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6 tips to avoid banking fees

Filed under: Banking on October 8, 2014 @ 12:18 pm

It’s never fun to get hit with bank fees, but one survey has good news: Most of us pay nothing.

A new survey from the American Bankers Association (ABA) found that 62 percent of Americans say they pay nothing in fees — up from 55 percent last year. And another 12 percent said they pay $3 or less per month.

The telephone survey of 1,000 U.S. adults, conducted on behalf of the ABA by Ipsos in August 2014, asked consumers to estimate how much they pay in fees for monthly accounts, ATMs and other banking services. The survey also found:

  • 7 percent of consumers said they pay $4 to $6 per month, down 8 percent in 2013.
  • 3 percent said they pay $6 to $9 a month, down 4 percent from 2013.
  • 7 percent said they shell out $10 or more, down 14 percent the previous year.

My husband Joe and I have used a couple of tactics to save on bank fees. The one that has saved us the most has involved using a split direct deposit. Our bank waives the $7 monthly maintenance fee for each checking account that has $100 or more direct deposited into it each month.

Here’s how it works: We get most of Joe’s monthly paycheck deposited into our main joint checking account. But Joe requested that his employer separate out $300, directly depositing $100 into our second joint account and our two individual accounts. That saves us $28 a month or $336 a year.

A few years ago, we also switched from a credit union to our current bank, SunTrust, to save on fees. The credit union didn’t have enough ATMs in the region, and we had plans to take road trips around the South. We didn’t want to get stuck having to pay to go to another bank’s ATM when we wanted cash. That has worked out well for the most part, though we have wound up in a few towns that didn’t have SunTrust ATMs.

The ABA recommends that you opt out of overdrafts, which can leave you with hefty fees, and instead sign up for alerts and keep close tabs on your transactions. Also, the ABA says, some banks will offer you free accounts if you use their bank for many of your banking needs.

Here are a few more ideas for avoiding fees:

  • Get an account with a bank that doesn’t charge you a fee for using another bank’s ATM and that will reimburse you the ATM fee that the other bank charges non-customers, Time Money suggests. Time Money recommends digital banks Ally and Schwab, which don’t have their own ATMs.
  • If you do use a bank that charges ATM fees and/or doesn’t reimburse you, download your bank’s mobile app, which can point you to the closest ATM when you’re traveling, Time Money recommends.
  • If your bank charges for paper statements, go electronic, recommends. For example, Central Pacific Bank charges $1.50 for paper statements on some accounts, while U.S. Bank charges $2 on certain accounts.
  • Beware of closing an account too soon, advises. Some banks charge early account closure fees. For example, PNC Bank charges $25 for closing an account within 180 days of opening it.

And one more tip from me: Always carry cash (I try to have about $50 in my wallet) when you’re traveling by plane. You might find only one bank’s ATMs in an airport and it’s likely they won’t belong to your bank.

I made the mistake of forgetting cash once and hoping that the Atlanta airport would have a SunTrust ATM. No such luck: They had only Wells Fargo, so I had to pay a hefty fee from Wells Fargo and one from my bank, too.

With a little knowledge and planning, many bank fees can be avoided. And, it’s always nice to save a few bucks.

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How I’m preparing my teens for fraudsters

Filed under: Student on October 3, 2014 @ 12:08 pm

Victims of elder financial abuse, including scams, lose about $3 billion a year collectively, according to a study by MetLife. It’s a big problem, and elder advocates have responded aggressively.

There are hotlines and email blasts that keep the elderly up to date on the latest scams targeting their age group, such as the AARP’s Fraud Watch Network and its fraud-fighting hotline, (800) 646-2283. Also, the government issues alerts, such as the Federal Trade Commission’s advisory on the “grandparent scam,” sometimes called the family emergency scam.

There is understandable concern about the fraud our elderly face, but I have to wonder whether we’re ignoring teens and young adults.

