How to Get Out of Debt With the Get Out of Debt Guy » credit card

Elaborate Scheme Leaves 180 With Over $1 Million In Fraudulent Purchases

Amanda Miller — Tue, 17 Jan 2012 13:05:58 +0000

Charges were announced last Thursday against seven members of an identity theft ring that allegedly used stolen identities of more than 180 people at major New York City retail stores including Home Depot, Sears, Kmart and Kohl’s, among others. The ring of fraudsters resold merchandise and gift cards for a profit after purchasing them under account holders names fraudulently.

Allegedly, as part of the scheme, the member of the ring manufactured driver’s licenses using the stolen identity information to facilitate their impersonations of the legitimate cardholders at the stores.

The ring consisted of Phillip Smith, the ring’s leader, Melissa Morton, who allegedly impersonated female identity theft victims, Mahmoud Abdul Hussein, Ali Abdul Hussein, Fadal Abdul Hussein, three brothers who allegedly manufactured the fake driver’s licenses out of their storefront smoke shops in Greenwich Village; and Francis Hidalgo and Randy White, who are alleged to have resold the illegally obtained store credits or used them to buy materials for home improvement projects for their businesses.

Manhattan U.S. Attorney Preet Bharara stated that “Identity theft is an insidious crime – its victims are often unaware they’ve been robbed until days or weeks later when they are hit with credit card bills for mysterious purchases made by criminal impersonators. Identity theft results in hundreds of millions of dollars in losses to unsuspecting victims and businesses, and victims may have to spend countless hours just to get their lives back in order. As [these] arrests demonstrate, we hold no quarter for the alleged perpetrators of these crimes and will work with our state and federal law enforcement partners to bring them to justice.”

According to court documents, since the ring’s inception in 2008 or earlier, Smith allegedly obtained stolen identities, including the names and social security numbers of legitimate account holders at large retail chains.

After obtaining the stolen identities, Smith called the customer service numbers at the retail stores to confirm that the victims had credit accounts and to determine the available credit limit. Once that information had been obtained Smith had a fake driver’s license in the name of the account holder made (allegedly from the Hussein brothers) but with photos of the individuals who would impersonate them at retail outlets.

As alleged, Smith drove Morton, one of his co-defendants, to retail stores throughout New York, Connecticut, New Jersey, and Pennsylvania, where she charged expensive merchandise and gift cards to victims’ accounts. Morton would tell the checkout clerks that she had forgotten her store credit card and home but would offer the fake driver’s license and the victim’s social security number as proof of identity.

Smith then allegedly drove Morton to branches of the retailers in other locations where she returned the fraudulently acquire merchandise for store credits. Then, the credits were sold to other members of the ring, including Hidalgo and White, for approximately 60 percent of their face value. In turn, the items were then resold for usually 70 percent of their face value.

During the investigation, court-authorized wiretaps were used to intercept telephone calls between the defendants. In some of the calls, Smith and Morton speak in code about the fake driver’s licenses and the victims whose store accounts they planned to target. In a separate call, Smith warned White that the fraudulently obtained Sears store credits had to be used “right away,” because otherwise “they [would] go bad.”

In other calls, Smith arranged to sell Home Depot store credit to Hidalgo for approximately 60% of the face value, and Hidalgo in turn allegedly found contracting businesses to buy the fraudulently-obtained store credits in return for cash. In still other calls, the Hussein brothers discussed the fake driver’s licenses they manufactured.

The Complaint charges Smith, Morton, Hidalgo and White with conspiracy to commit access device fraud, which carries a maximum term of five years in prison. The Complaint also charges Smith, Morton and the Hussein brothers with a separate conspiracy to produce fake driver’s licenses, which carries a maximum term of 15 years in prison. Smith and Morton are additionally charged with aggravated identity theft, which carries a mandatory two-year sentence if convicted – Source.

If you have been scammed and would like to file a scam report, please click here.

Be Smart and Find the Best Credit Card That’s Right for You

Steve Rhode — Mon, 16 Jan 2012 20:54:51 +0000

From How to Get Out of Debt

For anyone who has spent more than a few minutes on the GetOutOfDebt.org site you easily come to the conclusion that it is primarily about getting rid of debt but getting out of debt is more than just about eliminating your bills. Getting out of debt is also about not getting into overwhelming debt. One way to do this is to get smart about the type or kind of credit card you use.

A credit card provides better security and less risks than using a debit card. A erroneous transaction on a debit card can take money straight out of your checking account. Not so with a credit card.

Take a look at the table above to find the current average rates for each major category of credit cards.

So let’s take a look at each category of cards and see what’s available.

Balance Transfer Credit Cards

Cash Back Credit Cards

Low Interest Credit Cards

Rewards Credit Cards

Student Credit Cards

Airline Miles Credit Cards

Gas Credit Cards

Secured Credit Cards

Business Credit Cards

@GetOutOfDebtGuy

New Computer Virus Commits Post Transaction Attacks On Your Bank Account

Amanda Miller — Thu, 12 Jan 2012 19:25:33 +0000

From How to Get Out of Debt

When my grandma, god bless her soul, hears about a new scam, fraud or any form of financial trickery she immediately calls me up and warns me to stop whatever I’m doing and take notes. To her knowledge I don’t belong to more than one social media network, I don’t buy items online, I don’t apply for credit cards and the big one: I don’t use my debit card. And of course, I do all of these things (all in moderation, of course). These are all perfectly orchestrated white lies that I tell her so that I don’t have to sit through one more speech about about how DANGEROUS all of these things are for you. And grated, yes, all of those things I just mentioned do possess a level of danger and potential harm. But so does crossing the street (don’t tell her, but sometimes I don’t cross at the crosswalk).

Hopefully she’s not keeping up with my articles and reading this post today (Grandma: if you are, I love you and realize the jig is up!) but I bring to you news of a new alert to be forewarned about, checking your bank account online. Really.

An Israeli-based Security firm, Trusteer, found a new and elaborate computer virus that allows fraudsters to not only steal money from your bank account but to also cover its tracks. The virus came to attention after a large, unnamed, US retail bank spotted it and shared it with the firm.

The new virus is similar to that of a SpyEye Trojan horse where a robber swaps out surveillance camera footage to cover their thief-like tracks from security guards, but instead of a video, hackers are preventing bank account holders from noticing any missing money.

The Trojan horse employs a powerful two-step process to commit the electronic crime. First, the virus lies in wait until a customer with an infected computer visits an online banking site, steals their login credentials and tricks the victim into divulging additional personal information such as debit card information. Then, after the stolen card number is used for a fraudulent purchase, the virus intercepts any further visits to the victim’s banking site and scrubs transaction records clean of any fraud. That prevents — or at least delays — consumers from discovering fraud and reporting it to the bank, buying the fraudster critical extra time to complete the crime – Source.

It’s kind of ingenious. But bad. Very, very bad.

Trusteer is calling it a “post transaction” attack since the virus mainly controls what a victim sees after the fraud occurs. Chief technology officer for Trusteer, Amit Klien, says, “I predict that the use of post transaction attack technology will significantly increase as it enables criminals to maximize the amount of fraud they can commit using their initial investment in malware toolkits and infection mechanisms” – Source.

Apparently, if a victim account holder checked their balance at an ATM or even using an uninfected computer they would be able to detect the fraudulent transactions. The virus doesn’t go so far as to impact the bank’s systems but only the web browser on an infected system’s computer.

That being said, paper statements would reveal the fraud. Bad news for trees, good news for banking customers that receive paper statements each month! Sadly, only relying on paper statements could leave you a full calendar month behind when it comes to spotting the fraudulent transactions – Source.

The best way to combat this new virus is to make sure that the computers you use are up to date with the latest and best anti-virus software.

Or, as my grandmother would prefer, if you want money or a balance statement you’re going to have to get it all Jimmy-Stewart-It’s-A-Wonderful-Life-style and walk into a bank.

FTC Bans Landmark Clearing From Using Remotely Created Payment Orders

Amanda Miller — Thu, 05 Jan 2012 21:15:50 +0000

From How to Get Out of Debt

It was announced today that a Federal Trade Commission (FTC) action has banned a payment processor from using a new payment method to debit accounts after allegedly debiting millions from consumers’ bank accounts without their consent.

Payment processors provide merchants with the ability to obtain customer payments for products and services via electronic banking. According to the FTC’s complaint against Landmark Clearing, Inc., Larry Wubbena, and Eric Loehr, the defendants used a relatively new payment method called “remotely created payment orders” to give merchants access to consumer bank accounts.

From the fall of 2008 until the spring of 2011, Landmark allegedly used remotely created payment orders to debit, or attempt to debit, millions of dollars from consumers’ accounts without their consent. The FTC charged that in many instances Landmark debited consumers who had never heard of Landmark or its client merchants, had never gone to any of the merchants’ websites, and had never knowingly agreed to purchase products or services from the merchants.

According to the FTC’s complaint, Landmark’s payment processing activities caused substantial injury to thousands of consumers, often those who could least afford to have funds unexpectedly taken from their accounts without authorization. The FTC alleged that as a result of the unauthorized debits, many consumers suffered significant costs from overdraft and bounced check fees, plus the time and expense of closing bank accounts, opening new ones, and ordering new checks.

An example is John Chagoya, a consumer in California who was living on a fixed income when money was taken from his account. While checking his bank statement, he noticed a debit from Landmark payable to Direct Benefits Group (DBG), one of Landmark’s client merchants. “They never contacted me at all, and I never authorized anyone to debit money from my account.” As a result of the debit, Chagoya’s account became overdrawn, and he had to pay bounced check fees.

The FTC’s complaint alleged that Landmark’s clients routinely failed to obtain consumers’ authorization for the debits. By continuing to process these debits, Landmark played a critical role in its clients’ unlawful business practices.

According to the FTC, remotely created payment orders are created by entering a consumer’s name and bank account information into an electronic form and are processed like an ordinary paper check. When printed, remotely created payment orders look like regular bank checks, but instead of having the account holder’s signature, they bear a statement such as “Authorized by Account Holder” or “Signature on File.” Federal banking regulations require the creator of a remotely created payment order to have the express authorization of a consumer to process the debit. Unlike some payment mechanisms, such as credit cards, remotely created payment orders are not subject to significant oversight and monitoring, making them vulnerable to abuse. As a result, the FTC alleges, they have become a particularly attractive payment method for merchants and processors engaged in fraud and unauthorized debiting.

A red flag indicating unlawful debiting is a high rate of consumers and their banks rejecting and returning transactions submitted for debiting. According to the FTC’s complaint, some of Landmark’s clients generated astronomical return rates, sometimes higher than 80 percent, which gave Landmark compelling evidence that its client merchants had not obtained valid consumer authorizations for their debits.

“The return rates posted by Landmark’s clients provided obvious signs that they were engaged in dubious practices,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “But the defendants looked the other way. Payment processors who reach into consumer accounts on behalf of clients engaged in fraud will be held accountable.”

The FTC complaint alleges that Landmark actively promoted remotely created payment orders as a way to avoid the scrutiny associated with other payment mechanisms, advertising on its website that merchants “with a high percentage of overall returns” would benefit from using its remotely created payment order product.

According to the FTC, Landmark processed more than 110,000 remotely created payment orders with a value exceeding $5.3 million through the First Bank of Delaware on behalf of one client merchant, Direct Benefits Group (DBG), of which more than 70 percent were returned and rejected. In August 2011, the FTC charged DBG with debiting consumers’ bank accounts without their consent, and a federal judge halted DBG’s operation and froze its assets pending further litigation.

Similarly, Landmark allegedly processed more than $5.7 million in debits through the First Bank of Delaware on behalf of Platinum Online Group, of which more than 83 percent were rejected and returned. The FTC complaint alleges that Landmark accepted Platinum Online as a client even though Landmark had terminated EdebitPay, Platinum Online’s parent company, because of its high return rates. Landmark also knew that in 2008, EdebitPay and its principals had agreed to pay $2.2 million in consumer redress to settle FTC charges for debiting consumers without their consent. The FTC later filed a contempt action against EdebitPay for violating the settlement order.

The settlement order bans the Landmark defendants from processing payments through remotely created payment orders and a similar payment mechanism called “remotely created checks.” The order permits the defendants to provide other forms of payment processing, subject to stringent conditions. The settlement order:

Permanently prohibits the defendants from processing payments for any client they know, or should know, is violating the FTC Act or the Telemarketing Sales Rule (TSR);
Requires them to screen and monitor prospective and existing clients to determine whether their business practices violate the FTC Act or the TSR;
Requires them to monitor clients’ total return rates, reasons for returned transactions, and unusual transaction patterns, values, and volume;
Prohibits them from failing to investigate a total return rate exceeding 2.5 percent, and requires them to stop payment processing for a client unless the investigation shows its business practices did not violate the FTC Act; and
Bars them from referring any past remote payment clients to third parties for a fee, and from selling or otherwise benefitting from consumers’ personal information.

As part of the settlement, Landmark, Wubbena and Loehr have agreed to a $1.5 million judgment that will be suspended upon payment of $126,000 and the surrender of a parcel of land. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition or fail to meet the terms of the order – Source.

If you have been scammed and would like to file a scam report, please click here.

University of Georgia Ph.D. Student Sentenced For Fraud And Identity Theft

Amanda Miller — Fri, 30 Dec 2011 18:15:14 +0000

From How to Get Out of Debt

In early December, Carlton Lewis, a former Ph.D. student was sentenced to 70 months in prison for his role in an identity theft and credit card fraud conspiracy.

Throughout the conspiracy, Lewis, who was enrolled as a Ph.D. student at the University of Georgia, provided credit and debit card skimming devices to waitresses working in restaurants across the southeastern United States.

The waitresses used those skimming devices to unlawfully obtain the credit and debit card account information of customers who provided their credit or debit cards as payment for their food and drink orders. After the waitresses had filled the skimming devices with unlawfully obtained credit and debit card account information, they returned the devices to Lewis.

The waitresses were paid by Lewis based on the volume of account information that they unlawfully obtained using the skimming devices. Lewis then uploaded the unlawfully obtained credit and debit card account information to his computer and used a re-encoding device to transform Walmart prepaid money cards into counterfeit credit and debit cards.

Lewis and others then used the counterfeit credit and debit cards to purchase merchandise at retail stores. Lewis’s criminal conduct was uncovered when counterfeit credit and debit cards, a credit and debit card re-encoding device, and a credit and debit card skimming device were found in his vehicle following a traffic stop performed by the Tennessee Highway Patrol.

“This sentence highlights the commitment of the United States to prosecute identity theft cases, whose innocent victims suffer needlessly due to this criminal conduct,” said U.S. Attorney Bill Killian – Source.

If you have been scammed and would like to file a scam report, please click here.

East Coast Credit Card Fraud Ringleader Gets 12 Years In Prison

Amanda Miller — Wed, 28 Dec 2011 20:00:08 +0000

From How to Get Out of Debt

An identity thief was sentenced earlier this month to 12 years in prison for managing and east coast credit card fraud ring.

Jonathan Oliveras, used counterfeit credit cards encoded with stolen account information up and down the East Coast of the United States and has been sentenced for this crime. In addition to his 12 year prison term, Oliveras must also serve three years supervised release and has been ordered to forfeit $770,646.

Back in August Oliveras plead guilty to one count of wire fraud and one count of aggravated identity theft. In his plea, Oliveras admitted that he managed a ring of co-conspirators who used stolen credit card account information in New York, New Jersey and the Washington, D.C., area.

According to court documents, Oliveras sent payments to individuals he believed to be in Russia for the stolen account information. Oliveras then distributed the stolen account information, which was re-encoded onto plastic cards and used to purchase gift cards. The gift cards were used to buy merchandise that ultimately was returned for cash.

Federal and local law enforcement executing a search warrant in July 2010 at Oliveras’ apartment found, among other things, credit card encoding equipment and more than 2,300 stolen credit card numbers. According to court documents, credit card companies have identified thousands of fraudulent transactions using the account numbers found in Oliveras’ possession, totaling more than $750,000 – Source.

If you have been scammed and would like to file a scam report, please click here.

Founder of Internet Consumer Electronics Company Sentenced For Fraud

Amanda Miller — Mon, 26 Dec 2011 13:00:06 +0000

From How to Get Out of Debt

Back in May of 2008 David Whitaker pled guilty to an information charging him with wire fraud, conspiracy to commit wire fraud, money laundering and commercial bribery to which Whitaker admitted to defrauding around 83 business account customers and a credit card processing company of over $10 million.

Earlier this month he was finally sentenced to 70 months in federal prison and ordered to pay full restitution to the 83 business customers and credit card processing firm.

Whitaker admitted that he received millions of dollars from business customers who purchased electronic equipment from his company, Mixitforme, Inc. The equipment, however, was not delivered to the customers, and Whitaker made various false statements to the customers in an attempt explain why the deliveries were not made and in order to encourage additional orders.

During this same time, Whitaker admitted that he diverted millions of dollars which had been paid to his company for his personal use. He also admitted to having submitted false income tax returns to a credit card processing company, for the purpose of inducing that company to act as the credit card processor for Mixitforme. Whitaker also admitted to negotiating an employment opportunity between his company and a local bank branch manager at an annual salary of nearly twice that which he was being paid as an employee of the bank. In return, Whitaker obtained from the bank manager letters of bank credit which the manager did not have the authority to issue.

Whitaker has been detained since his arrest and expulsion from Mexico in March 2008. A federal arrest warrant had been issued for Whitaker in this matter in December 2007.

Assistant U.S. Attorney Andrew J. Reich told the court that the government considered a number of factors in deciding what sentence to recommend to the court. Reich explained that Whitaker had provided substantial cooperation to the government in its investigation of Google Inc.

For approximately 4 months in the early part of 2009 Whitaker assisted agents in setting up websites which purportedly sold illegal pharmaceutical products over the internet and which advertised their products through Google’s AdWords program. Whitaker also explained to government investigators that he illegally sold pharmaceutical products through the AdWords program while he was in Mexico. The investigation of Google eventually resulted in a non-prosecution agreement between the government and Google, which provided that Google was to forfeit $500 million to the U.S., and also establish a number of procedures and policies which would insure that “rogue” pharmacies would no longer be permitted to advertise through the AdWords program.

