Capitol Hill seems to be taking up the pro-consumer fight on two fronts this week with the extension and expansion of the Home Buyer Tax Credit and the sped-up start date of the Credit Cardholder’s Bill of Rights. Today, Obama officially signed off on the Homebuyer Tax Credit extension, which will extend the original November 30, 2009 deadline to April 30, 2010 and also opens up a $6,500 tax credit to eligible repeat buyers. On the frontlines of credit card reform, the proposed measure to speed up the Credit Cardholder’s Bill of Rights, from its original February 2010 date to December 1, 2009 was signed off by the House and is now awaiting Senate approval.

The passing of the revised Homebuyer Tax Credit, coupled with mortgage rates dropping below 5% again for the first time in 4 weeks, has many politicians and analysts hoping for another boom in the housing market to last well into 2010.

As for the credit card reform, if approved, the earlier-than-expected December date would be “just in time for the holidays,” when consumers are likely to more heavily rely on credit cards and could most benefit from the restrictions the reforms will place on the price-gouging practices of the credit industry. Cardholders and lawmakers in support of the proposal complain that since the passage of the Act in May, credit card companies have been abusing the grace period as a last ditch effort to raise interest rates, change card terms, add fees, lower credit limits, and even close accounts in order to recoup losses that the coming regulations will cost them. The reform is needed to help protect consumers by “locking a ban on interest rate hikes on existing balances, and tricks that have kept far too many consumers trapped in a never-ending cycle of debt,” reports CNNMoney.

On the other hand, credit card issuers have contested that the expedited start date would ultimately hurt the entire industry. Making the reforms effective a full two months sooner than planned won’t give their systems enough time, issuers argue, to get acclimated to the new regulations, and they have even gone so far as to defend the recent interest rate hikes—some as high as 30%–as fair considering the current state of the economy. Another lawmaker defended the measure, saying, “They have retained the right unilaterally and retroactively to raise the interest rate on what you already owe them. It is the single unfairest (sic) economic transaction I can think of that doesn’t involve a pistol!”

The CARD Act’s major provisions that will affect cardholders includes prohibiting arbitrary rate increases on existing card balances, requiring customer permission to opt into the ability to overdraw on accounts, and the “reasonable and proportional” penalty fees that require issuers to review all interest rates and reduce it where warranted. The measure awaits the Senate’s vote and Obama’s signature to become law.

The consumer protections and consumer incentives of these two key pieces of legislation are under hot debate as to whether the stimulus measures will be effective enough to spark sustainable activity in the struggling economy.

At Credit Karma Blog, what goes around comes around… So what do you think about this post? Agree, disagree, or have something more to say? We’d love to hear your reactions!

Debt is the new four letter word to avoid. Everyone, from Uncle Sam to the average American, is taking action to get out of the red: Bloomberg reports that the U.S Treasury Department is selling a whopping $81 billion of long-term debt next week to steer away from the country’s legal debt limit of $12.1 trillion; and Philly.com reports that Americans have been buying less stuff on credit cards, which helped drop the total U.S credit card debt peak of $975 billion in Fall 2008 to below $900 billion this summer.

Your card balance may not be in the billions, but are you taking steps to take care of your credit and eliminate your debt? This week’s roundup is especially for you to start taking steps to get out of the red too.

Credit Card News

• Thinking about canceling your card? Before you do, read The Wall Street Journal’s article, “Credit cards: break up or make up?“.
• Is it possible to live without credit cards?, FiveCentNickel asks.
• If you are shopping for a credit card, do your homework first with The Boston Globe.
• Reduce Debt Faster shares 3 ways to lower credit card payments.
• Prepaid credit cards gaining favor reports The Salt Lake Tribune.
• Study finds prepaid cards less expensive than debit cards from banks blogs Almost Frugal.
• The BBC looks into what’s in store for the future of credit cards?
• Credit card debt elimination guide @ Clear Choice Credit Cards.
• The Digerati Life looks at how to opt out of interest rate increases.

Debt News

• Cash Money Life asks an important question: Do you know how much interest you are paying each month?
• A fun, alternative approach from Five Cent Nickel: Use weight loss strategies to get out of debt.
• Don’t wait until January to think about budgeting Being Frugal warns!
• Good debt vs bad debt: isn’t it all bad? Your Money Relationship answers the burning question.
• Gather Little By Little recommends using your emergency fund to pay off your debt.

