Money Blue Book

Borrow Money Or Invest In Interest Earning P2P Loans With Lending Club

With the lowering of interest rates by the Federal Reserve in response to the current economic climate to the lowest levels we have seen in years, the interest rates offered by high yield savings accounts and high interest certificate of deposits are now simply not as attractive as they once were, only a few years ago. With the stock market still suffering from unstable price swings and massive volatility across all sectors, it makes present day sense to look towards alternative investment ideas to make some money.

While I have been a quiet Lending Club member for a few years now since the online company opens its doors to loan investors, I haven’t felt the need to review the program until now. Until recently, the top high yield savings account and best CD rates at most banking institutions offered a reliably consistent rate of return on deposits. But with market turmoil ever present and the specter of worsening bank failures looming, I’ve begun to turn my attention to other investment possibilities in an attempt to diversify my portfolio risk and seek a higher rate of return. The ability to earn a reasonably competitive interest income with the added ability to diversify risk via peer to peer lending networks like Lending Club and Prosper is becoming more and more attractive. At the very least, P2P lending programs offer potential profit seeking investors like myself the ability to play the role of the banker and help people out with their loan needs, while at the same time earning interest income that’s higher than what’s currently available in a regular savings account or bank CD.

What Is Lending Club and What’s P2P Lending and Borrowing All About?

Lending Club is a person to person, also known as a peer-to-peer, lending website that matches ordinary borrowers with ordinary local lenders (who are ordinary people themselves) through a pairing system that combines social networking, a computerized search algorithm, and manual credit worthiness checks. Essentially, Lending Club is a way to offer low interest loan rates to borrowers with good credit, while at the same time offering willing potential lenders like you and I the ability to earn a reasonably high interest rate of return with a relatively low risk of default on the loans that we extend to these borrowers. It’s an alternative way (that’s growing in popularity) for ordinary Americans to borrow money, get qualified, and get funded for loans expediently without the complex hassles of applying for traditional bank loans or having to deal with the riskier side of 0% balance transfer credit card offers or getting mired into the clutches of payday loans. On the whole, Lending Club offers borrowers better interest rates than can be obtained from any credit card offer, even those that purport to be low interest.

The whole business concept behind P2P lending networks like Lending Club is built on the premise that borrowers will be less likely to default to members of their own local communities. The Lending Club online system offers anonymous borrowers and local micro loan lenders a way to find each other and get matched up based on personal preferential demographic factors like geographic location, educational and professional background, and activity within a particular social network like Facebook (the social networking site where Lending Club had its upstart roots).

Still don’t believe Lending Club or peer to peer lending and borrowing programs are legit? Just take a look at a recent article from the Harvard Business Review, which notes the remarkable rise of peer to peer lending programs and documents the rise of such emerging programs as the next big wave of important financial innovations in the coming years, especially in light of the ongoing economic recession and the collapse of traditional lending institutions. It looks like P2P lending is here to stay, one way or another.

My Lending Club Experience – Investing In High Interest Bearing Loans

As a person who’s always up for trying out new financial products, I signed up for Lending Club when it first came out and have been using the online service ever since. So far, my Lending Club experience has been pretty positive, yielding fairly respectable returns in the process. Currently, my entire Lending Club participation has only been that of a lender and I have yet to participate as a borrower. However, while I can’t comment on Lending Club through my own personal experiences as a borrower, I have had numerous extended online conversations with actual people who have used the Lending Club service for their borrowing needs, primarily to help pay down existing high interest debt. Most of the Lending Club borrowers I’ve come into contact with have been pretty receptive to the user-friendliness of the Lending Club online platform and pleased with the convenient access to reasonably priced loans that the website affords, particularly when compared to last ditch lending alternatives like car title loans or payday cash advances.

One of the reasons why I slightly prefer Lending Club over other peer to peer lending networks – is its non-eBay auction-like nature. Having to engage in a convoluted bidding process for loan offers or loan investment prospects would inject too much complexity into an online loan matching process that’s trying to cater to the ordinary masses. Fortunately for investors in particular, Lending Club offers its loans on a take it or leave it store front basis. If you find a loan and the credit characteristics and interest rate of return strikes your fancy, you can buy it on the spot, or pass.

As primarily an experimental investor and cautious lender, I have mostly sought out high quality, lower risk of default type loans. As a relatively risk adverse lender with an infrequent appetite for riskier loans, I am not to keen on the prospect of any of my loan investments ever defaulting. However, at the same time, I understand that it’s a trade off – safer loans generally yield much lower interest rates of return, while riskier loans almost always yield much higher rates of return to compensate for the higher risk of default and nonpayment. The vast majority of my Lending Club loans as a lender have been A-grade, personally-chosen loan investments. Thus far, I have stayed away from using Lending Club’s computerized LendingMatch program to pair me with desired loans. I guess I have confidence in my own ability and prefer to retain control, rather than let some computer software do the leg work for me.

Currently, I have a little more than $800 invested into numerous micro loans with local borrowers. I’m always on the look out for high quality, attractive loan prospects but unfortunately, they are not always available. When they do become available, I try to snap them up quickly. These A-grade Lending Club loans have become quite a set of high yielding cash cows for me. Thus far, I’ve been very lucky and relatively fortunate as none of the Lending Club loans that I’ve extended have been significantly late or have entered default. Intriguingly, my Lending Club loans have earned me a steady interest rate of almost 8%, which is 2-3 times higher than what I earn with my best CD rates, best high yield savings, and even best money market accounts. As Lending Club continues to grow in popularity, its borrower base will inevitably grow larger in size, and the volume of attractive loan investments are bound to increase. If my default-free track record holds, I may decide to dabble in slightly riskier Lending Club loans in the near future to see if I can snag a higher rate of return but still maintain my default-free streak. Stay tuned!

For those wondering about the prospect of income taxes levied on the earnings off of Lending Club loans – yes, you are personally responsible for paying ordinary income taxes on all interest income that your Lending Club investing activities generate (you are issued a handy 1099 form at tax time).

