Gather Your Questions for Credit Card Reform

The Credit Card Reform Act that's been phasing in for practically ever is scheduled to firm on February 22. We've all heard dribbles and bits about the Act, but a survey by Consumer Federation of America and the Credit Union National Association found that most of us don't really know what it's all about.

The White House is hosting a Town Hall Meeting with White House Economic Advisor, Austan Goolsbee on Feb. 22 at 2pm, eastern time. You can submit your questions regarding the Credit Card Reform ahead of time.

You can also submit questions for the town hall through Twitter. Just be sure to include the hashtag #cardlaw in your Tweet.

In the meantime, here's a brief run-down of how the Act affects consumers:

• Consumers must be given 45 days' notice of any changes in the interest rates of future balances or in other key terms of a credit card account.

• Hikes in the interest rates of existing balances are generally prohibited. Exceptions: If a promotional rate expires, if the cardholder makes a late payment, or if the contracted rate was variable. That last one -- a variable interest rate -- is a key loophole that many credit card issuers have been exploiting by changing consumers to variable rate cards prior to Feb. 22.

• Consumers have the right to "opt out" of significant changes that might be imposed on their accounts. To do so, they merely have to close their accounts and pay off the existing balances within five years.

• Limitations are imposed on the issuance of credit cards to anyone under the age of 21.

• Customers who maintain monthly balances must be told how long it will take to pay off that balance if they make only the minimum monthly payments.

• Bills must be mailed at least 21 days before payment is due.

• Credit card issuers must apply any payments to balances carrying the highest interest rates first, and issuers cannot impose over-the-limit fees unless customers specifically authorize such transactions.

Credit Card Reform OUCH!

The Credit Card Reform Act of 2009 was a well-intended and long overdue attempt to stop the credit card fee insanity that imprisons many consumers. But, the Feds underestimated the creativity of their opponents, and they made a big mistake in giving the card companies warning. So what happened? Faster than reform could be implemented card companies rushed to the offense and implemented aggressive sneak attacks before they became illegal.

You became a risk
At one time card companies could raise your credit card rate if you were late on any other bill, even if you were never late on your credit card bill. It was called “universal default”. They justified this by claiming you were a risk. But since the Reform will eliminate this type of action, the card companies rushed to get rate hikes in.

They changed your minimum payment requirements
Say you signed up ABC Bank’s great balance transfer deal way back in 2008. This was a great deal because you took your high-interest balance from XYZ Bank’s card and transferred it to a really low interest card, saving you a bundle in interest rates. But suddenly the economy takes a dive and ABC Bank is suffering from loan loss and the challenges of Credit Card Reform, where are they going to look for money? Why, to you, of course! They do this by raising your minimum balance from 2% to 5%. The result is that you asked to pay a lot more each month. What if you can’t? You call ABC Bank and they’ll offer to lower your minimum payment back down at or close to the 2%, but they ski rocket your interest rate much higher than your initial great deal. This has nothing to do with your payment history, which could be perfect. You just get a lousy rate.

Your credit limit drops
A reduced credit limit can hurt your credit score because part of the formula used to calculate your score is the amount of credit available. A big gap between how much you spend and how much you have available is viewed as responsible credit handling. This is especially important if you have a need for a loan, like a mortgage for example. If a credit card suddenly reduces your credit limit, it looks like you’ve done something wrong when in reality you may not have done anything to hurt your credit.

These actions hurt many consumers deeply. So how do you fix credit card wounds? Go shopping, for a different card that is. Start with Coors Credit Union and you’ll find the following:

1. Our cards don’t offer too-good-to-be-true rates. Always be skeptical of cards that offer incredibly low rates.

2. Simple terms. The longer the terms and disclosures the more traps.

3. No account opening fees. Subprime credit cards often implemented a fee just to open the card, putting the user into a situation similar to payday loans. The Reform Act limits the amount of this fee. Coors Credit Union has never charged account opening fees and does not offer subprime credit cards.

See all the benefits that make the Coors Credit Union a trustworthy credit card.

