We have all heard that the recession is “ending” but I know most of us are still feeling the pinch!  With the Holidays coming up some will be tempted to dust off those credit cards and start using them again.  For others, your credit card is what has been keeping you afloat in this uncertain financial time.  Either way you need to know your rights when it comes to your credit card(s).

1st thing I want to make clear to you is that the credit card companies are depending on you NOT paying attention.  I say wake up, get aware and take control!  There is a ton of information I want to make you aware of… everything from identity theft to unfair credit practices… but in this article I am going to focus on your consumer rights and responsibilities.   I want to give you some things you can take action on NOW to be aware and in more control of YOUR credit.

The government has made some improvements in Legislation to help protect the consumer, however it is still your responsibility to manage your credit score and pay attention to your credit cards (both business and personal).  Some of this legislation is in effect now… some will not go into effect until February of 2010 or July of 2010.  Knowledge is Power!   Paying attention and putting that Knowledge into action is empowerment!  So here are a few things you should know about your rights.

What you need to know about your rights regarding Payments:

Credit card companies must apply your payment the day it arrives.  Now having said that it again is YOUR responsibility to check when your due date is.  Some unfair practices “trick” you into paying your credit card late.  Federal law requires that credit card issuers mail you your statement at least 21 days before the due date (this is an increase from 14 days before the bill is due). Your due date can change from month to month so DON’T assume your due date is always the 10th of the month.  Even a few hours late and you will be slapped with a late fee and probably a rate increase. Some companies are sneaky by moving your due date and hoping you won’t notice.

What can you do about it? If you are still getting a statement mailed to you OPEN IT IMMEDIATELY!  Check the due date.  If you’re credit card company offers it, get online statements e-mailed to you.  Be sure you enter the credit card company’s sender address so the statement notification does not go into your spam/junk folder.  Some credit card companies now offer “due date alerts” that will be e-mailed or text to you a few days before your payment is due.  Once your payment is made be sure to check that the payment was in fact posted the day it was sent.  If you are still mailing your payment mail your payment at least 10 days before the due date.

Do your best to pay even just a little MORE than the minimum due each month. As part of the new legislation credit card companies will soon need to disclose in the statement the consequences of paying only the minimum payment each month including how long it will take you to pay off the debt and an estimate of how much interest you will be paying over time if you do only pay the minimum.
Keep those confirmation numbers if you pay online!  Most of us are choosing to pay many of our bills electronically.  This is a great way to be sure your payment is posted on time.  When you do make a payment on line you will get a confirmation number.  I encourage you to copy and paste this confirmation number right into the memo line of your credit card payment within your Prosperity portfolio.  This way you will be able to easily look it up without having to print it out and dig through piles of paper if you should need to prove your scheduled payment.

What you need to know about Rate increases and late fees:
Credit card companies are waiting for the slightest slip up on your part to increase your rate.  But your rate can be increased even if you are not in default or late in any way.  Did you know you can reject changes in your card agreement?  A credit card company is required to provide you with written notice when it changes any term in your card agreement.  Part of the new legislation requires the information to be written in plain English and in at least 12pt font size eliminating the “fine print”.  What does this mean for you?  Well if your credit card company notifies you that they intend to increase your credit limit (due to no fault of yours) you can contact them and refuse the new terms.  Although calling is easier… it is a good idea to refuse in writing.  Act as soon as you get the notification.  There is always a time limit for refusing new terms.  As of now there is no legislation or rules as to HOW they notify you… it could be written on your statement, you could get a letter or a post card… It could look like junk mail… there is no set way they must notify you. So pay attention!

A word about those nasty late and over-the-limit fees. Did you know that much of the credit company’s income is as a result of these penalty fees?  $29 here and $39 there really adds up.  1st do your best to prevent your payment from being late in the 1st place.  BUT you need to pay attention to your statement again and look for these penalty fees.  If you do get one it does not hurt to call your credit card company to request the fee be reversed, especially if you usually pay your bill on time.  You’ll want to be sure to ask if the late payment has resulted in a rate increase and ask that that be reversed as well if possible.  It’s also a good idea to send a written letter in addition to the call.

Pay attention to your interest rate! It’s your responsibility to pay attention!  My tip here is when you enter your interest paid/finance charge in your Prosperity portfolio… enter the APR % right in the memo line.  This way you can look back through your register easily to compare month to month.  It also reminds you to be checking that month to month on each statement.