Setting Up A New Lending Club Account Is Free and Quick

Opening an account with Lending Club is easy and efficient, and as expedient as opening a new online bank account. To open an account and start lending money through Lending Club, you simply submit your personal information, bank name and bank transfer account numbers, along with some optional background information. Thereafter, the account registration process wraps up with the obligatory bank test deposits to verify true bank account ownership

Opening a new Lending Club account for borrowing purposes on the other hand entails a stricter registration process that necessitates that the applicant provide a Social Security Number and other identifying information for a full credit report and  FICO credit score background check (try looking up your own free FICO credit score beforehand). Though Lending Club imposes a rather strict set of prime standards for borrowers, this attention to credit quality over mere quantity ultimately ensures a better experience and loan exchange for both lenders and borrowers in the long run.

Borrowing Money and Getting A Loan From Lending Club

For prospective qualified borrowers, Lending Club offers an attractive way to obtain a loan at comparatively affordable rates – offers that beat out most personal bank loans and credit card interest rates. However, do be forewarned that Lending Club’s qualification standards for borrowers are high grade and rather stringent. Lending Club pretty much only wants prime, or near prime borrowers with good to excellent credit. Those with very bad or subprime credit are probably out of luck when it comes to Lending Club, and will probably have to resort to less than advisable, bottom tier loan alternatives such as bad credit credit cards or payday loan borrowing.

The process of applying for a Lending Club loan is surprisingly straightforward. Approved Lending Club borrowers get a 3 year unsecured fixed interest rate loan, with repayment obligations managed by Lending Club. There is no haggling or negotiations to contend with as you simply submit an application for a loan, and based on your FICO credit score, credit report, and background check, you are offered a fixed interest rate loan to accept or reject. At Lending Club, you can borrow anywhere from $1,000 to $25,000 as an unsecured loan, to be used for just about any purpose, including but not limited to, high interest credit card repayment or small business financing.

To get started as a Lending Club borrower, simply open a new Lending Club account as a borrower, and submit a loan application. At the time of registration, Lending Club will obtain a credit report and FICO credit score check of the borrower in order to rate and assign a credit risk grade (ranging from A thru G) and determine the appropriate interest rate the borrower can solicit on the site. Once approved, the borrower is free to list his or her loan request on Lending Club for prospective lenders to review and examine. During the credit risk scoring process, particular attention is paid to the borrower’s credit rating history, the amount of the desired loan balance, and the borrower’s current debt to income ratio.

Lending Club’s standards for borrowers are high and the program only currently accepts members who can meet the followings status and credit history requirements:

• Must be a U.S. resident.
• Must have a FICO credit score of at least 660, with a debt to income ratio (excluding mortgage) below 25%.
• Credit history report must indicate that you are a responsible borrower.
• Have at least 1 year of credit history, showing no current delinquencies, recent bankruptcies (7 years), open tax liens, charge-offs or collection accounts in the past 12 months.
• Must have no more than 10 inquiries on your credit report in the last 6 months.
• Must have a revolving credit utilization of less than 100%.
• Must have more than 3 accounts in your credit report, of which more than 2 are currently open.

For their middle man loan matching services, LendingClub charges a processing fee (ranging from 0.75% to 3.50% based on Lending Club’s assessed credit risk grade), which is included in the annual percentage rate (APR) and is subtracted from the loan proceeds prior to disbursement to the borrower.

Lending Money and Earning A Comparatively High Interest Rate On Lending Club Loans

To qualify as a Lending Club loan investor, you must meet and satisfy certain preliminary state and financial suitability conditions – translation: you must belong to an approved state and/or pass certain income and net worth requirements. With exemptions for certain states such as California, you generally must have an annual gross income of $70,000 or a networth (including your home) of at least $250,000.

As for the state residency requirement, you must be a resident of one of the following states below. Your state not on the list? Fear not – Lending Club has submitted proposals to all states and new ones are being added as they are approved.

• California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Minnesota, Mississippi, Montana, New Hampshire, Nevada,New York, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin, West Virginia, and Wyoming.

As a prospective Lending Club loan investor, you can start with as little or as much money as you’d like. Once you have opened a Lending  Club account and transferred in the appropriate funds for lending purposes, you will be asked to indicate your level of risk tolerance (credit risk ratings that range from A – G) and prompted to search for loans either manually, or get matched up with prospective loans with the aid of Lending Club’s computer algorithm based LendingMatch software. The Lending Match program generates a suggested loan portfolio based on your level of risk desired and your connections with the borrowers in your account. As mentioned above, I have chosen to stick with manual loan evaluations (with great success thus far) as I feel more comfortable with my own ability to assess loan prospects than entrust that duty to a random computer program.

Those who are new to peer to peer lending may wish to start with small incremental investments and tinker a bit with the seesaw effect of risk and interest rate of return, before diving into larger denominational investments. Those who get the hang of it may actually find the loan investment hunting and evaluation process rather interesting and personally rewarding (remember, you are potentially helping out someone who is in desperate need of a loan to get his or her life going again).

There are two loan components that will be of paramount importance to prospective Lending Club loan investors – the interest rate of return offered, and the rate of default risk. The current range of interest rates that Lending Club lenders and investors can potentially earn varies from 7.37% to 20.11% (depending on how risky the loan is in terms of risk of default, as determined by the automatically assigned Lending Club loan grade.

The worst case scenario for any Lending Club loan lender or investor is the dreaded loan default, which occurs when the borrower refuses or is unable to fulfill the obligations of his or her loan principle and interest rate repayment. Lending Club’s website indicates that the current overall default rate is less than 3%. However, and probably due to my personal strict and stingy loan evaluation tactics, I have yet to experience a loan default on my Lending Club loan investments. On the downside, I probably earn a much lower interest rate of return on my loan investments than I would be able to garner if I opted to invest in slightly more riskier B and C grade loans.

