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YOUR BOTTOM LINE
Creditors Crushing Consumers; Financial Opposites Attract; Aging-in-Place: How to Make Homes Safe for Aging Parents
Aired October 10, 2009 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is YOUR BOTTOM LINE, the show that saves you money. Credit card outrage, you know what I'm talking about. We'll tell you if your credit card company is racing to raise rates and minimum payments before new legislation goes into effect.
Aging in place, how to make homes safe for parents as they get older and save money while do you it.
And we all know the saying "opposites attract," how to find financial bliss in your partner. YOUR BOTTOM LINE starts right now.
In less than five months, Congress plans to implement new credit card rules designed to stop credit card companies from unexpectedly raising your rates or arbitrarily doubling, even tripling your monthly payments. CNN national correspondent Jessica Yellin shows us how consumers are getting crushed by their creditors and it's all perfectly legal.
Hi there, Jessica.
JESSICA YELLIN, CNN NATIONAL CORRESPONDENT: Hey, Gerri. The story I'm about to tell you is the kind of credit card nightmare that's happening to millions of Americans as credit card companies rush to change their practices before a new consumer protection law goes into effect.
CHUCK LANE, CREDIT CARD CUSTOMER: It's an injustice.
JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT (voice- over): Chuck and Jeanne Lane are outraged. They have excellent credit, never been late. Still, Chase credit cards jacked up their monthly payment from $370 to $911. So, Chuck Lane called the bank to complain.
(on camera): What did you tell them?
C. LANE: I told them this was the worst economic times in history, practically. I work for a small company. We have laid off 30 percent of our work force. I just took a 10 percent pay cut this morning. And this is what you're going to do to us?
YELLIN (voice-over): He says he learned his credit card payments skyrocketed when he checked his online bank account. C. LANE: And I went to my checking account so I could write down the amount that was coming out. And, lo and behold, it was $911.
YELLIN (on camera): Was that a surprise?
C. LANE: I was shocked. I was stunned.
YELLIN (voice-over): Now he feels abused.
(on camera): You thought you had a deal.
C. LANE: I did. I thought I had a really good deal.
YELLIN (voice-over): The card was sold as a low-interest way to pay down big bills. The Lanes have paid off half what have they owe, but still have more than $18,000 to go. They can't afford the new monthly payment, so Chuck Lane called to ask Chase for help. And guess what he was told?
C. LANE: You want me to pay five percent more in interest...
YELLIN: He can go back to his old payment, but only if he agrees to a higher interest rate. Under the new credit card law, the Lanes will have options. But for now, they are stuck.
C. LANE: So, you're putting us into bankruptcy. I mean, I don't see how that helps me.
YELLIN: The Lanes aren't alone. In a statement to CNN, Chase says they doubled the minimum payments for a million cardholders because, "While tens of millions of Chase loans have been paid back in less than 24 months, there have been a small percentage of customers that have not made as much progress. Our desire is to have these balances paid back in a reasonable period of time."
JOE RIDOUT, CONSUMER ACTION: Truly, this is the single-most abusive credit card change in terms that I have ever seen.
YELLIN: The credit card industry insists companies are not trying to skirt the new law.
SCOTT TALBOTT, FINANCIAL SERVICES ROUNDTABLE: It's their desire to provide the best products to consumers always, every day, to ensure that customers have the credit they need.
YELLIN: Ensuring that Americans have affordable credit, that was one reason banks like Chase got billions in taxpayer bailout money.
(on camera): Do you think they're showing proper respect to what Americans are going through?
JEANNE LANE, CREDIT CARD CUSTOMER: No, they're not. They have no respect for the American people. All they think about is the almighty dollar for themselves.
(END VIDEOTAPE) WILLIS: So many people, so frustrated. Jessica Yellin is with us along with Greg McBride, a senior financial analyst with Bankrate.com and Ryan Mack, the president of Optimum Capital Management.
Jessica, you know, this is just amazing, this story, and I think so many folks out there, as I was saying, are really, really frustrated with what's happening. Lawmakers though are trying to get out in front of this. What are they doing now?