Here’s something fun to take your mind off the long work week: a little bit of Jaywalking on Money Matters on All Financial Matters. While you’re sharing a few laughs with co-workers, make sure you browse the rest of these links so you don’t end up like those Jaywalking victims. Enjoy!

Credit Cards

• The Chicage Tribune announces that those annoying gift card dormancy charges are now canceled.
• Credit cards are indeed an indulgence confesses Money Ning.
• Market Watch reports that Congress to take aim at overdraft fee limits.
• Check out Money Under 30’s two-part series, “Radically re-thinking credit cards“.
• You won’t believe what the latest bank fee is for: paying off credit card on time every month, USA Today reports.
• Mighty Bargain Hunter responds to the article above, and takes a different side — anti-credit card legislation hurts just about everyone.
• Credit cards to charge good behavior fees blogs Frugal Dad.

Debt

• Liz Weston answers a question on ways to pay off costly debt.
• Graduation present or pay off debt? wonders Clever Dude.
• CNN Money reports that unemployment in cities eases in September.
• Did you know that even good debt can be bad, blogs Moolanomy.
• Have good credit? The Digerati Life suggests best debt consolidation loans for you.
• Not my debt - what do I do? PT Money solves this dilemma.

If you own a credit card or read this blog regularly, you should be familiar with the restrictions and fees credit card companies have been imposing on cardholders in recent months. Cardholders have been complaining about jacked-up interest rates, sudden fees, lowered credit lines, closed accounts, and unfair penalties. These changes to the terms on your user agreements for credit cards may not necessarily be due to your poor credit management or late payments; another reason is that banks have been trying to increase the profitability of consumer accounts before the reforms of the Credit Cardholders’ Bill of Rights take effect in February 2010.

With the credit crunch and rising consumer defaults, banks are doing what they need to do to stay in business. Consumers need to look out for the fine print on any notice of changes to your credit card from your issuer, like the one that Bank of America customers received, and see what you can do to protect your credit and your credit score.

ATM surcharge and fees

The Cost: As high as $5 per transaction. Every time you go to use another bank’s ATM for quick cash, you are likely to get slapped with increased fees from both ends of the transaction—the ATM’s bank and your own bank. You have to pay an average surcharge of $2.22 to use another Bank’s ATM, up nearly 13% since last year according to Bankrate.com. Then there is the fee your own bank will charge you for using another bank’s ATM, which has risen to an average of $1.46 from last year’s $1.25.

How to Avoid it: You can only plan ahead and be prepared with cash, or you can switch banks. If you want to stick to your bank, the best way to avoid this fee is to estimate how much cash you need for the day and withdraw what you need from your own bank’s branch so won’t be desperate for cash and tempted to use any ATM. If you’re sick of surcharges and fees, opt for an online bank, such as ING Direct, Bank of the Internet, NetBank, and First Internet Bank, that will reimburse ATM surcharges up to amount per month. Charles Schwab Bank and E-Trade off unlimited rebates for ATM surcharges.

Annual Fees

The Cost: Anywhere from $29-99. Bank of America announced last week that they plan to tack on a $29 to $99 annual fee to an undisclosed amount of its credit accounts starting in February. If cardholders don’t voice too much of a protest, other banks may follow in BofA’s steps very soon.

How to Avoid it: BofA calls the annual fees an “experiment”, so complaining might get some results. If you have an excellent credit score in the mid 700s range, you are in luck. You can try and negotiate with your issuer and even mention that you will take your business elsewhere; chances are they will want to keep a reliable customer like you. If you have poor credit, you can close your account to dodge the fee, but your already-low credit score will take a hit. If the account happens to be your oldest credit card, you might want to consider paying the fee because your credit score will take a big drop with closing your oldest credit line.

Reduced Limits

The Cost: None, but you will have lowered credit limits and a potentially lowered credit score. About 20% of U.S cardholders between October 2008 and April 2009 saw their credit card limits slashed involuntarily, and in some cases, their accounts arbitrarily closed, according to a FICO study. However, 73% of the cardholders complained that they were penalized with no apparent credit problem. Lowered credit limits means higher credit utilization (a ratio of your current credit balances against your total available limits) which unfortunately also means an average of a 20 point drop on a credit score; that could be the difference between being approved or not approved for a loan.