According to Reich, the impact of the agreement has been very significant, in that it has prevented millions of Americans from accessing illegal drugs through the internet.

At sentencing, Reich also stressed the importance which the government placed on the impact which this case had on the victims of Mixitforme. The government recommended a sentence of 70 months imprisonment and full restitution to the victims.

In following the government’s recommendation, the court stated that the sentence of 70 months struck the exact right balance considering the seriousness of the offense and the extent of Whitaker’s cooperation. The court also ordered full restitution to the victims, in the total amount of $10,065,399 – Source.

If you have been scammed and would like to file a scam report, please click here.

Arizona Telemarking Scam Leaves 5,000 Out Of Over $6.3 Million

Amanda Miller — Tue, 22 Nov 2011 20:37:48 +0000

From How to Get Out of Debt

Earlier this month word broke when a complaint was issued against four Arizona LLCs and 11 Arizonians that Arizona telemarketers had defrauded almost 5,000 people out of over $6.3 million. These criminals conducted a scam that used victims’ credit-card limits to determine how much to charge them in setting up their very own “web mall” business that they would receive commissions off of. They ran defendants Solid Ad Solutions, Solid Tech Solutions, Freedom Billing, and E-Web Financial.

The latter two companies, Freedom Billing and E-Web Financial made illegal calls to consumers offering them the work from home business opportunity through setting up their own “web mall” business. Promised to the customers was a business coaching program that would show them how to successfully operate their business and to buy the program back at the end of one year ‘if for some crazy reason you don’t make your investment back.

As soon as a consumer gave the go-ahead their credit cards were immediately processed and their money was gone. The scammers completed an order form with each successful sale stating the names of the opener and closer, the price paid, the package ordered, contact information and notes about the consumer to assist the upsell defendants in making further sales. This information was then sent to Solid Ad Solutions and Solid Tech Solutions.

“These notes included statements like, ‘Has 9K available on this card today,’ ‘BACK END CHA-CHING!! YOU ARE WELCOME!’ ‘Old dude, has no clue’ and ‘living on social security.’”

Employees from Solid Ad Solutions and Solid Tech Solutions would then call the customer back and claim to be the business coach to which they would then offer a website advertising and traffic opportunity. This “service” would cost between $500 to $33,400 depending on the customer’s available balance on their card.

These “coaches” would claim that by partaking in the advertising and traffic boost opportunity that they would soon turn around the money they’d put into the business opportunity. Consumers were lead to believe that this was an extremely lucrative deal. Once they agreed to this offer their “coaches” were unattainable to consumers.

The contract offered by Solid Ad Solutions and Solid Tech Solutions gave consumers only three days to cancel, purposely confusing consumers who believed they were entitled to the 30, 60, or 90 day to a year cancellation policy offered by defendants E-Web Financial and Freedom Billing.

If a customer did actually try to purchase something from one’s “web mall” the victims caught in this scam would not even see commissions coming in. Refunds were “stonewalled” and many were very aggressive sales representatives who talked them out of canceling or convinced them to wait for their “first quarter commission check” or “until after the Christmas shopping season,” knowing full well that the consumer would then be past the allowable cancellation period and well past the dispute deadline with their credit card.

Victims were promised to make between $1,000 to $7,000 a month. Attorney General Tom Horne is seeking an injunction and $10,000 for each violation of the Arizona Consumer Fraud Act – Source.

If you have been scammed and would like to file a scam report, please click here.

Must Have Black Friday Shopping Tips!

Amanda Miller — Fri, 18 Nov 2011 09:00:16 +0000

From How to Get Out of Debt

We are officially one week away from my favorite and most dreaded shopping day of the year. That’s right folks, Black Friday is here!

The Better Business Bureau (BBB) has released an excellent Black Friday shopping tip sheet that I urge all of you to read. So here. Read it…

“It’s time to start planning your Black Friday, that special day after Thanksgiving when retailers gear up to offer their best. Better Business Bureau past experience tells us that all deals are not created equal and the fine print is often the most important thing. Before you head out the door for a block buster and get caught up in the frenzy, the BBB offers the following tip sheet to help you save time and money.

Tip 1 – Know before You Go.
In the coming weeks many retailers will release their Black Friday deals online, in social media and other publications. Research where the sales are and make a list of your gift priorities to compare prices and plan your day of deals. Since many advertisements will begin before the actual sale, build up a coupon collection as soon as possible. Remember to bring ads with you on Black Friday just in case the price is not what you expected.

Tip 2 – Don’t Fall for False Advertising.
Despite BBBs effort to advance trust in the marketplace, some companies will resort to advertisements that are untrue, misleading, deceptive, or plain fraudulent. Black Friday advertising will be abundant and BBB urges consumers to watch for red flags.

Many consumers have experienced frustration and lost money they can’t afford to lose after being lured by prices too good to be true, bait and switch ads designed to bring you in but push you toward more expensive items, fine print return policies, final sales, and deals that end before the day is done. To protect you on Black Friday, BBB advises consumers not to believe all they see or hear without doing their own research to confirm the claims being made.

Tip 3 – Maximize Advance Alerts.
Do you have favorite retailers? Now is a good time to sign up for their email alerts and “like” their Facebook page. BBB Accredited Businesses and other stores are working to reward your loyalty and you may get a jump on special offers.

Tip 4 – Set up Your Reward Cards.
Have you ever stood in line with out your store rewards card? You either missed out or the clerk may have handed one over. Black Friday deals may have strict restrictions with no sharing allowed. Make sure you have reward cards with your favorite stores and keep them with you. Check your credit card rewards program as well for special points that could add up on Black Friday.

Tip 5 – Shop with Trust.
If you find a deal – don’t just jump at the first chance to get it. The BBB recommends doing your research on the business – know how long they’ve been in business, look into their customer service track record, check them out at bbb.org. If you have concerns about the type of gift or the right fit – make sure you ask about their return policy too.

Tip 6 – Comparative Shop Online.
There are dozens of Black Friday websites that claim to capture the best deals around and they can really help you do your comparative shopping online. Before you pick your favorite site, the BBB recommends that consumers ffind a reputable site that’s not a fly-by-night operation by checking them out at bbb.org and see what others say about the site through an online search.

If you decide to buy online there are a host of security measures to abide by, among them to Start with Trust and know you are dealing with an experienced, reputable retailer; confirm that the site is secure and be certain you have a phone number and physical address should problems arise with your order.

Tip 7 – Look for QR Codes.
They’re square, black-and-white and funny looking – but they can take you straight to a deal. QR stands for Quick Response codes and they’re popping up in many ads and print materials. Several BBB Accredited Businesses use them to help you Start with Trust and they can bring you directly to a special offer or a BBB Business Review. Before you can scan one and view the offer – you’ll have to install a QR app reader. Most newer smart phones are equipped to scan QR codes and if you’re a mobile shopper you could really have some fun.

Tip 8 – Shop Small
Save your gas money and your time when you stay close to home. The Better Business Bureau is encouraging consumers to support small businesses in their community on Small Business Saturday, the day after Black Friday. Check your neighborhood retailers for their weekend deals and gain some goodwill by knowing you’ve done your part to help them thrive during the holidays. Although a price match may not be applicable for some items – your neighborhood store may be able to guarantee a price for you – even if you decide to buy later.

Tip 9 – Check Return and Exchange Policies.
All bets can change for Black Friday deals which means the store policies can change too. Make sure you know what the return and exchange policy is for your Black Friday special and that a return is even possible – especially if you’re buying online. Final sales, a very short return window (like before December 25th) or in-store or online only credit could leave you with deal gone wrong.

Tip 10 – Shop Safely.
While getting a deal is important, there are ways to shop safely without putting yourself or your wallet in jeopardy. The Better Business Bureau advises consumers to take their time and plan ahead for the best rewards

Make a list (be sure to check it twice!) and prioritize where you should go and when.
Bring friends into the mix to help sort through your options, two cars can go in two directions making it easier to get limited quantities and some pals will even wait in line as you trade off shopping in the stores.
Remember to get gift receipts and keep them organized for those moments when the thought wasn’t quite enough – Source.”

Couple Faces Serious Jail Time For Their $25 Million Nationwide Telemarketing Fraud Scam

Amanda Miller — Tue, 15 Nov 2011 17:00:31 +0000

From How to Get Out of Debt

Kara Singleton Adams, from Georgia, was found guilty last week on charges of wire fraud, conspiracy, and structuring financial transactions, relating to a $25 million nationwide telemarketing fraud scheme. Already convicted in this scheme are three co-defendants including Adams’ husband, Jason James Eyer, James Adolph Schoenholz, and Brittany Dunphy. All three pleaded guilty to related charges before Adams’ trial and Schoenholz and Dunphy testified at the trial.

United States Attorney Sally Quillian Yates said, “This multi-million dollar fraud scheme used simple tactics. It started out with automated phone calls to consumers in almost every state in the United States, and the scheme quickly escalated to high-pressure telemarketing sales pitches. Many citizens are struggling in this economy and have incurred significant credit card and other debt. This case demonstrates that people need to carefully research any person or firm who makes promises to reduce or eliminate debt in a way that seems too good to be true, because fraudsters are out there seeking to prey on their economic situation.”

“The U.S. Postal Inspection Service is continuing to investigate and will pursue such criminal activity which centers on consumers and tries to take advantage of them. These are complex schemes and they have the potential to take millions of dollars from victims, and we will continue to track them down,” said Shelley Binkowski, Acting Postal Inspector in Charge of the Atlanta Division.

John Sours, Administrator, Governor’s Office of Consumer Protection, said, “This has been a long, involved case. We are gratified by the jury’s decision, and we would be remiss if we did not thank our partners in this effort, the United States Postal Inspectors and the United States Attorney’s Office.”

Adams was found guilty on 9 counts of wire fraud, 7 counts of structuring financial transactions and 2 counts of conspiracy, after a two-week-long trial. The jury found her not guilty on two additional counts of structuring financial transactions. The jury reached their verdicts after approximately 4 hours of deliberation.

According to United States Attorney Yates, the indictment, the charges, and evidence at trial:

Starting in 2008 and continuing through December of 2009, Adams, Eyer, Schoenholz, and Dunphy conspired to defraud consumers with credit card interest rate reduction programs through a variety of schemes and companies. Using various company names, the defendants initiated automated telephone calls to consumers throughout the United States to promote the sale of the defendants’ credit card interest rate reduction program. Consumers were either greeted by a prerecorded message instructing them to “press 1 now” if they would like to have their credit card interest rates lowered or directly solicited by a live telemarketer offering to lower the consumers’ credit card interest rates. Consumers who pressed “1″ were connected to a live telemarketer, who used a script promising to substantially lower the consumers’ credit card interest rates and save the consumers thousands of dollars in interest payments. The telemarketers claimed they had a special relationship with the creditors which would allow them to negotiate lower rates on the consumers’ behalf.

The consumers were told they would become debt-free much faster, typically three to five times faster, than they would without the program. Consumers were also guaranteed that their monthly payments would be no higher than their current monthly payments on their credit card accounts. The consumers were assured there was no out-of-pocket cost associated with the interest rate reduction program. They were promised that the savings of the program would cover the cost of the program, which was between $749 and $1,495. Consumers were also told that this savings would be realized within 30-45 days and were promised a full refund of their purchase price if they did not achieve $4,000 in savings.

According to the evidence, the victims did not in fact receive what they were promised. The defendants had no special relationships with any creditors. In many instances, no attempt was made to negotiate a lower interest rate for consumers’ credit cards. Even when the telemarketers actually cold-called a victim’s credit card company, the rates were rarely lowered and the victims did not save the thousands of dollars promised in the sales pitch.

Adams, Eyer, Schoenholz, and Dunphy then took additional steps to mail those victims a fake “financial analysis” payment plan with figures which had been purposefully manipulated to show a savings of at least $4,000, when, in fact, no savings had been realized. The defendants used this falsified payment plan “savings” to claim that they had satisfied the program’s guarantee and deny the victims who sought refunds of the $749 to $1,495 in fees that they had paid.

The companies involved in the scheme included “Economic Relief Technologies,” (ERT), formerly at 1820 Water Place, Suite 250, Atlanta; “SafeRide Warranty,” formerly at 1820 Water Place, Suite 255, Atlanta; and “VP Marketing,” (VPM), formerly at 1820 Water Place, Suite 195, Atlanta, Georgia.

The group also used many other names, such as “Clear Breeze Solutions;” “Money Works;” “Client Services;” “Financial Protection Center;” “Life Change Solutions;” “Express Debt Elimination;” “Capital Resources;” Express Corp Advisor;” “Express Corp;” “Card Services;”"Credit Services;” “Americare Software Solutions;” “A Better Tomorrow;” “Helping Hand Resources;” “Auto Protection Center;” “Warranty Services;” “Auto War;” “Assured Warranty;” “Debt Suite, Inc.;” “Total Curb Appeal, LLC;” “Debtworks Software, LLC;” “DM Associates, LLC;” “VersaDebt Corp;” and “FYI Tech, Inc.”

The victims were located in a total of 46 states with the losses totaling over $25 million. Adams and Eyer spent millions of dollars from the proceeds from operating the scheme in a little over a year at a variety of luxury hotels, high-end retailers, jewelers, casinos, exotic automobiles, as well as payments to private tutors for their children.

On November 30, 2009, the Federal Trade Commission obtained a temporary restraining order against Adams, Eyer, and Schoenholz and a federal judge appointed a receiver to take over the companies and find any and all assets derived from the fraud. Evidence at trial showed that at that same time, the three were in the Philippines, attempting to start up an identical business. While in the Philippines, Adams contacted her family members, Leiah Watson and Roger Dale Watson, instructing them to remove company documents and computers from her Marietta residence and hide them, in violation of the federal judge’s order, in an attempt to obstruct the FTC receiver’s investigation. Dunphy later obtained the computers and documents, sold the computers and wired the proceeds to Eyer in the Philippines.

Eyer has already agreed to a binding plea agreement in which he will serve 10 years, 6 months in prison. Leiah Watson and Roger Dale Watson pleaded guilty to charges of violating a court order on October 6, 2011, and will be sentenced in December of this year.

Sentencing for Adams and Eyer is set for January 5, 2012. Adams faces a maximum sentence of 25 years for each wire fraud count, 5 years for each conspiracy count, and 10 years for each structuring count. She also faces a fine of up to $500,000 for each structuring count – Source.

I hate to think about the life they’ve now made for their children since they will both more than likely be serving jail time.

Have you ever received a call like this or from one of these companies? Leave a comment below!

If you have been scammed and would like to file a scam report, please click here.

Is Bank Of America Taking Advantage Of The Unemployed With Debit Card Fees?

Amanda Miller — Thu, 10 Nov 2011 20:13:54 +0000

From How to Get Out of Debt

The state of South Carolina and Bank of America have teamed up together to administer unemployment benefits to South Carolina residents. Unemployment benefits used to come in the form of a check but are now being issued in the form of a Bank of America prepaid debit card.

Bank of America claims that it’s good deal for everyone from taxpayers to those receiving unemployment benefits. In fact, by utilizing the use of prepaid debit cards, The South Carolina Department of Employment and Workforce expects to save around $5 million annually without printing and mailing checks.

According to a Pew Research Center report from last fall about 1/10 of all South Carolina households did not have a bank account – Source. With this knowledge the State’s Department of Employment figures issuing the prepaid cards are a great way for families that do not have a bank account to avoid paying fees for cashing their benefit checks.

While the State had good intentions in mind they, along with bank partner Bank of America, are getting some bad press over this decision. While Bank of America (BoA) has the largest number of ATMs across the country, many living in rural areas without a BoA ATM or branch, are incurring massive fees when withdrawing money from their prepaid cards.

You see, as a Bank of America customer I can attest to this. If I withdrawal money from a non-Bank of America ATM I will usually have to accept charges from the bank of a $3.00 fee. My statement will then show an extra $2.00 from Bank of America for using an ATM outside of the bank. In total if I withdrawal money I can expect to have an extra $5 taken out of my account in fees. This is what the corporate world likes to call a “convenience” fee.

Residents of South Carolina that do not have a Bank of America branch or ATM in their general area are getting all too familiar with these fees and are in an uproar over the new prepaid system and many are experiencing a $1.50 “convenience” fee with these debit cards.

South Carolina is not the first state to make an accord with Bank of America in regards to prepaid cards paying out unemployment benefits; California and New Jersey have been working with the bank for months. In fact, in May the National Consumer Law Center named Bank of America’s prepaid cards “the best in the nation.” However, “unemployed card holders in those states don’t face the same list of potential fees that exist in South Carolina. One example: California and New Jersey’s contracts allow card users to conduct a limited number of free transactions at other banks’ ATMs” – Source.

When South Carolina learned of the options that are offered to those in other states the state asked Bank of America for changes and in July those unemployed were given unlimited free withdrawals at ATMS and one free withdrawal from any bank teller where the VISA logo is displayed per week.

However, this doesn’t help people that may need to make multiple withdrawals within a week. I read one article that seemed to point blame at Bank of America for this situation but I think both the state of South Carolina and the bank should be scrutinized on an even playing field. The state is the one that put this into effect and knew the terms and conditions with Bank of America that would be placed upon residents.

In August 2010, unemployment officials summoned [Sandra] Gortman for a benefits review during which she says she was strongly encouraged to sign up for a prepaid debit card. Gortman resisted. Fearful that the agency would delay her benefits if she did not submit, she says, Gortman signed the form. A few weeks later the card and a brochure came in the mail. The potential fees were disclosed in the fine print, she says, but she initially missed them – Source.

What are your thoughts on this matter? I feel like so many fingers are being pointed in so many directions on who is to blame for this? How would YOU fix this situation? Leave a comment below!!

