Credit Card Issuers continue to find ways to make extra profits

Many of us were hopeful that the Credit Card Act of 2009 would finally put an end to the abusive tactics of card issuers. Some methods used to garner fees seem down right criminal, and an Act of Congress was needed to stop them. But, like adage goes about plucking a grey hair, you take one out, and two more sprout back up in its place.

In the past year, card issues have created new ways to collect millions more in fees each year, many of which are hidden to consumers, unless you pore over your credit card statement.

Credit card issuers are going to more than ever try to find ways to make extra profits. New charges and changes to the way fees are calculated are adding to the balances of a growing number of cardholders. While some of the practices were instituted after the Credit CARD Act was approved in May, others were quietly being put in place earlier as a result of the recession. The one thing they have in common is that none of them are explicitly prohibited by the Credit CARD Act.

Under the Credit Card act, consumers with fixed rate credit cards will not have rates changed on current balances if they pay on time – but, the majority of cardholders carry variable rate cars, which could leave them exposed to risk of a rate increase. The rate on these cards is usually calculated by taking the prime rate, and then adding to it a risk spread. Historically, the prime rate used was the highest in the month. However, many issuers have amended their terms this year, so they can now select the highest prime rate in the previous 90 day cycle, which the Center estimates can cost consumers $720 million a year. It’s so hidden and obscure that it can’t be interpreted as anything other than a way to extract money from people in ways they don’t understand.

In addition, although historically the rate on cards floated freely with the prime rate, many issuers have now set “floors”, to limit how low a cardholder’s variable rate can go. Ultimately, what we’re seeing here is that the legislation may have the best intentions of the consumers in mind, but it lacks the breadth necessary to offer any real protection. The major of customers are still exposed to unexplained rate increases, and fees that they just will not understand.

2009's Top Money Saving Sites

Most of us are cutting back on the small luxuries in order to make our dollar go a little further these days - and we're also becoming much savvier with our shopping choices.  But, somehow, no matter how much we try, the holiday season seems to be one time of the year when we all seem to blow our budget.  So, we make New Years Resolutions to get back on track, to cut back on the things we really don't need, and find ways to save a buck or two on the things we really do need.


One way a lot of us are making our buck go a little further is by taking advantage of the offers on Money Saving sites 


FatWallet.com
Consider FatWallet the mother of all money-saving sites. It combines a deal forum, coupon search, and in-house cash back program, making it a one-stop destination for all things bargain-related. Though it specializes in online deals and sales, you can also use FatWallet for comparing other purchases too, like seeing which gym offers the cheapest membership, which car company offers the best rebates to combine with the government’s new cash-for-clunkers program, or where to find cheap lobster.


toolzdo.com
ToolzDo is a global community comprised of local neighborhoods with members who love to show neighborly love, keep more cash, live wiser and better.

To help the community keep more cash, ToolzDo provides a One-Stop Shop for all reuse of stuff in the home and office. The only place on the web you can rent, share, swap, give & get free stuff; from electronics to power tools and designer bags. Did we mention furniture, clothes, toys, strollers, books, food, home improvement materials, space, and much more. With ToolzDo, it's all in one place.

Dealhack.com
Dealhack call themselves the hottest site to get insider deals on consumer and tech products.  On Dealhack, you'll find specials, coupons, rebates, buyer's guides and lots of cool stuff. We've organized the site so you can search for something specific or just browse.




Retailmenot.com
Retailmenot is a great site, where you can search for local and national coupons for just about everything you can think of.  Retailmenot also has a Social Network  where you can connect with other shoppers so you get the best coupons, offers and deals. Share the fashions you love, hook up for shopping events, see what coupons your friends are using, add your favorite deals, make a wishlist for all your friends to see and more! 


BensBargains.com
Bens Bargains is similar to a lot of other coupon sites, it doesn't offer anything flashy, but it sure does display some great coupons and links to great bargains on retailer sites, and you can even compare prices if your searching for a bargain on something in particular.

Woot.com
Technically, it’s an online retailer, but Woot qualifies for our list thanks to unique selling format, community atmosphere and, well, 99 percent of the stuff it sells it an absolute steal. Woot runs on a deal-a-day format with only one item on sale per day, and when they’re gone, they’re gone. You’ll find everything from flashlights to fire alarms cropping up on the site, but even when the product disappoints, Woot’s spiced-up product descriptions usually never fail to elicit a smile. Just don’t buy when you’re in a hurry – shipping can sometimes take ages.


Kashless.com
Craigslist and Freecycle both offer amazing lists of items other folks are giving away entirely for free, but Kashless aggregates both into one seamless feed of no-catch freebies. It also adds some unique extras, like sharing listings on Facebook and Twitter (”This free fridge would be perfect to convert into a kegerator!”) and even real-time text notifications when items you’re looking for are posted. Having scored free firewood, air conditioning units and hot tubs on Craigslist before, we can safely say there’s a bounty out there.


