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Biweekly Mortgages: A Reader's Personal Story
Kevin is a DebtSmart subscriber.

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

The following is a series of e-mails written back-and-forth between Scott Bilker and Kevin, a DebtSmart Reader, about Kevin's experience with a nightmare of a mortgage!

Scott,

Thanks for your informative article on Biweekly mortgages. It really helped to open my eyes when I was considering one.

Isn't this practice illegal? Seems like the marketing materials that I received are misleading and deceptive. Do you have any recommendations on what I can do to help stop this practice?

Kevin

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Kevin,

Thanks for writing!

The practice of selling a biweekly mortgage isn't illegal, just not in the interest of consumers if it costs more than their current mortgage.

Also, thanks so much for your positive comments about DebtSmart and would like to include them on my web site and in-print.

Do I have your permission to do that?

Regards, Scott

+++++++++++++++++++++++++++++++++++++

Scott,

You have my permission to include my comments.

Just to let you know a little more on my biweekly mortgage saga... After researching info on biweekly mortgages, I contacted Wells Fargo Home Mortgage (I have my mortgage with them and received the offer for biweekly mortgage from them) to express my concern and displeasure at the program.

My first encounter was with a tele-sales guy named Ron. After inquiring on some details of the program, Ron proceeded to make some bold statements like, "You pay no more a month" and "Your monthly payment will not increase." I asked Ron, "How can you not increase your monthly payments when you make the equivalent of 13 monthly payments a year?" Ron stumbled for a reasonable answer and then conceded that you did in fact make two extra biweekly payments a year which was the equivalent of a 13th monthly payment.

After further discussion, I discovered that Ron worked for Paymap Inc. and not Wells Fargo. I made a simple request to speak with a Wells Fargo employee to discuss my concerns. Ron connected me with Carrie of Wells Fargo customer service. Carrie was very nice but didn't know anything about biweekly mortgages and really wanted to put me in contact with Paymap Inc. to help answer my questions and listen to my concerns. I repeatedly had to tell Carrie that I was a customer of Wells Fargo and wanted to speak with someone at Wells Fargo about my concerns.

Carrie asked me to hold and after a lengthy delay she introduced me to Denise. I was shocked to find out that Denise was in fact a Paymap Inc. employee. Denise went straight into the "sales pitch" which was irritating. She told me how "Easy and inexpensive their Equity Enhancement Program is (cool name for biweekly mortgage) and how they have 500,000 happy Wells Fargo customers." I asked, "Wouldn't it be easier and less expensive to divide my monthly payment by twelve and then apply that amount each month to my mortgage principle?" Denise agreed but said that most people don't have the discipline to do that.

I again asked for a Wells Fargo employee that understood their program to speak with. Seems that no one at Wells Fargo knows anything about their Equity Enhancement Program. According to Ron, Carrie, and Denise, only employees of Paymap Inc. know the details of the program. I expressed my displeasure. "Your telling me that no person at Wells Fargo understands or can speak with me about the Equity Enhancement Program?" They all agreed. It's kind of scary that as a consumer the company you trust with your mortgage doesn't know or understand the programs that it offers. I finished my lengthy phone conservation by asking for an employee of Wells Fargo to contact me to discuss the program. I'm not going to hold my breath waiting for the phone to ring.

Kevin

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Kevin,

I'm not surprised! I don't wouldn't expect their phone-drones to be able to understand the details of that mortgage "product." And they certainly don't know how it truly compares to your current mortgage so they could, and would, never tell you if it's better (cheaper) than your monthly mortgage.

Your story is very well written! In fact, I would like to use your article in print, online at my web site, or in the email newsletter, which is sent to 7,900+ people every two weeks. Articles posted online would have your photo (if you wish).

Do I have your permission?

If yes, then you agree that DebtSmart, Press One Publishing, its assigns and licensees, have been granted the non-exclusive right to use and/or reproduce your article in any manner, in any media, and for any purpose.

Please let me know as soon as possible--thanks!

Regards, Scott PS: If you have a digital photo, and want me to use it, just send me it as an attachment or snail mail to Press One Publishing, PO Box 563, Barnegat, NJ 08005-0563

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Scott,

Thanks for the compliment on my story. You do have my permission to use it.

Kevin Harve

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Buy a Car with a Cash Advance?
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Hi Scott,
Read your article Consider Financing Your Next Car with a Credit Card and as you asked I'm commenting on same. The logic of the 4.9% at 6 Months makes sense, BUT is it a reality? You said use your credit, WRITE A CHECK, isn't writing a check tantamount to a CASH ADVANCE? I believe it is with most credit card companies. If it is, then aren't you looking at a much higher interest rate? Example, one of my credit cards has PURCHASES @ 18.90, while CASH ADVANCES are at 23.00! And, any monies paid against the balance ALWAYS goes to the lower interest rate! Any comment? BTW, I enjoyed the article and you have a great website! Very interesting, informative & helpful "stuff!"
--Mel

Answer
Mel,

Thank you for writing!

You're correct that you would probably have to write a check. And yes, it's a cash advance, however, I have many, many, many, no-fee, low rate, check offers. I have one I just used for 2.99%, no-fees, which is far better than any used car loan I could get otherwise.

I said in my article to "consider" using your credit card. If it doesn't make sense in your case, then don't do it, but many people may be able to get a better deal this way.

Talk to you later.
--Scott

Reply
I just wanted to see if my train of thought process with regard to interest rates (cash vs purchase) was correct. BTW, know where I can get a credit card with a $75,000 credit line, I want to buy a used Ferrari! Keep up the great work, love your website!
--Mel

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Car Debt or Credit Debt First?
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
First off great site, very informative.

I've already organized my debt with the highest interest debt to be paid off first. Only thing is, my car loan is up toward the top and it's getting close to the time when I would need to roll over the payments of paid off debt to the next highest interest rate debt, my car loan.

Does it make sense to start increasing my payments on this loan? Isn't it fixed what I will pay on the loan? If this is the case shouldn't I start paying on the next highest interest debt (another credit card) instead? Thanks for any help!
Mike

Answer
Mike,

Thanks your positive comments about DebtSmart!

It's great that you've already set up a payment program that pays the highest-interest-rate debts back first. Many financial "experts" advise to pay off the lowest-balance debt first but that's simply wrong, meaning, more expensive!

Since your car loan is about to become the most expensive debt, highest interest rate, you should "roll" your payments from the last debt into the car loan. This is the most efficient method of repaying your debt.

There are however, a few details you need to check:

1) Are you allowed to pay off your car loan early with larger payments? There are some loans that have pre-payment penalty conditions so call the bank to make sure you can send in more money toward the loan principal.

2) When you send in your payments be sure the bank knows to apply the entire payment toward your balance. There are a few instances when the bank will apply the scheduled payment and hold the extra for the next payment. You don't want that situation.

3) Will you need that extra cash in the near future? If you pay more toward a credit card you can always get that cash back if you need it by using a cash advance or making purchases with the card. When you increase the payment on the car, that money becomes part of the car and cannot be converted back into cash again until the car is sold.

In summary, you are correct. It makes perfect sense to send the extra payment to the car loan because it's the most expensive debt on your list. Just be sure there are no penalties for paying off the loan early. If there are penalties, you'll need to consider if the savings from the interest charges are greater than penalties. Chances are you can pay off the loan early; if there are penalties let me know.

Keep up the good work!

Scott

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Tricky Insurance Pays Off
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
I found out after renewing a credit card that I had been paying for insurance that I wasn't aware of. This insurance would pay benefits in case I died or became disabled. I had the card since 1997 and became disabled in 1998 (Parkinson's). I called a credit card rep and she advised me to put in a claim. She also stated if there were any other balances to transfer I could transfer them and clear them up also. Could this be true?
--Alan

Alan,

Thanks for writing! I'm sorry to hear about your disability.

It's very common that people pay for something on their credit card that they don't even know about. It's usually some type of insurance, as in your case, or a buyer's advantage program, or other membership package. This happens because people are enticed to sign up for the "free trial" but then forget to cancel after the trial period. This is probably what happened in your case.

