Credit Cards » Credit Card News » Answers to Some Banking Practices that Puzzled You
Date May 18, 2009

Answers to Some Banking Practices that Puzzled You

Category: Money Management, credit card news

Overdrawing

You might have wondered why, when you make ATM withdrawals or debit purchases that are higher than your available balance in the bank, the transaction goes through.

Answers to Some Banking Practices that Puzzled YouIt might seem like the bank is playing the fool but, in reality, this practice is the direct result of banks wising up over the years. In the past, banks would most likely have cut you off if you overdrew your account. Nowadays, they let it through because they’ve learned that they can earn more by charging you special fees for overdrawing your account.

The same also goes when you go over you credit card limit. If you go over the limit of your card, your bank will allow it but you will then be charged a fee for it.

Minimum Amounts and Surcharges

In your purchasing experience, you may have encountered merchants who specifically require a minimum amount before they allow you to use your credit card. Some merchants also have surcharges if your purchase amount is below a specified value.

These are actually not rules from the credit companies and these merchants may actually be breaking the rules. Major credit companies such as MasterCard and Visa don’t allow requiring a minimum amount from cardholders. They also don’t allow surcharging, though there are exceptions with government and educational institutions. Most merchants may not be aware of these rules, however. They usually get their card terminals from third parties. They are, however, aware that they pay increasingly higher percentage of purchases as the transaction amount gets lower. Thus, they invent lower limits for credit card purchases or add surcharges.

0% Balance-Transfers

0% balance-transfers seem to be the perfect solution to handling your debt problems. It’s quite simple. If you have a debt in a credit card line with XX% interest rates, you move it to a card that is offering a 0% interest rate for a limited time, usually 12 months. The question is; how does the bank see profit?

First off, just by transferring the amount, you will already pay a fee. Then, after you transfer, you miss a single payment and that 0% interest rate jumps to 20% or more. You might also go over the 12-month limit and then you’ll end up with a rate of around 16% or more. Another possibility is that you make the minimum monthly payments for the whole 12 months and you try to move to another 0% interest card. However, the requirements will be tougher and you won’t qualify. Thus, you keep your card and you pay off your debt. After your debts are paid off, you keep your card and the bank continues to earn from you.

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Date May 9, 2009

Consumer Borrowing Falls, Smart Spending is the Order of the Day

Category: Money Management, People and Credit

Consumer Borrowing Falls, Smart Spending is the Order of the DayThe economic recession, the rise of unemployment, and the fall of the property markets have hit the country quite hard. For the average American, the reality has been rising loan rates, the risk of losing homes, and the threat of unemployment. As a result, every American has had to rethink the way they spend their earnings.

Today, Americans around the country are moving away from their old, consumer-driven spending habits. The order of the day for most Americans is now spending smart. It seems that frivolous spending, a common practice just a few years ago, is now on the way out.

Paco Underhill, an expert in consumer psychology, has stated that the consumer mindset is undergoing a major change due to the recession. He was recently quoted saying, “Our retail culture is in a major transition. Conspicuous consumption is now bad manners. Too many of us have spread ourselves far beyond our means. We can’t do this anymore.”

“Our closets are full, our houses are too big, we have too many cars. It’s time to make some very wrenching changes,” he further elaborated.

It seems that American spenders are doing just that. A report released by the Federal Reserve last Thursday shows that consumer borrowing dropped to $11.1 billion this March. Reuters had earlier polled industry analysts who had expected consumer borrowing to drop to $3.5 billion for March. The annual rate of consumer credit fell to 5.2% this March. This totals $2.55 trillion. Not since December 1990 has consumer credit percentage dropped so low.

The drop in non-revolving credit was to the tune of $5.7 billion, which is equivalent to a 4.2% rate, to $1.6 trillion. Non-revolving credit encompasses closed-end loans, such as those taken out for holidays, cars, boats, and college educations. On the other hand, the drop in revolving credit in March was at $5.4 billion, which is at a rate of 6.8%, to $946 billion. Revolving credit is composed of borrowings from credit cards and charge cards.

