you have other cards that have no balance.

If you must carry a credit card balance, it is better to spread it across multiple cards instead of carrying it on one card. This can impact your score 20-30 points. The more you apply for credit causing “inquiries” may also negatively impact your score.

Your FICO score will actually vary by as much across all three bureaus by as much as 60 points. This is caused by regional issues as the bureaus often have better records in certain regions, as well as the fact that each bureau utilizes a proprietary algorithm to determine your score.

It is a good idea to get your credit report and your credit score on a regular basis and check it for accuracy. Inaccurate items may be removed and bad credit items may be removed by going through a letter writing process or by signing up for a credit repair program.

All in all, it is important to both monitor your credit report and work to keep your score as high as possible to avoid paying higher interest rates as you would otherwise have too. America runs on credit, so you better understand yours!

Author: Christina Costa
Article Source: EzineArticles.com
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On the one hand, credit counseling can be a good way to resolve debt while avoiding bankruptcy. On the other hand, it can be like an onion; once you peel back the layers, you may cry after you see what you are doing.

Consumer credit counseling service companies organize themselves as either for-profit or not-for-profit. Recently, not-for-profit Credit Counseling in America has been in the media and under the spotlight of the Internal Revenue Service (“IRS”). The IRS has cracked down on some of the industry’s biggest players. Forty-one credit counseling companies had their tax exempt (not-for-profit) status revoked; they found that many companies didn’t offer the level of counseling or education required in order to qualify for a tax-exempt status.

What credit counseling companies do (regardless of profit status) is arrange for you to pay back your full principal balance(s) on terms that are easier for you to service such as a longer amortization term and/or a reduced interest rate. What this means is that if you owe $10,000 and you are paying an average of 15% interest on all your debts, you will still owe $10,000 but they will hopefully reduce your interest rate to at least half of your original rate and set more affordable payments usually over a longer period of time. Provided you can afford the entire plan and fees, you will be debt free at some point. Remember not-for-profit does not mean free, they still charge you a fee.

Credit counseling is reported to your credit report as a R7 and viewed negatively by every credit grantor. As a result, if you are in a 7 year repayment plan, don’t count on using credit cards, getting a car loan or mortgage for the next 7 years plus the time it takes you to re-establish your credit rating.

The origin of credit counseling goes back to the 1980’s when grantors got together and created it in order to recover money from people in debt. The new consumer credit counseling banner at the time was distanced from the credit grantors under a friendlier not-for-profit status which created trust and it worked well with the public. People signed up in droves and for-profit companies followed suit shortly there-after.

If you owe less then $10,000, credit counseling probably isn’t a bad idea and a good alternative to bankruptcy. However, people still fail at these plans because they take a long time and a lot of money is consumed by maintenance fees over several years.

A new entry to the debt management marketplace has been debt settlement. Debt settlement has been a popular option in America and the movement has been gathering momentum in Canada. Unlike credit counseling, debt settlement actually reduces the principal balance owed by you to around 40%-70% of your original principal balance. A credit counseling service doesn’t do that, it only freezes or reduces your interest rate.

If you owe more than you can manage, consider debt settlement as an option. It’s an excellent opportunity to wipe out your debt quickly while saving you a substantial amount of money without doing the same damage to your credit rating as bankruptcy would. I have seen people with $50,000 of debt totally debt free in as little as 30 days if they have the right resources. Others may take up to 36 months depending on their ability to settle. Debt settlement companies are also an agent acting in your best interest and are not directed or managed by the very same people you owe the way that credit counseling companies are. In most cases, the fees of debt settlement companies are based on the money you save so that means they are working to save you as much as possible. See http://totaldebtfreedom.ca/ for more information on debt settlement.

Author: Richard G Cooper
Article Source: EzineArticles.com
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The minimum payment on next month’s credit card bill could be almost double what you were required to pay this month due to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. How will higher credit card minimum payments affect your family’s finances, and can your mortgage advisor help you avoid financial hardship or even bankruptcy through cash out refinancing, a second mortgage, or a home equity line of credit?