As always, folks, be sure to read the fine print of anything you willingly opt into – even your government unemployment benefits!

Newspaper Deliveryman Makes Amanda Miller’s List Of “People I Wouldn’t Suspect Of Fraud”

Amanda Miller — Mon, 07 Nov 2011 21:19:36 +0000

From How to Get Out of Debt

Amanda Miller’s list of “People I Wouldn’t Suspect of Fraud” just keeps on growing week in and week out! Amongst the already listed TSA employee, postal carrier, United Nations employee and firefighter I now introduce to the list: a newspaper deliveryman.

A guilty plea was announced last week by Andre Tyler, a Maryland newspaper deliveryman, to unauthorized use of an access device and aggravated identity theft.

According to his plea, Tyler was a newspaper deliveryman for WilCan Services, a delivery contractor for a Washington newspaper, whose route included addresses in the Damascus/Laytonsville area of Montgomery County, mainly off Route 108 in Maryland. From December 2010 until his arrest on May 19, 2011, Tyler occasionally took mail from mailboxes along his route, kept the credit cards and threw the other mail away. Tyler would attempt to activate the stolen credit cards and if successful, use the cards for his personal benefit until they stopped working.

On at least one occasion, after the credit card company had suspended the stolen card Tyler called the company claiming to be the account holder and succeeded in having the card re-activated.

The total loss as a result of Tyler’s fraudulent use of the access devices was between $5,000 and $10,000.

Tyler faces a maximum sentence of 15 years in prison for the unauthorized use of access devices and a mandatory two years in prison, consecutive to any other sentence, for aggravated identity theft. Chief U.S. District Judge Deborah K. Chasanow has scheduled sentencing for January 30, 2012 at 2:00 p.m. – Source.

If you have been scammed and would like to file a scam report, please click here.

Bad Credit Is Bad News for the Unemployed

Guest Post — Thu, 03 Nov 2011 18:41:51 +0000

From How to Get Out of Debt

A recent report from Inc. Magazine says at that at least 60 percent of employers run credit checks on potential job applicants at least some of the time. This is a 17 percent increase from 2006.

And given the high unemployment rate, this is particularly concerning. With a much bigger pool of candidates to choose from, employers can narrow the pool of qualified candidates by looking at a job applicant’s credit score. Fearful that a poor credit score is a sign of irresponsibility, an employer might not offer a job to a candidate with bad credit.

This means that job applicants may be hit with a double dose of trouble. Not only are they out of work, but they also are unable to make regular payments on mounting mortgage and credit card bills, which is causing their credit score to plummet. Since many employers are making credit checks a mandatory condition of employment, job applicants with bad credit may find themselves stuck in a vicious cycle: No job translates to no ability to pay bills, which in turn causes poor credit, which means a person might be ineligible for jobs.

If you are a job applicant worried that an employer will run a credit check, your best bet is to be candid with possible employers and let them know about your experience. Since the recession has had unfortunate consequences for many people, the employer might be sympathetic to your plight. Pitch your situation as a learning experience so that you can show the employer that you are ready to move on from your mistakes.

Explain that you have started the process of learning how to build credit to minimize damage and improve your credit score.

By taking serious steps to repair your credit, your credit report might indicate that you have had a shift in the positive direction. If you walk into a job interview armed with a the facts about your credit score, how you have turned over a new leaf, and what your credit report indicates about your current behavior, a potential employer might be sympathetic, especially if you have extenuating circumstances brought on by the recession.

Though credit checks for job applicants might create barriers in the already-tight job market, employers are also likely to value an honest account of your situation. By being forthright about your past mistakes and offering evidence of your progress, employers will be more likely to look past a three-digit number and offer you the job.

This guest post was submitted by Philip Tirone, a credit expert who teaches people how to build credit and avoid pitfalls.

If you would like to contribute a guest post, click here.

True Cradle Robbers – Stealing Credit From The Cradle

Amanda Miller — Mon, 17 Oct 2011 19:34:09 +0000

From How to Get Out of Debt

It’s often not a parent’s first thought to check the credit report of their minor child, however, it may now become a necessity. Not because a child may fraudulently be using credit without their parents’ knowledge but because scammers may have stolen their unused Social Security number and identity.

The Better Business Bureau (BBB) put out a warning last week that parents should take notice to their children’s credit reports well before the age of the child being able to use credit to make sure their identity hasn’t been stolen.

This is a crime that is growing in the United States; a scammer uses an inactive Social Security number found online and sells them to people in an attempt to establish fan credit. The stolen numbers often belong to children well below the age of credit eligible years.

“Protecting a child’s innocent, clean record is something that every parent needs to do.”

According to the BBB press release about this matter:

“Scammers find it easy to target children – infants even – because parents are less likely to check the credit report of their 3-year-old child. What makes this crime so much worse is it often goes unnoticed until years after the fact when the child goes to make his or her first credit transaction.

One report put out by CyLab, shared a story of a 17-year-old girl who is $725,000 in debt because her Social Security number was stolen and linked to eight different suspects. The suspects opened 42 accounts including mortgages, auto loans and credit cards. Several bills were in collections” – Source.

The BBB is holding multiple Shred Day events throughout Central Texas between October 15 and 29, 2011. The events are in an effort to recognize and learn the need for consumer education and protection. The events are free and offer document shredding and paper recycling on the spot along with advice for protecting yours (and your child’s) identity. Consumers can bring confidential documents, phones, compact disks, floppy disks and old computer parts to be shred and recycled onsite for free.

If you have been scammed and would like to file a scam report, please click here.

Is Bankruptcy or a Debt Repayment Program the Best Option for Us? – Janet

Steve Rhode — Wed, 05 Oct 2011 18:27:19 +0000

From How to Get Out of Debt

“Dear Steve,

Moved to Ohio 3 months ago, from CT where we were delinquent on our upside home mortgage and managed to renegotiate the second mortgage to 20% of the total, then were able to sell our house and relocate.

We were able to find a private individual to finance our new house for us as our credit was shot….we have about 130K of cc debt and had met with a bankruptcy attorney in a different state but never filed.

We are trying to get back on our feet but our overwhelming credit card debt is weighing us down. When we thought about filing bankruptcy we were advised that a chapter 7 would not work for us and in a 13 we would be paying back all of our debt but the accruing interest would stop.

We have tried to renogitate our debt ourselves but credit card companies have not been willing to talk to us since we are current and we are nervous about defaulting on them then incurring huge fees and still not be able to renegotiate…what are your thoughts ? We are able to pay our mortgage and our car payments with about 60% of of our income….leaving the remaining 40% for living expenses and debt….

Is bankruptcy or a debt re-payment program the best option for us?

Janet”

The Answer:

Dear Janet,

Well let’s look at the overall solutions. Use my free How to Get Out of Debt Calculator to review your options.

From that we can make some better choices about which approach is right for you based on your goals and abilities.

Take a look at the calculator and then post an update for me in the comments below and tell me which solution looks most attractive to you. We can then talk about the pluses and minuses for each.

Right now you are in the toughest spot, current but feeling hopeless. There is a way out. But before I can point you in the right direction we need to evaluate your options.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Root Canals and Appendectomy Were Expensive and Landed Me in Bankruptcy. – Ray

Lewis Roberts — Sun, 02 Oct 2011 15:55:29 +0000

From How to Get Out of Debt

“Dear Lewis,

Made many not so smart mistakes which put me into serious credit card debt over the past 8 years or so. Followed by some dental work (multiple root canals) that had to be paid with credit card. Last year, had an emergency appendectomy that ended up in an medical insurance mess up. Ended up with 15K bill on that. By this time, I was far behind on credit card payments, with all accounts in the red. Collection calls from many, and a filed law suit by one creditor. Was forced to file bankruptcy. Initially tried for 7, but I make well above median income (firefighter/paramedic with two jobs), and only could qualify for 13. Total debt was around 44k, however only 36K was claimed by creditors. My attorney submitted my plan to the trustee, however she requested much much higher payments based on my income. At this point Im waiting for my attorney to submit the amended plan and hopefully get confirmed.

I have a few questions ! First of all, how high can the trustee raise my payments if I am on a 100% plan ? Do they routinely request pay stubs, or tax info each year ? If I do have an increase in income, how much of an increase would cause her to raise the payments anymore ? The reason im asking is this; I planned on taking another part time job….to comfortably afford to make the payments, as well as saving some money. In 5 years when this is behind me, Id like to have something in the bank so I can start to rebuild my life. Im not talking a huge increase in pay, but enough that I can make payments, pay my bills, still have plenty left over for unseen emergencies, and to build my savings. I did already ask the trustee if saving was allowed during a chapter 13, and she said that yes it was legal in this district.

Ray”

The Answer:

Dear Ray,

Unfortunately, each bankruptcy district is different in its nuances. Even within bankruptcy divisions it can be different. And sometimes there may be two chapter 13 trustees in the same division (heavily populated areas), and each trustee could be different.

Each year the chapter 13 trustee is going to require you to send a copy of your tax return. They generally do not ask for paystubs after the case is confirmed.

But if you are paying 100% of your creditors back, then usually the trustees do not care how much money you make or whether your income goes up.

The questions would be how your trustee wants you to pay back the 100%. Since you have only $36,000 in claims, in my district, you could choose to pay $1,000 for 36 months, $2,000 for 18 months, $600 for 60 months, or any combination that pays it in full.

But in some other districts, you are required to pay all of your disposable income each month until it is paid in full.

Without knowing your exact income and allowed expenses, I don’t know your disposable income. But lets say it is $3,000. Then in this scenario, you would pay $3,000/month for 12 months and get a discharge.

Good luck!

My name is Lewis Roberts and I’m an attorney licensed in Florida and Georgia. My practice focus is consumer bankruptcy, real estate issues/closings, and mortgages. I also have Florida real estate broker and mortgage broker licenses. I am a proud member of the National Association of Consumer Bankruptcy Attorneys (NACBA), National Association of Consumer Attorneys (NACA), and a graduate of Max Gardner’s Bankruptcy Boot Camp. I enjoy helping people with decisions that impact their financial well-being.

Legal Disclaimer: This is for educational purposes only. It is not to be relied upon as legal advice. It also does not create an attorney-client relationship. No such relationship is formed with attorney without a written agreement.

If you have a bankruptcy question you’d like to ask just use the online form.

Collectors Called Constantly Scared of Foreclosure, What Can I Do? – Roy

Mike Killian — Tue, 28 Sep 2010 17:06:47 +0000

From How to Get Out of Debt

“Dear Steve,

I have recently taken over management of finances and bill paying from my wife. I always knew we had some lingering credit card debt that had been following us since college, but I had no idea what the real situation was.

At this point we are $51,000 in credit card debt. We have a mortgage, a HELOC, and a car payment, and have been keeping up with the payments on those. We also owe $9900 to Discover Card. We negotiated with them and they are no longer charging interest as long as we continue to pay it off at $450 a month.

I received a letter from the county court today notifying me that I am being sued by CITI bank for one of the cards that has a balance of $17k. My credit score is already totally shot, so I am not really worried about that at this point, but I am worried that this is going to explode in my face and I’ll end up losing everything.

I have 2 kids, and losing the house would devestate them. I am worried that I could end up getting forclosed because the credit card companies will get access to take money out of my bank account or paycheck, and then I won’t be able to pay the mortgage. The collections people call constantly, but want all the monry now, and don’t want to talk about payment plans.

What can I possibly do to get out of this disaster?

Roy”

I asked my friend Mike Killian to answer your question for you. I wanted to make sure you got an answer as quickly as possible as I’m a bit backed up at the moment. I’ll be watching the comments on this question and be around to help if you need me.

Big Hug!

@GetOutOfDebtGuy

Dear Roy,

I don’t think there is a lot of question here. You and your wife need to make an appointment with a bankruptcy attorney immediately and at least explore options. You might preface this action by contacting a Debt Management company and seeing if a Debt Management Program (DMP) is workable but it is possible it may be too late for that option. But trying is clearly worth an attempt

But I am more inclined to think Chapter 13 may be the wisest choice although that is a call for you and your bankruptcy attorney to make. In many ways a Chapter 13 is sort of a court order debt management program where a repayment plan is worked out. You usually maintain your home and car and agree to pay every one back. It is possible some of the debts are forgiven but the point is, it is all court ordered and you are offered a fresh start and some clean breathing air.

You might want to take a look at Steve Rhode’s article, Is Bankruptcy Right For Me?

Sincerely,

Mike

If you have a credit or debt question you’d like to ask just use the online form. We are happy to help you totally for free.

Off to College: How to Use Credit Cards and Not Get in Over Your Head

Amanda Miller — Tue, 17 Aug 2010 13:57:21 +0000

From How to Get Out of Debt

Let’s face it: when it comes to getting credit, most students have it easy these days. Most college students do get credit cards — and plenty of them if they want. According to a recent study for the Education Resources Institute and the Institute for Higher Education Policy, many college students have credit cards and some of them got their first card as a high school student.

The good news is that most college students are pretty careful with their cards and don’t run up huge balances they can’t pay back. But at GetOutOfDebt.org, we’ve heard from enough students (and parents) to know that some do. When that does happen, it can create a lot of problems. So it’s worth the time to help students learn how to use those tempting pieces of plastic carefully and avoid a hefty tab by graduation.

The advantages of credit cards are the same for students as anyone else — they’re convenient, you can “buy now, pay later,” and they can help you build an excellent credit rating. After all, the best reference you’ll find on a credit report is a major credit card paid on time, all the time. A good credit rating can be a big plus when you graduate and start looking for a job, a place to live and perhaps even a car loan.

The main disadvantage to credit cards is that they don’t always feel like “real money,” so it’s easy to charge more than you can really afford. You can easily wind up with big balances that will be a huge drain on your finances once you’re out of school. And don’t assume you’ll be able to easily handle those bills when you get your first job. Most graduates are surprised at how far their first paycheck doesn’t go. The less debt you have to worry about, the better.

What is the Best Way for a Student to Use Credit Cards?

Don’t feel you have to take every offer that comes along.

Sure, that free T-shirt they give you just for signing up would be nice. But it won’t seem like such a bargain if you’re paying off that card for the next 10 years. You’re better off sticking with one major card, maybe two if you really need it. There will be less temptation and fewer hassles, but at the same time, one or two cards paid on time will be a big boost for your credit rating.

Remember, it’s not free!

When you do get a card, repeat this phrase, “This is simply a way to access a loan. It is not free money.” You can pay it back sooner (when you get the bill) or later (over time). If you pay over time, you’ll be charged interest. That interest increases the cost of the loan and can really add up. If you just make the minimum payment, for example, you’ll probably find that most of your payment goes to the lender in the form of interest, not to pay off what you charged. Don’t believe it? Look at your statement and see.

The table below shows an example of how much it will cost you in interest alone and how many years (in parentheses) it will take you to pay back your balance at different interest rates if you just pay the minimum payment each month.

Always, always pay your credit card bills on time.

Sounds obvious, but when cash is tight (which it usually is when you’re in school), you may be tempted to let the bills slide for a little while then make a large payment to “make up for it”— maybe when that student loan check comes through. It’s not a good idea. Not only will many lenders charge late fees if those payments aren’t there on time, but any late payments will be reported to the credit bureaus and stay on your credit report for seven years, even if you later pay the bill in full. If you can’t afford to make your minimum payments, a nonprofit agency like OnePay.org may be able to help. The worst thing you can do is wait, hoping the problem gets better while it only continues to get worse.

Check your credit report before you graduate.

Your credit report is going to be just as important to your financial future as that diploma will be to job-hunting. It can be reviewed by lenders, insurance companies and even employers! Get a copy of yours before you graduate to make sure everything is correct and up-to-date. If you find mistakes, fill out the form enclosed with your report to notify the credit bureau so it can investigate. To order a consolidated copy of your credit report, containing information from all three credit reporting bureaus, visit GetOutOfDebt.org online.

Advice for Mom and Dad

Like it or not, your children are going to get offers for lots of credit cards. You’d probably be amazed at how easy it is for them to get credit (even when you’re their major source of income).

You can handle this in one of three ways:

Ignore it, hope they don’t get into too much trouble, and if they do, deal with it then. The problem with this approach is obvious: you may one day get that dreaded phone call saying the debt is out of control.
Give your student a card before he or she leaves for school, either by co-signing or adding the student to one of your accounts. If you have the bills sent to you, instead of them, at least you’ll know what’s going on. The problem with this approach is twofold: first, if your offspring does go wild with the plastic, you might end up having to foot the bill or pay the consequences (late charges, marks on your credit file); and secondly, if you co-sign and the bills go to your child at school, you may not even find out that the payments aren’t being made until it is much too late.
Discuss credit cards with your kids well before they head off to school and then let them make their own decisions. Go over your bills with them so they can see how much those casual purchases add up and how interest does too. Tell them about a time when money was tight and how you handled it. Decide together how many credit cards they should get and how they will use them. This option may be your best bet for keeping your kids out of trouble — and protecting your credit rating, too. Remember, if your student gets a card on his or her own, without you signing it, you won’t be legally responsible for the bills but you may feel responsible anyway!

How did you learn how to use credit cards? The hard way — through experience — right? Maybe your kids don’t have to learn the same way. It may not seem like your teenagers are listening when you try to talk with them about credit, but chances are they’ll remember what you said. Time spent helping them understand the financial choices they’ll soon face will be time well spent.

I’m in the Process of a Divorce. He is Supposed to Pay My Credit Card Bill. – Becca

Steve Rhode — Fri, 06 Aug 2010 20:54:32 +0000

From How to Get Out of Debt

Becca

“Dear Steve,

My husband and I are in the process of a divorce. I have a credit card in my name only that has a a large amount of debt on it. In our divorce settlement he is accepting 80% of this debt responsibility (he knows it is his fault it is on there). What is the best way for this to get completely out of my name as I know how he is with money and I don’t want my credit ruined. Right now we both have great scores.

How do I get the debt my husband is accepting responsibility for out of my name?

