The provisions of the Credit CARD Act of 2009 targeting youth and credit will be going into effect Feburary 22, 2010. President Obama is on a mission to reduce the availability to young consumers in an effort to solve a problem that hurts so many of us college graduates today – we graduate with too much debt.

Here is a summary of the major changes that will affect young adults:

1) Less Access to Credit Cards Before the Age of 21
The CARD Act’s most significant rule is putting the lockdown on availability of credit cards to young adults. Reckless spending has always been an activity that people identify with the similarly ruthless lives of many young adults. Well, the time has come to limit the spending power of everyone under the age of 21.

• Credit cards can no longer be issued to anyone under the age of 21 with the exception that
  (i) they have an adult (of at least 21 years of age) to co-sign the credit card agreement.
  (ii) or, they can provide proof that they are able repay the debt they incur.
• Pre-screened credit card offers cannot be available to consumers under the age of 21.
• Joint credit card accounts can only have their limits increased with the permission of the adult accountholder.

2) A Close Watch on College Campuses
College campuses are hotspots for credit card companies. Their pretty booths with free t-shirts, pens, toys, and other stuff will cease to exist within close proximity of campus locations. Hopefully, less college students will become victims of consumer debt.

• Credit card companies are banned from offering free goodies as incentives to get students to sign up for credit cards in or near campus.
• Companies must also disclose the details of their contracts with colleges and universities regarding their marketing towards students and alumni.

3) Promotion for Financial Literacy
A major reason why everyone is having problems with debt is because they didn’t learn how to handle money at an early age. Now, the government is taking the initiative to change this trend that is ruining the financial futures of people.

• The act will require certain federal agencies to examine federal financial and economic literacy programs available to the youth ranging from kindergarten to 12th grade and adults.
• They must also recommend methods of funding and promotion of financial literacy programs.

Some of My Predictions
I’m guessing I was fortunate enough to not be caught in the middle of these changes. For those who are actually financially responsible during their younger years, the Credit CARD act may be a slight, but not major, setback. Also, just because these particular provisions are targeting young adults, it doesn’t mean they are the only ones affected – parents should embrace these changes as well.

For the future I foresee that:

• there will be less credit card debt for college students
• there will be a larger burden on parents to support their children
• students will borrow more on college loans
• college students are no longer a profitable market for credit card companies
• credit card companies will find loopholes to extend credit to young consumers
• many co-signers will have their credit histories ruined
• personal finance classes would be a standardized educational requirement

Alcohol is prohibited to everyone that is under the age of 21 but we all know that law hasn’t much of a restraint. How will this act fair in making a difference?

What are some of your thoughts on this act and how it’ll affect the younger generations? Share some of your predictions on the effects of this legislation.

(Photo credit: Rain Rannu)

Both my parents have Roth IRAs with Capital One Investment Services and I’ve been voicing my advice over how bad they’ve been managing their retirement accounts – no matter how small they may be.

They pay a $35 annual fee and own some weird investment fund that, I assume, was selected based on the advice of a broker. What lovely advice it was – for the broker – since he probably made some commissions for this recommendation.

I’ll be managing these accounts for them now. The first step would be transferring the accounts to Scottrade, where commissions are MUCH less. Then I’d be changing their investments to index funds, since they are less of a headache – especially for my parents.

Some interesting links from the personal finance blogosphere:

• 6 Smart Spending Questions To Ask Yourself Before Making A Purchase at Bible Money Matters. Controlling impulsive spending is so important to prevent debt accumulation. Stopping to ask yourself these questions could probably save you a lot of money.
• Don’t Flush Your Credit Down the Drain at SPENDonLIFE. An awesome infographic shows that path that your credit takes if you fail to pay your credit card bills.
• Maximize Strengths or Minimize Weaknesses? at Lazy Man and Money. I love taking a mental approach towards personal finance and this article suggests dealing with the weaknesses in our money management techniques rather than doing more of what we already do best.

Carnivals that Realm of Prosperity was featured in:

• Carnival of Personal Finance #239 – Hot Money Trends of 2010 Edition at Darwin’s Finance.

The exact definition of a “direct deposit” is quite vague in the banking world. Most of us understand a direct deposit to be a method of receiving payment electronically into our bank accounts. The typical forms of direct deposit are wages and Social Security income.

Why Do I Need to Fake a Direct Deposit?
Many bank accounts often have a monthly fee that can be waived under certain conditions. Sometimes, they require that you have one direct deposit per month to avoid paying that fee.

Or, a bank may be offering a promotional bonus to new customers who open a bank account – and the bonus is rewarded once the terms are met, such having a direct deposit.

For example: A couple months ago, I opened a checking account when Chase was offering a $100 bonus for new Chase Checking customers. To get the $100 cash bonus, I needed to set up direct deposit or make five debit card transactions. I had to meet the same conditions if I wanted to waive the $6 monthly fee.

Therefore, faking a direct deposit would beneficial to avoid paying account fees and to earn bonus cash.