Despite having previously paid for insurance that you were unaware of, it's going to work out because you can actually put in a claim. It sounds like they're willing to cancel all your debt with the claim. I don't know the details of the insurance but that's what I'm getting from your question.

The only thing I'm wondering about is that the credit card rep advised you to transfer your balance to the card and then put in a claim. This doesn't make sense because the bank would be giving you money then expunging the debt.

I guess it's possible that the rep was giving you an "insider tip" but I would still be cautious. Either way, if their transfer rate is better than your other cards then it's certainly smart to transfer your balances to this card.

To be sure of the details you must get a copy of the original policy. You many not have it so ask them to send you a copy. Read it carefully before you do anything. You don't want to be tricked into voiding the possibility of using the insurance to your maximum advantage.

I would do the transfer and put in a claim, as instructed by the rep. If they forgive the debt--fantastic! If not, then keep the debt as long as the transfer with them is the best option you have.

Good luck and please let me know what happens!

Regards,
Scott

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Consolidating Credit Cards to One Account
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Hi Scott,
I am a recent college graduate and I have accumulated about $4,000.00 worth of debt spread out in 4 different credit card accounts. I would like to transfer all of the balances to an account with a lower APR to save money and to make monthly payments more convenient. The problem is that I have not been able to be approved for a credit card with a limit of over $1500.00. Besides having multiple cards near their credit limit, I have good credit and always make payments on time. Is there anything that you can recommend? Please Help!
--Mary

Mary,

Thanks for writing!

I know just how you feel. I had the same situation when I was finished with college because I had to use my credit cards to help finance my senior year.

Here's the deal. The most important aspect of that debt is how much it's costing. At least that's my opinion. The best loan is the cheapest loan and I consider it worth the work to write four separate checks if the rates are worthwhile.

Many people make the mistake of consolidating simply because they don't like the work involved with handling many accounts. The mistake is that they consolidate at a greater rate for the convenience of having one payment. It's a personal choice to decide if it's worth a little extra in interest charges to avoid dealing with four accounts. It's not worth the extra cost for me.

If you do consolidate your accounts into one then please do not close your zero balance accounts! If you close your accounts you close your credit options. You may need those other cards sometime in the future to make the current banks compete for your business. You always want to have credit options and the best options, in my experience, emanate from banks that you have had a long relationship with.

Now let's talk about consolidating and saving money!

You mentioned having trouble getting new lines of credit to consolidate that $4,000 but there's another strategy you should attempt. Call each of your existing accounts and ask for their balance transfer department. Tell the rep, "I have about $3,000 of debt on other cards. If you (1) raise my credit limit, and (2) give me a great rate, I'll do the transfer right now otherwise I have three other banks to call!"

They may increase your credit limit on the spot by a few hundred dollars, they may do as you ask, they may need to get back to you, they may say no. No matter what happens, call each bank and see what they can do. If they do give you a good offer, then transfer your balance.

If they deny your credit line increase, then be sure to get a free copy of your credit report from the credit-reporting agency that the bank used to reject your line-increase request.

Good luck and please let me know what happens!

Regards,
Scott

PS: And you can take that to the bank! :)

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Giving Up Your Rights--Without Knowing It!
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

If you have a Capital One credit card, then I highly recommend you read this entire article!

I just received a letter from Capital One informing me that "enclosed is an important legal notice regarding arbitration" and I need to "read the entire notice to fully understand its implications" to my account.

This isn't the easiest reading by the way. It's a legal notice, written in legal language at the college graduate level. Quite different than the 6th-grade level credit offers they send me trying to get me to use my credit lines.

Here's an example from the arbitration letter: "The arbitration of any Claim must proceed on an individual basis, even if the Claim has been asserted in a court as a class action, private attorney general action or other representative of collective action."

Oh yeah, makes perfect sense to me.

Here's an example of the writing that's meant for me to easily understand (from a credit offer): "One of the attached Purchase Checks is already made payable to you. Consider using the other check to purchase something you've always wanted. It's that easy!"

Gee, I can understand that no problem. Why the difference in writing style? Could it be that in one case it's meant for me to be confused and in the other they want me to spend money on my credit lines? Could it be that both cases are written to work in Capital One's advantage? We both know the answers to those questions.

Here's the bottom line on this arbitration letter: if you do not reject the Arbitration Provision then it becomes part of your account. It's a "negative offer" similar to the music clubs that automatically send you the "CD of the Month" unless you tell them not to send it.

So what's the Arbitration Provision? It means that if you have a dispute that's listed in what they consider to be a dispute, the matter is taken to an impartial person, or group, to be resolved. Of course, you can choose your arbitrator--from their list.

It means that if you allow this provision to become part of your agreement you will not have the right to take your claim to court or participate in a class action lawsuit. And it may cost MORE to go to arbitration, probably because your attorney's fee could be covered for many claims, like say a class action lawsuit.

You may ask why it's important retain these rights?

First of all, I don't want to give up any rights unnecessarily, but more importantly is that although we are only going to recover pennies in a class action lawsuit, it's still in our best interest to be a part of these cases. Sure, the lawyers get all the money, but these lawsuits are one of the best defenses to keep the banks in check. It reminds them that they need to obey the law or they'll pay!

Here is a list of some of what they'll consider a "claim" (dispute you have with them or they have with you): Transactions or attempted transactions on your account.
Any billing or collection matters.
Any fees, interest, or their calculation.
Any products, services, or benefits programs in connection with your account (any insurance, rebates, rewards, etc.).
Any posting of transactions (including payments and credit) to your account.

I called their contact number in the letter to ask questions but only connected to their recording system that delivers answers based on a phone menu. In others, words, I couldn't reach a human--no surprise there.

I would urge you to STOP the Arbitration Provision from becoming part of your credit card agreement! I don't see it as being in our favor at all! If you have a Capital One account and accidentally threw out that letter, listen to the recording at 1-888-578-5462 to learn how to reject the provision.

Here's the general rule: When businesses spend money to send you an offer it's usually in their best interest and probably not yours. There are exceptions; however; I always approach all offers with a level of skepticism.

I have received term changes from other credit card banks which, if rejected, mean that the account is closed. The only consequence of rejecting the Arbitration Provision, which I saw in the letter, is that it doesn't become part of your account terms.

Let's look at this from Capital One's point of view. They're lending money to many people who are going to stiff them in bankruptcy court. I can understand why they need to protect themselves, however, they must treat us "DebtSmart" customers with respect. We are their best clients, and we need to stick together to show all the banks who's really in control--who's paying their salaries!

Don't give up any of your rights!

To reject the Arbitration Provision you must follow the detailed directions for completing the "Arbitration Rejection Coupon" that accompanies the notification letter.

Although I feel like they are trying to pull a fast one here I still like Capital One and recommend their credit card because the interest rates are generally lower than other credit cards. In their defense, on this Arbitration Policy change issue at least they indicated all the salient information in bold print on the envelope and in the letter.

By the way, the deadline for reject the Arbitration Provision is 1/31/02

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Advanced Cash-Advance Techniques
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Dear Scott,
I recently read your article about buying a card with a card. I have a 0% interest card and plenty of balance so it seems like a good idea. Problem is the seller is a private party. Obviously I can't use a convenience check or a cash advance or I'll blow the interest strategy. Is there a way to pay a private party so that it appears as a purchase on the card and not an advance? I have checked out PayPal but I'm not sure the seller is Internet active. Thanks.
--Tracy

Tracy,

Thanks for writing!

Note: Everything I suggest in this response is what I would do. You must be careful to analyze your specific situation to be sure that it will work in your benefit.

Glad to hear the you read my article, Consider Financing Your Next Car with a Credit Card!

It's great that you have a 0% deal on your credit card. I've used these deals in the past to purchase a few vehicles. Actually, it may not be such a problem that you seller is a private party. It's the same problem that you may face at a dealership.

Dealership say they accept credit card payments however, many will not let you purchase the entire car with your credit card. They'll allow you to put your down payment on the credit card but not the entire amount. This is because they don't want to pay the merchant fees for accepting the card. These fees are probably at least 2%. Therefore, a dealer would also ask you to use a personal check or bank check.

