I have purchased items through catalogs and off of television quite often. Sometimes, my card is not billed until the merchandise is shipped and at other times my card is billed 3 to 4 weeks before the product is shipped. I have friends that have told me it is illegal to bill my card before the product is shipped. How do I find the laws that effect me concerning these types of practices? Lon
Dear Lon:
The law that protects consumers from unfair billing practices is known as the "Fair Credit Billing Act". This federal law states if a consumer has a concern about an item billed to their account, the consumer must send a notice, in writing, within 60 days after having received the bill, to the creditor outlining the nature of their concern. The creditor must acknowledge to the consumer's notice within 30 days and take appropriate action to the complaint within 90 days.
Most credit card companies routinely print the entire "Fair Credit Billing Act" on the back of the customer's statement, or the Act may be rephrased. Check to see if the Act is printed on the back of your statement.
Dear Susan & Co.,
Is there a limit to how high an interest rate can be charged by credit card companies? I thought there was a limit of 22% or 23% a few years ago. Mike
Dear Mike:
The maximum interest rate a credit card company can charge is determined by what the usury laws are ( i.e.: maximum interest that can be charged) in the state where the cards are issued. Most, but not all states, set a maximum interest that can be charge by any creditors. Because there are some states that have no usury law, most credit card companies have chosen to set up operation in these states and issue credit cards from there. This give the credit card companies the liberty to charge whatever interest they chose.
Dear Susan & Co.,
How can I successfully get credit card companies to reasonably lower their interest rate. We do make timely payments, our income has just risen dramatically and we are struggling to get out of debt, but it will take much longer if I cannot get them to lower their interest rates. Cindy
Dear Cindy:
Unfortunately there is nothing you can do to force a credit card company to lower their interest rate. All you can do is ask but if they refuse, your only recourse is to payoff the balance by perhaps transferring the balance to a new lower interest credit card.
Dear Susan & Co.,
I have a question I always wanted an answer to and here's it is. What is the difference when interest is being charged by the average daily balance verses a home loan? is it true you pay more interest on a credit card then you do on any other type of loan? some say yes, if so explain to me how? I am a good manager when it comes to credit, and I was just curious about the way they charge interest. look forward for your answer thank you very much. Barry
Dear Barry:
The method of calculating interest can get very complicated and confusing so I will try to give as clear an explanation as possible. To figure how to calculate interest based on the 'average daily balance', take the beginning balance each day and divide this total by the number of 'days in billing cycle'. This gives you your average daily balance. Next take the Annual Percentage Rate (APR) and divide by 365, the number of days in the year. This will give you the 'daily periodic rate'. Take this figure and multiply by the 'average daily balance'. This gives you the daily interest being charged. Multiply this figure by the number of 'days in billing cycle'. This will give you your total finance charge for that billing cycle period.
On most installment contracts, which would include a home mortgage, the interest is generally calculated by taking the APR and divide by 12, the number of months in a year. This gives you the 'monthly periodic rate'. Take this figure and multiply it by the principal balance remaining. This gives you the monthly interest charge.
Whether using the 'average daily balance' with a 'daily periodic rate' or 'principal balance remaining' with a 'monthly periodic rate' method of calculating interest or finance charges, there is very little, if any, difference charged in dollars and cents.
Dear Susan & Co.,
Is it true that I can call my credit card companies, close my accounts and get a lower interest rate or pay only part of the balance without filing for bankruptcy? Colleen
Dear Colleen:
Yes, you can call your credit card companies and close all of your accounts but don't expect to get a lower interest rate or be able to pay only part of the balance.
Your credit card companies are not in the habit of reducing the interest rate they charge. This is how they make their money. They are also not in the habit of accepting only part of the balance due. This is like giving their money away and they are not inclined to do this either.
Dear Susan & Co.,
Because of late payments on a home equity loan, I was denied a credit card the Capital One. The interest fee was a 6.9%. My intent was to transfer balance of $2000.00 from a high interest rate card to Capital One. This higher interest rate Card is now a horrid 28% because of the bad credit report). Should I assume I may never find another credit company that I can transfer the balance to? (The only bad report is on this home equity loan, every thing else has been paid on time.) Should I write to the Capitol One that denied me and pled my case, and even agree to a higher interest just to be able to transfer balance? Please help. Thanks. Elena
Dear Elena:
You have found out the hard way what happens when you fall behind on just one credit account. You then are considered a high credit risk. Creditors feel if you fell behind with one account, you could fall behind on another account and their account might be the one you fall behind on. If they are going to take that chance, they are going to make you pay for the risk they feel they are taking by charging you a high interest rate.