TotallyFreeStuff.com
You probably spot offers for free samples all day long on billboards, newspaper ads, TV commercials and other mediums, but what if you wanted to look at them all in one spot and find some stuff you actually wanted to try? TotallyFreeStuff posts everything from free stuff you sign up for online, to items you buy at a store in mail in rebates for, and contests to win the really big stuff. You’ll have to cut through some junk to find the stuff with the fewest catches, but it’s one of the most comprehensive listings out there. And hey, it’s free.

When buying a new Auto, Steer Clear of the Rule of 78s

This is one rebate auto shoppers should avoid.

Some auto lenders still use the archaic and costly "Rule of 78s" formula to calculate a rebate of finance charges when a customer pays off a loan early. This rebate is actually a sneaky prepayment penalty.

"The Rule of 78s is a historical anachronism," says David Rubinstein, vice president of the Virginia Citizens Consumer Council. "It's simply another way of padding a loan."

The Rule of 78s is a mathematical formula that was devised in the days before modern calculators. The formula was a quick way for lenders in the 1920s and 1930s to estimate payoff amounts when a customer paid ahead on an installment loan. It's still around today.

Also known as the sum-of-the-digits method, the Rule of 78s gets its name from the sum of the digits one through 12 -- the number of months in a year.

Wrong way
For a borrower looking to end an auto loan early, there isn't a worse way a lender could calculate your payoff amount. The Rule of 78s formula packs extra interest charges into the early months of a loan. Using Rule of 78s, a lender typically collects three-quarters of a loan's interest in the first half of a loan term.

There are two basic types of auto loans: simple interest loans and pre-computed loans. The Rule of 78s can only be applied to pre-computed loans that are paid ahead of schedule. To understand why this is such a lousy deal for consumers, you have to understand how a pre-computed loan works.

With a pre-computed loan, the interest owed over the life of the loan is calculated using a standard amortization table. Once you sign on the dotted line for this type of loan, you're obligated to pay back principal plus the full amount of interest that will accrue over the entire term of the loan.

To sum up, interest on a pre-computed loan is calculated in advance and you're on the hook for every penny of it when you sign.

In contrast, with a simple-interest loan you're charged interest each day based on the balance you owe. So the quicker you pay down your balance the less interest you pay. A simple interest loan with no prepayment penalties rewards customers who pay ahead.

Pay ahead with a pre-computed loan that applies the "Rule of 78s" method to prepayments and you'll be slammed with a penalty, disguised as a rebate.

Caution: Interest padding ahead
Let's say you're ready to pay off your 48-month auto loan a year early. Because you signed on for a pre-computed loan, you're on the hook for 48 months worth of interest even though you're paying off the loan in 36 months.

But your lender is going to do you a "favor." You don't have to pay 48 months worth of interest. Instead, he's going to determine your payout amount including a "rebate" for those 12 months worth of finance charges you won't have to pay.

But your payout amount won't be what you deserve. The reason? Using the "Rule of 78s" method, your lender applies more of your previous payments toward interest and less of your previous payments toward principal.

Since less is applied toward principal, the amount you owe will be higher than expected. The earlier you try to pay off one of these loans the more you'll have to pay. The higher the interest rate, the more that payoff amount is going to hurt.

"If it had overcharged the lender and undercharged the consumer, it would have disappeared decades ago," says Jean Ann Fox, director of consumer protection for Consumer Federation of America.

"It's a dirty little secret."

Turning on the warning lights In 1992, the U.S. Congress outlawed the use of the "Rule of 78s" formula in closed-end loans longer than 61 months. "It just gets very egregious with a longer-term loan," says Elizabeth Renuart, staff attorney at the National Consumer Law Center. States outlawing use of the Rule of 78s formula in installment loans of five years and less: Arizona Michigan Delaware Minnesota Idaho Nebraska Iowa Nevada Kansas New Hampshire Maine New York Maryland Oregon Massachusetts South Dakota Vermont Source: CARLAW, a monthly legal reporting service for legal compliance specialists in the automobile industry. Whether a lender can apply the "Rule of 78s" method to installment loans of five years or less is a matter of state law. Currently, 17 states prohibit the practice. Earlier last year, U.S. Rep. John LaFalce, D-N.Y., introduced a bill (H.R. 1054) that would eliminate the use of the Rule of 78s formula in credit transactions. Fortunately for consumers, simple interest loans are now the norm in the auto financing business. The vast majority of auto lenders do not use pre-computed auto loans and they do not use the Rule of 78s method to calculate prepayments. "The Rule of 78s as it applies to installment auto sales is a relic of the past," says David Robertson, executive director of the Association of Finance and Insurance Professionals. "In today's mainstream market, that would be an absolute rarity." The pre-computed Rule of 78s auto loans that do exist today tend to be found in the subprime market. Folks with less-than-perfect credit should be on the lookout. "Buy here, pay here" auto lots and lenders that specialize in offering loans to borrowers with badly damaged credit may offer these consumer-unfriendly loans. "All the ones I've seen have had really high interest rates," says Mark Eskeldson, an auto expert and author of CarInfo.com, a consumer information and advocacy Web site. "If a car dealer is trying to put you into a rule of 78s loan it's fairly safe to assume that the dealer has packed your interest rate -- he's inflated it."