You need to find out if your 0% deal is good for cash advances. I'm guess that this may not be the case or else you wouldn't be asking, nevertheless, you should give your credit card bank a call and tell them that you'll write yourself a check, and deposit it in your account, as long as it's at the 0% rate.

If that doesn't work then ask them if they would give you that 0% rate if they, the bank, did a direct deposit into your checking, or savings, account. The key is to get that money in your account at the 0% rate, preferably without any cash advance fees, then use that money to write a bank-check to car seller.

Say it's the case that they still will not do this. They would probably entertain the idea of your transferring the balance from another card at the 0% rate, this way it's not a cash advance. Then, check with you other credit cards to find out if you can get a cash advance, with no fees. If so, you can write a check with the second card, deposit it into your account, buy the car, then immediately call the 0% bank and do a balance transfer. When the smoke clears you'll have that car at 0%.

You just need to do one more thing which, is to mark your calendar as to when the 0% deal expires. You must be sure to pay that off before they hike your interest rate. Also, don't be late paying on that 0% deal! It's probably true that the offering bank will slap you with a crazy-high interest rate as a penalty. I've seen some as high as 26% for late payers.

Good luck and please let me know what happens!

Regards,
Scott

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Providian Raised My APR to 29.99%
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
I was shocked to learn my Providian credit card raised my APR from 23.99 to 29.99. I've never missed a payment or been late. I called to find out why and the rep told me they mailed out a notice of change in terms. I said I never received the notice. They basically said too bad, but we can mail you out another one. I was so angry I closed my account. I waited for the promised re-mail of the notice. It never came. I called again, this time asking to speak with a supervisor. I calmly explained the situation, reminding them I've never missed a payment or been late, not even once. They said there was nothing they could do, except mail me the new terms. Still, another billing period and no terms. I called again, this time demanding my rate be lowered to the original 23.99, because I never received the terms. They said they would mail the terms again.

Now, I just received an insulting letter from them informing me that my request to lower the interest was denied because I closed the account too late. The letter went on to say this was all outlined in the notice they mailed to me in February. I have yet to receive the notice!! I don't even think the notice exists. Another family member has this card, with a closed account, and Providian never changed his rate. I feel singled out. Is it legal for them to change the terms without any notice?? What are my options to fight this?? If they are in violation of a law, who can I report this to (I live in Las Vegas)?? Please help!!
--Claudette

Claudette,

Thanks for writing!

What has happened to you is has become very common. I have also been receiving more and more notices with changes in terms.

The deal is that you can decline to accept some of these term changes and it won't affect your account. For example, I have received many term changes regarding arbitration. If you don't decline the terms then you give up your right to bring them to court under certain conditions. For more on that read my article, Giving Up Your Rights--Without Knowing It!

However, if you decline other changes, for example rate changes, then the bank will close your account and you'll have to repay under your original terms. Of course, you would have had to reply by their arbitrary deadline. To see the legal details you'll need to look at the original terms from your account agreement with Providian.

I also have a Providian credit card and in my 10/5/1998 Account Agreement it states: "CHANGES. After we provide you any notice required by law, we may change any part of this Agreement and add or remove requirements. If a change is made to the Finance Charges section of this Agreement, the new finance charge calculation will apply to your entire Account balance from the effective date of the change. Changes will apply to balances that include items posted to your Account before the date of the change and will apply whether or not you continue to use the Account."

The way I'm reading that is that they can basically do what they want. I guess the only argument you can make is that they have not yet "provided you" with a notice. If you want to bust chops you could try calling and asking them for proof that they mailed it because you have yet to receive the notice. Then make them send it to you by signature delivery like FedEx or Express Mail. Tell them that they have not yet "provided the notice required by law" and they cannot make any changes until they do provide that notice.

If the rep or supervisor cannot help then ask for "an officer of the bank."

You need to punish them! Teach them a lesson! You already closed the account but that's not enough! You must get a better rate, and let's face it, 23.99% is a crazy-high rate!

Apply for a new credit card and transfer the balance from that Providian card. Do it right away!

Check out my article, Getting better, cheaper credit--right now! and apply for a new credit card. Be sure to do a balance transfer from that high rate when you do the application. This will get rid of that high rate as well as increasing your chances of getting approved.

Lastly, you can make a complaint to:

1) The Office of the Controller of the Currency (OCC), 1-800-613-6743
2) The Federal Trade Commission
3) The Better Business Bureau

Good luck and please let me know what happens!

Regard, Scott

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Credit card debt can be one of the worst types of debt, due to high interest rates. High-interest credit card debt can result in hundreds of dollars in interest each month, making it even more difficult to reduce or eliminate your credit card balances.

Debt consolidation can be an effective way to reduce and eliminate credit card debt. Our counselers can help you consolidate and reduce your credit card debt. Simply fill out the form on the rigth to receive a free counseling session.

Credit Card Debt Consolidation can lower your credit card payments.
Christian Financial Consultants will light the path to freedom and will minister the support that all of His followers' need in challenging times. Our credit card debt consolidation program can help.

Christian Financial Consultants' unique credit card debt consolidation program may help you to:

• Lower your monthly payments In some cases, monthly payments can be reduced as much as 70%.
• Drastically reduce interest rates Christian Financial Consultants is currently achieving average interest rates between 6% and 8% for our clients, much lower than high credit card interest rates.
• Eliminate credit card payment late fees and over-the-limit charges

Please fill out the form on the right for a free credit card debt consolidation counseling session.

What is credit card debt consolidation?
Credit card debt consolidation is a means of consolidating all of your credit card debt into a single debt obligation, usually with a much lower interest rate. Our credit card debt consolidation program can help you pay off your credit card debt much faster.

Please fill out the form on the right for a free credit card debt consolidation counseling session.

Identity Theft--A Personal Story
by Robert B. Gamble

Robert B. Gamble is an Electrical Engineer currently working for the U.S. Navy at The Naval Air Warfare Center in Lakehurst. Robert also is one of the editors of Scott Bilker's best-selling book, "Credit Card and Debt Management." This article is brought to you by the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Several weeks ago I received a bill from Target Credit. I knew I did not apply for such a card, so I called the number related to the $160 worth of items charged and listed on the bill. They told me the items were shipped to someone in New York. Well, I was not about to pay for something I did not order, or receive, and I was not about to pay for a credit card that I did not even apply for.

I called Target, and came to find out that someone had signed up for the card, they had my name, my social security number, and my address, however the address had the wrong street number.

Needless to write, I told them to cancel the card and I filed a fraud report. Three months later, I am still receiving evidence that the thieves are still trying to use the card. Target assures me that they have canceled the card, and are not accepting any more charges. They assure me that their fraud department is handling it.

Thank you (Scott) for my Capital One card. Last week, I received a call from Capital One to verify if I truly wanted another Capital One Card. They noticed that the new application was to some address in West Virginia, and they wanted to confirm that I wanted the new card.

They provided Capital One my name, and my SSN and the new address. I told them no, and they told me I should contact the three different credit report companies and put a statement in that would require the credit report companies to contact me when any new credit cards are applied for. Kathy (the Capital One person) gave me the phone numbers for the three credit report companies and suggested I call them ASAP.

As soon as I hung up, I called them. The three companies are:
Experian (888) 397-3742
Trans Union (800) 680-7289
EquiFax, Phone # from the Credit Report - (866) 233-3780

Address:
Equifax Information Services, P.O. Box 740256, Atlanta, GA 30374-0256

or, Could not speak to anyone
(800) 685-1111 or (800) 270-3435

or, for online help
(888) 532-0179

Fax machine number
(888) 729-0083

I was able to contact Experian & Trans Union and speak to a live person. They helped me file the necessary information, and said I would receive a letter within 10 days. EquiFax, only has an automated number which wants to charge $39.95 a month for their protection service.

I have not contacted the number from the credit report that I received last month (Just by chance I ordered a Free report which came from EquiFax). While the credit report does not show the Target card, or any other card I don't know about, I still want to call and file the fraud report to require contacting me before issuing any new cards.

I hope this helps you and your readers, and again thanks for the Capital One card.

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Getting Your Overpayment Refund
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Dear Scott,

I receive your newsletter and love it. Very helpful!