Writing to Capital One will not do you any good. Once you have been rejected, no amount of pleading or writing will make them change their decision. Your only recourse is to stay current on ALL of your credit accounts and reapply with another creditor at some time in the future. Hopefully another creditor will be more lenient in their credit criteria or this one blemish will have fallen off your credit report.
Dear Susan & Co.,
I live in the state of Florida. I have had a couple of credit card companies buy out my accounts of other credit cards then up the interest rate on my accounts. Is this practice legal? How do they have the right to increase the Apr. from 10.9% to 21.9 or higher. I certainly didn't agree to this change in terms or for that matter had any thing to do with the account being sold or bought out . Do I have any legal rights on this matter. Thanks for your time and help. Sherry
Dear Sherry:
Yes, credit card companies are within their legal rights to sell your account to another company. Recently this has become a standard practice. And yes, unfortunately, the credit card company is within their legal right to increase the interest rate on your account. This authority was granted to the credit card company either when you originally signed up for the credit card or in a notice the credit card company sent to you some time after your were issued the card. If you did not agree to these terms and conditions, you could have written to the credit card company to cancel your credit card and not incurred any further charges. The credit card company would cancel your credit privileges and permit you to pay the balance remaining at the existing APR and not raise the rate at any time in the future.
Dear Susan & Co.,
I work with some teenagers in my neighborhood who are asking questions about credit cards. I am interested especially in teaching the ease in which credit cards can be abused. I want to show how much it can cost in the long run to purchase something with a credit card if only the minimum payments are made. Is there a formula for figuring this out, or perhaps a formula? For example, if they want to buy a couch for $300.00 and the store's credit card APR is 18%. If they make a minimum payment of $15.00 a month how long will they pay on the couch, and how much will the total bill be for the interest/finance charges. Can this same formula also be used for the illustration of purchasing a car? Thank you so much! Gunther
Dear Gunther:
No, there isn't a simple formula that you can use to demonstrate the point you are trying to make. In the example you give: $300 charge, $15.00 monthly payment, 18% APR, it will take 24 months to pay the balance in full for a total of $360.
To illustrate even further the point you are trying to make, I like to use the following example: Assume a beginning balance of $1000 and an interest rate of 18%. Monthly payments are 2.5% of the balance outstanding (i.e.: balance $750 x 2.5% = $18.75) with a minimum payment of $10.00 being required to be sent in. Consumer does not charge anymore on the credit card and sends in no more than the minimum payment request by the credit card company. It will take 12 1/2 years to pay the balance in full.
If you increase the beginning balance to $5000, it will take over 25 years to pay the balance in full. We strongly encourage you to continue to teach youngsters about the cost of credit. Unfortunately we see too many consumers who become enslaved to the credit card companies all their lives and never get out of debt.
Dear Susan & Co.,
Please e-mail information on how we can get credit card interest rates reduced and penalties stopped so that we can make some progress on getting out of this debt.
This has been going on too long. We've learned our lesson!!! Thank You! Respectfully, Rick M.
Dear Rick:
To negotiate a reduced interest rate and waiver of fees, you can call the credit card customer service department at the phone number shown on your monthly statement. Don't be surprised if you are unable to get anywhere in talking with a customer service representative. Credit card companies are not noted to make special arrangements with customers who have had difficulty in paying their payments.
Another alternative is to contact your nearest CCCS office to set an appointment to speak to a financial counselor about your dilemma. CCCS has working relationships with all major creditors to come up with a solution to a card member's problems. Creditors rely on our counselors to evaluate your overall financial situation and help you come up with the best alternative to solve your particular problem.
One of the solutions might be a CCCS Debt Management Program (DMP). A DMP is a voluntary arrangement between you, CCCS and your creditors. It serves the dual role of helping you repay your debts and helping creditors collect money owed them. You agree to deposit funds with CCCS each month which CCCS will then distribute to your creditors.
When you enter a DMP, some creditors will stop or reduce their finance charges and/or fees. Others will not. This is an individual creditor policy and these policies may change over the course of a DMP. During your counseling session, your counselor can explain what your specific creditor's policy and procedure is towards adjusting interest and/or fees.
To locate the closest CCCS office, call 1-800-388-2227. If it is not convenient for you to visit a CCCS office, call our affiliate Money Management International (MMI) at 1-800-762-2271. MMI offers the same service as CCCS except MMI counseling is done over the phone, by fax, mail and the Internet. Counselors are available 24 hours a day, 7 days a week. Good luck.
