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Helping the Majority of Americans who are Dealing with Financial Hard Times

A recent study conducted by the Center for Financial Services Innovation (CFSI) has revealed the ugly truth about just how much people all around the United States are suffering from financial woes. It might be easy to think that the only people having hard financial times are the homeless, or even the extremely poor. The truth that this study revealed, however, is that a whopping 57 percent of American adults are dealing with very real financial difficulties. The study was performed in order to get a current “health check” on the financial state of affairs for people in America. The hope is that by understanding the current situation, steps can be taken to help improve financial outcomes for households in the U.S. Different demographic groups face various financial challenges, but the end goal that everyone needs to get behind is finding a way to help everyone improve their financial outcomes, if possible. In response to the recent study, Aliza Gutman, the director of the CFSI and leader of the study, had some interesting insights to share in a recent interview. Gutman is in a unique position of being able to interpret the data that was used in the study and making it easy to understand for anyone interested in this topic. When asked about the significance of the study, and how it differs from previous, related studies Gutman said, “The Consumer Financial Health Study consists of a nationwide survey and consumer segmentation. We surveyed over 7,000 adults from across the United States and across the income spectrum, asking about financial behaviors, attitudes, preferences and product use. Consumers with annual incomes under $50,000 were over-sampled to provide a robust set of data on consumers in the lower half of the income distribution. However, since we aimed to understand the financial health of the entire country, we weighted the data back to the total U.S. population to report findings that are nationally representative.” There are seven consumer segments that were identified by the study. These seven segments were put into one of three categories: healthy, coping and vulnerable. The healthy segments seem… Read More

Are Millennials Making Prepaid Cards More Popular?

It has been well documented that Millennials say they do not care for credit cards. New numbers shed a bit more light on this subject: 65 percent of Millennials do not have a credit card 36 percent have never even had one It seems that prepaid cards are the most popular form of financial products for Millennials. A study revealed recently that 33 percent of young people either currently use or have prepaid debit cards. Just a few years ago, the trend was that only very specific groups, like teenagers and senior citizens, used prepaid cards. It looks like Millennials are bucking the system and are beginning to adopt prepaid cards as their preferred method of managing their money. What is to blame for the rise in popularity of prepaid cards, while credit cards seem to be on the decline? Here are a few things that may be contributing to this phase: Millennials grew up in an era when no one really used cash that much. They were used to seeing their parents use cards instead of checks or cash, so it makes sense that they would want a card-based form of payment to use for their purchases. Prepaid cards also allow people to stay in control of their money a bit more than credit cards allow for. You can set limits with prepaid cards, while it is very easy to get in serious debt with a traditional credit card. In fact, many Millennials watched their parents dig into serious pits of debt, so they would like to avoid making the same mistakes. Prepaid cards can also be integrated with mobile phone apps. The Millennials live and die by their smart phones. Mobile financial apps give prepaid card users the ability to check balances, track spending and even make money transfers, all in real time. So, how can financial providers begin to play catch up with so many young people showing a clear preference for new forms of financial services? For starters, the banks need to worry less about migrating people to full checking account customers and provide integrated services,… Read More

Former Treasury Secretary a Huge Fan of Online Loans

You don’t get the chance to see someone with the credentials of Larry Summers extolling the virtues of your industry every day. But that is just what online lenders recently experienced. Summers, the former Treasury Secretary and a world renowned economist has recently shifted toward becoming a full time supporter of the online lending industry. Once Summers left the Obama administration, he took a seat on the board of the Lending Club. The Lending Club is the country’s largest peer-to-peer lending company, with a lending division known as the payment company Square. At a recent conference called Lend It 2015, Summers listed why he is so excited about the online lending industry and why he is sure that “technology based businesses have the opportunity to transform finance over the next generation.” Along the way, Summers expects tech based financial companies to help to make the economy more stable and efficient in the years to come. Though it used to be that online lending was somewhat scrutinized by everyday borrowers, the industry has recently enjoyed an upswing in popularity. Customers who have great credit and want to consolidate credit cards on lower interest rate accounts can do so easily online. And even people who have lower credit scores can make use of online payday advance lending companies to get a quick loan to help them keep their heads above water in between paydays at work. In short, the Internet and other progressive forms of technology are beginning to change the way that people borrow money for good. And Summers seems to be on board for the long haul. The Change in the Online Lending Industry Why such dramatic changes in recent years? Well, according to some experts, half of all the workers in this country either own or work for small businesses. Whether it is because of the total number of jobs or output, the economy has finally recovered. However, lending to the small businesses that have fueled so much job growth has been somewhat stagnant. Part of the reason for the lack of lending progress to small businesses has been… Read More