How to Avoid it: You can fight back, or at least make the most of it. Try calling your bank and asking to have your credit limit increased, especially if you are in good credit standing. Otherwise, you can minimize the damage to your credit score by lowering your credit utilization accordingly and paying down your balances. Make sure you don’t go over your new credit limit or maintain a high credit utilization rate—your funds and credit score will shrink.

Overdraft fees

The Cost: As high as $35 per overdraft. If you make several purchases on an overdrawn account in a single day, banks often charge more for repeat overdrafts. That means that you don’t just pay an increased fee on overdrafts—you’d pay it several times over in a single day. Some issuers, including JPMorgan, Wells Fargo, and Bank of America, are planning to reform overdraft fees following criticism from Congress over the exorbitant practices.

How to Avoid it: Monitor spending on your debit card or stick to using a credit card. When you do get overdraft charges, especially if it was multiple charges in a short amount of time, call your issuer and try and pare it down to a single fee–sometimes issuers will do 4 overdraft fees in a single day while the customer doesn’t even realize they overdrew on their account. Avoid using this by using a credit card so you can’t overdraw your account–however, make sure you pay off your balance in full each month and don’t exceed your credit limit or else you’ll be paying fees all over again.

Interest rate hike

The Cost: As high as a 29.99% interest rate hike. Issuers have been squeezing in interest rate hikes for the last few months and will continue to do so in the upcoming months to profit as much from consumer accounts before the credit card reform legislation sets in. Rates rose by 20% just in early 2009, which is already taking a big financial toll on consumers who rely heavily on credit cards or with outstanding balances.

How to Avoid it: If you have good credit, try calling your issuer to have the interest rate dropped. Doing a balance transfer to another credit card with a lower interest rate is another option to ease your payment charges; make sure you don’t get hit with a transfer fee on the new card. However, the best, long-term way to avoid getting burned with these ever-increasing rates is to pay off the debt you have and to hold back on spending so you don’t carry a balance from month to month.

If you want to know more specifically the changes on credit cards each issuer is taking, check out Credit Card Changes by Issuer and Date for a good list of the fees that you might be unaware you are being charged. As banks look for ways to make a profit on plastic while they still can, these fees and hikes might be a red flag to ease up on your credit usage to avoid unnecessary charges all together.

Its “hump day” again, when Wednesday feels like forever since Monday and forever till Friday. Two factors that shouldn’t be a hump in your personal finance is your credit card and your debt. While you’re trudging through with your 3rd cup of coffee, read on to find out how to make it through the rest of your work week with less debt and more credit.

Credit Card

• How to save and make money with credit cards reports Saving To Invest.
• Money Under 30 warns, “Beware credit card skimmers and how to spot them.”
• Consumerism Commentary reports on Bank of America adding annual fees to credit cards.
• Pay or Walk? Annual credit card fees test limits; read about it in the Associated Press.
• Check out Mainstreet’s scoop on gift cards getting a makeover.



• Washington Post asks, is frugality falling out of fashion? Read more on the returning hunger for retail therapy.

Debt

• Worried about debt? Tips on managing your loans from Wisebread.
• Los Angeles Times questions, how about a bailout for student debtors?
• More Americans fall behind on debts reports Reuters.
• Ever wonder what the average household credit card debt is? Bargaineering tells all.
• Cash Money Life blogs on DIY debt consolidation options.

A sunnier forecast of our stormy recession

The thought of today’s stagnant economy is enough to make consumers tighten their wallet, throw credit cards in the freezer, and brace for more fiscal hard times as we push through the U.S’s worst recession since the Great Depression. But forget the doomsday reports and take a closer look at the good and bad of the recession headlines right now because an understanding of our economy can help you change your personal economy –how you handle your finances– for the better. Let’s take a look at various segments of the economy that are rebounding.

JOBS

The national unemployment rate has been teetering at the 10% mark for some time now, but its primed for change. The federal government’s near $500 billion stimulus plan is powering up for a new media blitz to promote job growth and policies that the administration says will create 20 million new jobs over the next 10 years. The White House reports that stimulus spending has helped create or save 1 million jobs so far, new jobless claims have dropped to lowest levels since January, and economists say the willingness of companies to begin adding jobs is getting close. While the current unemployment rate is still a dark cloud hovering over Americans, job creation efforts hold the possibility of brighter prospects.