Dear Susan & Co.,
I have looked a few places to find out more about my seemingly unique problem, to no avail. I wanted to ask you if you could imagine this scenario and possibly offer an explanation:
For about a year now, I have made strides to remove myself from my previous $16,000 debt. During the past year, I did accomplish this task through disciplined spending plus a salary increase of over 300%.
In May, since I've been relatively credit free, I set out to see if I could get the Platinum card I had been "pre-approved" for from several creditors. To no avail. I was rejected due to past credit history and a "legal pending item" (of which I do not know what they are referring to). Last year at this time I went through a huge task of reviewing my credit report and having a "collection" debt removed from my report, as it was inaccurate. One creditor told me that this was the worst kind of risk score to have (a 9, I believe) and that he wasn't surprised that I couldn't get credit up until that time. I did verify in February that this was in fact removed from my report. I thought I was free and clear.
Then in late June, I somehow received the approval for a brand new Mercedes ($40,000 car). Today, I received yet another rejection for a credit limit increase of $700 on my Visa. I have destroyed all of my department store cards and have not re-opened any of them after paying them off. My current salary is $70+K and my current debt (before the new Benz) is $8000. I pay no rent and do not own a home. Besides gas and car insurance, I do not have any other expenses to speak of.
My question is, why can't I get a crummy $700 limit increase on some cards, get rejected for others but still manage to get approved (without a down payment or cosigner) for a $40,000 automobile in between these requests? Could I possibly be still haunted by the inaccurate 9-rating and if so, why would Mercedes-Benz credit approve me if the others wouldn't?
Thanks in advance for your help and advice, Christine G. Dallas TX
Dear Christine:
It sounds to me that you have fallen victim to the "credit scoring" system that most credit card companies use. Credit scoring is a statistical method used to determine what type of risk you are. Factors such as: paying bills on time, not having too many credit cards, not having you credit cards at their credit limit, not applying for too much credit, are used to determine your credit score.
All of these factors, plus other items, have a numerical value. If the numbers add up, you are approved for credit. If they don't, you are denied credit. It's as simple as that. Don't try to find out what your credit score totals. Creditors maintain rigid control over this information. Also, each creditor uses their own credit scoring system and criteria for approving credit. The law doesn't require lenders to reveal the credit score or system used and it's just about impossible to speak to anybody to explain to you further why you have been rejected.
Generally, if you have any type of blemish on your credit bureau file, no matter how small or old it is, you will be denied credit based on the credit scoring system. This is the new way of approving credit. The human element is totally removed from the decision process. It's all a numbers game now.
Dear Susan & Co.,
I moved to Texas 1 year ago and have been getting unsolicited credit cards (applications and even cards) in the mail. I would like to stop this, but do not know how to do this. Recently, I tried to get phone service with GTE wireless and was informed that I had a problem with my credit history. I am in process of ordering credit reports, but I should have no problems (I have been employed as a professional for 20 years with the same company, have no debt except home mortgage, pay all credit cards off each month, and own my cars). I am concerned that some of these unsolicited cards have fallen in the wrong hands and want to stop any more from coming. I would appreciate your help either with an address or phone to request a stop on this. Thank you. Judy
Dear Judy:
To stop receiving unsolicited "pre approved" credit card offers, there is a new law that states if you call the credit reporting agencies (CRA), they must remove your name from their mailing lists. The CRA names and phone numbers are: Equifax at 1-888-567-8688, Experian at 1-800-353-0809, Trans Union at 1-800-680-7293. Good luck.
Dear Susan & Co.,
I'm a college student with little to no knowledge of how credit cards work! I have a variable rate Mastercard with a 18.90% APR (stupid late payment kicked it up over 10%!!!) and a daily periodic rate of 0.0518%. If I pay about $200 dollars a month could I afford a $1000 balance? How long would it take me to pay it off, if at all? How about at $300 a month?
Thanks for any help you can offer me!! Juho
Dear Juho:
If your credit card balance is $1000, your interest rate is 18.90% APR, you pay $200 per month and you do not charge anymore on the account, you will have your balance paid in full in six months. If you pay $300 per month, your balance will be paid off in four months.
Dear Susan & Co.,
I was told by someone a while ago that it is safer to NOT sign the back of your credit cards. Why is it necessary to sign the back, and what is the danger in not doing so? Thanks, Meredith E
Dear Meredith:
Please do sign the back of your credit card. (What I then do is put a piece of tape over my signature so the signature won't rub off.) By your signing your card, it could prevent your card from being used by an unauthorized person. For security purposes, your signature tells a store clerk you are the owner of the card.
