- Debt Calculator
- Financial Warning Signs
- Collection Agencies, Debt Collectors, Credit Disputes, and Your Rights
- What Types of Debt Collection Practices Are Prohibited?
- Avoid Credit Card and Charge Card Fraud
- Choosing Credit Cards
- Credit Card Costs and Features
- How Many Credit Cards Should You Have
- Credit and Divorce
- Identity Theft
- Money Management
- Co-Signing a Loan
- Credit Cards Vs. Your 401 (k)
- Payday Loans are Costly Cash
- Balance Transfers
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Financial Warning Signs
Don’t let money problems affect your work, family and social life.
Financial crisis does not happen overnight. And, many times we don’t see the signs of financial trouble until it’s actually too late. The following questions can help determine if you may be in danger of future debt problems, or indicate if your debt problems may be getting out of control.
Do you have a regular savings program in place and if so, do you find yourself depleting your savings as a way of supporting your debts? If you are exhausting your savings to keep up with bills, it could be an indication that you’re spending more than your income can support.
Don’t have a savings program in place?
You’re playing with fire and placing yourself at the mercy of relying on responsible individuals to help bail you out. A savings program in place provides you with a safety cushion for unexpected emergency situations that usually require financial resources. As the saying goes – ‘save for a rainy day.’ because you never know when it’s going to pour.
Are you only paying the minimum on your monthly credit card bills?
If you can only afford minimum payments, more than likely you’re overextended and should re-evaluate your budget and spending habits. Unfortunately, if you are thrown into a monetary emergency that requires financial resources, your situation will become unmanageable.
Have you been declined credit or declined a credit line increase?
Being declined credit or a credit line increase is a sign that you need to re-evaluate your finances. Creditors use guidelines to determine your credit worthiness.
After you pay your monthly bills, do you accumulate as much or more debt the following month? This may be a sure indicator that you’re utilizing your credit cards to maintain your style of living, or for daily necessities — such as gas and food.
Can you account for the total amount of debt owed, or have you avoided adding up the entire amount of your outstanding debt?
If you cannot account for the total amount of debt that you owe, you may be avoiding the problem. Confronting your spending behavior is the first step to financial freedom. Sure, it may be easier now to avoid the painful truth that you are heading toward financial devastation. However, if you establish a repayment program before the situation becomes unmanageable you will save yourself hours of unnecessary worry in the long run.
Are your cards close to or over your available credit limit?
If the answer is yes, it’s a strong sign that you are not aware of your current financial situation. In other words, you are failing to confront the fact that your disposable income keeps dwindling as your balances rise. Creditors assign a credit limit to you based on your credit history, outstanding debts, and income. If you are at or near your limit it is a good sign that you are headed for financial trouble.
Are you dependent on cash advances to pay on your other credit obligations?
Your income cannot support your life style, and it is important right now to analyze your budget. You may need to seek outside assistance in order to clearly see what necessary adjustments are needed to get you back on track.
Do you purposely hide credit card bills from family members?
Hiding debt from family members is a clear indication that you are aware that a financial problem exists. The fact that you’re hiding your spending behavior from loved ones indicates that you refuse to confront the situation, but realize there is a problem.
Do you float or bounce checks?
Floating checks is a practice of issuing checks prior to having the necessary funds available in your account. This is a clear indication that you are living paycheck to paycheck, and your finances are in trouble.
Do you avoid answering the phone in fear of demanding collection agencies and or creditors calls?
Receiving collection and creditor calls are a definite sign that you’re behind on your credit obligations. It doesn’t need to be that way — call Federated Financial. Getting back on track is easier than you think.
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Collection Agencies, Debt Collectors, Credit Disputes, and Your Rights
If you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a “debtor.” If you fall behind in repaying your creditors, or an error is made on your accounts, you may be contacted by a “debt collector.” You should know that in either situation, the Fair Debt Collection Practices Act requires debt collectors to treat you fairly by prohibiting certain methods of debt collection. Of course, the law does not forgive any legitimate debt you owe. Below are answers to commonly asked questions about your rights under the Fair Debt Collection Practices Act.
What debts are covered?
Personal, family, and household debts are covered under the Act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts.
Who is a debt collector or collection agency?
A debt collector is any person or agency, other than the creditor, who regularly collects debts owed to others. Under a 1986 amendment to the Fair Debt Collection Practices Act, this also includes attorneys who collect debts on a regular basis.
How may a debt collector contact you? A collector or agency may contact you in person, by mail, telephone, telegram, or FAX. However, a debt collector may not contact you at unreasonable times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector may not contact you at work if the collector is aware that your employer disapproves.
Can you stop a debt collector from contacting you?
You can stop a collector from contacting you by writing a letter to the collection agency telling them to stop. Once the agency receives your letter, they may not contact you again except to say there will be no further contact. The agency may notify you if the debt collector or the creditor intends to take some specific action.
May a debt collector contact anyone else about your debt?