How Can I Tell if a Transfer is a Direct Deposit?
The easiest way to determine whether or not a credit in your bank account is a direct deposit is to set up account alerts. Account alerts is a common online banking feature that would serve as a detector.

Configure your alert settings to email or text you whenever you receive a direct deposit greater than $0.01. Now, you can go on ahead and test which transactions are considered direct deposits.

Ways to Fake a Direct Deposit

• Online savings accounts. Online banks such as ING Direct and HSBC Direct both offer popular online high-yield savings accounts. Perform a direct deposit test by making a small transfer from these savings accounts into your checking account. If this works for you, set up monthly automatic transfers to your checking account.
• Paypal. Electronic payment services such as Paypal have accounts where they hold money for you. Try to withdraw funds from these accounts and see if your checking account recognizes the transfer as a direct deposit.
• Amazon. If you sell your stuff on Amazon, you’ll know that you had to provide your bank routing number and account number to receive payment. Every two weeks, Amazon disburses payments to you. This is very much like received a biweekly paycheck and it is considered to be direct deposit.
• Affiliate and advertising networks. If you have your own website, affiliate and advertising networks will often pay you on a monthly basis (if you meet minimum payout requirements). Choose to receive your commission and earnings through direct deposit. Although it isn’t really faking a direct deposit, it is an alternative method of getting it.

Once you have found a method of getting a “direct deposit”, you would have to remember to initiate the transaction (or have an automated system set up) and confirm it with the account alerts.

Note: A direct deposit transaction is never initiated through the receiving bank account. That means that you shouldn’t request a transfer while being logged into your checking account.

So, to those who are paying those nasty monthly account fees – stop. And to those who will use fake direct deposits to take advantage of account bonuses – enjoy!

(Photo credit: ericskiff)

Impulsive and spontaneous spending is the most dangerous way to fall into debt. Yet, it is the most preventable. Accessibility to credit cards overshadows the light bulb that should be going off in our heads indicating: “Hey! You don’t have the money to buy that!”.

Even if an impulse spender can’t get the hint, there should be some responsibility from a caring friend or family member to point it out.

Everyone, including myself and all frugal consumers, will have times when the urge to buy something is just too overwhelming. It is priceless to have someone who assumes the responsibility to slap me, yell at me, or simply making me feel bad when I’m about to splurge. The result: I don’t spend.

Stop Them!
Ever since I’ve started blogging on personal finance, I have somehow inherited the role as the “stop” sign of money matters among my friends. I can’t remember how many times I’ve heard:

• Should I get _________________?
• I think I’m going to buy _______________________.
• I need to buy a _____________________.

I’ve shot down so many of these questions down that I probably helped save thousands. I may be gloating but I’m quite proud of helping others not get into debt.

That’s why I believe it is a humble undertaking to volunteer oneself as a friendly financial “stop” sign.

Enforce the Rule
A stop sign on the road is there to tell the driver to slow down, check for dangerous conditions, and continue when safe. The same purpose applies here.

You are not there to slam the brakes on your friend’s spending habits. Sincerely ask them to reconsider whether or not they really need it. Dismiss the question – “Can you afford it?” – because it doesn’t matter. The abundance of wealth does not justify wasting money on unnecessary things.

A few questions that can put a spending spree to a halt:

1. Do you really need it? If someone can live without something, that means they don’t need it and don’t need to get it.
2. Is there something else you have that can do the same job? We like new stuff instead of old stuff even if the old stuff perform just like the new stuff – so, why pay for the same thing twice?
3. Can you wait to buy it another time? I find that sitting on the idea of buying something for a few days will eventually cause the craving to fade. Then, I look back and feel great that I didn’t pull the trigger on a purchase.

Can’t Stop Them? Then Show Them the Way
When I can’t prevent a friend from spending, I advocate smart spending. “I know you want it really bad, but let’s find a good price before you buy it.” Always advise them to take a look around and look for coupons, discounts, and sales.

Spending is inevitable but saving money never hurt anyone.

Parents: The Ultimate “Stop” Sign
Parents will stick their noses and express their opinion in every corner of your life. My mom and dad have pretty much confronted any situation they feel uncomfortable about when it comes to my business.

After many years of my parents questioning every one of my major purchases, I’ve developed the routine of running it by them before heading out the door – so I don’t have to hear it from them when I come back.

Parents will tell us whatever they feel is right. They will dissuade us from spending $300 on a video game console or a designer handbag and therefore, they’re the ones holding us back from making a majority of purchases that we feel are necessities. Over the course of hearing “Don’t waste your money!” repeatedly, that statement will automatically replay itself in our minds.

There will be situations where we are the “stop” sign and other times when we need someone else to stop us. Despite being frugal in the eyes of my peers, I am also vulnerable to consumerism.

Have you had times when you were a financial “stop” sign? Do you turn to someone every time you are about to buy something big? How has it worked out for you and those around you?

(Photo credit: totalAldo)