Becca”

The Answer:

Dear Becca,

The answer is, you don’t.

When you divorce your spouse you don’t divorce your creditors. The only way for him to get his name off the account would be for him to get a new loan and pay off the old card.

A creditor is not going to let a responsible party of a bill with a balance.

Divorce situations frequently don’t turn out all that well when one spouse is supposed to pay the credit card bill of the other. The divorce agreement often creates a bitter pill to swallow for the spouse that is now supposed to pay and payments arrive late or not at all. Then what I see is the spouse that was supposed to pay it, goes bankrupt, and in your case the entire balance will land on you.

My advice is to monitor your credit card online to make sure the payment was received as expected. If you can, setup email alerts from your credit card company to notify you of a bill due so you can monitor it.

Big Hug!

@GetOutOfDebtGuy

Victory and Disappointment for the Debt World Today: Total Debt Falls While Harassment Complaints Rise

Amanda Miller — Fri, 09 Jul 2010 22:08:48 +0000

From How to Get Out of Debt

CNN Money’s recent article, “Debt collectors get nasty” showed some real insight into the current debt collection process in this country. They touched on information reported by the Federal Trade Commission, FTC, about the number of complaints of debt collector harassment issues on the rise.

Apparently these debt collectors haven’t heard of a little thing called the “Fair Debt Collection Practices Act” by the FTC. FDCPA? No? I mean, it’s only been around since 1978. Perhaps they missed the memo. Only 32 years late…

It appears they were not informed that harassing phone calls, violent threats and obscene language were frowned upon in this country when trying to collect a debt.

“Complaints of harassment by debt collectors surged 50% to 67,550 in 2009, according to the Federal Trade Commission. And they are on track to jump 13% this year, based on the number of FTC complaints filed in the first six months.”

The FTC states on their website that “debt collectors may not harass, oppress, or abuse you or any third parties they contact.” Perhaps these collectors have not seen these fun facts.

Something they might want to know…

The FTC defines harassment as being:

“use of threats of violence or harm;
publish a list of names of people who refuse to pay their debts (but they can give this information to the credit reporting companies);
use of obscene or profane language; or
repeatedly use the phone to annoy someone.”

Those last two bulleted items there really struck a cord considering in the past year the number one complaint from consumers has been repeated calls and 35% of complaints involved the use of obscene or profane language.

Some consumers reflected on their experience with debt collectors and the harassment they’ve gone through. One woman mentioned a collector would call and demand, “you better talk to me, you deadbeat”. She was very put off by his threatening calls and was afraid of who would show up at her door.

“When she refused to answer the phone, the collector called her estranged sister, an ex-boyfriend and her husband’s ex-wife’s mother.”

These sort of violent or threatening complaints more than doubled last year with 2,517 cases.

Ok, let’s face it – these collectors know of the FDCPA and they have for 32 years. I personally feel they should be able to recite it in their sleep; it appears they know what they are doing but refuse to play by the rules. Perhaps they think that bullying customers is the best way to collect a debt?

I beg to differ; abuse should never be an option.

What some people don’t know is that YOU have the power to report them and their abusive behavior. If you don’t they will continue these practices on other clients and it will proceed to be a continuous cycle.

Look at Allen Jones, the Lewisville Texas resident, that reported vulgar collector harassment back in May. By doing so he sued the company and produced sound evidence of the calls placed by collectors to him. He won $1.5 million in punitive damages because of a collector’s harassing calls for his $200 debt.

On a positive note in the debt world, the FTC did release another report yesterday showing revolving consumer debt outstanding seems to be falling at a steady rate. Be it consumers are trying to get on higher ground during these rough economic times or the fact that creditors are pulling credit away from them.

Either way, after examining the amount of consumer credit outstanding the FTC concluded that, “consumer credit decreased at an annual rate of 4-1/2 percent in May 2010. Revolving credit decreased at an annual rate of 10-1/2 percent, and non-revolving credit decreased at an annual rate of 1-1/2 percent”.

That means that excluding mortgages and car loans and other “non-revolving” debts the total consumer debt dropped $9.1 billion in May while economists only expected a $2.3 million sink in debt. In the last 17 months this is the 15th drop in overall outstanding revolving credit resulting in a net fallen total of $146 billion (5.7% since 2008).

While total debt is falling, harassment complaints are on the rise. It’s hard to tell if this is a day of triumph for debtors in America to be making progress to becoming debt free or a disappointment based on how many creditors have been harassing them.

All I can say is, keep paying those debts. Don’t be a victim. Know your rights. And stand up for them if they’re violated.

Original Articles:
“Debt Collectors Get Nasty”
“Consumer Debt Falls Again, Led By Credit Cards”

How to Be Financially Successful When You Graduate

Amanda Miller — Wed, 09 Jun 2010 01:24:03 +0000

From How to Get Out of Debt

Congratulations! You’ve made it through the starving student years and now you’re ready to start a job and earn some real money. You’re probably thinking about all the things you’ll be able to buy, places you’ll go and things you’ll be able to do when those paychecks start rolling in.

Not so fast. If you’re like all the people who just assume they’ll figure things out as they go along, you’ll probably end up just like them— in debt. But if you’re smart about your money, you’ll end up way ahead of the game.

Plan Ahead, Double Your Money

Okay, I admit it. For most of us (except maybe some of the business majors) planning sounds boring, boring, boring. But what if I told you just a few hours with a paper and pencil might help you double your savings and investments? Research by the Consumer Federation of America and NationsBank found that people with incomes as little as $10,000 to as much as $100,000 who reported having a written financial plan, had twice as much money in savings and investments as people who said they didn’t have a plan. Now does it sound a little more interesting?

You’re probably not ready to hire a financial planner yet, but you can take a few hours to think about your goals — what you want, how much you need and how you plan to get there. Write down what you want, figure out how much it will cost and then look at how you can get the cash to get it. You probably have a lot of goals right now, like buying a car and vacationing in the Caribbean, but it’s unlikely you’ll be able to get it all immediately. Be honest. If you can’t swing as much as you’d like right now, scale back a little. Just put away what you can and don’t fall into the trap of thinking that if you can’t afford something you can just borrow to get it. Otherwise, you’ll wind up with a big chunk of that paycheck going to lenders every month.

A good exercise is to take one month to track every expenditure you have — every soda from a vending machine, coffee, snack, lunch out, pack of gum that you buy. After you spend a month doing this, you will be able to see areas where you can cut back on spending: drink coffee at home rather than buying it at work, bring a soda from home and pack a lunch regularly. Make going out to lunch a treat rather than the norm.

Where Does the Money Go?

Your salary may seem like a lot of money at first, but wait until you see how far it goes — or doesn’t go! Along with the new feeling of having a regular income will be the experience of paying expenses that you’ve never had before. Before you even get your hands on your earnings, Uncle Sam and the other tax guys are going to take a nice chunk out of those checks. Then you’ll have all kinds of living expenses, not to mention the things you just want. One study by the student financing organization Sallie Mae found that the average college grad needed to earn $38,512, before taxes, just to support his graduation debts and financial obligations. Ouch!

So the first thing is to hold off on big purchases until you get a realistic picture of how much you need to cover your bills and still leave some spending money. There may be some expenses you’ll overlook until you actually start working (clothes for work, travel, food, subscriptions). You may be surprised at how fast your money goes, especially if you were living in a dorm and eating through a dining plan at a college cafeteria. Housing, utilities and food cost a lot. The U.S. Department of Agriculture states that a man between the ages of 20 and 50 should spend between $126 and $250 a month on food, and a woman between the same ages should spend between $115 and $227 a month. So try to get a few months under your belt before you start spending freely.

Generally, before making any big changes in your financial picture, you should have enough money saved to be able to live for three to six months without an income. This is a good amount to cover any unexpected emergencies, layoffs or if you decide this job just isn’t for you.

Getting Around Without Going Broke

You gotta have a new set of wheels, right? And the car dealer will probably tell you that you can get into a great car with really low monthly payments. But wait a minute. Those wheels will cost you a lot more than you probably realize. In fact, the average car will cost you nearly half a million dollars over your driving lifetime!

How is that possible? Well, cars cost a lot more than the payments. There’s insurance, gas and maintenance, and they all add up. Before you let a new vehicle drive you to the poorhouse, think about your alternatives.

Buy a good used car. A good used car that holds its value could be your best bet. That way, if things don’t work out at your current job, you’ll be able to sell it for at least as much as you owe. And, of course, it will cost less over the long run.
Forget a car and use public transportation. If you really need to use a car for out-of-town trips or special occasions, consider renting one. It will be cheaper than owning one for a year.
Share a car. Organizations are popping up all over that allow you to use a car for just a few hours when you need one. Visit www.carsharing.net for more information.

Whatever you do, avoid buying or leasing a car that will obligate you to pay big monthly payments. What happens if you don’t like your new job or it doesn’t work out? How will you make the payments then? Also, steer clear of four and five-year car loans. If you need to sell the car after a couple of years, you’ll probably find that you are “upside down” (owing more on the loan than the car is worth).

Paying for That Education

The six-month grace period on your student loans may give you some breathing room, but those six months fly by. Find out what your payments will be and figure them into your spending plan. Also, consider paying extra each month to pay them off faster. You can always send in a few extra dollars with your payments and, over the long run, they will really add up.

Different lenders have different options to pay off student loans, but if you have a federal student loan, you generally have the following repayment options:

Standard Repayment Plan. You make fixed monthly payments of at least $50 over a fixed period of time — up to 10 years. Under this plan, you would probably pay the lowest total interest because the repayment period is shorter than that of the other plans.
Extended Repayment Plan. This plan gives you more leeway by extending repayment over a period of The six-month grace period on your student loans may give you some breathing room, but those six months fly by. 12 to 30 years, depending on the total amount borrowed. You would still pay a fixed amount each month of at least $50, but monthly payments are probably less than under the Standard Repayment Plan. Remember, however, that you will probably pay more interest because the repayment period is longer.
Graduated Repayment Plan. Under this plan, your payments start small and increase every two years. This gives leeway to recent graduates whose incomes start low but increase steadily. The repayment period lasts 12 to 30 years, depending on the total amount borrowed. Again, if you use this repayment plan, you will probably pay more interest because the repayment period is longer.
Income Contingent Repayment Plan. This plan bases monthly payments on your income and the total amount of federal loans that you borrowed. Your monthly payments adjust with your income — the lower your income, the lower the payment and vice versa. You would have up to 25 years to repay your student loans. After 25 years, any unpaid amount would be discharged but you will have to pay taxes on the discharged amount.

If you have a private student loan, contact your lender to find out your repayment options. If you run into trouble and can’t make your student loan payments, you may have several options until you’re back on your feet. If you have a federal loan, you may be eligible for a deferment or forbearance.

These options are only available to you if you talk with your lender before you fall behind on
your payments, though, so you have to ask before you’re too strapped.

A deferment allows you to postpone making payments on your loan (and even cancel certain federal loans) if you meet specific eligibility requirements.

Some of the requirements for deferment or cancellation are:

Economic hardship
You work as a full-time elementary or secondary school teacher in a designated area serving low-income students; you teach children with disabilities; or you teach math, science, foreign languages, bilingual education or other fields designated as teachershortage
areas. (The Department of Education annually publishes the
Directory of Designated Low-Income Schools for Teacher Cancellation Benefits. Check your school’s financial aid office for this directory.)
You are a student in school
You are a parent or working mother
You are a full-time professional provider of early intervention services for the disabled or a full-time employee of a public or nonprofit agency providing services to lowincome, high-risk children and their families
You have a temporary total disability, and
You are unemployed.

Depending on the type of federal loan you have, the federal government may or may not pay the interest accruing during the deferment period. If you must pay the interest, you can do so by making interest-only payments during the deferment period or you can let the interest accumulate and be added to the loan amount when the deferment period ends.

Even if you have other unanticipated personal or health problems but don’t meet the requirements for a deferment, you may be able to get a forbearance of loan payments. During a forbearance period you may make no payments or reduced payments. Interest will continue to accrue during the forbearance period and will be added to the loan amount when the forbearance period ends.

Home Sweet Home

Tired of dorm living or a crowded group house? Ready for that dream apartment, or maybe even a house? Before you sign a lease on a new place or even start house hunting, take some time to choose the best digs for your dollars. If you are having a problem affording a lease, you can look for a landlord who will give you a break on the rent in exchange for you doing some work on the place. Whatever route you take, living alone or with roommates, try to avoid long-term lease commitments until you are sure your job and any roommates will work out.

If you want to live on your own, look at all the expenses in the picture. Do you get free parking? Are utilities included in your monthly rent? If utilities are not included, your housing expenses will increase substantially. You may have bills for power, gas, telephone, water, and if you get cable, you add another $30 or so to your expenses each month. If utilities are not included, you need to pay attention to things that will jack up your power bill. Take into account such considerations as whether you’re in an older home, whether you have an air conditioning unit and whether you have central heat.

If you go the roommate route, you need to take care to protect yourself. There are plenty of horror stories out there about people who weren’t careful and ended up with huge financial responsibilities. Make sure that all roommates are on the lease, so that everyone is equally responsible for the lease payments. Be sure you are confident that your roommates can afford their share of the lease payment. Keep in mind that each person listed on the lease will be liable for the full lease payment if another person on the lease doesn’t pay his or her share.

A lot of people mistakenly think that they don’t have to worry about their roommate’s financial behavior. Be aware that any late or nonpayment of rent caused by your roommate can affect you for a long time. Even if your late rent payments don’t show up on your credit report (and stay there for the seven-year reporting period), they will hurt you when you are ready to move into a new apartment or house. Also, you could end up losing your deposit if your roommates damage the property or skip out on the lease.

You should use the same caution with your utilities. If you get the utilities in your name, you are responsible for all payments due, and it is up to you to get reimbursed by your roommates. If you try to hold out and wait until your roommates are ready to pay their share and the payment is late, this late payment can be reflected on your credit report and hurt you later in life, even though it wasn’t really “your fault.”

To protect yourself and make sure your bills are paid on time, you should come up with a system with your roommates. Some roommates put different utilities in different roommates’ names, so that no one person is personally responsible for all utility bills. The roommate in charge of a particular bill can divide the bill amount by the number of roommates and require each roommate to pay his or her share at least 10 days before the actual due date to make sure the bill payment is sent on time. You can have “bill night” where all roommates get together, order pizza and pay the bills.

Another way to make sure all roommates are protected is to have each roommate put a certain amount of money in an account, totaling $500 or so, to cover unexpected emergencies. If a utility is in your name, be sure to have your name removed from the account when you move.

A great (although usually unattainable) option for college grads with the time, energy and money is to buy a house that needs some work and fix it up. Although low down payment loans are available, if you decide to move in the next few years, you could wind up owing more than your house is worth. A larger down payment can keep you out of that trap. If you can rent part of it to roommates, you may end up with a great, low-cost investment on your hands.

Plastic Pointers

Those credit cards may seem like your passport to the good life right now, but nothing will sink you faster than an overloaded wallet that’s always getting a workout.

Here’s the reality: credit cards are great for convenience and to help you out in a jam, but if you run up a lot of bills you can’t pay quickly, you’ll pay a hefty price for that convenience.

The chart below shows how much you’ll pay in interest alone and how many years (in parentheses) it will take you to pay off a balance if you only make the minimum payment on your credit cards:

It’s a pretty good bet that two major credit cards will be enough. You can use one for day-to-day purchases that you pay in full every month. The other card should have the lowest interest rate you can find, and you’ll save that one for real emergencies when you know you won’t be able to pay it off right away.

If you don’t have a major credit card when you graduate, it’ll be tough to get that first one. This is truly a case where you’ll find out that it takes credit to get credit. If you find yourself in that bind, consider a secured credit card, which is a major credit card that requires a security deposit. Pay your bills on time each month and it shouldn’t take long to build a good credit rating and get all the credit you want.

Protect Your Credit Record

A lot of recent graduates make the mistake of charging up now with the expectation that they’ll be able to pay it all off later, when they are making the big bucks. They believe that they’ll get a high paying job soon enough and, at that time, they’ll have no problem paying off all their debt in full. That may or may not be true, but regardless, those months or years of nonpayment will be on their credit report for at least seven years.

Your credit report is your key to your good financial future. Anytime you need credit — for a mortgage, an auto loan, a credit card, student loans for graduate school, even getting a lease on an apartment — your creditor will look at your credit report to determine if you are a good credit risk. Some recent graduates who don’t pay attention to their credit reports now will get a big surprise later when they want to buy a new car and can only get an auto loan with a 20 percent interest rate.

According to the Fair Credit Reporting Act, negative information stays on your credit report for seven to ten years and can continue to be reported indefinitely to prospective lenders, insurance companies and employers if you apply for a loan or insurance for more than $150,000, or for a job that pays $75,000 or more. You keep your credit report clean by consistently paying your bills on time and having a reasonable amount of debt and open credit. The more consistent your payment history in your credit report, the better credit risk you are.

It’s a good idea to get a copy of your credit report to see what information it has. There may be inaccurate information in the report that you should dispute. A dispute form should accompany the credit report, and you should include a copy of any documentation you have that shows the information is wrong.

To order a consolidated copy of your credit report, containing information from all three credit reporting bureaus, visit GetOutOfDebt.org online.

Get Ahead Now

Now’s the time to start saving and investing for your future. “But I have no money!” you complain. C’mon. Do you really think it’s going to be easier “someday?” The more you make, the more you’ll want to spend. So get in the habit of saving now. Starting early means you’ll have to put aside a lot less to reach your goals than if you wait.

Here’s an example from The Truth About Money, a great book by Ric Edelman. Suppose you’ve set a goal of having $100,000 socked away by retirement at age 65. (You’ll need a lot more than that, but this is just an illustration.) If you start saving at age 20, assuming a 10 percent return, you’ll need to put aside only $9 a month. If you wait until you’re 30, you’ll have to invest $26 a month; at age 40 it becomes $75 a month; and if you really procrastinate, at age 50 you’ll have to sock away $239 a month. Starting early pays off big time!

