Hot on the heels of Bank Transfer Day, in which a disgruntled
Bank of America customer encouraged people to transfer their accounts from major banks to local banks and credit unions, comes Dec. 11's Balance Transfer Day, which has credit cards in the cross hairs.
The objective of the movement is to get credit card holders to transfer their outstanding debts from high-interest credit cards to cards with zero-interest rates and zero-balance transfer fees issued by credit unions and small, community banks.
"We are not speaking for abolishing interest rate on credit cards, we merely feel that it would be fair if they could be a little lower than today's average, [which is] around 16%, especially since we bailed out those banks with our own money in 2008," organizers say on their Facebook page.
Although the similarities are undeniable, Balance Transfer Day is not associated with Bank Transfer Day or Kristen Christian, the disgruntled Bank of America customer. Nor is it affiliated with or recommending a particular bank or credit card.
It's the people behind the Music For Change movement, which campaigned this summer for financial literacy with the Occupy movement, taking credit on the attempt to shed light on what they call corrupt practices and ineffective regulation in the credit card industry.
The main issue that organizers want to bring to light is how banks and credit card providers lure customers with introductory zero-interest rates offers that end in six months to a year. After the promotion expires, banks "are allowed to charge any interest rate they see profitable," organizers say.
As the site's manifesto says:
Banks receive millions of dollars from the federal government at interest rates as low as 0%, or in some cases they do not have to repay borrowed funds at all! ... Yet we the consumers are charged costly fees and interest rates of 15% and more for borrowing money from banks. Essentially, banks are using our own tax money to make even more money off of us. So why don't we beat the banks at their own game and demand the same 0% interest rate that they receive from the federal government?
Not all customers will be eligible for balance transfers depending on their credit score or the amount of their debt, but organizers still encourage those people to take part by submitting a transfer application, which they say "will be like sending a message of protest."
Another option is to transfer a portion of your debt to credit card with a 0% APR, organizers say. Even if the impact is temporary, the hope is that there will be long-term effects in getting better terms and conditions for customers struggling in tough economic times.
Either way, expert advice suggests the organizers should make it more clear that even people who successfully transfer credit should not close their old cards, since it can lower their credit score.
Just making an inquiry into a new card can hurt your score — but probably not by much.
Some 650,000 people joined credit unions in the four weeks leading up to Bank Transfer Day, says Patrick Keefe of the Credit Union National Association, and another 40,000 on the day itself, while there were only 600,000 new members in all of 2010. "So in a four-week period, we exceeded one year's growth," he says. "We really do think it was a combination of Bank Transfer Day and the [threat of the] fee itself. We heard over and over again, 'I'm not paying that damn fee.'"
Keeping up the pressure on banks, there's also the New Bottom Line movement — made up of churches, community organizations and labor unions — who have a "Move Our Money" campaign under way. The group says it wants to take $1 billion from big banks and put them into local banks and credit unions.
This post originally appeared at The Street.
The line between a future of financial solvency and one of distress is thinner than you might think.
Unfortunately, many people don't realize they're on the wrong side of that divide until it's too late, says Jessica Cecere, South Florida regional president for CredAbility, a nonprofit credit counseling agency.
"I call it ostrich syndrome. You know that things aren't good, but you just don't want to face up to it right now," she says.
But the earlier you realize you're having issues with debt, the better chance you have of fixing them, Cecere says.
Bankrate offers eight signs you're flirting with financial ruin. If four or more of these signs sound familiar, it's time to seek help, Cecere says.
Cecere recommends looking for a free, nonprofit credit counseling service. You can search for a free or low-cost counseling provider in your area by visiting the National Foundation for Credit Counseling website or by calling (800) 338-2227.
Another alternative is contacting a fee-only financial planner. The National Association of Personal Financial Advisors maintains a database of fee-only planners on its website.
Here are the telltale signs you're heading for a financial fall.
Paying late fees and juggling bills?
Frank Boucher, principal of Boucher Financial Planning Services in Reston, Va., says habitually running up late fees typically has one of two causes.
"If you're paying late because you can't pay on time, that's a clear indicator (of future financial trouble)," Boucher says. "If you're paying late fees because you're just lazy about it, you're throwing money away."
A more serious symptom of financial distress is juggling monthly bills by making payments big enough and frequently enough to keep services flowing, but never paying balances on time and in full, Cecere says. Your debt worsens every month as balances grow.