The sales figures of major retailers for April are also quite telling. Discount stores and supermarkets are winning out against their more high-end competitors. From food to clothing purchases, most Americans are moving towards where the best value is. Consumers are beginning to recognize the importance of holding on to their dollars and are being very careful in their spending. As a result, previously scoffed at buying practices such as buying pre-owned items and “private label” store products are becoming more and more the norm.

The appeal of high priced, luxury branded goods is also beginning to wane.
The changes in buying behavior have its positive and negative effects. Some retailers, for example, are being hit by the change in consumer practices. Clearly, they will have to adapt to this new consumer behavior trend or risk losing everything.

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Date May 8, 2009

20 Million Home Owners With Negative Equity, Study Shows

Category: Money Management, People and Credit, economy

House OwnersRecently, real estate website Zillow.com released figures from a study they made which indicate that the figure of homeowners currently paying higher debt mortgages than the worth of their homes at 20%. That roughly estimates to 20 million U.S. home owners.

These homeowners are in the unenviable position of being “underwater” or having “negative equity” in terms of home mortgages. This means that, if these homeowners were to sell their homes, they would actually have to pay money for their property to be sold. This sad state of affairs is the result of the sharp drop in real estate prices that the country has been experiencing these past few months.

The extent of the damage varies. The most hit areas include Stockton, California with an estimated 51.1% of homeowners are facing negative equity. In Modesto, California, the numbers are lower, but not by much at 50.8%. One of the worst hit state in the country is Las Vegas with an estimated 67.2% of homeowners own properties that are hardly worth the mortgage that they owe.

Vice president in charge of data and analytics in Zillow, Stan Humphries stated that, “A combination of falling prices and low down payments has left many borrowers underwater. In some markets, more than half of all homes are in negative equity.”

Humphries further elaborated that homeowners with negative equity are finding themselves in a very risky situation. Without a reliable financial buffer, any unexpected emergencies involving money, such as medical bills or unemployment, can severely stress their finances. In extreme cases, these homeowners would be facing foreclosures.

The data used in the study conducted by Zillow.com came directly from their own home price estimates. These estimates are obtained by collecting records of sales and using the current price trends for the other homes in their target communities. The home price estimate figures are then compared to the initial loan balances of homeowners. This will then show whether the homeowner has a negative equity property.

Zillow.com’s analysis takes into account the mortgage balance of the homeowner upon purchase of the property and the changes in the price of the property since then. It does not take into account the possibility that homeowners may have already paid the principal amount.

Humphries stated that the analysis is actually quite conservative. According to him, the trend for homeowners have been to remove value from their properties by taking home equity loans and other credit lines against it rather than adding to its value through paying up the mortgage of the property.

Not all industry experts support Zillow’s findings, however and the real extent of the damage from the property market crisis is still up for debate.

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Date May 7, 2009

Keeping Finances Afloat: Avoiding Bank Fees

Category: Money Management

Today’s economy being what it is, the ability to keep one’s finances float can spell the difference between surviving the economic downturn and going bankrupt. People in the United States have had to quickly adapt their financial habits to fit the requirements of the current state of the economy. While keeping an eye on savings and foregoing the luxury buys are one of the most obvious ways to avoid going bankrupt, some people might be overlooking keeping their eye on their credit card and banking fees.

1176251_27831922One of the industries most affected by the financial crisis is the banking industry. As more and more credit holders delay payment on their monthly bills, banks are coping with the rising rate of credits being defaulted. As a result, banks are beginning to see bank fees as one of the ways to recover. Case in point, a recent study from bankrate.com has shown that the average ATM fee is now at $1.97. Compared to figures from last year, this represents an 11 percent increase.

Bank fees are one of the most overlooked financial leaks that banking customers miss. These small fees may seem inconsequential at first but, as they begin to add up, they often translate to a considerable amount of lost cash every month. Aside from the aforementioned ATM fees, another fee that banking customers need to be aware of are overdraft fees. Overdraft fees are standard fees that have to be paid when the cost of the transaction is higher than the money available in the account. Overdraft fees can be quite high and estimates from Consumer Reports place the interest as high as 1000%.