If you have an attorney, the debt collector may not contact anyone other than your attorney. If you do not have an attorney, a collector may contact other people, but only to find out where you live and work. Collectors usually are prohibited from contacting such permissible third parties more than once. In most cases, the collector may not tell anyone other than you and your attorney that you owe money.
What must the debt collector tell you about the debt?
Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe; the name of the creditor to whom you owe
the money; and what action to take if you believe you do not owe the money.
May a debt collector continue to contact you if you believe you do not owe money?
A collector may not contact you if, within 30 days after you are first contacted, you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed.
What Types of Debt Collection Practices Are Prohibited?
Debt collectors may not harass, oppress, or abuse anyone. For example, debt collectors may not:
- use threats of violence or harm against the person, property, or
- publish a list of consumers who refuse to pay their debts (except to a
- use obscene or profane language;
- repeatedly use the telephone to annoy someone;
- telephone people without identifying themselves;
- advertise your debt.
Debt collectors may not use any false statements when collecting a debt. For example, debt collectors may not:
- falsely imply that they are attorneys or government representatives;
- falsely imply that you have committed a crime;
- falsely represent that they operate or work for a credit bureau;
- misrepresent the amount of your debt;
- misrepresent the involvement of an attorney in collecting a debt;
- indicate that papers being sent to you are legal forms when they are
- indicate that papers being sent to you are not legal forms when they
Debt collectors may not state that:
- you will be arrested if you do not pay your debt;
- they will seize, garnish, attach, or sell your property or wages, unless
the collection agency or creditor intends to do so, and it is legal to
- actions, such as a lawsuit, will be taken against you, which legally may
not be taken, or which they do not intend to take.
Debt collectors may not:
- give false credit information about you to anyone;
- send you anything that looks like an official document from a court or
government agency when it is not;
- use a false name.
Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, collectors may not:
- collect any amount greater than your debt, unless allowed by law;
- deposit a post-dated check prematurely;
- make you accept collect calls or pay for telegrams;
- take or threaten to take your property unless this can be done legally;
- contact you by postcard.
What control do you have over payment of debts?
If you owe more than one debt, any payment you make must be applied to the debt you indicate. A debt collector may not apply a payment to any debt you believe you do not
What can you do if you believe a debt collector violated the law?
You have the right to sue a collector in a state or federal court within one year from the date you believe the law was violated. If you win, you may recover money for the damages you suffered. Court costs and attorneys fees also can be recovered. A group of people also may sue a debt collector and recover money for damages up to $500,000, or one percent of the collectors net worth, whichever is less.
Avoid Credit Card and Charge Card Fraud
A thief goes through trash to find discarded receipt, and then uses your account numbers illegally. A dishonest clerk makes an extra imprint from your credit or charge card and uses it to make personal charges.
You respond to a mailing asking you to call a long distance number for a free trip or bargain-priced travel package. You’re told you must join a travel club first and you’re
asked for your account number so you can be billed. The catch! Charges you didn’t make are added to your bill, and you never get your trip.
Credit and charge card fraud costs cardholders and issuers hundreds of millions of dollars each year. While theft is the most obvious form of fraud, it can occur in other ways. For example, someone may use your card number without your knowledge.
It’s not always possible to prevent credit or charge card fraud from happening. But there are a few steps you can take to make it more difficult for a crook to capture your card or card numbers and minimize the possibility.
Guarding Against Fraud
Here are some tips to help protect yourself from credit and charge card fraud:
- Sign your cards as soon as they arrive.
- Carry your cards separately from your wallet, in a zippered compartment, a business card holder, or another small pouch.
- Keep a record of your account numbers, their expiration dates, and the phone number and address of each company in a secure place.
- Keep an eye on your card during the transaction, and get it back as quickly as possible.
- Void incorrect receipts.
- Save receipts to compare with billing statements.
- Open bills promptly and reconcile accounts monthly, just as you would your checking account.
- Report any questionable charges promptly and in writing to the card issuer.
- Notify card companies in advance of a change in address.
- Lend your cards to anyone.
- Leave cards or receipts lying around.
- Sign a blank receipt. When you sign a receipt, draw a line through any blank spaces above the total.
- Write your account number on a postcard or the outside of an envelope.
- Give out your account number over the phone unless you’re making the call to a company you know is reputable. If you have questions about a company, check it out with your local consumer protection office or Better Business Bureau.
Reporting Losses and Fraud
If you lose your credit or charge cards or if you realize they’ve been lost or stolen, immediately call the issuer(s). Many companies have toll-free numbers and 24-hour service to deal with such emergencies. By law, once you report the loss or theft, you have no further responsibility for unauthorized charges. In any event, your maximum liability under federal law is $50 per card.
If you suspect fraud, you may be asked to sign a statement under oath that you did not make the purchase(s) in question.
Choosing Credit Cards
Chances are you’ve gotten your share of “pre-approved” credit card offers in the mail, some with low introductory rates and other perks. Many of these solicitations urge you to accept “before the offer expires.” Before you accept, shop around to get the best deal.