As a Lending Club loan investor, one of the general statistics and trends I track closely is the company’s continuously generated performance stats for all loans. As you can see from the current Lending Club loan stats, Lending Club does a pretty commendable and transparent job of providing updated statistics relating to all late and defaulted loans for all members to review and assess. As the updated loan default statistics demonstrate, rather surprisingly perhaps, the vast majority of loans (particularly the A graded ones) are current and not late or in default. The B and C loans are also not as horrendous in terms of late payments or defaults as one may have assumed. Those who are into mathematics and willing to play the odds of probability may find it worth the slight risk of partial loan default to capture the higher interest rate of return on their investments. As always, smart Lending Club investors ought to spread their loan investments around to minimize the chances that one unexpected loan default will torpedo their entire Lending Club portfolio.

Lending Club Loans Are Now More Liquid Than Ever And Can Be Traded Like Securities

As Lending Club has completed the SEC registration process, all Lending Club notes and loans issued on or after October 14, 2008 can now be purchased and sold as securities, as they now represent Lending Club security investments rather than direct loan obligations of the underlying Lending Club borrower.

Now instead of waiting for the 3 year locked in loan commitment notes to reach maturity, they can now be traded on the secondary market through Lending Club’s trading platform agreement with FOLIOfn Investments Inc, greatly enhancing their liquidity and versatility as investments. While only loans and notes issued after Lending Club’s October 14, 2008 SEC registration date may be traded, in due time, it is reasonable to expect the number of trade-able notes to balloon in the coming future.

For those concerned about the safety and security of their invested loan funds as a lender in the event of a Lending Club failure or bankruptcy, Lending Club actually addresses this issue on their webpage. According to Lending Club, in the event the company, for whatever reason goes out of business or is no longer able to continue servicing loans, in order to ensure continuity, Lending Club has a backup servicing and successor agreement with Portfolio Financial Servicing Corporation (www.pfsc.com) for PFSC to take over loan servicing.

While the Lending Club business entity itself is still burning through venture capital cash like it’s going out of style, particularly as it focuses on promoting the growth and adoption of peer to peer lending, I personally think the concept of P2P social network lending is here to stay. Whether companies like Prosper or Lending Club will be around forever, or whether they ultimately will be bought out by more traditional banks eager for a piece of the peer lending pie, remains to be seen.

Special Offer: 30% Off Using MyFICO Coupon Discount  Code – MYFICOIS8, Or 20% Off With  – CPPSAVINGS

As someone who believes the FICO credit score is the single most important number in any person’s financial life, I track my own credit score and FICO changes closely and religiously. While admittedly a rather mundane and financially nerdy task, the routine monitoring of one’s credit score has far reaching financial benefits beyond just ensuring one’s continuous ability to apply for cheap credit or qualify for a discount loan at great rates. A high FICO credit score has broad ramifications that affect everything from your ability to get the best home mortgage rates and the cheapest car insurance premiums, to your capability of stopping identity theft in its tracks. For those that share my appreciation of maintaining a perpetually high FICO score, the practice is made easier with convenient and user-friendly online tracking tools that provide periodic email updates on credit score changes with updated and archived graphs that trace credit score changes over time.

For my own personal credit score monitoring purposes, I use the Fair Isaac company’s MyFICO Score Watch program to keep continuous track of my credit score changes and updates. While there are numerous competing credit scoring products out there that purport to track your credit score, only the MyFICO.com lineup of FICO credit score products actually offer you a real FICO score, the only credit rating system that’s current universally adopted and used by the vast majority of lenders, creditors, and banks when evaluating your credit worthiness.

The FICO Credit Score Is Important Because It Determines Your Access To The Best Mortgage Rates, Car Loans, Credit Cards, and Jobs

The FICO credit score is the credit scoring methodology brought to you by the Fair Isaac Corporation, the current undisputed leader in the credit scoring market. It is based on the data contained in your personal credit history report and is therefore continuously and routinely updated as credit transactions are added to or removed from your credit files. Thus, as your credit card balances change or when you apply for new loans, your current FICO score is bound to fluctuate as any one score represents only a mere snapshot of your current credit risk at any particular point in time. The FICO score number is based on a numerical sliding scale ranging from 300 to 850 with the higher range representing the least credit risk and the most desirable rating to potential lenders.

While the Fair Isaac Corporation provides the secret but uniform mathematical formula that makes up the coveted FICO credit score, the scoring system is computed based on your credit report information as recorded and retained by the three major credit reporting agencies – Equifax, Experian, and TransUnion. Because your credit history may vary from one credit reporting agency to the next, your FICO credit scores as computed by each credit reporting agency may be different from one another. This is another reason why it’s often advisable for those who are imminently seeking a major credit based acquisition such as a major home mortgage loan, to request their 3 FICO credit scores as individually computed by the big three credit rating agencies.

So why should you know your FICO score and why should you care? That’s because credit lenders do, and so do a vast variety of organizations and groups such as mortgage brokers, credit card companies, insurance companies, and even landlords and potential employers. While the three digit number FICO represents only your past history of fulfilling debt obligations, the use of the number has been increasingly expanded by a variety of stakeholders to evaluate trustworthiness and financial risk beyond its original intended purpose of predicting future ability to pay back loans. Thus, those who wish to successfully engage in any form of commerce or any consumer activity such as getting their home mortgage loan refinanced, obtaining a 0% balance transfer credit card offer, or even passing an apartment rental background check, it’s important to periodically purchase a FICO score report and know where you stand in the eyes of prospective creditors.

Without a doubt (and this is not a mere sales pitch, but a fact), the most reliable way to obtain a genuine FICO score is always via the MyFICO.com website. I advise against obtaining the score through any other less reputable means (as I naively did early on), lest you wind up with one of those useless FAKO credit scores, like the Vantage Score or Plus Score being hawked by a variety of vendors including the credit rating agencies themselves. Remember, the FICO credit score is owned by MyFICO.com and is currently the only widely accepted credit scoring standard among the major U.S. banks and mortgage lenders. When you hear financial experts or random people discussing their credit scores, more likely than not, they are talking about their FICO score, rather than some of the other generic credit score variations.