The danger if you don't sign the back, and you lose your card, the person finding your card could sign their signature and nobody would know the person offering the card is not the owner of the card and this is not your signature.
I can think of no negative with you signing the back of your credit card. Please sign the back and then put a piece of tape over your signature so it won't rub off.
Dear Susan & Co.,
I have an account with Household Bank, the card was closed last year and I make my payments every month, I have had a couple of late charges. They have now sent me a letter saying my credit report doesn't look good so they are raising my interest rate, but I have good credit with them and always pay my bill. Can they legally raise my interest rate because a credit report says something bad about me, even though the card is canceled and I have good credit with them?? Please help me. Thank you. Laura
Dear Laura:
Unfortunately, yes, Household can raise the interest rate on your credit card whenever they so desire. All they are required to do is notify you that the interest rate is being raised, which they have done. Your only recourse now is to pay the balance in full as soon as possible. What Household has done is being repeated by most credit card companies these days. Because of the increase in bankruptcies, all credit card companies routinely check their cardholder's credit bureau file. They are looking for a pattern of excessive debt or slow paying accounts. If either, or both, of these patterns show up, the card companies will raise the interest rate on the account. They aren't overly concerned if you pay the balance in full. They're actually hoping you will do that before you become delinquent with your account and possibly file for bankruptcy.
Dear Susan & Co.,
I went online and found that you have a given great advice to various individuals with different situations. You are doing a great job. Here is my situation: I pay my bills on time every month. I am not behind on any of my bills. I'm trying to get rid of all of them all together. I have managed to accumulate 10 credit cards. I have paid off three with the help of a part-time job. As I pay them off I close the accounts. I would eventually like be left with two and keep those for emergency purposes. I have three credit cards that have high balances. Should I use the money to pay the smaller ones off completely and then tackle the bigger ones or continue paying the others to a zero balance? I still send the creditor more than the minimum. Any suggestions? AA
Dear AA:
As a general rule, I suggest you pay off the credit card balance with the highest interest rate (APR) first. Some individuals prefer to pay off the credit card with the smallest balance first. This gives them a psychological feeling that they are making progress when they see a bill eliminated completely. It gives them motivation to continue to get out of debt.
Either way is acceptable just as long as you continue to strive to be debt free. The best policy is whatever motivates you most and what makes you feel you are accomplishing your goal.
Dear Susan & Co.,
I have a question that may be out of your field. I obtained a credit card a few years ago, and consolidated several other cards on it. An introductory rate of 7.9% was charged for 6 months, and then about 12.9% after. After a couple of years another company took over the card which by now had a considerable debt. For a few months they charged me my usual 12.9% (prime + 4.9), but all of a sudden, for no apparent reason (I had no late payments) it jumped to 19.9%. Being such a hefty sum, I could not find another card to transfer it to, then to my horror, after an accidental late payment, they bumped it to 25.9% charges and 27.9% for cash advances. If they did this to me, how many thousands of other people might they have done this to. Is this some sort of scam? I live in Indiana, apparently this state offers no protection from such practices. Thanks for listening, John
Dear John:
In the contract you signed when you initially received your credit card, the fine print authorizes the credit card company to make adjustments on the interest rate they can charge. All they have to do is notify you the interest rate is being adjusted. It also stipulates that if you pay late, they can raise the interest (APR) because of your late payment(s). All of this is perfectly legal and your only recourse is to quit charging on the credit card and pay your balance in full as soon as possible.
Dear Susan & Co.,
As a young married couple I feel my husband and have done some-what okay with our finances. We both came into the marriage with student loans and credit card debt. We currently have one credit card with a very high balance, as well as a loan for a computer, aside from our car and student loans. My question is about the credit card and computer loan. They are both with the same company and have 15.9 and 17.9 interest rates. We pay $50 dollars a month over the minimum payment on the credit card, however, it is getting us nowhere. Our minimum payment is $150, we pay $200, and our finance charges are $100 a month!! I have been considering a consolidation loan or even trying to switch to another lending company with lower rates. I feel negotiation with this company is out of the question because we have never been late with a payment. I saw an advertisement for a fixed interest rate visa which is much lower than what we have now. I would like to apply for that, or a consolidation loan, but feel we would be denied due to the amount of debt we have compared to our household income. We really want to start paying these bills down but feel there is no hope with the accrued interest charges. We would greatly appreciate any advice you could offer.
