Source: SMH
New York’s new masters of the universe are enjoying a golden age - thanks to increasingly exotic and risky credit derivatives. Stuart Washington reports. NEW YORK’S Central Park is a verdant green, and dappled sunshine plays on happy family picnics, Frisbee throwers and New Yorkers just lying around. But the city’s investment bankers, lawyers and traders have no time for walks in the park. They are focused on an entirely different kind of green: money, and lots of it. [more]

Did you know that USA consumer debt has grown by over 2 TRILLION Dollars since 1957? Did you know this equates to owing the company store for every man, woman and child in the United States - $33,000! Did you know that this year USA INTEREST on national debt will EXCEED the annual deficit?

Read Hugh Simpson’s explanation that includes a simple example to show you just how bad things are for every American. And he’s right, if those figures don’t wake you up, you’re dead. Either way, that is.

Source: WTHR
Indianapolis - MasterCard is warning its member banks about a rash of thefts from the bank accounts of card holders, some here in Central Indiana. Kristin is good about checking her checking account. “I check the account online every day.” And good thing. When she logged on Tuesday she found it had insufficient funds.

“I was like, what’s going on?” Kristin said. Kristin has a MasterCard debit card and her bank, Sky Bank, blames a security breach. “We were notified very late last week that a member merchant of Master Card had a data breach and account numbers were compromised,” said Mike Newbold, Regional President of Sky Bank Indianapolis. If it sounds familiar it’s because it’s a little like the case last year when a hacker got into customer financial records at TJ Maxx and its affiliated stores. The crooks quickly bought merchandise and gift cards from major national retailers like Wal-Mart. This breach may not be as big as that one but look where someone was spending Kristin’s money with her stolen debit card data.

Kristin shows us her online bank statement. “Well they were Wal-Marts.” In two days, $2,000 in charges were rung up in California Wal-Marts. “Only the last charge was declined,” Kristin said, “and that was today for $700.” And that’s because the crooks had pretty much emptied out her account. “It really makes you realize how vulnerable you are,” Kristin said. She wishes her bank warned her Master Card accounts were targeted. The bank says it just learned of the group of cards that could be vulnerable in the last 24 hours. It urges we all be vigilant. If you have online access Mike Newbold with SkyBank recommends “log in periodically and look at your account activity and see if anything looks suspicious.” The bank says it will work to restore customers balances.

Source: NY Times
Americans spent one in seven of their take-home dollars on debt payments last year, up from one in nine in 1980. Experts say few consumers are able to calculate the true costs of such payments. Behind closed doors, the decisions families like the Moellerings make about their debt — when to pay it off, when to shuffle it to lower-interest sources and when to let it revolve and build — can determine how much their salaries are worth. Like many others, the Moellerings have run up avoidable penalties and occasionally spent themselves into more debt or higher interest rates, even as they have tried to juggle other balances to bring down their monthly payments.

This spring they allowed a reporter to see how they struggled with these choices. Ms. Moellering’s basket recently included more unwelcome news: $2,693 due on a Visa card through her credit union, including finance charges of $25, and $13,680 on a CashBuilder Elite Visa, including a monthly finance charge of $200. Their credit card debt came to $22,228, including $380 in monthly finance charges. Interest varied from 12.1 percent to 32.24 percent. The Moellerings also have a mortgage of $93,000 and a home equity loan balance of $68,574, at 8 percent interest.

“We have friends in the same position,” said Ms. Moellering, who earns $30,000 a year as an administrative assistant. “One was off his insurance for a couple weeks and he broke his arm, and they’re out 25 or 30 thousand. We’ve talked to them about it. It doesn’t matter what you do, you always have that credit card debt.”

Source: thisismoney (UK)
Credit card companies have found a new way to squeeze money from customers. Some have set minimum monthly repayments so low that they can actually be less than the interest charged. So the balance owed can increase - even if you do not spend anything. Lenders have been gradually reducing the minimum repayment they require each month from around 5% of the balance owed a few years ago to between 2-3% now. Less debt is paid off each month, allowing banks to grab even more of your money in interest payments as it takes longer to pay off your balance. [more]

Source: Scotsman.com
A NEW generation is champing at the bit to finish their studies and join the world of work, but when it comes to money they are like lambs to the slaughter. Financial independence is full of risks and rewards, but as you can’t put an old head on young shoulders we spoke to recent graduates at Scottish Gas, Royal Bank of Scotland, Press Data Ltd, Scottish Widows Investment Partnership, KPMG, and The Audience Business and compiled a list of things they wish someone had told them. This list includes;

• I wish I had known exactly how much tax and national insurance would eat into my salary.
• I wish I had been told that my take-home pay would shrink come April.
• I wish I had been warned about the full implications of student loans.
• I wish I had known my overdraft would disappear at graduation.
• I wish I had known that my current account was not the best place for extra cash.
• I wish I had known that banks have different exchange rates for the same currency.
• I wish I had known that credit cards charge different interest rates depending on how you use them.
• I wish I had realised that my credit card company did not use my monthly repayment to pay off the most expensive debt first.
• I wish I had understood the consequences of only making the minimum repayment on my credit card each month.
• I wish I had known how much running a home actually costs.
• I wish I had known how complicated mortgages can be.
• I wish I had known the importance of budgeting.
• I wish I had been told to start my pension as soon as possible.
• I wish I had known that I would be throwing away free money by not joining the pension scheme.
• I wish I had known that asking for advice can be hugely useful.
• I wish I had known where to get impartial financial advice.

Axcess News reports that “According to the US Federal Reserve, consumers are borrowing at the fastest pace in four-months, despite the rise in gasoline prices and collapse of the housing market. Consumer credit increased at a 6.7 percent annual rate in March compared to a 2.8 percent increase the prior month, which marked the fastest pace of consumer borrowing since November.”

Maybe people are borrowing faster and more, not because they are ignorant and stupid but because they might understand that the country is headed for a depression that is going to be greater than the Great Depression. Maybe these people think “if we’re going to crash hard, let’s live it up while we can”.

The Monterey County Herald has taken a look at the consequences of credit card debt and found, like we have, that surveys clearly show that high credit card balances are a leading cause of divorce. Whether this is because the spouse knows or whether it is done behind the other’s back.

The article comments on the nature of the jewelry industry by saying that “The jewelry industry will tell you the rule of thumb is to spend two months’ salary for an engagement ring. That’s fine if you’ve got two months’ salary lying around. If not, common sense tells you that going deep into debt isn’t the way to begin a marriage”. Unfortunately, we are seeing a lack of common sense in a huge percentage of people who happily go into debt, not knowing what they are really getting themselves into.

Source: The Mirror
GREEDY banks are finding new ways to claw back cash from customers. Fearing a crackdown on charges, they are hitting back with new ruses. This is despite the “Big Five” - HSBC, Barclays, Halifax Bank of Scotland, Lloyds TSB and Royal Bank of Scotland - making combined profits of £41.3billion in the past year. That’s £131 a second.

