In a world where shopping online and booking a hotel or a rental car usually demands plastic, few people can survive without a credit card.

But vast changes in credit regulation coupled with a souring economy turned 2009 into the most turbulent credit year in decades, with a record number of rate hikes, consumer cancellations and changes in fees, terms and credit limits. And experts say there's more in store for 2010.

"2010 is going to be the year of accountability," said Adam Levin, chairman and co-founder of Credit.com, a credit-shopping website. "Credit card companies are going to be more accountable to consumers, but consumers are going to have to be more accountable too."

What should you expect in 2010, and how can you put yourself in the best position to lessen the pain, or even profit from the changes?

First it's helpful to recap what's already happened, said Bill Hardekopf, chief executive of LowCards.com. That's mainly because many of the anticipated changes are linked to a consumer protection law that was passed earlier this year but is taking effect in stages.

In May, Congress passed the CARD Act -- short for the Credit Card Accountability, Responsibility and Disclosure Act of 2009. But legislators gave banks time to acclimate to the new rules by putting in three effective dates. The first was in August, the second is in February and a final rule that affects gift cards applies next August.

What happened last August? Credit card issuers were required to give consumers 45 days' notice of rate hikes and bill people at least 21 days' before their payments were due. That was intended to assure that consumers were given adequate time to pay without getting hit with late fees.

In addition, consumers got the ability to "opt out" of a rate hike. The catch on this opt-out provision is that when you say no to the higher rate, the bank can close your account and double your minimum monthly payment, Levin said.

If you do elect to close the account, you can't be forced to pay off your balance all at once. But the new law does allow banks to set up a schedule that guarantees you'll have paid off your debt within five years. On the bright side, you pay off the debt at the old interest rate, not the higher one that the bank wanted to impose.

But most significant changes go into effect early next year.

As of Feb. 22, if you have a consistent history of paying on time your rates cannot be increased on outstanding balances except when a "teaser" rate expires or when you have a variable-rate credit card.

If a credit card company hikes rates on a fixed-rate card, they are only allowed to charge the higher rate on new charges.

Your rate can be increased if you've been irresponsible about your credit use, though. If your payment is more than 60 days late, the issuer can charge a penalty rate that could be vastly more expensive than what you were paying previously and that rate can be applied to an existing balance. However, the credit card company must reinstate the lower rate if you make at least six months of on-time payments.

And then there are those fees for exceeding your credit limit. You cannot be charged an "over-limit" fee unless you affirmatively opt-in to a program that will allow your card issuer to accept charges that put you over your credit limit. If you don't opt in, the bank will simply reject any such charges.

All consumers also must be told how long it will take to pay off their credit balances if they make only the minimum required payments.

Youthful borrowers those under 21 will not be able to get credit cards unless they have a co-signer or can show that they have income to pay their own bills.

Issuers of "subprime" cards those going to people with bad credit histories may not charge customers upfront fees to obtain the card that amount to more than 25% of the credit limit.

These changes have already spurred a flurry of activity. In an effort to maintain their ability to change rates, banks have been converting fixed-rate cards to variable-rate cards and they've hiked rates on millions of customers.

In addition, some 58 million individuals have had credit cards canceled or their credit limits cut, said Craig Watts, spokesman for Fair Isaac Co., the makers of the FICO score. These cuts aren't being imposed only on bad risks, either, Watts said.

The typical cardholder whose credit limit was affected had an excellent credit score, ranging from 760 to 770.

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Overdraft Trap's ! - Tvider
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Yep, getting a new set of wheels is one of those wonderful sources of high-octane excitement -- but don't get too revved up.

Car buying is, or should be, a calculated decision. It's a major purchase. So, before you go cuckoo for that coupe or raving for that roadster, consider these top 6 mistakes car buyers make.

1. Buying the wrong vehicle: Sure, those SUVs look big and cool, and dealers are dealing. But do you need one to drive the mile and a half to bingo every Sunday? Is that racy red sports car really the best choice for your family-of-five-kids-and-growing?

2. Getting emotional in the showroom: If you fall in love with a car, be sure not to overreact and get too eager. Give yourself some time to sit back and make sure it's the car for you. In short, don't let your heart rule your head -- it can lead to aching in both. Also, keep a grasp on reality. If you can afford $20,000 and the object of your affection lists for $30,000, you might be able to negotiate it down to, say, $27,000, but there's no way you're going to be able to buy it for $20,000.

3. Choosing a dealer by location: No, dealers are not all the same, not even for the same exact makes and models. Ask around. Learn from friends' experiences. Also, determine your dealer's Customer Satisfaction Index, or CSI, which is a ranking generally maintained by individual automakers for the dealerships that sell their vehicles. Ford, for example, gives out what's called the Blue Oval Award to dealers with a top ranking. The CSI is a reflection of how well an individual dealer satisfies its customers in sales and service. Ask your salesman about the dealership's awards. If he balks, you should walk. You can also check a dealership's complaint record with the Better Business Bureau.