Every time I get an alarmist piece of mail warning me that my car’s warranty is about to expire, or I get an automated call announcing my “final notice” that I’m paying too much interest on my mortgage, I wonder if my two teenage sons would know how to handle these situations.

In the past couple of months, I’ve come up with an action plan that I hope will prepare my boys for the scammers that are out there. Here are my five tips:

  1. Make them answer the home phone. This gives them a chance to hear the different angles of fraudsters, and they can ask me or my husband how to handle the call in real time.
  2. Educate them about personal information. They know not to give their personal information to the Nigerian prince email scams, but do they know not to give out Social Security numbers, driver license numbers or bank account information over the phone? Probably not.
  3. What if the call is legitimate? That said, there will be times when a service provider calls, or heaven forbid, a debt collector. When this happens, I will teach them that the callers should be the ones providing the information. For example, if the caller wants personal details, I will tell my boys to get the caller’s name, employee ID number and then call the company’s listed number to confirm the caller is legitimate. (My financial advice company periodically calls me and asks for personal identifiers before we can proceed. I always get the representative’s name and call the company’s listed number to confirm that it is a legitimate call.)
  4. Have them sign up for the Do Not Call Registry. Explain that they can register their cell phone number now, and home phone once they move out (if they have one), and that they will then be placed on a list banning telemarketers from contacting them 31 days after registration. I will give them a short script to say when a company calls. “This line is on the Do Not Call Registry. Please take me off your list or I will file a complaint.” After 31 days, the legitimate companies will stop calling, and you are left with the fraudsters. (Also, if a caller claims to be with the registry, he isn’t.)
  5. Teach them the fine art of hanging up. If someone calls and clearly wants information or money, teach your kids that it’s OK not to engage them. In fact, there are times when it’s OK to simply hang up. I got a call recently from someone who said she was with “the Claims Department.” I asked what that meant, the caller stuttered and couldn’t say which “company” she was with, so I hung up. My kids were there, and I explained to them what happened.

By giving your kids practical experience in how to handle con artists, you arm them with an important life skill. Don’t let them move out without knowing how to negotiate through the minefield of fraudsters out there.

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4 steps to take when choosing a financial planner

Filed under: Finances on October 1, 2014 @ 11:51 am

I had a bad case of financial planner anxiety. For over a year, I couldn’t bring myself to make an appointment with a fee-only financial planner.

But when I found a planner I thought would be a good fit, I called her, and she immediately put me at ease. “There’s nothing to be nervous about,” she told me, and we chatted for half an hour. Finally, I made an appointment.

The 2013 Household Financial Planning Survey, by the Certified Financial Planner Board of Standards and the Consumer Federation of America, found that nine out of 10 American households do some type of financial planning, even if it’s just an informal budget jotted down on a notepad. 

But far fewer — only 19 percent — have had a certified financial planner or similar professional create a comprehensive financial plan for them. In the group of consumers who did have a pro make a plan, though, most have all of their bases covered: emergency savings, retirement savings and plenty of insurance.

Until last week, I wasn’t in that group. But now I’m happy to say I am. And my husband and I feel much better about our financial future.

Curious about what happens in a financial planning session? Here’s how it went for us:

Before the session
My husband Joe and I filled out a detailed questionnaire about our finances. We wrote separately our short-, medium- and long-term goals and dreams, as well as our tolerance for risk and attitudes about investing. We also provided a lot of documents, including a copy of our most recent tax return and Joe’s most recent retirement account statement. (I didn’t have a retirement account, because I’d cashed mine in during the recession, which was part of the reason I wanted to meet with a financial planner.) We had to pay half the $600 fee upfront.

During the session
We did our session remotely because the planner is located a few hours from us; not every city has a fee-only planner. We dialed in via my laptop, using a meeting tool called WebEx. We talked with the planner while she pulled up documents, charts and graphs on the screen to illustrate her points. First, we talked about estate planning, such as creating wills and making sure we had named our insurance beneficiaries. Once that was out of the way, we went over retirement planning scenarios based on our goals. She played with numbers — such as retirement age — and investments at different risk levels, showing us how each scenario would look. I’m self-employed, so she outlined my retirement account options. Finally, she came up with a spending, saving and debt repayment plan that made all of us happy.