Types of Credit Accounts
Credit grantors generally issue three types of accounts. The basic terms of these account agreements are:
- Revolving Agreement
A consumer pays in full each month or chooses to make a partial payment based on the outstanding balance. Department stores, gas and oil companies, and banks typically issue credit cards based on a revolving credit plan.
- Charge Agreement
A consumer promises to pay the full balance each month, so the borrower does not have to pay interest charges. Charge cards, not credit cards, and charge accounts with local businesses often require repayment on this basis.
- Installment Agreement
A consumer signs a contract to repay a fixed amount of credit in equal payments over a specific period of time. Automobiles, furniture, and major appliances often are financed this way. Personal loans usually are paid back in installments, too.
Credit Card Terms
A credit card is a form of borrowing that involves various charges and/or fees. Credit terms and conditions affect your overall cost. So it’s wise to compare terms and fees before you agree to open a credit or charge card account. The following are some important terms to consider that generally must be disclosed in credit card applications or in solicitations that require no application. You may want to ask about these terms when you’re shopping for a card.
Annual Percentage Rate
The APR is a measure of the cost of credit, expressed as a yearly rate. It also must be disclosed before you become obligated on the account and on your account statements.
The card issuer also must disclose the “periodic rate” — the rate applied to your outstanding balance to figure the finance charge for each billing period.
Some credit card plans allow the issuer to change your APR when interest rates or other economic indicators — called indexes — change. Because the rate change is linked to the index’s performance, these plans are called “variable rate” programs. Rate changes raise or lower the finance charge on your account. If you are considering a variable rate card, the issuer must also provide information that discloses:
- That the rate may change;
- How the rate is determined;
- Which index is used;
- And what additional amount, is added to determine your new rate.
Before you become obligated on the account, you also must receive information about any limitations on how much and how often your rate may change.
Also called a “grace period,” a free period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a card gives you a free period is especially important if you plan to pay your account in full each month. Without a free period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. If your card includes a free period, the issuer must mail your bill at least 14 days before the due date so you’ll have enough time to pay.
Most issuers charge annual membership or participation fees. They often range from $25 to $50, sometimes up to $100; “gold” or “platinum” cards often charge up to $75 and sometimes up to several hundred dollars.
Transaction Fees and Other Charges
A card may include other costs. Some issuers charge a fee if you use the card to get a cash advance, make a late payment, or exceed your credit limit. Some charge a monthly fee whether or not you use the card.
Balance Computation Method for the Finance Charge
If you don’t have a free period, or if you expect to pay for purchases over time. It’s important to know what method the issuer uses to calculate your finance charge. This can make a big difference in how much of a finance charge you’ll pay — even if the APR and your buying patterns remain relatively consistent.
Examples of balance computation methods include the following:
- Average Daily Balance
This is the most common calculation method. It credits your account from the day payment is received by the issuer. To figure the balance due, the issuer totals the beginning balance for each day in the billing period and subtracts any credits made to your account that day. While new purchases may or may not be added to the balance, depending on your plan, cash advances typically are included. The resulting daily balances are added for the billing cycle. The total is then divided by the number of days in the billing period to get the “average daily balance.”
- Adjusted Balance
This is usually the most advantageous method for card holders. Your balance is determined by subtracting payments or credits received during the current billing period from the balance at the end of the previous billing period. Purchases made during the billing period are not included.
This method gives you until the end of the billing cycle to pay a portion of your balance to avoid the interest charges on that amount. Some creditors exclude prior, unpaid finance charges from the previous balance.
This is the amount you owed at the end of the previous billing period. Payments, credits and new purchases during the current billing period are not included. Some creditors also exclude unpaid finance charges.
Issuers sometimes use various methods to calculate your balance that make use of your last two month’s account activity. Read your agreement carefully to find out if your issuer used this approach and, if so, what specific two-cycle method is used.
If you don’t understand how your balance is calculated, ask your card issuer. An explanation must also appear on your billing statement.
Credit Card Costs and Features
Credit Terms Vary Among Issuers
When shopping for a card, think about how you plan to use it. If you expect to pay your bills in full each month, the annual fee and other charges may be more important than the periodic rate and the APR, if there is a grace period for purchases. However, if you use the cash advance feature, many cards do not permit a grace period for the amounts due — even if they have a grace period for purchases. So, it may still be wise to consider the APR and balance computation method. Also, if you plan to pay for purchases over time, the APR and the balance computation method are definitely major considerations.
You’ll probably also want to consider if the credit limit is high enough, how widely the card is accepted, and the plan’s services and features. For example, you may be interested in “affinity cards”– all-purpose credit cards sponsored by professional organizations, college alumni associations and some members of the travel industry. An affinity card issuer often donates a portion of the annual fees or charges to the sponsoring organization, or qualifies you for free travel or other bonuses.
Special Delinquency Rates
Some cards with low rates for on-time payments apply a very high APR if you are late a certain number of times in any specified time period. These rates sometimes exceed 20 percent. Information about delinquency rates should be disclosed to you in credit card applications or in solicitations that do not require an application.
