Help Wanted - In Fine Print

"TELEVISION IS NOT REAL LIFE. IN REAL LIFE, PEOPLE ACTUALLY HAVE TO LEAVE THE COFFEE SHOP, AND GO TO JOBS." Bill Gates Right on Bill...and last Friday, the Department of Labor reported that another 180,000 Americans left the coffee shops and found jobs during the month of March, with another 32,000 jobs added to prior month's reports. The Unemployment Rate dropped to 4.4%, matching the lowest rate in six years - and Average Hourly Earnings were up as well, rising to $17.22 per hour. So it was all good news for the US job market...but bad news for home loan rates, since a strong labor market can lead to inflation, the arch-enemy of Bonds and home loan rates. On the release, Bond prices slipped lower, causing home loan rates to rise slightly across the board.

And the Fed was watching too...remember that the pop in new job formations and stronger wages creates that risk of further inflation ahead, and this news comes on the heels of a higher read on inflation from the Fed's most closely watched indicator - The Personal Consumption Expenditure Index. So, despite the media and many "so called" experts saying the Fed has to cut rates soon - don't expect a cut in the near future, as the Fed's main priority is controlling inflation.

WANT TO REDUCE THE INTEREST YOU PAY ON CREDIT CARDS? YOU'RE NOT ALONE...SO DON'T MISS READING THIS WEEK'S MORTGAGE MARKET VIEW, TO GET SMART ON THE TRICKS THAT CREDIT CARD COMPANIES USE TO CHANGE THE RULES AND COST YOU MORE, IN WAYS THAT YOU MIGHT NOT EXPECT.

IT'S IN THE "FINE PRINT"...

Credit card companies do a great job at disclosing all of their terms and conditions...but do so in an exceptionally hard to read font and verbiage, designed to dissuade you from really reading the infamous "fine print". But failing to understand the terms can be costly.

Most people know that when your bill arrives, it needs to be paid on time or you'll be hit with a hefty late fee - but many don't know that paying late usually entitles the credit card company to raise your rate immediately and significantly. And worse yet - did you know that paying late on one of your credit cards also entitles all your other credit card companies to raise the rates you are paying them as well? You bet - it's called the "Universal Default Clause", and it basically means that if you are late on one credit card account, all other credit card companies that you have accounts with can increase the interest rate too, even if their accounts have been paid completely on time.

But the plot thickens further - this goes beyond late payments on credit cards alone.

If one of your credit card companies has the Universal Default Clause noted in their disclosure - and most of them do - this clause states that they have the right to penalize a consumer with an increased interest rate if a late payment is reported to ANY other creditor, including utilities, car loans, and home loans. Better believe that credit card companies with this clause sit back and wait for the opportunity to increase the interest rate...and continually monitor their customer's credit reports, just waiting for the opportunity to do so.

And just when you thought it couldn't get any worse...

...it's not just late payments that trigger the Universal Default Clause; interest rates can be increased if a consumer exceeds a credit limit, bounces a check, or applies for additional credit. All of these signs may be read by the credit card company that a consumer is "high risk". The penalty? You guessed it - a higher interest rate.

Further, if an offer seems too good to be true, it probably is. This popular phrase rings true for many consumers that sign up for zero percent interest offers. Although these offers sound great and every consumer goes in with the best intentions of paying the balance in full before the zero percent interest term expires, the vast majority of people do not pay off the bill before the offer ends. And what consumers do not realize is if the account is not paid in full, the creditor does not start charging interest from the date the deal expires, the creditor goes back to the day the purchase was made and charges interest on the balance for the entire period.

Or - back to the Universal Default Clause, if you are late on another credit card payment during the introductory time period with the zero percent rate offer - the card issuer of that sweet deal could prematurely break it off and force a steamed up interest rate, retroactively charged back to the original date of purchase. That smoldering rate could mean paying double or even triple for the purchased merchandise.

Try your best to only charge what you can afford to pay off in full, on a monthly basis. Beyond being just good advice, here's another little known credit card fact that could cost you.

If you charge and then pay the account in full, there is no interest due. But if you charge and choose to only pay half of the bill when it arrives, guess what - you get charged interest not just on the remaining balance, but for the entire charged balance, regardless of your paying half the bill in full. If the bill is not paid in full the following month, this game continues until the account is paid in full.

So although the fine print can be a real snoozer to read, taking the time to become familiar with credit card terms and conditions can save you some serious dollars. Review your current credit card terms and conditions and take the time to find a credit card company that truly matches your spending habits and needs. You will save yourself a few sleepless nights - and more importantly, save yourself a lot of money too!

One should consult with a qualified mortgage planning professional prior to implementing any mortgage planning strategies. If you are a real estate planning, insurance, tax or financial planning professional receiving this newsletter, please call our office and introduce yourself to us. We are always seeking to grow our referral network and expose more service professionals to our client base. 

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.