Archive for the ‘Credit Cards’ Category
If you have many credit card debts, then you should definitely consider doing credit repair. Take note that credit repair doesn’t just mean removing questionable information from your credit reports; it also means doing what you can to improve your credit score. One way by which you can do credit repair is by paying off all your credit card debts. Below are some tips that can help you do this type of credit repair. {sidebar id=8}
1. Stop accumulating more credit card debts.
With a credit car …
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In these perilous financial times, more and more people around the world are living a life sustained almost entirely with their credit cards. North Americans eat, sleep and breath credit cards and rack up enormous debts while they’re at it. Now is the time to learn how to get out of debt fast using the tips from this free report.
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By Ken in
Credit Cards
Feb
28
Our readers have sent in some very interesting questions about their credit reports:
- What exactly does credit utilization do to your credit score?
- What happens if you put personal expenses on a business card (Or your company thinks you did!)
A reader, Brian, asked this question:
Hi, If you have 3 credit cards, 2 of the 3 cards have no balance on them. The 3rd card has a balance that is near the limit. Will this one balance hurt my credit score, even though my utilization ratio for all 3 of the cards is under 30%??
Brian
A question about credit utilization:
Brian, thanks for your question.
You are wondering whether or not the 30% rule (keeping your debt under 30% of your available credit) means all of your available credit, or your credit available per account.
It’s a really great question, and I wish there were a clear answer.
FICO keeps it’s scoring system secret. They release general guidelines that tell us how we all “should” act if we want to maintain a high credit score.
The only thing I can tell you for sure is that they both matter. How much they both matter is anyone’s guess.
How much debt you have compared to your credit limit amounts to 30% of your credit score. Having a balance close to the limit on any account will impact your credit score, but the impact will be an unknown percentage of 30%. How’s that for Greek?
The best thing you can do is to pay down the balance on that account as quickly as possible. As far as your credit score goes, it’s better to play it safe.
I’m sorry I couldn’t give you a better answer. Both types of utilization matter, but FICO has never put anything out that says exactly how much each account matters.
Personal Liability for a corporate card?
Another reader, Don, had this question:
Icon-blank wondering if you may be able to assist me in finding some recourse information for my wife’s credit delema. My wife was most recently working for a top pharmacutical co. and was issued a Corp. Credit Card from American Express. Unknown to her on her card she was charged for their rewards program that she did not want! she was issued the card from her Co. I think somewhere around 2003. She only used this corp. card for corp. business and never used it for anything personal! She has since been displaced from her co. and finds out she has a personal balance of Approx. $625.00 owed to AE for the reward program.
American Express claims that this balance has been carried forward all this time as the Co. she worked for did not pay! Her company over the years also sent her for perks a AE gift Card for performance bonuses. Now we find out supposedly she had used a reward program reward but thought it was a gift card issued from her co. and AE is determined to charge us back fees for their program.
Question I have is can I get out of this charge because we never ever wanted this! Your Help? Don
Thanks for your question Don.
You have a few options in this situation and you may end up having to work with all of them.
I would start by finding out whether or not your wife has any personal liability for this card. Meaning that if you don’t pay the bill, will it damage her credit, or her former employer’s.
If she used her social security number to sign up for the card, then she is personally responsible. If she was the one who received the monthly bill, then she could be responsible (but I am not sure about the legality of that – do any of our other reader’s know?)
If she is not personally responsible for the card in any way, then it is her former company that will be stuck with the tab for these charges, and not your wife. That is something you would have to work out with them.
If your wife does legally owe the money to American Express, then the best thing to do is call American Express. Ask them who authorized these charges to the card? If it wasn’t your wife, and they can’t prove that it was your wife, then you are probably off the hook as far as liability is concerned too, but you will still have to get American express to agree.
You can also go head to head with Amex if you want to. Tell them that you never authorized the charges on that card, and you did not understand that the gift certificates we a result of the program.
You will definitely have to speak to a manager (or a manager’s manager) if you want to resolve this. Don’t even bother speaking to the person that answers the phone initially, they aren’t going ot be able to help you.