Reader Phil Hartney was the victim of one of these sly money spinners. When he opened his Virgin Money credit card statement he was stunned to find he had been hit with a £10 charge - for being £12.72 in credit. Phil, 54, of Glossop, Derbys, said: “This seems wrong. I was amazed I could be made to pay for keeping my account in good order. I keep this card for emergencies. I don’t want to owe anything, so I left it in credit. It’s unfair to sting me.” He has been trapped by the latest fee - a credit balance service charge. Any Virgin Money customer with a positive balance on a card for more than 12 months will be charged £10.

Source: TVNZ
The Commerce Commission has begun an investigation into unreasonable charges on late bill payments for credit cards. Collectively, New Zealanders owe almost $5 billion on credit cards. The Commerce Commission investigation has been prompted by similar action in Britain in which its Fair Trading Office found hefty late payment fees unfair. As a result their banks cut fees by half.

Penalty charges for credit cards in New Zealand can be up to $25 - even if a payment is just a day late - and that is on top of interest. The Consumers’ Institute says while credit card holders need to take charge of their debt, the fees are unfair in some cases. “You do have to be responsible for your own card and you should try and pay if off on time, but then you are encouraged to use credit cards and if you are late by a couple of days then you shouldn’t have to have an outrageous fee slapped onto your payment,” says Consumers’ Institute spokesperson Sue Chetwin. Budget advisors are dealing with the consequences of what they say is a growing trend.

“What we’re seeing is that in this day and age more of the loan companies and the credit card companies are taking advantage of the fact they can get away with doing these charges,” says Salvation Army spokesperson Katherine Martin. The banks say the fees recover their costs and customers are always provided with information on that cost base.

Danny Schechter: “We live in a country where the credit and loan complex has become as powerful as the military industrial complex. There are 10 banks that dominate the credit card business. They basically operate with impunity.”

Source: PRNW
The Personal Credit Index(SM) is down 15 points to 90, which is the lowest level since November 2006. Here are some of the schoking numbers:

Consumer financial concerns

• 38 percent are concerned about not being able to pay medical costs associated with a serious illness
• 28 percent fear not being able to pay the medical costs for normal health care
• 28 percent worry about not being able to maintain the standard of living they enjoy
• 21 percent are concerned about not having enough money to pay their monthly bills
• 16 percent are worried about not being able to pay their rent, mortgage or other housing costs
• 13 percent worry about not being able to make minimum payments on their credit cards

Credit Card Usage:

• 37 percent say they generally pay the full amount of their credit card bill(s) each month.
• 13 percent say they usually pay the full amount but not always
• 24 percent say they pay as much as they can but usually leave a balance
• 11 percent report that they usually pay the minimum but not much more
• 13 percent said they did not have any credit cards

Quality of Life:

• Only 26 percent of those making less than $40,000 annually feel they are in a good position to buy, while 71 percent feel they are not
• In sharp contrast, 60 percent of those making $75,000 or more feel they are well-positioned to spend, while only 38 percent of these consumers feel they are not in a good position to buy
• Among those making $40,000 but less than $75,000, 44 percent feel they are in a good position to spend, while 53 percent feel they are not

Source: Independent Financial Comparison (one, two)
This is excellent.

1. Annual fees are making a comeback

Throughout the Eighties and early Nineties, annual fees were the norm, as most credit-card issuers levied them. However, aggressive competition from the likes of the ‘American Eagles’ (Advanta, Capital One, MBNA, etc.) saw annual fees all-but-abandoned in the mid to late Nineties. Sadly, as lenders attempt to cope with rising bad debts and an enforced reduction in late-payment fees, annual fees are now making a comeback. More than a dozen cards now levy annual fees, and firms such as Lloyds TSB and MBNA are selectively introducing annual fees, targetting unprofitable customers and dormant accounts. So, keep a close eye on your monthly statements, in case your card issuer decides to spring an annual fee on you.

2. Balance-transfer fees are rising

If you’re paying interest on your credit-card debts, try transferring them to one of the dozens of cards which offer introductory interest-free periods lasting from five to twelve months. These 0% balance transfers cost card issuers a lot of money to subsidise. So, lenders have responded by bringing in transfer fees to offset the cost of providing interest-free credit. If you opt for a 0% balance transfer lasting six months or more, then expect to pay a fee of, say, 2% to 3% of the value of each transfer.

3. Card protection plans aren’t worth it

Last year, I acquired a new credit-card and, sure enough, the annoying sales calls began. One product on offer was a card protection plan from the likes of CPP and Sentinel. This cost £29 a year and provided protection against losses due to fraud and theft. Naturally, I turned down this kind offer, explaining that the true cost this product should be about £3 a year. Also, the Consumer Credit Act limits my liability against fraud to just £50 — and card issuers usually waive this sum.

4. Cash interest rates are extortionate

If you use a credit card to withdraw cash from a cash machine or over the counter, watch out for two things: cash-withdrawal fees (see point 5) and sky-high rates of interest. Although a typical credit card will charge an interest rate of around 16% a year on purchases, interest rates for cash withdrawals are far higher — anything from 20% to 30% a year. Even worse, you lose your normal interest-free period of between 45 and 56 days). Ouch!

5. Cash-withdrawal fees are steep

As well as attracting higher interest rates and forfeiting your interest-free period, making cash withdrawals on credit cards racks up additional fees. Until last year, this fee was, say, 2.5% of the amount withdrawn, with a minimum charge of £2.50. However, cash-withdrawal fees are on the rise, with many issuers now charging 3% (minimum £3). So, get the message: credit cards and cash don’t mix. Stick to making fee-free, interest-free cash withdrawals with your debit card.

6. Credit-card cheques are a rip-off

Unsolicited credit-card cheques are of my pet hates. Indeed, I’ve closed more than one account because a card issuer kept sending them to me. The big problem with credit-card cheques is that, nine times out of ten, they are treated in a similar fashion to cash withdrawals. Thus, although they offer ‘convenience and flexibility’, these benefits come at a high price. (While most credit-card cheques charge high rates of interest plus handling fees, look out for low-cost balance-transfer cheques which charge low rates of interest and could save you money.)

7. Foreign usage fees gobble up your spending money

When you spend on a credit card abroad, buy from an overseas website, or pay for goods in currencies other than sterling, all but a few credit cards charge you an extra ‘foreign currency conversion’ fee. Typically, this adds 2.75% to the cost of overseas purchases, or £5.50 for every £200 spent. To avoid paying this unnecessary fee, be sure to take the right plastic abroad. The following cards don’t levy this charge, both in EU states and worldwide:

Post Office : Classic MasterCard and Platinum MasterCard
Nationwide BS : Classic Visa, Comic Relief Visa and Gold Visa
Morgan Stanley : i24 MasterCard (this ultra-premium card charges an annual fee of £275)

In addition, watch out for fees for making withdrawals from cash machines abroad, which are broadly similar to those charged here in the UK.

