Credit card users have someone on their side– the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration. Those government organizations are supporting new rules to regulate practices of credit card companies. Here are a few of the new rules expected to go into effect mid-2010:

1. Interest Rate Changes: Credit card companies must disclose the annual percentage rate (APR) at the time the account is opened and if they plan on raising the rate, that must be clearly communicated when the account is opened.

2. Reasonable Time to Pay: Credit card companies can not treat a payment as “late” unless the consumer has at least 21 days to pay it.

3. Payment Allocation: If you have account balances with different Annual Percentage Rates and you pay more than the minimum, that extra money will go towards the account with the highest balance or it will go equally to all of the accounts.

4. Double-Cycle Billing: Credit card companies cannot do this anymore– it’s when they tack on finance charges based on balances associated with previous billing cycles.

These new laws are the most strict regulation efforts against the credit card industry in decades. Although the rules take effect July 1, 2010, the Office of Thrift Supervision hopes credit card companies will start complying as soon as possible.

Photo Courtesy of Andres Rueda

Here’s an option you may not have considered for holiday shopping: layaway. It’s a practice that was popular before credit cards found homes in just about every wallet. It basically allows the shopper to set aside the item they wish to buy by giving the retailer a small amount of money. Then the shopper makes payments towards the item when they have the money. But they don’t walk out of the store with the item until it’s paid in full.

Since banks are lowering credit limits and consumers seem more hesitant to rack up credit card debt, the Detroit News reports that layaway is becoming a popular option once again. In fact, Sears started offering layaway again for the first time since 1989 and it’s been a good move this holiday season. Kmart has had layaway for decades, but started an advertising campaign in October promoting the service prominently. So far it’s paid off.

There are some things to know before trying layaway according to creditcards.com:

1. Does the retailer provide full or partial refunds if the layaway is not completed? (Many stores charge a penalty for not completing the purchase. Kmart, for instance, keeps 10% of the purchase price.)

2. Does the retailer provide store credit toward future purchases if the layaway is not completed?

3. What is the payment amount?

4. When is it due?

5. How often must the payment be made — weekly, every other week or monthly?

6. Are any service or layaway charges added to the purchase price?

7. Are there additional charges, such as for shipping?

8. Will the layaway item be physically separated from other store merchandise, or marked “sold”?

9. If the item is not in stock and needs to be ordered, under what circumstance (such as once half the purchase price has been paid) will the order take place?

10. What are the product’s details (color, size, stock number, model number, trade name or manufacturer, etc.)?

There are also websites that offer layaway services including lay-away.com. Shop for the item you want and lay-away.com will help you buy it without using credit cards. They don’t charge a fee, because they make money off commissions from selling certain products. So if you’re giving up credit cards, but you’re a little short on cash, layaway may be a good option.

There are times when you want to pay down (or off) debts so that the payments are no longer pulling down your monthly budget. There are also times when you are better off keeping the debt and investing the extra money that you have.

1. No interest loans - these are the specials that many companies run (particularly at this time of the year). If you have the money to buy the item why not utilized the no interest loan and put the money into an interest baring account. You could even set up payments to come directly from the account if you are worried about forgetting to make a payment. The interest you gain may not be a fortune but it will be more than you would have made if you had paid cash.

2. Low interest debts - introductory rates on credit cards or even some loans make it viable for you to put extra money in a higher interest baring account instead of paying down the debt. As long as you are making more in interest than you are paying out it is a good choice.

3. Tax deductible debts - some loans (or at least the interest from the loans) can be written off on your taxes. This can make it possible to make more by investing additional payments instead of paying off a loan early. Talk to your tax professional about how paying down a tax deductible debt will ultimately affect you.

Keep in mind that when you have the money available to pay off a debt (even if it is invested in some other account) this is credit and not debt. The goal for a prosperous life is to always have the money to provide for your life.