Federal Law protects your use of credit cards.
Prompt Credit for Payment
An issuer must credit your account the day payment is received. The exceptions are if the payment is not made according to the creditor’s requirements, or the delay in crediting your account will not result in a charge.
To help avoid finance charges, follow the issuer’s mailing instructions. Payments sent to the wrong address could delay crediting your account for up to five days. If you misplace your payment envelope, look for the payment address on your billing statement or call the issuer.
Refunds of Credit Balances
When you make a return or pay more than the total balance at present, you can keep the credit on your account or write your issuer for a refund – if it’s more than a dollar. A refund must be issued within seven business days of receiving your request. If a credit stays on your account for more than six months, the issuer must make a good faith effort to send you a refund.
Errors on Your Bill
Issuers must follow rules for promptly correcting billing errors. You’ll get a statement outlining these rules when you open an account and at least once a year. In fact, many issuers include a summary of these rights on your bills.
If you find a mistake on your bill, you can dispute the charge and withhold payment on that amount while the charge is being investigated. The error might be a charge for the wrong amount, for something you didn’t accept, or for an item that wasn’t delivered as agreed. Of course, you still have to pay any part of the bill that’s not in dispute including finance and other charges.
If You Decide To Dispute A Charge:
Write to the creditor at the address indicated on your statement for “billing inquiries.” Include your name, address, account number, and a description of the error. Send your letter as quickly as possible. It must reach the creditor within 60 days after the first bill containing the error was mailed to you.
The creditor must acknowledge your complaint in writing within 30 days of receipt, unless the problem has been resolved. At the latest, the dispute must be resolved within two billing cycles, but not more than 90 days.
If your card is used without your permission, you can be held responsible for up to $50 per card.
If you report the loss before the card is used, you can’t be held responsible for any unauthorized charges. If a thief uses your card before your report it missing, the most you’ll owe for unauthorized charges is $50.
To minimize your liability, report the loss as soon as possible. Some issuers have 24-hour toll-free telephone numbers to accept emergency information. It’s a good idea to follow-up with a letter to the issuer — include your account number, the date you noticed your card missing, and the date you reported the loss.
Disputes About Merchandise Or Service
You can dispute charges for unsatisfactory goods or services. To do so you must:
- Have made the purchase in your home state or within 100 miles of
your current billing address. The charge must be for more than $50.
(These limitations don’t apply if the seller also is the card issuer or if a
special business relationship exists between the seller and the card issuer).
- Make a good faith effort to resolve the dispute with the seller.
No special procedures are required to do so.
If these conditions do not apply, you may want to consider filing an action in
small claims court.
For Help And Information
Questions about a particular issuer should be sent to the agency with jurisdiction.
Comptroller of the Currency
Compliance Management, Mail Stop 7-5
Washington, DC 20219
|Federal Credit Unions
National Credit Union Administration
1776 G Street, NW
Washington, DC 20456
|State Member Banks of the Reserve System
Consumer and Community Affairs
Federal Reserve Board
20th & C Streets, NW
Washington, DC 20551
How Many Credit Cards Should You Have?
Promotional credit card offers are very tempting. It’s not easy to turn down a card that comes with thousands of free airline miles, or a low APR. Even if you tell yourself you don’t plan to use the card, it’s good to know that it’s available, just in case. However, when it comes to adding to the collection of plastic in your wallet, you need to understand the impact that all of this available credit will have on your borrowing ability.
Let’s say you have a choice between either two cards with $5000 limits on each, or 10 cards with a $1000 limit per card. You are better off with the two cards offering you more. That’s because your credit rating is influenced by the credit lines available to you. Two $5000 credit lines not only look better, but also demonstrate greater faith in you as a borrower than ten cards that individually offer very little. Remember too that your credit score is influenced by your history in making timely payments on your balances. It is easier to track and remain consistent with two cards than it is with ten.
But that’s not all. When it comes to lots of cards, your creditors can factor in other criteria too. If you are in the market for a home or a car, then your lenders will want to determine the level of risk you represent as a borrower. There are two key elements here: outstanding credit and available credit. Many people confuse the two, so it is important to understand the difference: Outstanding credit is the total balance of monies owed on fixed term loans such as mortgages and cars as well as revolving credit accounts. Available credit is the actual dollar amount of credit to which you have access. For example, if you have a credit card with a $10,000 limit, and your outstanding balance is $2500, then your available credit would be $7500.
People’s monetary needs change over time and lenders are acutely aware of this. Emergencies, layoffs, illness and poor budgeting could create a financial bind. Even though you don’t need to tap into that $7500 credit line today, you just might find yourself using it all very quickly at a later date. Since lenders have no guarantee that the available monies won’t be used; their position is to view the dollar amount you can tap into as a risk.
Unused, open accounts may not affect your actual credit score very much. Still, you may find that you are turned down for a loan that you can easily afford because your unused credit is limiting your borrowing ability. To complicate matters even more, you should be aware that lenders use statistical models (automated underwriting systems) to assess risk and determine the probability of a borrower defaulting on a loan. Therefore, the lender will consider not only the number of current cards; outstanding credit; and available credit, but also what they view as your tendency to take on additional debt. If the lender’s system indicates that you will very likely apply for a lot of new cards at some point in the future, then the amount of money you qualify for today will be reduced.