If you’re intimidated by investments, consider starting an investment club or joining one in your area. Generally, there are a lot of tools that you can use to save, including mutual funds, money market funds, investing in stocks, traditional and Roth IRAs, or simple savings accounts.

One of the easiest ways to save is to have money taken directly out of your paycheck. An example of this is a 401(k) plan through your employer. A 401(k) plan is a great way to save, especially if your employer matches your contributions.

Matching works as follows: let’s say you put 10 percent of your gross monthly paycheck (before taxes) into a 401(k) account; your employer would put in a matching amount into your account. After a certain vesting period (during which time you must continue working for that employer — maybe two to five years) the matching amount is guaranteed.

If your employer offers a 401(k) plan, find out the following:

How much does your employer match? Some employers don’t match at all, however if yours does, this is free money you are passing up if you don’t participate.
What is the total amount you can contribute to the 401(k) plan?
How long you must work before you can start contributing to your 401(k) plan?
How long the vesting period is?
How well the funds have performed?

If your employer does match, a 401(k) is one of the best saving tools you have for retirement.

Whatever investment tool you choose, start saving something now. That means today!

When the Going Gets Tough

Not everything will be smooth sailing from here on out. You can’t predict what may happen; you could become ill and have to leave work, or your job may not be there forever. If you’ve kept yourself out of too much debt and saved part of every paycheck, you’ll weather the storms a lot easier.

Good luck!

Plastic Power: Smart Strategies for Making the Most of Your Credit Cards

Amanda Miller — Fri, 04 Jun 2010 15:03:23 +0000

From How to Get Out of Debt

At GetOutOfDebt.org, we help thousands of people with too much debt. So you probably figure we’d think credit cards are terrible, right? Wrong!

Credit cards can be a great tool and can even save you money if you’re smart about how you use them. That doesn’t mean charging up a storm on things you can’t afford, or even using your cards to maintain your lifestyle. But if you know the benefits of credit cards and how to take advantage of them, you can come out ahead. Here are the advantages of saying, “Charge It!”

Other People’s Money

When you use your credit card, you’re using the lender’s money. The question is, how much are you paying for it? If your card has a grace period and you pay the balance in full, then you’re paying nothing to use someone else’s money for anywhere from a few days to as much as two months, depending on the length of the grace period and when you make your purchase.

Smart Strategy: Time a big purchase a day or two after the closing date of your card’s billing cycle to get the maximum float.

What happens if you have to borrow money? A low-rate credit card can actually be a great deal. There are plenty of expensive traps on many cards, so be careful. Look for a steady, low-rate card and make sure you pay the bills on time so you don’t end up with a late fee or a higher rate.

Smart Strategy: Shop for a low-rate card at cardtrak.com or bankrate.com, or ask your card issuer to lower your current rate.

Protection for Purchases

Use your credit card for purchases and you’ll have additional protection you just don’t get when you pay by cash or check. You can dispute a charge if merchandise you order is not delivered as agreed (in the wrong quantity, the wrong color or on the wrong date, for example). You have up to 60 days from the date the card issuer mailed the statement showing the disputed charge to complain.

You can call the card issuer to dispute a charge, but I don’t recommend it. You only protect your rights under the Fair Credit Billing Act if you put your complaint in writing to the card issuer at the address listed on the statement for billing errors. I recommend you send your letter by certified mail, return receipt requested. Keep in mind that the law doesn’t cover changing your mind — for that you’ll have to deal with the merchant directly.

You may also be able to dispute a charge when there is a problem with the quality of the goods or services you bought. This is a little trickier, so follow the rules carefully. Here are the basic requirements:

The charge must be for $50 or more.
You must have bought the merchandise in your home state or within 100 miles of your billing address.
You must have made a good-faith effort to resolve the problem with the merchant.

In this case, you can’t dispute the charge and withhold payment if you’ve already paid off the charge, so act quickly if you think there is a problem. Again, I recommend you write a letter to the card issuer disputing the charge and send it by certified mail, return receipt requested.

Whether or not you can successfully dispute a charge because of a problem with the quality of the merchandise you bought depends on what rights your state laws give you against the seller of the goods. If, under your state law, you can withhold payment to a seller of defective merchandise, you may be able to withhold payment to your credit card issuer.

Smart Strategy: Use your credit card for big-ticket items, online or mail order purchases, or for any other charge where there could be a potential problem with the merchandise or service. Then, check your credit card statement carefully and dispute any errors in writing immediately.

Protection for Losses

Lose your wallet or purse filled with cash and you may be out of luck. Lose your credit cards, though, and it may be a little hassle getting them replaced, but that’s about it.

Under the federal Truth in Lending Act, the most you can be held responsible for is $50 in unauthorized charges. And that’s only if your card was actually stolen and used. If someone just steals your card number without taking the card itself, your liability is zero. This is more protection than your debit card provides you.

Smart Strategy: Keep in a safe place a list of your credit card numbers and the phone numbers to call if they are lost or stolen (not in your purse or wallet). Call immediately if you think you’ve lost them.

Travel Advantages

Whether you’re packing for a trip across the state or overseas, don’t forget to pack the plastic. Major credit cards are convenient, widely accepted and offer you additional protections mentioned earlier — both for purchases and in case you and your wallet part ways.

When you venture overseas, you’ll find that in many places, American Express, MasterCard and Visa cards will be accepted by many merchants — in some places, they’ll prefer plastic over traveler’s checks.

Besides the convenience, another advantage to using credit cards overseas is the fact that you’ll usually get a better exchange rate than you can on your own through local merchants. Credit card purchases are exchanged at wholesale currency rates, which are usually very attractive. One caveat: Some card issuers tack on a one to three percent “conversion fee” on foreign credit card purchases, but not all do, so ask in advance.

Smart Strategy: Take your major credit cards with you overseas, but be sure to check your credit card receipts carefully to make sure the amount is correct (foreign currency may sometimes throw you off) and keep a record of your card numbers in case there is a problem.

Car Rental Savings

If you don’t have a major credit card or only a debit card, it can be a hassle to rent a car. Some car rental agencies will not allow you to reserve a car with a debit card. (To learn more about the differences between credit and debit cards, see the article entitled “Credit Card or Debit Card: The Great Debate.”) But if you do have one, you may be able to save a bundle if your card offers free Collision Damage Waiver (CDW) coverage. This allows you to decline the rental agency’s expensive coverage. Many premium cards (like gold or platinum) and some standard cards offer this benefit. Just beware: in some countries you may have to buy coverage anyway — check with the rental agency when you book your car rental.

Smart Strategy: Use a card that offers free CDW when you rent a car and save the money on the rental agency’s coverage. Always check before traveling overseas to find out if you’ll be able to take advantage of the CDW.

Credit Card or Debit Card: The Great Debate

Amanda Miller — Wed, 02 Jun 2010 01:05:39 +0000

From How to Get Out of Debt

Having trouble getting approved for a credit card? Do you have bad credit? Maybe a debit card is the answer. Today, more and more banks and financial institutions are rushing to issue their customers debit cards. In fact, many of these companies routinely issue “enhanced” ATM cards that can also be used as debit cards to make purchases. This article will tell you everything you need to know about debit cards and how they differ from credit cards.

A credit card allows you to buy goods and services now and pay later — up to a certain amount (your “credit limit”). The merchant or service provider from whom you made the purchase collects what you owe from the card issuer — the company that issued you the card. The card issuer then bills you on a monthly basis. The minimum monthly payment due is based on a percentage of your total balance. You are charged interest on the unpaid balance you owe at the end of each period.

A debit card is a combination of a credit card, check and an automated teller machine (“ATM”) card. There are two types of debit cards — online and off-line. Online debit cards are usually enhanced ATM cards. When you purchase something using an online debit card, you immediately transfer money electronically from your bank account to the merchant’s bank account. You must punch in your personal identification number (“PIN”) to access your account for added security. Off-line debit cards may have the Visa or MasterCard logo and can be used at any place that accepts Visa or MasterCard credit cards.

When you pay with an off-line debit card, you sign for your purchase without providing any additional identification just like a credit card. The payment for the purchase is deducted from your checking account within one to three business days after the transaction. This “float” period is comparable to the time it takes for a regular check to clear the bank. Some debit cards handle both off-line and online debits, and you would choose the function you want when you use the card. Visa and MasterCard debit cards may be used to make online purchases if the merchant has a keypad for you to punch your PIN into. Be aware that some merchants charge you a fee to use an online debit card. Ask if you are unsure.

Most people use a credit or debit card for convenience. With both cards, you don’t need to carry around a lot of cash when you are away from home. If an emergency arises, such as a broken-down car, and the cost of the repair outweighs the cash in your pocket, a credit or debit card comes in especially handy. Credit and debit cards carrying the Visa or MasterCard logos are accepted worldwide and they save you from the identification hassles connected with writing a check.

The Major Differences Between Debit and Credit Cards

There are several major differences between credit and debit cards, outlined below.

Card Incentives

Certain credit cards will offer special services to make them more appealing, such as the replacement of lost or stolen merchandise, frequent flier programs, a warranty extension on a product, automatic air travel insurance, or collision waiver insurance for rental cars. Be sure to read the fine print on these benefits — they might not always be as wonderful as they sound. Debit cards, on the other hand, don’t usually offer these kinds of services to the cardholder.

Fees/Costs

With debit cards, since the money comes directly from your checking account and you never have an outstanding balance, you avoid interest charges, late fees and over-limit fees that are connected to credit cards. If you take cash from your bank’s ATM with your debit card, you don’t pay interest or a transaction fee as you normally would when taking cash advances on a credit card. If you use a machine not associated with the bank that issued your ATM card, however, you may be hit with two separate fees — one from the bank you are using and another from your own bank for not using a machine on its network. You also may be charged a fee if you exceed your bank’s quota of free debit transactions.

Spending Limit

A major disadvantage with credit cards is that undisciplined cardholders can end up spending much more money than they can actually afford. A debit card avoids this problem because the funds are taken directly from your checking account. But this raises a different problem — if you spend more than you can afford with your debit card, checks you have written recently may bounce when they reach your bank. You will then have bouncedcheck fees to pay, which can be very high. To avoid this, know how much money you have available in your account and budget carefully by tracking debit purchases in your check register. Also, be aware that a debit card may not give you a debit limit equal to the balance of the bank account to which it is linked. Check with your bank to find out your limit.

Credit Rating

Unlike credit cards, debit cards cannot help you build good credit because the accounts are generally not reported to credit reporting agencies. If you are looking to rebuild your credit and can’t get a credit card, you should consider a secured card, where you place a deposit with the bank equal to your credit limit. Secured cards are a good way to build a strong credit history and, as a bonus, the deposit you make may earn interest.

Billing Errors

Billing errors on credit and debit card accounts are treated differently by federal laws. If you find an error on your credit card bill, you must notify the card issuer within 60 days of the day that the statement was sent. You should write a letter to the customer service department, give your name, account number, explanation of the error, amount involved, and attach any documents that show the error, such as a receipt showing the correct charge amount.

Within 30 days, under federal law, a credit card issuer must either acknowledge receipt of your letter or correct the bill. If the card issuer does not correct the error within those 30 days, it must either do so within two billing cycles or explain why it hasn’t. Until the dispute is resolved, you can withhold payment of the disputed amount and the card issuer cannot report you as delinquent to the credit reporting agencies. But the card issuer can apply that amount to your credit limit and can charge you interest on the disputed amount (and later subtract it if you are correct).

For debit cards, you also must notify the card issuer within 60 days of the date of the statement that shows the billing error (or the receipt). You should call the card issuer to notify it about the error, then immediately write a letter confirming the phone call. Under federal law, the card issuer has 10 business days from the date of your notification to investigate the problem and correct any error. During its 10-day investigation, the card issuer does not need to credit your account with the amount in dispute. The card issuer can extend its investigation to 45 days, but only if it deposits the disputed amount into your account pending the result of the investigation.

Merchant Disputes

Different policies govern merchant disputes, depending on whether you used a credit or debit card. If you are dissatisfied with a product or service that you purchased using your credit card, the Fair Credit Billing Act gives you the same legal rights against the card issuer that you would have under your state laws against the merchant. So if your state law gives you the right to withhold payment to a merchant for defective merchandise or pay and later sue for a refund, you might also be able to withhold payment to your credit card issuer. State laws vary so you should talk to an attorney or to your local consumer affairs office. In general, your dispute rights only apply if you gave the merchant a chance to cure the problem, you bought the item in your home state or within 100 miles of your current mailing address and the amount paid was more than $50.

There are no dispute rights for debit card purchases under federal laws. However, some debit card issuers treat disputes regarding the quality of goods or services the same whether a consumer uses credit or debit cards to make his purchases. Check the terms of your debit card agreement.

Theft Protection

Perhaps the most startling difference between debit and credit cards is the protection you get under federal law if your card is lost or stolen. If your debit card has been lost or stolen and you fail to notify your card issuer within a short period of time, there is very little protection for you under federal law.

Under federal laws, your liability is $0 for any unauthorized charges after you report the card missing, but you can be liable for unauthorized charges made before you notified the card issuer. In general, you are responsible for $50 of any unauthorized withdrawals if you notify the card issuer within two business days after you realize the card is missing. You are responsible for $500 of any unauthorized withdrawals if you notify the card issuer two business days or more after realizing the card is missing, but within 60 days after the card issuer mailed the bank statement listing the unauthorized withdrawals. If you fail to notify the card issuer within 60 days after the bank statement with the unauthorized withdrawals is mailed to you, you are responsible for all unauthorized withdrawals up to the time of your notification.

You may get relief outside of the federal law, thanks to consumer complaints. Visa and MasterCard, some banks and some states have established policies that go beyond the federal law to protect consumers. Visa and MasterCard have policies that establish the same protections as exist for unauthorized credit card charges: debit card holders are not responsible for any unauthorized charges as long as they notify their issuer immediately and have a maximum liability of $50.

Some banks and states also have capped the liability for unauthorized withdrawals on an ATM or debit card at $50. You should check with your financial institution and state Consumer Protection office about your liability limits.

Under federal law, after you notify the debit card issuer about your lost or stolen debit card, the issuer has up to 10 business days to investigate and credit your account if it was used fraudulently. Some debit card issuers promise faster provisional credit. Although they are not required to, as a measure of good customer service, some debit card issuers waive bounced check and other fees that incur from checks that unintentionally bounced because a debit card was stolen.

A Few Final Suggestions

If you are thinking about obtaining a financial transaction card to build your credit history, consider a secured card or credit card and use it responsibly.
If you are having problems getting credit and don’t have enough money to obtain a secured card, then a debit card may be the answer.
For maximum consumer protection, a credit or secured card is preferable to a debit card.

If you decide to get a debit card:

Budget diligently and know how much money you have in your account. Write all withdrawals into your check register. Reconcile all ATM receipts with bank statements as soon as possible.
Memorize your PIN and don’t carry your PIN in your wallet, purse, or anywhere near your card. Never use your address, birthday, phone number or social security number as your PIN.
Hold onto your receipts from your debit card transactions. A thief may get your name and debit card number from a receipt and order goods by mail or over the telephone.
Check your debit card account statements to make sure there are no mistakes. If you lose your card or it is stolen, call your card issuer immediately and follow up the call with a confirmation letter.
Avoid using your debit card for specific types of purchases. If you use a debit card to purchase airline, train or bus tickets, the money is taken out of your checking account immediately or within three days after the reservation is made.
If there is a change in your plans and you need to cancel or postpone your trip, it can take weeks to get a refund issued. Some major car rental companies do not accept debit cards for reservations.
Think twice before linking your savings account to a checking account with debit card access.
If a thief steals your card, both your checking and savings account can be drained. If you get an overdraft account that is linked to your checking account, you can get into even more trouble if your card is improperly used. Some card issuers or banks have daily limits on debit card withdrawals, which prevent thieves from clearing out bank accounts. Check with your debit card issuer to see if you have a daily limit.

Regardless of your decision, a debit, credit or secured card will offer you the purchasing convenience you have been searching for. Please refer to the following table that compares credit and debit cards. Good luck!

I’m Considering Letting Some of My Debt Go Delinquent. – Terrell

Steve Rhode — Sat, 22 May 2010 13:03:45 +0000

From How to Get Out of Debt

Terrell

“Dear Steve,

2 1/2 years ago my car broke and I made the mistake of charging car rentals to get back and forth to work on my credit card. A $1500 debt climbed to over $4000 within 2 months. Up until January of this year I was able to make the payments. At that point the payments climbed to $180 and I was unemployed and broke.

I have made a 2 or 3 $100 payments in the last few months on that card. Two other smaller credit cards in the amounts of $1200 and $500 respectively also have climbed in monthly payments. I just started a new job and have no doubt about making the payments on the two smaller cards but I’m sure the interest on the larger one is outrageous by now. It’s tied to my bank account and every time I make a deposit the credit card sucks it up.

I’m considering letting the big debt go delinquent. Will letting that one card go delinquent kill my credit? Should I get the debts consolidated? I’m at a loss of what to do at this point. Please help.

Terrell”

The Answer:

Dear Terrell,

I’m not sure I can see any advantage to the plan you proposed. If you are late and delinquent on one debt it will drag your credit score down and probably lead to higher interest rates on your other cards.

But with the way your bank account is setup, it sounds like to go delinquent on that big balance card you’d need to change banks and open a new bank account so they stop draining you each time you make a deposit. Your current bank sounds like it might be a credit union.

With a total of about $6,000 in credit card debt, if you enrolled in a debt management or credit counseling program your monthly payment for all debts would be around $120 per month. If that sounds like something you can do and keep up, then contact a debt management company. They may also be able to reduce your interest rates as well.

If that does not sound like a payment plan you can do then you’re probably looking at a more aggressive solution like bankruptcy. Talk to a debt management company and let me know, in the comments section, if what they propose to you sounds reasonable.

Big Hug!

