3 Ways To Negotiate a Credit Card Debt Settlement Yourself.

The first thing you need to consider is what kind of arrangement you are going to seek. Let’s be honest, you’d like your credit card company to forgive all your debt and pretend it never happened, but short of bankruptcy, that isn’t likely to happen.

Once you’ve accepted the reality that you will need to pay something, you need to determine what that something will be. Here are 3 possible debt payment solutions to offer to your credit card company when you make the call.

I. Lump-sum settlement.

This is by far the easiest to understand and to sell to your credit card company, but it’s often the hardest to carry out, because you need a large sum of money available.

Since most credit card issuers aren’t going to negotiate until you are behind, one strategy is to stop making payments to the credit card company and put that money (and as much extra as you can afford) into a savings account for a few months.

This is what many debt settlement companies do for you, or at least it’s what they say they will do for you. In many cases, they hold the money and let the credit card company come after you for the full debt owed anyway. It’s a big reason why debt settlement is not a good idea in many cases.

If you have access to a chunk of money, they you can make an offer to your credit card issuer for a 1 time payment that is less than the full amount you owe.

WARNING: This technique will likely hurt your credit score, but then again so will having a high debt balance and not paying it off…

II. Workout arrangement.

This is a much easier option to carry out than the lump sum. The Workout arrangement is when the bank agrees to freeze your interest payments and late fees while you payback your balance. This is also the most ethical solution in my opinion, because you’re telling the credit card company that you will meet your obligations and pay back what you owe, as long as they agree to stop pushing you back under while you do it.

WARNING: You will most likely no longer be able to use your credit card, since the bank will probably lower your limit. This is a good thing in the long term though, since it will keep you from racking up even more debt. However, the lower credit limit will increase your debt-to-income ratio, and lower your credit score.

III. A Forbearance Program.

This one is probably the easiest solution to sell to the credit card company, but not the best for your bottom line. A forbearance program is an agreement by the bank to pause your payments and interest fees while you get your finances back on track. This is like taking a timeout to gather your resources for the next play.

The next play though is usually getting back on a payment plan in which you agree to pay the full amount owed and any interest and late fees accrued – forbearance is not forgiveness.

Final thoughts.

Whichever solution you choose, keep in mind that these are tough times for everyone – credit card companies included. They can’t get blood from a stone and they know that. Credit card holders still have a lot of leverage and everything is negotiable. Job loss and negative home equity have put the squeeze on banks trying to collect full payment.

You can use one of the debt solutions from above as a starting point, then see what else you get bargain down in the process. For example, you might get the bank to forgive all late fees and interest fees and give you a forbearance if you agree to pay the full principal. It all depends on your situation, and is up to the individual creditor.

Regardless of which solution to choose, be sure to get your credit card issuer’s agreement in writing before you send them any money.

Also, be sure to read How to Negotiate Your Credit Card Debt for more detail on the actual process behind making the call.

…and for your own sake, stop living beyond your means or you’ll find yourself back in the same place further down the road. It’s the number 1 reason why Debt Settlement And Loan Consolidation Don’t Work.

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3 Ways To Negotiate a Credit Card Debt Settlement Yourself. Copyright © Simple Debt-Free Finance

Once a debt hits the 180 days past due mark, it is recorded on your credit history and carries forward as a negative mark for 7 years. Nothing you can do will remove this prior to that 7 year expiration, so in effect the damage has already been done. Paying off that debt is the responsible thing to do, but you won’t be rewarded with a higher score for doing so. It does look better to lenders that you paid it off however, no matter how long it took.

So for debts 180 days past due, it’s better to pay them than not but don’t expect a big bump in your score for doing so.

The underlying reason for this is that creditors weigh your ability to remain current with your bills more than your ability to pay them back eventually. The better way to improve your credit score is to remain current on your debt and pay your bills on time. If you’re just focusing on paying off debt and some of it is past 180 late, then start at the most recent or current debt and work your way back, paying off the 180+ days late debt last.

Here’s an accompanying video clip in which Farnoosh Torabi, Jean Chatzky and David Bach field this question and more. (feed readers may need to view the complete post to see the embedded video)

Visit msnbc.com for breaking news, world news, and news about the economy

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Does Paying Old Debts Actually Hurt Your Credit Score? Copyright © Simple Debt-Free Finance

Meet Pete D’Arruda, not only does he have 25 credit cards with a total available credit limit of $300,000, but he’s proud of it!

The crazy thing is he’s a personal finance consultant!

Why would anyone, much less a finance consult, think so many credit cards is a good thing? Well, it’s about the almighty credit score. See, one of the major factors in determining your credit score is what’s known as your debt-to-available-credit ratio (or “utilization rate“). This is simply a ratio of how much you currently owe to your total available credit. In D’Arruda’s case, his total available is a mighty $300,000.

So you would expect his debt to available credit ratio to be quite low, and his score to be quite high since he never carries a balance from one month to the next. In fact, he does boast of a 810-815 FICO score.