Recently I have taken out a debt consolidation loan. From application for the loan and closing on the loan was 3 months. The consolidation loan included preprinted checks made out to each of the creditors (5) with the total balance owed at the application time.

The problem was that during the 3 months before closing I had been paying the minimum payment, so when the loan closed and the checks were issued the check amount was higher then the actual balance.

I have received credit checks from all of the creditors for the difference but one. The one I have sent 2 letters to the customer service address request the account be closed and issue the check.

It has been 2 months with no response from the creditor. I have received 2 statements showing the credit. What is the next step to getting the money back?

They owe me $179.00 to much money to walk away from. What is very upsetting to me is that, if I owed them money, I would have to pay late fees, interest and get marks on my credit report.

Sincerely,
Aimee

Aimee,

Thanks for writing! I love your attitude!

They should be required to pay you a late fee! But doubt that will ever happen but maybe someday a law can be added to the books that would require late fees due the consumer in this situation.

I have certainly been in similar situations. By making an overpayment to any creditor, you create a credit balance. That credit balance must be returned to you. You asked for a check twice and they haven't sent it.

Here's what I would do...

1) I'd call and speak to a customer service rep to see what's going on with the check. Maybe they sent it and the "check is in the mail."

2) If I still didn't receive the check, I'd use the credit card for my normal shopping, groceries, etc. Once I spent $179 I'd stop. If I went over $179 I'd pay them the difference and never use the card again.

3) Here's a technique you can try if you don't mind more hassle. I would do it because I'm also interested in finding out the results of creative financial techniques and telling everyone what happened. If I had credit checks issued on that credit line I'd write myself a check for $179 and deposit it into my personal checking account.

There a few possible complications with this: (1) if they have already sent you a check for $179 then it would be a cash advance and subject to cash advance fees (2) even if they haven't issued the check they may still try to charge you a cash advance fee, even though it's your money! In fact, I would bet they would charge you the fee. If I received a statement, after writing the check, that the $179 brings my balance to zero (plus a fee), because it's my money, and they charged me a cash advance fee, I'd call the bank and ask to have that fee waived because they never sent me the credit check. They'd probably argue and say it's still a cash advance to which I would reply, "it's not an 'advance' against my credit line because it's not a loan, it's my own money!" If they still didn't waive the fee I'd formally dispute the charge. I don't know if you want to make a mountain out of a molehill however, it is an option.

4) Same as (3) but use the card at an ATM or do a cash-advance at a bank.

Please let me know the outcome of your situation--thanks!

Regards,
Scott

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Debt can build up and become more and more difficult to manage. High credit card interest rates make the situation even worse. Our credit repair counselers can help you reduce your debt and repair your credit.

We negoitiate with your creditors to reduce your interest rates and consolidate your debt into a single, manageable monthly payment.

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The borrower is servant to the lender.
Proverbs 22:7

The financial cost
We all know there is a financial cost to indebtedness. High interest rates, fees and extended repayment terms mean the debtor ends up repaying several times the original amount that was borrowed.

Resolve your obligations
There is a vast difference between meeting your obligations every month and actually resolving them. This is where Christian Financial Consultants can help. Through our extensive network of not-for-profit resources, we have found common ground for our clients and more than 12,000 creditors nationwide. By reducing or eliminating interest rates and fees and by restructuring monthly payments, we can help you to make significant progress on your debt every single month. This provides a ray of hope and a promise of freedom. The net result will be freedom from debt in a fraction of the time that would be required otherwise. To find out how Christian Financial Consultants can help, request a confidential free quote or call our toll-free counseling helpline.

A step on the right path
There is a solution. Allow yourself and your loved ones to live a simple life as God intended. Rather than just meeting your obligations every month, why not begin to resolve your obligations? To find out how Christian Financial Consultants can help, request a confidential free quote or call our toll-free counseling helpline.

Please fill out the form on the right for a free counseling session.

Are your debts piling up and becoming difficult to manage? Debt consolidation can be an effective way to reduce the burden and help you along the path to completely eliminating your debt.

Our debt consolidation program can help you:

• Consolidate your payments into one monthly payment
• Lower your monthly payments
• Drastically reduce interest rates
• Eliminate late fees and over-the-limit charges

For a free, no obligation counseling session with our debt consolidation specialists, please fill out the form on the right.

Need debt consolidation help?

Debt Consolidation can lower your credit card payments.
Christian Financial Consultants can light the path to freedom and will minister the support that all of His followers' need in challenging times. Our debt consolidation program can help.

Christian Financial Consultants' unique debt consolidation help program may help you to:

• Reduce your monthly payments In some cases, your payments can be reduced as much as 70%.
• Drastically reduce interest rates We are currently achieving average interest rates between 6% and 8% for our clients, much lower than high credit card interest rates.
• Eliminate late fees and over-the-limit charges

Please fill out the form on the right for a free debt consolidation help counseling session.

What is debt consolidation, and how can it help?
Debt consolidation is a means of consolidating all of your debt into a single debt payment, usually with a much lower interest rate. Our debt consolidation program can help you pay off your debts much faster.

Please fill out the form on the right side of this page for a FREE debt consolidation help counseling session.

Debt Negotiation
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Question

I need to know if this will really work. It makes me very nervous in not paying my bills so they can be negotiated. I talked to DEBTCO and I got very excited that I could be out of debt in 3 years but when I got the papers (contract) I felt a little uneasy. Should I be uneasy? Should I think more about consolidation? Please help me make the right choice. I really need help with my debt. Thank you. --Jackie

Answer

Jackie,

Thanks for writing!

I do not know all the details for DEBTCO however, I'm certainly familiar with negotiating for payoff terms with credit card banks.

It's been my experience that credit card banks will negotiate settlements with customers who are having trouble. And "having trouble" does include not being able to make their payments.

My impression is that you're a good money manager and can find a way to pay your bills by using your credit options. You don't want to be late because you know that would really hurt your credit history. Worst of all, paying late may increase the cost of your outstanding balances if banks penalize you by raising your rates--not to mention all the late fees and other penalties.

My guess is that they (DEBTCO) want you to stop paying so you'll fall into the category of being in trouble and, therefore, it will be much easier for them to settle your accounts. Even if they can settle your accounts for less, which is probably the case, the settlement will be reported in your credit history and will certainly not look pretty to future lenders.

Okay, so I've written a lot of words so far but really haven't reached a conclusion. This is because there's always a trade off. You can do what DEBTCO says and probably (not definitely) have them settle your accounts for less thus saving you money.

BUT you risk the consequences of not paying your bills on time which can be further-reaching than the penalties on the accounts you want to settle. Lately, many banks have changed their policies to include clauses that give them the right to raise your rates if you're late paying other creditors!

Here's an example of that from my Citibank card: "If you default under any Citibank Card Agreement because you fail to make a payment to us or any other creditor when due, you exceed your credit line, or you make a payment to us that is not honored by your bank, we may increase the ANNUAL PERCENTAGE RATE (including any promotional rate) on all balances to a default rate of up to 24.99%."

What to do?

I never want to tell people what they should do. Ultimately you should base your decision on what you have learned. Speak with people that you trust to help you make our decision.

However, I can tell you what I would do if I were in your position.

I would call each bank that you want to settle with and ask to speak with their "settlement department." Tell them that you're going to be having trouble paying your bill and that you may even be considering bankruptcy (which you may have to sometime), but you want to find out your options for paying off the account in full if they reduce how much you need to pay to "settle" the account. For example, if you owe $5,000, tell them that you can pay it off in full for $2,500.

They may say that you must pay it off in ful,l or they may offer other payment plans or even reduce the interest rate to zero. They will need to be convinced that you really need help otherwise they won't consider settling the account for less than the outstanding balance.

Just make it clear to them that you'll be talking to a bankruptcy attorney to explore that option. Tell the bank that if they can offer you something reasonable you'll work with the bank, or else you'll be forced to consider the bankruptcy option.

What I'm suggesting is that you try to settle the accounts yourself first. You may not be able to get better payoff numbers than DEBTCO but it's possible that you can. Also, you may be able to avoid the problem of not paying your accounts on time.