Most banks have some form of membership fee for their customers. However, what most customers do not know is that they may be able to negotiate for a lower membership fee with their bank. This, however, depends on the bank. There are also some banks that have a monthly maintenance charge for their clients. As much as possible, these banks should be avoided. Some banks will only demand payment if the account falls below a certain amount, the maintaining balance. So, it is best to know what the minimum balance in the account is and to take care that the amount in the account never falls below it.

Another bank fee vacuum according to bankrate,com are ATM surcharges that are charged when customers use their card on another bank’s ATM. According to the study of bankrate.com, 99.2% of ATMS have these surcharges. It is therefore best to avoid using ATMs, if at all possible. A good strategy is to use a debit card for purchases.

The economic turmoil has placed a lot of pressure on the average American to keep their finances firmly in check. It looks like everyone is going to have to be careful of even the little things when it comes to fighting off the economic turndown.

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Date May 6, 2009

Need To Find an ATM? There’s Now an App for That

Category: MasterCard, Money Management

Technology is making it so simple to have information on demand and with MasterCard’s new application for the iPhone and iPod, finding an ATM is just a brief touch away. The application, now available on the Apple App Store, allows users to find out the exact location of ATM’s regardless of their location around the world. The MasterCard’s “ATM Hunter” application helps customers not only find the location of the nearest ATM but the users can even get more advanced help.

It is estimated that every year more that 2 million MasterCard customers contact the company by phone or email to request information about ATM locations. MasterCard began to focus on this particular need of the customers and went a step further to provide details and more specific information. Customers can now get touch access to such information as to where handicapped accessible ATM’s are located, how much the nearest banks will charge for ATM fees, and where to go to make a deposit. Other details include the hours of the banking facility, such as which are open 24/7 and which locations have drive-thru service. Consumers will no longer have to call in to the company information line or access the MasterCard website to get information about banking institutions in the area, allowing people to remain on the go.

The MasterCard “ATM Hunter” application will come in handy for people who travel frequently whether for work or for pleasure. Having access to the cash machines as well as information pertaining to fees allows consumers to shop and compare the rates of fees and not just by proximity or location. As consumers continue to practice frugal money habits, the application is something many consumers will come to rely on for saving money.

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Date May 3, 2009

Number of People Sued by Credit Card Companies Increasing: Here’s What to Do If You Are Sued

Category: Bad Credit, Credit Card Management, Credit Repair, Debt Consolidation, Money Management, economy

lawsuitIt’s difficult to track exactly how many debt collection cases for defaulted credit card debt are filed because they are filed along with all civil cases through the prothonotary’s office. Capital One, a credit card company known for lending money to individuals with less than perfect credit histories, have filed a large number of cases. In Lancaster, Pennsylvania, of 255 cases filed during the first three weeks of April, Capital One filed 45% of them (a total of 114). Neither the attorney representing most Capital One lawsuits in court, Paul Klemm, nor Capital One representatives returned phone calls from reporters regarding this issue.

Attorneys who have counseled clients facing bankruptcy or credit card defaults have stated that more credit card companies than ever before are attempting to recoup some of their financial losses by taking card holders to court. In previous years, credit card companies would sell off their debts (for pennies on the dollar) to debt collectors and collection companies. Lawsuits, if filed, would be filed by debt collectors – not the credit card companies themselves. Now that the economy has nosedived and credit card companies are having trouble finding buyers for their unpaid debts, they are becoming more aggressive about collecting on defaulted accounts themselves. A successful lawsuit means a greater recovery rate for the credit card company.

The credit card industry states that the changes made by the U.S. House of Representatives on Thursday, April 30th, would cost the industry more than $10 billion per year in interest payments. The figure was obtained through a study by the law firm Morrison & Foerster. Changes to the credit card laws include restriction of interest rate increases and prevention of credit cards given to anyone under the age of 18.

If a creditor takes you to court, here is what you can do to build your case:

Prepare a Budget: list all of your monthly expenses and obligations from utility statements, invoices, receipts, and billing statements and show proof of your monthly income.