YELLIN: A couple of things, Gerri. First of all, they're trying to move up the effectiveness date when those new credit card protections go it into effect there's a bill make to make that happen in December rather than February. We don't know whether that will pass. I can also say that 18 members of Congress saw the story you just showed, it aired originally earlier this week, they were outraged and they wrote the banks asking them to voluntarily freeze their practices, not to raise rates, before the law goes into effect.
Now as you know, Bank of America had already agreed to do that. Chase, the company that has the Lane's credit, they say they're not going to freeze their practices and Wells Fargo, they actually raised their interest rate three percent.
WILLIS: Wow. It's so amazing and congratulations again on that story. Great story.
Greg, I want to turn to you now, though. I mean, we kind of took our credit cards for granted, I think. You know, we thought we should have the terms we want and if we didn't, we were going to change. Do you think, though, that the credit card companies are now going too far?
GREG MCBRIDE, BANKRATE.COM: Well, the time for credit card issuers to be thinking about risk isn't now, it was three years ago, when they were giving out credit like it was candy, and defaults were low and only now that people are unemployed, that people are relying on the ability to make minimum payments just so they can stay current on the payments, only now do the credit card issuers have an eye towards risk.
Raising interest rates is only one part of the problem. The other thing here is this raising of minimum payment requirements, and with millions of households relying on those minimum payments because they've seen a reduction in income, that's enough that can take somebody who is living on the edge and push them right over.
WILLIS: Ryan, what do you do? I mean, if you have Congress people calling these banks and asking for changes and terms and they're not telling the congressmen they'll work with them, what can an individual do?
RYAN MACK, OPTIMUM CAPITAL MGMT: Well definitely, the outrage is merited. You know, we gave trillions of dollars of taxpayer dollars to many of these banks that wouldn't be opening, functioning right now had it not been for the taxpayers, but now is not the time to play victim. Now is the time to get on the aggressive, on the offensive to see what you can actually do to improve your financial situation, improve your FICO score, somebody with a 750 FICO score has a lot more leverage to build a transfer rate than somebody with a 650 FICO score.
WILLIS: There are lots of steps that you can take out there to improve that, but you know, changing the terms of your credit card can really be tough.
Greg, I want to turn to you. There was a poll out recently from the folks at "Consumer Reports" and people are getting smarter, here. Let me show you some number: 21 percent of folks out there polled by "Consumer Reporters," they say they've received unfair treatment, 32 percent say, hey, we've gone and closed card and 45 percent almost half of folks say we're charging less on our credit cards. Are we getting smarter?
MCBRIDE: Absolutely. I mean consumers are dialing down their use of credit, they're focusing on paying down debt and even consumers that pay their balances in full every month, they're using credit less, they're resorting to other methods of payment. People don't want to be carrying a large load of debt at a period of time when job losses are still mounting.
WILLIS: Jessica, I want to bring you back in here. You know, we've always wanted our congressional representatives to jump in on this very tough problem for Americans. Now, they are. Can we count on them to always be there and do they have anything else they're going to do at this time to help us out?
YELLIN: Actually, Gerri, yes, they will have another chance to take a bite at the apple, it has to do with financial regulation reform that's coming up, that has to do mostly with reforming Wall Street and changing some of the practices that led to the financial collapse. But, there is a piece of this new bill that will deal with consumer protections.
And I can tell you, lawmakers are getting lobbied vociferously, aggressively by credit card companies, banks, trying to water down the consumer protection, so people have an opportunity to call their members of Congress, write their members of Congress, insist that they stand up for the regular guy. And I can tell you, I'm talking to a lot of members who are pretty angry about the credit card companies, right now.
WILLIS: Yeah. Well you know, we've been covering this for months on this show, the relationship between credit card issuers and consumers, and it's just not been a level playing field.
Ryan, you know, there's another area that's not a level playing field either, that's prepaid debit cards. Now, I know this is one of your big topics.