In the past, it was possible to obtain all 3 of your FICO credit scores from each of the 3 major credit reporting agencies via the MyFICO Complete package, as all three – Experian, Equifax, and TransUnion had agreements with Fair Isaac to sell their respective credit report data and individually computed FICO credit scores via the MyFICO.com homepage. However, due to a recent contractual rift between Experian and MyFICO, the Experian FICO credit score is currently no longer available to ordinary consumers. Obviously this will make it substantially more difficult for ordinary consumers to track and manage their credit scores from one location as it eliminates direct consumer access to one of the three all important FICO scores. Although Experian has indicated that only its own Plus and Vantage Scores will now be directly available to consumers (essentially useless fake credit scores due to their spotty usage among lenders), genuine Experian FICO credit scores will still be available to banks and major lenders that request them. But consumers themselves will no longer be able to find out for themselves where they stand in terms of their Experian FICO scores. Despite the financial depravity and injustice of it all, for the time being at least, ordinary credit score customers will have to rely and make do with the FICO credit scores obtained from the remaining two participating rating agencies – Equifax and TransUnion. Experian should get a punch in the face for this one.

Credit Score Monitoring Can Help Prevent Identity Theft and Help You Improve Your Credit Score Rating

Along with the ability to request your individually computed FICO credit scores from the major credit reporting agencies (currently only Equifax and TransUnion), MyFICO also offers consumers a FICO credit score online monitoring product that helps you keep continuous track of your credit score changes as they occur. With the MyFICO ScoreWatch program, changes to your credit score are automatically plotted out for you by date, and over time, the up and down fluctuations can help you better understand and learn how your financial decisions and mistakes impact this very important number.

For example, as a user of the MyFICO ScoreWatch online product for many years, I witnessed my FICO credit score changes firsthand when I engaged in a festive round of 0% balance transfer arbitrage a few years ago. The sudden large spike in credit card balances caused my FICO score chart to plunge significantly due to my increased debt utilization ratio (a key component of the FICO score). However ScoreWatch showed a dramatically recovered FICO score a year later (by more than 50 points) after I paid back the 0% APR credit card loans in full and on time. Knowing where I stand at all times in the eyes of potential lenders via a continuously updated credit score chart helps to not only motivate me to continuously stay on top of my financial life, but it also encourages me to make  regular and timely credit payments to stay as debt-free as possible.

The other primary benefit of using a credit score monitoring tool is to help prevent identity theft. Preventing identity theft is perhaps one of the biggest reasons why someone not otherwise on the verge of purchasing a new car or seeking a home mortgage loan would desire to keep a close watch of their credit score. Heaven forbid, but in the event that your social security number or identity is compromised, and a free-wheeling thief decides to open a  new credit card account in your name, your automated MyFICO ScoreWatch sentry is likely to be one of the first lines of defense against the unauthorized intrusion. The MyFICO ScoreWatch system tracks changes in credit balances and payment history, and thus sudden increases or appearances of new credit card accounts will quickly trigger an online alert and response. Such alerts can warn you to investigate and find out the cause, before any potential identity theft attempt can ever inflict major financial harm. Priced around the same as the monthly fees charged by identity theft prevention-only products like LifeLock, but with the added benefit of tracking your FICO credit score updates as well, the MyFICO ScoreWatch product offers a pretty attractive multi-service package to credit score addicts and casual personal finance junkies alike.

MyFICO Products Offer Free FICO Credit Scores With 30-Day Trial Periods

Unlike your official free credit reports, your official FICO credit scores cannot be obtained in the same way for free. However, that doesn’t mean there aren’t any discounted MyFICO deals out there that can provide you your genuine FICO credit score at 15-20% off, or even for free courtesy of a free trial period. Currently, MyFICO offers free product trial options to get your FICO score for free, albeit such methods usually require you to cancel within a pre-determined 30 day trial period to avoid any cost. While I have since moved on to paying for my single FICO’s and credit score monitoring services, when I was still a poor struggling student, I frequently relied on popularly available free FICO credit score trial periods via MyFICO to get my three digit numbers. For those who aren’t certain if a particular MyFICO product is suited for them, I recommend checking out the desired links below to watch the accompanying demonstration video clips to get a better overview of how each individual FICO product works.

Save 20% Off FICO Credit Score Products With MyFICO Discount Offers

Aside from the free FICO and free credit report trial periods mentioned above, MyFICO currently offers low cost and affordable ways to obtain your FICO credit score and credit report with the aid of FICO coupon codes. To save 20% off all MyFICO offers, simply submit the following discount code at checkout for 20% off the listed price -  CPPSAVINGS. Please write a comment if the code no longer works. If the 20% off FICO promo code worked for you or if you have any favorable or negative experiences worth sharing, please join the comment discussion below.

1) MyFICO Score Watch – Free FICO With 30 Day Trial Period (Equifax) - The popular MyFICO ScoreWatch online tool allows you to keep close watch of your genuine FICO credit score as it fluctuates up and down based on changes made to your personal credit reports by the credit reporting agencies. Best of all, your past FICO score changes are archived and saved in a very intuitive graphical chart for your review. Your credit report at Equifax is monitored on a daily basis while the associated FICO credit score is tracked and updated on a weekly basis. Anytime there is a credit report change that causes your FICO to suddenly rise or drop, such as a credit card balance change, late payment, or a new account, you are immediately notified online or via phone text message.

For those looking for extra identity theft protection, ScoreWatch alerts you whenever a new credit account has been opened in your name, offering you the warning necessary to investigate before the unauthorized access can destroy your credit irretrievably. A MyFICO ScoreWatch subscription also provides you Score Power reports that break down the details of your Equifax credit report to fully explain the reasons hurting or helping your credit score. These reports are invaluable to those trying to increase and boost their FICO credit scores in anticipation of a future loan or mortgage. There is also a 30-day free trial available. So long as you cancel in time, you can walk away with a free FICO credit score and credit report by Equifax.