I'd be happy to look at your contract with DEBTCO and give you my opinion on what they're promising. You can send it to me by email or fax to (609) 660-1412.

Good luck and please let me know what happens!

Regards, Scott

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Credit and Marriage
by Scott Bilker

Scott,
I was 36 when I married. I have excellent credit. However, the man I married went through a messy divorce and his credit is moderate at best. If I apply for credit, such as a new car, am I obligated to list my husband's debts or can I still obtain credit in my own name?
--Vicky

Vicky,

Thanks for writing!

When you got married you also married his credit. For better or worse. But that doesn't mean that it has to entirely affect your credit.

If you apply for that new car you won't have to list any of his information unless the cars is going to be in his name as well. If it's your car, and your doing the financing, then they should only be researching your credit background.

The only catch having joint accounts with your husband. These accounts will show up in your credit report. But if these accounts are being paid on time then you should have no problems.

As long as his credit problems don't have your name attached to them they you should be okay.

Have you taken a look at your credit report lately? If not then take a look at both you and your husbands reports. I like to use MyFico.com. You can look at all three credit reports and the overall scores. By checking your credit report, in advance, you'll know exactly what to expect when applying for financing.

Good luck and please let me know what happens!

Regards,
Scott

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Extending a Low Rate
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
In the past year I left a considerably higher paying job for which I was in six years, to take a less stressful and lower paying one. Consideration of debt was a difficult one in this transition. I knew I would now be making less money to pay off the debts incurred but never realized how difficult it would be. I am now paying the minimum required and know that I will never get out of it this way. Any suggestions? Have moved most debt to lower rate cards, but the time on those is running out. Can I request that my rate remain the same since I make my payments on time?
--Nancy

Answer
Nancy,

You can request that your rates be lowered but they're not going to do it unless you give them a good reason. That reason is that you'll transfer your balance to another bank unless they lower your rate.

Now that you have a lower-stress job you may want to consider earning extra money in your spare time. I know many people that have successfully cleaned up they're house plus made some extra cash selling their old stuff on eBay.com.

Also, be sure to make a complete list of all your financial obligations, mortgage/rent, phone, credit cards, cable tv, etc. and figure out how that works with your current income. This list of monthly payments is part of the roadmap you'll need to make the right financial decisions.

Scott

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Fighting an Increasing Rate
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
I had a card that had a fixed rate of 5% on my balance. I closed the account years ago when I started taking control of my debt. Since this was the lowest rate of the cards I had I was only paying the minimum and concentrating instead on paying off other high interest credit. I received a notice with one of my invoices that they would be increasing the rate to 20% and that I basically didn't have a choice in the matter (fine print). I transfered the balance over to other cards that would have a lower APR than the 20% they would be imposing however this severely limited my available credit for emergency purposes.

Just wanted to know if it is legal for them to increase the rate on a closed account and if there was any other option for me to consider. Obviously this would be information for any future similar situations. Thanks!
--Mike

Answer
Mike,

Do you have the original paperwork that gave you the fixed rate of 5%? I truly hope so because it's that documentation that could ultimately help you keep that rate. The only problem is that you did transfer the balance but you did so because you thought they wouldn't keep the rate at what they promised.

I see this happen frequently that's why I ALWAYS keep copies of the letter, terms, conditions, etc. in my files for just such a situation. I even photocopy applications!

If this happened to me, and I found evidence that they couldn't raise the rate, then I might even contact a lawyer and see what could be done. I would also contact the Federal Trade Commission and other consumer groups to see if they could help me make the bank honor their agreement.

For the future...get everything in writing and keep it in a file!

Good luck and please let me know what happens.

Scott

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The following signals may indicate that you have taken on too much debt:

-You are not sure how much you owe in total

-You have thought about filing for Bankruptcy

-You only make the minimum payments on you credit cards

-You are near or at the limits of your credit cards

-You need to use your credits for every day purchases

Fill out the form on the right for a free, no obligation Debt Counseling session to help assess whether you have too much debt.

Scott, you have too many credit cards!
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
I read your article in which you state that you have 80 or so credit cards. I'm not sure why this is advantageous. I have cancelled all but one card which I pay in full each month and by no means see my "options" (to get into debt, I guess) as being restricted.

For instance, I did need to carry a balance for 3 months to pay for an engagement ring at the beginning of this year. All I did was charge it to my everyday card, which has a lousy rate but gives me perks, get a new card with a low rate so I paid almost no interest for those three months, then closed that card when it was paid. This is actually better than calling the banks for the best rate because the cards with the perks almost always have the lousy rates, so you're better off putting it onto one of those cards, and then transferring it to a lower rate card, then you get the perks.

The problem with having multiple cards that go unused is that potential creditors will count available credit against you when you apply for a mortgage or a car.

Also, the more open accounts you have, the greater the chance of being defrauded. Having only one card is by no means restrictive there are hundreds of companies who would give me a card after a 5-minute phone call. I just don't see the point in keeping cards that aren't being used open. --Keith

Answer
It's true. Between my wife and myself (joint accounts) we have over 80 credit cards!

WARNING, I am NOT advising anyone to go and get 80 credit cards! The more credit lines you have available, the greater the probability you'll increase your debt, obviously.

So why do I have so many cards?

There are many reasons:

1) When I borrow money I want to have many loan options. About half of my accounts are offering me low-rate transfer deals all the time! I have purchased used cars with my credit cards at 0%! And because I have so many cards I can continue to transfer the balances and keep the rates less than 4% all the time. I've been doing that for more than 10 years!
2) I'm into this topic, saving money on credit cards. How can I write about credit cards if I don't have credit cards? How can I verify good credit card offers if I don't ever receive or use any?
3) I actually enjoy trying to uncover the true costs of credit. I need lots-o-data!
4) Who would you want writing about credit...someone who hasn't had or used a credit card for 25 years or somebody who deals with credit cards all the time?

I don't carry a balance on all of those credit cards. If I did, then this article would be about bankruptcy not being "debt smart."

If you think 80 credit cards are a lot then how many do you think the worlds record is?

According to the Guinness Book of World Records Walter Cavanagh of Santa Clara, CA is "Mr. Plastic Fantastic" and blows me away with a total of 1,397 unique accounts! I couldn't even image juggling that many credit cards.

Next, your strategy for using a card that gives you perks, at 0% for purchases, is good. You used the perk card then transferred the balance to a low rate card. When you were done you closed all the accounts. That's great!

I personally don't close the accounts as long as the banks aren't charging me an annual fee. I keep them open because they ALWAYS give me a great offer within a couple months after my balance goes to zero. I don't want to keep applying for new accounts and closing accounts.

It is true that you're going to have a difficult time getting a mortgage if you have many open credit lines--even if the balances are zero. That's because the bank doesn't want you to have the potential to get into credit card trouble since it could affect their mortgage profits.

How many cards are too many?

When you apply for a mortgage the bank may ask you to close some credit card accounts before they grant you a mortgage. When I purchased my home I had 24 credit card accounts and I got the mortgage with no problem and no questions asked. Each bank has it's own lending policies.

As far as having a greater chance of becoming a victim of fraud, I doubt the number of cards is going to make you a greater target. In the last email newsletter my friend, Robert Gamble, told his story of identity theft where someone was trying to get new credit lines in his name.

Actually, when you think about it, someone would have a difficult time getting new credit in my name. If they tried they'd probably get rejected because I have so many accounts right now. If I only had 2 accounts open then it would be much easier for someone to defraud me with identity theft. Ironic isn't it?

And since I don't carry all those credit cards with me, I only carry 2 in my wallet, I don't have to worry about losing the actual cards. Also, I keep a list of all the items in my wallet just in case I do ever lose it. Plus I have every account and every phone number in a database so I can contact each bank if there ever was a problem.

You said that you don't see the point to having that many credit cards. The point is a personal point, Scott's choice, for Scott's reasons. It works for me and may not work for everyone. I attribute getting out of debt to having all those credit cards. I learned how to beat the system by being immersed in it and developing good "Credit Card and Debt Management."

