A Primer on Credit & Debit Cards and Other Tax Matters

The Reader of this article should be aware, that as of January1, 2011, Congress did change the Federal EstateTax (FET).

Since these Tax Changes are all new, It is strongly suggested that the Reader consult his Financial/ Tax Advisor to Tailor a Plan to suit his Present and Future Needs.

This Article was added to the H/AREA Home Page on 03/01/2010.

  1. A Primer On: Credit Cards vs Debit Cards

    1.1  Different Types of Credit and Debit Cards

    Credit,Charge,ATM,and Debit cards are not all alike. Here's some information from a WebSite to help you choose wisely.
    Click on the Following Link.

       Credit,Debit,Other Cards


    1.2 Credit and Debit Cards: What U Need to Know

    This NYT article was written in 01/ /09 but is applicable.
    Click on the Following Link.

        C&D Cards:What U Need to Know


    1.3 More Consumers Just Say No to Credit Cards

    This a Very Recent ( 02/09/10) USA Today Article that appeared in their Money Section. Well Worth Reading since it is Timely.
    Click on the Following Link.

        More Consumers Just Say No to CC's


    1.4 Refer For Information (RFI’s)

    1.4.1 THE CARD GAME:  How Visa,Using Card Fees,Dominates a Market
    Click on the Following Link.

        How Visa DC Works


    1.4.2 How Credit Cards Work

    You Swipe this Piece of Plastic at a Terminal and Many Functions Take Place Instantly. Read On to Find Out How It Happens In a Matter of Seconds.
    Click on the Following Link.

        How Credit Cards Work

  2. Credit Card Changes for Yr 2010

    Ref:  WSJ Sunday, 01/24/10

    The new Credit Card Act goes into effect in Mid-February 2010. Unfortunately, Credit Cards issuers have responded by:
    1. Raising Interest Rates and Fees (Even for those that make their Payments On-Time).
    2. Lowering their Customer Credit Limits.

    There are several new rules. Here are some of them.

    2.1  Grace Period
    Once Upon a Time, You had 30 days in which to pay after receiving your bill. It is now down to a 21-day grace period from the date that the bill is sent out.

    2.2  Predictable Payments
    The Law now requires that the Payment Due Date be the same date every month.
    If the payment is delivered on a non-business day (Weekend, Holiday,) its not considered Late..

    2.3  Longer Notice on Interest Rate Changes
    This Law has changed this from a 15-day notice to 45-day.
    This Notice will not a Separate Item. It will be incorporated in the Billing Statement. Read the Billing.

    2.4  Rates on Existing Balances
    If the Individual is 60-Days behind in Payment, the CC company can raise your rate to the default rate.
    If that person pays on time for 6 months straight, The CC company must return it to the lower rate.

  3. OverDraft Fees on Credit Cards
    Large Banks maintain OD fees ranging from $19 to $39.
    Click on the following Link to get a View of What is Presently in Effect and What might Change.

        OverDraft Fees

  4. Tax Matters for Yrs 2009 -2010

      Sections 4.1 & 4.2 -- Ref: Bergen Rcd, Business Section, 01/28/10.

    4.1  Money Back for New Vehicle Purchases
    The 2009 American Recovery & Reinvestment Act (ARRA) has provisions that Taxpayers who purchase new vehicles in 2009 may be able to deduct state and local sales taxes
    that they paid on this purchase subject to income thresholds.
    A new vehicle, purchased by the individual under the terms of the Cash for Clunker Program, received $3500 or $4500 payment from the Federal Govnm’t.
    Taxable income was not realized by doing this.

    4.2  IRA Required Minimum Distributions (RMDs)
    In late December 2008, Legislation was enacted that suspended the requirement for taxpayers who reached age 70 ½ to receive RMDs during Yr 2009 from their IRA’s and other retirement accounts.
    This provision has not been extended beyond Yr 2009 and apparently there is no legislative effort in Congress to do so considering the Deficit.
    Therefore, for Yr 2010, Qualified Taxpayers will be required to receive RMDs.

    4.3  The Federal Estate Tax (FET)

      Ref: The WSJ,02/13-14/10

    A Comparison between the Yr. 2009 FET and Yr. 2010 FET

    Yr 2009 FET
    1. There was a $3.5M ( $7M for Couples) exemption .
    2. The top rate was a 45 % estate tax.
    3. There was a full exemption for Capital Gains on Assets.

    Yr 2010 FET
    1. No Estate Tax.
    2. However, there is a 15% Capital Gains Tax (CGT) on appreciated assets worth above $1.3M.

    The shift to a ZERO Estate Tax in Yr 2010 will certainly help the heirs of very large estates.
    Their tax accountants will be very busy juggling between the CGT assets and the NO Estate Tax assets.
    However,It will probably hurt the heirs of smaller estates because of the CGT.

    In Yr.2011, the exclusion amount reverts back to $1M with a maximum top rate of 55% ---- Unless the U.S. Congress is willing to take up the FET this year.
    This course of action depends on their legislative priorities and how ‘ Full Their Plate Is’
    with other pressing matters (Job Creation, Defict Reduction, Legislation on 'Too Big to Fail') etc.
    TBD.