"You're thinking ahead of time, 'I don't really have enough money to pay my bills,' and you're sort of living paycheck to paycheck," she says.
Counting on a future windfall
Basing your plans for financial stability on a future payoff, such as an inheritance, a run-up in the value of your home or a big tax refund can put your finances in dire straits.
It's also a symptom of a bigger problem -- rationalizing when it comes to your debt, Boucher says.
"You're planning on a bonus that doesn't materialize, or what we saw happening not too long ago, with people saying, 'I can always suck more equity out of my property,'" he says. "If you think like that, you're really setting yourself up for a fall."
Multiple credit card hocus-pocus
Credit cards are best used as a convenient way to make purchases without having to carry cash and to earn rewards, Cecere says.
"If you're a savvy consumer and you can use credit cards and you can get points for them ... then you're charging groceries and gas, but you're paying for them at the end of the month," she says.
If your credit card debt is consistently rising and you're unable to make more than the minimum payments, your balance will continue to rise. And if you fail to make the minimum payment for more than 60 days, your rate could jump, making your financial condition even worse.
While cardholders can stave off trouble temporarily by making the minimum payments or shifting balances to new cards, any kind of sudden change in your finances, such as a rise in gas prices, can destabilize your finances, Cecere says.
Fighting with your partner over finance
Most couples have occasional fights about debt, but if you regularly fight with your spouse about money, it can be a sign there's not enough disposable income to finance the family's spending, Boucher says.
Likewise, Cecere says if you're regularly suffering from stress over heavy debts, it could be an indication that your financial situation is unsustainable.
"It's on your mind, but you don't want to talk about it. You can't sleep at night because you're worried about your bills," she says.
If that description sounds familiar, Cecere says it might be time to seek a free, nonprofit credit counseling service.
Regularly paying overdraft fees
If you're constantly incurring fees for overdrawing your checking account, you could be on the brink of financial disaster, says Wayne Blanchard, senior partner at Money Professionals Group in Orlando, Fla.
He compares nonsufficient fund fees, or NSF fees, to the nautical flags raised to warn of dangerous wind conditions.
"If you're getting a lot of NSF notices, that's a hurricane warning flag. It's here," Blanchard says. "That's not a warning, that's a real problem here now."
Regular overdraft fees can occur for a couple of reasons, says Blanchard. Many serial overdrafters are struggling financially and don't have income available to cover their debts, meaning they're likely on the verge of having to declare bankruptcy.
You have a savings rate of zero
If you're unable to set aside a small amount of money for savings in your budget, your finances are on unstable footing, says Boucher.
"Savings is an expense, and it's something that should be budgeted for just like any other expense," Boucher says. "What's going to happen is something is going to come along -- an unexpected car repair or a home repair or an interruption in income -- and you're going to be in a very bad place."
He says that while saving may be difficult, not saving puts you at risk of financial hardship. "With no savings, you're really standing on the edge of a cliff," he says.
Blanchard agrees. He says many people rely on credit for their emergency backstop, but credit isn't effective as an emergency savings fund. If banks see you regularly adding abnormally high charges, they'll clamp down on your limit.
In order to be financially healthy, you need to set aside money for unexpected emergencies and for your future retirement, Blanchard says. While an emergency may never come, retirement certainly will, and you'll need to be financially ready.
Covering expenses with retirement savings
Borrowing or withdrawing retirement funds from your 401(k) is a common thread in many of the cases of financial distress that Boucher has seen as a financial adviser.
Boucher says, "401(k) loans are usually a bad idea under any circumstances, but when you have more than one, that's a sign that you're not managing your cash flow very well."
Regularly pillaging your retirement savings isn't just a warning sign you're living outside your means, it could have serious consequences for your retirement. It lessens the beneficial effects of compounding that help retirement funds grow.
Treating your home like a piggy bank
Using your home equity as a financial crutch is something Boucher often sees with clients heading toward financial distress.
Boucher says such moves are especially ominous if they're not due to a serious financial need but to a desire for "wants" like a vacation or a new car.
"You're paying for a vacation with a home equity loan and you're amortizing that over 15 or 20 years. That just doesn't make any sense," Boucher says.
This post originally appeared at Bankrate.com.
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