Lots of credit cards never did anyone any good. Limit yourself to two cards with decent limits and low APR’s. Use them sparingly and pay off everything right away so that the debt does not accumulate. Get into the habit of using cash or your debit card. Finally, learn how to budget and use your money wisely so that you have enough for the curveballs that might come your way.
Credit and Divorce
Steve and Jane recently divorced. Their divorce decree stated that Steve would pay the balances on their three joint credit card accounts. Months later, after Steve neglected to pay off these accounts, all three creditors contacted Jane for payment. She referred them to the divorce decree, insisting that she was not responsible for the accounts. The creditors correctly stated that they were not parties to the decree and that Jane was still legally responsible for paying off the couples joint accounts. Jane later found out that the late payments appeared on her credit report.
If you’ve recently been through a divorce — or are contemplating one — you may want to look closely at issues involving credit. Understanding the different kinds of credit accounts opened during a marriage may help illuminate the potential benefits — and pitfalls — of each.
There are two types of credit accounts: individual and joint. You can permit authorized persons to use the account with either. When you apply for credit — whether a charge card or a mortgage loan — you’ll be asked to select one type.
Individual Or Joint Account
The creditor considers your income, assets, and credit history. Whether you are married or single, you alone are responsible for paying off the debt. The account will appear on your credit report, and may appear on the credit report of any “authorized” user. However, if you live in a community property state (e.g. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your spouse may be responsible for debts incurred during the marriage, and the individual debts of one spouse may appear on the credit report of the other.
- Advantages/Disadvantages: If you’re not employed outside the home, work part-time, or have a low-paying job, it may be difficult to demonstrate a strong financial picture without your spouse’s income. But if you open an account in your name and are responsible, no one can negatively affect your credit record.
Joint Account: Your income, financial assets, and credit history — and your spouse’s — are considerations for a joint account. No matter who handles the household bills, you and your spouse are responsible for seeing that debts are paid. A creditor who reports the credit history of a joint account to credit bureaus must report it in both names (if the account was opened after June 1, 1977).
- Advantages/Disadvantages: An application combining the financial resources of two people may present a stronger case to a creditor who is granting a loan or credit card. But because two people applied together for the credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to each spouse. Former spouses who run up bills and don’t pay them can hurt their ex-partner’s credit histories on jointly- held accounts.
Account “Users”: If you open an individual account, you may authorize another person to use it. If you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must report it in your spouse’s name as well as in yours (if the account was opened after June 1, 1977). A creditor also may report the credit history in the name of any other authorized user.
- Advantages/Disadvantages: User accounts often are opened for convenience. They benefit people who might not qualify for credit on their own, such as students or homemakers. While these people may use the account, you — not they — are contractually liable for paying the debt.
If You Divorce
If you’re considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it’s important to make regular payments so your credit record won’t suffer. As long as there’s an outstanding balance on a joint account, you and your spouse are responsible for it.
If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user. Or ask the creditor to convert these accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. A creditor, however, does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.
A lost or stolen wallet or purse is a gold mine of information for a new kind of
crook — the identity thief.
Identity thieves can use information found in your wallet or purse — credit cards, checks, Social Security cards, even health insurance cards — to establish new accounts in your name. That could create an identity crisis that can take months to detect, and even longer to unravel.
If your wallet or purse is lost or stolen, the Federal Trade Commission suggests that you:
- File a report with the police immediately. Get a copy in case your bank, credit card company or insurance company needs proof of the crime.
- Cancel each credit and charge card. Get new cards with new account numbers. Call the fraud departments of the major credit reporting agencies: Equifax (800) 525-6285; Experian (888) 397-3742; and TransUnion (800) 680-7289.
- Ask the credit bureaus for copies of your credit reports. Review your reports carefully to make sure no additional fraudulent accounts have been opened in your name or unauthorized changes made to your existing accounts. In a few months, order new copies of your reports to verify your corrections and changes, and to make sure no new fraudulent activity has occurred.
- Report the loss to your bank if your wallet or purse contained bank account information, including account numbers, ATM cards or checks. Cancel checking and savings accounts and open new ones. Stop payments on outstanding checks.
- Get a new ATM card, account number and Personal Identification Number (PIN) or password.
- Report your missing driver’s license to the department of motor vehicles. If your state uses your Social Security number as your driver’s license number, ask to substitute another number.
- Change the locks on your home and car if your keys were taken. Don’t give an identity thief access to even more personal property and information.
If someone has stolen your identity, the Federal Trade Commission recommends
that you take three actions immediately.
First, contact the fraud departments of each of the three major credit bureaus. Tell them to flag your file with a fraud alert including a statement that creditors
should get your permission before opening any new accounts in your name.
