What is the best way to pay off credit cards. Do you pay off small balances first, then start tackling the higher debt? If done this way, would it not free up extra cash to pay more on the higher card debt? Brenda
Dear Brenda:
There are two schools of thought on how you should payoff credit card debt. One is to first concentrate on paying off the credit card debt that has the highest interest rate. The other is to first payoff the credit card debt with the smaller balance.
What you should do depends on you. If you want to reduce the total dollar amount of interest you will have to pay, payoff the debt with the highest interest rate first. If you want to feel you are making progress in getting out of debt, payoff the debts with the smaller balance first.
Dear Susan & Co.,
I graduated from college in 1996 and I ran credit reports to see where we stood. My credit report showed four cards with over 10,000.00 worth of charges and many delinquencies. With some investigation I found that my mother had taken out cards in my name and not told me and maxed all four of them out. When I confronted her she said she did it and that she was working to get them paid off. It has been three years since I found out and a recent report has shown more delinquencies and very little balance reduction. My question is, is there anyway to take care of this problem and correct my bad credit without having to have my mother charged with credit card fraud and put in jail? WB
Dear WB:
For answers to your questions, you need to contact the fraud victim department at each of the credit reporting agencies. Please contact:
Trans Union
Fraud Victim Assistance Department
P. O. Box 6790
Fullerton, CA 92834
(800) 680-7289
Equifax
P. O. Box 740241
Atlanta, GA 30374-0241
(800) 525-6285
Experian
P. O. Box 1017
Allen, TX 75013
(800) 301-7195
Dear Susan & Co.,
I was told that if I was stationed overseas. that my creditors were required to reduce the interest rate charged on credit cards. We were stationed in Germany from Jan 88 to June 97. If true, is there anything I can to do get my debt refigured at the proper interest rate. Carmen
Dear Carmen:
There is no law that says any creditor must reduce the interest rate charged, if a service member is stationed overseas. You reference the Soldiers' and Sailors' Civil Relief Act. This act states if, prior to entering active duty service, a member has a credit obligation with an interest rate in excess of 6%, the member will, upon writing to the creditor, not be obligated to pay interest in excess of 6%.
Dear Susan & Co.,
I owe $3,000 on a loan (at 8.25% interest). Should I empty my savings to pay it off? M.D.
Dear M.D.:
Most likely the interest you are paying on the loan is higher than the interest you are earning on your savings account. That would seem to indicate it would be advisable for you to empty your savings to pay off your loan.
But there are other factors you should take into consideration. Will paying off your loan wipe out your savings? If so, what would you do for money in case of an emergency? Also, what will make you sleep better at night, knowing you have no debt or knowing you have money in the bank? The answers to these question will give you the answer as to whether you should pay off your loan or not. Good luck.
Dear Susan & Co.,
Please help me. I need to file a complaint to a bank regarding to the mortgage payment. How do I do it? Steven
Dear Steven:
The Federal Information Center serves as a clearing house for federal services, programs, agencies and information available to consumers. The agency should be able to tell you whom you need to talk to. Their number is 1-800-688-9889. The U.S. Consumer Gateway performs a similar function in the Internet at http://www.consumer.gov
Dear Susan & Co.,
What are my rights with credit card companies under the Soldiers' and Sailors' Relief Act? I am active duty military and I heard that I am entitled to pay no more than 6% interest rate, among other things. Can you elaborate? Tony
Dear Tony:
The Soldiers and Sailors Relief Act of 1940 was passed at the start of World War II when there were many civilians being drafted. The act is intended to give relief to those civilians who enter the military. The interest rate on any debts the individual had before they entered the military must be lowered to 6%. This act does not apply to any debts military personnel incur after entering the military.
Dear Susan & Co.,
Here's my situation: my husband and I make a good income and are able to live a comfortable life, despite being $25,000.00+ in credit card debt. We have about 15 credit cards (including department stores), most of which were "maxed out" a couple of years ago. We still use the department store cards on occasion, especially during Christmas time. We make on-time minimum payments each month, and so I don't consider us as being in *big* trouble. We have tried many times to pay more than minimum payments each month on one or more cards, but "something else always comes up" and we end up using the money for other things (car repairs, unexpected expenses, etc.). We are trying to decide if entering the CCCS program would help us more than it would hurt us. Here's what I mean:
1) Right now, we pay about $650 per month in minimum payments. If we enter the CCCS program and our accounts are suspended, do the credit card companies stop charging interest? If they don't, then how would entering the program benefit us at all?
2) Do all of our accounts have to be suspended?