Saving 10% Could Hurt You

Would you like to save 10% today? That’s a common question at the checkout counter and at this time of year, in this economy it can be especially tempting. But, I am here as your voice of reason to tell you to resist that temptation.

You know how it works. The employee is required by management to ask every customer if they’d like to open a store credit card. They may even be prompted by a message on their register. It’s not personal; they are just doing what is required by their job.

It’s likely that you gave the items that you are purchasing more thought than you are this credit card. You might think, “10% could really help me out.” But the long line and your schedule might deter you. “Only takes a minute,” says the clerk.

You are not likely to read over the card details or consider comparing it to another comparable store during that “minute”. You probably won’t ask about the interest rate or terms and conditions. And the clerk is not going to explain all the details either. Their goal is to get you to fill out the application, move the line along and collect an extra dollar in their paycheck for each application.

Filling out the form doesn’t guarantee you’ll get the card. Your application is subject to credit check and approval. Yes, the store has more time to review you than you did in deciding to apply for the card.

And regarding your credit score; every time you apply for a credit card, approved or not, it’s a ding to your score. So that impromptu decision to apply for credit just brought down your score. If you are caught by that temptation at a few other stores, you are ticking away at your score more. Plus, most store credit cards carry a high interest rate. The exception can be co-branded cards that carry the Visa, Mastercard or Discover logos.

Remember this: No financial decision should ever be made without thinking through the consequences and investing the details.

CNN Calls Credit Unions the Best Revenge

Browsing through my online financial reading list I came across this on CNN Money and had to pass it along:

Credit unions: Best revenge for angry cardholders

Sure, 2010 looks to be marginally better once new credit card regulations kick in, but I’m still betting the bank credit card industry will find new and creative ways to extract revenue from consumer accounts. It’s their business model, after all.

But sweet revenge could be just a credit union away. A recent Pew Trust study determined that on average, credit cards issued by credit unions charge much lower fees than their bank-card brethren. For example, the median late fee on a credit union card is $20. For a bank card it’s $39. Yes, that’s right: Credit unions charge 49% less. Credit unions also offer a better interest rate deal. By law credit unions cannot charge more than 18% interest; the median bank-card penalty rate for late payments, according to Pew, is 29%. (read the rest of the article…)

Credit Card Companies Implement Work Arounds As Reform Gets Closer

The Credit CARD Act sets a deadline of February for many changes to credit card policies. In preparation for expected loss associated with reform card companies have been and still are making changes to protect their profits.

Bank of America, Chase and Discover Card both switched many of their cardholders from fixed to variable rates. This allows the companies to raise rates when the prime rate goes up without actually implementing rate hikes. Rates would just naturally rise and fall along with prime. Card companies raised some consumers card rates raised since the Act was announced in May to squeeze in higher rates before the deadline.

Lawmakers had recently introduced legislation to move up the effective date of new credit card reforms by two months to Dec. 1, but that’s up for debate in the House. The push for an earlier date is to disable last minute rate hikes.

Another way banks are looking to protect credit card profit is by implementing or raising annual fees. According to Bank of America new annual fees will range between $29 and $99. BoA also stated that the fees would not be coordinated with the card services, but with consumer profit. In other words, the people who pay cards late or carry a balance would pay a lower annual fee, since they contribute to the banks bottom line. The “good” consumers who don’t add interest income would be charged more.

Meanwhile, I urge you to look at your credit card terms & conditions and read all statements and notices, especially now as things are changing. And if you are looking to change, do look at your credit union offerings. Consumer Reports recently reviewed credit cards and determined that the best and most trustworthy cards were offered by credit unions, associations and specialty retailers.

Inactive Credit Cards Might Not be So

Maybe I shouldn’t be putting this information out there for just anyone to read because if it falls into the wrong hands it could be used wrongly. But for the rest of you take what I’m about to tell you as a caution.

We all get new credit or debit cards in the mail and they always have that paper sticker that instructs you to activate it by calling a toll free number from your home phone. Right? Right, you know the drill. And you probably assume that until you’ve called the activation line the card is dormant and secure. Right? Well, maybe, but not always.