HOUSING MARKET

The mortgage rates dipping below 5% is a promising gauge of a stabilizing housing market. Refinancing has been on the rise, the First-Time Homebuyer Tax Credit has spurred traffic in house sales, and the Federal Reserve’s continued purchases of mortgage-backed securities has been keeping the housing market afloat in spite of foreclosures and dropping home prices. Also, buzz of Congress possibly expanding the $8,000 tax credit to apply to all homebuyers may jumpstart the housing market back to pre-recession activity. “The most fundamental argument for the Credit is that nothing works in the economy if housing is falling – it hurts household wealth and credit becomes tight,” writes CNN Money.

RETAIL SALES

Before you cringe at these numbers, this is actually good news. Retail sales in September were down 1.5%, but that’s better than the expected 2.1% fall economists predicted. Outside of auto sales, which plummeted about 10% after the Cash for Clunkers auto sales incentive expired, retail sales are actually up 0.5%, which is also higher than economists projected. And when consumers spend, everyone profits. Stronger-than-expected gain in retail shows a boost in consumer confidence, which is a great omen for the coming holiday season. More spending is both an effect and a cause of a slow, gradual recovery, and may be reflecting broader progress in other areas of the economy.

STOCK MARKET

Even the average consumer has reason to be excited about the Dow’s highest close in a year. Better-than-expected retail sales and strong earnings from some big-name companies have helped drive climbing index points, and continued upward market trends indicate a strengthening economy on a larger scope. Analysts say that while the 10,000 point threshold isn’t a significant technical milestone, it is “meaningful on a psychological level” and will bring more confidence in buying and selling on the floor. While the ongoing problems in the financial industry and a potential stock market pullback make some economists skeptical, growth on Wall Street is a general precursor for good things to come.

CREDIT DEBT

Trends of decreasing credit debt reflect an overall healthy shift in consumers’ financial lives and more responsible credit use in the economy’s current credit crunch. Better consumer management of debt suggests that consumers will also be better customers in the marketplace by being more creditworthy and thus less at risk of defaulting and throwing the economy into another credit spiral. On top of that, credit scores are on the rise for 39% of consumers. Healthier credit for consumers spells more liquidity in the market, more consumer activity, and a healthier, more productive economy.

FUTURE FORECAST

The coming holiday season may be the clearest temperature check on the state of our economy—it may explode into a spending frenzy or it might be another conservative Christmas for many of us, but there is hope for significant growth in a better-than-expected end to 2009 and a recovering 2010 if spending keeps up. By no means is this a concrete financial analysis of our economy, but step back and look at the bigger picture—economic recovery may not be smooth sailing but at least consumers are beginning to look forward. People are gaining back their appetite to shop as the U.S economy slowly but surely emerges from deep recession. Sure, credit is still tight and rising unemployment could stall a full recovery from recession, but consumer demand is up, markets are stabilizing, and there is more reason to hope that darker times could give way to sunny skies in our economy.

Choosing the right credit card can be daunting when credit card applications bombard you with unfamiliar terms like variable default rate, cash advance transaction fee, and more APRs than you can imagine. Shopping for your next credit card starts with identifying your spending habits and how often you plan to use your credit card. Are you looking to earn rewards, for an emergency card, or an everyday-use card? Then check out the terms and conditions, especially the ones that affect your particular credit usage. Knowing your credit card and your specific needs before you sign on the dotted line can help you hone in on the key terms that will benefit or cost you.

REWARDS SEEKER - If you are itching for your next vacation, a rewards credit card can get you on a flight to Hawaii sooner. Just make sure you read all the rules and restrictions of the rewards program to make sure your credit usage will qualify you for the flight mileage or travel packages that you want.

• Know what kind of rewards you can get to make sure you are able to redeem enough to make the card worth it for you. If you are a frequent flyer or stay at top-of-the-line hotels, then you can potentially earn lots of rewards from your card. The Starwood Preferred Guest Credit Card is a great choice for jetsetters because it offers one of the best hotel loyalty and airline miles program with the least restrictions. But, in order to take advantage of a bonus 15,000 points on your Starwood card, you would have to spend the equivalent of $15,000 within 6 months to get 3 free nights in selected hotels. If you can hit this spending threshold without going bankrupt, then this is the right kind of card for you.
• Look at the APR for purchases at the bottom of the application because rewards card tend to have higher variable APRs than other cards (you are getting hotel stays and airline flights out of it after all). A rewards card works best for people who don’t carry a monthly credit card balance, or else you might end up paying for the rewards you accumulate many times over in steep interest charges.
• Also, look out for an annual fee; you’ll get the most out of a rewards card by using it regularly enough to benefit from the rewards program that fee pays for.

