Credit Cards » Credit Card News » 5 Simple Credit Tips Before Availing a Loan
Date May 21, 2009

5 Simple Credit Tips Before Availing a Loan

Category: People and Credit, credit card news

Your chances of securing a loan relies heavily on the kind of credit score you have. The better the score, the higher your chances of getting that loan will be. A good credit score can also get you a relatively painless set of terms for your loan. So when you plan on getting a loan, make sure your credit score looks good first.

credit card tipsHere are a few tips to get your credit score up to muster.

1. Credit Score Review. To determine how things stand with your credit score, make a review of it. See where your problem areas are and correct them. Also, make sure of the accuracy of the report. If there are any errors, inform the appropriate people immediately.

2. Pay On Time. How soon you pay your bills weighs greatly on your credit score. It actually accounts for 35% of your     credit score. You should do as much as you can to avoid paying late. Make automatic reminders for you to pay your bills. You can also use the services of automatic payment systems to make the payments for you. Of course, make sure you have the balance to cover it.

3. Keep Balances Low. 30% of your credit score depends on the ratio of the amount that you owe and the available credit that you have. This means the larger your credit balance is, the lower the ratio that you will     get. Thus, if you keep your balance as low as you can every month, you can be assured of a high credit score.

4. Keep Up Card Activity. Aside from keeping your balances low, you can also get a lower ratio between your credit balance and your available credit by getting multiple lines of credit. With multiple credit lines, you have a higher credit amount available, which will actually give you some leeway with your credit balance. Don’t get tempted, however.

Of course, to continue enjoying your higher credit amount, you must keep your multiple cards     active. To do this without bloating your balance, use your cards for small purchases every once in a while.

5. Avoid New Cards.   While having a number of credit cards can help your credit score, getting too many can actually hurt it. Avoid opening too many cards, as they will hurt your credit score in the short term. The burden of juggling bills and purchases over many lines of credit might make it difficult for you to keep up. Also, opening multiple lines of credit in a short time can ring warning bells amongst most creditors.

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Date May 10, 2009

Finding Your Way Out Of Credit Card Debt

Category: Bad Credit, Credit Card Management, Debt Consolidation, People and Credit

Credit card debt is one of the biggest problems for American consumers nowadays. With rising interest rates and the state the economy is in, credit card debt problems are a dead weight that any credit cardholder would want to get rid of.

Finding Your Way Out Of Credit Card DebtLike any problem, to begin fixing your credit card debt problem, you first need to determine how big the problem is. Unfortunately, some people are not very clear about the details of their credit card debt. Understandably, some people find rummaging through all the fine print and the mathematical confusion that credit card bills carry to be too daunting. However, you will never truly understand why your monthly payments are as high as they are unless you understand the details of your credit card.

Credit card transactions carry many details that credit cardholders need to be aware of. Transaction fees, for instance, are automatic fees that you pay for every transaction. Your interest fees are the interest you pay for your debts. Credit cards also charge fees for any penalties that you can usually find in the fine print of your bills. These are just a few items that you need to be aware of.

One of the best ways that you can help yourself to get out of credit card debt is to consult a financial counseling outfit. There are many financial counseling outfits out there offering their services to help you get out of debt and stay out of it. Some of them are also non-profit agencies that can be very helpful for people who are really tight on their budget. Financial counseling outfits can analyze your credit card debt details for you, explain it to you more effectively, and lay out several steps for you to follow so that you can get out of debt. Consulting them should certainly be at the top of your list if you want to get out of debt.

Aside from consulting the experts, there are also some “common sense” steps that you can take to get out of credit card debt. The most obvious one is to stop using your credit card while you are deep in credit card debt. If at all possible, pay cash. If not, use a debit card instead of a credit card.

You can also call your credit institution and see if they can renegotiate a better monthly payment rate for you. Some banks can offer you better rates, especially if you have good credit standing. However, be careful of offers where you transfer your existing debt balance to a low interest credit card. Although the rates are attractive, you’ll be paying a much higher balance should you miss payment.
Finally, when you are paying your debt, make sure to pay first the card with the highest interest rate. You should also depend more on electronic or online payment rather than through the mail to ensure that your payment does not come in late.

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Date May 9, 2009

MakingHomeAffordable.gov May Help Mortgage Woes

Category: Obama, People and Credit, economy

As a result of the drop in the property markets, many homeowners have found themselves in a difficult situation. The drop in property values has left many homeowners with properties whose values are way below what they owe in their mortgages. Thus, should these affected homeowners want to sell their properties, they would have to bring cash to the table.

