Archive for January, 2010

If you are drowning in credit card debt, or have collection agencies calling you at work and at home, it’s understandable if you feel overwhelmed right now. However, you can get your credit card debt under control, eliminate it, and show the credit card companies that you can handle credit responsibly. Here are some useful tips for getting out of credit card debt for good.

Work with the credit card issuer

If you sense that you won’t be able to make next month’s credit card payment, proactively contact the credit card issuer yourself. Explain your situation to the company and ask for a lower monthly payment, a lower interest rate, or both. Most credit card companies are reluctant to resort to a collection agency to collect on their debts, since this results in your debt being sold to an outside agency for pennies on the dollar.

Pay more than the minimum

If you ever hope to reduce and eventually eliminate your credit card debt, you must pay more than the credit card’s minimum monthly payment. Even if the additional amount is only $100, every little bit of extra cash helps you on your journey to getting out of debt.

Transfer your balances

Many banks and companies offer zero or low annual percentage rate (APR) balance transfer credit cards to new credit card holders as a promotional incentive. Usually, balances from other credit cards can be transferred to these new cards. If you are able to obtain such a card, transfer as much of your high-interest credit card debt to it as you can. Then, try to pay off this debt before the promotional period ends.

Use only cash

Once you start paying off your credit cards, it is easy to fall back into the routine of using them to make purchases. If you do this, you will never be able to reduce your credit card debt. The solution is to use only cash when you make purchases. Using cash also makes you more aware of how much money you are actually spending on various items.

Once a credit card is paid off, destroy it

It is very tempting to go back to using credit cards that are no longer “maxed out,” especially if the cards have a very high spending limit. Once a credit card is fully paid off, destroy it. This will prevent you from sabotaging your own efforts to stay out of debt.

Keep one or two credit cards

Credit cards do make certain purchases easier (e.g., hotel reservations); however, there is no reason why you should keep five or more credit cards. One or two low-interest credit cards should be sufficient; the rest should be destroyed or made unavailable (e.g., placed in a safe deposit box) for use only in an emergency.

File for bankruptcy

If you simply cannot reduce your credit card debt by cutting back on purchases and even taking on an extra job, the best resort may be to file for bankruptcy. Granted, your credit will be ruined for seven years, but you’ll be able to start fresh. This may be your best option if you see no other way to pay off your credit card debt, or your credit card issuers refuse to consider a mutually beneficial debt payment plan.

Hally Z.

There are many ways you can get a credit card, even if you have bad credit.

Open checking and savings accounts. When you’re starting on the long road to obtaining credit cards, you will want to begin in a very obvious place: your local bank. Open a checking account and keep it in good standing. Add a savings account at the same bank, even if you only keep $10 or $20 in it.

Place utilities in your name. When possible, transfer some household utilities to your name including the cable and electric bills. Having a phone in your name is also beneficial for your credit score and report.

Comparison shop. Shop around for the best interest rate and terms before applying for a credit card. Do not cast a wide net and apply for multiple credit cards at once in hopes that one will bite. Instead, compare each credit card’s annual percentage rate (APR), up-front fees, rewards programs or cash back bonuses, as well as convenience of payment methods. Also be aware of:

• APRs: The U.S. Federal Reserve Board advises consumers to pay attention to the different APR terms of each credit card, as credit cards sometimes offer an introductory APR that will increase after a designated length of time.
• Low credit limits: Look for a card with a low credit limit or one that is within your monthly budget. You want to be able to pay off the entire balance each month before the due date. When you have bad credit, you may not be offered a high credit limit in the beginning anyway.

Gas cards. Set achievable credit card goals when you have bad credit; apply for a gas station credit card with the Visa or MasterCard logo. Gas credit card limits are typically set low in the beginning and they come with some sweet cash-back reward deals.

Department store credit cards. Department store credit cards may be easier to get when you have both bad credit and steady employment. Apply for a department store credit card when it has a special such as a 10 percent discount on your first purchase made with the card. Spend no more than you can afford to pay off when the credit card bill comes.

Bank credit cards. After you’ve shown financial responsibility by paying off your gas card or department store card bills on time, apply for a bank credit card such as a Visa, Discover, American Express or MasterCard. Be aware that with bad credit, the initial interest rate may be high, but you should be paying off the balance monthly and avoiding the interest rate anyway. If you have no luck with a bank credit card, consider a secured credit card, or have a family member co-sign the credit card application.