Thank you, Monica
Dear Monica:
You definitely should try to get this credit card and computer loan at a lower interest rate and could apply for the Visa credit card at a lower rate. If you don't get the Visa card, you could try for a consolidation loan next. You want to be cautious though with trying to apply for too many credit cards or loans. Creditors don't like to see you with too many inquiries on your credit bureau file. They feel you are trying to get more credit rather than trying to get credit at a lower interest rate.
If you apply for credit cards or loans at three places and are unsuccessful in getting the credit you desire, I would quit trying for at least six months. Instead try to concentrate on paying larger payments on your credit card account so you can get this paid in full. You can then concentrate next on getting your loan paid off.
Dear Susan & Co.,
My husband died recently. I have credits cards, where he added me to his account after we were married. Do I have to give up the credit cards accounts now that he has died? Do I have to submit my own application to keep the cards? Ann
Dear Ann:
If your husband added your name to his accounts you are considered an authorized user of the accounts and should be able to continue to use the cards. To be safe, call the credit card Customer Service Department (there should be an 800 phone number on the credit card) and explain your situation. They can better advise you of what their policy is when a spouse dies.
Dear Susan & Co.,
I have just received an offer from my MBNA card (balance currently 0) to transfer balances at 6.9% until July 10. I have outstanding balances on several other cards (total about $5,000) - interest rates range from 12.9 to17%. There is no transfer fee charged. My question is this: MBNA intereston transferred balances accrue daily. Am I really saving money transferring my balances?
What is a good rule of thumb here - I feel pretty ignorant about all of this. Thanks - Your answer will be very appreciated. B.Helene
Dear B.Helene:
An interest rate of 6.9% is obviously better than 12.9% or 17% so yes, you would be saving money up until July 10th. But what happens after July 10th? What interest rate will MBNA start charging after that date, how much will you still owe and how soon will it be before you have your balance paid in full ? Once I know the answers to these questions, I can tell you if you would be saving money by transferring your balances.
Dear Susan & Co.,
My fiancee has charged $1800 on a credit card and has not made one payment. They have been calling and leaving messages. Now we received a one time offer to pay it off by paying 50% of what is owed. Is this a good idea. He says it will ruin his credit, but his credit is already ruined. Could settling with the company harm his credit any more than it already is? This is not the only credit card he is behind on paying. He has at least $8000 he owes. Erin
Dear Erin:
The creditor is offering a settlement which could have a bearing on him getting credit in the future. If your fiancee pays 50% of the balance to settle, the creditor will most likely make a notation on your fiancee's credit bureau file that the account is 'settled in full’. It will still show a balance remaining on the account of the balance that wasn't paid. This balance and notation will remain on file for seven years from the date of last activity on the account.
Whether this will harm your fiancee's credit anymore is unknown. To get more specific answers I would suggest your fiancee call the closest CCCS office and make an appointment to speak with a counselor. Perhaps the counselor can determine the status of the other credit card accounts to see if they are beyond repair.
If there isn't a CCCS office convenient, please call our affiliate Money Management International (MMI) at 1-800-762-2271. MMI offers counseling 24 hours a day, 7 days a week by phone, mail, fax or email.
Dear Susan & Co.,
I am writing a book on credit card debt, and would like to know if your organization has any information or statistical data on the consumer credit card debt level in the US I had obtained some of my information from Bankcard Holders of America, however, I have a feeling they are no longer in business (Is this true?). Well, if you can help me I would appreciate it a great deal. Thank You, Cody
Dear Cody:
We do not have any information on consumer credit card debt in the US. You might try Faulkner & Gray at 1-312-913-1334. They publish many periodicals about the credit industry in general.
Yes, Bankcard Holders of America apparently did go out of business. An alternate source offering basically the same information as Bankcard Holders is CardTrak of America at 1-800-344-7714.
Dear Susan & Co.,
I currently have two major credit cards, one with a $1750 limit and one with a $7500 limit. I have both of them paid off at this time, but this has not always been the case. I have two outstanding loans, one for $5000, and another for $24,000. My question is that I have been told in the past that holding a credit card that has a high limit and is relatively unused may be a red flag to someone who is considering me for a loan, is this true? Would I be better off getting rid of the $7500 credit card? For the most part I don't use the cards, but have heard that to get a good credit rating you have to have a established credit and a credit history. I am 26 years old and have had at least one credit card for the last 5 years. Any advice would be appreciated.