He also claims to have piles and piles of rewards in the form of cash back, airline miles, freebies and more.

But here’s the problem: You can get a very good credit score and low utilization rate with far less than 25 credit cards. This is just extreme.

Most finance experts recommend keeping your debt to available credit ratio below 30%. This means that D’Arruda has to keep the total of his current balance to under $90,000 to get the maximum benefit to his credit score. $90,000! Most people with $90,000 in credit card balances is likely to have bigger problems than a less than perfect credit score. This is just overkill.

You can achieve the same benefit by having one or two credit cards, and charging less that 30% on them. If that’s less than you spend per month, then use cash for the difference. (Here are 5 more ways to improve your credit score)

Besides having far too much available credit, he’s also opening himself up to 25 different potential points of identity theft.

And I for one wouldn’t want to have to keep track of all those accounts, various balances and rewards programs! And all for a high credit score which may not be all that important anyway.

I will give him credit for having self control. How many people in his situation would simply find themselves six figures in debt?

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Is 25 Credit Cards Too Many? Copyright © Simple Debt-Free Finance

Since the CARD Act eliminates many of the fees and interest payments banks traditionally use to offset other expenses and because the CARD Act only regulates consumer credit cards, banks are paying for other services like free checking and general business costs on the backs of business card holders.

That may not sound like a big deal to many, especially with the “business is the bad-guy” mentally that seems so prevalent over the past few years, but it’s not companies like GE we’re talking about – it’s largely small, independent businesses.

Many of these are people who have lost their full time jobs as employees and decided to make a go of it on their own.

The biggest concern for most business card holders is a hike in interest rates on existing balances. This could mean thousands in extra payments a year for anyone carrying a large balance. That’s significant for many home-based or startup businesses.

To make matters worse, some unscrupulous credit card issuers have begun marketing business cards to individual consumers:

“A study released Wednesday by the Pew Charitable Trust’s Safe Credit Card Project says that consumers are still vulnerable to these practices, because more than 10 million offers for business cards are sent to U.S. households each month.”

Consumers may not even be aware that the CARD Act doesn’t pertain to business cards. It looks like credit card rates and fees that were once difficult to maneuver have just become more so. Be careful out there people.

Read more.

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Are Banks Using Business Cards to Pay for Loss of Consumer Card Fees? Copyright © Simple Debt-Free Finance

I read stories about credit card doing this, and mine was one of the companies mention in one of the articles. Still, it wasn’t until they hit me with interest even after paying off the balance in full that I decided I was done with them.

I didn’t close the account, I just stopped using them. I resisted the urge to tell them close because I didn’t want to take a hit on my credit score. The funny thing is I got a call from them last weekend trying to sell me payment protection! Yeah, right!

Well, it turns out that I’m not alone.

The Federal Reserve is trying to get a piece of the credit card industry’s swipe fees, and banks are passing that along. Lucky consumers get to be the victims in the governments efforts at “financial reform.” Way to go guys.

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I’m Collateral Damage In My Bank’s War With the Fed! Copyright © Simple Debt-Free Finance

Why Credit Should Matter Now

Many consumers make the mistake of waiting until the last moment to do something about their credit scores and only make the attempts when they need to secure financing. But waiting until the last minute these days is a measure in ‘too little, too late’. It is important to do something about your credit score now regardless of your timeline or need for financing.

Here is an overview of situations where a bad credit score will cost you big bucks:

Mortgages

Mortgage lenders are scrutinizing credit histories and scores harder than ever thanks to the near-meltdown of the industry a few years ago. There are now stricter lending laws being imposed and borrowers need to come to the table with really good credit in order to have the most opportunities for an affordable home loan. Those without good credit scores will have a tougher time getting lender approval and for loans that are approved the interest rate of the loan will be higher, meaning you’ll spend a lot more money over the life of the loan than if you were eligible for a lower interest rate. Your loan terms and conditions may also be stricter such as requiring more than the typical 20% down payment on your loan.

Auto Loans

Like mortgage lenders, auto loan financing may be impossible for those with bad credit or the interest rate you pay on the loan may be much higher than for other buyers. As a result, you will pay more for the vehicle over the life of the loan, which is essentially a price you can’t make up in the value of the vehicle since most vehicles depreciate as soon as you drive them off of the sales lot.

Auto/Home Insurance

It is not just financing companies that are looking closely at credit scores. Insurance providers are pulling credit scores on customers in order to gauge their potential for claims being filed. Insurance providers use a theory that credit history is relative to claim potential, meaning that those with lower scores are more apt to file an insurance claim. If you have a low score, you will have to pay a higher premium on your auto and home insurance than consumers who have better credit backgrounds.

Utilities/Consumer Services

There are many regular service providers who will pull credit scores before approving service applications. If customers have low credit scores, most providers will require a hefty down payment or prepayment on accounts to prevent risk of the bill not getting paid. For instance, with a low credit score, you may have to put up several hundred dollars on your mobile phone account or if you open a new account with the electric company, a deposit might be necessary to start services. Such deposits are often held for up to a year to gauge prompt payments each month and only then will you receive a credit.