Pam Gaulin

Identity theft has become so widespread, the Federal Trade Commission estimates that up to 9 million people in the United States have their identities stolen each year.

Here are 10 facts about identity theft that may help prevent you from falling victim to this widespread crime.

1. You should frequently review your credit reports and credit card statements

Identity theft can go far beyond somebody getting your credit card number and running up purchases at the mall. A perpetrator may rent an apartment in a victim’s name or establish a telephone account. Checking your own financial information is a good way to spot this behavior.

2. Identity theft can have widespread consequences

Identity theft sometimes is quickly resolved, but many victims must spend hundreds of dollars and invest hundreds of hours to restore their good names and their good credit records. Victims have missed out on job prospects, school loans and mortgages.

3. Perpetrators of identity theft use various strategies

Individuals can protect themselves by shredding all personal documents including credit card applications that come through the mail. Also keep a close eye on store employees as they process your purchases. Law enforcement statistics indicate that nearly half of all identity theft is undertaken by somebody who is acquainted with the victim.

4. Even when somebody employs maximum precautions, identity theft still may occur

Some identity theft perpetrators open credit cards with a change of address, which adds to the time before the victim discovers that identity theft has taken place.

5. Government document fraud also is widespread

An identity theft criminal may obtain a driver’s license or official I.D. card with the victim’s name but with their own photo, or use a Social Security number to obtain government benefits, or even file a fraudulent tax return with the victim’s information.

6. If victimized, take the appropriate steps right away

File a police report and retain a copy, notify creditors and dispute any transactions that you did not authorize. The Federal Trade Commission’s identity theft Web site allows you to file a complaint online.

7. Contact the three major credit reporting agencies if you are victimized

These are:

• TransUnion - www.transunion.com
• Equifax - www.equifax.com
• Experian - www.experian.com

8. Place an extended fraud alert on your credit reports

This step not only discourages further fraud, but also may help authorities identify the criminal. You only need to contact one of the three major credit reporting agencies, which then are required by law to inform the other two. Each agency also is required to send you a copy of your credit report.

9. Close all accounts that have been raided or opened by fraud

Be sure to create new passwords and PINs. These new numbers and passwords should be original. For example, it’s not a good idea to use the final four digits of a Social Security number as a PIN.

10. Keep the FTC’s identity theft hotline number with you

Call the FTC toll free at (877) ID-THEFT (438-4338).

Michael Thompson

Going to college is the first step towards independence for many young adults. Many attend colleges in their home state, living on their own in dorms or apartments. During these college years a student’s main concern should be on studies and how to pursue a career upon graduation. Unfortunately, rising debt lurks in the shadows for many of these students and when they graduate, the harsh reality of this debt brings puts a tether hold on some of their plans and goals.

College Debt

It used to be that credit card debt was the big culprit for the debt college students had upon graduation. However, with the Credit Card Act of 2009, that debt won’t be a factor. But the debt of college students will still be as high as before and some instances higher. In recent years college students have been borrowing more money than they ever have in the pursuit of higher education. So many students’ borrowing has increased to keep up with the costs of rising tuition.

Tuition Hikes the Main Culprit

There used to be a time when a person entering college fresh out of high school only needed to take out a college loan for a couple of thousand dollars each semester. However, with the cost of tuition rising significantly each year, students are borrowing twice as much just to pay for an education. In fact, college tuition hikes have passed the rate of inflation. According to the College Board, between the years of 1999 to 2000 and 2009 to 2010, college tuition has increased at an average annual rate of 4.9 percent over the general rate of inflation.

Life-Altering Effects of Increased Student Borrowing

Federal Direct and Stafford loans typically give graduates a six-month grace period before they have to begin repaying their loan. However, with the current economic situation and unemployment still high, finding good paying jobs is becoming difficult for some. Even when a decent-paying job comes along, plans such as getting married and purchasing a home are put on the back burner, as graduates find themselves living paycheck to paycheck.

There may not be a way to avoid borrowing for college tuition. However, if college students are made knowledgeable about how student loans affect their lives after college, they can be better prepared to handle the debt. Financial education on debt and borrowing can benefit students a great deal and help them develop a plan to handle the debt college tuition helped them to accrue.