After the session:
We followed up on “action items” the financial planner assigned to us. For example, I opened a savings account with Ally Bank, which earns 0.9 percent, to hold our emergency savings. We tweaked our budget to reflect the amount the planner recommended we commit to debt repayment and, later, to saving. And I will open an individual retirement account as soon as we finish paying off the credit card debt we incurred during our remodel. We also get a half-hour follow-up session with the planner.

After having been through the financial planning experience, here’s the advice I’d give to anyone considering it:

  1. Go with a fee-only planner. This means the planner is paid only by you and is not getting commissions to sell you financial products. You can find a fee-only planner on the website of the National Association of Personal Financial Advisors. The Certified Financial Board of Standards offers a guide to choosing a planner.
  2. Consider a mini-plan. If your financial life isn’t very complicated, many planners have a less expensive package that might cost half as much as a full financial plan. Depending on your situation, it might be all you need. That’s what we did, and it saved us quite a bit.
  3. Don’t put off meeting with a financial planner out of anxiety. I can tell you from experience, you’ll probably feel relieved once you’ve gotten the advice of a pro.
  4. Find a planner who’s a good fit for you. Most planners are happy to talk with you on the phone about their services, so you can get a feel for whether they’re a good match. I talked with one other planner, but went with the one we chose because she focuses on financial life planning — that is, tailoring financial goals to your hopes and dreams, rather than straight number crunching.

So, if you’re considering a financial planning session, I’d say go for it. It’s pricey, but I think it will pay for itself many times over.

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How to fight credit card budget woes

Filed under: Credit Tips on September 26, 2014 @ 11:41 am

It turns out that less than a third of Americans keep a detailed budget, according to Gallup.

Gallup also found last year that if you went to college or have a household income of at least $75,000, you’re a little more likely to keep a budget — a little under two-fifths in those categories said they kept a budget.

So, what is our hang-up about budgeting? Gallup surmises that Americans might not feel the need to budget because they can check their bank account balance at any time via mobile banking, as well as online banking, the most popular mode of banking, according to American Bankers Association. But, budgeting is about more than reviewing your checking account regularly.

If you keep a detailed budget, you can plan for big expenses, such as visiting Aunt Mae over the holidays. Perhaps more important, you can plan for the unexpected, such as the $3,000 in car repairs my husband incurred when he recently went in for “routine maintenance.”

Because I set aside part of my take-home pay for unexpected bills, we have not suffered from any recent, unplanned expenses.

While I have my family on a strict financial diet, there is one thing I struggle with when it comes to keeping a realistic budget — budgeting for credit card bills. I’ve wondered if credit cards are actually a major reason why people do not budget adequately. Do we hide our heads in the sand because we are going over budget every month with our credit cards?

My husband and I pay our card bills off every month, a habit I highly recommend, but I still always struggle with keeping the credit card part of the budget under control. And I have put off itemizing my cards by category on my budget spreadsheet, because I know the news won’t be good. Head in sand, you say? But some people actually use credit cards as a budgeting tool.

Hank Coleman writes on that he and his wife have found that charging expenses primarily on a credit card has simplified their budgeting, because there is a paper trail. Coleman suggests that you use a charge card if you are concerned that you’ll go over budget with a traditional credit card — with a traditional card, you can simply pay a minimum payment each month. A charge card requires you to pay in full each month.

But what if you already have credit card debt?

Louise Balle advises on that if you owe on your cards, pay off the card with the highest interest rate first. She suggests that you make up a budget of all your expenses, including your minimum payments on your cards, then subtract that figure from your take-home pay. That sum is what should go toward your credit cards until you pay them off, she says.

Benjamin Chambers writes on that you can get your bank to send you a text when you reach a certain balance threshold. He actually uses his card for groceries, paying off the bill each month. Benjamin says personal finance is about behavior, rather than knowledge, and if you practice, you can learn to manage the credit card aspect of your budget, and it will become as natural as using cash.

