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Income Based Repayment (IBR) is a program launched in July 2009 that allows qualifying Federal student loan debtors to base their student loan payments on their income.
It’s tax time and that means payday for many American workers expecting a tax refund. After a tough economic year, many cash-strapped taxpayers may be feeling a bit desperate and don’t want to wait longer than necessary to get their money. Unfortunately, this could drive consumers struggling to make ends meet to seek a refund anticipation loan.
Basically, a refund anticipation loan is a short-term cash advance that uses your expected tax refund as collateral. The loans allow you get your money a little bit earlier, but at a hefty price. According to consumer advocates, refund anticipation loans fees translate into high Annual Percentage Rates (APRs) of 50% to 500%.
Low- to moderate-income taxpayers are usually the target of tax refund anticipation loans. These consumers end up paying a total of more than $900 million in fees for their easy money. Although the IRS does not take an official stand on refund anticipation loans, it also does not endorse the practice. Unless someone is facing a true financial emergency, the fees are just not worth the convenience. Instead, taxpayers should consider taking steps to ensure they receive the maximum amount owed to them:
Finally, if you are anticipating a tax refund for more than $500, consider reducing the withholding on your W-4. Calculators at IRS.gov can help you figure your appropriate amount. More money on your paycheck will help during this time of economic recovery.
It seems like everything on television is a competition. Cooking, decorating, and weight loss challenge programs have turned kitchens, living rooms, and workout rooms into battlefields. Thankfully, there are people who are taking a more realistic approach to this “reality” trend. The Lose To Win: Financial Edition makeover competition sponsored by E Federal Credit Union (EFCU) in Louisiana combined practical professional help with unmatched participant dedication to achieve remarkable results.
In early 2009, Kristi Smith, a single mother of two from Walker, LA, was drowning in debt with little savings and little hope. A recent divorce and undisciplined personal spending left her with mounting debt. Smith decided to take a chance at a fresh start by entering the makeover competition.
With the help of her financial coaches, Anna Lafitte of EFCU and MMI’s Valerie Jenkins, Smith and her two children, Shelby and Kalyn, were named the competition’s winner by losing more than $22,000 in debt and saving over $12,000 in eight months. She competed with three other families to see who could reduce debt and increase savings by the greatest percentage during the contest that ran from February through September 2009.
“I can’t believe we did what we did! The numbers we produced in these 8 months were simply overwhelming. I never in my wildest dreams would have ever imagined being able to eliminate $22,000 in debt while saving $12,000 at the same time, “said Kristi Smith. “Our family has made large strides to getting ourselves out of an ugly financial mess, and we can hold our heads high with pride, knowing we did what had to be done to change our future.”
Throughout the competition, each family met at least monthly with their financial coaches to discuss ways to improve their financial situation by reducing their spending habits, increasing their earnings, and living more financially sound lives. In addition, the families participated in quarterly financial seminars.
All of the participating families made real and significant improvements to their financial outlook. Combined, the four families made a financial swing of more than $80,000 in just eight months. For details on how they did it, check out LoseToWinFE.com where the families’ journeys were chronicled weekly through online videos and blogs. Event organizers hope that the success of the four families will inspire others to improve their own financial lives. Are you inspired?
Kristi Smith (left) hugged by one of her financial coaches, Valerie Jenkins of MMI/CCCS.
During uncertain economic times, it’s especially important that people not only know how to manage their debt, but also their interactions with debt collectors. To remind people of their rights—and debt collectors of their obligations—the Federal Trade Commission (FTC) is featuring a new video highlighting the rights of consumers whose debts have gone into collection, and the rules of behavior for debt collectors.
Card issuers are required to mail/email credit card bills at least 21 days before the due date. The practice has been 14 days prior to the due date. In addition, card holders will get credit for all payments made prior to 5:00 p.m. on the day payment is made.
Card issuers are required to give customers at least a 45 day notice of future changes to their interest rate or other significant changes to their terms and agreement. The practice has been a 15 day notice. Consumers must be notified about their right to cancel the credit card account before the increase or change goes into effect (generally meaning that they can repay the debt at the existing rate, but no longer use the account).
Last Thursday, the Federal Reserve Board approved new rules "that would better protect credit card users by prohibiting certain unfair acts or practices and improving the disclosures consumers receive in connection with credit card accounts and other revolving credit plans." The rules are scheduled to take effect on July 1, 2010. According to the Federal Reserve’s press release, the rules will:
-Protect consumers from unexpected interest charges, including increases in the rate during the first year after account opening and increases in the rate charged on pre-existing credit card balances. (Note: I believe that this will address, among other things, the Universal Default provision in many credit card agreements.) -Forbid banks from imposing interest charges using the "two-cycle" billing method. -Require that consumers receive a reasonable amount of time to make their credit card payments. (Note: I am not sure how "reasonable" is defined, but the rules do say that banks may increase a rate if the minimum payment is received more than 30 days after the due date.) -Prohibit the use of payment allocation methods that unfairly maximize interest charges. (Note: This refers to how a creditor pays down your debt. If you have debts with different rates (ie. cash advances, purchases, balance transfers), some creditors are currently applying your payments to the debt with the lowest interest rate first.) -Address subprime credit cards by limiting the fees that reduce the amount of available credit.
The Board is also adopting final rules to revise the disclosures consumers receive in connection with credit card accounts and other revolving credit plans to ensure that information is provided in a timely manner and in a form that is readily understandable.
The Board is separately proposing rules to protect consumers that use overdraft services offered by their bank. They are also adopting final amendments to to address depository institutions' disclosure practices related to overdraft services.
So what do you think? Will the new rules help consumers better manage their credit card debt?
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