WILLIS: Your big issue is fees. Explain what those cards are and why they're so unfair. MACK: Well, essentially these cards are essentially individuals paying money to use their own money, and so $9.95, just activation card up to $20, up to $100 just to activate these cards to use your own money.
MACK: Yes, there are various cards out there they are selling at Wal-Mart and various things, next to these prepaid phone cards where individuals put money on these cards and just to use their own money they have to spend money, but they'll say you know, there's no credit check, it's safer than using money and it's better than -- if you don't have a bank account. This is not the solution.
The solution is to get yourself in that situation, if you've bounced checks before, if you had teller check cashing system, let's go to credit loans, let's go to loan builder programs, let's put the budget together, make sure we're not bouncing checks any longer, let's do those things and get ourselves back into the system where we can use free debit cards, we don't have to use excessive fees to spend money to use our own money.
WILLIS: All right, I want to say thanks to my guests, great information. Jessica thanks for the story, Greg, Ryan, great information. Thanks to both of you for being with me today. Appreciate it.
Have extra cash in your account? We have creative ways to help the money go the extra mile, next.
WILLIS: Well the stock market may be doing very well now, thank you very much, but last year, well, it was a different story. The average 401(k) fell 24 percent last year. The average balance according to the folks at the Employee Benefit Research Institute and the Investment Company Institute was just $45,519. Not enough to retire on.
Now, if you're still struggling to get back on it your feet when it comes to your retirement savings, take heart. The market's turnaround has probably helped you considerably. But, there is one thing we should keep in mind from that experience. Investing for the long run can't mean setting it and forgetting it. Being a successful 401(k) investor means staying on top of your investments and making sure the way you're handling your money makes sense for your age and your personal situation.
Well if you're lucky enough to have an extra $1,000 in your account right now, what should do you? Spend it? Save it? The folks at "Money" magazine have some interesting ways you can use that extra grand to make a big impact on your bottom line.
Donna Rosato is senior writer with "Money" magazine.
Donna, welcome, good to see you again. DONNA ROSATO, MONEY MAGAZINE: Good to see you, Gerri.
WILLIS: So, very intelligently, the first think you say is "emergency fund."
ROSATO: That's right, you know, it's great, people are saving more, but a lot of people are leaving their money in a bank account that's earning very little money. So first of all you want to make sure you're saving enough in your emergency fund.
You don't need three months of savings these days, you probably want six months and if you're in a shaky industry because of the difficult job market, you might want to have a year's worth of savings. So, take that extra $1,000, put it in a savings account, put it in a high-yield savings account that can earn over 1.5 percent to two percent.
WILLIS: It's not a lot of money but over time hopefully it will build up. Retirement, you know, I just said that the average retirement fund had about $45,000 in it last year. We need to work on that, too.
ROSATO: Oh that's right, all of us can save more for retirement and the good news is if you're over 50,000 you can throw an extra $1,000 a year, it's called a catch-up provision, into your IRA, so if you haven't done it yet this year you can do it for 2009 and you can do it again for 2010, that $1,000 would be well-spent.
WILLIS: So, Donna, everybody right now is worried about their jobs. Will I continue to have it? Is there a way I can invest in myself right now?
ROSATO: A thousand dollars can go a long way to preserving your job. There's a couple things that you can do, couple of ideas we had, why don't you take that money, take a class, you can probably spend about $500, take a class and maybe improve your speech, take a language class, some kind of certification, look at your local college, invest in developing a Web site. You could pay a designer for $200, you can probably get a nice website set up, and if you have a smart teenager around, have them set it up for you.
WILLIS: On the cheap.
WILLIS: Your next idea is probably my favorite for most people, paying down your credit card debt. You don't know where those terms are going, where your interest rate is going, what your limit's going to be. It's a great time to pay down credit card debt.
ROSATO: That's right Gerri, a lot of people are seeing their interest rate rise and the average interest rate on a credit card today is 15 percent. So, if you are carrying $1,000 balance you're paying $150 in interest, so pay that $1,000 off and then you're going save, that's money in the bank for you.