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What is Better? Fewer Cards with Higher Balances, or Many Cards with Smaller Balances?
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
My husband and I are preparing to buy a new home. We want to clean up our credit card accounts to better our chances for a mortgage. We were considering paying off our credit cards with smaller balances using other credit cards. What is better when your credit is being considered for a home loan--fewer credit cards with higher balances or more credit cards with smaller balances? The cards we are planning to pay off we are going to have closed so there are fewer credit accounts opened. Is that a smart move?
--Christina

Christina,

Thanks for writing!

That's a great question!

I would have to say that having fewer credit cards with higher balances is going to be "better" in most cases. The reason is because with fewer cards you have a lower amount of available credit and that is certainly a consideration when banks review your credit report, or as I like to call it, your "credit résumé."

Let's look at a few numbers. Say you had three credit cards. Each has a $5,000 limit and a balance of $1,000. At this point you have a $15,000 limit and $3,000 debt. Many mortgage lenders may view that as a possible unsecured debt of $15,000.

By consolidating all that to one card you'd have a $3,000 balance with a $5,000 limit. That's certainly looks more favorably to lenders.

Since you have many credit cards you also have some options to get some great rates! When deciding which credit cards to use to consolidate your debts, be sure to give them a call. Tell them, "Here's the deal. I'm consolidating all my debts to the fewest cards possible and closing my other accounts. If you want to keep making money then you'll need to give me a great rate or else I'm gone!" If the first rep can't do that then ask to speak to their supervisor.

In my opinion, a good rate is 4.9% fixed until it's paid off, 0% for one year, or a 9.99% fixed rate for life on all purchases and charges. Your options will depend on your history with each credit card and their thirst for profitable customers.

When we purchased our house we had 24 credit cards with a total of $24,000 and still got approved for the mortgage! They didn't say a word. The reason is because we've never had a late payment. Paying on time is one of the most critical keys to getting the best deals and having the most credit options.

One more tip. This is the exception for keeping your cash! Don't reduce your debts by paying them off with cash because you'll need that cash for the down payment and closing costs. After you're in the new house then pay off the credit cards with any remaining cash.

Good luck and please let me know what happens!

Regards,
Scott

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Manipulating the System
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

It's Friday night and the phone rings... you know the call, it's late, the last bite of my dinner being chewed, all you want to do is watch TV and relax. Guess who's calling? Yes, it's a mortgage company that's trying to sell me a refinance deal!

The girl asks me about my mortgage, my rates, and my credit card debts. To which I do reply, after all I'm always curious about getting a better loan (plus I love toying with these people).

I ask her what their best rates are. She tells me that it depends on my credit history. I said, "Okay, say I have a credit rating like Bill Gates. NOW what's your best rate?" She said that she can't quote a rate however, the loan officer would let me know. So I agreed to have the loan officer give me a call.

On Monday, while I'm trying to set up the new DVD player, the phone rings. Guess who? It's the loan officer, let's just call him Kevin. Well okay, so Kevin is really his name. I'm not going to change names to protect the innocent. :)

Kevin starts his spiel about how he can save me money on my $110,000 30-year, 6 7/8% mortgage and $15,000 of credit card debt. I asked him what his best rates are and he told me it varied depending on my credit score, which he could check if I tell him my social security number--I don't think so! There's no way I'm giving that out over the phone. If his deal sounds real then I'll ask for paperwork to be sent through the mail.

I told him to assume that "My credit history is the best of anyone on earth and in this universe. Now, what is your best rate?" He told me 6.5% with 1 point.

He went on to explain that unlike other mortgage companies that ask for the 1 point at closing, they "conveniently" include that amount in the mortgage principal. I told him that 6.5% isn't that much better than my 6 7/8% (6.875%) and when you throw in the 1 point then your "best" loan is really around 6.6%.

That's when he asked me what my credit card rates are. I told him that my credit card debts are at about 1.99% APR, which are a little high since I had the entire $15,000 at 0% for the prior 20 months.

Kevin said that I'm really not getting 1.99% and that there's no way I ever got 0%. He said, "Tell me where I can get those credit card rates?"

I told him to look in his mailbox. That's where many great credit card deals are found. And most really good ones are offered from your current banks.

He still didn't believe me and said that if I look at my statement I'd see that I was really paying 16% or more. I explained that when I had those 0% deals, my credit card statement would arrive and show a balance of $15,000 and under "finance charges" the total is "$0.00."

His response was, "Think about it, Scott...why would a bank give you 0%. They're not making any money!"

I said, "To get new customers."

Kevin then told me that it doesn't make sense that they would do that. I said, "Well then, does it make sense that Publisher's Clearing House gives away $10 million, or that McDonalds gives away millions in prizes? Why do they do it? To get business."

Why do the banks offer 0%? Because they think that I'm going to forget that the offer ended and let my rate bounce to 15% (or more). I'm not!

I'm simply going to transfer my balance to another low-rate offer when their offer ends. Overall, the bank will make money because most people (not DebtSmart readers--we're all too "debt smart") are not going to not notice that the rates have been increased or will be too lazy to continue transferring balances.

After I told Kevin how I keep transferring my balances he said pretentiously, "So you're manipulating the system."

I said, "I'm taking advantage of my best loan options. You just called me and are trying to get me to transfer my mortgage and credit card debt to your bank. If I decide to use your offer, am I then 'manipulating the system'?"

That comment really caused Kevin's brain to freeze up. Almost as locked-up as Windows 98 with 20 open applications. He was forced to shut down and restart.

He finally replied with, "Well no."

"So then, if I use other bank's offers I'm 'manipulating the system' but if I use your offer then I'm not. Is that right?"

Kevin said, "Well I guess you're just being smart."

You see my friends, there is a stigma about transferring balances. People say that you're "credit surfing," that you're "manipulating the system" or "using Peter to pay Paul" (I don't owe Paul anything) or "paying one credit card with another."

Hear me on this...DON'T listen to these myths. Don't be brainwashed by this dogma! It's always DebtSmart to use your best loan options! It's doesn't matter how many times you switch cards. You're always going to save money when you pick a better loan deal.

Kevin changed the subject by trying to give me numbers for his refinancing deal. He said that my payments, with his 6.5%, 30-year, mortgage for my $110,000 would be about $750.00 per month. Of course I always have my calculator handy and I told him that the payments are more like $695.28, in fact, they are exactly $695.28. He said that he's including his 1 point fee in the payment.

Well then, according to my numbers the payment is $702.23. I asked him how he's coming up with $750. Kevin said, "It's obvious that you have a calculator there."

My response was "Yeah, I have a calculator here. What do you have there? Whatever you have doesn't seem to be able to come up with the correct payment."

Finally, since he can't talk about facts anymore he starts to get emotional and says, "Look, I've been doing this for years. I do this all day. What do you do over there at Press One?"

"I write and publish books, I run a web site, write an email newsletter." However, I never did mention to Kevin the subject matter.

Lastly, I should say that Kevin was nice and I do want to thank him for calling because it resulted in this informative article.

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Saving for a Down Payment
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
How do you save money to buy a home when you are swamped with credit card bills that just seem to suck every last bit of savings?--Darryl

Answer
Darryl,

I know exactly how you feel since I was in that very same position at one time.

First of all you need to be sure that your credit card interest rates are as low as possible. By "low" I mean below 11.9%. There are many excellent credit-card offers available from numerous banks, which make the rates very competitive. Look through your junk mail and read the fine print in some of those offers. Start using the 0% offers and track the dates when they expire so you can be sure to transfer your balance before the rate is increased.

Once you've minimized your interest cost, you need to make saving for that house a priority. The way I saved while paying my credit card bills was to make minimum payments. That's right, it's one of those exceptions to the pay-the-most-to-your-credit-cards- first-rule.

In this case, to save for the down payment of your house, you make the minimum payments to your credit cards and bank the difference. The reason is that you need to save your own money to use as a down payment; you cannot cash advance money from your credit cards to buy a house. Well I guess, technically you could, but most likely you won't be given a mortgage if the bank learns that you’re buying a house with your credit cards.

The strategy here is that you’re going create extra money by paying less each month to your credit cards. Many times banks will give you an opportunity to skip a payment. That's the perfect time to save that extra payment in a bank account toward your down payment.