It’s true that if someone should try to use some unactivated cards them they would be declined, but that’s not true for all cards. Some “unactivated” cards are actually live and could be used.
"Very few banks send out a card that can't be used, at least in low-risk situations," says Scott Stevenson, founder and CEO of Eliminate ID Theft, a credit protection service. "But I'd bet most Americans think you cannot use a card unless you call and activate it."

That means that someone could come along and take a card out of your mailbox and use it. You’ll probably never know if your card is actually inactive or not. Credit card companies, of course, tend not to disclose this information. Some cards allow only small purchases as a convenience to continue service for customers. A small purchase might be anything under $200. A few card companies do not set limits and a few others completely lock down their cards until activation.
So why do they bother with the sticker at all? Mostly it’s a fraud precaution. The activation procedure lets the card issuer know that the card has reached your home. It also can discourage would be thieves.

Whenever you receive a new card in the mail, first check to see that no one has tampered with the envelope. Then activate it and store it either in your wallet or a locked unit. Don’t leave unactivated cards lying around in your to-do pile. Remember, a large percentage of identity theft is committed by someone who knows the victim.

Oh, and if you’ve taken out a credit card that you only want to use for emergencies (not carry in your wallet) do be sure to activate it. If the card issuer sees that you haven’t activated a card after it’s been sent they will deactivate it for security purposes—usually after about one month.

Put Old Cards to Use

Plastic cards are just part of life. But what do you do with them when they are no longer of use?

Here's one idea...make a stand.

Get an old card plastic card. Could be a hotel card, gift card or those fake credit cards that come in the mail.

Make a Z-fold by bending the card about 3/4" from one end.

Then make another bend in the opposing direction about 1.5" from the other end.

And voila, you got yourself a stand.

Thanks to Lifehacker for reminding me of this snazzy idea.

How to Really Destroy a Credit Card

I am not sure what my dad was thinking, but whenever he had an expired credit card he would give it to me to bend back-and-forth until it broke. Then he would toss it in the trash. Did he think this was fun for me? Well to this day I can’t stand that task or the smell of plastic on my fingers. Back then this might have been an effective way of thwarting credit card theft, but today you need to be extra cautious.

When you cut up a card you shouldn’t just simply slice the thing in half. You’ll need to slice each set of four numbers into six pieces (see the video below). You’ll also need to cut through your signature and the magnetic strip.

Really don’t forget that magnetic strip it contains a lot of information about you. Running a magnet over the strip will scramble the data. For even more insurance take a hammer and bang it along the strip to smash any RFID chips that may be embedded.

Some home shredders are capable of slicing credit cards. If you choose to use a shredder be sure it has cross-cutting functionality, so that your card is sliced and diced. A good shredder will have a slot to align the card for proper shredding and reduced jamming.

Don’t assume that you can safely toss your old cards into recycling. Though they might be expired thieves do know how to extract data. Recycling centers often employ more hand picking techniques and could be even more risky for identity theft.

I guess some people burn their cards, at least that’s what I’ve heard. While it does completely destroy the data, I wouldn’t recommend this because it is environmentally bad and stinks.
Once you’ve chopped up your card, even if you use a shredder, separate the pieces into at least two different trash bins. That way they have less likelihood of being pieced back together.

This video shows you how to simply and effectively destroy any plastic card.

Listen to the Children (for financial advice)

Marketplace's Scott Jagow sat down with a few kids to listen to their ideas about money, the economy and the future. One quetion asked was, "Should kids be allowed to have credit cards?" The answers might surprise you.

Should kids be allowed to have credit cards? from Marketplace on Vimeo.

Taco Bell I.D. Theft

Identity theft really can happen anywhere, even a Colorado Taco Bell. Three Colorado Springs residents were convicted last week for stealing credit cards from gyms and Taco Bell restaurants in Woodland Park, Broomfield, Lakewood, Canon City and Pueblo.