Thank you, Richard
Dear Susan & Co.,
I have four old credit card debts over seven years old. Two have been charged off and the other two have been submitted to a collection agency for collection. I recently received my credit report which shows this information along with balances and account numbers. My questions are as follows:
Dear Susan & Co.,
I have been in a similar situation as many of your writers. We have accumulated much more debt than I like to admit with several credit cards. Some months I can hardly meet the minimum payments, and I have had a couple of occasions where our check was returned or payment was late. Is there a way to negotiate a payment schedule with the companies that I can live with? I know credit card companies would rather get what they can than to get a bankruptcy settlement, which is usually nothing. Thanks for your input. EB
Dear Susan & Co.,
Do some creditors allow you to renegotiate the high interest rates on credit cards? Thanks! Vicki
Dear Susan & Co.,
I am currently searching for a credit card that I may transfer balances of my current Visas on to. I am finding it very hard to pay off my Capital One and Citibank Visa cards with such a high interest rate of 24%. Any recommendations for good companies to transfer to that won't whack me with a % rate of 19% or higher after 6 months would be helpful. Thank you. Susan
Dear Susan & Co.,
My wife and I have been arguing about the number of credit cards we have. She wants to get rid of all the cards we don't use and I think we should keep them. She thinks that if we were to try to obtain a loan that the credit would count against us. I think that we should keep them. There are no annual fees so they are costing us nothing and we may need them in an emergency. Any advice on what we should consider doing? Thanks JT
Dear JT:
Your wife is right. In some cases the fact that you have too much open to buy reported on your credit bureau report(s) may results in your credit application being denied. It does look better on your credit report if you, the consumer, close the account.
Having all this available credit could results in a future liability issue if the card(s) is lost or stolen. A good rule of thumb to consider is to have only two multi-purpose major credit cards that you use. Make every effort to pay the balance owed in full each month and bank those finance charges for yourself.
Shop for the card that best meets your purchasing needs, has no annual fees, and the lowest finance charge. It is obvious that you have A-1 credit so there should not be a problem in obtaining credit in the future should an emergency arise.
Thanks so much for writing in.
Dear Susan & Co.,
Several of my credit cards have sent me little forms saying that their rates are going up. Most of my cards tell me I can refuse the new rate and as long as I don’t use my card, my rate will remain the same. Evidently, they can raise it as high as they want until I pay it off.
Where can I find out what my rights are? How high can they raise the interest rate? Is there a book out there that answers these questions? I called the main VISA place, and they said to call the chamber of commerce for rules in my state. The chamber says they don’t have that information available.
Help! Who do I call, and am I stuck with increasing rates if I can’t pay off the card? Thanks. Debbie
Dear Debbie:
Your cards must have variable rates. That is, the rate of interest is figured as the prime interest rate plus several points. Let’s say, your rate is prime plus 5%. When prime is 9.5%, then your rate is 14.9%. But if prime goes up to 12%, then your rate goes to 17%.
Your card contracts should state whether the rates are variable or fixed. If the card is variable, you are stuck with the rate. However, if your credit is in good shape, you can shop around for a low fixed rate card and see if you can transfer balances.
There are laws against usury, but rates have to get pretty high before those go into effect. I suggest you call your congressman’s office with your question about your rights in your state. Check your library for books on credit and the Fair Credit Billing Act.
Thanks for writing.
Dear Susan & Co.,
I have received a notice from my credit card company that they are raising my APR to 15.9% which will apply to all my account balances. When I signed up for the card, they advertised a fixed rate on purchases of 12.9% and of 9.9% on transferred balances "until your transferred balances are paid in full."
I have made some payments late, but I’m now in the position to pay more than the minimum payment. The notice says I can "reject the changes described in the notice," but I will lose my account privileges. I still have a copy of the original application and have nothing in writing indicating they can change the cardholder agreement.
Do I have a leg to stand on? Who should I contact to help resolve this? Searching for Answers
Dear Searching:
The late payments probably precipitated the increased APR. In their eyes, your late payments broke the terms of the original agreement.
Review the terms of the agreement again. If you don’t find an indication that terms will change with late payments, call the creditor and ask for the billing department. State the situation and ask for a clarification of terms and an explanation of the increased APR.
It’s possible you can negotiate for the lower APR again by making timely payments over 3 to 6 months. It never hurts to ask. Just get the agreement in writing.
Regardless of the outcome, I love your more than minimum payments! Get that money out of their pocket and back into yours.
Thanks for taking time to write.