Credit Card APRs

If you are looking to apply for a new credit card but have a poor credit score, your options will be seriously limited. In some cases, you will only be eligible for secured cards, which means you need to send several hundred dollars as a prepayment. Secured cards will also require you to keep up with timely payments to keep the account loaded and change significant fees for transactions and penalties for late payments or over-the-limit charges.

While credit repair is possible by anyone, what is important to remember is that it is a time-intensive process that should begin as soon as possible. Even if you are not anticipating a need for a loan in the near future, there are too many other resources relying on credit scores for you to ignore the importance of your credit standing. Over time and with good financial management practices, you can improve your credit score to where it should be. Today, lenders are looking for borrowers with a credit score of 730 or higher in order to afford the best deals and the most options.

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How Credit Repair Now Can Save You A Lot Of Money Later. Copyright © Simple Debt-Free Finance

For example, it’s kind of frightening to me that 6% have no idea! How do you not know?

I find it interesting that a very clear majority (59%) of those under 30 have a larger emergency savings fund than credit card debt. It certainly seems that this younger generation does not share it’s parent’s love of leverage.

What do you think of having no debt and no savings? Is that better or worse than having more credit debt than savings?

It’s encouraging, but there is a lot of progress to be made, as Greg McBride says.

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Which is Larger: Your Credit Card Debt or Your Savings Account? Copyright © Simple Debt-Free Finance

First Premier Bank credit card offer with 79.9% APR is a hit.

According to this article, the initial offering of 79.9% proved popular with customers! What’s this you say? People actually wanted a card with such insane rates? Yes.

It turns out that so many people with poor credit saw it as an opportunity to rack up hundreds to thousands in free charges – and defaulted!

Muhahhaha…

Serves First Premier right!

Miles Beacom, the CEO said:

“A lot of the people ran up the card, defaulted and went directly to charge off.”

As a result, they dropped the rate to 59.9%. “We also tested it at 23%, 33%, 45%, but 59.9% is the one that shows the best performance and where the organization can market the product,”

I’m actually surprised the bank is still offering the card, since the CARD Act capped fees at a max of 25%, and the bank has said they were previously relying on even higher rates to offset the default risk of the customers.

Despite the $135 in annual fees and sky-high interest rates, the company claims to service about 3 million people, with 200,000-300,000 applications each month!

Strange days indeed.

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First Premier Bank Credit Card Offer Features A 79.9% APR, a Bad Deal – For The Bank! Copyright © Simple Debt-Free Finance

Lenders, creditors and credit scoring institutions like FICO—the company that creates the most-widely used credit score in the United States—consider a broad variety of information when evaluating consumers. In order to be regarded as a responsible credit card or charge card user you must, for example, pay your bill on time each month, refrain racking up debt and avoid going over your credit limit. This goes for NPSL credit cards too.

These are the main tenets to proper spending and most people are aware of their importance. However, many consumers don’t realize the importance of factors like credit utilization, and their credit scores suffer because of it.

Credit utilization

Credit utilization is a balance-to-available credit ratio that organizations like FICO include prominently in their credit scores. It basically measures how much of your available credit you are using—the lower the better—which is important because responsible credit users, the thinking goes, use only the credit they need, not all that is given to them, and leave themselves a significant buffer in case of emergency.

High credit utilization is typically simple to avoid, especially for people with excellent credit. Just make sure that your spending is about 30%-40% of your credit limit each month. But what if your credit card company does not inform you of your credit limit and/or you think your card has unlimited spending? How can you keep your utilization low then?

NPSL Credit Cards.

Credit card companies often don’t provide their customers with concrete spending limits because of a feature known as No Preset Spending Limit (NPSL). Credit cards with this feature—like the charge cards from Chase and American Express, World MasterCard credit cards, and Visa Signature credit cards—have limits that change on a month-to-month basis reflecting various factors such as spending patterns, payment history, and economic trends.

Both this secrecy and the fact that the feature’s name contains the words “no” and “limit” lead many consumers to buy into the myth of the limitless credit card. Still, whether you initially misunderstood the meaning of NPSL or not, you never know what your spending limit is with an NPSL credit card, which makes it difficult to effectively budget and increases the chances that your card will get declined when you try to make a big ticket purchase.

As you might expect, the lack of uniform spending limits for NPSL cards also affects how credit utilization is calculated. According to an NPSL Credit Card Study conducted by CardHub.com in Nov. 2010, credit card companies report proxy limits to the major credit bureaus in place of their cards’ true spending caps or they just report nothing at all. As a result, FICO could consider you to have used more of your available credit than is truly the case or to simply have less available credit overall. Either way, credit damage is possible. The study also discovered that credit card companies use various types of faux limits and that some of the largest issuers—namely HSBC, Chase, and U.S. Bank—refuse to publicly reveal which they report. Thus, an NPSL card’s effect on your credit standing might be both unpredictable and impossible to compensate for.