The article in The Gazette from Colorado Springs states that two men gathered credit card numbers from locked and unlocked gym lockers and from Taco Bell patrons. They used a skimming machine in a young woman's apartment.

A credit card skimming machine copies information from a credit card by reading the magnetic strip. The data thieves then use this information to make up fake credit cards that they use in person or for online transactions. These machines are disguised to look like any credit card swipe machine. That's why some identity theft protection literature will tell you to watch your card in restaurants. Sometimes they can be installed under the counter or in the back. If a worker leaves your site with your card you should be suspicious.

But this was not the case here. These people stole the cards and then took them to another location to skim.

Game Change for Balance Transfers

Some people enjoy a game called “balance transfer.” Usually balance transfer offers carry a low interest for a specified period of time. It could be 6 months to a year. After that the rate rises. Game players watch the calendar carefully and try to switch before the good rate expires. The game is still going, but with pending credit card regulations poised to chip away at credit card company profits, the rules are changing.

Balance transfers almost always carry a fee. Typically this fee has been 3% of the transfer amount. But some companies like Chase are guarding against the future. They expect that changes to credit card regulations will deeply affect their profits, so they’re looking to get more out of people who play the balance transfer game. At Chase the transfer fee has risen to 5%. Usually the transfer fee has been capped at around $100. This is might change as well. Expect to see an increase in transfer fee caps.

When you look at how these increases translate into dollars, it might seem a small price to pay for a better rate. The highest fee for a transfer of $10,000 would be $500. But then a fee cap would reduce that significantly.

Here’s how it all plays out in an example.
Say you have $10,000 on a card with a 21% interest rate.
Minimum payment = $273.25
But you can afford a fixed payment = $355
At this rate it will take you 40 months to pay down and cost you $3,897.86 in interest.

Transfer that balance to a promotional balance transfer at 5% for 9 months with $150 fee and here’s what you get. (Keep your payment the same at $355)
After 9 months you’ve:
paid $323.93 toward principal
paid $31.07 to interest
balance = $7,132.57

If you stayed with the original card after 9 months you’ve:
paid $206.80 toward principal
paid $148.20 to interest
and your balance = $8,261.85

Your balance difference between the original and the transfer is $1,129.28. That puts the transfer fee into perspective.

It seems like the changes will make the balance transfer game more exciting as it will be a bigger challenge to find the lowest transfer fee and the best rate. But I’m still not a fan of the transfer game. It requires way more time, effort and brain power than I can handle. If you forget and don’t transfer your balance to another card before the rate changes you’re probably paying much more. Plus it can wreak havoc on your credit score.

Credit Card Fees to Make You Feel Special

This offer came in our mailbox a few days ago.

We should fee special for receiving this offer, it's limited to only 1% of U.S. residents. It comes with:

• 24 Concierge Assistant,
• Exclusive Rewards Program ,
• Luxury Gifts, and
• it's made with carbon!

It also carries a $495 annual fee! (Except if you live in Iowa, then it's just $0.50--state regulations.)

Consider the benefits:

Concierge Program: These programs are useful and busy people may like the idea of having someone take care of reservations at restaurants, golf courses and theatre shows, but it's not something we are likely to use.

Rewards Program: The card gives you 1 point for every dollar spent (cash advances are excluded). Rewards expire after 5 years. This isn't bad, but we already receive similar rewards with another card. And there are rewards earning cards available that have $0 annual fee.

Luxury Gifts: I have no idea what these are since no examples were given.

Black Carbon card: It's pretty, but not enough to sway me.

So, nearly $500/year to carry a black Visa? No thanks. I'll run with other 99% of U.S. Residents who don't carry black either.

The History of Credit Cards

Credit has been around for as long as humans have been trading. It was mostly given on good faith and expected to be paid in full. It wasn’t until just over 50 years ago, however, that the credit card industry was born.

