We’re going into the weekend, which will give us few days of respite from watching those little green numbers on the big, black NYSE board bounce up and down, up and farther down, up and really down. Hopefully, two days off (the stock markets will be open, but the bond market will be closed Monday for Columbus Day) will calm things down, though some analysts are seeing this as a not-good-at-all delay in finalizing some necessary deals.
No one in the financial sectors is happy now, except Warren Buffett, who is supposedly prowling the markets looking for deals. I’m not going to waste my sympathy on the angst of hedge managers and derivative traders, though…my concerns are more with the ordinary Americans (and our fellow working stiffs around the world) who are wondering if they can keep a roof over their head and food on the table.
For those reading this article, there are a few pluses. First, because you’re reading a blog promoting thrift, I’m going to assume that you already have a certain degree of financial self-discipline in place. You’re not going to experience the amount of shock a spend, spend, spendaholic will feel as the credit lines dry up and the credit card statements keep coming. You're probably fine with cooking your own food, now that stacks of Stouffers in the freezer or food from the local takeout is suddenly a luxury. You know that you can survive quite well without a weekly pedicure from a trendy salon or a reflexology session, and you're ready to turn the thermostat down and your sweater collar up.
But there are some additional things you need to be aware of, especially relating to the lack of liquidity in the economy and the lack of scruples on the part of some financial institutions.
Do all you can to keep your credit record pristine, and especially, be sure to pay all your debt obligations on time: mortgage, car loan, credit cards, etc.--it's fine to pay the minumum on credit cards for awhile, but don't pay less and don't delay in getting that check in the mail. Many of the largest credit cards issuers are gasping for cash right now and they're looking for any excuse to hike your interest rate.
Some may not even wait for an excuse. If you signed up for one of those "3.99% for the next six months!" credit cards, dig through your files or go online and see if you can find your credit agreement. Then read it carefully. Far too often, especially on such promo deals, the issuer has reserved the right to change the interest rate whenever it wishes, to whatever it wishes, once the honeymoon period is over. Be aware, too, that a promise of a "non-variable" rate may mean only that the interest rate won't vary automatically in sync with some index such as the prime rate, but the issuer can "vary" it any time it wants.
Credit card issuers usually show some restraint about hiking rates without cause, because they compete fiercely for customers and it's very bad PR. (Back in February, Bank of America tried it, got called on it, and backed off.)
Now, however, issuers may be willing to ride out the outrage. On a blog I visit regularly, one commenter today reported opening his credit card statement to find his payment had doubled. It doesn't take a big hike of your interest rate to do that.
So check your statements every month. Look at the interest rate. If yours bounces into the stratosphere (hikes to near 30% have been reported) contact the issuer and ask why. If you get the runaround, try contacting the issuer of another card, especially a card you currently have, and ask them if they'll give you a better deal if you transfer your balance to them. Be sure to nail down, though, both the interest rate you'll pay and how long it will last. (Ask them to mail a credit agreement to you, and write down the date and time of the call and who you talked to.)
I did this recently, and was given my choice of 3.9% for six months or 6.4% until the transferred balance was paid off. I took the 6.4%, a good rate for the long term, rather than leaving myself open to another rate hike six months down the road. I could do this because my credit history is reasonably good, another reason to make those payments on time.
I just checked the DJIA at closing--down, but only a little, a much better ending then the last five days. Cross your fingers, say your prayers each night--and keep your eyes on those loan statements.
(More on this subject--including mortgages--on Tuesday.)
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