4. Talking trade-in too early: This is another easy trap to fall into, because dealers love to play the trade-in game. Don't let them muddy the waters. Negotiate a satisfactory price for the new car, and then bring up your trade-in. Another thought: If you bring in your old car full of trash and covered in mud, the appraiser will rightly assume you don't put much value on it yourself.

5. Going it alone when you need a helping hand: If hassles give you headaches and negotiations make you nauseated, turn it over to an auto broker or a service such as the AAA Endorsed Auto Buying Program, which nets members special pricing through authorized dealers.

6. Forgetting that it ain't over till it's over: Or, in the case of car buying, it ain't over till the business manager sings. You may think you have bought your car once the sales manager shakes your hand and tells you what a great deal you got. But beware the business office, often called the finance and insurance office. Dealers often make as much money in this room as they do on the showroom floor. Insurance, dealer add-ons, extra fees and interest rate changes are among the common ploys you could get clobbered with on your way out the door.

PHOENIX -- Should I stay or should I go? That is the question more Americans are asking as the housing market continues to drag.

In good times, it would have been unthinkable to stop paying the mortgage. But for Derek Figg, a 30-year-old software engineer, it now seems like the best option.

Mr. Figg felt trapped in a home he bought two years ago in the Phoenix suburb of Tempe for $340,000. He still owes about $318,000 but figures the home's value has dropped to $230,000 or less. After agonizing over the pros and cons, he decided recently to stop making loan payments, even though he can afford them.

Mr. Figg plans to rent an apartment nearby, saving about $700 a month.
Strategic Defaults by State


See data on "strategic defaults" -- homeowners who choose to default on their mortgage even though they could still afford to pay it.

     A growing number of people in Arizona, California, Florida and Nevada, where home prices have plunged, are considering what is known as a "strategic default," walking away from their mortgages not out of necessity but because they believe it is in their best financial interests.

A standard mortgage-loan document reads, "I promise to pay" the amount borrowed plus interest, and some people say that promise should remain good even if it is no longer convenient.

George Brenkert, a professor of business ethics at Georgetown University, says borrowers who can pay -- and weren't deceived by the lender about the nature of the loan -- have a moral responsibility to keep paying. It would be disastrous for the economy if Americans concluded they were free to walk away from such commitments, he says.


Developments: Is Walking Away FromYour Mortgage Immoral?

Walking away isn't risk-free. A foreclosure stays on a consumer's credit record for seven years and can send a credit score (based on a scale of 300 to 850) plunging by as much as 160 points, according to Fair Isaac Corp., which provides tools for analyzing credit records. A lower credit score means auto and other loans are likely to come with much higher interest rates, and credit card issuers may charge more interest or refuse to issue a card.

In addition, many states give lenders varying degrees of scope to seize bank deposits, cars or other assets of people who default on mortgages.

Even so, in neighborhoods with high concentrations of foreclosures, "it's going to be really difficult to prevent a cascade effect" as one strategic default emboldens others to take that drastic step, says Paola Sapienza, a professor of finance at Northwestern University. A study by researchers at Northwestern and the University of Chicago found that as many as one in four defaults may be strategic.



Driving this phenomenon is the rising number of households that are deeply "under water," owing much more than the current value of their homes. First American CoreLogic, a real-estate information company, estimates that 5.3 million U.S. households have mortgage balances at least 20% higher than their homes' value, and 2.2 million of those households are at least 50% under water. The problem is concentrated in Arizona, California, Florida, Michigan and Nevada.

Josh Cotner, who owns an insurance agency, says his mortgage balance is about $100,000 more than the market value of his home in Gilbert, Ariz. Mr. Cotner could rent a bigger home nearby for $600 a month, far below the $1,655 he now pays on his mortgage, home insurance and property tax. He says he recently stopped making mortgage payments because his lender wouldn't help him reduce the principal on his loan under a federal program in which he believes he is qualified to participate. Given the sometimes lengthy legal process of foreclosure, he may be able to stay in the home for at least another nine months without making any payments.

Banks warn they may get tough with strategic defaulters by pursuing legal claims on a borrower's other assets. "We will try to reduce people's payments if they have a hardship," says Thomas Kelly, a spokesman for J.P. Morgan Chase & Co. "But we have a financial responsibility to get people to pay what they owe if they can afford it."

Steven Olson, a loan officer and roof installer in Roseville, Minn., defaulted in 2007 on a plot of land in Florida he had bought as an investment. "I thought I could move on with my life," he says. But the lender, RBC Bank, a subsidiary of Royal Bank of Canada, sued him, seeking to make him pay more than $400,000 to the bank to cover its losses on the loan. Mr. Olson has hired a Florida lawyer, Roy Oppenheim, to resist the claim. An RBC spokesman declined to comment.