MakingHomeAffordable.gov May Help Mortgage WoesThe mortgage problem is at the forefront of the economic concerns that the Obama administration is trying to solve. Early last March, President Obama launched the foreclosure prevention program.

The foreclosure prevention program is aimed at reducing the debt problems that around 4 million U.S. citizens are facing. The $75 million plan approaches the problem in a number of ways. Mortgage investors, loan servicers and borrowers will receive government incentives. Subsidies for interest rate reductions will also be made available.

In return for these incentives, the foreclosure prevention program tasks companies to modify loans to make them more affordable. In particular, the plan aims to change loan rates so that a typical household’s housing payments would amount to at most 31% of its gross monthly income. Those homeowners who have kept up with their payments also get the chance to refinance for lower-cost loans, even in cases where they have minimal or no equity.

During the launch of the foreclosure prevention program, borrowers were already informed to contact their respective loan service companies. However, the companies said that they would need a few weeks before they could actually begin to process applications. Just recently, banks have begun to do just that.

A number of homeowners have started receiving the benefits of President Obama’s foreclosure prevention program. The previous week, Chase Mortgage of JP Morgan Chase issued 15,000 or more mortgage modifications. Bank of America has also released around 100,000 letters to its borrowers and actually began assisting borrowers at risk in April.

For those who are interested in getting their mortgages adjusted, the best solution is to visit the website MakingHomeAffordable.gov. From there, they can take an online quiz to see if they qualify for the program. Eligible borrowers are then given a list of paperwork to prepare. Once the paperwork is ready, they can then contact their loan service company and follow their instructions to apply for debt modifications. Not all loan service companies are participating in the plan, however. Also, borrowers should be able to negotiate with their lenders through the phone and there is usually no need for a face to face meet.

After contacting the lending company, borrowers will have to wait for the company to decide how to help them out. The company can choose to lower the loan’s interest rate, reduce the balance of the debt, or extend the life of the loan. The goal of the lender will be to lower the monthly payment to at least 38% of the borrower’s monthly income. Once 38% is reached, the government will pay the lender in order to bring that figure down to 31%.

With President Obama’s foreclosure prevention plan, many homeowners in danger of losing their homes can breathe easier. With a lowered monthly payment rate, a majority of homeowners should make it through. An important thing to remember, however, is that the loan modifications do not become permanent until the borrower keeps up with the monthly payments for three months consecutively.

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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

Debt Relief Companies Targeted By Lawmakers

Category: People and Credit

debt-relief-scamLegislation aimed at regulating unfair billing practices within the credit card industry have dominated the news for the past few weeks. While this is good news for consumers who are currently struggling to keep their accounts in good standing, there is another industry that is preying on consumers who have already fallen behind on credit card payments. Various debt “relief” companies are sprouting up everywhere, making promises that few cash-strapped consumers can resist. This largely unregulated industry is now in the cross hairs of lawmakers seeking to provide consumers will some level of protection.

On Tuesday the House voted in favor of Bill 2191 which requires debt management agencies to register with the Oregon State Department of Consumer and Business Services. Additional areas covered by House Bill 2191 include regulating advertising, limiting or imposing caps on fees and other protections. The Association of Settlement Companies and United States Organizations for Bankruptcy Alternatives which represent the debt negotiation industry have opposed this bill. In contrast companies within the debt consolidation industry support the bill.

Illinois Attorney General has announced lawsuits have been filed against two debt settlement companies. The lawsuits allege that California based SDS West Corporation and Debt Relief USA, Inc located in Texas charge excessive fees, do little or nothing to improve the financial situation of clients and engage in deceptive marketing practices. The complaints allege that both companies charge substantial upfront fees as well as monthly maintenance fees for debt settlement services. Many consumers claim they did not understand that the majority of their monthly payments would not be applied to their escrow account but instead used for company fees. Other clients allege they were not aware of the fact that it would take several months to save enough money to begin negotiations. Both complaints ask the court to bar the defendants from engaging in debt settlement within the state as well as paying restitution to clients.

Imposing restrictions and regulations designed to protect constituients addresses only part of the problem.  Consumers are not absolved of their responsibility and must understand that many of the issues they currently face could have been avoided.  Financial experts agree that people must pay more attention to the terms and conditions prior to entering an agreement with lenders or debt relief services.  Consumers are encouraged to research companies and the services they claim to provide before becoming bound by a legal contract.  These simple steps can greatly reduce the number of people who would otherwise be victimized by unfair or predatory business practices.