I like the idea of getting alerts on my phone if I go over a certain amount, but the alerts allowed on my favorite card, which is with Bank of America, don’t include that option. I looked at my Capital One, and it does have an option to alert you if your balance goes above a certain amount.

I set up an alert with Capital One; I want to see if I can curb my card spending this way. It will be interesting to see if I can change my behavior, as Benjamin says you can.

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Americans like banks again, but I don’t

Filed under: Banking on September 24, 2014 @ 11:55 am

The recession permanently changed my view of the American banking industry, but it looks as though other consumers are letting go of their resentments.

Every year, Gallup publishes its Work and Education Poll in which Americans rate their feelings on various industries. The choices range from one, “very positive,” to five, “very negative.”

In August 2014, Gallup surveyed 500 people about 24 industries. The survey shows that Americans, for the first time since 2007, have a positive view of the banking industry. How quickly we forget.

I will say that my view about the industry as a whole is different from my view on specific companies. I have generally positive feelings about the institutions where I bank. I like Sun Trust, where I have my checking and savings accounts. I also am happy with my credit card issuer, Capital One. When I think of the relationships I have with banks I use, I focus mostly on their products and how I’m treated.

However, when I think of the banking industry as a whole, my feelings are much less favorable, primarily due to the subprime mortgage mess and the resulting recession in 2008-2009. That was the root cause of other Americans’ negative feelings about the banking and the real estate industries from 2008 to 2013, according to Gallup.

My husband and I experienced the trauma of the recession first-hand, and it affected our lives in a big way.

In 2003, when housing prices were flying high, I bought my first home in Kansas City. I bought a house I could easily afford, and everyone — including my mom — said buying was a smart decision and that I’d make some money when I sold the house.

Fast forward to 2011, and we had to move. My husband, Joe, had lost his job in the middle of the recession, had gone to grad school and finally landed a job in Georgia. After years of being broke, it was a no-brainer for him to take the Georgia job. But we had to sell our house and its value had taken a nosedive. A few relatives told us to stop making payments and let the bank foreclose, but we didn’t want to abandon our obligations or wreck my credit.

When the first real estate agent we called told us she didn’t think she could sell our house, I almost cried. Our inner-city neighborhood was taking a beating from the recession, and a bigger house right behind ours had just sold for $14,000 after a foreclosure. But, we finally found a real estate agent who agreed to help us. He gave us tasks, such as rearranging furniture and painting our walls a fresh, airy cream color. Whenever there was a showing, I’d throw fresh flowers cut from our yard on the table, load the dogs into the car, park a few blocks away and hold my breath. It seemed like a miracle when a buyer put in an offer for $64,000, which was $10,000 less than we still owed. We had to take out a $9,000 personal loan from our new credit union in Georgia to be able to afford to sell the house. The whole situation left us a bit bitter.

At one point, I even called my mortgage bank and to see if it would let us settle the mortgage for less than we owed. I didn’t expect the bank to say yes, but I wanted to at least ask and also let it know what I thought about the huge role banks had played in the housing crisis, due to their backing risky mortgage loans, and the fact that situations like mine were the result.

I told my bank I could easily let the house go into foreclosure and it could then sell it for $12,000 or so. Or, maybe they could accept $64,000 and forgive at least part of the additional $10,000 I would still owe. They said no way.

I’ll never forget that conversation and the (at least it seemed to me) smug and callous attitude of the bank rep I spoke with. “Banks like yours caused this mess,” I told her. “And now regular consumers like my husband and me, who are trying to do the right thing, are paying the price.” It wasn’t much, but it was my little chance to tell the “banking industry” what I thought.

So, we sucked it up, took out the loan, and felt grateful to have sold our house. We paid off what we owed in about a year, but my unhappy feelings toward the banking industry will linger for much longer.