Go straight on up the corporate ladder at Amex until you are able to speak with someone who can actually help you get the charges removed off of the account.
If American Express has been billing you for something that you never authorized, then it’s their problem too.
This is a situation that I would say, just don’t let it go until it’s resolved. It’s going to be trouble, any way that you handle it, so just work with the situation until it goes away.
Make sure that you keep her former employer informed as well, especially if your wife has no personal liability for the credit card.
Thanks for your question!
Have a question for us? Leave a comment below!
By Ken in
Credit Cards
Feb
28
Citibank is making some major changes to their “Thank You” points reward program. The Consumerist has gotten ahold of a letter sent to one of their customers explaining the changes:
As of March 1, 2009, we are changing some of the terms and conditions that will affect your ability to earn and redeem ThankYou Points. The following is a list of some of these changes:
1. ThankYou Network may be revised in a manner that may affect your ability to use the ThankYou Points you have already accumulated;
2. If you make a late payment on your participating Sponsor Account, any ThankYou Points you earned through that Sponsor may not be available for redemption until you pay the reinstatement fee disclosed on www.thankyou.com/help.jspx
3. If your ThankYou Member Account is closed for any reason, you will lose any ThankYou Points in that ThankYou Member Account. If your participating Sponsor Account is closed, you will no longer be able to accumulate ThankYou Points and may lose the ThankYou Points that you earned through that Sponsor and through ThankYou Network. If all your Sponsor Accounts are closed, we may close your ThankYou Member Account;
4. If you combine your ThankYou Member Accounts, any action taken concerning points from one Sponsor Account may affect all the Points in your ThankYou Member Account;
5. If your ThankYou Member Account is frozen, you may be charged the processing fee disclosed on www.thankyou.com/help.jspx to unfreeze your ThankYou Member Account;
6. ThankYou Points will not expire as long as you have qualifying purchase activity at least once every 18 months unless ThankYou Network is terminated;
7. ThankYou Points may not be redeemed and may be lost if your Card Account is not open or current;
8. If your Card Account is closed you will not be able to earn ThankYou Points and you will lose any accumulated ThankYou Points that have not been transferred to your ThankYou Member Account including Flight Points that have not appeared on your billing statement;
9. The fixed flight option for Travel Rewards is no longer available. Please use the online booking tool at www.thankyou.com for variably priced Travel Rewards.
What Is Important Here
As you can see, the program is undergoing some pretty serious changes. As credit card holders, frankly, we are used to receiving notices of changing terms. The vast majority of these changes are always to our detriment, yet they usually try to phrase it like it is helpful. It is often difficult to tell the important changes from the fine print.
The most important one, they save for last, is the changing of the “fixed flight option” for travel rewards. This has been providing more value to members than the fixed flight option. In response, most observers are recommending that you spend any points that you intend to use for air travel between now and March 1st.
What Else Are They Saying
To me, what sticks out is not so much what they are saying, but how they are saying it. They frequently use the word “May” to describe everything. That is a very vague word. What I interpret it to mean is that they will do these things, however, there is a slight chance that customer service could waive it if you are nice to them.
Either way, they are positioning Thank You points as being directly tied to the good standing of your account. It is interesting to note that not all reward programs work that way. I can open and close my American Express Starwood accounts, without affecting my points with the Starwood Preferred Guest program, an entirely separate entity. Making a late payment on my USBank Northwest Airlines WorldPerks Visa in no way affects my ability to redeem WorldPerks points for flights.
What Should You Do
Obviously, try to take advantage of the Fixed Flight Option now. Then, you might wish to reconsider your membership in this program. I am not a holder of a “Thank You” points earning card, and I don’t really know anyone who is. Therefore, I am not in the best position to say if this card still returns much value. My advice for this card and others is always to look at how much value this card is returning per dollar spent. If you are getting less than what you can for a cash card, it is time to cancel. If you have other reward cards that are returning greater value per dollar, it also may be time to cancel. Finally, if you do chose too say “No Thank You” to your Thank You points card, use all those points before you do.