WILLIS: OK, the gym? Are you kidding me?
ROSATO: Right, everyone thinks it's great, it's like an indulgence to join the gym, but actually it's going to pay off. It's not going to make you only feel better, but being fitter pays off in cheaper health care bills. The average overweight person pays almost $1,500 more a year in cost that's just an average.
WILLIS: Fifteen-hundred just by carrying a few extra pounds. Wow.
ROSATO: That's right. And the median gym annual membership is $750. So, spend $750 on the membership and another $250 for the personal trainer to help you get off and get motivated.
WILLIS: All right, Donna, thank you for that.
Depending on your habits the topic of money can become a major source of strife among married couples. What you need to know to keep your relationship free of financial stress.
WILLIS: The recession it seems is taking a bigger toll on singles when it comes to unemployment. According to a study by the Federal Bank of st. Louis, the jobless rate is double for singles than it is for married folks. Married men are likely to take a new job at lower pay than their single counterparts; singles on the whole, are also younger and have less education and workplace experience.
According to a report by professors at the Wharton School at the University of Pennsylvania and Northwestern University, people tend to marry spouses with opposing emotional reactions toward money. In other words, opposites attract. So what do you do if you're spendthrift and your spouse is a tightwad?
Jeff Gardere is here, he is a clinical psychology.
You know, times are tough, are tough, and now that all of us have married our financial opposite, it's even worse because you both have different reactions to how to cope with this financial trouble.
JEFF GARDERE, CLINICAL PSYCHOLOGIST: In the past, we used to be able to get away with this, with marrying your financial opposite because love does conquer all and there were so many other things in the relationship that would buoy it. Now we're finding with this great recession this is the worst time to have these financial issues in your relationship.
WILLIS: Right. What do you do about that? I mean, you have different -- I know this is true of you, it's true of me.
WILLIS: You know, you have different reactions to the same problems. How do you come together? GARDERE: Well, you have to get the emotion out of it and that's what happens all the time. We get into the blame game, we point fingers, we look at our opposite, our financial opposite and we tell them how they're doing such a bad job as far as taking care of finances. What we really need to do is to be able to sit down, count to 60, get all of that stress out, as much as we can, and then have logical conversations as to how we can solve the problem instead of pointing fingers at one another.
WILLIS: And let's have a budget, too, as long as we're at it, right, to keep everybody on the up and up with the budget.
GARDERE: Well, the budget is great because you are talking to one another and you have a plan and that's the most important thing. Instead of competing with one another, yelling at one another, being in the conflict, now you have the teamwork, which is what relationships should be about in the first place.
WILLIS: All right, Jeff. I want to give you some issues. And you tell us how to solve that problem, how to work around it.
WILLIS: In a lot of cases there's just one person making all the financial decisions or paying the bills. They are in charge. Is that the right way to go?
GARDERE: Well, that's absolutely the wrong way to go. Two heads are better than one in this case, and certain people should split what the responsibilities are. Look at the things that you do well versus what your partner does maybe even better. If you're able to have good people skills, maybe you should talk to the banks and your partner, if they're really good at balancing the budget, should be the one to do the stuff on the computer.
WILLIS: But split it up, make sure you split it up. And speaking of splitting up, do you believe in separate accounts?
GARDERE: I do believe in separate accounts, but I has to be for the right reason. Don't do it because you're trying to hide or it's about isolation. But, do it if you want independence financially and emotionally, but there should be open books where the two of you can talk about what's in each other's accounts, so you can come together if you need the help.
WILLIS: All right, one other question. What do you do about the situation where one spouse earns all the money or most of the money? How do you manage those tensions?
GARDERE: We find out that the person who earns all the money is usually the dictator. They usually tell everybody else how things should go. The one who makes all the money should have the responsibility of making sure that we can both be on the same page and equitable as far as what we do in dealing with the finances. Too often we find that people who make all the money will just bring the paycheck in and tell the other person, well, you write all of the checks. And writing the checks is a big responsibility and even more stressful than going out and making the money.
