Mary Reed

Article / Updated 05-03-2023

The federal Truth in Lending Act makes it easy to compare credit card offers, because it requires credit card companies to provide written information about the credit card terms. Do a comparison of credit cards fees, rates, APRs, and balance calculation methods before you accept even a preapproved credit card. Here are some of the terms of credit that creditors must provide: Annual percentage rate (APR): This is the cost of the credit expressed as an annual rate. Pay close attention to a card’s default APR — the rate you end up paying if you make a payment late (or pay some other creditor late), you exceed your credit limit, or your credit score drops below a certain amount. Your APR could triple depending on the terms of the credit offer! Balance calculation method: When you carry a balance on your credit card, the credit card company figures out how much interest to add to that balance by using one of several different methods. Some methods cost you more in interest than others. The least expensive balance calculation methods are adjusted balance and average daily balance excluding new purchases. The most expensive are two-cycle average daily balance including new purchases and two-cycle average daily balance excluding new purchases. Fees: Credit card fees can be really costly, so look for cards that have few and low fees. Examples of common fees include an annual or membership fee, a late fee, a bounced check fee, a fee for exceeding your credit card limit, and a balance transfer fee. Believe it or not, some cards charge you a fee every time you use them or because you don’t use them often enough! Grace period: This is the amount of time you have to pay the full amount of your card balance after the end of the last billing cycle before you’re charged interest on the balance. The longer the grace period, the better; a 25-day grace period is probably the best you’ll do. Some cards have no grace period; avoid them if you expect to carry a balance on your credit card. Periodic rate: This is the rate of interest you’re charged each day on your card’s outstanding balance. If you expect that you may carry a balance on your credit card, get the lowest rate you can. The rate may be fixed or variable, but even a fixed rate isn’t truly fixed because a creditor can raise it at any time after it gives you 15 days notice. Also, pay attention to the interest rates that apply to balance transfers, cash advances, and other transactions you may make with a credit card. These rates won’t be the same as the periodic rate.

Cheat Sheet / Updated 02-23-2022

If you’re going through a divorce, basic decisions need to be made with your spouse. Interview divorce attorneys before you decide to hire one to help with your divorce and keep a list of national and local resources available in case you need divorce advice and support.

Article / Updated 04-03-2017

A debt collector may agree to let you pay less than the total amount you owe on a debt. Although settling a debt shows up as negative information in your credit report, negotiating a settlement indicates that you took responsibility for paying as much as you could on the debt. Your credit report will show that the settled debt is not outstanding anymore. Credit: ©iStockphoto.com/alexskopje Here's how to approach negotiation on debt settlement with a debt collector: Determine what you can afford to pay. Review your budget. Do not offer more than you can afford. When you know how much you can afford, begin your negotiations by offering less. When you negotiate with a debt collector do not provide bank account numbers, your place of employment, or references. Ask the debt collector to remove all negative information from your credit records related to the settled debt that has been added to your records since the debt was turned over to him. (The debt collector cannot remove any negative information about your debt that was added to your credit files when the debt was still with the creditor.) Then check your credit histories to make sure that the negative information has been removed. Put the deal in writing. Get the details of the agreement in writing before you give the collector any money. It's also a good idea to hire a consumer law attorney to review the agreement. At a minimum, your agreement should clearly state: How much you have agreed to pay. Whether you will pay the settlement amount in a lump sum or over time. When the lump sum or payments are due. How you will make the payment(s), such as via an electronic bank transfer or with a cashier's check. Avoid giving a debt collector a personal check. That the debt collector agrees to report to the credit bureaus that your debt has been "paid in full" as soon as the settlement amount is received. Any concessions that the debt collector has agreed to make. Conditions that breach the agreement and the consequences of the breach. Do not sign the agreement until it reflects everything you agreed to and unless you understand everything in it. After you sign the agreement, make a copy for yourself and file it in a safe place. If the debt collector won't put your agreement in writing, prepare an agreement yourself; sign it; and send it to the debt collector via certified mail, return receipt requested. When you encounter a debt collector who refuses to negotiate, contact the creditor who turned your debt over to the debt collector. Find out if the creditor may be willing to work out an agreeable compromise. If you don't feel confident negotiating a debt settlement agreement, hire a consumer law attorney to do it for you, especially if the debt you owe is substantial. The mention of bankruptcy may motivate a debt collector to settle your unsecured debt for less than what you owe. In the end, debt settlement may cause you to owe more in federal income taxes because the amount that you don't pay is reported to the IRS as income. However, depending on the state of your finances when you settle the debt, the IRS may decide that you are insolvent so you won't owe any federal taxes.