8. Interest rates are too high

At present, the Bank of England’s base rate is 5.25% a year, yet a typical credit card charges more than 16% APR on purchases, and even more on cash withdrawals. In my view, this margin (more than ten percentage points over the base rate) is too high. Of course, by keeping interest rates high, banks makes higher profits from our addiction to spending on credit, so don’t expect rate cuts any time soon.

9. Late-payment charges

Until last year, most credit-card issuers would levy a penalty charge of between £20 and £25 if you missed a payment, failed to pay on time, or exceeded your credit limit. However, following enforcement action from the Office of Fair Trading (OFT), no card issuer now charges more than £12 per offence. Nevertheless, as an ex-banker, I know for certain that the true cost of dealing with these problems is measured in pence, not pounds, so I firmly believe that the card issuers got off lightly. Then again, recovering unfair bank and credit-card fines is a doddle, if you read our ultimate guide to reclaiming your money!

10. Minimum monthly repayments mean misery

Minimum monthly repayments (MMRs) are the work of the Devil. Until the mid-Nineties, credit-card issuers would demand an MMR of at least a tenth (10%) of an outstanding balance. However, fierce competition for customers has whittled this away such that most card issuers now require an MMR of 3%, 2.5%, even a measly 2%. Of course, the lower the MMR, the longer it takes to repay your debt. Indeed, as MMRs mainly consist of interest and other charges, they hardly chip away at your debt at all.

For instance, let’s say that you owe £2,500 on a credit card which charges an interest rate of 1.5% a month (19.56% APR) and has a minimum monthly repayment of 2.5% (minimum £5). If you pay only the bare minimum, you will repay this debt in 26 years and one month. Over the decades, you cough up a total of £6,058, which is your original debt of £2,500 plus interest of £3,558. Therefore, avoid MMRs like the proverbial plague!

11. Negative payment hierarchies bump up the cost

Be very wary of transferring a balance to a 0% credit card and then taking this card shopping. Unless your 0% deal also extends to purchases, you will pay standard rates of interest on your spending. This is because almost all credit-card issuers apply what’s known as a ‘negative payment hierarchy’. In other words, your monthly repayments first go towards repaying your cheapest debt, such as a 0% balance transfer, leaving your most expensive debt to accrue interest. Nationwide BS is the only major credit-card issuer not to use this sly trick.

12. Payment protection insurance is hugely overpriced

As I warned in Millions Conned By Card Cover, credit-card issuers charge extortionate premiums for payment protection insurance (PPI). Also known as credit card repayment protection (CCRP), this optional insurance meets your monthly repayments if you are unable to work due to an accident, sickness or unemployment. This protection is up to ten times as expensive as it should be, so don’t buy it — unless you like being mugged, that is!

13. Credit cards encourage you to spend more

When spending on credit cards, we often splash out more than we initially intend to. Indeed, Keith Tondeur of money education charity Credit Action warned that paying with plastic encourages us to spend around a third (34%) more. Tondeur’s report, Escape from Debt, was originally published in 1993, and I imagine that this overspend will be much worse these days. Thus, if you find it hard to resist impulse purchases, then steer clear of credit cards.

14. Twelve different ways to calculate interest

According to consumer group Which?, the UK’s top twenty credit-card issuers charge interest in twelve different ways. This makes a mockery of Annual Percentage Rates (APRs), because a card with a ‘higher’ APR can be cheaper than one with a ‘lower’ APR, depending on how each calculates interest. Thus, Which? recently made a super-complaint to the Office of Fair Trading, asking it to introduce a standardised formula for calculating credit-card interest.

Source: Newsday
There are some traps credit-card companies have laid for consumers that can trigger a spiraling financial crisis, potentially leading to an endless cycle of consumer debt. One such practice, known as universal default, permits the companies to increase interest rates if a cardholder makes just one late payment to another credit card company or even pays a phone or utility bill late. That means if your credit card payment arrives past due, you risk having your interest rates raised on all your other cards.

Nearly half of U.S. banks use universal default, enabling them legally to raise consumers’ interest rates as high as 40 percent. Credit-card issuers justify the practice by saying it’s an indicator of increased risk - the higher the risk, the higher the rates. This hidden and unfair practice, however, is harmful to New York consumers.

To give an understanding of why credit-card companies don’t want universal default stopped, consider the potential for profit. There are approximately 30 million credit cards issued in New York State, with the average consumer holding more than four cards and 16 percent carrying 10 or more. Statistics for 2004 show that the average household credit card debt was $9,300 nationwide, and total card debt is currently about $800 billion nationwide. In addition to universal default, consumers face new penalty fees along with complicated and ever-shifting interest rates that are driving up the costs of using cards. For example, some issuers are charging cardholders a $5 to $15 fee to make a single bill payment by telephone, and between $2 and $13 to obtain a single copy of a billing statement.

In the 1980s, companies provided a 15-day grace period before fees were assessed or interest rates were raised. But today these charges can be issued even if your payment is just minutes late. Yet another practice, called double-cycle billing, charges interest on your current balance as well as your balance from the prior month, even if you paid on time. Information about these practices is often buried in the fine print of a credit-card agreement that can run 20 pages or more. Nationwide, banks collected a record $17.1 billion from such penalty fees in 2005, a 15.5-percent increase from 2003. Late-fee charges increased 160 percent over a 10-year period to an average of more than $33 per late payment in 2005.

More and more New Yorkers are at risk of higher debt from using credit cards; seniors and college students in particular are two groups that have been relying more on credit cards in recent years. A new study by the National Consumer Law Center says the average credit-card debt for consumers aged 65 to 69 has skyrocketed 217 percent in the past decade, to $5,844. Ten out of 12 colleges allow companies to set up tables on campus and offer free merchandise for students who apply for credit cards. This aggressive marketing is contributing to student debt. About 47 percent of college students have four or more credit cards. By the time they graduate, students often have doubled their average credit-card debt while tripling the number of credit cards in their wallet.

In March, Citigroup - one of the largest issuers of credit cards - announced it was voluntarily giving up use of universal default after congressional hearings and consumer groups began focusing more attention on this unfair practice. Although this is encouraging news, other major financial institutions have not followed suit, and those companies have enough tricks up their sleeves to make the day the credit-card statement arrives in the mail a day of high anxiety.

Source: Sunday Herald
SCOTLAND’S GROWING debt crisis is set to take a turn for the worse, as tens of thousands of debtors face being chased for long-standing money owed from years ago - by collection agencies who may have paid just pennies to buy their liabilities.

