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The www.FedPrimeRate.com Personal Finance Blog and Magazine

Thursday, October 29, 2009

Don't Fall Prey To Money Transfer Scams

With the global economy in the shape it's in, it comes as no surprise that money transfer scams are on the rise. The Federal Trade Commission (FTC) has produces a very informative video that everyone should watch then pass on to their friends and family. Even if you think you know all there is to know about all the money transfer fraud schemes out there, watch this anyway. You may be surprised at how clever the scammers are getting, and how their scams are evolving. Here's the clip:

As you might have guessed, I gave this clip 5 stars.

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Wednesday, October 28, 2009

Prime Rate & Credit Cards: Another Timebomb?

In 2007, the Pew Charitable Trust launched the Safe Credit Card Project; an ongoing study which analyzes industry practices and how they affect consumers. On October 28th, the project released their monthly report which discusses an alarming trend among bank-issued cards: circumventing the Credit Card Reform Act of 2009 by shifting to variable-rate APRs which are tied to the Prime Rate. This practice allows issuers to raise interest rates under circumstances which would normally not be permitted.

Data on Variable Rate Cards
According to the study – which encompasses over 400 credit cards – as of December 2008, 31% of bank-issued credit cards had fixed rates. The current report states that number is now less than 1%.

For now, this trend does not apply to cards issued by credit unions; as of July, 64% of their cards continue to offer fixed interest rates on purchases.

Minimum Rate Requirements
Furthermore, a growing number of creditors are implementing Minimum Rate Requirements (MRR). This practice sets a minimum benchmark APR; preventing the variable rate portion from falling below a predetermined level, even if the index it is tied to (such as the Prime Rate) moves lower.

Future Implications
Considering that the U.S. Prime Rate is at a historically low level of only 3.25%, interest rates on almost all bank-issued credit cards are poised to increase in the future. During rampant inflation in the seventies and eighties, the Federal Funds Rate reached double-digits; peaking as high as 21.50% on December 19th, 1980. Although that event was an anomaly, the historical median prime rate is 8.75% and the cumulative average is 9.842%... both of which are significantly higher than today.

Similar to the adjustable-rate mortgage collusion which has recently unraveled, consumers are now leveraging credit cards to pay for tuition, medical bills, and other expenses with the assumption their APR will remain relatively consistent as they pay down the balance. Although the economic consequences of this problem dwarfs in comparison to the mortgage debacle, it is a potential time bomb nonetheless. In turn, some of today’s credit card reviews and marketing campaigns are not only misleading the public, but also perpetuating the problem.

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Tuesday, October 27, 2009

This American Life on The Health Insurance Industry

healthcare and the health insurance industry in the USAMy favorite radio program This American Life recently had two episodes about the American healthcare system in general, and the health insurance industry in particular. Very informative and entertaining, as usual. If you want to understand how we arrived at the crazy system we have today then listen to these shows.

The first part can be found here.

The second part can be found here.

NB: When you visit the above webpages, Look for the Full Episode link to listen to the above programs for free. They'll stream over your live Internet connection and play on your computer.


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