2) MyFICO Standard Score and Report - One FICO and One Credit Report (Choice Of Equifax or TransUnion) – If you simply wish to know your FICO credit score and have run out of free FICO credit score trial offers, this MyFICO package is the one for you. With the MyFICO Standard Score and Report, you get to pick a genuine FICO formulated credit score and credit report from either one of Equifax or Trans Union. Each FICO credit report comes with a full explanation of how lenders view you, including a detailed listing of all of your credit card accounts, auto loans, student loans, pending debt collections activity, court judgments, bankruptcies, tax liens, and home mortgage loans in your name. The standard credit report with FICO package also comes with a customized recommendation as to the best course of action to boost your FICO score based on the specifics and particulars of your current situation.

3) MyFICO Quarterly Monitoring - $4.95 FICO Score With 30 Day Trial (TransUnion) – This offer allows you to get 4 genuine FICO credit scores and credit reports from the TransUnion credit reporting agency during a 12 month period. During the course of a year, MyFICO will automatically pull your credit report and FICO score quarterly (every 3 months) so you’ll be kept up to date as to what’s happening with your credit in regular periodic intervals. MyFICO Quarterly Monitoring also offers a weekly monitoring service for new information tied to your identity including changes in public information and new credit based activity. This package is geared towards those interested in arming themselves against identity theft. Interestingly, the Quarterly Monitoring subscription even comes with complimentary identity theft insurance up to $25,000 with extra assistance towards identity theft resolution in the event you ever become a victim.

Those who are just looking to get a cheap FICO credit score or one that is heavily discounted may wish to cancel after trying the service out for a month. You can cancel anytime after the first month and simply pay the single $4.95 monthly fee and walk away with an affordable FICO score provided by TransUnion. Otherwise, the upfront annual cost is $49.95.

4) Suze Orman’s MyFICO Platinum Kit - $49.95 (All 3 Credit Reports, and FICO Scores From Equifax and TransUnion) – This offer is for those who want to know their complete MyFICO credit score and credit report in a single snapshot form (nearly the same as the former MyFICO Credit Complete package). With the Suze Orman MyFICO Platinum Kit, you get all 3 of your credit reports from Equifax, Experian, and TransUnion, along with your Equifax and TransUnion generated FICO credit scores.

For those who don’t read her books, watch CNBC, and don’t know who she is – Suze Orman’s a pretty well known and popular financial expert, known for her in-your-face big sister-like financial quips. Some find her berating style a bit annoying, but I actually find her to be pretty enduring, albeit frequently a bit too blunt. However, her FICO Platinum package does a pretty decent job of walking you through the FICO score experience step by step and offers lots of useful tidbits to help you take control of your credit and harness the power of a high credit score. Because it’s a Suze Orman product, the package is especially suited for financial beginners and those focused on paying off mounds of debt.

Recession? What Recession? Presenting – The New Visa Black Credit Card

Currently, the economy is undergoing a major recession, with consumer spending tanking, and dire ramifications emerging for the future of our financial and banking systems. But if you examined the newly released promotional material and advertisement literature for the new Visa Black Card, you might have thought otherwise. With an eye popping annual fee and lavish credit card perks oozing to great  excess, this new credit card offer from the renown Barclays Bank definitely does not reflect the current mainstream economic sentiment.

The Original Black Card Craze

Years ago, the first card to emerge and promote itself through rumors and word of mouth marketing as the ultimate status symbol for high net worth spenders – was the American Express Centurion Black Card. With its extravagant spending perks and incredibly high credit limits, enough to buy a few palatial mansions and small estates with just a few card swipes, the Amex Black Centurion Card was considered to be the ultimate materialistic status symbol of its day, at least to those superficial few that actually cared about those types of things. Known as the first true “Black Card”, the Amex Centurion program’s strong reputation of exclusivity enabled it to attract the interest of a certain wealthy and high pedigree clientele – invite-only applicants, who were willing to spend more than $250,000 a year on their existing American Express credit cards and pay an annual fee of $2,500 to gain entrance into the exclusive program.

The New Visa Black Card – Another Card Designed For The Uber-Rich

Now, a new Black Card has emerged from the financial decadence of yesteryears, clad in black – this time from Barclays Bank Delaware – in the form of a more versatile and widely accepted Visa brand credit card. Now, for the low, low bottom basement price of just $495 a year (with absolutely no sarcasm intended of course), you can now get your grubby paws on and own your very own genuine Black Card courtesy of Visa. Fashioned from an admittedly attractive carbon graphite material (as opposed to the paltry plastic that adorns the credit cards of common peasant folk such as myself), and featuring a virtually unlimited credit limit with the ability to earn 1% cash back of all purchases, the new Black Visa Card appears to personify wealthy and power – or financial overkill – depending on how you look at it.

While seemingly totally out of place on a financial landscape littered with the dead and twitching bodies of former banking giants and credit lending organizations, the extravagant card features and exorbitant fees of the exclusive Visa Black Card from Barclays actually makes a lot of sense if you think about it. Rather than cater to the unpredictable credit card appetites and questionably untimely payment whims of ordinary consumers who may or may not be in the proper financial position at all times to pay back their credit card spending debts, why not peddle a product that targets the cream of the crop – the top percent of the American population with the vast financial means to afford their high spending lifestyle? Being not only able to rake in larger profit percentages from higher credit card merchant fees through the high rate spending habits of the financial elite, but also able to reduce the risk of dealing with ordinary Joe and Jane Plumbers struggling amidst a stagnant economy seems like the financial sure fire way to go in terms of profiting from credit card spending in an otherwise down economy.