At the same time, ask the credit bureaus for copies of your credit reports. Credit
bureaus must give you a free copy of your report if it is inaccurate because of
fraud. Review your reports carefully to make sure no additional fraudulent
accounts have been opened in your name or unauthorized changes made to
your existing accounts. In a few months, order new copies of your reports to verify
your corrections and changes, and to make sure no new fraudulent activity has
Second, contact the creditors for any accounts that have been tampered with
or opened fraudulently. Ask to speak with someone in the security or fraud
department, and follow up in writing. Following up with a letter is one of the
procedures spelled out in the Fair Credit Billing Act for resolving errors on credit
billing statements, including charges that you have not made.
Third, file a report with your local police or the police in the community where
the identity theft took place. Keep a copy in case your creditors need proof of the
With proper planning and through utilizing the steps listed below, you and the members of your household will soon be able to feel confident about living within your means, reducing debt, saving for emergencies and planning for your financial future.
- Narrow your objectives.
You may not be able to achieve every financial goal you’ve ever dreamed of, but you can achieve the most important ones if you identify them clearly in your own mind and decide which are most important.
- Focus first on goals that matter.
To accomplish primary goals, you often need to put equally desirable, but less important goals on the back burner.
- Be prepared for conflicts.
Even worthy goals can clash with one another. When faced with a conflict between goals of equal importance, you can sometimes choose by asking yourself questions like: Will anyone’s health be affected? Or, which goal will cause the greater harm if delayed?
- Put time on your side.
The most important ally you have in meeting long-term goals, like preparing for retirement, is time. The reason is that money placed in money market funds, stocks, bonds or mutual funds usually grows over time — sometimes substantially!
- Choose carefully.
In drawing up your list of goals, you should look for things that will help you feel financially secure, happy or fulfilled. Listed below are some examples that can help getting you started. Once your list is made, rank those items in order of importance:
- Buying a house large enough to accommodate you comfortably;
- Getting out of debt — and staying out;
- Paying for your children’s college education;
- Investing with the aim of becoming financially independent;
- Accumulating enough funds to retire without struggle.
- Include family members.
If you have a spouse or significant other or children, make sure they are a part of your financial goal-setting process.
- Sweat the big stuff.
Once you have prioritized your list of goals, we’ll show you ways to keep your spending in check. Whenever you make a large payment or purchase be sure to ask yourself: “Is this taking me closer to my primary goals — or leading me further away from them?” If a big expense doesn’t get you closer to your goals, try to delay the purchase.
- Don’t sweat the small stuff.
Although this program encourages you to focus on short, medium and long-term goals, most of life is lived in the here-and-now. Most of what you spend will continue to be for daily expenses — including many that are simply for fun. That’s okay — so long as you include it in your budget.
- Be prepared for change.
Your needs and desires invariably change as you age, so you should probably re-examine your priorities as often as you see necessary.
Co-Signing a Loan
What would you do if a friend or relative asked you to cosign a loan? Before you answer, make sure you understand what cosigning involves. Under federal law, creditors are required to give you a notice that explains your obligations. The cosigner’s notice states:
- You are being asked to guarantee this debt. Think carefully before you do. If the borrower does not pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.
- You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.
- The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.
- This notice is not the contract that makes you liable for the debt.
Depending on your state, this may not apply. If state law forbids a creditor from collecting from a cosigner without first trying to collect from the primary debtor, this sentence may be crossed out or omitted altogether.
Cosigners Often Pay
Studies of certain types of lenders show that for cosigned loans that go into default, as many as three out of four cosigners are asked to repay the loan. When you’re asked to cosign, you’re being asked to take a risk that a professional lender won’t take. If the borrower met the criteria, the lender wouldn’t require a cosigner.
In most states, if you cosign and your friend or relative misses a payment, the lender can immediately collect from you without first pursuing the borrower. In addition, the amount you owe may be increased - by late charges or by attorneys’ fees’ if the lender decides to sue to collect. If the lender wins the case, your wages and property may be taken.
If You Do Cosign
Despite the risks, there may be times when you want to cosign. Your child may need a first loan, or a close friend may need help. Before you cosign, consider this information:
- Be sure you can afford to pay the loan. If you’re asked to pay and can’t, you could be sued or your credit rating could be damaged.
- Even if you’re not asked to repay the debt, your liability for the loan may keep you from getting other credit because creditors will consider the cosigned loan as one of your obligations.
- Before you pledge property to secure the loan, such as your car or furniture, make sure you understand the consequences. If the borrower defaults, you could lose these items.
- Ask the lender to calculate the amount of money you might owe. The lender isn’t required to do this, but may if asked. You also may be able to negotiate the specific terms of your obligation. For example, you may want to limit your liability to the principal on the loan, and not include late charges, court costs, or attorneys’ fees. In this case, ask the lender to include a statement in the contract similar to: “The cosigner will be responsible only for the principal balance on this loan at the time of default.”
- Ask the lender to agree, in writing, to notify you if the borrower misses a payment. That will give you time to deal with the problem or make back payments without having to repay the entire amount immediately.