Studies Reveal Real World Benefits of Payday Loans

It is no secret that there are lots of folks and organizations out there that like to drag the payday lending industry through the mud whenever they get the chance. Things have become so bad for some alternative financial providers that some lenders have been forced to close up shop because of some heavy pressure from government initiatives, like Operation Choke Point. It appears, however, that there is some very real proof that there are indeed benefits to payday loans that some people don’t want other folks to know about. Two new studies on the payday lending industry cast a new, more positive light on the industry as a whole. A Law Professor from Columbia, Ronald Mann, came to some very interesting conclusions in his most recent study. Here’s just a little bit of what Professor Mann’s study revealed about the short term lending industry: The study proved that credit ratings changes for people who default on payday loans are not all that much different from the credit score changes that responsible borrowers have. The decline in credit score in the year that a borrower defaults greatly exaggerates the final effect of the actual loan default. This is because the credit scores for folks who default on their loans typically experience very large increases for more than 24 months after the year that they defaulted on their loans. In other words, the payday loan default is not to blame as the ultimate cause for certain borrowers’ financial problems. This is usually because the borrowers who do not pay their payday loans back usually have dealt with other financial problems in the past that caused their credit scores to decrease. This all goes on to suggest that defaulting on a payday loan plays a very small part in the complete timeline of distress that default borrowers experience. It is hard to bring all of this into line with the improvements that the improvements to borrowers’ financial situations come from the ‘ability to repay’ requirements that are factored into every payday loan that is provided by short term lending companies. In a… Read More

Tips for Home Buyers with Bad Credit

Every prospective home buyer has a few financial concerns to think about prior to shopping around for a new home. It all starts off with getting prequalified for a loan. This step allows lenders to review your financial history and health. After that, borrowers can begin the process of submitting loan applications, so lenders can get a more in depth history of the purchaser’s financial situation. Lenders will almost always offer the best loans and lowest interest rates to home buyers who pose the lowest risk. Credit scores vary from just 300 to 850, with 850 representing the lowest level of risk. Anyone with a credit score lower than 620 may find that it is difficult to qualify for a mortgage. Don’t lose hope, though, as there are some lenders that specialize in providing mortgage loans to people with low credit scores. If you are planning on purchasing a home soon, but worry about your credit score, here are some tips to help you along your way. Get Your Finances Stabilized Prior to Shopping for a New Home It is a good idea to avoid any major financial changes for about two years prior to purchasing a new home. Lenders are apt to be more comfortable with loaning money to borrowers with low credit scores, if those borrowers have a stable income, up to date bill payments and a stable employment situation. Start Saving Money Now for a Big Down Payment The lenders that provide loans to people with bad credit scores assume that these loan seekers will provide large down payments. It is a good idea to have around 20 percent of the purchase price of your home saved up for a down payment. If you can save more, do so, as you may need additional funds for home inspections, loan closing fees and other expenses that pop up when you get around to actually closing on your loan. Pay Down Your Debts and Keep them Paid Down Lenders will often look at your debt to income ratio when they are looking at your loan application. Debt to income… Read More

The Feds Close in on Operation Choke Point

In a move that many have anticipated for quite a while, the United States Department of Justice finally took some action to investigate Operation Choke Point. It seems this investigation/debate will also involve the Federal Deposit Insurance Corporation, so financial pundits are hopeful for some swift action. The announcement provides some sense of vindication for businesses that have been treated unfairly by this initiative put in place by the Obama administration to crack down on businesses deemed unfavorable. U.S. Representative Blaine Luetkemeyer (R-Mo.) announced that both the DOJ and the FDIC have pledged to investigate the ill-conceived Operation Choke Point. This all comes in response to communications from more than 30 Congress members to the FDIC Acting Inspector, Fred Gipson, head of the DOJ office of Professional Responsibility, Robin Ashton and DOJ Inspector General, Michael Horowitz. According to Mr. Luetkemeyer, the investigation will help to determine if any regulations or federal laws were broken and if a senior FDIC official gave false intelligence to the U.S. Congress. Operation Choke Point was originally set in motion to point out any illegal activities, like identity fraud and to punish the bogus companies doing these types of things. But instead of sticking with its original mission, this initiative has been targeting businesses in over 30 industries that the government has philosophical or political disagreements with. Industries, like telemarketing, dating services, gun and ammo dealers, and payday lenders have all been unfairly singled out and almost destroyed. Rather than actually identifying and taking legal action against illegal operations or companies that have committed fraud, Operation Choke Point has instead been putting big time pressure on banks to cut off financial services to small payday lenders and other legitimate businesses. These kinds of attacks on legitimate businesses actually threaten the people that the government and its regulating bodies are sworn to provide protection for. For example, the typical payday lending customer earns about $30,000 to $50,000 a year. These folks have not been able to get financial services from traditional banks or credit unions and depend on payday lenders and other small lending companies. These… Read More