Diners' Club holds the claim as the first credit card that was accepted by a variety of merchants, even so it was still more of a charge card than a credit card since purchases were expected to be paid in full each month.

from creditcards.com
"According to a representative from Diners' Club, the story began in 1949 when a man named Frank McNamara had a business dinner in New York's Major's Cabin Grill. When the bill arrived, Frank realized he'd forgotten his wallet. He managed to find his way out of the pickle, but he decided there should be an alternative to cash. McNamara and his partner, Ralph Schneider, returned to Major's Cabin Grill in February of 1950 and paid the bill with a small, cardboard card. Coined the Diners' Club Card and used mainly for travel and entertainment purposes, it claims the title of the first credit card in widespread use."

Diners' Club reached 20,000 cardholders in 1951. Soon after American Express (established 1850) jumped into the market with its own purple card in 1958. But it wasn’t until 1959 that credit cards went plastic with the debut of a new American Express card, which by the way was still really a charge card.

Also in 1959 MasterCard trumped Amex’s plastic card with the introduction of revolving credit. Over the next decade the credit card industry took off when Visa and MasterCard both formed their own groups of credit-issuing banks. As the bank card industry grew, banks interested in issuing cards became members of either the Visa association or MasterCard association. Their members shared card program costs, making the bank card program available to even small financial institutions. Later, changes to the association bylaws allowed banks to belong to both associations and issue both types of cards to their customers. Today American Express, Diner’s Club and relative newbee Discover (owned by Sears) operate independently of the Visa and MasterCard systems.

• In 1968, consumers’ total credit debt was $8 billion (in current dollars). Now the total exceeds $880 billion.(SOURCE: Federal Reserve Bank)


• At least one in ten consumers have more than 10 credit cards in their wallets. However the overall average number of credit cards per consumer is 4.(SOURCE: Experian's "National Score Index")

For most of us it is difficult to imagine life without the convenience of credit cards, debit cards, or ATMs, yet when you think about it the world hasn’t been using these tools very long. Maybe we’re still figuring out how to do it right.

Next Thursday credit card execs will meet at with White House officials to discuss transparency of their lending practices. At that meeting some of the largest credit card lenders will need to explain hiked interest rates, imposed fees, slashed credit lines and their use of bailout funds.

Locking Your Wallet in Your Car Won't Stop Theft

This post originally ran on June 9, 2008. But in re-reading it I am reminded of a disturbing event that occurred in Ohio in December 2008. The moral of this story is that your car holds valuable information--don't be careless. Thieves can access nearly anything they want if they try hard enough. The post states that they'll often leave your cash but might take a credit card. However, it's becoming more likely that they won't touch your wallet at all. Instead they take your registration and/or insurance cards which are much more valuable.


Everybody knows that it's not a smart idea to leave your wallet in a gym locker room. It doesn't matter if you have a lock or not. But the old advice of leaving your stuff in your car isn't working either.

Last year a posh health club near my home experienced a rash of car break-ins. In this case the thieves were smashing car windows and grabbing purses. The purses were easy to spot as they were usually hidden under a jacket or a blanket. Vehicles with car seats seemed to be a sure sign to thieves that something valuable would be within reach.

photo by Kevin Saff

But smashed windows are loud, messy and tend to draw attention. So now stylish thieves come prepared. They prowl gym parking lots, trail heads and baseball/soccer field parking lots were victims are likely to leave their wallet behind. All it takes is a little bit of locksmith tools and know how and their discreetly in your car. Then they look in the usual places: under a jacket, glove box, under the seat, or in the compartment between seats. They leave your cash and only lift a card or two. Then they re-lock your car.

This sneaky strategy is successful in fooling you for a bit. Your car is locked, your cash is there. So it may not be until you get to your next destination that you notice your Amex is missing. By that time at least 1-2 hours have passed and they've racked up thousands of dollars in high-end electronics and gift cards (gift cards are tough to track).

Earlier this year Aurura police busted a ring of parking lot thieves that made news around the country. They caught 20 people who made over $400,000 worth of stolen credit card purchases. They were reselling their purchases in various places including eBay.

No one needs the extra heart palpitations of finding your credit card was stolen while you were exercising. There's really only one way to avoid being hit--If at all possible leave your cards and valuables at home or carry them with you. This is tough to do when you're at the gym. If anyone has other suggestions it would be kind of you to share.

