AEA Progresses But Have Problems with Bad Debt

Based on the call report of the credit union during the first quarter of this year, there are a few flickers of progress for AEA. The call report was put online this week in the website of National Credit Union Administration.

However, it is still struggling with bad debt and its net worth to total assets ration is still supported by a $20 million worth of cash infusion which NCUA gave to AEA during December.

According to NCUA public affairs specialist John Zimmerman, the credit union was supported by giving additional capital through a deposit, also known as subordinated debt. Consequently, AEA’s net worth to total assets ratio for quarter four 2011 was 2.69 percent.

At the end of March, AEA’s ratio was up to positive 2.85 percent. One year earlier, their ratio was minus 7.77 percent.

Moreover, AEA’s profit for quarter one 2012 was $839,000. That is in line with the profit-making trend observed during 2011, with a $6.2 million ending cumulative profit.

During quarter one 2012, AEA reported shares and deposits up by $11 million. But the membership is decreasing from 46,015 members one year earlier to 41,750 members this year.

Zimmerman added that AEA constantly developed its performance for quarter one and AEA is developing its net worth as well. For the month of March, it reported $7 million of net worth, which is an increase from $6.1 million during December. On the other hand, the credit union had minus $18.6 million net worth during March of last year.

AEA might be converting delinquent loans to foreclosures since there was a decline in the number of delinquent loans but an increase in the number of foreclosures.

During December, AEA had $8.9 million loans overdue by 12 months or more, but it was down to $2.4 million during March. In contrast, AEA’s foreclosed and repossessed assets reached $7.8 million during quarter one 2012, which is up from $2.1 million foreclosures in 2011.

How to Fix Your Credit Card Debt

According to Hamm, one very effective technique to get out of credit card debt is to call your credit card company and negotiate for a lower interest.

Most people are burdened by the worsening debt because of credit card use. Credit card can be acquired easily at first and can also easily trap you to spend more without proper thought. Impulsive buying and poor choices can lead you to so much debt before seeing your first bill.

Eventually you will find it difficult to pay your card debt and you might even be shocked at the first sight of the minimum payment required. This is the start of you financial struggle.

I can relate to this struggle because I have been into it before. I kept adding debt until I reached a point that seemed to be impossible to fix and it was so painful.

One of the steps that I took was to call up the credit card companies and told them my real situation and then start negotiating.

Let me share with you how I did it. But first let me warn you not to use this tactic if you depend on your credit card in bringing food to your table because it might just backfire on you. The credit card company might close your card. However, if you are in a situation where you do not depend so much on your credit card, then this technique might be of help to fix your credit card debt. Through negotiation you can convince the credit card company to lower the interest charged to your account which can help you to save a lot of money in the long term.

For example, if you have a credit card debt of $10,000 payable in 8 years at 19.9percent interest rate, the total amount of interest you will be paying for that period is approximately $10,055. If that interest rate is reduced to 9.9 percent, the total amount of interest for the period is $4,516 thus a saving of $5,500.

How to do the negotiation? The first step is to call the company and explain your situation and your appeal to stretch your payment and to reduce the interest. If the person you are talking to will not accept your proposal talk to the person higher or the supervisor. The secret is not to get angry. The response maybe “no” but eventually you will be passed to somebody who can decide on your case. But remember to engage in this tactic only if you do not rely on your card because the bank might cancel your card or reduce your limit but you still owe them money. If you can handle your situation without your card then go for this tactic and it can help you save a lot of money.

American’s Less Usage of Credit Cards Worries Visa and MasterCard

It was observed this year that Americans were not using often their credit cards. This is bad news for both Visa and MasterCard. These two companies reported their quarterly earnings last Wednesday.

Master Card will report its results before the stock market opens while Visa will make its report after the stock market closes.

WHAT’S UP: One of the big factors that contribute to the economic growth is consumer spending. In fact, 70 percent of economic growth is due to consumer spending. From January to March, consumer spending rose by 2.9 percent- the highest growth in a period of a year. This is a good start for Visa and MasterCard which do the processing of credit card and debit card payments. But despite an increase in consumer spending, they charged less. In January and February, the charges went down to $5 billion, according to Federal Reserve.

The card companies are expecting overseas customers and rich cardholders in the increase of card use. Sales of jewelry and other trinkets are consistently high as recorded in retail shops like Saks Inc. and Tiffany & Co. The charges of American Express increased 12 percent more in the first three months as compared to last year on the same period.