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Breaches make me rethink my debit card swiping habits

Filed under: Debit Card on September 17, 2014 @ 12:47 pm

I’ve had new debit cards issued to me twice in the past year, both times after big data breaches, and it’s causing me to rethink my swiping habits.

Right now, I swipe my debit card anywhere and everywhere, using it to pay for anything from a $150 vet bill for my dog to a $1.50 bottle of water at a convenience store.

In fact, I used my debit card to buy a cart full of household goods at Target right before the news of that data breach broke.

Unfazed by that experience, I continued swiping — including at Home Depot, where I recently bought painting supplies for a house project. Right before details of Home Depot’s breach went public, SunTrust canceled my debit card and notified me that it was issuing me another card due to possible fraud at a retailer where I’d shopped.

As far as I could tell, there was no evidence of fraud on my account either time. That’s partly why I haven’t changed my debit card use yet; I think my bank is doing a good job of being proactive. In fact, it’s fairly common for banks to automatically reissue whole portfolios of debit cards after data breaches at large merchants, according to David Pommerehn, senior counsel for the Consumer Bankers Association, an industry group.

According to a 2014 survey by Pulse, an ATM/debit network, 84 percent of banks reissued all cards exposed in the Target data breach.

While I appreciate my bank’s vigilance, having my debit card reissued has been quite a hassle for me both times. I have my main debit card on file with my auto insurer, my cellphone provider and my life insurance company. I also have it saved with one or two online retailers that I use frequently enough that I don’t want to enter my card info each time.

This time, I forgot that the card was on file with my auto insurer, and I got a cancellation notice and a call from my agent. That was a bit stressful.

And here’s something that really makes me upset — and a bit mad. The blog Krebs on Security notes that data from The Home Depot breach for sale on the online black market includes the full names of cardholders as well as the zip codes of the store locations where the purchases were made. That information makes it easier for fraudsters to perpetrate ID theft.

Now I’m trying to decide what to do. Most security experts I’ve interviewed advise consumers to use credit cards instead of debit cards for purchases. There are more consumer protections, the credit card isn’t tied to your actual money and it’s generally quicker and easier to get fraud ironed out. (That doesn’t help with the ID theft issue, though.)

My husband and I have tried using a credit card for all of our purchases and paying it off in full each month. The problem: We found that we looked at our money differently and ended up spending more.

But, I don’t really want to keep risking the money in our main checking account by continuing to make all of my daily purchases on my main debit card.

I love the idea of using a debit card connected to another account, with a smaller amount of money in it, for everyday purchases. On the other hand, we already have multiple accounts to help us manage our money, and I’d like to simplify our financial life, not complicate it.

So, for now, I’m going to keep checking my bank account daily, a habit that helps me feel fairly secure. And, I’m going to give my insurance company and cell phone company the card number for a credit card I rarely use for purchases. I’ll just set up an alert to remind me to pay that credit card bill every month. That way, if my debit card gets replaced again, I won’t have to worry about updating my information with those providers yet another time.

But, really, I’m starting to wonder if good old cash or “masked credit cards” that hide your personal information are the only options for consumers who are tired of having our information compromised by big retailers, again and again.

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File credit bureau disputes by mail, not online

Filed under: Credit Disputes on September 12, 2014 @ 10:35 am

Whatever you do, don’t file a dispute with the credit bureaus the way I did.

I recently decided to get serious about checking one credit report every four months.

In August, I checked my TransUnion credit report. TransUnion is one of the three major credit bureaus (the other two are Experian and Equifax), and lenders follow closely what the bureaus reveal about your borrowing and repayment activity. You can get those bureaus’ credit reports for free once a year from

There are a couple of important reasons for checking your reports regularly: to correct any mistakes and to identify possible identity theft.

Almost a sixth of all consumer complaints in 2013 were about identity theft, according to the Federal Trade Commission (FTC). While I didn’t find any evidence of identity theft in my TransUnion credit report, I did find errors. The FTC found in December 2012 that 20 percent of consumers disputed errors and had changes made to at least one credit report. It turns out, I had a similar experience.