By Ken in
Credit Cards
Feb
28
I came across this article in Consumer Reports about 10 insurance policies you don’t need. Wouldn’t you know it that half of them are actually offered by credit card companies and are a complete waste of money.
Tour de Scam
Let’s take a look at how your credit card company is trying to scam you by selling you “insurance”
First, Consumer Reports lists:
Credit-card-loss protection. It pays off losses if your card is stolen and the thief goes on a spending spree. Plans cost $7 to $15 a month. But federal law limits your loss to $50 per card. Instead: Put credit-card numbers in a safe place, and report lost cards ASAP.
If you didn’t know this, you have already failed credit card 101. In fact, I have never heard of anyone even being charged the $50 per card. In the few instances where I have had my credit card number stolen, my bank has immediately credited my account in full for the fraudulent charges. What is really fraudulent is the way credit card companies try to pretend that you could be liable for fraud in order to sell this junk. I can’t think of a bigger scam.
Next, we have the:
Credit-life insurance. Credit-card companies, banks, and other organizations that finance a purchase or lend money offer policies that repay a loan if you die. According to the Consumer Credit Insurance Association, the average rate across the nation for credit insurance is 50 cents per $100 of coverage. This means a consumer pays $30 a year to insure a $6,000 loan. That’s a lot of money when a healthy, nonsmoking man of 40 can buy $100,000 of 10-year level term coverage for as low as $100 a year. Instead: Make sure you have enough term life to cover loan payments.
This one is not quite a scam, just a really bad deal. It is not only 5 times the market rate for insurance, but it ignores the fact that your loans are subject to court proceedings after you die. If you are making interest payments on credit card debt, that is bad enough, to “insure your debt” at inflated prices is a terrible deal.
Number three is:
Credit disability insurance. This policy will pay minimum installments on a loan, typically up to 36 months, if you are disabled according to the terms of your policy. A policy may cost $21 per $1,000 of coverage. Instead: Make sure that your disability plan will cover your expenses, including any loan payments
This is pretty much the same as the credit life insurance. It is a terrible deal that is best covered by other insurance products.
Number four is:
Credit-card balance insurance. Credit-card companies market this policy which makes minimum payments on a credit card, if you are ill, disabled, or lose your job. Monthly premiums are based on the card’s balance. For instance, at 90 cents per $100 and a balance of $3,000, you’d be stuck for $27. At that balance level your yearly premium would be $324. Instead: Create an emergency fund that will cover 3 to 6 months of your expenses.
Yet another waste of money. There is a trend here. If you are so in debt that any temporary disability will cause you to default, clearly you are ripe for marketing very low value insurance like this. This only pays off your minimum balance, which we all know will not pay off your debt until well after the next ice age.
Number five is:
Identity-theft insurance. Sold by banks, credit-card issuers, and specialty insurers, it covers the cost of repairing your credit and sometimes attorney’s fees. Policies cost $20 to $180 a year for up to $25,000 in coverage, which does not include unauthorized charges or funds siphoned from accounts. Instead: Check your credit reports regularly. You can now get a free annual credit report from each of the three credit bureaus (Equifax, Experian, and TransUnion).
This is a tough call, as identity theft insurance could be a good thing. Unfortunately, similar to most travel insurance, it has so many holes as to be as useful as a leaking life raft. It doesn’t include unauthorized charges, the biggest problem is your thief gains access to your bank account. The real danger of identity theft is loss of time and aggravation sorting the whole thing out. I am not sure how an insurance company can go about reimbursing you for that.
One Positive Note
I am giving the credit card companies some grief here, but one of these insurance policies is actually unnecessary because you have a credit card. That would be the rental car coverage. Fortunately, you can decline the coverage offered by a rental car company because your credit card, in most cases, will provide coverage for you. My only warning to you would be to carefully read the terms of your credit card’s rental car insurance. Several countries are not covered, and most specialty vehicles other than basic cars are not covered.