                        
    The Burning Questions

States where lenders generally can pursue such legal claims include Florida and Nevada but not California and Arizona, where laws generally prohibit lenders from pursuing other assets of mortgage borrowers. A new Nevada law will protect many borrowers from these judgments if they bought a home for their own use after Sept. 30, 2009.

Another risk for defaulters is that banks could sell the rights to pursue claims to collection agencies or other firms, which could then dun the borrowers for up to 20 years after a foreclosure. Such threats appear to deter some borrowers. A recent study from the Federal Reserve Bank of Richmond found that under-water borrowers were 20% more likely to default in a state where mortgage lenders can't pursue claims on other assets than in those where they can.


    How much of your home's value do you owe on your mortgage?


Brent White, an associate law professor at the University of Arizona who has written about this issue, says homeowners should make the decision on whether to keep paying based on their own interests, "unclouded by unnecessary guilt or shame." He says borrowers can take a cue from lenders that "ruthlessly seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility."

But it isn't just a matter of the borrower's personal interest, says John Courson, chief executive of the Mortgage Bankers Association, a trade group. Defaults hurt neighborhoods by lowering property values, he says, adding: "What about the message they will send to their family and their kids and their friends?"


In Mesa, another suburb of Phoenix, low prices are helping to draw buyers who may walk away from other homes. Christina Delapp bought a house out of foreclosure in July for $49,000 in cash. She says she will stop paying the mortgage on another home she still owns in Tempe if she can't sell in the next few months for more than the $312,000 that she owes.

Ms. Delapp, who has been jobless for 18 months, says that the new home is part of her survival strategy. "I feel very fortunate," she says. "Regardless of what happens to my credit, we've managed to put together the best safety plan that I possibly could."

Mr. Figg says that deciding to default on his loan was "the toughest decision I ever made." He worried that if he ever loses his job he would be marooned in a home that he couldn't sell for enough to pay off his loan, limiting his ability to find work in other parts of the country: "I couldn't move up. I couldn't move down. I couldn't move out of the city. It was a very claustrophobic situation."

By moving to an apartment, Mr. Figg expects to lower his costs by about $700 a month. He plans to put that into his savings account and says he is willing to rent for the next five years or so.

Lenders are guilty of having "manipulated" the housing market during the boom by accepting dubious appraisals, Mr. Figg says. "When I weighed everything," he says, "I was able to sleep at night."

Q:
Dear Dr. Don,
My fiancee and I pulled our credit reports in anticipation of purchasing a home. When I pulled my credit report, I was surprised to learn that my parents made me an authorized user on several accounts, some of which had negative payment history that was negatively affecting my credit score.

How can I get myself removed as an authorized user? Will removing me as an authorized user remove this negative history from my credit report?
-- Steve Storied



A:
Dear Steve,
There are two steps to take. First, get your parents to remove you from the accounts where you are an authorized user. You could contact the creditors and ask them to remove you from the accounts as an authorized user, but creditors often insist on only letting the primary account holder make this change.

Second, contact the consumer reporting agencies -- Equifax, Experian and TransUnion -- to have the authorized user payment histories removed from your credit report. When you are removed as an authorized user, the account and the payment history of the account can be removed from your credit report.

Because your credit score is based on what's in your credit report, having the negative information drop off your report may help your credit score. But if you don't have much of a credit history besides the authorized user accounts, having them drop off your credit report could result in a lower score.

Biggest mistakes

When is a house not a home? When it's a piggy bank.

Homeowners treated their houses like piggybanks or automated tellers during the housing boom years, withdrawing equity in the form of cash whenever they wanted to buy something. Many of these homeowners now owe more than their homes are worth, a condition known as having "negative equity," or being "underwater."

Negative equity limits your ability to sell a house to get out from onerous mortgage payments, or to move to take a better job or to relocate to a better school district.

People abused their home equity in a couple of ways. Some turned equity into cash by getting ever-larger home equity loans or lines of credit. Others took advantage of cash-out refinancing as a way to collect excess cash to spend.

During the boom, it worked this way: A homeowner borrowed $100,000 to buy a $120,000 house. A few years later, when the house more than doubled in appraised value because of the housing bubble, the owner did a cash-out refi for $200,000 and pocketed more than $100,000 in cash.

The money was quickly spent on Harleys, Hummers and holidays in Hawaii.

"Too many consumers thought of their home equity as easy-access ATMs," says Jeff Lazerson, president of Mortgage Grader, a Laguna Niguel, Calif.-based mortgage technology and management company. "Many thought they were individual geniuses about the infinite value of their homes, not understanding that they were just riding the high tide that turned out to be a crashing tidal wave."