Review Of The Visa Black Card’s Features and Offers

One of the Visa Black Card’s most aggressive promotional hitch is its unique exclusivity and selective membership. The card admittedly does state in its promotional tracts that the card is exclusive in nature and therefore not freely available to just anyone. While the Black Card’s exclusivity doesn’t stem from its availability to only just black people (as comedian Stephen Colbert comically lampoons in a Colbert Report TV skit), the card’s marketing material does state that the program will only be limited to the top 1% of U.S. residents – “to ensure the highest caliber of personal service is provided to every customer” as they put it. Whether this is indeed a fact or just an artificially generated gimmick to inspire awe and mythical reverence in the Black Card name remains to be seen.

For those with high credit scores who apply and are approved for the Visa Black Card, selected members get to enjoy the following supposedly exclusive privileges:

1. Limited Membership – Obviously a sought after feature for the high classy types who want to segregate themselves from the economic stimulus check-hungry masses.
2. 24-Hour Concierge Service – This privilege I do find very appealing – though I’m not sure what I’d use it for exactly.
3. Exclusive Rewards Program – Busy business travelers will definitely find the travel, airline, and hotel rewards very appealing, and the free upgrades worth the annual program cost of Black Card ownership.
4. Business Travel Insurance Protection – Road warriors may appreciate the worldwide travel insurance, baggage protection, and card purchase guarantees available to cardholders.
5. Luxury Gifts – Even rich people must appreciate expensive freebies.
6. Patent Pending Carbon Card – The card does look and feel pretty cool. It’s the ultimate buying tool – as the Black Card’s website wisely points out to those who may skeptically think otherwise.
7. Annual Fee Of $495 – *Gasp* Unless there’s a decimal point missing in that numerical figure, this is probably a deal breaker for non high net worth applicants. However, the pricey annual fee will probably not faze the Black Card loyalists out there.

Perhaps like all super credit card offers for the rich and famous, the greatest appeal of the Visa Black Card, aside from its apparent exclusivity, is its unique access to a free members-only concierge service that operates at your beck and call, 24 hours a day, 7 days a week via telephone and email. With the Visa Black Card’s concierge service, members get to enjoy personalized and complimentary assistance towards the fulfillment of their entertainment, travel, business, shopping, and lifestyle needs. For the ultra-rich clientele who is perfectly capable of affording anything they wish, oftentimes, it’s the ability to acquire a product or service on demand as soon as it’s desired that’s worth its weight in gold. The ability of the Visa Black Card to tap into a service whose sole purpose is to help you open doors and acquire access to difficult-to-find products, or acquire ticketing admittance to otherwise unobtainable sporting events or exclusive restaurants may appeal greatly to upper echelon card carrying customers.

So, Does It Make Sense To Apply For The New Visa Black Credit Card?

Obviously for those of you who couldn’t give a hoot, the Visa Black Card’s not meant for your financial tastes. But for the lot of you who do exhibit some interest, read on. While the Visa Black Card does indeed provide a measure of exclusivity and offer a myriad of attractive credit card benefits such as a 1% cash back reward rate on all card purchases and a frequently sought after introductory 0% APR balance transfer rate, many skeptics (myself included) may have a legitimate argument when we point out that the card doesn’t really offer anything that is genuinely exclusive or unavailable in other credit card programs. Many of the same high end perks of the Visa Black Card can be find in other high end card programs like the American Express Platinum, which offers virtually the same travel reward benefits and 24 hour concierge services, for the same comparable annual fee. One can even argue that the original “Black Card” – the American Express Black Centurion Card, stills promotes a greater sense of wealth and exclusive entitlement with its invitation-only application process. Unlike the Amex Centurion Card, the Visa Black Card can be directly applied for, while the Black Amex is by exclusive invitation only based on a pre-demonstration of the ability to record credit card charges at a very high rate for a certain period of time. It’s clear the Black Visa Card is going right after the Amex Black Centurion crowd, but I’m not certain the program sufficiently distinguishes itself other than by name only. Is simply slapping the Black Card label onto the credit card offer sufficient to give it mystique and appeal among the high end trendy crowd? I’m not sure.

For big time spenders and those who place value into such indicators of wealth and status, the Visa Black Card’s annual fee is easily paid for by the cash back offers, free gift rewards, and convenience of the 24 hour concierge services. But as an admittedly fairly frugal saver and spender, I’m not sure what type of status or self esteem boost I would gain from carrying around the carbon fiber credit card in my wallet. But then, I haven’t become a millionaire and reached wealthy status yet.

Note: The New Credit Card Rules Do Not Go Into Effect Until July 1, 2010

These days, it seems like whenever there’s a good thing going or some attractive opportunity for pecuniary gain or profit, the masses ultimately swarm the offer like locusts until they’ve completely ruined it for everyone else. This is how I feel about credit cards and the credit card industry. Credit card rewards and interest free balance transfers were once the easiest ways to make some free money on the side, but now that the Feds have enacted the new credit card law, all of that’s about to change.

As a big proponent of credit card use and an eager partaker of reward credit cards, balance transfer deals, and credit card arbitrage, I’ve been taking advantage of all that they’ve had to offer for some time now. Over many years, I’ve applied for and been approved for more than 25 credit cards. I’ve owned, carried, and used most of the major credit cards from Capital One, Bank of America, Citibank, Advanta, Discover Card, to American Express. Throughout college and into adult hood, I’ve used my squadron of credit cards to earn more than $10,000 worth of cash back rewards, redeemed point rewards for countless free gift cards, and accrued more than $15,000 of interest profit from balance transfer arbitrage. At its peak, I was carrying more than $100,000 in total credit card balances at one time, taking advantage of 0% APR credit card funds deposited into a high yield savings account to earn free interest money.