The economic crisis is not yet over and consumers are not up to spend more and use their cards. In February the recorded credit card debt is $799 billion which is 15 percent lower than what was recorded in December 2007, the beginning of the Great Recession.

This trend worries Visa and MasterCard because they make money through the processing fees they are charging from card usage. They need consumers to use their cards more often to survive.

The companies could cover up loses in charges from credit card use through debit card usage. However, banks that issue debit cards to consumers are discouraging them to use their debit cards because of the regulations that limit the amount of fees which the banks can charge from the use of debit cards.

WHAT IS TO BE EXPECTED: According to analysts Visa expects to make earnings of $1.51 per share on revenue of $2.4 billion, while MasterCard will earn $5.29 per share on revenue of $1.79 billion.

LAST YEAR QUARTER’s FIGURE: Visa made $1.23 per share with recorded revenue of $2.24billion and MasterCard earned $4.29 per share on revenue of $1.5 billion.

Standard & Poor is Worried About California’s Budget Deficit

The credit rating of California has not been lowered by Standard and Poor. However, the rating agency observed that the recent development in the budget of Golden State is something to be worried about. Standard & Poor is a little bit disgusted about what is taking place in California.

A review was conducted last Tuesday and it was found out that the income tax revenues were below the target to be collected for the month of April. Standard & Poor is very much worried about this finding about income tax revenues collection. California State Controller John Chiang was stopped to withhold the legislative pay based on budget quality of employees because a judge ruled that it is illegal to do it.

Gov. Jerry Brown’s has his own forecast regarding personal and corporate income taxes for the fiscal year. According to the Legislative Analyst’s Office estimate made last week, the state of California is behind its tax collection target by more or less $3.5 billion for the fiscal year.

A judge from Sacramento Superior Court supported the State lawmakers in accusing Controller John Chiang for allegedly violating the constitution when he withheld their pay for twelve days last summer. John Chiang submitted a budget that is not properly balanced.

According to S&P, the decision is not a solution to solve the budget deficit. The decision simply opens the door for Legislature to make adjustments in budget allocation which may be politically expedient but may not be an effective solution to fix the budget deficit. What is needed is additional spending cuts in order to decrease the risk of an imbalanced budget for the fiscal year 2013.

BY THE NUMBERS

California community health centers was awarded on Tuesday by Obama $122 million under the embattled Affordable Care Act. The grants will be allocated to different centers. Large health centers like Davis, Visalia and East Paolo will receive $ 5 million; others like Madera center will receive $4.8 million and for small centers like the one in Yuba City the allocated amount is $500,000.

The Double Cost Damage Caused by Bad Credits

Anybody should know the reason why he has a bad credit. Those who are planning to make car loan should brace themselves for higher monthly payment for subprime loans.

According to Experian, for a five–year new car loan made in April, an average of 4.54 percent was paid by a buyer with prime credit. But a subprime buyer did pay 9.55 percent which simply means an increase of $59 per month on a $25,000 loan.

Aside from an increase in monthly payment, the buyer should also prepare for a higher car insurance premium.

Even with a clean driving record, a subprime credit can incur you an additional cost ranging from $30 to $100 a month.

Liz Pulliam Weston, a finance columnist who wrote “The 10 Commandments of Money: Survive and Thrive in the New Economy” said that life becomes more expensive for people with bad credit even if they do not intend to borrow in the future. Let us look at some examples on how a poor credit history can create double damage to car buyers.

Life becomes more expensive if your credit is bad

Due to recession, American’s credit scores reduced in points. In 2011, Experian credit reporting agency said that the average credit scores of those buying new cars or trucks dropped by six points from 766 to 761. For used vehicles buyers, the average credit scores dropped by nine points from 679 to 670.

With the economy recovering, lenders are now more willing to accept loan applications from those who did not qualify a year or two years ago. It was observed that there is an increase of 13.8 percent for new car loans to customers with poor credit, according to Experian. And for used vehicles loans, there is an increase of 8 percent.

The risk scores provided FICO which is the largest provider are also the risk scores used by Insurance companies. Insurance companies use these data as a good predictor of claims. Bad credit adds to you insurance cost. There is no exact answer as to how much cost is added. But in California, Hawaii and Massachusetts, insurers are not allowed to use credit information to determine insurance rates.