The times may be tight, but that doesn’t mean they have to be tight for you. Finding ways to save just a little money here and there will give you the opportunity to pay off your mortgage or other debts in record time. Just making two extra payments on your mortgage each year will allow you to cut your term by 1/3.

1. Tax Refunds - instead of spending your refund on something frivolous, put that money to work. Use it to make that extra payment (or two) on your mortgage.

2. Groceries - Keep a close record of what you are spending on groceries and work out a plan (using coupons and other techniques) to allow you to cut out $50 a month from your budget. Use your savings to make an extra payment on your mortgage.

3. Luxuries - pass on the manicures, expensive hair cuts or other special treats for just one full year. Use these savings to make a dent in your mortgage term.

4. Entertainment - utilize free and discount opportunities for family fun. Put aside the money that WOULD have been spent eating out, going to the movies and other things and use it to make an extra couple of payments on your mortgage or debt.

The money adds up quickly and the more you pay on your debt the faster it vanishes. The best part is that once the debt is gone then the savings will be available to spend in other (usually more enjoyable) directions.

Will this person give me a gift? Often I buy presents for people because I think they may be buying me a gift. I don’t want to be put in that awkward situation where they’ve bought you a nice, thoughtful gift and you have nothing to give them in return.

Would this person be offended if I didn’t give them a gift? We all have those people in our lives that tend to be easily offended and if they don’t receive a Christmas gift we may upset them.

Is there a big reason why I want to give this person a gift? There are several people on my list simply because I want to give them something special. Usually it’s because they’ve impacted my life this year or I just feel compelled to do something nice for them.

After thinking about each person I’ve decided to make homemade gifts for many of the people on my list. It’s a low-cost idea, but something I think they will appreciate. I will probably spend about as much time on putting these gifts together as I would have spent on going to the mall, but the affect on my budget will be far less. That way I can still keep them on my Christmas gift list.

Photo courtesy of Kevindooley

Christmas is about friends and family, turkey and pie, and for millions of Americans– cash and credit. According to The Good Sheet (found in your neighborhood Starbucks this week) 2007 holiday retail sales reached $474.5 billion. Last year the average consumer planned to spend more than $800 on gifts, decorations and greeting cards, plus more than $100 on themselves. Here is Christmas by the numbers:

• $9.3 billion spent on jewelry last November and December
• $5.8 billion spent on hobbies, toys and games during November and December of 2007
• $19.8 billion spent on computer and video games last holiday season
• $700 million was spent on candles last year
• $26.3 billion in gift cards were purchased for Christmas 2007

And not all of that money spent is cash. In November and December of 2007, consumers gathered $12.8 billion in new debt. According to an organization that tracks debt, that equals 16% of their total accumulated debt for the year. According to a 2007 survey, one in three consumers were still paying off the Christmas purchases from the year before. So where do you want to be next year? Still paying off your Christmas purchases?

The government started this fiscal year with a record high deficit. This is mainly due to all of the recent bailouts that have been instituted to save companies. Not the Mom and Pop stores, mind you. The government bailouts have only gone to the big companies that are too big to be allowed to fail.

Just recently American Express was able to change its identity to one that makes it a banking institution so that it would be able to receive some of the bailout money. I have to wonder if I could be eligible if I changed the name of my company or business to something with ‘the bank of’ in its title.

Now the government is going to step in and bailout more companies once again. This time it is the top three automakers (although I don’t know how top you can be if you have to be bailed out). There was a time when sound business practices are what kept a business running and not a government check.

The top three automakers in the United States pay more per hour to get a car made than the other companies - as much as 3 times more. If business A makes a product for $50 and business B makes the same or nearly the same product for $150 then can you guess which one is going to have the most profit at the end of the day.

Hand outs are NEVER good. There are times when people,individuals - need a hand up so that they can regain their balance and go on. But companies have to make it on their own or this ceases to be a free market society.