However, despite my aggressive credit card usage history, I’ve never paid a single cent in credit card interest, forked over a single late fee, or suffered a major long term FICO credit score hit. Currently, my FICO credit score stands at a very healthy 802, thanks to my solid credit history and lack of any late payments. In fact, I don’t even know what any of my credit card interest rates are as I’ve never had to deal with them before. I have always paid my monthly card balances in full and on time. As a naturally frugal saver, I’ve always lived within my means and eschewed unnecessary material goods . Since I started using credit cards at the age of 18 and made paying off my regular credit card balances a priority in my life, I’ve never had to pay anything to the credit card companies, and instead have managed to profit immensely from them.

Because of all this, I had mixed feelings when the federal government finally issued the new credit card rules and announced its plan to crack down on allegations of unfair and deceptive credit card practices by the credit card industry. While the new rules have the potential to benefit American consumers and essentially protect them from their own spending stupidity and consumerism negligence, the new changes are likely to rain on my parade and spell the end to the credit card party I’ve been enjoying for the past few years. However, despite my personal misgivings and the potential loss of a key cog of my personal finance arsenal, I think the new credit card rules and regulations were probably long overdue. Like the mortgage industry, the credit card sector has been in serious need of a good shakeup for some time. Lax federal oversight and governmental complacency has allowed the industry to get a bit too lax on basic fairness standards, permitting abusive and egregious predatory credit card practices to go unchecked.

Despite the Current Recession, The New Credit Card Law Don’t Go Into Effect Until Summer Of 2010

As evidenced by the huge credit bubble that finally popped recently, America has had a love affair with debt and leverage for the last two decades. This abundance of credit in all forms caused many to become drunk with highly leveraged spending power, leading many down the path of out of control shopping, and encouraging the tapping of home equity to pay off credit card balances. The credit card industry’s practice of packaging and selling credit card debt to investors and hedge funds encouraged the growth of exorbitant risk penalties, over the credit limit fees, and all sorts of balance transfer and cash advance charges. Driven by the natural pursuit of profits, the credit card issuers eagerly raked in the ever increasing interest charges and late payment fees. Eventually the subprime mortgage crisis destroyed the housing market and in turn caused a chain reaction devastation that led many credit card consumers to no longer be able to handle their credit card payments, leading to a rise in defaults and ballooning non payment scenarios.

Wallowing in their own mismanagement mess and inability to control their spending habits, consumers ultimately turned to the federal government for bailout assistance. After bombarding the Fed with over 65,000 public comments (the highest number ever received by the federal government on any one issue offered up for comments), the Fed finally responded and issued an announcement of its approval of new credit card rules to combat what regulators labeled as unfair or deceptive credit card industry practices.

In its combined action and announcement, the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Reserve Board approved the new credit card rules, sending a financial tsunami through the the banking and credit card industry. From here on, it is clear that these new rules will fundamentally rewrite the way future credit cards are packaged, marketed, and priced for consumers and small businesses. Despite the significant moves, some lingering critics remain displeased at the effective date of the new rules – July 1, 2010 – and argue that consumers need the new rules now to protect them from overbearing credit practices already in place in light of the current ongoing economic recession and not wait until mid-2010 when the recession may already be over. Of course, the industry has indicated that it needs the lengthy amount of time to adapt to these newly enacted regulations.

How Will The New Credit Card Rules and Regulations Affect You and Make Your Debt Reduction Life Easier?

1) No More Interest Rate Hikes On Existing Balances – Previously, as was the routine practice by the credit card issuers in recent years, credit card interest rates could be increased and jacked up on a whim with only a short notice to the customer in one of those fine print letters that nobody ever actually reads. With the new credit card regulations, interest rate hikes will not be permitted on existing balances and rate increases will only be allowed under limited circumstances such as on future purchases, new cash advances, when a promotional or introductory rate ends, or in response to an actual late payment in violation of pre-existing card agreements. This is one of the biggest changes and one that I wholeheartedly agree with. However, as one who has always paid off his card balances on time and has never paid late fees or credit card interest charges, my advice to all is to always pay off balances on time and in full to avoid having to even worry about credit card interest rates to begin with.

2) Interest Rates Cannot Be Raised Until A Payment Is Over 30 Days Late – Under the new credit card rules, interest rates for existing balances can only be increased if there is an outstanding payment that is over 30 days late. This change eliminates the old practice of allowing credit card companies to increase or double your current APR interest simply if you run up a large balance on your cards (to force you to pay those balances off quicker than you’d like). In addition under the new rules, card lenders must give cardholders at least 45 days of advance notice in the event of interest rate changes, including rate hikes due to 30 day late payments or non payment penalties. Previously, card issuers frequently gave notice of 15 days or less.

3) No More Universal Default – Credit card companies will not longer be permitted to raise current interest rates on cardholders simply because of their payment history or track record with other unrelated creditors such as landlords, utility companies, or even with different credit card issuers. Previously, universal default essentially allowed card issuers to raise rates arbitrarily by alleging cardholders had universally defaulted on all existing loans simply with a single violation against one unrelated debt account. While many card issuers like JP Morgan Chase have already discontinued this practice, this new rule compels the rest to follow.

4) No More Double Cycle Billing – While the immensely illogical practice of two cycle or double cycle billing is predominantly already a thing of the past with most card issuers having already abandoned this ridiculous practice, the new rules will officially end the loophole. Double cycle billing is the practice of calculating interest on daily card balances from more than just the previous 30 days. This billing practice hurts consumers who pay off their balances in full in one month but not in the next, because it irrationally averages multiple month balances to generate interest fees for credit card companies. Thus cardholders end up getting hit with finance charges and interest fees from the previous billing cycle even though they have paid the bill in full.

5) Card Payments Applied To Higher Interest Rate Balances First – One of the most significant new changes (and perhaps the most important), will help compel the practice of fair allocation of payments – a great future benefit to consumers, particularly those that engage in 0% balance transfer offers, cash advances, or ATM withdrawals that carry different interest rates. Any new payment above the credit card bill minimum must automatically now apply to the part of the balance with the highest interest first. For those who have multiple balances on the same account at different interest rates, this new rule will prohibit card lenders from applying payments towards lower interest balances first before applying them to the higher interest ones. This will stop the seemingly unfair industry wide practice of applying monthly payments to the cheaper credit card balances first, while letting more expensive balances accrue interest charges at higher rates.