ShawnTe Pierce

The U.S. Census Bureau claims there are roughly 1.5 billion credit cards in use across the nation, which translates to an average of eight credit cards per American adult. At the same time, a company that advises the credit card industry, R.K. Hammer, reports that Americans annually pay more than $20 billion in credit card fees. Perhaps it is no wonder that 41 percent of U.S. adults told the National Foundation for Credit Counseling that they grade their knowledge of personal finance at “C,” “D” or “F.”

Knowledge is power. Here, then, are 10 credit card industry facts that may help you better deal with the world of credit cards.

1. Beware of the “universal default clause”

Just one late payment on any credit card can prompt the entire credit card industry to raise your interest rates on all of your cards.

2. Identity theft

A plague upon the credit card industry and personal finance in general, identity theft is described by federal authorities as America’s fastest-growing source of crime. Monthly reviews of credit card statements and credit reports are the best ways to combat identity theft.

3. Credit card offers can lead to identity theft

A typical household receives several credit card offers per year. The trouble is that if the household doesn’t shred these offers, identity theft criminals can obtain vital personal information and open credit card accounts in your name.

4. Maintain that credit score

The magic number for your credit score is above 600. Go below that and you likely will face severe credit limits and high interest rates.

5. Make some noise

The fact that you may receive multiple pitches from the credit card industry, even if your credit score is below 600, reflects the fierce competition between companies. Call the credit card companies and ask to speak to supervisors for the lowest interest rates, and even negotiate for consolidation of credit card debt. The same determination on the phone can help if you believe an unwarranted late fee or penalty has been assessed.

6. Watch those gas stations

Folks seem to run into all sorts of problems when they use credit cards at gasoline pumps. First, if you don’t have a minimum of $50 remaining on your limit, your purchase attempt may be rejected. Gasoline stations may also be slow to record your transaction. Sometimes it’s best to simply pay with cash.

7. Keep an eye on payment time frames

If a few days are shaved from a payment time frame, such as 25 days instead of 30 days, credit card holders may falsely assume that they’re paying on time, only to run into a costly late fee and all of the accompanying troubles.

8. Minimum monthly payments will cost you dearly

Minimum monthly payments often consist of little more than interest on the lump sum. The laptop you purchased for $300 could end up costing $1,000 or more if you’re paying the minimum monthly payment. In this sense, credit card purchases can cost even more than rent-to-own arrangements.

9. Shop locally

If you restrict your purchases to within your home state or within 100 miles of your billing address, you will have an easier time disputing charges for unsatisfactory goods or services. Federal law gives credit card companies more rights for purchases made out of state or beyond the 100-mile radius.

10. Sometimes, “big government” actually can work for you

When looking for advice, keep in mind that the Federal Trade Commission monitors trade within the 50 states. There’s even a U.S. Financial Literacy and Education Commission, and local nonprofit credit counseling agencies are abundant.

Michael Thompson

One of the best New Year’s resolutions you can make is vowing to get your financial house in order. Reviewing your credit report is a great way to do this and to kick off the year right.

Viewing your credit report is completely free; you are legally entitled to one free report from each of the three credit agencies: Experian, Equifax and TransUnion. Thanks to the Fair Credit Reporting Act, you can see the credit information that potential creditors and employers may use in making decisions about you.

Here are some things to look for when reviewing your credit report at the beginning of the year.

Collection accounts

Your credit report may give you some small surprises such as that $56 bill for medical lab work that was never mailed to you. Review your collection accounts and find out how old they are. Check with an attorney or consumer credit reporting agency and see what the statute of limitations are on the collection accounts. Pay off any of the accounts that are still within the statute.

Late payments

Late payments can drive your credit score down fast. When reviewing your credit report at the beginning of the year, look at your payment history. If you only have one late payment for the entire year, call the creditor and see if they will remove that late payment one time as a courtesy. Some creditors will do this, and it will help your credit score. If you notice a pattern that indicates that you may not be paying off your bills in a timely fashion, sign up for automatic drafts. But only sign up for these services if you know you will have adequate funds in your account on the date you agree to let the creditor take the money.

Accounts you don’t recognize

If you see any accounts you don’t recognize, contact the creditor for more information. It may be an old account you forgot about, or it could be an indication that someone used your financial information.

Some experts recommend looking over all three credit reports at one time, as different agencies may report different accounts. Others recommend spacing out your free credit reports over the span of one year. If you can afford to purchase additional credit reports through the year (they are usually around $10 to $30 each), try to review all three credit reports every four months.

Meg C.