Article / Updated 03-31-2017

Your credit report contains information your current creditors and potential future lenders review to make decisions about your creditworthiness. You are entitled to one free copy of each of your credit reports every 12 months. To order your free reports, go to AnnualCreditReport.com, or call 877-FACT-ACT. For a comprehensive picture of your creditworthiness, order a copy of your credit report from each of the national credit reporting agencies, not just from one. Each report may contain slightly different information about you, in part because all creditors do not necessarily report all consumer account payment information to each of the three agencies. If you’ve already obtained copies of your free credit reports during a particular 12-month period, you must pay for additional copies. In most states, the cost is $10 per report. (Some states also charge a sales tax.) However, depending on your state, you may be entitled to pay less for additional copies of your credit reports. Call your state attorney general’s office to find out. You are always entitled to a free credit report if You are unemployed and intend to apply for a job within the next 60 days. You are receiving public welfare assistance. You believe that you have been the victim of identity theft. You have been denied credit, employment, insurance, or a place to rent within the past 60 days because of information in your credit report To order additional copies of your credit reports, contact the three credit reporting agencies individually. You can order the copies via the mail, by phone, or online. Here’s the ordering information you need: Equifax: 800-685-1111; Disclosure Department, P.O. Box 740241, Atlanta, GA 30374 Experian: 888-397-3742; P.O. Box 2104, Allen, TX 75013 TransUnion: 800-888-4213; P.O. Box 1000, Chester, PA 19022 If you order additional copies by mail, put your request in a letter, sign it, and include the following information: Your full name (including Jr., Sr., III, and so on) Your Social Security number Your date of birth Your current address and previous addresses for the past five years Your phone number, including area code The name of your current employer

Article / Updated 03-26-2016

Debt collectors who pursue old debts are not breaking any laws unless they violate the Fair Debt Collection Practices Act (FDCPA) or your state’s debt collection laws. Beware fast-buck motives, though! Some debt collectors go so far as to Contact consumers about debts that have been charged off as uncollectible. The creditor may charge off on a debt because it thinks the amount of the debt is too small to bother with or because the consumer who owes it is judgment proof. The creditor may decide to try to collect the debt later, or it may sell the debt to a debt collector who specializes in collecting very old debts. Try to collect debts for which the statute of limitations has expired. The statute of limitations begins on the first day you miss a debt payment, and it typically lasts between four and six years. To find out the statute of limitations on your past-due debts, speak to a consumer law attorney in your state or contact your state attorney general’s office. A debt collector is legally entitled to collect a debt after the statute of limitations has run out on it; however, the debt collector is breaking the law if he sues you over the debt or threatens to sue you. You can unintentionally reactivate the statute of limitations on an old debt by telling a debt collector that you agree to pay some money on the debt, even a very small amount like $5. When the statute of limitations is reactivated, it starts running all over again as though you just defaulted on the debt. Also, in some legal jurisdictions you can restart the statute of limitations on a very old debt simply by acknowledging that the debt is yours. Tell credit bureaus that an old debt in your credit history is a new debt. Most negative information can remain in your credit history for only seven years and six months. Some debt collectors take this unscrupulous and illegal step in order to put pressure on you to pay the debt, promising that when you do, they will get the new negative information removed. If a debt collector violates your legal rights when he contacts you about a debt that has been charged off or for which the statute of limitations has expired, get in touch with a consumer law attorney right away. You should do the same if a debt collector tries to get away with reporting to the credit bureaus that one of your old debts is new.