Document Medical Conditions: if a medical condition has made it difficult for you to keep up with your payments, or medical expenses are eating up all of your income, get documentation of your medical condition from your doctor(s).

Respond to the Court By the Due Date: do not ignore the situation as it will not go away. If you don’t respond to the court prior to the date listed on your letter, the creditor will automatically win due to your inaction. There are sample response letters you can use online, or call and talk to the court clerk for assistance in how to respond to the court regarding your credit card suit.

Document Changes: many people are unemployed or laid off at this time, which makes it difficult or impossible to pay your bills on time. Get documentation if this has happened to you. Other life changes can also contribute to the inability to pay for bills, from having a baby, becoming depressed, medical conditions, etc. If they can be quantified by doctors or employers, these are all viable reasons and should be mentioned in court.

Document What You’re Doing: If you’ve joined a debt relief solution, such as a debt management company or a credit counseling service, obtain proof from the company. This shows you aren’t just sitting back and skipping out on your bills and that you’re making an attempt to remedy the problem.

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Date May 2, 2009

Time Line of Credit Cards

Category: Credit Card Management, Money Management, Statistics, credit card news, economy

In 1949, Frank X McNamara, shared a meal with two friends. When he reached into his pocket for his wallet so that he could pay for the meal (in cash), he discovered that he had forgotten his wallet at home.  He called his wife to bring him some money – and suddenly a  new idea was born.  A credit card that could be used at multiple locations and not require someone to have cash on them. Previously, retailers had their own credit cards and made money out of the loyalty of the cardholders, since the cards could only be used at their locations.

McNamara’s credit card, the Diners Club, would need a different method to make money since they wouldn’t be selling anything.  Restaurants and retailers who accepted the Diners Club credit card as payment were charged a 7% fee for each transaction, and the cardholders were charged $3 annually (starting in 1951).

The first Diners Club credit cards were given out in 1950 to 200 people- who were mostly friends of McNamara.  The card was accepted in 14 restaurants in New York, and were made of paper.   It was hard to get retailers to agree to accept the card because they saw it as competition for their own credit cards, and customers didn’t want to bother with the card unless there were a large number of retailers who would accept it as payment.

The credit concept grew and by the end of 1950, more than 20,000 people were using the Diners Club credit card.
Competition for credit cards began in 1958, when Bank Americard (later called Visa) and American Express both started offering their own credit cards.

In 1975: Citibank adopts “plain language” contracts, and decreased the loan agreements from 3,000 words down to 600.

In 1983: The governor of South Dakota, Bill Janklow, signed a state law that allowed credit card contracts the  ability to change at any time and for any reason. This explains why the majority of credit card companies operate out of South Dakota.

In 1988: The Federal Truth in Lending Act was amended to include more specific contracts.  Credit card companies responded by offering pages and pages of complicated fine print.
During the MID-1990s: Financing and credit cards are offered to riskier borrowers with low introductory rates and steep fees and penalties.  Capital One and several non-bank institution finance firms lead the way with these offers.

In 2000: The larger banks use their “change-in-terms” clauses provided in 1983 to increase interest rates on good borrowers in order to recover from losses of customers not paying their credit card bills.

In 2005: Questionable mortgages with “teaser” rates are given to people who are not likely to afford the homes, and more credit cards are given out.

In 2008: The Fed adopts new restrictions for credit cards that go into effect in July 2010, with separate legislation designed to protect cardholders from many issues under the “Credit Card Bill of Rights”.

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Date May 1, 2009

Common Sense Your Best Defense Against Identify Theft

Category: Credit Card Management, Credit Repair, Credit Score, Money Management, People and Credit, credit card news

It used to be that identity theft meant an unauthorized purchase on a credit card. But criminals have advanced identity-theftalongside technology and suddenly identity theft can involve a stolen Social Security number used for filing false medical claims or applying for mortgages. When you swipe your card at the ATM, gas pump, or in the RedBox for your next video rental, how do you know there isn’t a fake front added to the swiper – capturing your credit card number and pin?