For me, there were missing addresses, an incorrect address, two past mortgages were listed as open and our current mortgage was not included.

I did not feel the errors on my TransUnion report were malicious, and none of them reflected badly on my record. I had disputed online with success in the past and decided to do the same again.

I filed the dispute online on August 5, 2014, and received notice that my file had been updated on September 2. Everything was updated correctly, and a new credit report was available for me to print.

That’s the second time I’ve disputed errors on my or my husband’s files online and without supporting documentation. But, that’s not the best idea, I’ve learned.

Tara Siegel Bernard of The New York Times advises against filing disputes online. By sending a dispute by certified mail, Bernard says it can help you if your problem isn’t resolved because you have physical proof of your claim. It also helps if you eventually need to provide evidence for a court case.

Kelly Dilworth writes for that you may also be forfeiting your right to challenge the error in court by filing online. By clicking the “I accept” button, you might be agreeing that you will accept a decision by a single arbitrator rather than a jury, making it potentially harder to prove your case, Kelly writes. Don’t know where to start? The FTC offers a sample dispute letter.

I was lucky that the errors on my report were not malicious and were easy fixes. But if you are faced with potential identity theft, the FTC has an excellent guide for helping identity theft victims. Much of it is geared toward how to help a victim, but it includes sample letters you or an attorney can use.

The three major credit bureaus have some excellent information on filing a dispute, as well as their mailing addresses and the information you need to provide at TransUnion, Equifax and Experian.

As tempting as the convenience of filing online might be, I’m going to file my disputes by certified mail from now on. It just isn’t worth the risk to do otherwise.

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No emergency fund? Crowdfunding is one solution

Filed under: Credit Cards General on September 10, 2014 @ 1:11 pm

You need a new clutch for your car, your kid has to have surgery, or you’re buried in credit card debt. Should you turn to crowdfunding?

More low-income consumers are turning to their social networks to fund emergencies, according to D2D Fund, a nonprofit that works to increase financial security for low-to-moderate income households.

Without an emergency fund in place, crowdfunding may make sense. The 2014 Consumer Financial Literacy Survey from the National Foundation for Credit Counseling found that lack of “rainy day” savings was cited as the top financial worry by 16 percent of consumers. And 34 percent said they didn’t have any savings, not counting retirement savings.

I’ve been there, back when I was less adept at managing money. In fact, throughout my 20s, I didn’t have an emergency savings fund. One car problem was enough to send my financial stability into a downward spiral. In fact, not having an emergency fund was probably the top reason I racked up credit card debt during those years.

That was before crowdfunding became popular. Though it’s certainly no substitute for having an emergency fund, it does seem to be an innovative way to get money quickly without having to rely on a generous relative or credit cards — especially if you have a compelling story.

I know people who have done crowdfunding, and I’ve even contributed a few times. A few years ago, I was on Facebook late one night when a friend of mine shared an urgent post from a friend of hers who worked at a local vet clinic. A young couple had brought in their pit bull, who was suffering from a twisted stomach and was going to die without immediate emergency surgery. But the couple was broke.

I’m a dog lover, and the post was so heart wrenching that I immediately called the vet clinic and donated $100 on my credit card. The dog ended up being able to have surgery, thanks to the crowdfunding effort, and her life was saved.

If you’re considering donating via a crowdfunding site, watch out for scams, the Better Business Bureau recommends, noting that crowdfunding is “the Wild West of fundraising.”  In order to be absolutely sure your money won’t go to a fraudulent cause, you might have to donate only to people you know personally.

Otherwise, make sure you check out the recipient and cause as well as possible, the BBB recommends. Read through the project page to see if there are links to social media profiles, news stories or other sources that back up the claims. And consider requesting additional information from the campaign administrator before donating, the BBB recommends. Finally, be aware that you’re taking a risk.