Recognizing the importance of credit utilization is ultimately very important to garnering the best credit score possible. You must therefore find out what your credit limit is and make sure to keep your spending well below this amount. If your issuer cannot provide you with a definitive limit because your card has NPSL, then you should close your account and get a card without this feature. NPSL is not a reward, it’s a burden, bringing uncertainty and the possibility of credit score damage. Given the fact that NPSL cards are for people with excellent credit, a traditional rewards credit card would be an excellent replacement.

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NPSL Credit Cards and the Case of the Unknown Credit Limit. Copyright © Simple Debt-Free Finance

Here’s a look at how things work:

Understanding Balance Transfer Credit Cards

Credit card companies issue balance transfer cards to a target market of consumers who actively use credit cards. The balance transfer cards typically offer a low (or no) interest rate for a promotional period of time – usually 6-12 months. A consumer can use the balance transfer cards to move existing credit card balances to one card and consolidate the amount of credit card payments they make each month. Provided a card holder can pay off the entire balance placed on the new card at the lowered interest rate within the promotional time period, a balance transfer credit card can be a valuable tool for debt elimination.

Understanding the Risk of Balance Transfers

While the resource can be ideal for some consumers, there are also risks associated using this tactic. Traditionally, using other credit cards to pay off credit card debt has been known to start a vicious cycle of bad debts. However, if there is a sufficient plan in place for effectively paying off the total balance before the low interest rate ends, the benefits are greater than the risk.

It is the temptation that may make balance transfer cards a non-viable resource for eliminating debt. Cardholders that consolidate their balances to one card only have one payment to make each month. They may become inclined to either use their now balance-free card to make more purchases or allocate the ‘extra’ money they have after consolidating payments for other things besides debt elimination. The vicious cycle of spending more than you have is often a big factor for consumer continually in debt. Adding a new credit card to the mix may be a dangerous financial move.

How to Make It Work

If you still have good credit and can get approval for a balance transfer credit card, you must first make some considerations about your finances and spending habits before signing up.

Have a Plan

Say you consolidate $3000 worth of balances from several other credit cards. Your low interest rate period of the balance transfer card is 12 months. You have to calculate the outstanding balance divided by 12 months to figure out how much you need to pay each month to be debt free within the year. In this case, you would need to pay at least $250 a month, every month for a year to zero out the balance. You also have to factor in the interest charges on the card each month so add a few more dollars to your monthly payment to account for that. Even if your minimum payment each month is only $75, you need to commit to allocating a full $250-$275 a month to eliminate the debt in time. Resist the temptation to only pay the minimum and spend the rest elsewhere.

Compare Offers

If your credit is good and you have the option of several cards, make sure you check the terms and conditions of each of the balance transfers to find the right one for you. You may be tempted to sign up for the first offer you get, but it is in your best interest to find the card that best suits your lifestyle.

You may be approved for a balance transfer credit card but be cautious of your limitations. You may have $5000 in existing credit card balances but only a $2500 limit. Work out the numbers to see if it is worth making transfers if you can only deal with a portion of your total balance owed.

Stop Spending

Once you have zeroed out your other credit card balances, stop spending beyond your means. A clean slate may be too strong a temptation so consider taking the cards out of your wallet and only use one for emergency purposes – at least until the balance transfer card is also zeroed out.

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Balance Transfers – Simple Solution or Debt Enhancer? Copyright © Simple Debt-Free Finance

Some astute readers will know that I typically only have good things to say about my Bank of America Upromise card.

Not anymore.

My wife and I have had this Upromise rewards card for about 6 years and make a habit of paying the credit card balance in full every month. The reward is a monthly contribution to our 529 college plan for our children. Basically, 1% of our monthly expenses get contributed to the fund. It’s not going to make or break the college fund, but every little bit helps.

As it is so easy to do with many habits, we let this one slip.

Over the Thanksgiving holiday we carried a balance for one month -one month, no late payments. We paid the balance in full for December.

Imagine my surprise when I received our credit card statement for the month of December – the month after we paid the balance in full, mind you – and saw a finance charge for $45!

I naturally assumed this was a billing mistake caused by the due date of the previous statement being on a holiday (New year’s day) and that one call to customer support would set things right.

Wrong.

It turns out I’m a victim of “Residual Interest”, which is a clever way for credit card companies to stick you with 2 interest payments when you carry a balance for a month even when pay your card balance “in full.”

I asked the very pleasant BofA support rep if this was a new change as I had never heard of or had to pay residual interest in the past. She assured me it’s common practice and part of my card agreement. ( I looked and could not find it.)

Fair enough.

I mean, it’s clearly legal for them to do, despite all the wonders of the Credit CARD Act of 2009, this is apparently one of the egregious acts not eliminated by the CARD Act. But It’s also perfectly legal for me to take my business elsewhere – and that’s what I’m doing.