No Foolin

The following is not a joke. This a roundup of true stories that could affect you.

• The Make Work Pay credit goes into effect today. You could see between $10 and $20 extra in your pay that's up to $400/year. CNN points out the details.
• There's a Conficker Worm on the loose and it's looking for you computer. CBS tells you how to protect yourself if you haven't already.
• Chase will be refunding $4.4 million in sneaky fees to their credit card customers. Read about at The Consumerist.
• Also at The Consumerist--Ford will make your car payments for 1 year if you lose your job.

But enough of that. For some real April Fool's Day fun test your friends' ESP skill, but first watch the instruction video below. Then follow the link below the video to the ESP test.

Link to ESP test

Have a foolish day!

New Rules: Saving vs. Debt

The new rule on whether you should pay off debt vs. building savings is that there are no rules. I know I've been following the rule of pay down debt before adding to savings and I've touted the benefits of this strategy: debt costs more long term, savings accumulate slower. But all bets are off in this economy.

Suzy Orman just released an update to her 2009 Action Plan, and I've got to agree with her on this. Suzy says, "If you do not have a stash of cash and you have been using all your extra money to pay down your credit card debt and they keep closing your cards down- what are you going to live on if you lose your job? Chances are you may not have any available credit limit to use to rely on since the cards are reducing those limits, you will not be able to get a new card since you are now not employed. So to help you in the event you lose your job my advice is to pay just the minimum required on your credit cards every month, and then use every extra penny you have to build your emergency savings fund."

Make your goal to have 8 months of living expenses in an emergency fund. As long as you continue to make minimum payments on your credit cards your credit score should be fine. That is unless the card company doesn't reduce your limit or close down your card, which they are less likely to do as long as you pay the minimum. But don't be tempted to use the cards for charges that are not emergencies. And only then if you don't have other funds to cover the event.

If you already have a substantial emergency fund in place, keep paying down that debt. These are unusual times and it's important to be prepared for the worst while remaining flexible to changing your strategies.

Credit Card Revenge Doesn't Work

photo by JJanetC

I found the photo above on flickr under the title "Credit Card Revenge". I don't know what she stuffed in those credit card reply offers. It almost looks like she blew them up like balloons. Whatever she did it looks like a lot of time and trouble. I'm sure it made her feel good and was great credit card therapy. In fact it made her feel so good that she posted a pic. But I'm sorry to tell JJanetC that her act of revenge doesn't hurt her opponent one bit. Not even a little. Nope not a scratch. Sorry they didn't even notice.

I know this for a fact because I am a former direct marketer. It doesn't inconvenience the company because they have to pay the postage, in fact they expect a bit a that. They also don't think "ooh, we made this person mad". And they don't take your name off their mailing list. The truth is they never even open this stuff anyway.

If you want to stop receiving credit card offers try a more effective approach. Visit OptOutPrescreen.com. This is a real website recommended by the FTC. OptOutPrescreen.com works with Experian, Equifax and Transunion. If these companies sound familiar it is because they are the same companies that report your credit score. Likewise they are the companies that credit card companies purchase mailing lists from. So the OptOutPrescreen.com is a central site that takes your name off all three lists.

Visiting OptOutPrescreen.com should take care of things for credit card offers but it won't stop other types of mail solicitations. You can also visit the Direct Marketing Association's opt-out page. Opting-out with the DMA will get you off the catalogue and other mail solicitations. By the way these companies also use the 3 credit reporting agencies to purchase mailing lists.

If you've used these options before but have again started to receive unwanted mail that's because your opt-out expires after 5 years. So you need to do it all again. But unlike our friend who took the photo, this process only takes minutes. She probably spent much more time gathering, stuffing, sealing and snapping photos.

And just for the record I have to tell you about those little postcards that are stuffed into magazines. You know the ones that fall out or are bound in so that the zine always flips to the same place. Yes, they are annoying. But to the people who fill them out with silly names, curse words, pornography, or religious quotes and then send them back to the company--you are also wasting your time. The company doesn't care. They don't even look at them. They've got better things to do with their time and I hope you do too.