- Make sure you get copies of all important papers, such as the loan contract, the Truth-in-Lending Disclosure Statement, and warranties – if you’re cosigning for a purchase. You may need these documents if there’s a dispute between the borrower and the seller. The lender is not required to give you these papers; you may have to get copies from the borrower.
Check your state law for additional cosigner rights.
Credit Cards Vs. Your 401(k)
High interest-rate credit card debt is an exercise in sheer frustration. The balances decrease at a snail’s pace, if at all. Years go by and yet the debt is still staggering. Ultimately, you can pay five times the value of your initial purchases. That’s a fantastic deal for your creditor, but not a very good one for you or your family. Understandably, many people are tempted to pay this debt off by borrowing against a 401(k). It certainly is a very appealing option, but it does have ramifications. Here’s what you need to consider:
When it comes to borrowing against your 401(k), you can usually do so at two percentage points above prime (these days, that’s about 6%).
Keep in mind, though, that unless the loan is for the purchase of a home, the debt must be repaid within five years. If you owe $10,000 and borrow that amount at 6%, you would need to pay $178 per month to be finished within the required period of time. Now, compare that with your credit card. Let’s say your interest rate is 20%. For you to be free and clear of that debt within that same time frame, your payment would be $265 per month. At this point, the 401(k) is the better deal, however, typically a 401(k) loan cannot be larger than $50,000 or half the balance in your 401(k) account, whichever is less.
More important, if you lose your job while the loan is outstanding, your former employer will most likely require that the remaining balance be paid within a short period of time (typically within 60 days of your departure date). If you are unable to do that, then the tax penalties are harsh: the IRS will consider the balance as a distribution subject to income tax, and if you’re under age 59, and not retired, you will be hit with an additional 10% penalty.
Before you risk shortchanging your future, consider every alternative. First, try to get a lower interest rate on your card. A simple phone call to your creditor might accomplish this for you. If you are turned down initially, pay consistently, pay more than the minimum and try again a few months later. Another good option is to simply determine how much it would cost each month to pay off your debt in less than five years. Commit yourself to making those payments by having that amount automatically deducted from your checking account. This way, you budget for it and you won’t spend it elsewhere. A balance transfer seems to be a great choice on the surface. However, you should undertake such a transaction with extreme caution, or it can turn into a very costly mistake.
Finally, no matter which approach you take, resolve to budget wisely, use cash (debit cards will do just as well) and put credit card spending behind you.
Payday Loans Are Costly Cash
“GET CASH UNTIL PAYDAY! . . . $100 OR MORE . . . FAST.”
The ads are on the radio, the television, the Internet, and even in the mail. They refer to payday loans – which come at a very high price..
Check cashers, finance companies and others are making small, short-term, high-rate loans that go by a variety of names: payday loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans.
Usually, a borrower writes a personal check payable to the lender for the amount he or she wishes to borrow plus a fee. The company gives the borrower the amount of the check minus the fee. Fees charged for payday loans are usually a percentage of the face value of the check or a fee charged per amount borrowed – say, for every $50 or $100 loaned. And, if you extend or “roll-over” the loan — say for another two weeks — you will pay the fees for each extension.
Under the Truth in Lending Act, the cost of payday loans — like other types of credit — must be disclosed. Among other information, you must receive, in writing, the finance charge (a dollar amount) and the annual percentage rate or APR (the cost of credit on a yearly basis). Please note that laws regulating payday loans vary by state.
A cash advance loan secured by a personal check — such as a payday loan – is very expensive credit. Let’s say you write a personal check for $115 to borrow $100 for up to 14 days. The check casher or payday lender agrees to hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the check, you redeem the check by paying the $115 in cash, or you roll-over the check by paying a fee to extend the loan for another two weeks. In this example, the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100.
Alternatives to Payday Loans
There are other options. Consider the possibilities before choosing a payday loan:
- When you need credit, shop carefully. Compare offers. Look for the credit offer with the lowest APR — consider a small loan from your credit union or small loan company, an advance on pay from your employer, or a loan from family or friends. A cash advance on a credit card also may be a possibility, but it may have a higher interest rate than your other sources of funds: find out the terms before you decide. Also, a local community-based organization may make small business loans to individuals.
- Compare the APR and the finance charge (which includes loan fees, interest and other types of credit costs) of credit offers to get the lowest cost.
- Ask your creditors for more time to pay your bills. Find out what they will charge for that service — as a late charge, an additional finance charge or a higher interest rate.
- Make a realistic budget, and figure your monthly and daily expenditures. Avoid unnecessary purchases — even small daily items. Their costs add up. Also, build some savings – even small deposits can help – to avoid borrowing for emergencies, unexpected expenses or other items. For example, by putting the amount of the fee that would be paid on a typical $300 payday loan in a savings account for six months, you would have extra dollars available. This can give you a buffer against financial emergencies.
- Find out if you have, or can get, overdraft protection on your checking account. If you are regularly using most or all of the funds in your account and if you make a mistake in your checking (or savings) account ledger or records, overdraft protection can help protect you from further credit problems. Find out the terms of overdraft protection.