WILLIS: All right, it's a team effort.
GARDERE: Absolutely. As a relationship should be.
WILLIS: Thank you.
GARDERE: Thank you.
WILLIS: So much. Appreciate your help, today.
GARDERE: All right.
WILLIS: One big expense that could be in your future, caring for your parents. We'll tell you how to save money by keeping them safe at home.
WILLIS: Next week is national Aging-in-Place Week, time to think about where your parents will live as they get older. The AARP says 89 percent of folks over 50 want to stay right in their own homes and that can cost less than an assisted care facility. We visited two homes to figure out whah at it takes to prepare a house for aging-in- place.
WILLIS: Steve, all of this starts outside. You've got the rail, there's a little ramp, here.
STEPHEN C. GIDLEY, AGING-IN-PLACE CONTRACTOR: And then we have the vestibule, which is well lit and heated and then we have the elevator, which is wheelchair accessible and it's also safe to carry up four people.
WILLIS: And so, we're going to go up to the first floor, here.
GIDLEY: Yes, we'll take a ride to the first floor where the living is.
WILLIS: Steve, I want you to show me this one-floor living idea. How does it work?
GIDLEY: It was very important to John and Lee Sullivan that we be able to have a bedroom directly accessible to the kitchen and the family room so it would be easy one-floor living -- wide doorways, well-lit rooms, safe, easy over thresholds, flat floors.
WILLIS: It's really pretty and wide open.
GIDLEY: So, here's a bathroom, also right off the kitchen with a comfort level it to seat.
WILLIS: Yeah, that's totally different than we're used to seeing. GIDLEY: Six inches higher than usual, so the individual gets up and down easily. It's got a grab rail so it's safe.
WILLIS: Grab rail, right here and another one over here.
GIDLEY: A grab rail in the shower, a seat in the shower and again, low shower controls so an attendant can help an individual with motor function problem, take a safe shower.
WILLIS: So Steve, this is a more modest renovation, this house right here, the upgrades, not quite what we saw before. Tell me what you've got in this house.
GIDLEY: Well, the man living here needed to be made comfortable on one level, so, again, this is first-floor living. And what we needed to do is make it universally safe for him.
WILLIS: So, Steve, you've really transformed this into a safe and accessible house. You know, we see the tape down here holding that carpet down. You can't trip on that.
GIDLEY: Right. And a walker won't catch its legs on that.
WILLIS: Tell me about the stairs, here.
GIDLEY: Right, we wanted the client to be able to easily access his bedroom and the kitchen. There were two steps up in the house, so we did was we made them mini four-inch short steps, we put safety railings and a guardrail so he could step up each platform and turn safely with his walker.
WILLIS: So, this is much easier for him, obviously, navigating this. And you said that you've really worked hard on the bathroom. So, let's talk about that.
GIDLEY: Right. Once again, the requirements were for a safe shower area, and also a safe tub area and what we did was we made it accessible so that he could get into the bathroom, use the chair, all the shower controls are low, and we put guardrails in the shower so that he could have good stability.
WILLIS: Bottom line, just the basics like handrails and an accessible shower can run you up to $10,000. Bigger upgrades well, they'll cost you more. That elevator we showed you, about $30,000.
But even a higher-end renovation could cost less than an assisted care facility. The average price for one year in an assisted living facility is $36,000, that according to MetLife.
Now, once you decide to make upgrades, look for a contractor with a CAP certification from the National Association of Home Builders, and it's a contractor who has taken courses in becoming a certified aging-in-plaace specialist. You can contact your local senior center to find contractors who do this kind of work in your area. As always, we thank you for spending part of your Saturday with us. YOUR BOTTOM LINE will be back next week, right here on CNN. You can also catch us on HLN every Saturday and Sunday at 3:30 p.m. Eastern Time. And you can hear much more about how the news of the week affects your money on "YOUR MONEY" today at 1:00 p.m. Eastern and tomorrow at 3:00, right here on CNN. Don't go anywhere. Your top stories are next in the CNN "NEWSROOM," have a great weekend.