If you want to turn to crowdfunding for an emergency, you can do it yourself by spreading the word through social media or your blog, or you can use various crowdfunding websites. For example, allows fundraising for a variety of personal reasons, including emergencies, medical bills and memorials. Current campaigns include medical bills for a child with cancer, replacing $4,000 worth of camera equipment stolen from a photographer’s van, and paying $20,000 in lawyer fees for an Ohio TV anchor locked in a legal battle with his former employer.

As with any service, though, it’s important to read the fine print carefully, find out exactly how the process works and check the fees. Here are examples of fees charged on various crowdfunding sites:

  • charges a flat 5 percent of all donations, and the payment service they use, WePay, charges 2.9 percent plus 30 cents per donation. That means if you raise $100, you’d get about $92. (Or, if you raise $10,000, you’d get about $9,200.) So, it’s a significant chunk of money.
  •, another popular site, charges 9 percent if you don’t reach your goal, or 4 percent if you do reach your goal. Plus, you have to pay 3 to 5 percent on top of that, depending on your bank, in PayPal processing fees. So, you’d lose between 7 and 14 percent of what you raise. There’s also a $25 wire fee for non-U.S. campaigns.
  • With, you pay a processing fee of 2.9 percent plus 30 cents per donation. (They also ask donors to contribute more to cover the cost of the service.)

In addition to fees, another issue to consider is taxes: According to, crowdfunding is fairly new, and it’s not always clear whether the money you raise is considered a gift or income.

However, if the money is for a family struck by a tragedy — say a fire — then the money likely would count as a gift, according to

Consult a tax professional before you spend all of your crowdfunded money. You definitely don’t want to get hit with a big tax bill at the end of the year — then you might have to write a compelling story about your IRS woes and turn to crowdfunding yet again.

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New FICO scoring model unveiled

Filed under: Credit Cards General on September 5, 2014 @ 10:21 am

Your credit score could soon rise without you changing a thing.

The FICO score, which most lenders use to assess your creditworthiness, is getting a facelift. The new FICO Score 9 will become available in the fall, although it could be several months before you see a difference.

How will FICO’s latest incarnation benefit you? In two ways:

  • If you have paid-off collection accounts, they will no longer hurt your score. Right now, an account in collections harms your score, even if you have paid it off.
  • If you have medical debts, they will have less of an impact than, say, that crazy buying spree you went on with your credit card. Credit Card Forum says FICO was likely influenced by a Consumer Financial Protection Bureau (CFPB) report that found that people whose medical debt had gone into collections may have been overly penalized by the old credit scoring system.

So, if you have already paid off an old debt that had been in collections or if you have outstanding medical debt, your FICO credit score could see a boost.

Both changes are huge, as they make a lot of sense.

We have time and again heard from readers who saw limited value in paying off debt in collections. Our experts advise readers to pay the debt to avoid a lawsuit (and to end the relentless cycle of phone calls from creditors), but the credit score damage is done and takes years to fall off your credit report, whether the bill is paid or not.

The medical debt change also addresses a big credit score problem. I know first-hand how oppressive medical bills can be. In the past two weeks, I have received five medical bills from my recent gall bladder surgery. Independent of the expense (more than $2,500 so far), there is the pressure of keeping track of what has been paid, what is pending with the insurance company and what you still owe. Anyone who has faced a medical crisis understands the unique challenges those expenses have.

FICO says its new scoring model will better assess “thin files,” or credit reports of people who don’t have much credit history, by looking at types of payments or debt differently, such as the medical bills. But people who have unpaid debt that isn’t tied to health care would witness a drop in their scores, according to In contrast, was told that a typical credit score of 711 could go up by 25 points for those with medical debts but no other serious problems with their credit.

The FICO score, which ranges from 300-850, factors in payment history (35 percent); amounts owed (30 percent); length of credit history (15 percent); and new credit and types of credit used (10 percent each).

My argument for great scores still stands: Pay bills on time and in full, check your credit reports periodically, and you should be just fine. (You can check your reports for free at But it’s nice to know that if you do get in credit trouble, there are times when you are recognized for otherwise good behavior.