FOR EMERGENCIES ONLY – You want a credit card handy to back you up for when you have a financial emergency or want to buy a big ticket item. For the times you need credit quick, watch out for any extra APRs or fees that could make you pay extra for credit card features you won’t be using often.

• Cash Advance APR is an important interest rate to check out on the application, especially if you’ll be tempted to use your credit card to withdraw cash often. The rate is often high for most cards and usually upwards of 20% or more, which means even a small $50 cash advance can rack up a $10 fee.
• If you want to use your credit card as a backup to your checking account for the times you overdraw your funds, check out the Overdraft Advance APR, which also tends to be upwards of 20%. Depending on the increments your credit will deposit into your checking, anywhere from $20 to $200, relying on your credit card to keep replenishing your debit can cost you fees and interest.
• Finally, be sure to pay off your balance so you won’t get stuck paying high interest on your occasional purchases. If you only use your card for emergencies or big ticket items, a 0% APR credit card like the Citi Platinum Select Card gives you a 0% APR for the first 6 months, which is like getting an interest-free loan on your balance.

EVERYDAY PLASTIC ADDICT- Your credit card is your best friend, and it goes everywhere with you and pays for everything. For regular plastic users like you, a cash back credit card will give you the most benefits from daily charges.

• Be responsible with frequent credit use and make sure you don’t spend more than you can afford to pay back. One glance at the default APR, which is often double the original APR at around 30% or more, will tell you how much you’ll be paying in interest if you don’t pay your monthly balance on-time and in full.
• Since you may be using this card more than your other credit cards, you might want to think about doing a balance transfer, which will transfer the balances of other cards to one card so you can pay off the balances more efficiently and at a potentially lower APR. Read the fine print on balance transfer APR plus an extra transaction fee for balance transfers. If your card has a lower APR and a 0% balance transfer APR, you can pay off the balance of other cards at a lower interest plus you don’t have to pay extra interest on the transfer.
• Finally, know your credit limit and make sure you don’t end up paying an over-the-credit-limit fee, also covered in the fine print, for all of your regular or impulse purchases that rack up.
• Credit card-addicted users like you benefit the most from a cash back credit card like the Chase Freedom Credit Card, which gives you $50 back on your first purchase and will let you earn more money as you spend. Most cash back credit cards offer around 1% cash back earning power on every purchase, plus a higher rate for everyday purchases, such as Chase’s 3% cash back in rotating categories like department stores, home improvement, and gas.

One last note on the fine print: Despite what the Pricing and Terms page will tell you about the rates, fees, and costs that you should know before you complete your credit card application, these conditions are subject to change according to the issuer and the Prime Rate. Check out the Credit Cardholder’s Bill of Rights for your rights as a cardholder and the new regulations, like a 45 day advance notice on interest hikes, that keep issuers in check.

Becoming a millionaire seems like an impossibility since the past decade’s get-rich bubbles in real estate, dotcoms, and stocks have burst and left most Americans worried about earning a regular salary, let alone millions.

Becoming rich won’t happen overnight, but it can happen over time. It takes good, consistent habits and before you know it, you’ll be a lot closer to millionaire status than you were before reading these 7 tips:

1. Finally get rid of your debt! Your credit card debt is a black hole of interest and never-ending, unpaid debt for all your hard-earned savings. The average American carries a $6,000 balance on their credit card and a typical credit card APR is 14.9%, so if you paid the minimum payment of $100 a month, it would take little over 9 years to pay off your balance. On top of that, you will have racked up $5,074 in interest charges! Start focusing your current cash flow on paying off your debt now so you can avoid potentially paying double your original debt in interest charges in the long run.
2. The old piggy-bank method, reinvented - Let’s take out the calculator again, but let’s focus on saving rather than debt reduction. If you saved $500 a month and put it in a savings account like Ally Bank’s high-yield 1.75% APY online savings account, in 10 years you will have $60,553.84 saved up! If you keep this up for the next 45 years, you’ll be sitting on a $270,000+ nest egg when you retire. Or you can opt for a CD with an even higher interest rate, like Discover’s 3 year CD with 2.75% APY, which will yield a whopping $430 in interest with an initial deposit of $5,000 by the end of the CD’s term.
3. Trade your credit card for a debit card, secured card, or cash - There is nothing evil about a credit card, as long as you know how to use it responsibly. For consumers overspending on credit or paying late or not at all, sticking to credit card alternatives like a debit card, secured card, and cash is the best way to avoid the debt and interest charges and keep up a healthy credit report. And seeing your spending directly shrinking your bank account might make you think twice about your purchases.
4. Shop around for loans – Not all loans are alike, and with a little bit of research and comparing, you can save a substantial amount of money by looking for a loan with the best terms and rates that fit your needs. If you are a student, use SimpleTuition to do all the loan searching and work for you. For any other type of loan—from opening up your first restaurant to paying off your car—check out Prosper and Lending Club for a person-to-person lending platform that has reduced rates for lenders (as opposed to going to a bank) and are perfect for short-term and smaller loans.
5. Invest! – On that note, you can also invest in the P2P platform of Prosper and Lending Club to get a high rate of return, ranging from 8-20%, while also helping out fellow consumers.
6. Cut a little, save a lot – Start making coffee at home and deposit the $4 you would’ve spent every weekday morning in a savings account, and within a year you will be $1,008 closer to becoming a millionaire. If you usually eat out for dinner and opt to go out 2 times a week and cook the other 3, that adds another $3120 a year to your savings. If you want to take this saving thing seriously and cut out your annual Tahoe ski trip and New Year’s Las Vegas trip, your “staycation” could save you another $3,500+ or more. With these three suggestions, you could savea possible $7,628 to deposit to your piggybank.
7. Sell on eBay! – Think you have nothing to sell, it’s too complicated, or it takes too much time? Millions of people buy and sell on eBay and millions of dollars are exchanged because it can be profitable and effective if you do it right. Check out this blog, “Sell it Now—how to make hundreds of dollars in 37 minutes,” and see how to make your mint-condition Beanie Babies collection can help make you a millionaire.

Start Today
Getting rich slowly may not be your ideal way to hit seven figures, but it’s certainly the most practical and realistic. Building your personal wealth is hinged on simple ideals of saving more, spending less, dealing with debt, and being financially responsible over a longer period of time.

There is a new trend developing due to the sagging housing economy where a homeowner who is underwater with their home, acquires a new bargain priced home and then walks away from the overvalued property. This practice, known as “Buying and Bailing,” has been a hot topic for homeowners looking for an escape route from paying a mortgage on a home that has lost significant value.

It sounds too good to be true; mortgage rates are still very low and you’ll be able to get a great deal on a home which is more affordable than your current home. More real estate and mortgage brokers are becoming familiar with the ins and outs of these transactions and are more than willing to coach you through this type of endeavor. However, accomplishing this in reality is difficult, you will need to be able to afford a new down payment as well as support both loans in order to qualify for the loan on the second home. Some consumers have set up a short sale, put the home in a spouse’s name or told the bank that they plan on renting out the first home as work around to help qualify for the second loan.

This type of exit strategy will only work in markets where the home values have dropped considerably. At first glance this may appear as a miracle from above, but consumers need to understand the repercussions of a buy and bail. Specifically, their credit score will be battered once they start missing mortgage payments which will ultimately end in foreclosure. Once they have a foreclosure on their credit report they won’t be able to get a Fannie Mae loan for up to four years. Additionally, anything requiring a credit check like insurance, new credit cards, employment screening will present your past misdeeds and likely affect pricing of other financial products or even cost you a job.

No one really knows how much this will affect consumers’ credit as this is the first time homeowners have made this type of risky and possibly illegal maneuver. One thing is for sure, consumers attempting a buy and bail will always have a looming uncertainty around if a lender or worse the police may come after them. At minimum, lenders can put a lien on the new property; as well as sue for fraud if you misrepresented yourself on your loan application. Many are rolling the dice that most lenders are severely understaffed and hoping their situation may get lost in the shuffle and never be addressed.