@GetOutOfDebtGuy

“How Do I Go About Making My Credit Score Better” – Antoine

Steve Rhode — Mon, 15 Feb 2010 20:27:41 +0000

From How to Get Out of Debt

Antoine writes in to the Get Out of Debt Squirrel and asks:

I don’t have credit card dept of any kind. I’ve never filed bankruptcy. I have bills on my credit report some of them I’m unaware of and the others are overdue bills. How do I go about solving the problem to get it off my credit report? How can I make my score go up? Please help me.

Antoine, Never Fear, the Get Out of Debt Squirrel is Here. Yeah I know, corny. But I just had to say it.

Tackling a bad credit score is both easy and important to do. A bad credit score can hold you back from cheap insurance rates and access to cheaper credit. A bad credit score and and a bad credit report give you higher monthly payments. Let me put it this way, I can’t think of a single advantage to having a bad credit report.

Legally Improving Your Credit Report is Easy

Armed with the right information and the right tools it can be easy to improve your credit report. Now doing this will cost you a little bit but better to make a small investment to get a big reward, much better credit.

Stop Fooling Around The first step is to stop fooling around with all those free credit reports you hear about and just go straight for the gold standard in credit reports. A really good consolidated credit report, like you can get online here, will give you all the information you need to know to:

Identify your creditors.
Compare each of the three major credit reports side-by-side to see who is actually saying what about you.
Using the creditor contact information on the credit report you can contact those you don’t recognize to either make payment arrangements or settle the debt in full.
If there is any information on your credit report which is not correct, the credit report will give you the information you need to contact each individual credit bureau and ask to have that information removed.

Legally Improving Your Credit Score is Easy

Online credit score tools will easily show you what changes you need to make to improve your credit score. With the right credit score tools you can see how much your score will improve by repaying certain creditors or doing specific things like closing credit or getting credit. Since the mac daddy of credit scores is the FICO score, don’t mess around, go to them and get your score online now to best model how to improve your credit score. That’s what I do.

The FICO folks even provide a free credit score estimator you can use online.

You’re Almost Done, But Not Yet

As crazy as tis sounds Antoine, you need to get some new good credit to add to your credit report. Without new good credit to add it will be hard to neutralize your past credit transgressions. Don’t apply for a gas card or store credit card, those only bring down your score.

Instead go for one of these easier to get major credit cards to get back in the credit game, get it reported to the credit bureaus and starting making your credit report and credit score look as spotless as it possibly can.

Take a look at these cards of an example of what I’m talking about. You can also find more here in the credit card section.

Do You Have a Question for the Squirrel?

If you would like to ask a question, don’t be shy, ask it online here.

Bailout Plan Wants to Push More Credit On Overloaded Consumers

Steve Rhode — Thu, 28 Jan 2010 22:39:16 +0000

From How to Get Out of Debt

The average client who seeks help at the Consumer Credit Counseling Service of Central New York has $47,000 in credit card debt and makes $37,000 a year.

Not surprising, considering that living expenses are going up while wages aren’t rising to match.

“Living expenses have jumped significantly, and people’s income hasn’t kept up,” said Karyn Dettbarn, the credit counseling company’s Albany branch manager. “People are using their credit cards to pay for their expenses.”

Federal Reserve Chairman Ben Bernanke suggested on Monday that a new economic stimulus package should include increased access to credit for consumers, home buyers and other borrowers.

So we already have consumers that are overloaded with credit and the governments answer to the economic crisis is to make it easier for consumers to get more credit?

Bailout plan to perpetuate our house of cards Times Herald-Record, NY - 56 minutes ago By Christian Livermore The average client who seeks help at the Consumer Credit Counseling Service of Central New York has $47000 in credit card debt and …

Click Here for Credit Card Debt Help

Source: Bailout plan to perpetuate our house of cards – Times Herald-Record

I’m $850 in Debt, in College, and Don’t Want to Tell My Parents. – Jessica

Steve Rhode — Sat, 16 Jan 2010 19:57:04 +0000

From How to Get Out of Debt

“Dear Steve,

I am a college student with 2 years left of undergraduate school and then one more year for grad school. I got a credit card last summer and was doing fine until school started. I couldn’t find a job so my bill racked up to around $850.

I still am unable to find a job and I am struggling to afford the cost of food. Creditors have been calling me day and night. I’m scared that my credit will be messed up because of this or that creditors will file a lawsuit against me.

As of right now, I do not have any student loans but I have considered taking one out just to pay this debt. The problem with that is, I do not want my parents to know what a mess I have gotten myself into, and they would find out if I took out a student loan!

What are my best options?

Jessica”

The Answer:

Dear Jessica,

Taking out a student loan to pay this debt would be a massive and colossal mistake. It would be the worst thing you’ll ever do and if you do it I will personally come over and kick your ass. I hope I didn’t sugarcoat that too much for you.

Of all the solutions available to you, the best is to fall on the sword with mom and dad and fess up to the situation. You owe too little to be helped by credit counseling, budgeting isn’t going to save you since you have no income to budget, and as long as this issue remains open and unresolved it will hurt your credit.

I think you’ve learned about the dangers of debt when you can’t pay it and it is time to put this matter behind you with a little help of the Bank of Mom and Dad.

They may be upset for a short period of time but share with them what you have learned from the experience. Help them to see that this is the least expensive and most important class that you will learn in all your college years, Debt 101: The Consequences of Debt.

Big Hug!

@GetOutOfDebtGuy

Credit Counseling Seen as Little Help in Bankruptcies

Steve Rhode — Thu, 07 Jan 2010 21:16:41 +0000

From How to Get Out of Debt

Such a great article on the failure and total waste of time that pre-bankruptcy credit counseling is and always was under the 2005 bankruptcy reform farce.

Many credit counseling groups supported the mandate of pre-bankruptcy credit counseling because they incorrectly thought it would funnel income generating customers into their debt management programs. It was the wrong assumption then and it is still the wrong mandate to continue.

Counseling seen as little help in bankruptcies Columbus Dispatch, OH - 4 hours ago Transferring credit-card debt to a card with a zero percent interest rate offer, for example, is nearly impossible for someone with delinquent payments. …

Click Here for Credit Card Debt Help

Source: Counseling seen as little help in bankruptcies – Columbus Dispatch

West Virginia Wipes Out Credit Card Debt for 1451 Citizens – Consumer Affairs

Steve Rhode — Tue, 05 Jan 2010 05:07:31 +0000

From How to Get Out of Debt

• West Virginia Wipes Out Credit Card Debt for 1451 Citizens Consumer Affairs - 2 hours ago As thousands of consumers discover each year, shady companies that promise to get rid of your credit card debt always fail to deliver. …

Click Here for Credit Card Debt Help

Source: • West Virginia Wipes Out Credit Card Debt for 1451 Citizens – Consumer Affairs

Business Noticing Increase in Credit Card Purchases. Not a Good Sign.

Steve Rhode — Sat, 19 Dec 2009 14:55:22 +0000

From How to Get Out of Debt

The story below caught my attention. An early sign that things are getting worse for consumers. When you notice a noticeable uptick in credit card use in a down economy that means that more people are running up debt when they can’t afford to pay. Yikes!

POLK COUNTY (Bay News 9) — During these tough economic times more Americans appear to be turning to plastic when they’re making purchases, and business owners are noticing.

Crowder Brothers Hardware has sold hammers and nails to people in Polk County for three-decades.

And while many small businesses are struggling, their customers keep coming in.

“You can put off buying a new car or some new clothes,” said Bruce Phillips owner of Crowder Brothers Hardware. “But if your toilet is leaking you don’t have that option of saying, ‘well we can let it go — we’ll fix it in a few months.’ So, we’re fortunate there.”

Phillips says the biggest change he’s noticed through the years is that his cashiers now swipe more credit cards than they count cash.

“We’ve probably seen credit card usage go from 30 percent up to now 50 and 60 percent,” Phillips said.

But as more consumers get used to swiping, more are finding themselves in the red.
Americans now owe an estimated $850 billion in credit card debt, which is four times as much as in 1990.

Consumers aren’t the only ones affected by the increase. Small business owners like Phillips say they’re also paying a price as the popularity of plastic rises.

“Cash is king,” Phillips said. “Credit card — we pay a percentage to have those processed and that affects our bottom line profit.”

The Consumer Federation of America reports 58-percent of people with credit cards do not pay their balance in full each month.

Watch video.

Source: Business noticing increase in credit card purchases

I’ve Been Called Back to Active Duty in the Army. What Do I Do About My Car Payment and Bank Loans? – Larry

Steve Rhode — Thu, 10 Dec 2009 00:41:54 +0000

From How to Get Out of Debt

Larry

“Dear Steve,

I have been called back to active duty. I do not make as much on active duty as I did on the civilian side. I am currently selling my house but even with it gone I don’t make enough to pay my car note and my bank loans.

How do I fix this without bankrupcy or repositions? The out of debt companies that I have found only deal with unsecure loans. Is there a program for soldiers like myself?

Larry”

The Answer:

Dear Larry,

I assume from the tone of your email that you are single and not leaving a spouse behind to live in the house, drive the car or pay the bills.

First, let me say that I really appreciate and thank you for the sacrifices you are and will make to serve in our armed forces. When people say that members of the military are unsung heros, they really are.

Any answer to your situation lies within the Servicemembers Civil Relief Act (SCRA) which provides some protections to be entering active duty in the military. While the Servicemembers Civil Relief Act provides you with some protection you need to remember that the protections only extend to debt incurred prior to returning to active duty.

Regarding the Car:

A servicemember who, prior to entry into active duty, entered an installment contract for the purchase of real or personal property (including motor vehicle), is protected under the SCRA if the servicemember’s ability to make the payments is “materially affected” by the military service.

The servicemember must have paid, prior to entry onto active duty, a deposit or installment under the contract.

The seller is then prohibited from exercising any right or option under the contract to rescind or terminate the contract, to resume possession of the property for nonpayment of any installment due, or to breach the terms of the contract, unless authorized by the court.

Regarding the Bank Loans:

The SCRA limits to 6 percent interest on credit obligations incurred prior to military service or activation, including credit card debt, for active duty servicemembers.

The SCRA clearly states that no interest above 6 percent can accrue for credit obligations (that were established prior to active duty or activation) while on active duty, nor can that excess interest become due once the servicemember leaves active duty – instead that portion above 6 percent is permanently forgiven. Furthermore, the monthly payment must be reduced by the amount of interest saved during the covered period.

Summary

While the SCRA provides you with some protections, such as the loss of the car to repossession if you meet the criteria, you need to think about what will happen if you park the car with a friend and then return to deal with the amount back due at that point.

You could pay less on the car now but that won’t stop it from being a crisis to deal with when you get back. Talk to the lender and ask them what options they may have since you are being called up to active duty.

While these are your rights it does not mean that the banks will play nice and follow them. Take this recent story out of Michigan for example:

“Bank of America violated, we believe, the Servicemembers Civil Relief Act (SCRA),” said Rupprecht’s attorney, Julie Gafkay.

The SCRA protects military personnel from civil action, such as car repossession, while they are in a military action. Gafkay believes Bank of America repossessed Rupprecht’s 2004 Dodge Neon while the serviceman was in Iraq.

Rupprecht got a late payment notice after his military pay was not put into his account, and once the money was there, the lawsuit states Rupprecht called from Baghdad.

Gafkay says Rupprecht called on a satellite phone in a combat zone, asking Bank of America to reinstate payments and to take the money he owed from his account. Bank of America refused.

She says a collection agency, also named in the lawsuit, is trying to collect $11,000. It’s a legal dispute between a soldier and large financial institution that is also getting $25 billion in bailout money from the federal government.

“They are receiving a handout from the very government that he is over there fighting for!” said Gafkay.

A spokeswoman with Bank of America says due to the lawsuit, they cannot make a comment at this time.

You can also read and listen to this NPR story for more SCRA horror stories.

If you have a problem with any creditor while you are on active duty, find your local military Judge Advocate General (JAG) office where you are located and ask for help. The JAG office deals with these issues all the time.

I’m not positive if this guide is still current but here is a link to the Servicemembers Civil Relief Act Guide that might be helpful for you.

Hooah.

Steve

As Medical Costs Rise, More People to Charge Medical Care

Steve Rhode — Sun, 12 Jul 2009 23:50:55 +0000

From How to Get Out of Debt

When doctors first began accepting credit cards for payment years ago, patients were shocked. The impression was that the doctor was just in it for the money. Then a few years latter some medical offices began to offer credit company backed financing for larger medical procedures, again patients were shocked. This trend was lead by GE Money and their CareCard and Citibank.

Doctors are medical care providers but they are also their own little small businesses as well. Unless a physician works for an entity that doesn’t give a damn about income, then that physician is going to be responsible to themselves or a parent corporation to make sure they are bringing in a lot more money than the doctor costs.

I know you’d like to think about your doctor as that friendly local professional that cares for the community no matter what. Well I hate to burst your bubble but in these days of declining insurance reimbursements and increasing administrative expenses, maximizing income for the small town Main Street doc is just as important as it is for the hospital based physician.

But patient beware. It is estimated that over 60% of bankruptcies can be traced back to medical expenses and if you find it necessary to pull out the plastic to pay for your next medical office visit you can’t afford, you might just be infecting yourself with terminal debt that can only be treated with bankruptcy.

@GetOutOfDebtGuy

My Son Has Aspergers, Autism, Anxiety, Depression and College Credit Cards. – Laura

Steve Rhode — Tue, 23 Jun 2009 19:40:20 +0000

From How to Get Out of Debt

“Dear Steve,

My son who is 27 yrs old and currently on permanant disability for aspergers autism,anxiety disorder 300 and depression, he got caugh up in getting credits cards while attending school you know the ones, credit cards for students. Any way he will never be able to work and is currently getting social security disability benefits. what action can be taken other then bankrupcy because not only can he not afford it as social security is his only income and his mental capacity cannot handle bankrupcy court, I am on disability my self and my financial means is very limited…. Thank you for any help you can give me.

Laura”

The Answer:

Dear Laura,

I think it would be beneficial for him to go bankrupt and permanently eliminate this past debt so you never have to deal with it again. The alternatives of ignoring collection attempts or fighting the debt is a much more stressful experience for both of you and his condition would not benefit from that path.

You may be able to find an attorney that will help you for free by visiting the pro-bono listing of bankruptcy attorneys.

Big Hug!

@GetOutOfDebtGuy

My 19 Year Old Daughter Owes $5,000 on a TD Bank Credit Card. Does She Have to Pay?- Marion

Steve Rhode — Fri, 19 Jun 2009 20:48:19 +0000

From How to Get Out of Debt

Marion

“Dear Steve,

My daughter was is 19 years old was offered a credit card at TD Bank, when she went in to take some money out of her savings account. She was told that it was a great time to get a card, and that they get commission/points for how many people they can sign up for a credit card. My daughter Liana was also asked if she had a job, and she specifically told them “no”, that she was a full time student. She was approved for the card anyway, with a $6000 limit, and now tells me that she owes more than $5,000 on the card, with no way to pay for it. What can we do??

What are her rights since I believe that this card was pushed on her, and approved through irresponsible and unethical practices. How can someone be approved for a credit card who has no viable way of paying for the card?

Marion”

The Answer:

Dear Marion,

Liana was 18 or older when she legally entered into the contract for the credit card, that makes it binding. Additionally, the lender is not required to qualify new cardholders to see if they can actually afford to make the payments. Being approved for a credit card does not mean you can afford it. It means that the lender is willing to trap you on the card.

Credit card companies and lenders go for young people because they know that once they hook them with a card, the person is going to hold onto it for a long time. One reason is that the young person has no means to pay it off.

Liana was not screened for the card, by her own admission she accepted the card in order to help a bank employee to meet a sales quota or target. That bank employee has now saddled your daughter with either bankruptcy, debt settlement, bad credit or years of debt repayment. Nothing good will happen from this point except that hopefully Liana has learned an early and painful lesson about the realities of credit and debt. Truly, this is the opportunity for the teachable moment.

If you are unable or unwilling to make her payment or pay off the card for her then you might want to make an investment in bankruptcy for her. That will cost around $1,800. And while she does not have a lot of debt compared to others, it’s more than she can handle. Other option is to drop out of school and force her to work to pay this off.

If you doubt anything I’m saying to you here, ask a local attorney for specific legal advice.

Big Hug!

@GetOutOfDebtGuy

I Started to Get Into Debt at 19. – Jon

Steve Rhode — Tue, 12 May 2009 14:38:58 +0000

From How to Get Out of Debt

Jon

“Dear Steve,

Hello, My story is a bit different, and longer than most. feel free to edit as you like. Coming out of high school, I had a job with great perks, and really good pay about a year and a half ago. The problem was, that with all these perks and money at the age of 19, I became confident, and (later on) reliant on my credit cards, and overdraft bank account, and deep into debt very quickly.

I was getting daily bills of 5$ after going into my overdraft, and I had to take out a loan to buy (a lemon of) a car, and quickly racked up 3 credit cards with little money to spare. After getting laid off, and deciding to go back to school, I was living on only 1/3 of the salary I once received every month, and struggling.

At the end of this school year, I was fortunate enough to run into some money, and pay off all credit cards. As it stands, I will be canceling the cards on Monday, and will be paying off the car loan (much earlier than anticipated) by the end of the summer.

In my current situation, do you have any suggestions when I get completely out of debt? What impact will my credit score have taken after this time? I have not received any phone calls from my credit cards for late payments, and have never been later than 2 months (overdue, i know) for the minimum payments.

I also plan on removing the overdraft off my account, and the fees associated. I also am not going to carry a debit card, rather just an ATM card to receive a limited amount of funds per day. Do you have any other suggestions to help me limit my funds?

Thanks, your website has proved very helpful. Jon

Steve”

The Answer:

Dear Jon,

Hopefully I’ve answered this in time for you. I would not rush to close your oldest credit card. I’d keep it open to help improve your credit report as you move forward with your life. The longer a card has been open, the more credit score love it gives you.