6) Longer Payment Grace Periods Of At Least 21 Days – Credit card issuers will be required to offer consumers  a reasonable amount of time to make payments on monthly credit card bills – at least 21 days after bills are mailed or delivered. This will help protect consumers from shrinking payment periods and give them a reasonable amount of time to make payments before late charges and interest fees are applied. Personally, I don’t even know how long my credit card grace periods are as all my cards are set up with automatic bill payment that automatic pulls money from my linked checking account to ensure I never have a late payment. I highly encourage the use of automated debit payments. It makes life easier and much more hassle free.

7) No More Unreasonable Fees For Exceeding Credit Limit Because Of Hold On Account – This addresses a basic fairness problem some cardholders have been experiencing, particularly those who travel a lot. Oftentimes when consumers make reservations for rental cars or hotel rooms, merchants will place a hold for a certain credit limit amount on credit cards as a security deposit beyond the purchase amount. While the security deposit hold is in effect, the card’s credit limit is temporarily reduced, making it more likely for the cardholder to accidentally exceed his or her credit limit in the meantime with additional charges and thereby incurring an over the limit charge or fee. The new rules do away with excessive fees in such a scenario.

8) Limitations On Bad Credit Credit Card Fees - This new credit card rule change has the potential to reign in fees for subprime credit cards big time. Subprime credit cards that target people with bad credit will no longer be allowed to charge hefty upfront fees with the new limitations. What was happening was that these subprime credit cards (high interest cards for people with low credit scores with $500 credit limits) were charging applicants with upfront fees that totaled half the credit limit and demanding fee payment in less than a year. The new regulation will severely reign in these fees, but essentially eliminating the future of credit card offers for people with bad credit altogether.

9) Disclosure Of Foreign Currency Transaction Fees – While most people are not aware, international credit card users have had to pay extra fees for credit card transactions charged overseas in foreign currency denominations. While these extra foreign currency fee charges remain perfectly legitimate, the new rules require issuers to clearly list the fees and do a better job of publicizing then to the consumer so that it doesn’t come to them as a surprise.  The disclosure of all fees charged for purchasing goods or services in a foreign currency or for using the credit card outside of the United States will need to be made on a table on credit card applications and marketing solicitations, and not just in tiny fine print when the account is initially opened.

10) Better Overall Disclosure of Credit Card Terms and Conditions -  The new federal rules will require all credit card terms to be disclosed and marketed more clearly to consumers. Card issuers will need to clearly disclose and provide notice regarding important terms and conditions like payment due dates and times, as well as how interest rates and fees will be applied to those making only minimum payments each month. Some credit card issuers have been sneakily shifting around payment due dates and mandating arbitrary payment times, such as setting cut off times at 1:00 pm or on a weekend or holiday. These rules will prohibit such unreasonable and arbitrary practices. As mentioned above, any change to existing credit card terms will need to be expressly disclosed to the consumer at last 45 days before they take effect.

Goodbye Credit Card Rewards, Introductory Teaser Rates, and 0% Balance Transfer Credit Card Offers

The new credit card regulations issued by the federal government will have a significant negative impact on the credit card industry and the future of credit card use in the United States and elsewhere as issuers re-evaluate their existing business and risk pricing models. Because the new rules will severely restrict the ability of card issuers to modify pre-existing interest rates and card terms in response to changes they perceive as credit risk factors (known as interest rate pre-pricing), it is likely all new credit card interest rates will increase as a result, along with a severe reduction in credit availability. All existing rates in place prior to the effective date of July 1, 2010 will likely go up tremendously as well (even for those with excellent credit history scores). Because the new rules do not mandate a ceiling on how much credit card issuers can actually charge for interest fees or late payments, consumers are likely going to be slapped with even higher rates from hereon. With the credit card industry, it comes down to profitability and redistribution of costs. Because of the new rule changes, credit card issuers are likely going to lose a significant amount of money (more than $10 billion a year) in lost interest payments and fees. Instead of eating up the loss and taking their lumps, they are likely going to pass them onto consumers through stiffer interest rates and less favorable credit card reward terms.

The new regulations will have several unintended but perfectly foreseeable consequences as well, including a severe reduction or complete elimination of popular low interest deals, 0% APR balance transfers, and 0% purchase credit card offers, even for those with very high credit scores. The new rules greatly favor those who are irresponsible with credit card usage and those who were never meant to carry credit cards to begin with, and will punish the prime borrowers by eliminating the vast majority of all cash back credit card offers and interest free promotions. Only time will tell whether all such offers will be eliminated en masse, or whether the industry will be able to find a way to stay profitable and continue to offer purchase and usage incentives for consumers.

Despite the fairness benefits of the new credit card rules, here are some of the ways the changes will negatively affect credit worthy consumers:

• It will be much more difficult to qualify for credit cards as credit availability in compliance with the new rules will dry up.
• Substantially higher credit card interest rates overall, even for those with excellent credit scores – primarily to compensate the card issuers for their loss of income under the new rules.
• No more 12 month zero percent balance transfer offers with no balance transfer fees – likely to be replaced with high balance tranfer fees or low interest credit card offers instead.
• There will be a signficiant scaleback of credit card rewards, cash back incentives, and frequent flyer airline mile programs for responsible credit card use. Goodbye juicy credit card promotions.
• Severe reduction or total elimination of bad credit cards, forcing those with poor credit to seek higher credit and riskier options such as payday loans or pay day cash advance.

As always with life, it seems financially responsible individuals such as myself always seem to get the shaft. It’s always the bad home mortgage borrowers, bad credit card users, or the irresponsible spenders who ultimately get bailed out by the government – taking all the credit card goodies enjoyed by the responsible credit card consumers with them.