3) What if my husband and I need to guarantee a hotel or rental car reservation? How can we do that with all of our accounts suspended? Sometimes it seems like you *need* a credit card to do a lot of things in today's "electronic age".
4) My husband is going to be starting law school next fall and we will need to get student loans. How will entering the program affect our ability to do that?
5) In your experience, does completing the program help or hurt your chances of being approved for future loans (house, car, student, etc.). Do credit companies look on it as a positive step even if you had excellent (although excessive) credit before entering the program?
Thanks for your time! Allison
Dear Allison:
In answer to your above questions:
1) According to my calculations, if you continue to pay $625 per month to your credit card companies, and don't lower your payment from $625 per month or charge anymore, you should be out of debt in a little over 5 years. If you continue to pay only the minimum payment required, it will take you over 40 years to get out of debt, provided you don't charge anymore also. What do you want to do, get out of debt in 5 years or over 40 years? The choice is yours.
You don't need CCCS Debt Management Program (DMP) provided you can discipline yourself to paying more than the minimum payment required and break your addiction to constantly charging on your accounts. If you can't discipline yourself, CCCS DMP can help by giving you encouragement to get out of debt. Some of your creditors might lower or suspend the interest charge if you are on a DMP.
2) If you sincerely want to get out of debt, all of your credit cards should be deactivated. Otherwise you will never be rid of debt and you will constantly be in slavery to the credit card companies.
3) You could perhaps keep one card active only for the purpose of securing a hotel room or rent car. You must discipline yourself to using this card only for these two purposes and no other.
4) Each creditor looks at a borrowers qualifications differently so it is impossible to say if your entering a DMP will affect your husband's ability to get a student loan in the future. To date, I have not heard that the DMP has been a problem. In most cases the DMP has helped secure this type of loan because the program has helped the consumer lower their debt obligation.
5) Your participation in a DMP will not change anything which is already on your credit report. A DMP could have an impact on a credit worthiness decision in the future if your program is set up to pay a lower payment than the creditor is asking. Creditors might report that you are on a DMP and are not paying as originally agreed although they have accepted the reduced payment. If you pay the required payment asked of the credit card company, the DMP should not have a negative impact on your future credit.
Whether you use CCCS DMP or not is not the important factor. What is important is that you both commit yourself to getting out of debt. Break your credit card addiction. Change the way you look, act and feel about credit cards and about debt. Look at credit card debt as a curse that you want to get rid of as soon as possible. Let CCCS help you if you feel you need assistance in ridding yourself of this burden.
Dear Susan & Co.,
Can you provide any information on FICO or sites I can obtain in debt information? I am also interested in knowing what an average score is, where I can obtain my latest score and how to improve it. Any help you can provide will be most appreciated. Thanks, Jim
Dear Jim:
When you say you want information on FICO, I'm assuming you mean Fair Isaac & Co., a major developer of credit scoring methods. Unfortunately Fair Isaacs does not reveal information to the general public on their scoring methods. This is confidential information supplied exclusively to creditors (for a fee, I might add).
Each creditor devises their own scoring method so there is no such thing as an 'average score'. An example would be a bank and a finance company each having a scoring system. The finance company will look at an applicant for a loan different than the bank so their scoring system will be different. And because this information is confidential, there is no way you can obtain the scoring method try to improve your score.
On any scoring system, all creditors are looking at, and considering in their scoring method, a few basic characteristics such as: time on job, time at residence, buying or renting, income, credit references, total debt and manner of paying your bills. Other factors can and are considered also but these are the basic criteria. If these basics are all in line, you should be able to obtain credit, regardless of who the creditor is and what scoring method they use.
Dear Susan & Co.,
I just finished paying off my credit card bills that I accumulated during college (at least the minimum payment on time every month.. so that's not my problem). What is my problem is that I saved every statement and now I'd like to get rid of them (except for the final statement probably). I know I shouldn't just throw them in the garbage for security reasons. A couple of the accounts I have closed, and another two are still open. What would you suggest? Thanks for your time. Ann
Dear Ann:
Yes, you can throw away all of your old credit card statements. Before you throw away the statement, you need to shred the statement in a special way. Where your credit card number is on the statement, rip or cut with scissors so that the number is in two separate pieces of paper. Put each half in separate garbage bags. Discard each bag on separate days or separate disposable centers so that nobody can piece the two parts together again.