Many people would criticize me for suggesting that you pay less to your credit cards because you're going to pay a little extra interest. However, this interest cost is the fee you pay to be able to get the cash for the house. It was worth it for me and everything turned out just fine.

Good luck and please let me know how things go!

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My family vacation for $32 per person per day!
Vacation in cabins and save money!
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

That's right, $32 per person per day is what it worked out to cost for our family's April 2002 vacation. This article will cover the details of all costs related to this vacation! I think that's great price but please let me know if you think it's a thrifty, quality, vacation.

The vacation lasted four days and three nights in Pennsylvania. While there we visited Herr's potato chip (and foods), Longwood Gardens, and Winterthur (in Delaware).

The main reason the price of the vacation was low is because we stayed in a cabin. Cabins are great, at least I think so. First of all, because cabins are generally less expensive than hotels. And second because they're much more flexible for the family. Farm cabins are even better since young children love seeing, petting, and feeding animals.

The cabin also helps save money because it comes with a full kitchen! This means that you don't have to eat out for every meal, or call for room service.

If you're bringing young children on the vacation they'll enjoy, and you'll enjoy, allowing them to run free and burn out some energy, in the yard. Having had my kids stay with me in a hotel room I can tell you that a hotel room is simply a small room with two trampolines (beds).

The beauty of the cabin is that it's much more spacious, less expensive, and provides more activities for kids. A major part of the family vacation is just staying at the cabin, relaxing, you know, the reason why you wanted to go on vacation in the first place. :)

Researching for cabins, or any other lodging, is best done online. In fact, most of the places I've contacted say that people are finding them online. I always look for a place that has as much information as possible about a potential cabin since the cabin is my first choice.

Helping Daughter With Debt
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Our daughter, who is 31 and single, has $15,000 in credit card debt that would we like to help her get out from under. This debt consists of two different maxed out credit card accounts that are both charging very high interest rates, as well as late charges and over the limit fees. We are considering refinancing our mortgage, which currently has a balance of $47,000 and a 5.75% rate. We will continue to make the same payments we're making now, and she will make the additional amount needed to pay off the loan in about 6 years. That way she would not have any debt showing up under her name, and we would be able to take the additional interest off as a tax deduction. Even though there would be closing costs involved on a refinance, I still feel that those charges would be less than the interest on the credit cards over the long term. Is this a good solution or not? By the way, we have had several lengthy discussions with her about how to manage her finances and also purchased your "How to be more credit card and debt smart" manual for her.
--Anna

Anna,

Thanks for writing and getting my book!

Great question especially considering that last issues survey was about lending to family. The good news is that it seems, from those results, that lending to family works out better than lending to friends. Also, I'd like to speculate that lending to your children, in general, could work out well. The last thing anyone would want is a damaged relationship over money.

I do believe that your plan is a good idea. And I believe this for many reasons. First of all you are going to be saving money by refinancing and your going to be saving money for you daughter by reducing her interest rates. Second, because the rate reducing is in the form of a mortgage you get that tax benefit. Third, once her loans are paid off by the refinance they'll be off of your daughters credit report.

Daughter to pay back with interest. Now lets crunch some numbers. If she's going to be paying this loan back in exactly six years than a principal of $15,000 at 5.75% requires a monthly payment of $246.83. However, if you really wanted to work out the numbers there are still other cost considerations. Closing costs for example.

If you were going to refinance anyway then all the costs that involve the property like legal, title work, loan applications, etc. you would have paid regardless of lending to your daughter. However, if there are points involved then your daughter's portions would contribute to increasing that cost. If there is a charge of 2% then your daughter's portion of that charge is $300.

On the other side of charges, you will be receiving a tax refund based on the loan and extra savings because of her additional loan. You could refund that amount to her by simply reducing the rate of the loan based on your tax bracket.

If you're in the 15% tax bracket then reduce the APR by 15% from 5.75% to 4.89%. This reducing in interest represents the amount you'd be receiving as a refund based on your daughter's loan.

The 6-year, monthly payment of $15,000 at 4.89% is $240.81.

Now that your daughter will have no outstanding credit card balances she'll need to be careful when spending. I suggest only using her credit for emergencies and budgeted spending. Managing credit overlaps managing spending.

Hope that helps!

Please let me know how it all works out!

Regards,
Scott

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Make Payments For Son's Car
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Dear Scott,
My son purchased a car for $15,000 at a high rate of interest. He's been paying for 32 months and he still owes $11,000. He has just been laid off and to top it off the car has blown the engine. I would like to help him pay the loan off to keep his credit rating but would like to negotiate the amount down. What are the chances? Would he be better off to let it be repossessed? This would be to nobody's advantage. Please advise.
--Jim

Jim,

Thanks for writing!

The good news, certainly for your son, is that you're willing to help him. And because of that you'll be able to save him some money and keep his credit history clean. Since your son probably has your character, it's a good bet that he'd make sure to repay you when he's back on his feet.

Here are a few ideas to save money, while helping your son at the same time:

1) Buy the car from your son.
Since you are willing to help out financially, you may be able to save money by buying the car from him. That's because you're more likely to be able to get a better rate on a loan for the car.

Check with your credit union or local bank and find out what the deal is for used car loans. The bank will loan you an amount based on the book value of the car, but the rate will most likely be far less than the current rate.

If you cannot get the full $11,000 needed to pay off the original amount you may want to consider using a credit card cash advance if the rate is low. Call your credit card bank and see what they have to offer. Tell them that if they give you a good deal you'll use their line of credit otherwise you'll be calling your other credit cards to see who wants to make a profit. Or, if you have a low rate transfer offer on one of your credit cards, you could cash advance one credit card and immediately transfer the balance to the lower rate card.

So between the bank loan and other financing you can take possession of the car and save money over the current financing.

2) Fix the car.
The car is still worth quite a bit of money. Replace or repair the engine and keep track of that cost.

3) To sell or not to sell.
At this point you have a functioning car that's been refinanced at a lower rate. Your son's credit history looks good because the car has been paid off. Now the question is, "Will your son want the car when he gets on his feet or will he want a less expensive vehicle?"

If he wants to keep the car, then you could sell it back to him for the unpaid balance plus the cost of repairs. Or he could pay you monthly for all the financing.

If he doesn't want to keep the car then sell it. Take that money and pay off as much of the financing as possible. You may not get enough from the sale to repay the entire amount. In that case you'd need to work out how that difference would be paid.

As far as negotiating the amount goes, it's always worth it to give the lender a call and see if they'll reduce the balance. However, in this case, I believe the chances are slim.

The above suggestions are the ideas I would consider. I hope you find them useful.

Good luck and please let me know what happens!

Regards,
Scott

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ONLINE AUCTION CORNER: Pay Off Debt with Your Clutter
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

You know all the stuff that’s filling up your garage, attic, or shed? It’s the same stuff that you want to sell at a garage sale if you only had the time. Well, those unwanted items may be able to help you start reducing your debt today!

How?

By selling it all at online auctions like eBay.com. Although I have been recommending doing this for years, I’ve only recently started selling my unwanted household clutter online. It’s really not clutter it’s stuff I don’t want anymore that other people might need.

Since I’m just getting started selling at online auctions I’m also going to start letting everyone know about how I’m doing it and how well it’s going.

So far, it’s going VERY well! Everything I’ve put online has sold! I’ve sold an autographed Norman Mailer book that my father picked up at the library discard rack and a digital voice recorder. Total sales, $56.00 for two hours of work--that’s $23 per hour for creating more space in my garage! Pretty good deal!

To make transactions simple, you can receive payment from your auctions through PayPal. They allow your buyers to use their credit cards to pay. Setting up an account with PayPal is FREE, however, there are modest transaction charges.

I’ve already auctioned off a Sony Handycam Video 8mm CCD-F33, videocamera.

How can you get started making extra money today?

Look through your house for items you believe may be worth selling. Items that you can probably sell for $10 or more.

Next, research the value of your item. Go to eBay.com and do a search for your item. Check the current items for sale and the completed items. Look at the prices that your item has sold for in the past so you can get an idea of its true sale value. Also, read what other people wrote about that item so you have a starting point for writing your advertising copy (fancy way of saying “sales pitch”).