So, goodbye Bank of America! I’ll be taking my purchasing habits to a new rewards card.

I wish it didn’t have to end like this, but it’s your choice not mine and at the risk of sounding arrogant – you chose poorly.

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Goodbye Bank of America! Copyright © Simple Debt-Free Finance

“Tracking spending is easy when you pay for everything in cash. But checks, credit, debit, and electronic payments all make the trail harder to follow. Toss in payments made quarterly or annually and you have a murky soup of spending.”

I came across this in a Yahoo! Finance article last week and thought it must be a typo, and yet there it is in an article by a well known finance writer.

I know there is a rather large anti-credit card movement happening these days. There are countless blogs and posts devoted to cutting up your credit cards and living an all-cash life. Dave Ramsey is a big proponent of just such a move. I know it works for many people, and for others it’s the only way they stay out of debt. But to say it’s easier to track your expenses with cash is plain silly.

It’s certainly easier to live within your means when you pay with cash, but it’s also easier for small expenses to slip through the cracks. And and envelope system quickly gets overwhelming when you try to set one aside for every category of expense. It’s must easier, more detailed and less time consuming using a credit card or debit card statement for tracking expenses -especially when you use finance software that automatically updates your transactions based on those statements from a website!

What gives?

For what it’s worth, the rest of the article has some solid tips like the importance of settings goals, and fostering good habits. Automation is also discussed, and as any long time reader of this blog knows I’m a big fan of automating your finances, and so is David Bach.

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Is Tracking Cash Flow Really Easier When You Buy With Cash? Copyright © Simple Debt-Free Finance

How to Repair Credit One Tradeline at a Time

Nobody begins adulthood with the intention of getting negative marks on their credit file. Well, at least not most people. However, at one point or another, either through poor finance choices or because of a genuine oversight, you may have to tackle the issue of credit repair. For some people, this will involve reestablishing credit after bankruptcy, divorce or numerous defaults. For others, it could be as simple as forgetting to pay a bill or two on time. Knowing the process that you will have to go through will save you time, energy, and possibly money.

photo by http://www.flickr.com/photos/travistruman/

Free Annual Credit Reports

There are tons of websites that claim to offer free annual credit reports, but the truth is that most of them want something from you – money. Even if these sites do let you see a credit report online for free, you will only get access to an estimated FICO score, or a list of fairly up to date tradelines. A tradeline is any item that appears on your credit report.

The only place that you can get a copy of both your FICO score and an accurate listing of your tradelines is AnnualCreditReport.com. Although you will be tempted to peak at your scores online, it is recommended that you opt to have a hard copy mailed to your home from the three credit reporting bureaus: Experian, Equifax and TransUnion. This step will save you some money and assist you with disputes if need be.

Reviewing Your Credit File

This part of the process will determine whether you will have to invest a few weeks of your time or are home free. After you have a copy of your hard copy credit reports, it is time to go through each trade line and compare the remarks from each of your accounts. There will likely be a few minor discrepancies, such as one credit bureau reporting a slightly lower balance than another. As long as the payment history reflected is accurate and no extraneous accounts appear, don’t worry about it.

If available, use billing statements and receipts to compare against what is on your credit reports. If you see a major discrepancy, highlight it, take note and continue forward. You will be sifting through around seven years of your credit history, so be patient and wait until you are completely finished before going any further.

If you find any errors that you cannot disprove with billing statements or payment receipts, check your credit card statements, bank records and check registers. Luckily, most people don’t pay their bills with cash. So there is a good chance that you will have the proof lying around somewhere.

Request an Account History Review

If you find errors on your credit report, you should request that they be removed. Sometimes this can be as easy as calling the company that handled the account and faxing over your receipts, but other times a knock-down, drag-out fight will be necessary. Start with the direct approach first. Using the company name, address and account number listed on your credit report, locate the main phone number and ask to speak to someone in billing.

You might get transferred to the archives department if the account is closed or if you are disputing a fairly old payment. Be patient as you will probably be inadvertently transferred to people that cannot help you, get told to call back, and repeat the same process again. Inhale…exhale…continue.

Once you are certain that no headway has been made, a certified letter to the company’s address might do the trick. Give them adequate time to respond before taking further action, with 30 days being the standard accepted time-frame. In the meantime, you can try to look for the email addresses of the CEO and people in the public relations department. If you are lucky enough to find a working email address, the problem will get resolved quickly.

For genuine mistakes, the steps outlined above are usually all that it takes to get a tradeline error removed. Unfortunately, some companies, for whatever reason, are hard pressed to correct any type of mistake. This is when you need to get directly involved with the credit reporting bureaus. Although TransUnion, Equifax and Experian have online dispute forms and toll free phone numbers, sending correspondence via standard mail usually prompts more favorable results.

The Dispute Process

Read up on the Fair and Accurate Credit Transactions Act of 2003. This is an act passed by Congress. It outlines the responsibilities and rights that consumers and companies alike are subject to.