UK banks and credit card agencies last year offloaded a record £6.5 billion in unpaid debts to money collection agencies, up from about £4bn in 2004. Estimates suggest the total debt being chased could reach more than £8bn within the next three years. Some experts warn that, unlike some banks and card issuers who are seen as a softer touch when it comes to collecting money owed, the new “owners” of the debt are more likely to hunt people down, regardless of how vulnerable they are.

Joanna Elson, chief executive at the Money Advice Trust, which runs Scotland’s National Debtline advice service, said: “The further away debt gets from its original lender, the less interest they may have in ensuring good practice. There may be some collection agencies who cut corners.”

One recent case seen by the Sunday Herald was that of an 85-year-old, now living in sheltered accommodation, facing a demand for almost £2000 for money she owed on a Barclaycard back in August 1999. The original debt had been barely a quarter of that amount, but grew after interest of almost 1.5% a month was added to what she owed. A Barclaycard spokesman declined to discuss the case, but said: “Those who have failed to repay their debts should always assume that their debts have not gone away. Where we do pass on a debt to a collections agency, this action will only be undertaken after all other options have been exhausted. Customers who are in this position will be informed that their debt is being passed onto an agency for collection.”

The surge in the amounts being sold on comes as the big banks wrote off £6.7bn in bad debts in 2006, according to the British Bankers Association, the industry trade body. Total figures for card companies are not known, but Barclaycard alone was forced to write off a staggering £1.57bn in bad debts last year. However, contrary to what many believe, “writing off” debt does not mean those who owe the money are no longer chased for it. However, consumer groups argue that debt collection agencies are bound by the Limitations Act of 1980, which says a creditor has only six years to take legal action over a debt. After that, the slate should be wiped clean.

But Kurt Obermaier, executive director at the Credit Services Association, which represents debt collection agencies, says: “If you owe me £20, the fact that I can’t sue you after six years doesn’t mean you no longer owe it to me. It does not finish the debt and I can go to you seven, eight or however many years later and politely ask you to pay me back that money. If you refuse, I can politely warn you that I will be coming back to see you next week to ask you to reconsider.”

Source: MSNBC
Many banks and card issuers include language in the agreement you sign that they can charge fees of $30 or more — or raise your interest rate to as much as 31 percent — if you’re so much as a day late making a minimum payment on your due date.

Some banks and card issuers will even boost your rate if you’re late on another bill — an industry practice known as “universal default.” The theory is that is you miss paying another bill (even if you’re disputing that charge), you’ve somehow become a riskier borrower. In some cases, these agreements say they have the right to raise your rate “at any time for any reason.” Your only remedy is to pay off the card in full and cancel your account.

Fees have become a huge money-maker for credit card issuers. Late fees now average $34 per month; “over-limit fees” — that’s when you spend more than your credit limit — average $31 per month, according to a recent report by the Government Accountability Office. After hearing loud complaints from consumers about these practices, Congress has begun holding hearings on the credit card industry and is looking into curbing the most abusive practices.

“The disclosures on calculating interest rates are so complicated that virtually no average consumer can understand them,” Sen. Carl Levin, D-Mich., said at a recent hearing. “In some cases, consumers become overwhelmed with penalty interest charges that can double or triple the size of their debt, and make it nearly impossible for them to pay their bills.” Levin cited a case in which a card holder overspent his limit three times for a total of $200 and was charged over-limit fees 47 times amounting to $1,500.

Source: Aberdeen News
“If you would be wealthy, think of saving as well as of getting.” A mind-set such as this is rather difficult to find. Saving money seems to be either on the back burner or nearly impossible for many Americans today. In the eighteenth century, the enlightened thinker and early American, Benjamin Franklin knew the problems that debt brought on.

More American households are in debt today than at any point in the past 15 years. In fact, debt is rising faster than income. This is especially true in middle-class households. There seem to be two major components to the debt crisis in America: people spending money on things they do not need and cannot afford, and banks and other sources encouraging us to do so.

Franklin also said, “Pride is as loud a beggar as want, and a great deal more saucy.” Today there are many items that could drive a person into debt. Take a look around you. There are many new electronic devices, fashions, toys, cars, etc. The list could stretch out for miles, which would probably not come as a shock to many people. It seems as if we live in a world where “keeping up with the Joneses” is not a simple saying, but a way of life.

Source: Mortgage Solutions
The discovery that one in 20 teenagers does not believe that money borrowed on a credit card needs to be repaid must have made debt counsellors’ hearts sink, while also reassuring educationalists that the introduction of lessons in finance into the school curriculum has not arrived a day too soon. A survey, published in February by the charity Personal Finance Education Group (PFEG), of 1,000 teenagers aged 14 to 18, found that by the time they were 17, more than half of those surveyed had already been in debt and 90% worried about their money.

Source: Alternet
America is very wealthy country, but one has to wonder how much of our wealth is in fact a chimera, spun of a consumerist ideal and given the appearance of solidity by a flood of easy credit? How much poverty and real economic pain is covered up by an endless succession of pay-day loans and EZ-finance rip-offs that eventually just bury people under mountains of debt from which they have little chance of digging themselves out.

Today’s bankruptcy rate is ten times what it was during the Great Depression, foreclosures are at a 37-year high and the United States has a negative savings rate, yet we’re told every day that the economy is going gangbusters. George W. Bush often points out that more Americans own their own homes today than ever before. He doesn’t mention that they also have less equity in those homes than ever before. Every day brings news of the potential scope of the emerging “sub-prime” loan scandal — what Robert Kuttner called “deregulation’s latest gift” — and new indicators that the housing market that’s driven so much of the economy for the past five years is a bubble that’s begun to burst right before our eyes. Compounding our personal debt problems are our representatives, equally profligate spenders who are just as happy to run up enormous budget deficits and who reflexively guarantee and subsidize trillions of dollars of new loans to already strapped American businesses and consumers.

It’s a pretty good time to ask ourselves just how we got here.

Source: China Daily
“Enjoy today’s happiness using tomorrow’s money” is a slogan that has been deeply rooted in the heart of many young credit card holders. However, a recent survey found that some of them are worried about becoming card slaves, a term used to refer to people pay only the minimum amount against their credit card debt every month.

Conducted by China Youth Daily and www.sina.com, the survey collected roughly 1,800 ballots and found that 23.7 percent of them were worried about becoming slaves, borrowing money from one card company just to pay off the debt on another and always living on the edge of bankruptcy.

Following relentless promotions by banks in recent years, credit cards are now popular in several large cities in China. Holders have an average of more than two cards. The survey found that 35.8 percent of people have one credit card, 34.8 percent have two or three, and 20 percent have more than three. Although about 85 percent of people said they pay off their credit card debt every month, roughly 12 percent of people said they pay only the minimum balance, the survey found. Young people have become the mainstream of credit consumption. A credit card website - www.51credit.com - has more than 300,000 registered members, including many undergraduates and middle school students. The members’ average age is just 26.