Bottom Line here… You must pay attention! It is up to you to be proactive about YOUR credit health. Don’t take these unfair practices lying down… FIGHT BACK!  LOOK at your statement, reconcile your credit card accounts just like you would your checking account.  Check your APR % rate.  Look for late or over limit fees.  Look for fraudulent charges.   A credit card company cannot hold you liable for fraudulent charges and some fees can easily be reversed but there is a time limit for you to dispute them.   If you find an error or fee on your statement you feel is unwarranted… Dispute it!  Call to confirm the information, request reversal of fees, etc. but also send it in writing.

Remember, Credit cards fall under the same rule as the rest of your money… You need to be vigilant and pay attention.  When you spend on your credit card spend intentionally.  Don’t fall into the trap of spending more than you are making.  Tell your money where to go so you don’t wonder where it went!

$700b Bailout, Sub-prime, Fannie Mae, AIG, Bank Mergers & your MK business

Business women need to understand the economic crisis and how it affects them.

Even if you haven’t been watching the news, you’ve heard about what’s going on out there on Wall Street. No doubt you heard that Monday afternoon, the Dow (an invisible grouping of 30 companies who each have $7+ billion in annual revenues-Microsoft, Verizon, SBC Global, etc.) dropped the most it has ever dropped. You’ve also heard that the $700 billion bailout package went before Congress and was not passed. If you’re breathing on planet earth, you know something about the sub-prime mortgage mess in the USA.

Like you, I go to the gym in the morning and see the headlines splashed across the TV screens-I observe the people around me running a little slower, and elipticisizng (is that a word?) with less vigor as we watch the unfolding of an historic financial disaster. When a hurricane happens, everyone understands that a big, nasty storm blows through one of our cities, that lives are in danger, and real estate is going to be damaged. We understand that kind of disaster. I’m not so sure that we understand this kind of disaster.

Everybody has been calling, texting, and emailing me for my take on what’s going on out there. (Now y’all made me blush!) Most of us really don’t understand this kind of disaster, what it means for us and what on earth it has to do with the Mary Kay business you’re building. So I’m going to unpack it in English for you! You already know that our passion here at Ascend is to take all things financial, and turn them into something that makes sense to your worldview, the way you do business, and the way you leverage your greatest asset (your ability to generate income). We are big believers in capitalism and we believe in the Mary Kay business.

I’m not an economist, but I think that as businesswomen, we need to be empowered by knowledge so we can act appropriately. With that said, let’s dive in!

The 3 Minute Summary of how we got here:

Right before Seminar 07, there was an undercurrent of disaster brewing in the financial markets. The financial markets are where money is sold-literally.

How can they sell money?

It starts with the Federal Reserve (central bank for USA) saying to big banks, “Hey, I’m going to lend you money, but you’ll have to pay it back at prime of 2%.” So then those banks take the loan, and re-loan it with additional interest points (a point is 1%). They loan money to businesses as investment capital, to home owners, issue credit cards, give car loans, etc. Banks started to get a bit greedy; especially between 2004-2006 when the housing market was booming. The Democrat Party spearheaded a movement to have 70% home ownership among us. With interest rates at an all time low, this seemed doable and banks were going to profit HUGE. The pervasive attitude was that real estate always appreciates. They started to offer mortgages to people who had bad credit, no credit, and sketchy income sources. Insult to injury, they gave bigger loans to people than they could afford (which artificially overpriced the value of homes). After all, if real estate “always appreciates” there was little risk. Banks were blinded by greed.

With zillions of dollars worth of IOU’s (mostly mortgages) on the books, financial institutions started to leverage–a sexy way to say speculation–they started to buy these things called Credit Default Swaps. They are demonic “investments” that supposedly offered insurance against a company or a pool of mortgages from defaulting. It was a get-rich-quick scheme that everyone in the financial markets jumped into with both feet. AIG was the primary issuer of these pixie-dust securities (think of securities as stocks). They got in over their head, and were going to have their credit score reduced because they couldn’t pay when mortgages started going belly up. (so much for “insurance”) Whether you’re AIG or LeAnne Ozaine-Smith, if your credit score is pillaged, you’ll pay prohibitive interest rates to borrow money.

Enter the Government Sponsored Enterprises (GSE) of Freddie Mac and Fannie Mae (the US Postal Service is another example of a GSE). These organizations sold securities based on pools of mortgages; that’s why their called mortgage-backed securities. When folks started to default on their loans, the value of these stocks went to hell in a hand basket. The government was obligated to fix the problem because they basically own Freddie Mac and Fannie Mae. No way around it.