You can use it to make purchases and then when you get home, send the payment immediately to the card company. That way when the bill arrives, it’s all paid for. If you have online banking, this is easy to do.

Shunning credit is not the best answer if you want to build the best credit history you can. And a good credit score is beneficial in life. Your credit history and credit score can only be improved if you use credit. Otherwise, there is nothing to score you on.

It is interesting that new proposed legislation would not permit anyone younger than 21 from getting a credit card. It’s a bit shortsighted but in your case it may have prevented some of the debt pain you faced.

The underlying issue here is that you need to autopsy your problems. You’ve already started to do that but I think you need to be honest with yourself about what drives your spending. Is it spending to impress? It seems like you don’t trust yourself with credit if you are going to live on a cash basis.

And by the way, I’d rather see you use a credit card than a debit card. A credit card is a safer financial tool to use if you can get a grip on your spending.

Big Hug!

@GetOutOfDebtGuy

College Students Rack Up Debt

Steve Rhode — Thu, 30 Apr 2009 14:52:54 +0000

From How to Get Out of Debt

I recognized the school in this video, it was the first college I went to, Montgomery College, in Rockville, MD.

@GetOutOfDebtGuy

Debit Cards Less Safe Than Credit Cards & Please Use Your Credit Card Online

Steve Rhode — Tue, 31 Mar 2009 13:54:08 +0000

From How to Get Out of Debt

Over the years I have been droning on and on about the differences between a debit card and a credit card regarding safety and why people need to be more afraid of using their card in a restaurant than online. Where does the waiter go with your card when you hand it to them?

Debit cards and credit cards are not covered by the same laws regarding consumer protection. Credit cards give you better protection. If your debit card is cloned or scammed the funds come straight out of your checking account, bouncing other checks and payments. Not so with a credit card.

But a new story in Wired simple exemplifies my constant warnings. For the full story, read Washington D.C. Restaurants Become Credit Card Cloning Hot Spots.

With unobserved access to diner’s credit cards, restaurant wait staff have long been the source of a steady stream of stolen magstripe data. It takes only a second to swipe a customer’s card through a tiny skimming device purchasable over the internet, which is easily concealed in pocket or apron.

Corrupt servers are typically recruited by a ringleader who encodes the data — like customer names and account numbers — onto blank cards, in some cases turning out full blown replicas, complete with holograms. The servers often earn up to $50 per card if they work at an upscale eatery, down to just $10 each if, as in a recent Florida case, the cards were stolen from a Burger King.

The D.C. skimming ring was first spotted a year ago by Citibank, which noticed a froth of fraudulent transactions trailing legitimate card use at Clyde’s, where cards skimmed by a single server wound up accounting for $107,000 in bogus charges.

The most prestigious, and recent, hot spot was 701 Restaurant, the clubby eatery where Hillary Clinton rang out her presidential campaign last June. Restaurant owner Ashok Bajaj says the Secret Service told him about the skimming earlier this month. According to court records, cash register logs tied $38,000 in fraudulent transactions to cards handled by server Lavelle Denise Payne from August 2008 until this month.

At the agency’s request, Bajaj kept Payne on for another week while the government firmed up its case. “We watched her very carefully for that week,” says Bajaj. “She was the nicest person. I don’t know. Maybe this is a sign of the economy.”

“It’s very sad when people do these things,” Bajaj adds. “I mean, she was making excellent money working at the restaurant. But I guess it’s never enough.”

Now for the people that get all freaked out by using your credit card online, just remember that your biggest worry is the wait staff and also that when companies computers are hacked in to that the bad guys get the card numbers of all customers, including you, even if you refused to use it online.

I guess this story is duplicitous since it is about being paranoid and stop being paranoid in the same article. Ironic.

Steve

I Don’t Want to Pay Stupid Credit Card Overlimit Fees And Charges. – Melissa

Steve Rhode — Thu, 26 Mar 2009 19:48:09 +0000

From How to Get Out of Debt

“Dear Steve,

I have 2 credit cards that I haven’t paid since August. Now my debt is almost 5000 since most is from over limit, late payment and finance charges. I was able to get one credit card to accept 50 a month at 0% for the next 12 months. Obviously i am hoping to pay more over the course of the year. My other card on the other hand is not so helpful. I was paying every month but could not get away from there over limit fee. Then I just stopped paying. I am not in a financial situation where I can pay a large amount. They were willing to settle for half the balance in two payments. I want to work this out but I also don’t want to pay for all of these stupid charges. What are my options at this point?

Melissa”

The Answer:

Dear Melissa,

It is up to the creditor to determine what fees and charges they may waive. The fees and charges that you object to are part of the cardholder agreement you signed and agreed to when you got the card.

Your solution will come down to negotiations. You will either be able to persuade them to waive those fees or you might want to get professional debt settlement help.

Just realize, what you are asking for is some consideration on their part to waive fees and charges they are within their right to charge. The sweeter you can make the offer so they paid as fast as possible, the more of a chance you have to get them to bend a bit.

It seems to me that the offer they gave you of 50% over two payments is a pretty sweet deal.

Big Hug!

@GetOutOfDebtGuy

I’ve Said It For Years, a Debit Card is Not as Safe to Use as a Credit Card

Steve Rhode — Wed, 25 Mar 2009 14:45:16 +0000

From How to Get Out of Debt

The Consumerist site had a great story titled “Why Do Lenders Want You To Use Your Debit Card Like A Credit Card?” in which they brought up the issue again about the differences between a credit card and a debit card.

Debit cards have invaded our lives and they are pushed like crack by our banks. The information the banks give us is that they are safe to use, but are they as safe to use as a credit card?

Banks made the big conversion from regular ATM cards to debit cards because debit cards make them money every time you use it. They get a percentage of the transaction fees every time you use the card.

You need to think about your debit card like a check. If you would not feel safe in writing a check when you are making a purchase, don’t use your debit card. A mistake on a debit card transaction by a merchant is not an annoyance like it is with a credit card, it can actually drain your checking account, cause all sorts of things to bounce and screw up your rating with check writing credit bureaus.

In the U.S. there are completely different laws which cover the credit card and debit card. I’m not going to go into all that again but let me give you a quote from that story in The Consumerist:

“Remember, though, that paying with a real credit card conveys certain benefits. It may give you more protection in terms of disputes or extended warranties, and in cases where the merchant places a hold—hotels and car rentals, for example—a real credit card will prevent your checking funds from being frozen indefinitely. Your bank may in fact extend those benefits to any signature debit transactions on your debit card, but you’ll have to contact your bank to find out.”

Steve

My Credit Card Companies Said They Can’t Help Even if They Got a Bailout. – Shaun

Steve Rhode — Mon, 23 Mar 2009 19:53:38 +0000

From How to Get Out of Debt

Shaun

“Dear Steve,

Hubby and I bought our home in 2007, our credit was in pretty good condition. We had the same amount of credit cards as we do now, with the exception of 2. One each. Some are the same cards for both of us.

We have about 13 or 14000 in just credit cards. My car will be paid off in November, his in 2011. He owns his own business in additon to working full time for insurance purposes. Our daughter has a birth defect and NO insurance company would accept her since her condition requires a lot of surgeries and her background is so extensive. So, I stay home to take care of her.

I have student loans in about $2000, but its accuring interest daily and I have til July to start repayment. And since the stimulus and bailouts, I’ve called all the credit cards for myself and hubby to redo the interest and they said no, there’s nothing they can do. Infact, one after the call, dropped my credit limit, which affect my credit score by 20 points. Then after that, we got letters from all but 2 or 3 saying they were going to increase the interest rates and if I didn’t want the increase, i could cancel the card, but I didn’t know the effect it would have to cancel the cards on my credit, if that decrease credit dropped it by 20, i just thought the worse!

And we’re trying to keep our credit reasonable so we can refi in a few years that we will be able to fix up the house from the stuff insurance wouldn’t cover when we had a tornado (screen porch was damaged) and pay off the car for my hubby, put the the rest in the bank for more rainy days. Hubby said consolidation is just as bankrupcty and we dont want that either..We’re lost!

What is the fastest, effective way to pay off these credit cards without filing bankruptcy (which we probably wouldn’t qualify, nor want to) and still not hurt our credit in the process.

Shaun”

The Answer:

Dear Shaun,

You certainly have had a lot of things that normally sink the average financial ship. You deserve a big pat on the back for finding a way to work your way through these issues.

Outside of bankruptcy, the least harmful intervention would be to enroll in a debt management plan and see if the new lower interest rates offered through the plan will assist you to repay your debt. A mark can be made on your credit report that you are in a debt management plan, but it is not bankruptcy.

The only painless way out of your current situation would be to pay the bills in full or at least the minimum payments. You could then use the debt snowball approach to reduce the debts with some turbocharging.

If you want to see if debt management would be right for you, it never hurts to ask for additional information. You can click here for debt management information.

Big Hug!

@GetOutOfDebtGuy

Should I Take Money Out of My IRA to Pay My Credit Cards? – David

Steve Rhode — Fri, 13 Mar 2009 19:27:35 +0000

From How to Get Out of Debt

“Hi Steve,

My wife is out of work and I was for about a year. We have about 40K in CC debt and there is no way I see to get rid of that. We have 2 houses and can’t selll the one we do not live in as the market stinks. We have the two mortgages. I have 54K in a self directed IRA I want to use to pay off the cc debt. I make 90K yr but we have the cc debt, car payments, living expenses and our salaries do not make the monthly liability.

I want to know should I take the money out, and if so what would I get minus all the fees? I am 43 yrs old and my wife 48 with no IRA and a 13K yr job.

David”

The Answer:

Dear David,

I think it would be an utter mistake for you to touch that money in your IRA. At this point it is protected from your creditors. If you take it off and settle or pay off your credit card debt there is no expectation that it will remedy your overall situation.

If you are unable to unload one of those homes you are probably headed for bankruptcy and if that’s the case, call me cold, but I think you need to leave the IRA funds where they are to protect them. You need to leave this money in and let it grow because you will grow old fast.

Do me a favor, contact a local bankruptcy attorney and ask for a free bankruptcy consultation. Go in and talk to the bankruptcy lawyer about your situation. Report back and let me know what happens.

Steve

I Have Several Credit Cards That I Haven’t Been Able to Pay On. – David

Steve Rhode — Fri, 13 Feb 2009 16:31:04 +0000

From How to Get Out of Debt

“Dear Steve,

I have several credit cards that I haven’t been able to pay on, I am currently paying on one of them, Im just now starting to get calls from lawyers for collection. My wife and I also have a time share that we havent been able to use let alone afford, we havent made payments on that either.

How can I possibly recover from this mess?

David”

The Answer:

Dear David,

It seems senseless to pay on one credit card and not the others. That certainly does not address the bigger problem of you not being able to meet your obligations. You can’t be selective about paying one over others. It’s like favoring the right wing of a crashing plane. That does not stop the plane from going down.

If you take no action then you will wind up with more aggressive collections and potentially getting sued. You should expect to lose the timeshare as well. And there is certainly nothing that requires you to file for bankruptcy protection, you are allowed to stay on your current path but that doesn’t seem to be working too well for you.

In order to meet your obligations you will either need to increase income, reduce expenses, or a combination of both to allow you to have access to sufficient money each month to meet your obligations. If you had nearly enough money you could then think about a solution like a debt management program.

But as long as the financial altimeter is winding down towards impact with the ground you will either need to be mentally prepared to continue with the collection path or seek protection in bankruptcy. I would suggest that you schedule an appointment with a local bankruptcy attorney, you can click here for a free bankruptcy consultation. Meeting with a bankruptcy attorney does not mean that you will file bankruptcy. Meeting with a bankruptcy attorney simply helps to educate yourself about that option so you can make a better and more informed decision about how you want to proceed.

Big Hug!

@GetOutOfDebtGuy

Is Buying a Used Car With a Credit Card a Good Thing? – Karla

Steve Rhode — Wed, 21 Jan 2009 22:45:43 +0000

From How to Get Out of Debt

Karla

“Dear Steve,

Is buying a used car with a credit card a good thing?

Karla”

The Answer:

Dear Karla,

Excellent question. My answer may surprise you. Actually buying a used car using a credit card can be a very smart thing to do for two reasons.

If you have a problem with the dealer you can dispute the transaction and have the credit card company help to resolve the issue for you.
If your credit card offers you reward perks that you will use it can rack them up faster. For example I really love the Southwest Visa card for getting free flights anywhere they fly.

But this is only a good thing to do if you can afford to pay the card off within one to three months. The last thing you want is to carry a big balance on a credit card and have the bank jack your rate way up.

Big Hug!

@GetOutOfDebtGuy

Terrance Says His Debt Problems Are Worse Than Anyone He Knows

Steve Rhode — Wed, 12 Nov 2008 18:51:44 +0000

From How to Get Out of Debt

Terrance

“Dear Steve,

First off I’m 20 years old and have debt problems worse than anyone I know. But besides that I have payday loans, banking accounts, cell phone, and one credit card.

Some happened before I was even 18. But I talked to a friend of mine who said she repaired her credit herself by just writing letter and calling the companies and creditors that had her account and made offers and stuff.

She also used the 7 year rule of having some of them remove. She said the only amount paid that was high was like $200.00. And also she in this program where they help you buy a house and rebuild your credit, they put like 4 thousand dollars down to the 2 thousand she put down. I just need help with getting my credit straight without bankruptcy.

Please just give me some kind of advice

Terrance”

The Answer:

Dear Terrance,

Thank you for writing to me for help. I know your money troubles feel like they are the worst, but you are not suffering alone. The most common question I am asked is if this is the worst case I’ve ever seen. And it does not take a high level of debt for it to make you feel bad. A relatively little amount of debt can make you feel hopeless and like you’ll never be able to get out of debt ever again.

Any contract that you entered into before you were eighteen is potentially voidable since you were not of legal age to enter a contract. For those agreements I would suggest that you contact a local attorney for advice and assistance in approaching those creditors.

Your combination of debt is what is troubling me. You’ve got the usual cast of high interest players in this mix. The payday loan, cell phone, bank accounts and credit card company can go after you hard to get their money back.

From what you’ve said it sounds like your friend made offers to repay less than the total amount owed in order to show the account had been paid off. If these arrangements had been made with a collection agency, it is probable that these debts will resurface again. Collection companies are hired to collect money but can not contractually obligate their client, the original creditor. If you want to settle a debt for less than you owe, be sure to get the agreement in writing from the original creditor.

If they don’t want to put it in writing then that should be a warning flag that it might not be a real promise on their part. What they may do is take your payment and then latter say that they never had an agreement with you and demand the rest of the money. I’ve seen it happen many times.

If they do agree to put it in writing, be sure to keep that letter and proof that you made the payment in a safe place. You may need that evidence to show the creditor and credit bureaus that the account is now paid off.

The seven year rule is a bit of a misleading trick. After seven years an old delinquent account will be removed from your credit report but that does not mean the debt has gone away or is no longer collectible. Waiting for a debt to be removed from the credit report and thinking that it has closed the door on that old debt, would be a mistake.

The most effective way to put an old debt to rest is to pay it off or go bankrupt. Bankruptcy will legally eliminate debts for good and for all time. A debt discharged in bankruptcy is no longer collectible.

The home purchase program your friend is in sounds very suspect. Unless this is a program run by a local government agency I would not trust anyone with what you’ve said. Anyone that is promising you to rebuild your credit and then makes you pay $2,000, even towards a house, makes bells and whistles go off in my head. I’d love to know more about that program and who is offering that. There is no way I would suggest that you participate in anything like that without giving me specific information so I can investigate it.

You are just starting your financial life. You are still young and at your age, bankruptcy would not be the worst case scenario. If you did go bankrupt I would hope that you would learn from your financial mistakes and use that first-hand experience to be a better steward of your finances moving forward and for the rest of your life.

Big Hug!

@GetOutOfDebtGuy

The Answer:

So You Have to Use Your Credit Card In An Emergency – Personal Finnance Bloggers Question of The Week

Steve Rhode — Thu, 06 Nov 2008 15:13:04 +0000

From How to Get Out of Debt

This weeks personal finance brain trust question was:

What goes through your mind when people say that they HAD to use their credit card to get by? Is using a credit card when you can’t afford to pay a smart or necessary thing to do?

WC – A 27-year-old writer living in Chicago and writing about personal finance through The Writer’s Coin.

I think that people should take that as a warning. I realize for some people it’s the only option, but anyone that catches themselves saying that should really reprioritize to make sure that it doesn’t happen again and that they’re not making things worse by paying with a credit card. Whether it’s “smart” or not depends on how big of a hole they’re digging and what the alternatives are. If they could cut their spending somewhere, then it’s a bad call.

Credit cards have the potential to help but also the potential to make things worse, and not realizing that is a huge mistake. For the people out there who have no choice and have nowhere else to turn—credit cards are a serious warning. If you can’t get by without them you are in deep trouble and something needs to change ASAP.

Patrick Bryan – Living in Northern Ireland, Patrick helps people in a very different environment and economy but yet, mush is universal and much is the same. Visit Patrick’s Northern Ireland blog on debt.

To pay your essential bills on your credit card is clearly a danger sign, however I can’t condemn people for doing it, and I can understand why it feels like the only alternative at the time. Many people also have temporary cashflow issues, and using credit cards helps them get by until (for example) their bonus is paid, or a big contract comes in. It is a great way of getting fast, accessible credit for short periods of time. I use my credit card for most of my purchases (including groceries and fuel) and enjoy 56 days interest free borrowings, why shouldn’t I use the credit cards money for free in that way? I always make sure however to pay the bill each month and use this discipline to keep control of any of the wilder spending urges I experience.

My advice to people who are finding that they have to use credit to get by is to first look at their budget – identify what is happening and take action. If it is going on non-essentials and you are not clearing the bill each month, stop buying them! If you still have a shortfall each month you need to ask yourself some tougher questions – can you downsize the car, shop at cheaper stores, cut back on the family vacation next year? Ask yourself this question – “if credit cards hadn’t been invented, how would I have managed to pay the bills this month, and what would I be doing differently in relation to my spending?”.