Predictably, lenders are calling this practice unethical, deceptive and fraudulent. They are quickly looking at ways to close this loophole to reduce future risks in their portfolios. For many it’s comical to hear the lenders call something “deceptive” when only a few years ago, they were creating variable rate mortgages with complex minimum payments and negative amortization, as well as 100% financing programs that contributed to the housing collapse. Regardless, lenders are now adopting stricter underwriting conditions when evaluating new purchase loans for borrowers with existing home mortgages including producing an executed lease agreement or requiring documented income to verify the consumer will be able to support both mortgages. Both of these are precautions to help weed out Buy and Bailer’s before they take ownership of that second property.

Buying and Bailing may be a way out for those who have the means to pull off such a complicated transaction and simply get lucky that lenders are understaffed and unable to properly follow up, but it requires a perfect storm of having the funds on hand, adequate employment/income to satisfy the underwriting, and a family member or spouse that can assist in securing the second home by being the primary applicant. Realistically, while this option does provide a viable, albeit difficult escape route for some, it’s very questionable of its legal and the long term ramifications are unknown at best.

The Class of 2010 is probably all too familiar with hearing doomsday-esque warnings about Graduation Day from everyone including the guy sitting beside them at Starbucks to close relatives and even their nosy neighbors, saying, “We’re in a recession”, “Unemployment is still on the rise”, “Your liberal arts degree isn’t very useful, is it?”, and, “What are you going to do after you graduate, in this economy?”

Getting ready to graduate and move on to the “real world” is not as promising as it seemed when this year’s soon-to-be college grads were eager freshmen back in the day. And in the face of fears like unemployment, large student loans, and nosy neighbors, there are lots of reasons to think this year may be the worst time to be a college senior.

Don’t let these reasons depress you–these are five reasons why you should see the college senior’s half-empty glass as, actually, half-full:

1. Jobs– Yes, the unemployment rate will probably hit 10% by graduation next June and you will probably experience the average 6-8 months of unemployment that many young professionals are currently going through. No, you do not need to despair. First off, unemployment is a natural part of the cycle of a career; it is not a failure and it does not stall your life–looking for a job is still actively progressing towards your career. What is going to be important five years from now isn’t that you were unemployed at this time, but how you handled being unemployed. Remain persistent and ambitious about the job you want and keep sending out resumes daily because you will come across opportunities. For many it may be better to settle for a lower-paying job in the field you actually want, instead of getting stuck in a career path you have no interest or passion in. As a college graduate, you do have a job right after you graduate and that is to look for a job, so approach your job search with as much work ethic and dedication as you would your first job.
2. Housing– You might be homeless post-graduation when your college apartment lease expires, but fear not! You could move back into your parent’s house and save yourself some money; its the life of “being taken care of” and blowing your money on things like shopping and entertainment, but just remember that Mom still makes the rules. Opting for rentals is expensive because no one is buying new homes, but you can cut costs by doing what you’ve been doing for the last four years—rent with roommates. Sharing appliances, furniture, utility bills, rent, and space will be beneficial to all of you and will help your household adopt a frugal and cost-conscious mindset.
3. Student Loans– Student loans will begin repayment period within 6 to 9 months of graduating, so be prepared to pay by then. Regularly budgeting it into your monthly expenses will make it less of a stress and more of an accepted part of your finances and your life to be dealt with as efficiently as possible. As long as you pay at least the minimum payment (more if possible!) on-time, your credit report will stay healthy.
4. Budgeting– It will no longer be as simple as budgeting for eating out, movies, clothes, and other fun stuff. Graduating takes away Dad and Mom’s monthly checks; you will soon be responsible for rent, utilities, car insurance, food, internet, transportation, and more. Since this will take some help and getting used to, check out personal finance management sites that can do all the work for you: they automatically pull your accounts together and calculate your spending so you can see how you’ve been spending your money and where to cut back. If you want to keep it simple, sit down with a pen and paper and write your monthly income, subtract all necessary expenses like bills (don’t fool yourself—eating out twice a week is not necessary), and whatever is left over after is what you can spend or save.
5. Debt– The average college student graduates with just over a $3,000 balance on their credit card, and tack on student loans in a few months, and you can end up spending most of your 20s trying to dig yourself out of debt from college instead of saving up for your first house or investing in a 401(K) plan. The best way to start dealing with the burden of debt is to start paying it off NOW so you don’t have to fear dealing with it later when more interest will have accrued. Another plus side to paying off debts now is that your credit report will become healthier and healthier, which means a healthier credit score that will help you when it comes time for a home mortgage, auto loan, or new credit card.