Dear Susan & Co.,
I was given a Corporate American Express Card to be used for business purposes by my former employer. Upon leaving, there were some unreimbursed expenses that my employer has not taken care of. Can American Express hold me liable for the charges on this corporate card that I did not personally apply for? What liability does the company have in this? Unreimbursed
Dear Unreimbursed:
I called the corporate card division of American Express and was told that you might be liable for expenses on the corporate card. It depends on the arrangement made by your former employer when the account was opened. In some cases, only the company is liable for expenses. In others, both the card user (you) and the company are liable for expenses.
If you know the corporate card number, you can determine your position by calling 1-800-492-3344 and asking a customer service representative. Good luck.
Dear Susan & Co.,
I have two gold credit cards and I barely send over the minimum each month. In addition, I have two classic credit cards. I am having difficulty keeping up with all of this. I would like to find a way to decrease my payments or if possible to cancel my credit cards. Or are there other solutions to solve my credit problems? O.B.
Dear O.B.:
You can cancel your credit cards at any time, BUT canceling you credit cards will not cancel the debt or stop the interest on your balances. You still will owe whatever moneys you borrowed plus interest.
Since you are able to make at least the minimum every month, I’m going to make some suggestions based on two assumptions.
First assumption: You credit history is still good. Then seek a consolidation loan from your credit union or bank. Shop around for the lowest interest rate. If you get the loan, then close the credit card accounts and send back the cards immediately. If you don’t you will be sorry.
Second Assumption: You’re still spending money on entertainment. This is the equivalent of picnicking on a crumbling ledge overlooking a 1000 foot drop. Any money you’re spending on wants - movies, eating out, hobbies, extra clothes, etc. - should be reallocated to your debt payments. Your situation is serious. Treat it seriously.
Regardless of your approach, you’ll need a written budget. You can get one in a CCCS counseling session and at the same time discover if your particular creditors accept minimized payments and offer lower interest rates through a CCCS payment plan.
Debt is starting to encroach on your financial freedom. Cop an aggressive, can-do attitude toward reducing it, and don’t stop until you draw a free financial breath. Good luck.
Dear Susan & Co.,
My mother has a credit problem. I have just recently found that she has several cards open in my name. Is there a way to change this and get her some help to start paying them? Cory
Dear Cory:
There is more than a credit problem here. For your mother to open credit accounts in your name without your knowledge she had to forge your name on applications and store receipts while using a card with your name on it. That is credit card fraud.
Unfortunately, it is your credit report that is affected. So you're the one with the credit problem, not mom.
What to do? Creditor policies vary somewhat but generally these are your options.
You can file charges against your mother and send a copy of the police report along with a letter of dispute to each creditor asking that the account be corrected.
You can send each creditor a letter of dispute along with a copy of your driver's license, your social security number and several examples of your signature for comparison. They may ask that you tell them who you think did it.
You can pay the accounts.
If you choose the third option, close all the accounts and return the cards. You can return any merchandise possible to lower outstanding balances.
A CCCS counselor (1-800-873-2227) can help you develop a repayment plan. Hopefully, your mother will do everything she can - within the law, please - to get this debt repaid in a hurry. Meanwhile, get a post office box that your mother does not have access to. I wish you the best.
Dear Susan & Co.,
I have recently been working very hard to pay off my debt on my credit cards. I have almost caught up and only use it for emergencies. I recently noticed that my annual percentage rates is 18.65%. I like my credit card and don’t want to switch, but I notice so many other cards with much lower interest. Can I negotiate this rate with the company: Thanks for your help. Kate
Dear Kate:
Congratulations on your hard work and success in paying down your debt!
Kate, if you like you card, why don’t you get the balance paid down to zero, and then make it your financial policy to pay the balance in full and on time each month? Then you won’t care what the interest rate is! You won’t be paying it!
But yes, you can certainly call and ask for a lower interest rate. They may consent to lowering the rate by a few points.
Just don’t send out too many applications at one time. Having too many inquiries on your report is viewed as negative. Thanks for writing!
Dear Susan & Co.,
At least twice a week, I get credit card applications in the mail offering me thousands of dollars of credit. I've taken a few just in case of an emergency. What I want to know is how do credit card companies know I can afford all this credit? Just 5 Cards
Dear Just:
Credit card companies have mathematical formulas to help them determine if you are a good credit risk. But they don't know what you can afford. Only you can determine that.
All it takes is a rule of thumb and a little math of your own.