The CFPB Issues Proposed Rules for Prepaid Financial Products

Back in mid-November the CFPB (Consumer Financial Protection Bureau) issued their proposed rules to offer certain protections under the existing Electronic Funds Transfer Act’s implementing of Regulation E and the Truth in Lending Act’s implementing Regulation Z to certain prepaid financial products. The CFPB also released the results of a study they conducted on the prepaid financial service industry. The rule that is being proposed by the CFPB defines prepaid accounts as a code, card or other device which is given for individual, households or family purposes and which also is issued on a prepaid basis to customers in specified amounts or not issued on a prepaid basis but with the potential of being loaded with funds at a later date; and that is redeemable upon presentation at merchant locations for goods or services, able to be used at ATMs or for person-to-person financial transfers. Prepaid accounts would also include payroll card accounts (given by some employers in lieu of actual pay checks or direct deposits to checking accounts) and government benefit accounts. However, prepaid accounts would not include store gift cards, gift certificates, promotional or loyalty card benefits or general use prepaid cards that are clearly labeled or marketed as gift certificates or gift cards. Regulation E Extended Under this proposed rule, Regulation E’s current definition of an account would include prepaid accounts and these protections would be extended to consumers that receive such prepaid financial products: Periodic account statements or the ability to access account information for free online. Limited liability for any unauthorized charges if the consumer promptly notifies their financial institution of any unauthorized charges that have taken place. Timely investigations and resolutions with regard to any errors that are reported. The Know Before You Owe Clause The new rule also includes the “Know Before You Owe” disclosures for prepaid accounts. Financial institutions that offer these types of financial products to consumers would be required to provide short and long form disclosures to consumers before a prepaid account of any type is acquired. And for some types of prepaid products that are sold in retail stores,… Read More

The Consumer Financial Protection Bureau Announced New Mortgage Rules

In 2010 the government established the Consumer Financial Protection Bureau. It is this agency’s job to make sure that the consumer is protected as far as financial matters go. They have recently released a new list of mortgage rules that banks must now follow. According to the New York Times, this is to start next January. With these new rules the Consumer Financial Protection Bureau wants to enforce qualified mortgages. This is meant to ensure the borrower can actually afford the loan. It will also protect the lending institution should the borrower default on the loan. The new regulations say that the borrower must have an income and asset combination that is sufficient to pay back the loan. The goal with this is to make sure that before someone gets a loan that they are able to pay for it. If they are not able to pay back the loan, then the borrower will end up in over their head with debt, and no way to pay back the loan. This can really ruin the borrower’s credit score. Another rule is regulating how much the monthly payment can be. The Consumer Financial Protection Bureau is limiting the monthly payment to be no more than forty-three percent of the borrower pre-tax income. This will help the consumer not have such a high payment every month that they cannot afford the other necessities that they need to purchase, or pay other bills that need paid. Upfront fees are to be limited now. No longer can banks charge fee after fee after fee. Now they are limited on what they can charge for fees so that the consumer is not overwhelmed with paying for fees when getting a loan. The Consumer Financial Protection Bureau is also eliminating interest-only payments. These types of payments can leave borrowers in much more debt. When the borrower is only paying on the interest, not the loan itself, they are not paying off the loan at all. Instead all the money goes to the interest, which will just come back as more interest that needs paid. It is… Read More

Tips for Retirement When You Are Starting Your First Job

When you are starting out at your first job it is a really exciting and nerve racking all at the same time.  There are things that you must do though when you start your first job to help you prepare for retirement.  Here are some tips to help you out when you are starting your first job. The first thing you need to do is to find out if your employer sponsors a retirement account.  If they do you need to find out if they match any contributions that you make and if so how much.  If they do match a percentage of your contribution you really should at minimum contribute the maximum they will contribute this will help you to build up your retirement account for when you are ready for retirement. Another thing that you should do when you start your first job to prepare for retirement is to start investing.  The key to investing and getting the best return from this is to diversify your portfolio.  If you keep your portfolio diversified with the right investments then you can bring in a very nice return for you to have in retirement. Create a budget and stick to it.  This will help you to have money to put into savings each month.  This also helps you to see where you can cut back and have more money to put into your retirement savings account. When you leave your job for a new one do not cash out your retirement account.  Instead most experts agree that you should do is to roll it over.  If you are unsure of how to go about this talk to your boss and find out either who to contact or how to roll it over.  Make sure you understand to understand how to roll over the account before you actually do it that way you do not do it incorrectly. Think about what your goals are for your retirement savings.  This is an important thing to know, make sure that you take your time when setting your goals for your retirement savings.  Once… Read More