The three major credit bureaus handle countless disputes on a daily basis so, if your dispute is not worded correctly, an unfavorable decision could be made. You don’t have to write anything fancy, but clear and concise language backed up by physical proof will be necessary for your dispute to be accurately reviewed. Just state the facts, and include dates and copies of previous correspondences.

A decision from the credit bureau will be mailed to you explaining why or why not they agree with your dispute. If your dispute was upheld, allow the company that made the reporting error up to 30 days to correct their mistake. If the dispute was found to be unsubstantiated, and you truly feel that you are in the right, write to the credit bureau again, making sure to note exactly why you think that they made the wrong decision. Many times disputes are not even seen by human eyes as electronic scanning software is used to read and analyze the bulk of electronic and mailed disputes. Try writing out your dispute by hand this time, or use a font that simulates cursive handwriting.

Most companies will quickly correct reporting mistakes because they honestly did not make them on purpose in the first place. On the other hand, certain unscrupulous companies, such as unlicensed debt collection agencies, will be more interested in attempting to strong-arm a payment out of you. If you can provide proof that you paid your debt, or if the reporting company cannot prove that you owed it in the first place, there is no reason that a negative mark should be on your credit.

While this process works great to remove erroneous tradelines take care not to abuse your power. Taking advantage of a situation in which you know that you owe a company money could result in your being blacklisted or even taken to court if proof surfaces in the future.

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How to Repair Your Credit, One Tradeline at a Time. Copyright © Simple Debt-Free Finance

The Kardashians had a debit card? Who knew?

I sure didn’t, but then I don’t much care about Kim or any other Kardashian…

It looks as though they had loaned their likenesses to a prepaid debit card issued by The Revenue Resource Group, but that card had some questionable fees and so they have pulled out of the deal after taking some heat for it. The Connecticut attorney general is on The Revenue Resource Group’s case about possible violations of state laws and potential violation of the new financial regulations in the Dodd-Frank bill.

Apparently the card has almost $100 in fees per year, and $1.50 ATM fee on top of that.

I dunno if that violates any laws, or even if it should violate any laws. What I do know is that $100 a year for ANY card – debit or credit, rewards or not – is way too much. In fact, I would go so far as to say any fee for using a card makes that card not worth using.

But the best part may be the lawyer’s quote:

“The Kardashians have worked extremely long and hard to create a positive public persona that appeals to everyone, particularly young adults,” he wrote. “They have been successful in doing so because they are recognized as honest, ethical, and fun-loving individuals who are kind and caring to others.

I suppose it is hard to argue that Kim’s home made adult film that cemented her search-worthy status on the internet doesn’t appeal to young (male) adults.

Read more: http://www.nydailynews.com/gossip/2010/11/29/2010-11-29_kardashians_cut_ties_with_prepaid_debit_card_after_outroar_from_consumer_advocat.html#ixzz16jLFbp9T

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Kardashian Debit Card Comes to an End. Copyright © Simple Debt-Free Finance

1. They take a picture of you scanning your card and entering your pin while you’re checking out. They’ll need to be near you, or just behind you and they’ll likely be posing as though they’re looking at their phone.

2. They tour around your neighborhood after you leave for work in the morning, or before you get home. They’re looking for bills you might be sending with personal information, or credit card offers and bills being sent to you.

3. They drive through the neighborhood in the wee hours of the morning (night), looking for garbage bags. They take the garbage, and sort through it later.

4. They attach a device called a “skimmer” to ATM’s. Skimmers sit between you and the ATM, so it looks like you’re putting your card in the ATM, but in reality you’re giving it to the skimmer – and the thief.

Why I don't own a shredder.

It’s also for this reason that you should use an office shredder, and shred anything and everything that has your name, account number or even address on it, lest it end up in the hands of the wrong people.

Debit cards are another big risk. I know a lot a people advocate debit cards over credit cards because they help limit spending, but if a thief gets hold of your debit card number and pin, then he has access to your whole bank account. At least with a credit card it’s the issuer who’s out the money while you sort things out and you still have the money in your bank to pay the bills. This is why credit cards are more secure than debit.

If your bank or credit card company offers it, consider getting a card with your picture on it.

Also, try to use secure ATM’s – the kind with doors that only open with a valid bank card, or an ATM in a public place in plain site, like the kind in stores. It’s a lot more difficult to attach a skimmer in high-traffic, public areas. Using the same ATM helps as well, since you’re more apt to noticed something different.

Related Posts:

• Heads Up – Your Credit Score May Suffer Even If You Pay Off Your Card Every Month!
• Using Secured Credit Cards To Rebuild Credit.
• Is 25 Credit Cards Too Many?
• First Premier Bank Credit Card Offer Features A 79.9% APR, a Bad Deal – For The Bank!
• NPSL Credit Cards and the Case of the Unknown Credit Limit.