You’ll know when you start getting the bills and experiencing the problems associated with identity theft. The Federal Trade Commission estimates nine million Americans are victims to identity theft annually, but the most extreme identity fraud cases are rare.

For the most part, fixing a case of identity theft will involve closing one credit card account or freezing your credit if you notice a problem. If you should become the victim of extreme identity theft – where a person becomes “you” in order to open new lines of credit or pay for their medical expenses – you can experience a very lengthy clean up process to repair your credit history. It can take months, sometimes even years, to repair credit histories and scores after such fraud takes place.

Security measures are constantly being improved for your credit card accounts, bank accounts and health care records – but you can’t rely on them to fully protect you from all fraud. You need to take some common sense steps to prevent identity theft.

Preventing the problem is easier than treating the problem. Review your monthly statements regularly from all of your financial accounts. If you see anything that looks suspicious, take action immediately. Most of the time you can stop identity theft in it’s tracks if you take action as soon as you see an unauthorized transaction – but if you aren’t reviewing your financial information monthly or even more often – chances are you’ll miss it until it becomes a huge problem.

Look at your credit reports to make sure there is no errors or omissions on your report. Follow steps to fixing any errors.

Shred bank statements and medical records before disposing to prevent garbage pickers from gaining access from your important information. Don’t carry your social security card in your wallet. Change online passwords frequently and don’t make them easy to guess.

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Date April 29, 2009

Visa Commercials Promote Debit Cards

Category: Credit Score, Low Interest Credit Cards, Money Management, Obama, People and Credit, Rewards Programs, Shopping, Statistics, Visa, bailout, economy

Visa has noticed the trend of increased debit card use during this recession. They’re running several TV ads that promote Visa debit cards for everything from buying pizza, going to an aquarium with your daughter on a Tuesday, and paying for products online.

On April 29th, Visa Inc. reported that their branded debit card total dollar volume of purchases surpassed credit card purchases for the first time during the last three months of 2008 – making the debit card transactions processed by Visa 50.4% of their total transaction volume in the same period.

It’s no mystery why consumers are turning to debit cards over credit these days. Consumers are becoming more conscious of their spending, and people don’t want to rack up any more credit bills if they can help it. Debit cards are popular over cash use, because American consumers have a preference for the convenience plastic provides – beginning in 2003, credit and debit card purchases bypassed cash and check purchases.

“A big group of consumers like the discipline that debit spending can bring them, and that is particularly relevant in this kind of environment,” said Tim Murphy.  Murphy looks after MasterCard Inc.’s main payment products.

Unlike credit cards, which allow consumers to charge more than they can afford to pay when the statement comes and carry the balance from month to month, debit cards only let you spend what you have in your checking account. A Nilson Report provides data for the increase of debit cards since 1987:

nilson

Banks are helping to encourage debit card use through the offering of rewards programs. While debit card rewards programs are not as generous as most credit card programs – it’s still a good incentive that helps people choose debit over credit. Credit card use is expected to decline even more, as Americans continue to monitor and rein in their spending habits.

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Date April 27, 2009

Who Will Win The Battle Over Credit Card Regulations?

Category: Credit Card Management, Money Management, credit card news

Consumers waiting for positive changes within the credit card industry should know that not everyone supports restrictions on credit card practices. The President and Congress support regulations which would protect consumers from the heavy handed practices that are currently taking place.  Not surprisingly banks are resisting the idea of forced regulations within their industry.  Various government officials continue to push for changes that protect consumers.

Don’t expect changes to happen overnight or without more resistance. Banks argue that they will get paid one way or the other. In fact without restrictions in place now they (banks) could easily raise battle-credit-cardinterest rates higher than they are currently and decrease available credit across the board. It is painfully clear that consumers and their financial well being is not a point of concern for banks. That realization on it’s own is enough to anger Americans who have lost jobs, homes and their life savings in the last year. Now when you remember that many big banks have received bailout money to support their business, it is almost unbelievable the lengths they are willing to go to avoid regulation. While bank executives and government officials argue over unfair practices consumers remain at the mercy of the credit card giants. To offer consumers some level of protection, Senate Chris Dodd and Senator Chuck Schumer have proposed an immediate credit card rate freeze. The House of Representatives is also considering legislation (Credit Cardholders’ Bill of Rights Act) which also contains provisions which prohibit credit card practices that punish responsibly customers.