Create a Realistic Budget

Saving money is an important thing to everyone. One thing that will make it easier to save money is to have a budget. A budget must be realistic in order to work. It can be somewhat overwhelming to create a budget that is practical. It does not need to be overwhelming though; there are some things that you can do to help you to make creating a budget easier. Everyone’s budget will be different; there is no formula to make a budget that works for everyone. A budget is a personal thing that is meant to help you to save money and not overspend. There are default templates for budget, these are good and all, but do not assume that you can just use that. A default template for a budget is a good starting point, but you have to adapt it to make it work for you. You need to have realistic expectations for your budget. You need to make sure that you are putting an appropriate amount in each category you have. You need to make sure that you have accurate income projections as well as realistic spending amounts. You may want to try to save in a hurry and therefore put a small amount in any given category but if you actually need more than that amount you will not have a realistic budget and it will not work. One thing that cannot be overlooked is that you need to regularly review your budget. This is an important step in the budget making process. You should review your budget every month when you first create it. That way you can adjust anything that you need to. After you spent a few months without needing to adjust it you can wait a couple months to review it again. You must review your budget every so often so that you can adjust what you need to in order to get your budget where it needs to be. A budget will help you to track your spending patterns. This means that you can see where you spend money and where… Read More

Criminal Identity Theft Has Become a Growing Problem in the 21st Century

Identity thieves have been around for decades always trying to find new ways to take advantage of other people. This is not a new problem. However now they are not just taking people’s identities for money, they are committing crimes with someone else’s identity. Identity theft should scare everyone. If you identity gets stolen, it can take a rather long time to put your life back together. Many do not know this, but you have more to fear than someone stealing your identity for money. You should fear them stealing your identity to use it to commit a crime. This is even worse than having your identity stolen for money, as I am sure you can imagine. You must protect yourself so you can avoid this. More and more of what we do is online now. We put more of our information online now that at any other time in the history of the internet. We assume sites are secures, and we are told that they are, but some people spend their day trying to get that information, and if they succeed, you could be in trouble. It is not just websites that you need to worry about. It is the personal information that you keep on your computer as well. Criminal identity thieves use various tactics such, such as viruses, which can cause your computer and your identity to have some problems. What all this means is you need to make sure that you always have your computer protection software up-to-date. When a criminal identity thief gets ahold of your identity and commits a crime in your name you are on the hook for that crime. This means you have to pay for a lawyer to go to court and prove your identity was stolen and that you did not commit that crime. Depending on the number of crimes, you could end up have to go to court a lot which will cost you a lot in lawyer fees. Until it is all settled your reputation is going to be diminished. People will look at you differently because they… Read More

High Tech Toys for Tots

The age of children who play with high tech gadgets gets lower and lower all the time. Now toys are being made with this same technology for children to interact with. There are a lot of new tech toys on the market now, how many have you heard of? Here is a list of some of the best high tech toys for your tots. Dolls for little girls have become more and more realistic over the years and Baby Alive is no exception. This baby is actually able to interact with your child. She also does everything that a real baby does, so if this is something your little one cannot handle and you do not want to clean it up it may be too high tech for your home. There are a lot of little children who like to play with stuffed animals. Many of them pretend that the stuffed animal interacts with them a little. Now there is Cuddles: My Giggly Monkey. This monkey will laugh, giggle, and close his eyes to interact with the child. This fall you will see the Furby Boom on shelves at toy stores. This isn’t the old Furby that was limited in what you could do with it. With the Furby Boom you will be able to interact with the toy using your smartphone. It has many things that it can do like take showers, eat, and even have babies. For those who have a child who would like to be a DJ there is the Jakks EZ Pro DJ Mixer. This allows your child to have tons of fun improving their DJ skills by scratching up some music. You can even buy a separate mic to go with it and sync the music together. We have had various versions of digital pets for decades now. This fall a new digital pet will hit the market called Ubooly. This pet can play games, tell you stories, and even make faces through a smartphone. You do not even need a phone with a data plan. If you have an old smartphone lying around,… Read More

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