Dear Susan & Co.,
Is there a support group for spouses of chronic debtors? I visited the CCCS office here in Rockford, Illinois and while they were extremely helpful, there was not much they could do until my husband would come in. He won't. Drdailing
Dear Drdailing:
Check with you local United Way Agency to see if there is a Debtors Anonymous or some other similar group in your area that you can contact for help and support.
Dear Susan & Co.,
Here is my situation. I currently make $64,000 as a VP in the Financial Services arena, however, due to past credit problems, I can't even qualify for a bank account. I have direct deposit available by my employer but still I have been turned down by three major banks after they run credit checks on me. My credit report shows numerous unpaid utility bills, a large unpaid balance on a credit card etc. I am trying to make the time to visit a local CCCS office in the next couple of months. Can you answer the following question: Do you know of a commercial bank the might do business with me, especially since I have the direct deposit option here at work? I live in the Chicago, IL area. Thank you VERY much! Cynthia
Dear Cynthia:
No I don't know of any commercial bank that I can recommend. What I'm curious to know is why are the banks reluctant to open an account with you. Did they give you a specific reason other than you have unpaid balances ? Do you have some outstanding 'hot checks' from other banks ? Find out exactly why they are denying you a checking account and then clear up this problem.
Dear Susan & Co.,
My car payments are $465 a month for a car that I am upside down in. Should I try to refinance or buy a new car to lower my payments? Any suggestions would help. Thank you, Robert
Dear Robert:
If you are upside down on your car, it is going to be very difficult, if not impossible, to either refinance or buy a cheaper car without putting down some money to lower the balance you still owe. Unless you can come up with some cash immediately, it appears as if you will have to live with your $465 a month car payment.
Dear Susan & Co.,
I have a bit of an odd scenario here. I know that with the IRS, if they send you a letter stating that you owe them a certain amount of money, and you send a letter back refuting their claim, and if they do not respond with 30 days, they acquiesce (the doctrine of law is 'estoppel by acquiescence.')
Is this true with banks? If not, what provision of federal law exempts them from acquiescing? Thank you. Richard
Dear Richard:
You are asking for a legal interpretation of the law and since I'm not an attorney, I cannot give you an opinion. You will need to seek the services of an attorney for an answer to your question.
Dear Susan & Co.,
Is there financial assistance for individuals going through divorce (not yet served with separation papers) yet receiving only $50 a week and trying to make ends meet? Thank you in advance for your response. Erin
Dear Erin:
There are organizations who will help you through this emergency. Start your search for help by calling United Way in your city for a listing of social services. Ask what kind of help each organization offers.
You have to eat. Apply for food stamps. Meanwhile, ask a church pantry for groceries until the food stamps begin. If you have small children, ask about the WIC program which can also help you with groceries.
You have to keep a roof over your head. If you have no family or friends to turn to temporarily, then call the Salvation Army and ask if they will help you with the rent for a month or two. Ask your landlord to work with you until your situation improves. Maybe you can trade work for rent for awhile.
You have to keep the lights on and water running. Again, ask the United Way which organizations will help you. Assistance ministries can sometimes help.
You must increase your income. If you have no job leads, then register with temporary agencies in your city. Some of them offer training as part of their package.
I'm sorry you're going through such a bleak time, Erin. Ask for help and take the help. Things will get better. Thanks for writing. I care.
Dear Susan & Co.,
All three of my grown kids fell on hard times and moved back home with us. They've all got jobs now but aren't making enough to move out. Meanwhile, I've gotten behind on my bills trying to help everyone out. I think these kids should help out, but I don't know how much to ask. What do you think? Broke Mom
Dear Broke:
I think it's past time for these *adults* to start carrying their load. *Every month* each of them needs to pay you the following:
Rent: 25% of his/her take-home pay. With apartment rent starting at $300 you are offering a deal!
Utilities: 25% of every utility bill. If the electricity is $200 each will pay $50
Food: At least $110 a month ( a single adult's thrift food plan according to the U.S. Department of Agriculture). If you have big eaters, ask for more.
Cleaning supplies: $15 a month. That's for laundry powder, toilet tissue, etc., not toothpaste or makeup. You're not responsible for their personal hygiene expenses.
Set a due date each month for their payments and hold them to it. Mom, these people are not kids. They are adults. Do them a favor and treat them that way.
Dear Susan & Co.,
My employer allows me to charge items through it's internal account which are then reflected to me in a billing statement.
Last billing, I found an inexplicable charge. I immediately contacted the accounting department and was referred to the business manager who said, "I'll get back to you." I have contacted him twice to no avail. It's almost a month later and no satisfactory response.