Credit Cards can be powerful financial tools when used properly. However, if you’re like 35% of our fellow Americans, you are only paying the minimum payment each month, at least according to the Federal Government Office of the Comptroller of the Currency. Federal regulators are currently pressuring major banks, including major issuers such as Citibank and MBNA as well as the Bank of America, to increase their minimum payments so that consumers have a fighting chance of paying off their high interest credit card debts.

Today, your credit card minimum payment is usually between 2% to 2.5% of the total debt on your credit card. If you were to pay the minimum payment every month today on $10,000.00 of credit card debt at 18% APR, it would take you more than 50 years, 601 payments in total, to pay off your debt, and you would pay an extra $29,000.00 in interest charges to the bank for the privilege of using their money.

By the end of March 2006, major card issuers nationwide will be increasing their minimum payments to effectively 4% of the total debt each month, which for the estimated 50 million Americans who are paying the minimum payment each month may mean that their credit card minimum payment will double. Regulators argue that by paying 4% credit card minimum payments versus 2% credit card minimum payments, you the consumer will be able to pay off your debts more quickly, if you can come up with the extra money each month! Taking the above example of $10,000.00 at 18% APR, you would be able to pay off your credit card debt with a 4% minimum payment in as little as 15 years, and you would pay less than $6,000.00 in interest fees to the bank. That’s a savings of over $23,000.00 versus a 2% minimum payment.

Sounds great right? Higher credit card minimum payments can help you get out of debt faster than lower minimum payments, but there is one catch. You need to pay twice as much every month. So if your minimum payment is currently $400.00, you’ll need to find another $400.00 per month just to keep up with the new minimums. Even if your bank does not increase your rates this coming month, it’s only a matter of time before they are drawn into compliance with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and your credit card minimum payments rise.

As you can see from the above examples, the government is onto something, paying off credit cards more quickly saves consumers a ton of money, but it actually increases their minimum payments, making it unaffordable for the Americans who need this sort of protection the most. In fact, many of the people whom we’ve spoken to in the writing of this article would likely face bankruptcy after their savings were depleted with these higher payments.

But is there a better way? For homeowners there are some very attractive options available. A Cash Out Refinance, a Fixed Rate Second Mortgage or Home Equity Loan, or a Home Equity Line of credit from your mortgage broker is one of the most effective ways to stop paying high interest on credit card debt and to actually reduce your total monthly payments. For the average customer carrying $10,000.00 dollars of credit card debt at an APR of 18% their new higher minimum payment will be 400 dollars, and if they are like most customers they also have a car loan of $20,000.00 at 9.5% and pay about $450.00 per month, the typical savings realized by consolidating those debts with their mortgage or taking a second mortgage to pay them off can be 60-70% on their current unsecured or revolving debts, and even more savings come tax time through interest deductions available for mortgages.

Speak to a mortgage broker and you’ll find that you can borrow $35,000.00 per month by refinancing with cash out, getting a home equity loan or second mortgage, or opening a home equity line of credit for as little as 200 dollars per month, or even less. Refinancing with cash out not only pays off your credit card debt and your car loan at the high interest rates associated with credit cards and auto loans, but also saves you over $650.00 per month in this scenario by lowering your total monthly payments. Yes, your mortgage payment will increase, but your total monthly payments will actually decrease, putting $650.00 in your pocket each month. Use some of that savings to make at least one extra mortgage payment per year and you’ll pay off that mortgage even faster than you could the credit card debt at minimum payment levels. And you should speak to a tax professional as well, because while you cannot deduct credit card or car loan interest from your taxable income, in most cases you can deduct the interest paid on your mortgage from your taxes, which has the potential to save you thousands more over the life of the loan. This method is not for everyone, but if you are a homeowner facing financial constraints and the thought of your credit card minimum payments going up by up to double makes you shiver, it may make sense to speak with a mortgage broker and with your accountant about a debt consolidation refinance or a debt consolidation loan.

Author: Kyle Allen
Article Source: EzineArticles.com
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Need a credit card? No problem! And that’s exactly the problem. In a nation where instant gratification is touted as a virtue, credit is available to anyone no matter what their credit history. This is causing personal and financial problems for many consumers who abuse the easy availability of credit and find themselves unable to pay back their loans.