How Your Identity Gets Stolen (and What to Do About it). Copyright © Simple Debt-Free Finance

First Premier Bank Mastercard

First Premier Bank Mastercard still the worst credit card out there. Besides settling out of court with the New York Attorney General’s office (always a bad sign), First Premier sports APR of up to 59.9% and a $75 annual fee. And because of the CARD Act of 2009, you could end up paying as much as $170 in fees even though the card only has a $300 credit limit!

But the biggest red flag is how these advertise (bolded by me, for emphasis):

“First Premier’s card now advertises a $25 to $95 processing charge (which fluctuates by the minute, depending on when you click on the card’s website).”

Beware – they also offer this card under the names: Centennial and Aventium.

Platinum Zero Secured Visa from Applied Bank.

This card has the dubious distinction of being the second worst credit card available. This is a sly piece of abusive marketing. They advertise 0% APR, no application fee and no annual fee but when you look deeper you see that none of it is really true. Oh, it’s technically true, just not really true. It all depends on what your definition of the word is is…

While there is no Annual fee, there is a $9.95 monthly fee (which adds up to $119.40 per year!). If you’re late with a payment, you’ll get hit with a $35 late fee. And that 0% APR is on purchases and cash advance, but there is no grace period and interest charges accrue beginning on the date of the transaction. So, again it is 0% technically - IF you pay it off on the same day!

It’s easy for someone like me to look at these cards and think that anybody who agrees to these terms deserves what he gets, but I know there are a lot of people with poor credit scores or no credit history and little opportunity to build or rebuild their credit score. But there is a better option than cards like these. These cards represent the worst of the credit card industry. They are the stereotypical credit card company that sucks the lifeblood from the very people who need a break – the so called subprime borrower. A better option for people who need to build their credit history might be secured credit cards.

source

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• Using Secured Credit Cards To Rebuild Credit.

Worst Credit Cards for 2010. Copyright © Simple Debt-Free Finance

Hard to believe? Well, yes. Yet that appears to be what’s happening for some lucky credit card holders.

At least four credit card issuers are experimenting with these kinds of reward incentives. It’s not surprising, given that the rate of credit card default has gone from less than 4% in the mid 2000′s to just around 9% in June of this year. Given that stark fact, many issuers may be viewing these types of incentives as a way to settle for at least some of the debt.

These kinds of settlement rewards are being offered to a select few, who are apparently just keeping up with the minimum payments. Credit card companies are not making these offers on a request basis (meaning you can’t simply call up and ask for it). It’s unclear how exactly one gets on this short list though, since it’s unlikely the companies are calling consumers out of the blue. I imagine you still need to make an effort to negotiate the terms of your credit card debt, even if you don’t ask outright for this kind of forgiveness incentive.

Credit card companies say they will be more likely to offer these incentives if they prove successful with this limited initial group. It should be interesting to see how successful these programs are, given that most debt settlement programs don’t work.

For what it’s worth, here are the four credit card companies who have taken steps toward these innovative new incentives:

American Express. Amex has experimented with cash incentives of $300 to some customers for paying off their balances and closing their accounts.

Citibank. Citibank has offered “statement credits” as large as $550 to some customers to pay down credit card debt, accepting credit line reductions and use of their cards for up to 11 months.

Wells Fargo. Wells Fargo has offered reduced interest rates to customers who paid down their balance.

Chase. Chase has offered “statement credits” up to $200 to customers who paid down their debt within six to nine months.

Many of these offers appear to be contingent upon the customer either closing their account, or ceasing to use the card if only temporarily. This may be enough to offset the tendency most people have to simply go back to the behavior that got them into debt to begin with. If that’s true, maybe these incentives will end up being more effective at cleaning bad debt off the books than it at first appears. Time will tell.

source.

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Credit Card Companies Bribing Customers? Copyright © Simple Debt-Free Finance

• Shortened payment periods. The CARD Act of 2009 mandates that credit card companies must allow at least 21 days between the time the bill is mailed and the payment due date, but apparently some companies aren’t adhering to that.

• Sunday due dates. The CARD Act attempts to force credit card companies not to process payments on Sundays, since there is no US Postal delivery, but some banks are saying they are open . for business regardless, and if due dates fall on a Sunday, they fall on a Sunday.

• Low-limit cards. Since the CARD Act prohibits issuers from charging the outsized fees for charging over the limit on low-limit cards, some issuers are creating new processing and overdraft fees.

• Fake inactivity fees. It’s being called an annual fee that is waived when the cardholder spends a certain minimum amount, but that sounds an awful lot like an inactivity fee.

• Rebate offers. Some card companies are offering to refund finance charges when users pay on time, but such offers can quickly – and unexpectedly – be revoked, only to leave the cardholder holding a much larger charge than he anticipated.

Avoiding these traps and pitfalls is simple, but not easy. It’s for reasons like these that you should avoid carrying a balance at all costs. If you can’t do that, then it may not be a bad idea to cut up the card altogether. Just don’t cancel the account.