By Ken in
Credit Cards
Feb
28
American Express is like some person with multiple personality disorder these days.
In the last few months, they have granted me credit, and then submitted me to a financial review.
They have written people letters telling them they are being penalized based on where they shop, and then both denied it and said they will stop doing it.
Now, we learn that they are actually paying people $300 to cancel their accounts. What gives?
One Possible Explanation
I can’t explain all of Amex’s recent craziness, but I have been struggling to see why they would pay you to close your account. This story is picking up traction in the mainstream media, albeit several days after my readers learned about it.
Here is my theory: Big Spender X is starting to default on his credit cards. Amex’s computers show this is the case and want to jettison this excess baggage. If they offer him $300 to pay off his Amex account, perhaps he will do so first, before defaulting on his other accounts and/or declaring bankruptcy. Interestingly, the $300 payment comes in the form of a gift card. Why a gift card? Well, it is not a statement credit, it is not an account that could necessarily be visible to a bankruptcy judge, nor is it really cash. If I were about to declare bankruptcy, maybe having a “gift card” wouldn’t be such a bad place to keep some money from my creditors.
Amex Closes The Loopholes
Some savvy reward card aficionados, myself included, have been exploiting a loophole in American Express and other company’s reward cards. Now that Amex is closing the loophole, I don’t mind publicizing it a bit more. The trick is to purchase something that can be deposited in your bank account, netting you free mileage or reward points.
It doesn’t take too long to think of what your bank will accept as a deposit. The most obvious thing a bank accepts is money. Where can you buy money with your credit card? Clearly, making a cash withdraw on your credit card for this purpose is not wise, as you will be charged several percent as a cash withdraw fee, and immediately start incurring interest. Where else might you charge money to your credit card? Amazingly, the United States Mint accepts credit cards! Even better, they occasionally offer coins such as the new Presidential Dollar series to customers on a direct ship basis, with no shipping charges. Simply order money, and then deposit it in your account to pay off the charge.
The benefits are numerous:
1. You get the reward points for the transaction.
2. You can conceivably either earn interest on the deposit in the amount of time, up to 45 days it may take between when you deposit the money and when it is paid on your monthly statement. You could also use the deposit as a short term advance to smooth out an ripples in your cash flow.
3. You can reach the minimum spend requirements that various credit cards impose for certain benefits and bonuses. For example, last year I spent $30,000 on my Starwood Amex, qualifying me for Starwood Gold Status.
4. Finally, you can actually use the coins for their originally intended purpose. I have learned through my travels that most countries have long offered coins that were at least a dollar. Frankly, it is both novel and convenient to pay small expenses in dollar coins.
For American Express card holders, the same loophole has always been available to purchasers of traveler’s checks. If you lived near an American Express travel office, you could purchase traveler’s checks with no commission. Unused checks could then be deposited in your bank account, just like cash.
Just this week, I received a notice of a change in terms from American Express. It specifically said that, as of April 1st, they would no longer offer reward points for purchases of traveler’s checks and other cash equivalents. That language would seem to include coin purchases.
Is This The End Of That Trick?
Surprisingly, my prediction is that it will not be. As far as I can tell, only the reward points are being withheld. I can see no reason why someone couldn’t reach their minimum spending requirements or take out a free, short term loan, buy purchasing coins or traveler’s checks. Until Amex starts treating coins and traveler’s checks like cash withdaws, I suspect many people will still order them for purposes other than intended. Furthermore, there are plenty of valuable reward points offered by Visa and Mastercard issuers that can still be accumulated through the U.S. Mint.
At least for now.
By Ken in
Credit Cards
Feb
28
Once you begin the dispute process with your credit reports, where do you go from there? A reader had this question:
I have successfully disputed a few charges on my Experian report. Do I need to dispute the same charges on my other credit reports?
Also, if I cleared a derogatory item at Experian, would that make it easier to clear it at the others? IE – I call Equifax and say “hey, account ###### was cleared at Experian for reason blah blah” – would that be sufficient, do you think?
Thanks for your question!
