Credit Card Sharks-Warn your kids and clients

There's a new law that forces credit card issuers to increase the minimum monthly payments borrowers must make. The good news is that borrowers will pay much less in interest over time. Nevertheless, many consumers might still be better off owing a loan shark money than a credit card company. Here are seven ruthless practices that credit card issuers engage in and loan sharks don't:

1. Loan sharks don't raise your interest rate if you're late paying a bill to another creditor. According to an ABC News report, 44 percent of credit card agreements contain a universal default penalty, which allows the issuer to increase the borrower's rate if a payment to another creditor is missed or late. Here's an example from Chase Manhattan Bank's cardholder agreement as reported in the 2004 New York Times series on credit cards: "The highest rate (28.49 percent) may be charged if the cardholder is late making a payment to any creditor; this can include phone and utility bills, car payments and the like -- even if credit card payments are made on time." So if you agree to accept a credit card with an 8 percent interest rate, and you make your payments on time for several years, your rate can suddenly jump to 28.49 percent. All you have to do is misplace your gas bill for a couple of days and be late on your payment.

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2. Loan sharks don't solicit. The credit card industry sends out 5 billion solicitations a year in the United States alone, according to cardweb.com. Many of these solicitations go to people who don't even have jobs, such as my 20-year-old son, Zack, a college student. He gets at least one credit card offer a day. As far as I know, he's never been approached by a loan shark.

3. Loan sharks don't change the terms whenever they want. And if they do, they aren't bold enough to put it into print, as Bank One does on its Visa Card term sheet. Of course the print is quite fine. It reads: "We reserve the right to change the terms at any time for any reason." I assume "any reason" includes, "We'd just like to increase our profits." Or "We don't like your last name." Or "Let's raise the rates of everyone who has an odd-numbered address."

4. Loan sharks don't penalize you for paying off your debt. According to ABC News, some credit card agreements contain a no-balance fee: You can be charged a fee when your balance reaches zero.

5. Loan sharks don't charge you for not borrowing more money. Some credit card issuers actually charge a $15 monthly fee if your card remains inactive for more than six months.

6. Loan sharks don't make you sign a document that says that you can't sue them. Granted, they have their ways to encourage you to avoid this step. But Chase Manhattan Bank's cardholder agreement plainly and clearly makes you agree to give up your constitutional right to sue: "The cardholder cannot take the issuer to court or be included in a class-action suit against the company."

7. Loan sharks don't lobby the government to make it harder for you to go bankrupt. Banks and credit card issuers spent millions of dollars lobbying Congress in favor of the 2005 bankruptcy bill.

Last time I checked, loan sharking was still illegal. The banking industry's questionable practices are fully protected under the law. If ever an industry needed to be more tightly regulated, it's credit card lending. A shark is a shark, even if it wears a suit and works in a building with marble floors.

Jim Sollisch is a writer in Cleveland.

Fighting the Credit Crunch

These days, getting a home mortgage isn't as easy as it used to be. Tighter lending standards have made it more difficult to obtain financing for some borrowers. Here's what you can do to prepare for a home purchase under the new lending guidelines.

• Get copies of your credit report so you can clear up any inaccuracies. If your credit score isn't near 700, postpone your home purchase to allow time to improve your credit score.
• Understand the true cost of homeownership, which may include unexpected expenses, such as maintenance, decorating and utilities. When you review your household spending plan to determine how much you can afford in monthly mortgage payments, remember to factor in these added expenses.
• Be prepared to make a down payment of at least 10 percent to 20 percent. Don't jeopardize your budget or tap into any emergency funds, however. Wait to purchase until you can comfortably cover the down payment.
• Be prepared to show a tax return as well as a pay stub to document your income.
• Stick with conventional loans. Despite the turmoil in the subprime mortgage market, there are plenty of conventional mortgages available.

As a first-time buyer, should I wait until prices go lower to buy a home?
No.

If you continue to wait, you may never be able to afford to get into the housing market. Even as home prices are currently moderating – or even falling in some areas – rents continue to climb. The best way to build household wealth is to own a home. Once you become a home owner, you are able to take advantage of the generous tax deductions that homeownership offers, and you begin to build equity in your property. As your property builds in equity, you can use those gains to sell your starter home and afford to move into a bigger house.

With so many homes on the market to choose from, your best strategy may be to scale back expectations for your dream starter-home. Instead of trying to buy a 2,000 square foot home, consider shopping for a 1,500 square foot home. Remember, the sooner you make the jump from renter to home owner, the quicker you begin to create and build up wealth for your family. After a few years, you will be able to leverage this investment and buy a larger house.

For more information on why now is a great time to buy, visit www.nahb.org/timetobuy

Pending Home Sales Recover in June
Pending sales of existing homes rose 5 percent in June from a downwardly revised May total, NAR reported this morning. This marks the largest monthly gain in the pending home sales index in more than three years, but it still lags 8.6 percent below its June 2006 level. NAR senior economist Lawrence Yun said the latest totals are encouraging, with pending home sales rising in each of the nation’s four regions. “However, it is too early to say if home sales have already passed bottom,” Yun said in a statement. Wed, Aug 1, 2007 

Get Some Space

Small spaces can be warm and intimate. But if a room in your home feels more cramped than cozy, there may be a simple way to improve it.

Odette Lueck, of Odette Lueck Interiors in Oakland, Md., says the best way to stretch the size of a room is to start from the ground up. "The thing I use most is diagonal lines on the floor," says Lueck, who suggests installing wood flooring or tiles in a diagonal line. "No matter which way you look, it's expanding the border."

If you're not ready for a major project, you'd be amazed at what you can accomplish with just a few decorating tricks. First and foremost is color. To make your room appear larger, stick with neutrals and keep backgrounds (wall, furniture, draperies) the same color, says Lueck. But neutral doesn't have to be boring. "Use your color in accessories," says Lueck. But beware of patterns. Too many patterns can make a space seem cluttered.

Furniture placement is also important. The number of pieces should be kept to minimum and positioned against a wall. "Use glass coffee tables," suggests Lueck. "It's one less thing to be a solid focus in the a room." Don't be afraid to use a little creativity. For example, a stack of coffee table books next to chair can serve as a unique end table.

Another option is to embrace the room's petite size. "More often than not clients

make the mistake of

thinking that room

always has to

be larger," says

Lueck. "Small is

not necessarily bad.

A lot of times, what

you're actually

striving for is a more

intimate space." To

warm up a small

room, include dark

colors, lots of wood

and plenty of cozy

fabrics.