Article / Updated 03-26-2016

When a debt collector contacts you about a debt, he must send a written statement of your right to request written verification of the debt and your right to dispute the debt. Request verification of the amount money you owe and to whom you owe it if the debt is not yours or you think that you owe less money than the debt collector wants you to pay. When asking for proof, remember these tips: Always put your verification request in writing. Ask the debt collector to respond to you in writing. Ask the collector to verify the original amount of the debt that is still owed and any interest, late fees, and collection fees. Ask him to itemize each amount instead of presenting the debt as a lump sum. According to the Federal Trade Commission, which enforces the FDCPA, the No. 1 complaint about debt collectors is that they try to collect more money than the consumers really owe. Make a copy of the letter for your files, and send the request via certified mail with a return receipt requested. That way, you know when the letter was received. If the debt collector never responds with the verification, you have proof that the debt collector violated the FDCPA. Some states limit the kinds of debt-related expenses a debt collector can charge consumers. Find out if your state has such limits by getting in touch with your state attorney general’s office or with a consumer law attorney. Also, the contract you signed with your original creditor —the creditor who turned your debt over to a collection agency or sold the debt to the agency — may limit the fees that you can be charged. If you do not have a copy of the contract, ask the debt collector for a copy. Get in touch with a consumer law attorney if the debt collector does not respond to your request or says he does not have a copy either.

Article / Updated 03-26-2016

To ensure that your debt management plan helps you get out of debt, you must take an active role in overseeing it. Even when working with a reputable credit counseling agency, problems can develop if you participate in a debt management plan. Follow these tips to minimize the potential for problems: After your counselor tells you which of your unsecured creditors have agreed to participate in your debt management plan, contact them to confirm their participation before you send the counselor any money. Taking this step before paying any money may not always be possible. Due to cost constraints, a nonprofit credit counseling agency may not contact your creditors to find out if they will participate in your debt management plan until you have given the agency an initial month’s payment on the plan. The agency wants to be sure that you are serious about paying your debts before it spends time negotiating the plan details with your creditors. If your counselor tells you that one of your creditors won’t agree to participate in your plan until you send the counselor an upfront payment, contact the creditor to confirm that what the counselor says is true. Make sure that the schedule your counselor sets up for paying your debts provides enough time for your creditors to receive what they are owed each month before the payment due dates. Otherwise, you risk racking up late fees and penalties. Every month, just after the date that your counselor is due to make a payment, confirm with the counselor that the payment was made on time. Whenever you receive a monthly statement of your account from one of the creditors participating in your debt management plan, review it carefully to make sure your account was credited correctly. Make sure that each creditor made any concessions it agreed to make, such as lowering your interest rate, waiving certain fees, or allowing you to make reduced payments or interest-only payments for a while.

Article / Updated 03-26-2016

Knowing what debt collectors cannot do to collect a debt from you may help you deal with and protect you from their approaches to debt collection. The Fair Debt Collection Practices Act (FDCPA) is the federal law that governs debt collection for personal, household, and family debts like your mortgage and car loan, other personal loans, your credit card debts, past-due utility bills, past-due student loans, medical and insurance debts, condo fees, unpaid legal judgments against you, and bounced checks. The FDCPA applies to outside debt collectors, but not to a creditor’s own in-house debt collectors (meaning debt collectors who are employees of a creditor). If your state has its own law that applies to debt collectors, it may be tougher and more comprehensive than the federal law. Contact your state attorney general’s office to find out if your state has a law and about the protections it provides you. Debt collectors who are covered by the FDCPA cannot do any of the following to collect a debt from you: Call you before 8 a.m. or after 9 p.m. unless you tell them it is okay to do so. In fact, you don’t have to talk to debt collectors at all. The FDCPA entitles you to tell debt collectors not to call you again Call you on a Sunday. Contact you at work if the debt collector knows that your employer does not want you to be contacted there during working hours. Get in touch with your employer about a debt you owe, unless the debt is past-due child support. Contact your relatives, friends, or neighbors about the money you owe in order to embarrass you into paying your debts. Debt collectors can contact these people to obtain information about how to contact you, such as your address or phone number, but they are not permitted to say why they want that information. Communicate with you about your debt by using a postcard or an envelope that clearly indicates that a debt collector sent it. Use a letter or envelope that appears to have come from a government agency or a court. Call you repeatedly during a relatively short period of time. Such behavior is harassment, and the FDCPA makes harassment illegal. Swear or insult you when you are having a conversation, or threaten you with the loss of your reputation or with jail time. Order you to accept collect calls from them. Deposit a post-dated check you have given them before the date on the check. Collect more than you owe on a debt, unless the contract you have with the creditor that turned your debt over to collections allows the debt collector to do that.