Disputing an item, and having it removed at one credit bureau does not automatically remove the items at the other two main credit bureaus.
For each account that you want to dispute, you will need to go through the process at all three credit bureaus. You can do that easily (and for free!) by signing up for an account with each of the three main credit bureaus:
You can also begin the process by visiting Annual Credit Report.com. However, Annual Credit Report will just make you create logins for the three credit bureaus individually, so it ends up being just an extra step.
If all you need is to see your current credit report, then Annual Credit Report is your best bet. If you know you want to dispute charges, then go ahead and set up the individual accounts. Make sure you write the login information down somewhere too.
Disputing items on your credit report is going to be an ongoing process for a while. You will need to sign in and dispute, then log back in and make sure that the items have been removed, then dispute a few more items if you need to, etc.
Be careful of disputing too many accounts at once. If you dispute a large number of accounts on your credit report, your credit score will be temporarily frozen until the disputes are resolved. This is also why I say that it’s an ongoing process.
Pick one or two accounts at each credit bureaus, dispute, resolve, repeat.
Once you finish with one credit report, like our reader, you will want to move on to the next two credit bureaus and do the same thing.
Now, to answer the second part of the question,”If you have an item removed at one credit bureau, will it be easier to get it removed at the other two?”
Unfortunately, the three credit bureaus really do not work together. Having an item removed at one bureau means nothing to the other two bureaus. Not only do they not automatically update, it won’t matter to the folks at TransUnion that you had something removed at Experian. This is because they are two completely separate entities.
A note about the dispute process:
When you dispute an item on your credit report, by law the credit bureaus have to get in touch with the business that is reporting the disputed account. That business then has 30 days to validate the debt. If they do not validate the debt, then it will be automatically removed off of your credit report.
This is the reason many people are able to have old, (but correct) items removed off of their credit report.
Most companies will not take the time to validate a very old debt – especially if they have already sold the account to collections, of if it was a one-time late payment, etc.
That means that you and I really do have a lot of say over what goes in to our credit reports, and our credit scores.
Our credit reports are not at all like report cards – they aren’t written in stone, and kept in a permanent file forever. Instead they are mobile records, things fall off of them after 7-10 years, and you can pretty much edit them as you see fit.
If you’ve had credit problems in the past, (or even the odd late payment here or there) the very best thing you can do for yourself is to clean up your credit report.
It takes time, it takes effort, but disputing the negative items on your credit report can save you thousands of dollars throughout your lifetime – better interest rates on loans, for some, just being able to get a loan.
The very best thing you can do for yourself is to make maintaining your credit reports a lifelong monthly habit. It takes very little time to do, and you will never have to pay more for a loan than absolutely necessary.
For more information on how to dispute the negative accounts on your credit reports, you can read our step-by-step walk-through.
How to Dispute An Item On Your Credit Report
Thanks for your question!
Have a question for us? Leave a comment below!
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What happens when you buy a car on credit and then default on the credit card?
One of our readers, David, had this question:
What if I buy a 4k car with 1k down (total 5k) on a credit card and then make the minimum payments for a few months before I “can’t” afford them. What happens?
David
David,
If you finance a $4,000 car on credit and then default on the payments, it will ruin your credit. Let’s take a closer look at the situation though.
What happens when you default on a credit card?
Defaulting on a credit card sets a specific path in motion:
- The credit card company will begin collection activities - This begins with calling your house, and calling you at work or on your cell phone. If you refuse to speak with them, or continue not making payments, you move on to step two.
- Collection Activities become more persistent - You will get several letters in the mail. If you refuse to speak to your credit card company at all, or tell them they have the wrong phone number, your account will go to what is known as “Skip – Trace”. The skip trace divisions of credit card companies exist to track you down. This means that they will literally call everyone in the phone book who shares the same last name as you do, among other things.
- Your debt will be sold - After refusing to make payments over several months, and having no contact with you, the bank will most likely cut it’s loss and sell your debt to a debt collection company. Or they will outsource it, and collect a percentage of anything the company manages to get form you.