To extend the metaphor, those are the homeowners who are underwater now.


Smart strategies going forward

Banks had breathtakingly lax standards for extending home equity debt during the housing bubble. Now, they have pulled a 180. Banks frequently reduce the limits on home equity lines of credit and encourage borrowers to close their accounts.

Lenders are also reluctant to approve cash-out refinances. Many lenders won't approve a cash-out refinance for more than 80 percent of the home's appraised value, no matter how high the borrower's credit score.

Someday, lenders will loosen today's strict lending guidelines. When they do, it would be prudent to remember that house prices can -- and do -- fall. Borrowing against all of a home's equity can limit your options when prices sink.

....................

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What Is "Bad Credit?

Dropping your high-interest card for a 0% interest card might seem like a no-brainer, but it's anything but. The rules -- and the penalties for slip-ups -- are changing.

[Related content: , credit cards, credit, credit counseling]
By www.ncrcreditplus.com

Transferring a credit card balance used to be so easy and painless that some consumers referred to it as a game: Sort through a stack of offers, find the best deal and you win. Now, fewer offers, shorter introductory periods and higher fees make finding a good balance-transfer deal much more challenging.



"Balance transfers are harder and more expensive than ever," says Jim Randel, the author of "The Skinny on Credit Cards." "This is all part of the pullback in the credit card industry."

The availability and attractiveness of the terms of balance transfer offers has taken a downturn right along with the economy -- but card issuers also point to federal credit card legislation, passed in May and slated to take full effect next year, as the reason for even more changes.

In July, JPMorgan Chase, the largest credit card issuer in the country, cited the new federal regulations when it sent letters to its customers informing them that the bank will increase its maximum balance transfer fee to 5% -- the highest charged by any issuer. Subsequently, the company stopped including balance transfers in most of its new offers.

"In a higher-loss environment, it's important that we are prudent with our balance transfer offers," Chase spokeswoman Stephanie Jacobson stated in an e-mail. She said the increase would not apply to all deals or customers but would not say who would be affected. Bank of America -- the second-largest issuer -- has increased its maximum balance transfer fee to 4%.


The standard balance transfer fee had been about 3% -- and some issuers also limited the total fee, often to less than $100, with caps. "It used to be common for issuers to cap balance-transfer fees -- to no more than, say, $50 or $75," Randel says. "Those caps are going away."

The fee increases and lack of caps can hit consumers' wallets hard. For example, a 5% fee on a $10,000 balance transfer would be $500. It is possible to find better deals, but it takes work.

Small-business owner Ken Kilpatrick, who lives near Philadelphia, made many phone calls to find a transfer deal for his $10,000 balance. He finally opened a Discover card at 0% interest for a year, with a fee capped at $99. "There are still deals, but you've really got to look for them," Kilpatrick says. "First, the customer service reps will tell you about what deals they're promoting right now, but if it's not what you want, you just have to keep asking questions."

Here are some steps to take if you're looking for a balance-transfer deal:


1. Go to online forums and get feedback from customers of the issuer you're considering. "Do a little homework on the company. Check and see how they treat their customers," Randel says. "Because once you've switched, you can't just switch back. Your old issuer may or may not take that debt back."

2. Read the fine print to make sure you're getting the deal you think you're getting. Some card issuers now advertise a certain introductory period -- say, a year -- and introductory interest rate -- say, 0% -- but the fine print specifies other periods and rates for those with less-than-stellar credit. "The best investment consumers can make is in a magnifying glass -- take that and read the fine print," says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling.


3. Pay attention to the APR on purchases, not just to balance transfer terms. Until the new federal rules kick in, in February 2010, any new purchases at a higher interest rate probably will be buried under your lower-rate transferred balance. "You need to know, 'OK, if I charge a pair of shoes on that card, what's the rate?'" Randel says. "Because if you have a $2,000, 0% balance transfer, and you charge a new pair of shoes for $50 at 15.9%, the last thing that's going to get paid is those shoes."
Get advice in a credit card forum

4. Consider keeping your old card open if you do transfer a balance to a new credit card -- unless you'd be tempted to rack up a new balance on it. "If you leave the old card open, it can be a temptation to add little charges here and there, and before you know it, you've run up your debt again," Cunningham says.

5. Don't assume that interest rates or other terms will not be changed by the issuer in the future. For example, Chase recently increased minimum payments for some customers by 150% -- and many of those affected had low-interest deals for the life of a balance transfer.

That might trip up some customers who can't afford the new, higher payments, possibly causing them to be late or miss a payment and, in turn, causing that low interest rate to skyrocket.

"During that 12 months, or whatever the introductory period is, the issuer typically cannot change the interest rate or minimum payment," Randel says. "After that, they can do whatever they want -- and worse, if you miss a payment, the game is off."