- If you decide you must use a payday loan, borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.
If you believe a lender has violated the Truth in Lending Act, file a complaint with the Federal Trade Commission.
- If you need help working out a debt repayment plan with creditors, or developing a budget, click on the “free debt consolidation quote” below. We will be more than happy to assist you.
When you think of your own personal assets, chances are your home, car, and savings and investments come to mind. But what about your Social Security number and your bank and credit card account numbers? To people known as “pretexters,” that information is a personal asset, too. Pretexting is the practice of getting your personal information under false pretenses. Pretexters sell your information to people who may use it to get credit in your name, steal your assets, or to investigate or sue you. Pretexting is against the law.
How Pretexting Works
Pretexters use a variety of tactics to get your personal information. For example, a pretexter may call, claim he’s from a survey firm, and ask you a few questions. When the pretexter has the information he wants, he uses it to call your financial institution. He pretends to be you or someone with authorized access to your account. He might claim that he’s forgotten his checkbook and needs information about his account. In this way, the pretexter may be able to obtain personal information about you such as your Social Security number (SSN), bank and credit card account numbers, information in your credit report, and the existence and size of your savings and investment portfolios.
Keep in mind that some information about you may be a matter of public record, such as whether you own a home, pay your real estate taxes, or have ever filed for bankruptcy. It is not pretexting for another person to collect this kind of information.
There Ought to Be a Law. Now, there is:
Under a new federal law — the Gramm-Leach-Bliley Act — it’s illegal for anyone to:
- Use false, fictitious or fraudulent statements or documents to get customer information from a financial institution or directly from a customer of a financial institution. Use forged, counterfeit, lost, or stolen documents to get customer information from a financial institution or directly from a customer of a financial institution.
- Ask another person to get someone else’s customer information using false, fictitious or fraudulent statements or using false, fictitious or fraudulent documents or forged, counterfeit, lost, or stolen documents.
Transferring large balances to low interest rate cards can be very enticing. Creditors make their offers hard to resist. The idea here is to give you a lower rate than what you’re got right now. As a result, you get a lot more mileage out of your money because more is applied to principal each month. The balance that’s been hanging over your head way too long is finally decreasing noticeably and rapidly. And voila you’re out of debt before you know it.
On the surface, it looks like a great way to get rid of high-interest rate debt quickly, and save a lot of money too. But it’s not that simple. Before you take that leap, pay attention, or that great offer could become a very costly mistake. Here’s what you need to know:
- Is the special rate permanent?
- If not, then how long will it be in effect?
- What will the APR be when the introductory rate expires?
- Is there an annual fee? If so, what is it?
- Are there balance transfer fees? If so, what are they?
(Note: our experience indicates that some creditors can charge fees as high as 3% or 4% of the balance transferred. And, the higher the balance, the higher the fee. So, a 4% fee on a $2000 transfer would cost you $80. Keep in mind that you will be paying interest on that amount as well; if you pay only the minimum required payment, then that fee of $80 could become very costly.)
Get out your magnifying glass and read the entire agreement “ especially the fine print. Review it thoroughly until you’e sure you understand it. If you have questions, call and ask. If they are not answered to your satisfaction, or if you are confused, don’t go with it.
After you’ve reviewed these questions with the creditors, you need to consider several other factors:
First, don’t assume that you immediately qualify for the offered APR. Remember that the promotion is a general mailing. In the end, not all customers will meet the creditors’ specific criteria for that extremely low rate. So, while you may be lured in with a special rate of 2.9% (with an increase to 17% after, say, 6 months), you may find that you qualify for an introductory rate of 8.9%, with an increase after six-months to 21%.
Next, keep track of exactly what amounts you are transferring, and when. Some creditors will waive fees – but only for the initial amount(s) on the balance transfer form. After that, all other transfers are treated as cash advances, and you will be charged accordingly.
Of course, if you want to hold on to that special rate, make sure you make your payment on time. Many creditors will raise their rate to well over 21% after just one late payment. One more tip: They keep an eye on your payment activity on other accounts as well. If you fall behind with another creditor, don’t be surprised to see a much higher APR on that new card when you get your next statement.
If you choose to go ahead with the transfer, you must fill out the form carefully. Otherwise, it may be delayed or cancelled. The transfer itself may not go into effect for two to four weeks. Therefore, as you’re trying to reduce your costs, make a payment on the previous card to avoid any late fee.
Once the new creditor notifies you of the transfer, you must confirm the transaction with the previous company. For your protection, we urge you to document this by noting what was said along with the date, time and name of representative. To be on the safe side, be sure you receive a billing statement from the previous creditor reflecting a zero balance (call the company and request one if they don’t send it.)
Once that’s done, what are you going to do with that old card? Cancel it, of course! You can do this by phone but we recommend that you follow this up with a letter to the creditor, confirming that the card will be closed. Be sure to tell the company that any credit bureau notation must state that the card was cancelled at your request.