“When paying for things with my credit cards I never think about how much I earn each month, only what is left of my credit line. My monthly salary often fails to cover my debts. Credit cards stimulate consumption, and help me to enjoy my life now and worry about my debts later. I bought my computer, mobile phone, iPod and other expensive items using my credit cards.” (Xia Xiaoxue, 24, an office employee).

Comment: So an increasing number of the Chinese population are falling into the same trap that many Americans have fallen into… and can’t get out of anymore. Debt for life. Slavery to the banking system to repay debts a dozen times over.

Source: Telegraph
The Government is to remove all barriers to banks sharing data on us in a bid to curb irresponsible lending. But the potential for error is huge, writes Teresa Hunter

The Government is poised to remove all privacy to our financial arrangements by allowing banks and other institutions to reveal full details of our accounts to each other and credit reference agencies, even though we may not have given permission for this data to be shared.

The move is likely to prove controversial as credit reference agencies can be prone to errors. Citizens Advice confirmed that the bureaux regularly deal with clients who have been refused credit because of problems with their files. Moira Haynes of Citizens Advice says: “There can be things on files which customers do not agree with, or imply financial associations with other people which do not exist. We do what we can to help them get the mistakes corrected.” [more]

Source: Scotsman News
It was introduced to help tackle credit card fraud, but now chip-and-PIN technology has been blamed for fuelling the ongoing rise in consumer debt. The claim was made by the online consumer advice service uSwitch.com, which said that the popularity of the new system has made it easier for people to get cashback on credit card purchases at the till and overspend.

Chip and PIN was introduced in February 2006 as a replacement for the old-style signature strip system, which was considered to be an easy target for potential fraudsters. Since its introduction, it has been credited with cutting down on fraud, but a report produced by uSwitch.com suggests this has not come without a cost to consumers. The service said the introduction of the new technology had led to a “dramatic increase” in credit card debt, and added that up to one million people believe that charges on credit card cash withdrawals are free, as they are on debit cards. This is not the case. [more]

Source: Cardguide UK
For the first time the number of people in the UK seeking insolvency in 2006 broke the 100,000 barrier, illustrating the high consumer debt level problems that have emerged, with nearly one and a half trillion pounds worth of consumer debt in total. Banks have taken the hit pretty hard, with many major banks complaining about the high levels of bad debt that they have been left with as a result of consumers seeking protection through bankruptcies and IVAs because they cannot afford to keep up with repayments on financial commitments such as loans and credit cards. And it seems that some major banks are now intending to take a stance against these bad debts. One of the UK’s major banks, Barclays, is planning to revamp its credit card services to focus on mainstream borrowers, and it is looking to do this through getting rid of its sub-prime credit card division according to recent reports. [more]

Source: AZ Central/WSJ
Debit-card use is soaring, but a series of recent scams highlights the growing risk of fraud to consumers who use the method of payment. Thieves are always inventing new ways to steal consumers’ account information, whether they use debit or credit cards. But debit cards typically put consumers at greater financial risk because they offer less legal protection than credit cards in the event of loss. And because debit cards access funds directly from your bank account, the money is missing while you sort out any theft, which could mean bounced checks, late fees and other problems. [more]

Source: Pahrump Valley Times
According to Scurlock, incomes have risen about 1 percent in “real terms” in the past generation, while household debt increased over 1,000 percent. Scurlock cites the Federal Reserve in saying that 12 percent of young families were more than two months behind on their debts in 2004. With new bankruptcy laws, that figure has undoubtedly gone up. Scurlock interviewed people in the industry and, to his shock, found that credit card companies and big banks encourage debt-to-the-extreme.

Fees and “extras” such as unneeded insurance are the ways that banks make their money. For instance, although Scurlock says they take little to no time to process, there’s a reason that “bounced checks” come with a $25 or higher bank fee.

Source: HLS
“Maxed Out,” a new documentary examining the proliferation of debt in America, was shown at an advanced screening in Ames Courtroom. Filmmaker James Scurlock and Professor Elizabeth Warren, a leading bankruptcy expert who appears in the documentary, were on hand after the film for a panel discussion.

“Credit cards are transforming middle class America, and James Scurlock is determined to tell the story,” says Warren. “Maxed Out pieces together clips and interviews to tell a tale that startles, and eventually outrages, the viewer. The film is a reminder that one person with an idea, a camera, a few friends and a lot of perseverance can help change a national conversation.”

In the film, Scurlock interviews debt collectors, pawnbrokers, people in debt, and experts like Warren to show how the credit industry unfairly targets consumers, wreaking havoc upon the lives of Americans.

“We’re all led to believe that people get into financial trouble because they are irresponsible, but I’ve learned that most people are getting in trouble because the banks and credit card companies are setting their customers up to fail,” said Scurlock. “The more credit they give us, the more credit we need. When we inevitably fall behind, they can charge the huge late fees and the over-limit fees and the stratospheric interest rates that drive their profits.”

To solve the debt problem, Scurlock calls on the government to pass tougher regulation on the credit industry as well as the industry itself to change its practices. Instead of targeting the least responsible consumers, Scurlock argues, lenders should take income into account when offering credit to consumers. Scurlock is also the author of the book “Maxed Out: Hard Times, Easy Credit, and the Era of Predatory Lenders,” which is a companion to the documentary. Warren has written several books and articles exposing the credit industry, including “All Your Worth: the Lifetime Money Plan” and “The Two-Income Trap: Why Middle-Class Fathers and Mothers are Going Broke.” The screening is sponsored by the Consumer Law Unit of the Hale and Dorr Legal Services Center.

Click here to view a trailer of the “Maxed Out” documentary.

Source: AJC
Ten thousand dollars in credit card debt sneaked up on Randy Arroyave like a ninja in the night. When he got his first card, he would only use it for big-ticket items, like a $300 leather coat or trips home to Latin America. Then he would pay it off, diligently but slowly. “I was very careful and very apprehensive to use it,” recalled Arroyave, 30.

But he relaxed his credit card code when he quit working to attend Hunter College of the City University of New York, using it for meals, entertainment and small things. It wasn’t long before he had two cards — and mounting debt. And still, the tempting offers for new cards arrived daily in the mail. “I didn’t check for the interest rates,” he said. “I chose the first one in the mail that looked pretty.”

Like Arroyave, millions receive a dizzying array of credit offers. Banks promise everything: low introductory or annual interest rates, rewards programs, and cards that come in gold and platinum. Making sense of it all can stump even the most financially savvy. But a little knowledge can go a long way. “Know how much you spend,” said Curtis Arnold, founder of CardRatings.com. “And know your lifestyle.”