Banks may be threatening restricted credit as a result of regulation however they also know they are very vulnerable right now as well. When it comes right down to it, that is what banks should have been doing for the past several years. Americans have become accustomed to instant credit regardless of your actual ability to pay off your debt. It may take some time to readjust that mindset but changing the way we think about money and debt is long overdue in this country.

Hopefully the banks and government officials can hammer out an arrangement that can benefit all parties involved, especially cash strapped consumers. In the meantime credit card holders who are barely hanging on financially will have to wait for relief. Take this time to learn more about responsibly credit use, debt elimination and money management skills that can help guide you through this period of your life.   Remember our economy has gone through valleys and peaks before and will again. Consumers should remember the treatment they have received at the hands of their lending institutions and use that lesson to avoid becoming indebted in the future.

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Date April 25, 2009

Canadians Looking to New Credit Card Rules, Too

Category: Credit Card Management, Credit Score, Money Management, Obama, People and Credit, bailout, credit card news, economy, payment systems

Americans aren’t the only ones dealing with credit card problems. While President Obama met with executives from flagscard issuers including American Express Co. and Bank of America Corp. to review credit-card policies for fees and interest rate limits, the Canadian government Prime Minister Stephen Harper is responding to consumer groups and lawmakers who insist the banks should have lower rates, and more information for consumers for understanding how the credit cards work. Namely, consumers should know clearly what their interest rates are, and not be faced with interest rate increases for unknown reasons.

Finance Minister Jim Flaherty, will announce new rules for credit cards next week that will include regulations for issues that are unfair to consumers. Some of these changes will include a required 21 day grace period for all credit cards, which means that if the payment is sent within the 21 day window there is no interest accumulated. Currently, grace periods vary from one bank to the next. Banks and credit card companies will need to indicate clear interest rate change information – so that they’re unable to simply increase credit limits whenever they want.

“We have to make sure the system operates fairly, and everybody knows the rules,” Jim Flaherty said during an interview with Washington.

The Bank of Canada cut the overnight rate to a record low of .25% earlier this week, but most banks are charging almost 20% interest on unpaid bills which isn’t giving cardholders much needed relief from the interest-rate cuts.

Canadians, just like Americans, are living off credit cards more frequently than ever before. The neighbors to the north are also experiencing record numbers of people losing their jobs, and will be facing huge credit problems if the trends continue. Canadian bank credit card balances have increased from $41 billion from August of 2008 to $49.9 billion currently – which is an increase of almost 40% in a year’s time, according to a report by Deloitte.

According to Moody’s Investors Service, credit card losses rose to 3.1 percent of the average balances in the third quarter, which is the 7th consecutive period of increases. While still training the United States card losses of 6.6% of balances, the number is still too high.

Up to three parliamentary committees in Ottawa may be holding hearings on credit card and bank issues, with the committee reports being watched closely by Flaherty to determine whether additional governmental regulations will be needed.

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Date April 22, 2009

New Study Shows Americans Fear Credit Fraud Most

Category: Credit Card Management, Credit Score, Money Management

While many Americans are struggling to survive during an economically trying time, many consumers may be credit-signsurprised to learn what they fear most. Beyond the concerns of war, acts of terrorism, and health crisis on the rise, it a legitimate fear of credit card fraud. Research conducted in early 2009 indicates that as many as 68% of the 1,000 respondents surveyed have a greater fear of being the victim of credit card fraud and having someone access their credit or financial information than of any other problem currently spotlighted in the world today.

As technologies develop and people are required to keep up with the times, credit fraud is a very real danger. So many consumers are already working to pay off their debts and improve their credit rating but at the same time, know they must continue to protect their information and not become a victim of fraud. Knowing that one breach of financial information can cause disastrous results for your own credit, consumers are stressed about staying diligent regarding their credit.