Do I have to pay interest on a disputed amount? Connor
Dear Connor:
If your purchases were made on a credit card, you do not have to pay interest on a disputed item according to the Fair Credit Billing Act (FCBA).
But to exercise this right , you must contact the creditor within 60 days after receiving the first bill with the error on it. Send the creditor a letter that includes the following: your name and account number; a statement that an error has occurred and your explanation - if you have one- of why you think that error occurred. Go a step further and send the letter by certified mail, return receipt. Most billing statements include an address specifically for billing errors.
According to the FCBA, the creditor must acknowledge your letter within 30 days. Until the dispute is settled, you may withhold payment of the amount in dispute as well as any minimum payment and finance charges that concern the disputed amount. You still, of course, must pay any part of the bill that is not being disputed.
Dear Susan & Co.,
I was out shopping for a car last weekend and found one I liked. But the salesman said that it had a reconditioned title. What is a reconditioned title? Car Buyer
Dear Buyer:
A reconditioned title is given to vehicles that have been damaged, repaired (or reconditioned) and put up for sale again. So the car you like has evidently been damaged and repaired. Were I you, I would want to know the extent of the damage done and what was done to repair it. Also I would have a third party mechanic inspect the car before I bought it.
Dear Susan & Co.,
We have two sons aged 16 and 18. When the 18-year-old turned 16, we bought him a car. Now the 16-year-old wants one, too, and in all fairness we should buy him one. But we are barely able to make the insurance payments for both boys and the 18-year-old's car payment. We're really in a bind here. What do you suggest? Distressed Parents
Dear Parents:
First things first. Don't risk ruining your credit by buying a car you can't afford. Sit down together and list all your expenses versus all of your income. See what money is actually available for car expenses. Then consider these suggestions.
If both boys are in school, let them plan to share a car. They could split the cost of the insurance and gas.
If you are able, use cash to buy an older model car for the younger son. Then take liability insurance only on the car.
If feasible, sell the older son's car and buy two older models using cash, applying for liability only on both cars.
If the boys want the adult privilege of owning a car, they need to come up with some adult dollars on their own. At the least, if they can't work during the school year, they can save earnings from summer jobs to pay for their insurance.
If you want some help preparing a budget, CCCS offers free classes. Call 923-2227 or 1-800-873-2227 to reserve a space.
Best wishes and thanks for writing!
Dear Susan & Co.,
I just recently learned that my father, who passed away five years ago, had a couple of life insurance policies. The policies have never been collected and show the beneficiary to be the estate. He had no will. Who is entitled to the life insurance policies? I would appreciate your advice in this matter. No Will
Dear No Will:
I’m sorry, but this is a legal matter. You really need the guidance of a lawyer who understands probate and estate law. If you don’t know a lawyer, you might contact the Lawyer Referral Service for help. I hope all works out for the best.
Dear Susan & Co.,
I am very worried about my aunt who is 72 years old. She has worked hard all her life and owns her home here in Houston. The problem is she can’t pay her property taxes. She gets just enough social security and retirement to live. I’m afraid she will lose her home. Is there any help out there for her? Mary
Dear Mary:
Yes, there is help for your aunt. And you will find it at the Harris County Appraisal District Office (713) 957-7800.
When you call, ask for an application for the tax deferment plan for persons over 65 years of age. If the application is approved, your aunt’s taxes will be deferred as long as she owns the property. Taxes will be due on sale of the property.
In addition to the deferment plan, Harris County also offers certain exemptions which discount tax liability. Most of us know about the Homestead Exemption, but there are also exemptions for persons over 65 years of age and an exemption for the disabled.
All this information is available in booklet form from the appraisal district. Appraisal district personnel have always been helpful, informative and kind to clients I have sent their way. Give them a call.
Dear Susan & Co.,
I moved out of a rent house 30 days ago, and I have not received the deposit or a letter explaining why the landlord is keeping the deposit. When I spoke with the landlord about 2 weeks after I moved out, she said she was keeping the deposit for damages that I disagree with. The next day I sent her a certified return receipt letter informing her of my new address.
I understand that a landlord has 30 days to return a deposit or give an itemized list in writing of the damages or be liable for three times the amount of the deposit. I assume that I must sue in small claims court to get this.
What exactly are my rights in this? Do I understand the law correctly? What is my next step? Do I need to send a certified letter demanding payment? Thank you for your time. D
Dear D:
Everything I know about the law I learned from Richard Alderman's book Know Your Rights. Everything he knows about the law he learned from law school, passing the bar, experience, teaching law, etc.
I suggest you contact an attorney for the specific answers to your questions.
Good luck.