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Date May 4, 2009

Financial Literacy Survey Results Indicate Americans Not Taking Advantage Of Free Credit Reports

Category: People and Credit, credit card news, economy

In March 2009 a financial literacy survey was conducted on behalf of The National Foundation for Credit Counseling clipboard(NCFF) by Harris Interactive. One thousand consumers age 18 and over were contacted by telephone to answer various personal finance questions. Despite the fact that lending decisions are based on credit history and score, many consumers seem unaware or uninterested in staying up to date on the information reported on their credit report. The results of this survey indicate 64 percent of respondents have not ordered their free credit report in the last 12 months. More than one-third of the people surveyed admit they do not know their credit score. Reviewing your credit report is essential in spotting inaccurate reports which may cause your score to drop or warning signs of identity theft.

The third annual survey reports the following findings:

  • Less than half of adults surveyed track their spending which has been proven to help improve savings and reduce debt. Seven percent, nearly 16 million adults have no idea how much money they spend on basic necessities and other expenses. Eighteen percent of adults claim the reason for not having a budget is due to not wanting to be restricted on how much money they spend.
  • Due to the current economy, 57 percent of adults are spending less than they were last year, although 45 percent of consumers spending less agree they would return to previous spending habits if their financial situation were to improve.
  • Seventy-two million adults report they have no savings. Generation Y makes up for nearly half of the adults with no savings. Twenty-three percent are saving more than they did in the previous year. If faced with an emergency those with no savings would be forced to either use a credit card or take out a loan to pay for expenses.
  • Fifteen percent of respondents admit to making late credit card payments in the last twelve months. More than 13 million adults have household debt (credit cards) exceeding $10,000 with balances carrying over from month to month. The same number have accounts in collection and are either considering or have filed for bankruptcy.

These results indicate what most of us already know, many American consumers have a long road ahead in establishing financial security. Increasing financial literacy is vital in saving millions of adults who currently heading down the wrong financial path. The good news however is that 70 percent of respondents report paying all their bills on time with no debts in collection. Other positive results show that 41 percent of people saving money have over three months income in savings. The spotlight often falls on consumers who are struggling with debt, however 46 percent of people surveyed do not carry any credit card debt from month to month and sixty-one percent of respondents currently live on a cash-only basis.

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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 28, 2009

Credit Card Companies Cry Unfair

Category: Obama, People and Credit, credit card news, economy

President Obama has advised credit card companies that as President, he would be supporting stricter regulations on the credit card industry and its practices. Coming up in July 2010, tougher regulations on deceptive practices by credit card companies will go into effect. Consumer felt some relief but the credit card executives began to whine.

While many credit card companies are hard at work, raising customer’s interest rates at the drop of a hat or cutting credit from loyal, good-credit customers, the executives still feel as though they have been through enough already with the Federal government. They feel they have already had to work overtime to comply with the new set of rules, even if they don’t start until mid-next year. They also complained because so many customers are defaulting on their contracted financial obligations because consumers are facing job loss and the inability to survive from paycheck to paycheck. They reason that by raising interest rates of the “good” customers, they can make up for the loss from the credit_card2amount of defaults. These executives conclude that what they are doing will help to keep them in business.

Luckily, President Obama wasn’t in agreement. Instead, Obama reasoned that there needed to be more consumer protection while still enabling the credit card companies to make a profit. The new rules will certainly benefit credit card holders for many reasons. One of the major changes will dictate that the credit card companies can no longer raise the interest rates on any existing balances. Late fees can also not be charged unless a reasonable time has passed before a credit card holder hasn’t made a payment. It is these practices that are now taking place that are leaving more consumers struggling with credit card debt.

Essentially, the government wants to help rehab the relationship between the consumer and the credit card issuers. There will be the need for clearer agreements the average consumer can understand in an effort to prevent unknowing applicants get taken advantage of by big business. The President wants the situation to be fairer for all involved and the new regulations for 2010 should be a good start.

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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 19, 2009

Dialing for Lower Credit Card Interest Rates

Category: Credit Card Management, Low Interest Credit Cards, People and Credit, credit card news, economy

Finance experts everywhere insist that you can often lower your credit card interest rates simply by calling and requesting a better interest rate or a modified payment agreement with lower monthly payments. While this may be possible for some people, many people who seem to need the slight financial break the most are finding it impossible to get a lower interest rate on their credit cards when they call and ask.

“I tried calling my credit card company for a lower interest rate. I was told they couldn’t do that and phone-and-creditthere was nothing they could do to help!” William Brewer of Oklahoma says.