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New Game, Same Old Credit Card Tricks And Traps. Copyright © Simple Debt-Free Finance

The CARD act has put the breaks on many fees and interest rate increases, but the act doesn’t prevent credit card issuers from creating new fees or cutting other perks. Credit card companies are making up the lost money by reigning in their reward programs. According to industry analysts, reward programs cost the credit card industry billions of dollars per year and those issuers are now saying they can no longer offset those losses with fees and higher rates due to the CARD Act.

Here’s what some credit card companies are doing with their rewards programs:

• Charging “redemption fees” on frequent flyer miles and hotel stays. Reward points may accrue the same as always, but it will cost you to trade them in.

• Raising the level of points required for certain rewards above the true cost of the item. For example, HSBC Premier offers a $50 gift card for California Pizza Kitchen for 6,000 points. This works out to $60 of spending, which is $10 over the price of the gift card!

• Slashing cash-back rewards. Both American Express and Chase have done this. For example, you may have previous earned 1.5% cash back for all purchases, and now you earn 1.25%.

• Adding annual fees to offset rewards.

While the Credit Card Accountability Responsibility and Disclosure Act may have led to some much needed reforms in what the Federal Reserve has called “unfair and deceptive” practices of credit card companies, it does come at a cost and credit card issuers are passing that cost on to the cardholders.

Unfortunately, there isn’t much the cardholder can do about this except shop around for a better deal or perhaps a reward program that better suits their spending. Credit card users should also keep a sharp eye on their terms and watch for changes to their existing rewards programs.

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How The Credit CARD Act of 2009 May Be Affecting Your Rewards. Copyright © Simple Debt-Free Finance

I came across this article the other day in which a person asks a staff reporter for CreditCards.com if she pays off her credit card every month, can her score still suffer if that balance is “too high”? The surprising answer is: yes!

Your credit score could be hurt by large balances, even if they are always paid off, so keeping debt levels relatively low may help your family’s scores.

The key to understanding this is the idea of your debt level.

One of the major factors in determining your credit score is the ratio of debt to available credit you have. This is called your debt utilization ratio and it is quite simply a measure of how maxed out are you on your credit cards. For example, let’s say you have an available credit of $10,000, and your monthly balance is about $3,000. This puts your ratio at an nice round 30% – even though you never carry a balance from one month to the next!

Now the problem is also one of timing.

Say that in this example your credit card issuer reports your current balance to the credit bureaus on the 30th of the month, but you submit your payment on the 1st of the following month (still ahead of the due date). Now you apply for a car loan on the 15th and the bank pulls your credit report and sees that you have a revolving debt utilization ratio of 30%. By the way, this would most likely be a perpetual instance, not just for one month – unless you paid your bill much earlier in the billing cycle some months.

Obviously there are other factors involved here as well. For example, your ratio will appear much worse if you don’t have any other credit cards available, or your balance is higher and your credit line lower. In the example above, you’d look like a poor candidate indeed if your credit limit was only $5,000 (you’d have a debt ratio of 60% – $3,000/$5,000. Most financial experts believe that your utilization ratio should be under 30% to maintain an excellent credit score.

Here are some ways to turn this problem around:

• Charge less.
  Lowering you monthly balance is a great way to lower your debt utilization ration AND live within your means, though it’s not always easy to do…

• Pay more often.
  Most credit card companies let you make multiple payments throughout the billing cycle. The more payments you make, the lower your balance will be at report time.

• Pay earlier.
  If you pay off the balance as soon as the statement is available, then you will likely have a 0% utilization when the issuer reports your balance to the credit bureaus.

• Request a higher limit.
  This is simple math. Increase the denominator (the number on the bottom – in this case the available credit limit) and you decrease the ratio. The problem is that it may not so easy anymore.

• Open up another credit card – but don’t use it!
  Having another credit line can help offset the ratio in much the same way as a higher limit can, since the new credit card limit adds to the available credit you have. As long as you don’t use it, it won’t impact your ratio negatively. But bear in mind that too many credit cards is also a bad thing for your credit score. The sweet spot seems to be about 3 open credit accounts.

A real life scenario.

I was worried about just this sort of thing when I was looking to buy a new home. We put most of our purchases on our family reward card and pay it off every month. But since I have this blog, I’m always keeping up on personal finance news and I knew about the possibility of this sort of timing issue hitting me on my credit report.

I was worried that when I began to shop around for the best mortgage that my debt utilization ratio would get in the way. So, I called my credit card company and asked for a limit increase. This was back in the day when credit was like candy, so they were very willing to do this for me. Also, my utilization ratio was right about on the 30% fence, so it didn’t take much. An increase of $5,000 was enough to put me into the 20% range, and the rest is history – I got a very favorable rate on my mortgage at a wonderful local bank instead of one of the mega-subprime meltdown lenders.

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Heads Up – Your Credit Score May Suffer Even If You Pay Off Your Card Every Month! Copyright © Simple Debt-Free Finance