According to the company,Unisys Securities, that conducted the survey  found that “Adults in the U.S. are most likely to worry about fraudulent use of their credit and debit cards and identity theft. Americans are least concerned with their personal safety”. Younger Americans are less concerned about personal and financial safety and indicate they are most concerned with meeting their personal financial obligations. Older Americans (65+) are less concerned with online financial safety because it is likely less of that age category do not shop online or use the internet for other financial transactions. It is the middle-aged American’s who concern for credit card fraud is at the highest.

Fearing credit card fraud is a reasonable concern and consumers need to be aware of what security risks are implicated each time a credit card is used or financial information is supplied for services, such as a loan or other transaction.

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Date April 20, 2009

More Focus on Financial Knowledge

Category: Credit Score, Money Management, credit card news

With so many consumers struggling with debt these days, there seems to be a major increase in the amount of credit-card-scanorganizations that are working to improve the financial literacy of the country at large. April is dedicated to be Financial Literacy month, with National Credit Education week being observed April 20-26 so there are many launches of new educational programs to help with debt.

Research shows that many Americans are not fully prepared to deal with their own financial issues. Many of the new programs are targeted towards students who are already struggle to pay for their education while still struggling with debt. According to research done by Sallie Mae, the largest student loan provider, more that 84% of undergraduates have at least one credit card, with nearly have of all college students having 4 or more credit cards, each with a balance.

While consumer debt is on the rise, student debt is even more so and there are several program being established to help students prevent debt from taking over their lives as well as learn how to deal with debt they have already incurred.

Programs like Student Debt Alert was launched earlier this month. It promotes the improvement of student loan programs and educates students about Grant Aid. The American Bankers Association started the Teach Children to Save Campaign, which works with younger students in teaching them the importance of financial literacy, including advice on the importance of budgeting and depositing money into a savings account regularly.

Getting an early financial education is an important part of a student’s learning process and will serve young adults well in the future. For non-student consumers, there are websites like Ask Dr. Debt, which has been referred to as the “Dear Abby of Debt” and provides users with tools to help with credit card and debt questions. A database of frequently asked questions helps consumers seek answers to popular questions concerning debt. There are also calculators and other tools to provide help with personal financial management.

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Date April 18, 2009

Who Pays for Credit Cards in a Divorce?

Category: Bad Credit, Credit Card Management, Money Management, People and Credit, credit card news

It’s common for divorcing couples to have credit card debt that must be assigned to one spouse or the other during the divorce judgment. What is often left out however, is protection for each spouse for not being held responsible for any additional credit card debt incurred by the other person – or from having to pay off the credit card debt assigned to the other spouse in the event the spouse doesn’t pay their share of the joint credit card debt.

Are you surprised that this is a possibility? Creditors are not obligated to respect the terms of your divorce judgment when it comes to payments. If you were married when the debt was created, they are legally able to come after you for the payment if it is not paid, even if the divorce judgment assigned that particular debt to your spouse. Prior to meeting with your lawyer to assign debts, it is recommended that you obtain a credit report for each of you to make sure there are no credit cards or accounts opened that one of you are not aware of, to ensure they are assigned appropriately during the judgment.

How to Cut off Liability for Future Debtfinancial-problems

For all credit cards that have both your names on the accounts, you should either close the accounts entirely so that they can no longer be used, or at a minimum remove your name from the accounts that your spouse will continue to use. Removing your name from the account will not relieve you of responsibilities for debts incurred prior to the divorce, but if the spouse goes on to add more debts to the account after the divorce, you will not be held liable for those debts.
If you fail to remove your name from any joint account that is going to be used by your ex after the divorce, the payments (or lack of payments) will be reported on your credit report as well as your spouse – and you will be equally responsible for payments, interest, penalties and any legal fees resulting from the use of that card.

Protect Yourself From Future Financial Problems

One method of further protecting yourself is to insist that any joint account that will be held by your spouse after a divorce be refinanced. This is often as simple as applying for a new card in just one person’s name, and then transferring the balance. The money transferred from the old account to the new account is now the legal responsibility of the person who was assigned that debt in the divorce. If they fail to pay it – it will not fall back on the other person.

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