LeAnne’s Brief Soapbox:

As a culture, it is easy to abdicate responsibility to the banks, the Fed, CEOs of businesses, predatory lenders, and Wall Street. We salivated at the American Dream, and bought more house than we could afford as if it was our inalienable right to live in a big, glorious home. Or if we didn’t buy a big home, much like banks, we leveraged our families to the hilt with Home Equity Lines of credit, used plastic, and continued to borrow as if the supply would never catch up with demand. We have no basis of financial responsibility and then wonder how we end up in hot water?

Seems pretty obvious to me.

The Skinny on the “Bail Out”

It was the Government’s way of issuing a line of credit to the Treasury so that it could lend money to the financial markets in exchange for “warrants” in those companies. Think of warrants as more than IOU. They are a legal stake in that company. The government was trying to help companies dump their positions in spoiled mortgage-backed securities. Also, it should be noted that Wall Street firms would not have directly received the funds (thus the whole hype about executives banking off of it was hog wash). The bill would have helped temporarily ward off a Firm’s creditors.

I think this quote is extremely profound in an election year:
“Of the 38 incumbent members of Congress from both parties who are considered vulnerable in the coming election, 30 voted against the bill.” (Without Bailout Plan, What will the Cost Be, Time Magazine, September 30th, 2008)

What in the heck does this have to do with my Mary Kay Business?

Everything. Since 2003 my team and I have been loud-mouth advocates in the Mary Kay Community of financial responsibility in business. We’ve exhorted you to manage your business with financial integrity so you can have financial peace in moments of history like this. Better, we’ve made it a no-brainer to manage your business finances with Ascend Live.

Never before has it been more important to take all that Mary Kay Ash envisioned for you and make it reality.

Practical Tips for your MK Business

Here are some practical tips to help you embrace capitalism, your God-given potential, and to bolster up your confidence in the face of this week’s market news:

1. Limit how much news you watch. Getting emotionally wrapped up in the things the talking heads on TV are saying is not going to positively move you to action. That doesn’t mean you turn a blind eye, it means that you watch, and purposefully move into action, not slip into inaction.

2. Stop pretending that its 2005. Credit isn’t cheap, and big shocker, you have to pay it back! The MK Visa has an average 17% interest rate on it. Even though her name is on that piece of plastic in your wallet, YOU pay it back (and PS, it ain’t the best credit card out there). If you borrow money, you’re going to pay it back with interest, period. The “loose” money lending that happened between 2004-2006 is gone. This means that credit card companies are going to make it harder to borrow, they’re going to try to recover their losses, and they aren’t at all interested in providing you a break on your interest rates. Don’t lie to yourself and justify purchases just because the interest is deductible; make sure it’s a solid business decision, especially if you’re using credit to make the purchase.

3. Sell the product you have on your shelf. Your inventory is valuable, but it has a shelf life. Your inventory is an “investment,” but it isn’t making you money just sitting there unsold. Unsold inventory is an asset, but a depreciating one. (All of us can point to a few limited edition items on our shelf that diminish in value every day they go unsold; and remember, unsold current catalog products have a 2 year shelf life, max!)

4. Spend on purpose. Get rid of the thinking that just because it’s a “write off” that it’s a good business decision. Now, more than ever, it’s time to become fiscally conservative. When you start running your business from cash, for a profit (just like Mary Kay Ash taught) you will recession-proof your business. Every single thing you spend money on needs to be re-evaluated for return. If it directly or indirectly ain’t increasing your profits, don’t buy it (that includes Section 2 purchases).

5. Think and act like a businesswoman. The excuse you’ve given yourself that you’ll float by financially by just checking your bank-balance online just doesn’t cut it in this, or any economic climate (not to mention it isn’t legal). If you’ve been sitting on the fence, or trying to find the inspiration to start using your Ascend Live portfolio, stop waiting. Ascend does your books. It is the watch-dog over your profits, and helps you run your business from a place of financial integrity.

6. Don’t stop investing. Do you want to buy when things are on sale or when they’re full price? Stay the course on saving and investing. If economic climates like these aren’t further proof that you need an emergency reserve for your family, I don’t know what is. On Tuesday, October 28th at 12 pm PST (1pMST/2pCST/3pEST), I will be teaching a webinar called How to Recession Proof your Business. This will give you some great pointers on how to use your Mary Kay business to inject a healthy sum of money into your family’s emergency reserves (or start one). Click here to get registered for this free webinar.

Ignore the marketplace. Focus on the fundamentals. Book, coach, sell, manage your money, recruit from integrity.

All my love,

LeAnne Ozaine-Smith
& the Ascend Live Team