First, you need to decide how you’ll be using your card, Arnold said. If you plan to carry a balance, then the annual percentage rate is going to be the most important piece of information. The APR is the amount of interest you’ll pay on any balances you carry. The lower the rate, the better. Just a few percentage points can make a huge difference, saving hundreds of dollars and cutting the length of time it takes to pay off your debt. Also, beware of introductory offers. Some cards promise rates as low as 0 percent interest on balance transfers, but if you miss one payment, the rate can jump as high as 30 percent.

Many of these deals can also come with hidden fees attached. “They’ll talk about the 0 percent rate [on balance transfers], but generally they won’t advertise they’re hitting you with a $300 fee,” said Arnold. And remember — be honest with yourself about your ability to pay off your balance before your introductory rates expire. “Everyone has good intentions, but life happens,” said Arnold.

Reward cards may seem tempting, but their higher interest rates nullify any benefits if you carry a balance. But if you can afford to pay off your balance each month, a reward card may offer the best deal. Now all you have to do is sort through the offers and choose the right one. “It’s not one size fits all,” said Monica Beaupre of American Express. But a 2004 law sponsored by Sen. Chuck Schumer (D-N.Y.) made it easier. It requires all solicitations to include a table of information, called the Schumer Box, which contains most of the information you’ll need. Web sites like CardRatings.com, which ranks hundred of credit cards, can also make comparison shopping easier.

Which is exactly what Arroyave did. When he graduated from Hunter and started working as a biology lab technician, he set out to rid himself of his credit card debt. His goal: freedom in six months.

Source: BBC News
More credit card companies have been quietly raising a variety of charges to restore their profitability, says the information service Moneyfacts.

Its latest survey shows that six card companies have made big changes to their charges in the past two weeks. Offers to transfer a card balance free of charge have almost all disappeared. Moneyfacts says banks are responding to last year’s ruling by the Office of Fair Trading (OFT) that credit card default fees should be cut to just £12.

“Battling with rising bad debts and a huge loss in revenue from the capping of default fees, credit card providers have been forced to look for other ways to maintain their income stream,” said Michelle Slade of Moneyfacts. “Changes range from interest rate increases, by as much as 10% (on cash transactions), to shortening of interest-free deals,” she added.

Balance transfers: The six major credit card firms highlighted by Moneyfacts for the recent introduction of higher charges are the Co-operative Bank, GE Money, Marks & Spencer, the Nationwide and Northern Rock. But Moneyfacts accuses Lloyds TSB of being particularly sneaky. “Cash withdrawal fees and foreign usage charges are rising, but perhaps the sneakiest of all is the requirement to make purchases as part of a 0% balance transfer deal,” said Michelle Slade.

Moneyfacts says Lloyds TSB is negating the apparent advantage of its 0% nine-month deal for balance transfers, by insisting that customers make a purchase of at least £100 with their new card within the first three months. That purchase will attract an interest charge of either 15.9% or 17.9% and will not be paid off at all until the cheaper, transferred, debt has been paid off in full. However, in response, Lloyds TSB said that the full terms of the 0% deal was “very clearly communicated in customer literature.” In addition, the bank said that the £100 purchase that customers had to make to obtain the 0% deal was itself subject to an initial three-month interest free period.

OFT: All this has been part of a growing trend. In the aftermath of the OFT’s ruling that credit card default fees should be slashed to just £12, many credit card companies raised their basic interest rates. Since then, the banking group HBOS has revealed that it would lose £60m in income this coming year as a result of the OFT’s ruling. Other charges were introduced as well. Last month, Lloyds TSB announced it would charge customers £35 a year if they did not use their credit cards enough.

And in January, HSBC said it would charge much higher interest rates when customers used their credit cards for gambling. Meanwhile, 0% deals for balance transfers, which gave birth to a breed of people called “rate tarts”, now almost all come with a transfer fee attached, typically of 3%. Only the Britannia building society does not charge such a fee.

Source: Home and Family Bills
Let’s face it folks – the average American is a compulsive spender, and here are the statistics to prove it. The American Consumer Satisfaction Index (ACSI) in May this year predicted that consumer spending was likely to increase, even as the growth of wages and salaries continued to slow down and the national savings rate went into the red. While increased consumer spending may be good for the national economy, it’s definitely not so for the bank balance of the average family, more so when you spend $12 for every $10 that you earn. It’s high time the purse strings were tightened, and we all started focusing on saving.

It turns out that the simplest ways to cut costs are the most practical ones – the lessons you learned from Mom, but somehow forgot all about as you grew up. Well, it’s not too late to jog your memory, dust those mental cobwebs, and get your financial act together with these easy cost-cutting tips.

Source: Consumer Affairs
After years of docilely taking orders from banking interests, Congress is at least trying to assert a bit of independence, as evidenced by recent Congressional hearings that have spotlighted the abusive, predatory and usurious practices that have come to characterize the credit card industry. Check out this lengthy article that goes into issues such as; Universal Default, Trailing Interest, Penalty Fees, Complex Statements, Hidden Costs, and passing the buck on Identity Theft.

The article concludes with something we fully agree on; Consumers need to know a lot more about how to manage their personal finances. More schools should offer classes devoted specifically to teaching students how investing works, how debt can be accrued, and how credit is not a blank check.

Source: USA Today
Sandra Block has written an article on debt and credit cards that is worth reading. She starts by writing that, “If you want to get a group of people riled up, ask them how they feel about their credit card issuer. But send the children out of the room first, because you’re likely to hear language that’s inappropriate for tender ears.”

It is clear that Sandra has a good understanding of credit cards in our society when she writes, “Americans use credit cards to pay for everything from groceries to speeding tickets. But they’re increasingly besieged by colossal fees and interest-rate increases that seem to hit them without warning or justification.”

Read more on unpopular credit card and bank practices such as Universal Default and Double Billing.

Source: Scrippsnews
This question was presented to a debt adviser:
My friend has several credit-card accounts totaling more than $35,000 in debt. My friend has a steady, well-paying job. But the debt-to-income ratio is too high for the banks, so a personal loan could not be approved and tapping into home equity is out of the question. I have considered using my home-equity line of credit to help, but am very concerned about putting myself into that situation. It’s a close friend, but someone whom I have known only for a couple of years.

Please read Steve Bucci’s excellent advice on this situation.

Source: London Independent
Paying for goods with notes and coins could be consigned to history within five years, according to the chief executive of Visa Europe.

Peter Ayliffe said that, by 2012, using credit and debit cards should be cheaper and more convenient than cash. Some retailers could soon start surcharging customers if they choose to buy products with cash, because of the greater cost of processing these payments, he warned. Visa Europe briefed the British Retail Consortium last month on new “contactless” cards that can be waved in front of a scanner to make small payments. However, the consortium dismissed this vision and claimed that card processing fees, which regulators are investigating, are still too high. One member of the consurtium said that the estimated “interchange” fee charged to retailers amounts to some 4p for each transaction. Nick Mourant, treasurer at Tesco, said: “There is a duopoly between Mastercard and Visa in the UK. Their setting of fees is anti-competitive.”