It is a very dangerous activity to use a credit card to get by at present as providers are starting to identify people using their cards to shop for essentials and are reducing limits and in some cases withdrawing cards if they think the customer is getting badly out of shape. They are also actively cutting credit limits and withdrawing unused cards.

Leaving aside the rights and wrongs of putting essentials on credit cards my advice is to try and wean yourself off the habit, even making some life-changing decisions if necessary to try and live within your means. In the coming recession I strongly recommend curtailing your borrowing wherever possible and try not to rely on credit to buy anything you can’t repay when the bill comes in.

Patrick – Patrick writes two excellent blogs, Cash Money Life and the Military Finance Network.

I think a lot of it depends on the situation. When many people are just starting out in life, they may not have an emergency fund in place or have a lot of savings. In this case, credit cards can be used as a last resort for emergencies. They are much better than using payday loans to make ends meet.

The important thing is that people only use credit cards to get by for true emergencies – food (not fast food or restaurants), car repairs, plane tickets for a family emergency, etc. The problem comes when people think they NEED to use credit cards to get by and end up using them for expensive clothes, jewelry, or other luxury items.

Steve Rhode – A personal finance blogger and founder of the Myvesta Foundation, a global social enterprise that helps people find solutions for money troubles. You can ask Steve your debt related question through GetOutOfDebt.org and he’ll help you for free.

Ouch! Not much good happens from using credit and creating debt when there is no reasonable expectation that you will be able to repay it. It only leads to bigger problems down the road unless you win the lottery or find a windfall of money to pay off the debt.

It might not be a smart thing to do but I can certainly understand how some might find it a necessary thing to do. I remember right after hurricane Katrina hit New Orleans and slaughtered that area. People were without homes, without food, without jobs and without hope. People used their credit cards to buy diapers, pay for a hotel room or pay for food.

And being in that same situation, with a hungry child looking up at me, I can’t say that I would not do the same thing in that situation. That does not make it right but maybe desperate times call for desperate actions.

Abusing a credit card may be necessary but there will be consequences to pay latter. Those consequences could include bill collectors, bad credit report, a bad credit score, threats of lawsuits, being sued, wage garnishments, etc.

When someone tells me that they had to use their credit card to continue to get by when not faced with an unusual life emergency, well then that’s a clear sign that we need to come face-to-face with the reality of the situation and deal with it.

Using a credit card to make ends meet at the end of the month, month-after-month, or using once credit card to pay another is critically dangerous to your financial health. What will happen soon enough is that the denial about the financial situation will soon get stuck on the tracks and be broadsided by the powerful and fast moving freight train of reality. That’s painful. You need to take action and get off the tracks before that happens.

J. Money – You’ll enjoy the blog Budgets Are Sexy for a look inside the life of one blogger and how money impacts it.

I think “Wow, they must have REALLY been in a sucky situation!” I’m more of a positive thinker, so I tend to give people the benefit of the doubt from the get-go. I bet most of the time the people confuse NEEDS with WANTS, but that usually pops in my mind later if i’m giving it more thought.

There is nothing with with putting NEEDS on your credit card to get by – this is life, and it’s not always perfect. If you need food or shelter, and have absolutely no money in the bank, then you’re pretty much out of luck. It also depends on the timeframe we’re talking about here. If we’re talking about a few years here, then obviously there are some other ways to get your hands on money – loans, friends, etc. But i see no problem w/ loading up the card for a few months and then working to pay it off as quick as possible.

I personally put everything I personally can on a credit card to manage my budget. It gives me 30 free days, ya know? I pay it off in full each month, but worst case scenario you rack up a little interest when needed. That’s what it all comes down to really – the needs vs wants.

Dawn – Iowa Hippie Chick blogs about money love and marriage and offers so very insightful posts on personal finance that involve emotional insight and awareness. Visit her blog.

What goes through my mind

Is they don’t have a grip on their personal finances.
They probably don’t have a spending plan/budget.
They definitely don’t have an emergency fund.
And they just aren’t getting real with themselves, about their own money!
I don’t think it is a smart thing to do, at all.
It just dig’s their debt hole deeper, compounding their problems.
Solution = Emergency Fund!

Marcus – The creator of the CreditMattersBlog, this blogger has a deadly sharp point of view when it comes to consumer debt issues. Visit his blog.

It is what it is. Some people are deeply into debt. I suspect that some people use their cards as a last resort. When someone tells me that they HAD to use the card, I ask how that actually transpired. Did they always use cards to supplement their income? Did they start using the card recklessly and then end up in a hole? For the most part, most people don’t have to use their cards to get by — at least not initially. It’s only after they’ve started loading up on debt, and can’t keep up, that they usually have to turn to credit cards to make ends meet.

Your second question is much easier to answer. If you can’t afford to pay your credit card bills in full each month, you should stay away from cards. You’ll eventually get buried if you can’t pay your card in full each month. Most of the people I’ve run into — who ran into trouble with cards — typically carried balances from month to month. Carrying balances, especially ones that continue to rise, is also not good for your FICO score. Higher utilization translates into lower scores. I’ve written extensively about the virtues of paying in full.

Using a credit card, when you can’t afford to pay the balance off each month, is not smart.

Expect Tidal Wave Of Limit Reductions and Credit Card Closures to Hit Before Christmas

Steve Rhode — Mon, 03 Nov 2008 17:50:42 +0000

From How to Get Out of Debt

Yesterday I wrote about a little old hardware store that had noticed an increase in card purchases over cash. That’s not a good sign if people are using plastic more for routine things and especially in this environment of credit card issuers reducing credit limits, raising interest rates and closing cards.

You see, the credit card issuers are getting freaked out that more people are going to start using the cards when they can’t afford it. Shocking! I guess that’s okay when you can limp along and make the monthly minimum payments but otherwise it is a bad thing.

The credit card message has been “use the card, use the card, use the card” but that pendulum is swinging to “don’t use the card, don’t use the card, we’ll take that card”.

Apparently this trend is not limited to just the United States or just hardware stores. A story in India noted:

Usage of plastic money is increasing with times but at the same times it is also increasing the worries of credit card companies. In September 2008, the transactions done through credit cards went up by nearly 20% against the previous month. Normally this would be a reason to cheer for the card companies but presently it has become a cause of concern.

The credit card companies are worrying because they think that rising usage of credit card may also result in higher number of defaults among these users.

If all of this is true, which it is, retailers are going to be hating life this holiday season as credit card issuers start closing cards to avoid even higher losses. Without available cash or loose credit, consumers won’t be able to go overboard on holiday spending.

I’m thinking we need a joust between banks and retailers. Wouldn’t that be fun to watch?

Video Comment

Next big worry: Credit cards

Steve Rhode — Mon, 03 Nov 2008 08:55:23 +0000

From How to Get Out of Debt

Local card banks contacted for this story declined to comment on their financial outlook or the possibility of layoffs, but experts believe weak earnings will linger in the short term, and might even pose some long-term challenges to the industry.

“The increase in delinquencies in credit card debt is a major cause for concern,” said Robert Dye, senior economist for PNC Financial Services Group in Pittsburgh. “The scale is not as big as the home mortgage problem, but it definitely adds stress to the financial services industry at a time when they don’t need any more stress.”

Some are even predicting a fundamental change in mindset toward debt, prompting consumers to put off purchases, buy less-expensive substitutes, eat out less, and rethink their propensity to do so on credit. Consumer borrowing fell for the first time in more than a decade in August, the Federal Reserve reported last month. The decline, at an annual rate of 3.7 percent, reflected a sharp drop in the category of borrowing including auto loans and a smaller decline in the category including credit cards.

Last week, the digital-market analysis firm comScore.com, said that credit-card applications at the top 10 online sites dropped for the first time in the past five quarters, dropping 6 percent year-over-year in September. Last year at this time, applications were up 26 percent year-over-year. Consumers are doing all they can to take out additional lines of credit, comScore.com Vice President Jennifer Lanouette said.

Click Here for totally free debt help, advice and answers.

Source: Next big worry: Credit cards

Here’s some real financial advice you can really use: keep spending

Steve Rhode — Sun, 02 Nov 2008 19:31:25 +0000

From How to Get Out of Debt

Frugality is the newest trend, but I’m tired of it already. Two reasons. I’m sick of millionaire financial advice gurus telling us that the solution lies in the kind of sensible spending that all but millionaire financial gurus and idiots already employ. More important, the new frugality is exactly the wrong reaction to the troubled economy. If we are afraid to spend or invest, things are just going to get worse.

Turn on those pulse-of-America TV shows Dr. Phil and Oprah if you want to see the financial advisers in full hectoring mode. The moneybags hosts, who have made a fortune by flapping their gums, drag on a hapless debt addict or some poor schmo who has lost his job and subject them to “advice” from people who make their living telling others to do the obvious. Don’t pile up credit card debt, they say. Live within your means. Take any job to bring in some money, even if it means bagging groceries. Don’t buy stuff you don’t need. Dr. Phil and Oprah pile on, tut-tutting about the financial misadventures of people whose annual expenditures on luxuries would amount to less than Oprah spends on a pair of shoes.

Canadian newspapers are full of the same kind of useful advice. Take a brown bag lunch. If you must eat out, do it at a cheapo chain restaurant. Drink the crummy office coffee instead of the good stuff. Cut back on TV cable. Rent a movie, don’t go to the theatre. Shop at the discount stores and look for sales. Watch for articles soon suggesting that women go back to sewing their own clothes and canning vegetables.

This would be life-changing stuff for the analysts and consultants who issue the advice. It’s hardly a revelation for ordinary people. Most of us don’t exactly have a lavish lifestyle.

Personally, I make my own lunch. Have for years. Restaurant meals are fairly rare, partly because I resent paying taxes for the privilege of eating. I rarely buy anything unless it is on sale. I doubt that I’ve ever paid full price for a shirt in my life. Let’s put it this way, the scope for additional frugality is limited.

My wife has suggested that cutting back wine consumption would be appropriate, but that’s madness. Now is the time when we need to drink more than ever.

Frugality can be a bad thing, if everyone is engaging in it. Our economy is built on consumer spending and continuous growth. One could argue that it shouldn’t be, but it is. If consumers don’t spend, people lose their jobs. As more people lose their jobs, consumer spending drops further. More people lose their jobs. If people don’t invest, or at least hold on to the investments they have, the value of those investments keeps going down. Then there is more panic selling and the investments go down again.

We know all of this, but right now we are caught up in a fear-driven stampede that has become our worst enemy. It’s important to remember that you still own the same stuff you owned before, it’s just worth less. That’s two words. As long as you don’t sell, your investments will eventually start going up.

Source: Ottawa Citizen

Debt is Number-One Problem for People in Wales

Steve Rhode — Fri, 31 Oct 2008 12:34:48 +0000

From How to Get Out of Debt

This article from the UK sadly demonstrates how debt is debt around the world.

Debt is now the number-one problem for people in Wales, new figures from Wales’ Citizens Advice Bureaux showed yesterday.

It is the first time in the CAB’s 69-year history that mortgage debt problems have become its clients’ main concern.

Mounting fuel debt and rocketing credit card, store card and charge card debts in Wales are also revealed in the 2007/08 Citizens Advice Cymru report.

To add to the misery, CAB volunteers say there is growing anecdotal evidence that despite Government calls for lenders to offer more help to householders faced with the nightmare of repossession, the exact opposite is happening in Wales with lenders becoming ever more aggressive towards those in mortgage arrears.

The report reveals that mortgage-related and secured debt loan problems in Wales have rocketed by 60% in just 12 months, overtaking benefits and tax credit-related issues as the number-one problem in Wales.

There were 105,544 debt client issues in Wales out of a combined total of 292,177 client issues last year.

And while credit card debt enquiries across England and Wales as a whole have dropped by 4% in the past year, within Wales alone the CAB has seen requests for help with credit, store and charge card debts jump by 19%.

Jonathan Edwards, head of public affairs for Citizens Advice Cymru, said: “While in more affluent areas people have been using credit cards to buy luxury items, which they are now foregoing, the situation is very different in Wales.

“Here, where incomes are much lower than those in England, people are using credit, store and charge cards to pay for everyday items, including mortgage repayments.

“We also have anecdotal evidence that lenders are becoming much more aggressive in terms of repossessions in Wales, despite all the fine words from Government about hoping for the exact opposite.

“Citizens Advice Cymru welcomes the statements made by the UK Government requesting that lenders view repossession action as a last resort.

“What we need is action to ensure that lenders do everything in their power to keep people in their homes.”

There are also growing fears for the health and safety of thousands of people in Wales who are unable to afford to heat and light their own homes.

Across England and Wales as a whole the CAB has seen enquiries about fuel debt rise by 11%.

And in Wales alone that figure rose to 16% in 2007/08, with some 3,500 people unable to pay their gas and electricity bills.

“With the onset of winter we expect that figure to get much worse,” said Mr Edwards.

Fran Targett, Director of Citizens Advice Cymru, said: “With over £1.4 trillion of debt circulating in the UK economy, the number of debt cases dealt with by the CAB service in Wales has been increasing year on year.

“The fact that debt-related cases is now the number-one issue for our clients is testament of the increasing money-related problems faced by individuals and households in Wales.”

The CAB is now campaigning for financial inclusion to be more of a priority for the Welsh Assembly Government.

“There is a clear case for financial inclusion to be pushed up the political agenda in Wales,” said Ms Targett.

“We look forward to responding to the forthcoming Government of Wales Financial Inclusion Strategy and making the case for such a structure via the creation of a National Money Service for Wales.”

Meanwhile, the Nationwide Building Society has just announced a three-year partnership with the CAB.

Its £3m investment will fund the recruitment and training of 1,300 volunteers at more than 400 bureaux over the next three years who will provide financial education training and advice on money matters across the UK.

David Harker, chief executive of CAB, said, “Nationwide’s support means that bureaux will be able to reach hundreds of thousands of clients in their local communities with financial education sessions and advice on money matters.”

Source: Debt is number-one problem for people in Wales

Redefining the American Dream

Steve Rhode — Fri, 31 Oct 2008 03:22:26 +0000

From How to Get Out of Debt

Average household debt in the United States is 130 percent of average household income, up 20 percent since 2005 and double what it was 20 years ago. The U.S. household savings rate is close to zero. Consumer confidence has plummeted with the value of 401(k) plans and retirement nest-eggs. Retail sales fell 1.2 percent in September, double the expected decline. Car sales are at a 15-year low. And credit card defaults look like the next shoe to drop as cash-strapped Americans have run up credit card debt to postpone the day of reckoning.

Click Here for totally free debt help, advice and answers.

Read the rest here: Redefining the American Dream

How to Get Out of Debt With the Get Out of Debt Guy » credit card

Elaborate Scheme Leaves 180 With Over $1 Million In Fraudulent Purchases

Other Related Articles to Read

Be Smart and Find the Best Credit Card That’s Right for You

Balance Transfer Credit Cards

Cash Back Credit Cards

Low Interest Credit Cards

Rewards Credit Cards

Student Credit Cards

Airline Miles Credit Cards

Gas Credit Cards

Secured Credit Cards

Business Credit Cards

Other Related Articles to Read

New Computer Virus Commits Post Transaction Attacks On Your Bank Account

Other Related Articles to Read

FTC Bans Landmark Clearing From Using Remotely Created Payment Orders

Other Related Articles to Read

University of Georgia Ph.D. Student Sentenced For Fraud And Identity Theft

Other Related Articles to Read

East Coast Credit Card Fraud Ringleader Gets 12 Years In Prison

Other Related Articles to Read

Founder of Internet Consumer Electronics Company Sentenced For Fraud

Other Related Articles to Read

Arizona Telemarking Scam Leaves 5,000 Out Of Over $6.3 Million

Other Related Articles to Read

Must Have Black Friday Shopping Tips!

Other Related Articles to Read

Couple Faces Serious Jail Time For Their $25 Million Nationwide Telemarketing Fraud Scam

Other Related Articles to Read

Is Bank Of America Taking Advantage Of The Unemployed With Debit Card Fees?

Other Related Articles to Read

Newspaper Deliveryman Makes Amanda Miller’s List Of “People I Wouldn’t Suspect Of Fraud”

Other Related Articles to Read

Bad Credit Is Bad News for the Unemployed

Other Related Articles to Read

True Cradle Robbers – Stealing Credit From The Cradle

Other Related Articles to Read

Is Bankruptcy or a Debt Repayment Program the Best Option for Us? – Janet

The Answer:

Other Related Articles to Read

Root Canals and Appendectomy Were Expensive and Landed Me in Bankruptcy. – Ray

The Answer:

Other Related Articles to Read

Collectors Called Constantly Scared of Foreclosure, What Can I Do? – Roy

Other Related Articles to Read

Off to College: How to Use Credit Cards and Not Get in Over Your Head

What is the Best Way for a Student to Use Credit Cards?

Advice for Mom and Dad

Other Related Articles to Read

I’m in the Process of a Divorce. He is Supposed to Pay My Credit Card Bill. – Becca

The Answer:

Other Related Articles to Read

Victory and Disappointment for the Debt World Today: Total Debt Falls While Harassment Complaints Rise

Other Related Articles to Read

How to Be Financially Successful When You Graduate

Plan Ahead, Double Your Money

Where Does the Money Go?

Getting Around Without Going Broke

Paying for That Education

Home Sweet Home

Plastic Pointers

Protect Your Credit Record

Get Ahead Now

When the Going Gets Tough

Other Related Articles to Read

Plastic Power: Smart Strategies for Making the Most of Your Credit Cards

Other People’s Money

Protection for Purchases

Protection for Losses

Travel Advantages

Car Rental Savings

Other Related Articles to Read

Credit Card or Debit Card: The Great Debate

The Major Differences Between Debit and Credit Cards

A Few Final Suggestions

Other Related Articles to Read

I’m Considering Letting Some of My Debt Go Delinquent. – Terrell

The Answer:

Other Related Articles to Read