- If you refuse to speak to the professional collection company (and they will use even more aggressive and rude contact methods) then the collection company will usually seek a judgment.
- You will have to go to court and settle your debt, or your wages will be garnished.
- The only way the debt will disappear after this point is if you either pay it, or declare bankruptcy.
So, that’s the bad route. At every step along that path you will have the opportunity to make a payment arrangement and take care of the debt.
Now with that said, I think what you are getting at is that you want to purchase a car with a serious discount.
If you were to put $1,000 down, finance $4,000, and make the payments for a few months, you could try this alternate step:
- After making your payments for several months, contact a debt negotiation agency. This agency will represent you to the credit card company, and negotiate to decrease the amount of your debt drastically.
- In order for the debt negotiation company to do this properly, they may make late payments in order to reduce the total amount of your debt. (Not all companies do this, but some do). It means that you will have late payment records on your credit report. You can challenge those late payment marks later, but there is no guarantee that you can have them removed.
- The debt negotiation agency will have to close your credit card account in order to negotiate and reduce your debt.
- You will also need to be prepared to make a larger, one – time lump sum payment. If the debt negotiation company can negotiate the debt down to around 33 cents on the dollar, then that is the payment you will have to be prepared to make in order to get the settlement.
- Debt negotiation companies can help anyone reduce their debt, even those that probably can afford the payments. However, this method does damage your credit score. You will have to decide whether or not several late payments, a closed credit account, and a record of a settlement on your credit report is worth reducing the $4,000 debt of the car down to around. $1,320.
For help with that decision, I can refer you to a couple of our articles, as well as a debt negotiation expert who can better answer your questions about that process.
Here are the articles for more information:
For more information on debt negotiation, you can listen to our interview with Mr. Sam Sky from Debt Negotiation Associates.
You can also ask Sam a question directly by filling out a quick form here.
Thanks for your question!
Carnival Roundup:
Thanks go out to these blogs for featuring our articles in their carnivals this week:
Welcome to the Carnival of Debt Reduction – Quotable Quotes Edition at Ask Mr. Credit Card’s Blog. If you are new here, please feel free to have a look around, and grab our free RSS Feed.
We are featuring some excellent articles today, so grab a cup of coffee and relax while you check them out! I’ve included some quick quotes from the articles that I’ve chosen as my Editor’s Picks.
Enjoy!
Mr. CC
“Debt is the slavery of the free”
~Publilius Syrus
“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them”
~Ogden Nash
“It is possible to pay another man’s debts on his behalf, but it is not possible to make a guilty man innocent by suffering in his place”
~Carl Lofmark
“Debts are nowadays like children; begot with pleasure, but brought forth in pain”
~Moliere
“Debt is the fatal disease of republics, the first thing and the mightiest to undermine governments and corrupt the people”
~Wendell Phillips
“If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”
~John Maynard Keynes
That’s it for this edition of The Carnival of Debt Reduction! Thank you for your submission, I enjoyed reading them!
By Ken in
Credit Cards
Feb
27
Welcome to the Carnival of Debt Reduction – Quotable Quotes Edition at Ask Mr. Credit Card’s Blog. If you are new here, please feel free to have a look around, and grab our free RSS Feed.
We are featuring some excellent articles today, so grab a cup of coffee and relax while you check them out! I’ve included some quick quotes from the articles that I’ve chosen as my Editor’s Picks.
Enjoy!
Mr. CC
“Debt is the slavery of the free”
~Publilius Syrus
“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them”
~Ogden Nash
“It is possible to pay another man’s debts on his behalf, but it is not possible to make a guilty man innocent by suffering in his place”
~Carl Lofmark
“Debts are nowadays like children; begot with pleasure, but brought forth in pain”
~Moliere
“Debt is the fatal disease of republics, the first thing and the mightiest to undermine governments and corrupt the people”
~Wendell Phillips
“If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”
~John Maynard Keynes
That’s it for this edition of The Carnival of Debt Reduction! Thank you for your submission, I enjoyed reading them!