Comment: When is the last time you TRUSTED a BANK to tell you that their new services and offerings were going to SAVE money and BE cheaper? They only do this so you no longer have a choice and THEN they raise the cost in gradual steps, just like they have done every time with new services you’re supposed to be excited about. Of course, it is also easier for banks to track your activities, whereabouts, and payments.

Source: McClatchy Newspapers
The percentage of poor Americans who are living in severe poverty has reached a 32-year high, millions of working Americans are falling closer to the poverty line and the gulf between the nation’s “haves” and “have-nots” continues to widen.

A McClatchy Newspapers analysis of 2005 census figures, the latest available, found that nearly 16 million Americans are living in deep or severe poverty. A family of four with two children and an annual income of less than $9,903 - half the federal poverty line - was considered severely poor in 2005. So were individuals who made less than $5,080 a year.

The McClatchy analysis found that the number of severely poor Americans grew by 26 percent from 2000 to 2005. That’s 56 percent faster than the overall poverty population grew in the same period. McClatchy’s review also found statistically significant increases in the percentage of the population in severe poverty in 65 of 215 large U.S. counties, and similar increases in 28 states. The review also suggested that the rise in severely poor residents isn’t confined to large urban counties but extends to suburban and rural areas.

The plight of the severely poor is a distressing sidebar to an unusual economic expansion. Worker productivity has increased dramatically since the brief recession of 2001, but wages and job growth have lagged behind. At the same time, the share of national income going to corporate profits has dwarfed the amount going to wages and salaries. That helps explain why the median household income of working-age families, adjusted for inflation, has fallen for five straight years.

These and other factors have helped push 43 percent of the nation’s 37 million poor people into deep poverty - the highest rate since at least 1975. The share of poor Americans in deep poverty has climbed slowly but steadily over the last three decades. But since 2000, the number of severely poor has grown “more than any other segment of the population,” according to a recent study in the American Journal of Preventive Medicine.

“That was the exact opposite of what we anticipated when we began,” said Dr. Steven Woolf of Virginia Commonwealth University, who co-authored the study. “We’re not seeing as much moderate poverty as a proportion of the population. What we’re seeing is a dramatic growth of severe poverty.”

Source: Reuters
NEW YORK (Reuters) - Bank of America Corp. is defending its decision to offer credit cards to people who don’t have U.S. Social Security numbers, amid criticism that the program effectively endorses illegal immigration. The bank’s pilot program, revealed last week, focuses on Hispanics in the Los Angeles area.

It has spurred opposition in Congress and from grass-roots groups who say many illegal immigrants could benefit, and that the program might foster identity theft, money laundering and terrorism.

Bank of America Chief Executive Kenneth Lewis defended the program on Thursday in The Wall Street Journal. This came after some groups called for a boycott of the No. 2 U.S. bank by assets. They say their efforts are bearing fruit. William Gheen, director of the National Illegal Immigration Boycott Coalition, said his group has collected hundreds of e-mails from people vowing to cancel accounts and move mortgages. The group said it has more than 11,000 signatures on its petition calling for a boycott of Bank of America. “What Bank of America is doing is illegal, or should be,” Gheen said.

For its part, Bank of America has not seen “any unusual business activity” resulting from responses to the pilot program, spokeswoman Alexandra Trower said. “Some (customers) are very supportive, while others are not supportive,” she said. “That is why we undertake pilots.”

The Pew Hispanic Center estimated there were 11.5 million to 12 million illegal immigrants nationwide a year ago. That’s up from the Census Bureau’s 8.7 million estimate for 2000. The total population is 301.2 million, the bureau said.

CEO RESPONDS

Bank of America’s roots date to San Francisco in 1904. That year, Amedeo Giannini, a son of Italian immigrants, founded the Bank of Italy to serve “the little guys,” including immigrants that other banks wouldn’t touch.

In his Thursday opinion piece, Lewis admitted it is not pleasant to be caught a century later in the “heated” national immigration debate, and that he was “feeling the passion.” Still, he pledged to continue the card program, which he said complies with the USA Patriot Act and other laws. Lewis said illegal immigrants can obtain cards at many U.S. banks and businesses, and that Bank of America requires other identification to open accounts.

He also agreed with former U.S. Treasury Secretary John Snow that the government could better enforce money laundering and terrorist financing laws by encouraging foreign national consumers to enter the “financial mainstream.” James Angel, a professor at Georgetown University’s McDonough School of Business, said: “From a homeland security perspective, we want undocumented workers in the financial system, so they can be tracked.” Lewis said his bank’s program can help people build credit histories — and perhaps become long-term customers. “Let me be clear: Bank of America does not deliberately market financial products and services to illegal immigrants,” he wrote.

Nearing the end of his sixth year at the bank’s helm, Lewis has faced criticism before, including for spending $82 billion to buy FleetBoston Financial Corp. and card issuer MBNA Corp. Wall Street now views those acquisitions as successes. Lewis has led Bank of America’s evolution from a regional bank into by far the largest U.S. bank by branches and deposits. The bank is near a regulatory cap that bars acquisitions giving it more than 10 percent of U.S. deposits. It must focus on adding new customers and selling products to existing ones. Some may need encouragement. The bank often gets mediocre scores in customer surveys, including this week’s American Customer Satisfaction Index from the University of Michigan. On Sunday’s Academy Awards show, Bank of America will launch a new advertising campaign, with a “Bank of Opportunity” tagline replacing the 4-year-old “Higher Standards” slogan.

OPPOSITION

Some Republicans in the Democratic-controlled Congress say Bank of America is pursuing one opportunity too many. “After September 11th, we were told that money was the lifeblood of terrorists, and that we should do everything possible to block their access to financial resources,” Rep. Tom Tancredo, a Colorado Republican and prominent illegal immigration opponent, said Thursday in a statement. “Today we are hearing a far different message,” he continued. “I hope the (Bush) Administration will shut down this reckless and illegal program.”

Meanwhile, CNN host Lou Dobbs, another illegal immigration opponent, has called the card program “outrageous,” and the idea that Bank of America isn’t marketing to illegal immigrants “fundamentally, absolutely and unequivocally a lie.”

Bank of America’s Trower said it is premature to say whether the card program will expand. “We will analyze the results from the Los Angeles pilot, from a business and environmental perspective, to determine our next steps with this program,” she said.

Source: Telegraph
MBNA has started fining customers who have positive balances on their credit card accounts.
Robert Watts reports

Swingeing rates of interest. Annual fees. Hidden charges. For years credit card companies have charged their customers for borrowing money. Now one card provider has started punishing its cardholders for being in credit.

MBNA, the American credit card giant, has written to thousands of people in the past few weeks who have inadvertently paid the company too much money.