That doesn’t mean you shouldn’t pay your medical bills in a timely manner. I’ll continue to pay my medical bills quickly, as I’ve been doing, partly because it’s easier to track them that way. And you should avoid having any bill go into collections, if at all possible.

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AmEx, Discover top list of most-loved cards

Filed under: Credit Cards General on September 3, 2014 @ 10:09 am

Do you love or loathe your card issuer? A study from consumer research firm J.D. Power ranks customer satisfaction among the top card issuers every year, and this year’s winners and losers were a surprise.

I’m pretty happy with my issuer, Capital One (my main card is its Venture rewards card), so I was shocked to see them near the bottom of the rankings.

For the first time, American Express shared top billing with Discover as the two issuers tied as consumer favorites in the J.D. Power 2014 U.S. Credit Card Satisfaction Study, released on Aug. 27. Both companies scored 819 out of 1,000 possible points. (Overall consumer satisfaction with credit card issuers hit 778, a record high, according to the survey.)

Chase came in third at 789 points. The issuers that ranked in the middle of the pack were: Barclaycard (776), U.S. Bank (773), Wells Fargo (773), Bank of America (766) and, just barely making it in, Capital One at 765 points. The two that scored lowest were Citi at 756 points and GE Capital Retail Bank at 739 points.

The survey asked consumers to rate their credit card issuers on six factors:

  • Interaction with customers
  • Credit card terms
  • Billing and payment
  • Rewards
  • Benefits and services
  • Problem resolution

American Express customers are wealthier, spend more and are less likely to carry a balance than cardholders of other issuers, according to J.D. Power. Discover, in contrast, serves a wider range of customers and keeps its offerings simple: for example, it has a cash-back card with no annual fee.

When Business Insider polled five personal finance experts on what cards are in their wallets, three out of the four who use credit cards said they had an American Express card.

That makes sense. My theory, based on my own experience, is that you’re more likely to love your card issuer — and be treated well by them — if you have more money and manage your credit well.

I think part of the reason I now really like Capital One is that I have a rewards card that comes with nice perks and great service.

Years ago, I was much less fond of the company when I had a basic, low-limit card and was struggling to build my credit after being irresponsible in my 20s. In fact, once, in the middle of a rare nice dinner out with a boyfriend, I remembered in a panic that I had forgotten to pay my bill. As I pulled a scrap of paper out of my purse to jot a reminder, “pay Capital One bill,” the waiter looked over my shoulder and shuddered. “They’re evil,” he said.

But the J.D. Power survey found that only 11 percent of consumers actually reported having had a problem with their credit cards, and that fraud was the most common issue reported (21 percent of all problems.)

According to J.D. Power, fraud represents a chance for card companies to get in good with their customers, if handled the right way. That’s because cardholders then view their card company as an ally against the bad guys.

I can relate. Last summer, a criminal got hold of my credit card number and made a fraudulent purchase. I check my accounts frequently, but Capital One caught the problem before me.

I felt really good about the fact that the company quickly spotted the bogus charge — it felt as though Capital One was protecting me. I also was pleased with the professionalism of the representative from the fraud resolution department, and the fact that I got a new card within a few days. (In fact, the J.D. Power survey showed that getting a replacement card to a consumer within seven days is one of the top way issuers can make fraud victims happy.)

If you’re less than thrilled with your issuer, you might have considered switching. The survey found that 10 percent of consumers switched their primary card in 2014 — and the top reason cited (42 percent) was to get a better rewards program.

If you’re thinking of ditching your card for that reason, The Points Guy recommends crunching the numbers, adding up your costs (such as the annual fee) and comparing that with the dollar value of rewards you receive.

One tip from J.D. Power: Make sure you really understand your rewards before you consider switching to get a better deal. About 37 percent of consumers surveyed admitted they did not “completely” understand their card’s rewards program.

As for me, I’ll be sticking with Capital One, even if that leaves me out of the American Express/Discover love fest for now.

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