YAY Capital One!!!!

“Good News: Because of your on-time payment history, some or all of your Annual Percentage Rates (APRs) have been returned to your Non-Introductory Rate.” (23.5% down to 14.8%)

Someone finally gets it! If you raise your interest rates and fees on your good customers in bad economic times, you will lose them. You will then put yourself at risk by not being able to cover the high defaults by your current customers with reasonable fees from your loyal customers. What the credit industry has tried to do to good consumers lately has been nothing short of irresponsible and the worst business decision ever.

How? First for those good customers who have had their rates jacked to almost 30%, credit limits reduced and fees increased for absolutely no reason other than they can, the strategy is simple. Pay off the balance and close the account. Protest the unfair practices that have become commonplace in this faltering economy of massive default buy paying off these banks and dropping them. Second, if you have to have a credit card, and in order to maximize your credit scores you need at least two, go to the companies that will reward responsible behavior. As you can see Capital One has. Go to your local Credit Unions who have not yet jacked any fees or interest rates. Ditch companies like Chase, Bank of America, and Discover who have generated countless horror stories from good consumers. Get rid of anyone who messes with your interest rate, your credit limit and your fees. Soon these companies will be facing the massive default debt with little income from legitimate fees to counteract the losses. Then and only then will the consumer be back in the drivers seat with their own credit and those who want to remain in business will stop messing with the consumer.

The above reduction in rates actually happened this evening. A client was previously told by Capital One that a review of their account would take place on the July statement, and verified with their customer service rep that indeed their interest rate did drop from the default rate (they missed a payment June 2008 by one day) of 23.5% to the new interest rate of 14.8% for the next billing cycle. The new statement verified it also. So there you have it. Capital One is true to its word and at least in this case was a responsible company to work with. My client was also assured that the next review, if my client kept the account in good standing, the company might raise the credit available, eliminate yearly membership fees and allow balance transfer specials. Now whether these offers are good for a consumer to take is a debate for another time but here is a situation where the opposite to the credit card company trend of squeezing the consumer actually happened and has the opportunity to happen for other responsible consumers.

This does not suggest that you run out and try to qualify for an account with Capital One. Credit is still very tight. But for those of you with Capital One cards, call them and ask them what they can and will do for you. Let's make a statement to the likes of Chase, Bank of American and countless others that we won't be at their mercy by taking our credit business elsewhere. We don't have to settle for less.

Down 35% in late 2008… recovered 27% by July 2009

Facebook Consumerwarfare: Remember the panic of the stock market last fall? The retirees losing over 50% of their retirement account values didn’t think they could wait it out. Workers losing over 50-75% in their 401k and IRA values freaked. Stock values were tanking lower than anytime since the great depression and our grandparents’ birth. Banks were either closing or reorganizing prompting a drain on the FDIC (their insurance company). Large financial institutions were taking on defaults the likes of which we have never seen. Wall Street suffered blow after blow as well as exposing some trading weaknesses. Sadness and gloominess was everywhere. Financial worries abounded. Private losses were unrealized but possible.

Conservative financial professionals constantly cautioned us that potential losses were just ”potential” IF action was NOT taken and we waited. They strongly suggested to anyone who could wait to do so. History and past trends suggested and supported that to act based on quick reaction to bad news rather than waiting over time, one would make their potential and paper losses a reality. To wait would most always yield an eventually better outcome. For investors, that meant keeping their portfolios just the way they were despite the appearance of vast lost values on paper. People were strongly encouraged to wait it out if they were able and confident enough in their investments. Not everyone, however, had the confidence, determination and guts to wait.

Part of me wanted to react as well. I was as much in a panic as anyone about the funds I was squirreling away. I was worried for myself, my family, friends and the nation as a whole. I watched what little I had in savings and investments wither away on paper. Before last fall, being a single parent and helping 4 boys into adulthood I had finally started to discipline myself to save and invest on a monthly basis. I couldn’t buy large lots of stock with agents but I did find a place where I could invest monthly and buy portions of shares as I accumulated them. I set up a stock portfolio which was, in effect, my own managed mutual fund. I had a meager 401k from a previous employer that I had monitored occasionally. Like everyone else I started paying much more attention to the financial status of this country. So many of my friends had at one time or another said to me, “I only look at my retirement account once in a while”. Well I guarantee you some of them started looking more often and some not at all to avoid the disappointment.

In the late fall of 2008 I looked at my stock portfolio and saw I was down 35%. Having a finance background I started charting the DOW every business day since the end of September 2008 looking for improvement. Let’s just say I’m curious, a positive thinker and like numbers. Of course I was fairing better than most but still it was disappointing. I can’t stand losing anything. I took some comfort that I had actually picked more secure stocks. I selected stocks I believed had a better than average chance of surviving this uncertain economy. I believed these companies in which I invested would become profitable again. My technique in line with most professional advice, was to try to diversify and be patient. Anyone who knows me will tell you patience is not my strong suit but I learned it well. I know as well as anyone, the cardinal rule of investing is to “buy low and sell high” but selling anything these days was not an option because losses could be deep. So I stayed the course determined that I would also keep investing on a monthly basis at the lowest prices. This is what is called dollar/cost averaging and is an excellent method of investing when you don't have lump sums of money to invest. The current economy, I believed, was a blip in history sure to rally back at some point in the future as it had done in the past. I was determined to learn from history and be patient. I listened, I watched and I monitored progress.

My 401k from a former employer was losing some of its value although I caught it before I would suffer a loss. This company, I believed, was not as strong as it once was and operated already on very low margins. I found a very competent broker who rolled my 401k over into a fund that historically was at one of its lowest points in the last 5 years and yet was strong and in a field that would always be doing well. The growth potential was good.

Today the Dow is over 9000 points, the first time since January. I’ve gradually recovered 27% of losses in my stock portfolio, partially due to continually investing on a monthly basis through the toughest of times. My 401k is up 23% from January when I rolled it over where that too has seen monthly investments on my part. While certain weeks are better than others depending when financial news and infomation gets released, I am optimistic that staying the course was the way to go for me.

This all reminds me of something a friend of mine kept telling me when things looked bleak. “Nothing is ever as bad as it seems”. If we accept losing we will, if we embrace winning we will. I choose to win.