Rule of Thumb: Spend no more that 15-20% of your take-home pay on credit payments.
The math part: Make a list of everyone you owe, from credit cards to personal loans. By each creditor write the payment you make every month.
Add all the payments to get the total dollars you spend monthly on credit.
Divide the total of payments by your total monthly take-home pay. What percent do you spend on credit monthly? Compare your situation to the 15-20% rule. How many dollars can you wisely dedicate monthly to credit?
Makes it a lot simpler to decide what credit offers to accept, doesn't it? And we thought we would never use those 8th grade math statement problems in real life!!
Dear Susan & Co.,
It's great to know there is someone out there that's trying to help. I am in debt to the tune of about 20,000 in credit cards. That's probably one of the worst ones you have heard. I am also married but am pending divorce, and she gives me no help whatsoever. I refinanced my home about three years ago for a lower rate. I realize that there are a lot of routes for me to take, but I am somewhat scared. Can you help me? I am embarrassed to say that I owe a lot of credit cards. Bernard
Dear Bernard:
I am sorry you're going through such a hard time. To decide what you're going to do about finances, try these steps.
Some expenses you simply have to pay to live, such as housing, utilities, food, health needs, car insurance and car payment, etc. Make a list of those expenses and the cost of each, starting with housing. Compare the cost of renting with the cost of keeping the house to help you decide whether you can keep the house or not.
Add up the cost of your necessary living expenses and subtract the total from your monthly salary. What you have left over is the amount you can use to pay your credit cards. If it is not enough to pay everyone the regular amount, I suggest that you call Consumer Credit Counseling Service for a free counseling appointment. A counselor can go into detail with you so you can figure out your best options.
Don't let embarrassment keep you from dealing with this problem soon. All of us have made decisions that we regretted.
And no, Bernard, your situation is not the worst I've seen. Don't give up. Take care of yourself by getting some outside help. And thanks for writing.
Dear Susan & Co.,
A buddy and me got bored, so we decided to go to the mall and see how much credit we could get. We filled out every application we could. When we told my sister what we had done, she said we had ruined our credit by asking for so many cards. How could asking for credit ruin our credit. It's not like we were going to use the cards or anything. Is she right? Not Bored Anymore
Dear Not Bored:
You haven't ruined your credit, but you may have created a problem for yourself in getting the credit you really want - at least for awhile.
Every time you apply for credit, the lender pulls your credit report. The lender’s name and the date the report was pulled are then listed in a section on your report called "inquiries." That inquiry remains on your report for two years.
When several inquiries are made within a very short time period, lenders get a little nervous about extending credit. Too many applications mean you have a higher potential for building up so much debt that you can’t make the payments.
In that one day at the mall, you created a large block of same-date inquiries that will sit on your report for 2 years. You're not ruined, but you may have trouble getting credit until those inquiries roll off.
Dear Susan & Co.,
Well, I did it again. I swore I wouldn’t use my credit cards for Christmas gifts, but I guess I got caught up in the shopping spirit. Now the bills are coming, but I don’t know how I’m going to pay them. Any suggestions? Christmas Shopper
Dear Shopper:
Don’t you remember making this pledge when you were our shopping?
Being out of cash I, Christmas Shopper, choose to borrow money at 22% interest on my credit card to buy gifts which I cannot afford but want. Knowing in January I'll still be broke and realizing I must repay the loan, I hereby pledge to reduce my spending and change my lifestyle until the loan is repaid (hopefully before next Christmas). To wit:
Okay, so maybe you didn’t make this pledge. But you might as well have because it is exactly what you have to do now.
When we make choices, we also choose the consequences. Yours are listed above. You can do it. You’re more resourceful than you think.
Good luck!
Simple question. Is there a service like yours that serves the Southern California area? I am specifically interested in finding out credit card companies with low interest rates and reasonable minimum monthly payments where I can transfer three card balances. Any ideas? Matt
Dear Matt:
The fastest way to find a CCCS in your area is to call the National Foundation for Consumer Credit at 1-800-388-2227. An automated response will list the CCCS offices in your area and the local phone numbers.
Before you start transferring balances, do some research. Is the low interest rate temporary or fixed? If temporary, when does "regular" interest begin and at what rate?
Think through why you're looking for "reasonable minimum payments." Are you having a hard time meeting your current payments? If so, then you're overextended and headed for trouble that lower interest and minimum payments won't solve.
A budgeting session with a CCCS counselor could head that trouble off at the pass. Call a CCCS in your area or in Houston (1-800-873-2227.) Good luck.