Carolynn Shaw, a mother from Sydenham in south London, received her letter last week. MBNA’s missive tells her that unless she clears the positive balance on her card by the end of next month she will be charged £10 or – if less than £10 – the total amount by which her card account is in credit. “When I first read it I just felt it was a bloody cheek. It’s my money,” she says.

Ander Hagger of Moneyfacts, the service that allows consumers to compare financial products, says: “This is the only instance of a fine for being in credit we’ve seen. MBNA says it’s doing this to protect people’s money for them but I don’t know if that excuse holds water – fining people is hardly a good way to protect customers’ money, is it? I’d say there is a real danger that people would be so offended they might take their account elsewhere.”

Finding yourself with a positive balance on your credit card is not as hard as it may seem. It can occur when a cardholder has overpaid their balance, perhaps if they had set up a monthly standing order. Carolynn isn’t sure how she ended up in credit: she hadn’t used her MBNA card for about two years. “I’d destroyed the card and thought the account was closed,” she says. “It was only by chance I actually got the letter. MBNA’s letter was sent to our old address and the forward we had put on our mail from there is about to expire.”

MBNA insists that its new policy is not intended as a revenue-raising measure. A spokesman claims it is in fact a “tidying up exercise”. “We want people to get their money back. As well as not earning any interest, positive balances do not have protection from fraud. This is not about fining people just for the sake of it,” he says.

The fines are not a one-off penalty. MBNA describes the fee as a new “annual service charge” for accounts that have been in credit for more than 12 months.

Unsurprisingly perhaps, MBNA isn’t prepared to say how much the new fines will earn the company. Instead it claims that only a minority of the “thousands” of customers it has written to – again, the company refuses to say how many customers are involved – will receive the £10 charge. Most will apparently take one of the three options MBNA lists in its letter: transfer the balance to a current account, spend the credit on the card or give the money to MBNA’s “nominated charity”, Cancer Research UK (MBNA says it has given £500,000 to this charity in recent years).

Barclaycard, Britain’s largest credit card company, says it does not charge cardholders for being in credit and has no plans to do so. Another provider, Virgin Money, suggests that the recent crackdown by the Office of Fair Trading on credit card charges would only force providers to conjure up new ways to make money out of their customers.

Carolynn says she is certain she will not be applying for another MBNA card in the future. She has also yet to decide how she wants to spend the outstanding balance on her MBNA account – assuming that she can act before the company claws back the balance. “Actually there was only £1.05 on the card – which might just allow me to splash out on a cup of tea.”

Source: CNN Money
Fourth-quarter report from National Association of Realtors shows largest price drop on record as markets with price declines now outpace those with gains.

NEW YORK (CNNMoney.com) — The slump in home prices was both deeper and more widespread than ever in the fourth quarter, according to a trade group report Thursday.

Prices slumped 2.7 percent in the fourth quarter compared to the fourth quarter a year earlier, according to the report from the National Association of Realtors (NAR). That’s the biggest year-over-year drop on record and follows a 1.0 percent year-over-year decline in the third quarter.

In addition, 73 metropolitan areas reported a decline in the fourth quarter, compared to a year earlier. That outpaced the 71 that saw a gain. It was both a record number and percentage of markets showing a decline in the group’s quarterly report. Five markets saw prices unchanged.

Latest prices in your hometown

That decline was a far more widespread than the third quarter, when only 45 markets reported drops and 102 saw gains, or the second quarter when only 26 saw a year-over-year slump in prices. The national median price was still showing a year-over-year gain in the second quarter.

The most recent median prices are down even more: 3.4 percent since hitting record highs in the second quarter. Almost three-quarters of the markets, reported on by the group, saw declines in median prices over the past six months, with eight reporting double-digit declines.

Vacation markets, where investor-buyers had driven up prices during the building boom of 2005, were particularly hard-hit. The Sarasota-Bradenton-Venice, Fla., market saw the biggest year-over-year decline in the fourth quarter, with prices plunging 18 percent. When looking at the change between the fourth quarter and the second-quarter peak, the Palm Bay-Melbourne-Titusville, Fla., market saw the biggest drop, with median prices plunging 19.5 percent.

Top 10 foreclosure markets

But the weakness in prices wasn’t restricted to those kinds of markets. Springfield, Illinois, reported a 16.2 percent drop in the fourth quarter compared to the third quarter, the biggest decline during that time frame, along with a 10.4 percent decline compared to a year earlier.

Still, the trade group statement said it believed that the worst was over for the drop in prices. “Examination of data within the quarter shows home prices stabilizing toward the end,” said a statement from David Lereah, the NAR’s chief economist. “When we get the figures for this spring, I expect to see a discernable improvement in both sales and prices.”

Part of the decline in prices was attributable to the drop in sales pace. Total existing home sales, including single-family and condo, were at a seasonally adjusted annual rate of 6.24 million units in the fourth quarter, down 10.1 percent from a 6.94 million-unit level in the fourth quarter of 2005.

And the slower pace of sales, coupled with investor-buyers from 2005 trying to sell homes and condos they had bought, created a glut of homes on the market, according to other real estate readings, which also fed into the decline in home prices.

NAR President Pat Vredevoogd Combs, a Grand Rapids, Mich., realtor, admitted the group doesn’t expect to see a big gain in 2007 statistics.

Unlock your home’s value

“Right now, buyers are responding to seller pricing and incentives, and there’s a bit of a pent-up demand as a result of buyer hesitation during the second half of 2006,” she said in the group’s statement. “We’re not looking for big changes, but a gradual rise in sales and home prices is projected - that will be good for the overall housing market and related industries.”

She said that since most homeowners stay in a home six years on average, a look at five-year price gains shows most homeowners are doing OK despite the recent weakness. The median five-year price gain is 41.8 percent, according to the group’s figures.

The nation’s leading homebuilders have all reported declining prices for new homes, which are not captured in this report. KB Home (Charts) reported a net loss of $49.6 million, or 64 cents per share, for the fiscal fourth quarter ended Nov. 30, earlier this week. Other leading builders reporting weakness in prices include Lennar (Charts), Pulte Home (Charts), Centex (Charts), D.R. Horton (Charts) and Toll Brothers (Charts).

The most expensive market in the latest report was San Jose-Sunnyvale-Santa Clara, Calif., where the median home price $760,000. That was up $20,000, or 2.7 percent, from a year earlier but down $19,000, or 2.4 percent, from the third quarter and off $35,000, or 4.4 percent, from the second-quarter peak.

The cheapest market was Elmira, N.Y., where the median price was $78,400. That was off 0.5 percent from a year earlier and down 16.2 percent from the third quarter, which is when prices there peaked.

Despite the record weakness, there were some markets that showed strong price gains. The best was Atlantic City, N.J., where the median price was $339,800, up 25.9 percent compared to a year earlier.