There was a time in history when extensive credit was available only to the aristocracy, and debt carried a social stigma for anyone else. The poor and middle class were carefully scrutinized when they applied for loans, and debtor’s prison awaited those who did not repay their debts.

Americans are more indebted than ever in the nation’s history. The amount owed on loans for cars, homes and credit cards adds up to nearly 100% of annual after-tax income, according to a report in Business Week magazine. Yet, according to the Consumer Fedaration of America, this alarming level of indebtedness has not deterred the moneylenders: credit card companies have more tha $3 trillion of unused credit lines up for grabs, approximately $30,000 per
American family.

According to Fair, Isaac and Co. (FICO), the average consumer has access to $12,190 on all credit cards combined. Not everone is a spendthrift: more than half of cardholders use less than 30% of their total credit limit. However, one in eight is using 80% or more of their credit limit, and 1 in 10 have a total debt greater than $10,000. Cardweb.com estimates that 20% of American credit cards are maxed out.

There are specialized credit cards being offered to all kinds of borrowers, from students to small business owners. Each demographic group is targetted with a specific sales pitch.

People with good credit ratings can easily access lines of credit at an interest rate of 5% or less over the current prime rate, and such applicants are also qualified for Platinum credit cards. However, about half of cards in circulation are Gold cards, which require just $10,000 in annual income for qualification.

The credit industry uses credit scores to divide potential customers into “prime” and “subprime” markets, referring to the prime interest rate set by banks. Elite borrowers can obtain a line of credit on a Platinum card at an interest rate around 12%. A Gold card carries an average interest rate of 15%, while a standard credit card charges rates around 17%.
Then there’s the subprime market, which first emerged in the 1990s, dealing with consumers whose credit scores are 500 or less, little or no credit history, those emerging from bankruptcy and anyone with an inconsistent performance in managing credit. These people are often low income earners and/or poor money managers, but the credit card industry finds a way to profit from these most needy of borrowers.

Unlike “secured” credit cards, cards offered to subprime borrowers require no security deposit. Credit limits start out very low — initially in the $100 to $500 range. However, fees can be hundreds of dollars and interest rates can easily soar to usurous rates of 30% or more.

The industry also offers “secured” credit cards to offer high-risk customers. Borrowers are required to pay an up-front security deposit from $99 to $5,000 to serve as collateral in case of default.

Many social and business commentators have denounced the subprime lending business for exploiting the poor, comparing the industry’s problems to depression-era banking scandals. Lenders take on poor and desparate customers at their own risk, writing off losses in the 15% to 17% range, versus the average industry loss rate of 6.5%, according to CardWeb. The delinquency rate among subprime card issuers is 10%, twice as high as the industry average. Some credit card companies, such as NextCard, have been unable to recoup their losses and have closed up shop.

According to many pundits, the American economy has been thriving in the past 5 years, with a steady growth in the GDP. However, 90% of this growth has been due to the housing bubble; real wages have declined by 4% since 2000 while health costs have risen by 40%. Middle and lower class Americans are becoming increasingly financially squeezed and unable to pay their debts.

A record number of 1.3 million cardholders filed for bankruptcy in 2004. In response, the credit industry lobbied successfully for stricter bankruptcy laws. However, according to the Consumer Federation of America, the increasing incidence of loan defaults did not spur the card companies to become more discriminating in their choice of customers. In fact, they actually boosted their promotional campaigns to a record 5 billion solicitations ( approximately 50 per American household) compared to 3.5 billion the previous year, many of these ads targeting the sub-prime market.

Now consider the debit card: it is decorated with the Visa or Mastercard emblem, and has all the functions of a credit card in that can be used at a cash register and for internet and telephone purchases. However, it takes money directly out of the cardholder’s bank account and allows no more spending once the account is empty. A debit card has no monthly fees and no interest charges, and no chance of getting into debt. Perhaps this is the best consumer solution to a credit-mad economy.

Author: J Shipper
Article Source: EzineArticles.com
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