What’s worse is that you and I are paying for these government bailouts. CEO’s, administration and even workers in the companies that are making WAY more money than I am are using my money to get a paycheck. It just doesn’t seem right.

The record high deficit will continue to climb as long as the bailouts flow freely. The government is building up a debt at a time when the rest of us are being called to dig out of debt. It has to stop now or we will be selling out the future of our children.

The current economic times have made more people worry about their financial future than any other time in recent history. It doesn’t help that the current trend is to buy now and pay later. Debt is crushing the American consumers and Christians are not immune.

Debt freedom is a vital tool for the Christians. You belong to the person that you owe. The bank (loan company or other lender) dictates where you work, when you work and how you work. Having debt means NOT having control.

- If you have to make payments each month then you do not have the freedom to leave your current job until you have some other form of income lined up.
- If you owe someone money on your house or car (or any other item) then you do not own that item. You could not give it away if you felt led to do so - it’s not yours to give.
- If you are making payments on items then that money is tied up and can not be used to bless someone else or to assist the Church.
- If you are living in debt then you are teaching your children to live in debt (and bondage to the ones who own the debt).

There is nothing good about debt. It is the number one hindrance to a blessed walk with God. It is hard to act by His direction when you are so busy taking your orders from the people and places that own you.

Consumption on credit has been a driving force for the economy as long as there has been an economy. Even though mass credit is new, the use of credit goes back in the United States all the way to the Pilgrims. It is not a new way to do business, but the sheer volume of business done on credit is new.

The heave use of credit made its way into the society in the late 1800’s and early 1900’s. Songs were written to encourage people to avoid living off debt. Clothing stores opened up with the basic principle of selling clothes on payments. Banks were eagerly handing out money to borrowers.

After the stock market crash of 1929, bankers tightened up their belts. It was a painful lesson to endure and they were in no hurry to relive it. Lenders still handed out loans, but now the restrictions were much tighter. Long term mortgages were only extended out for around seven years. Borrowers only qualified to get around 25% of the man’s income (regardless whether the woman of the house also worked).

World War II shocked the economy once again. Soldiers came back from risking their lives with little or no credit history. Lenders were leery about giving loans to untested borrowers. The government stepped in to help out these Veterans and their families. The Veterans Administration established housing benefits and the government began backing the loans.

Lenders were enticed by the volume of new money flowing into the market. The industry professionals that had weathered the Stock Market Crash were gone. Fueled by the influx of borrowers, lenders once again began to loosen restrictions on credit.

The length of time for a mortgage term was expanded and long term loans found their way to 30 years (and now sometimes even more). Affordable housing became something you could pay each month instead of something that you could actually buy.

Retailers followed the mortgage industry and more consumers began to purchase everything on revolving credit. Furniture, cars, appliances and even clothing or groceries could be purchased today and paid for over the next several months or weeks. It offered people the opportunity to buy things they might not otherwise be able to afford.

The next crash was felt in the 1970’s and 1980’s. Banks folded by the thousands (not by the half dozen). TRADITIONAL interest rates climbed to double digits (and even into the 20% range). But the economy recovered quickly and the problems and lessons were easily forgotten.

The credit lifestyle that is prevalent in the first few years of the 21st Century shows all the signs of the other crashes. People, companies and even the government are in the habit of extended the spending well beyond the income. Something has to give and when it does hopefully we will learn something from it this go around.

We could all use a little help shrinking our bills. At BillShrink.com, get free personalized savings information about credit cards and wireless service. For instance, ever wonder if you’re paying too much for your cell phone? Plug in some details about your monthly bill, minutes used, texting habits and number of lines and BillShrink.com will search dozens of cell phone plans to find out if you could be saving any money.

If you use credit cards, find out if there are other credit cards that could be offering you better cash rewards or benefits. Tell BillShrink how much you spend a month and the top three categories you spend the most in. Then BillShrink will let you know if there is another credit card out there better suited for your habits. Check it out and let us know what you think.