This is an encore post that originally ran June 9, 2008.

If this is how they treat good customers...

Over the weekend I watched Jerry Lewis' The Bellboy twice. I saw it a few times when I was a kid but didn't remember any of it. OMG, this movie is so funny. Now I can't stop relating almost anything I come across to The Bellboy. So imagine my hysterics when a Twitter friend gave a tweet that she just received notice from Capital One that they were raising her interest rate from 8.9% to 30% because she pays her bills in full and on time. HA, ha, ha, that's like when the Bellboy gives a box of candy to the dieting guests so she'll come have to come back and diet again. Oh, wait it's nothing like that...

It's exactly like what I wrote about in Credit Card Companies Slap "Good" Customers. Capital One is trying to capitalize on the one time the little tweeter doesn't pay her card in full. The company sent an undisclosed number of credit card customers similar letters with notice that their rates will increase in April. Good thing they've got enough time to close these accounts. Just what will that do to the struggling credit buffoon?

Credit Card Changes No Big Deal to Credit Union Members

Last month announced mandatory changes to credit card practices that they deemed unfair to consumers. The changes will take place in July 2010.

Once in place credit card companies can no longer do the following:

• two-cycle billing


• raise rates if you are late on other bills


• raise rates for late payments


• raise rates during the first year

Critics are unhappy that the restrictions don't go into effect until mid-2010. Bankers probably aren't so happy that they can no longer pull these tricks. But credit unions can sit back and smugly say "We told ya so."

If you hold a Coors Credit Union credit card you don't have to wait until 2010 to get a fair deal. That because your credit union has always been honest. We don't stick you with unfair credit card practices.

So will this level the playing field between large corporate credit cards and credit unions. Maybe, but I'll be that they come up with new tricks that don't make the Feds list of no-no's. Hey they've got a year and half to think about it.

More on 401(k) vs. Debt

Funny how the universe seems to converge. Yesterday my husband and I were contemplated suspended his 401(k) contributions to put toward debt. Nelisha Wilson of the Coors Investment and Retirement team gave sound advice tell us to stay in. Then later in the day I turned on NPR in my car just as a caller was asking Liz Pulliam Weston a similar question. The difference was that the caller wondered if he should reduce his contributions and put the rest toward debt.


Liz Pulliam Weston advised that it may be okay to reduce contributions as long as it was a short-term plan to control debt. She also advised not to reduce below the level that is needed for the employer match.


So last night we discussed this at home. We figured out that we would have an additional $150 after taxes to put toward debt. This is if Neil reduces his contribution but stays in enough to earn a 3% company match. As of last night we figured this was probably not worth it considering Ms. Wilson's point about a sale on stocks--which by the way was also pointed out by Ms. Pulliam Weston.


But I had to do the math and returned to the calculator. First, I have to say that I'm not proud of the debt we are carrying. Second, we are sticking to our plan to be rid of it in 2 years or less.


Here's what we're looking at:
credit card 1, Interest rate 26.99%, balance $10,000
credit card 2, Interest rate 12.99%, balance $10,000


Plan A
If we continue 401(k) contributions as is and pay $1,000/month to debt
credit card 1 will be paid in 1 year, 4 months
credit card 2 will be paid in 2 years
The total interest paid would be $3,421


Plan B
If we reduce 401(k) contributions and increase take home pay by $150/month then add this to the debt payment plan to make it $1150/month
credit card 1 will be paid in 1 year, 1 month
credit card 2 will be paid in 1 year, 8 months
The total interest paid would be $2,813


Comparing:
Plan be would rid us of credit card debt 4 months earlier and save us $608.


The big question:
What would we lose in retirement earnings? That's the one thing I can't figure out how to calculate. It's a gamble. Do we give up funding our retirement with ($150 x 24 months) $3600 to save $608? Currently the 401(k) is losing over 7%/quarter.


What would you do?