Article / Updated 03-26-2016

April 15 is the deadline for filing state and federal individual income tax returns. An extension to file your tax return is not an extension to pay your taxes. Taxes are due on April 15, and the IRS begins charging interest and penalties on your unpaid taxes on April 16. For this reason, paying some of your taxes on April 15 is better than paying nothing at all. The more you pay, the less your tax debt will grow because of interest and penalties. File your tax return on time, or file IRS Form 4868, “Application for Automatic Extension to File,” which gives you until August 15 to get your return to the IRS. You can download the extension request form from the IRS, order it by calling 800-829-3767, or pick it up at your local IRS office. If you don’t have the money to pay the IRS, you have options. These options can be costly. It’s a good idea to consult with a CPA or financial advisor about whether any of these options is right for you. That person may suggest that you will be better off asking the IRS to let you pay what you owe in installments or to let you settle your debt for less through an Offer in Compromise. Pay with plastic. You have to pay a convenience fee of 2.49 percent on the amount that you charge to pay your IRS bill. And, of course, if you don’t pay the full amount of your tax debt when you receive your account statement, you pay interest to the credit card company. You can’t pay your taxes with a credit card, then declare bankruptcy, and make the debt disappear. Tax bills are not dischargeable in bankruptcy. Use a credit card convenience check. This option is relatively expensive because you probably have to pay a fee to the credit card company for the privilege of using the convenience check. Plus, if you can’t pay off the amount of the check right away, interest accrues. Borrow against your home equity. The good news is that the interest you pay on the borrowed money is probably tax deductible. The bad news is that if you can’t repay the borrowed money, you may lose your home.

Article / Updated 03-26-2016

Not paying unsecured debts can result in loss of assets. If you cut your budget to the bare bones and still can’t pay all your debts and living expenses, you have to decide what you will pay. Unsecured debts that deserve priority treatment include: Child support, especially if it’s court ordered. If your child support order was written after December 31, 2003, and you are employed, your child support payments can automatically be deducted from your paycheck. Federal income taxes. Uncle Sam has almost unlimited powers to collect past-due tax debts. State income taxes. If you don’t pay these taxes, your state can sue you, garnish your wages, or seize your property. Property taxes and homeowner’s insurance, if these expenses aren’t included in your mortgage payments. When you don’t pay your property taxes, the taxing authority will eventually take your home. If your homeowner’s insurance gets cancelled for nonpayment, your lender will buy insurance for you, but the insurance will be very expensive, so the total amount of your monthly mortgage payments will increase. Federal student loans. The IRS can collect what you owe when you fall behind on your federally guaranteed student loans. Your health insurance, if you’re responsible for the payments. Keeping up with your health insurance is especially important if you or a family member has an ongoing health problem. Without insurance, an expensive illness or accident could push you into bankruptcy. Medical bills. A growing number of healthcare providers, including hospitals, are getting aggressive about collecting on their patients’ past-due accounts, even suing patients in some instances. If you owe money to a healthcare provider, contact the provider to try to work out a plan for paying what you owe.