If you try to call your credit card companies and the customer representative seems unwilling or claims to be unable to assist you – don’t give up so easily. Ask to speak to a supervisor, manager, or someone who IS authorized to consider the request for a lower interest rate or modified repayment terms. Remain polite, but be firm – the customer service representatives are likely reading from a script.

People who are most likely able to reduce their interest rates are people who are less likely to need it – those who haven’t missed any credit card payments and have a better than average credit score. Credit card lenders have an elaborate sharing system through their computers. They know what your FICO credit score is, they know whether you’ve paid your other accounts on time or late, and they know how much debt you’re currently carrying. The riskier you are, the more you would benefit from a lower interest rate to help get yourself back on track but the less likely a credit card company is to lower your interest rate when requested.

As the number of delinquencies and defaulted agreements increase, lenders are getting tougher and are unwilling to work with people. Unfortunately, raising interest rates on people who are already struggling to make their payments, or being unwilling to work out modified payment agreements in times of financial need doesn’t make it any easier (or possible, even) for some customers to make their payments and it seems the lenders are just shooting themselves in the foot by making it impossible for people to make payments.

If you do attempt to call your credit card companies to request a lower interest rate or modified payment agreement – do not mention the fear of losing your job as the reason for the request. That puts you in an immediate high-risk situation. If you’ve been making your payments on time previously, simply remind the company you’ve been a good customer and would like to remain their customer but are seeking the best interest rates – if they can’t lower your rate, mention you might transfer your balance to a competitor who can.

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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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Date April 17, 2009

Can We Live in a World Without Credit Cards?

Category: People and Credit, Statistics, Student Credit Cards

About 25% of Americans living a cash-only lifestyle prove that it is in fact possible to live a life without credit cards. For the rest of us relying on the convenience of credit cards and the access to money when we may not have the cash flow available – we wonder how it’s possible to sustain a life in these modern times without using plastic.

The creators of the FICO credit score, Fair Isaac Corporation, claims approximately 20 to 25 million people in the US do not have credit, with another 35 million living in the US with a very limited credit history. These numbers boil down to some surprising statistics: one in every five Americans do not have access to credit.

cut-up-cardsOf course, there are two groups of people in the category of non-credit card users: people who don’t have credit cards because they don’t want them; and those who just can’t get credit cards because they have bad credit, or due to their immigration status, or other reasons.

The Federal Reserve Board Survey of Consumer Finances of 2004 showed that 58% of households having credit cards had balances on their cards. With the current state of the economy, studies have been showing that the use of credit cards is declining (whether that is due to inability to get new credit or a desire to avoid getting into (more) debt is unknown).

“In college, I got my first… and second… and third credit card. Every where I turned their were people set up on campus giving away free stuff if we applied for their credit card. I mainly used my credit cards to fill in where student loans left off and my own income wasn’t quite enough when it came to paying for college tuition and required textbooks – but after four years of relying on the credit cards to fill in those gaps, I graduated with about $6,000 in credit card debt,” says Stacy Jamezegour. “The credit card debt was on top of the $45,000 in federal and private student loan debt!”

Jamezegour goes on to explain that some of the credit card debt also came from repairing the vehicle she used to get to and from work and college – since all of her full-time income was paying for college and living expenses she was unable to establish an emergency fund. She believes that she would not have been able to finish college had she not had credit cards available to “fill in” the gap of what she needed to pay and what she had available through student loans and her income.

Others who have used credit cards and then paid them off later vow never to go into credit card debt again. They are able to live a credit-free lifestyle, and once adjusted, say there is really no need to carry a credit card in your wallet. “I used a home equity loan with a low interest rate to pay off my high interest credit card debt,” Jason Michaels explains, “instead of making multiple payments to several credit card bills each month, I just make one, lower payment. I will never use credit cards again.”

Like many people who have sworn of credit cards after bad experiences or have decided never to use them in the first place, Michaels uses a debit card with a MasterCard logo connected to his checking account to handle any purchase that would traditionally be done on a credit card – like reserving a hotel, or to pay for items online or by phone. This counters the argument of credit card users that you really need them for certain expenses or reservations.

Credit card companies have made billions upon billions of dollars off consumers using credit cards incorrectly. As people began relying on credit cards as “additional income”, forgetting that it would have to be paid back, or otherwise allowing the debt to become too much to handle – interest payments and over-the-limit fees and other finance charges we a welcomed result by the industry. As consumers become more knowledgeable and take better control over their financial situation – consumers and credit card companies alike may discover that it is in fact, possible to live in a world without credit cards.

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