Market Research

Remember that camera I put up for auction? Well, it sold for $71! That's $71 off my debt! So far, everything I've put up for auction has sold.

Look through your house for stuff that you really don't use anymore. That stuff may be very useful to other people, so you should consider selling it online at auction web sites like eBay.com and use the proceeds to reduce your debts.

Once you find items that are good candidates to be sold online, it is important to be able to get an idea of how much they are worth. You can look at StrongNumbers.com for prices of many items, or simply go to eBay.com and do a search for the items.

By reviewing the search results, you'll find the best description for your item. Do another search with the more specific description and see if any are for sale right now.

Next, click on "completed items" which will show you what your item has sold for in the past. Then sort by highest price first. This final research list tells you the highest prices you can expect to get when you auction your item. It also tells you what people used in their description that made the item sell at the greatest price. This is the information you'll want to include in your item description.

Finally, you need to register with eBay.com to get an account. The registration process is easy. Just go to their main page and click on "register now," and fill out the online forms.

Okay, so now you have the item, you have an idea of what to write in the description, you have an account, the next thing you need is a picture of the item.

As the cliché goes, "a picture is worth a thousand words," and this is absolutely true! People want to see what they're going to buy. When you were researching the item description, you should also have noticed the photos used. You'll want to take similar pictures to use in your description.

The best way to get great photos is with a digital camera. I use the Sony Digital Mavica FD73 ($350). Another option is to take a film photo and scan the print.

Also, many companies that process film give you the option of having your pictures posted online. This option allows you to take pictures of your items, then download the pictures. You can then use the pictures that are already posted online to link in the HTML description of your item (I'll talk about that in the next column).

Research your items, pick the most likely to sell, take a photo of each item, and make each picture digital.

Posting Your

You should be ready to:

1) Identified items you're ready to sell online.

2) Researched the value of each item.

3) Developed the "sales copy," i.e. the words you use in the item description.

4) Taken photos of each item and digitized them.

Now all you need to do is post the items.

Quick mention, all the stuff I had for sale last week sold! So far 100% of my items have sold and taken over $150 off my debt! My latest sale is a Star Trek book that I found at the flea market for $5.

Two final notes before we get to posting your items.

First, you need to determine how much shipping may be for your items. You must decide how much to charge, if you're going to include it in the final price at no additional cost or if you'll let the auction winner know the shipping costs at the end of the auction.

Second, you need to be able to accept payment. Many people will want to pay with a credit card. The good news is that you don't have to set up a merchant account. You can simply sign up with PayPal.com.

Back to posting...

There are many online auctions where you can sell your items. The most popular place is eBay.com so we'll talk about posting there.

To post your items go to eBay.com and click on "sell" on the top menu bar then select a category.

TIP: You can enter a category number at the bottom, which is a great short cut, however, you need to know the number. To quickly get the category number for your item, go to an auction for a similar item. Directly below the Item # is a link to the category. When you click on this link look at the URL. The category number is shown in the URL, for example, ".../list/category11724/..." this is a great short cut for finding the category.

Next you need to enter a title for your auction. Again, look at the research you did with similar items. Use the same description that others have used.

Use the same strategy for the description, look at what others have written for similar items. Be careful to not copy the exact wording in the description because this may technically be a violation of copyrights--just paraphrase.

You're allowed to post one photo for free with your auction. Take advantage of this! Also, for only an additional 25 cents you can have your photo shown in the line-item listing--I do this every time.

Another important decision is setting the minimum bid price. "Your auction will start at this price: generally, it is the lowest price at which you are willing to sell. Setting the minimum bid too high may discourage bidding!"

If nobody bids to your minimum price then you don't have to sell the item.

Finish completing the posting information. For a basic posting the default settings are probably going to be correct. There are many sections of this form so READ everything very carefully.

After you have correctly completed the form you'll be quoted the price for listing your auction. Be sure that the price makes sense. For listing a $10 item the cost is approximately $1.25. Be sure to print this page for your records.

Good luck and please let me know how your items are selling!

For free information about how we can help you reduce your debt, please fill out our form.

Early Payoff
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
I would like to pay off my 80K-15 year, 7.74% mortgage in 8-10 years? How much per month or year do I have to make to reach this goal?
--John

John,

Thanks for writing--your question is a great Household Math™ problem! In fact, you just inspired me to add a section so people can submit their Household Math™ questions.

Your question is very straightforward. You have an $80,000 mortgage for 15 years at 7.74%. Assuming these numbers are exactly correct, and no payment have been made to-date, the monthly payment is $752.57.

To pay off $80,000 at 7.74% in 8 years requires a monthly payment of $1,120.40. This saves you $27,904.20 over the 15-year loan.

To pay off $80,000 at 7.74% in 10 years requires a monthly payment of $959.67. This saves you $20,302.20 over the 15-year loan.

Therefore, any monthly payment greater than $960 will achieve your goal of paying of the loan in 8 to 10 years.

Regards, Scott

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9 Steps to Get Organized for Financial Success!
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

The beginning of my financial life was when I received my driver's license. Before that I rode my bicycle around and had no bills. Well, I needed a car, right? I had to get to work so I could pay for the car, to get to work. That's what started the bill cycle. The car was used (preowned) but it was the gas credit card that was getting charged.

Let's not forget that I could now go to the mall, buy stuff, and take Larissa on better dates than McDonalds (we started dating before I could drive). So it didn't take long for the bills to start arriving in the mail.

I just didn't know what to do with this mail. Nobody ever showed me a system for managing bills because I didn't have any to keep organized.

So what did I do back then? Probably what many people do today. Bring in the mail, stack it on a desk, and tend to the pile at the last minute. Hopefully I didn't miss too much because I frequently found mail on the floor behind the desk.

It didn't take long for me to realize that I had to do something. I had to get organized!

That was a lifetime ago, really, I was 18 then, now I'm 35 and insanely organized about handling money, bills, and all finances. I've learned over the years that the better organized you are with all your transactions the less likely you are to: Bounce checks.
Exceed credit limits.
Pay late.
Get charged for stuff you didn't buy.
Get hooked into extra charges.
Be stressed over bills.
Go into perpetual debt.
Let fraud go unnoticed.

Here are the 9 quick steps to getting organized for financial success--today!

1) Filing system.
When it comes to getting organized, everything needs a place, a home, a spot. The basic filing cabinet is the best way to organize the paperwork.

The hanging files are the best. They're just easier to work with, easier to access. A basic filing cabinet costs around $30 and is well worth the price.

Once you have a filing cabinet, and some hanging files, create a file for each bill and bank account, for example, mortgage/rent, electric, cable TV, water/sewer, health clubs, checking account, savings account, cash receipts, etc. For credit cards I name the file by the bank name and the last four digits of the card number, i.e., "Citibank 4323."

Lastly, create one more file called, "Bills Unpaid." This is the place to put all those annoying statements until you have time to write the checks.

2) Take care of the mail when it arrives.
Don't let the mail pile up! As soon as you bring in the daily stack of bills, which is what most of it is anyway, go through each envelope immediately. What I do is open every bill, throw away all the stuff that's not important, and staple the bill to the bill-payment envelope, then put then in the bills in the Bills Unpaid file

Now when you're ready to sit down and take care of payment, all your bills will be in place and you won't have to spend time going through each envelope before writing the check.

3) Use accounting software.
I know everyone reading this article right now has a computer. That means you should be using software to track your spending and organize your financial life. I cannot think of a better use of the computer for people in general!

"If you have a computer, then you should be using financial software." That's a quote.

Why?

Money is like the blood of your financial life. It flows into every aspect of what you do. It circulates in, out, and all around everyone in the family. By using your computer to track spending, you'll always know exactly what's going on, where money is being spent, and how to plan for new purchases.

The most powerful aspect about using software is eliminating that checking ledger. I haven't written in a check ledger since 1987! I have searchable records of every credit card charge and check that I've written in my entire life!

The best part is that I don't bounce checks. It's easy to balance your checking account using the computer. There's no adding, subtracting, etc. You just match the checks (and ATM withdrawals) with your bank statement and everything should balance. If it doesn't then you can quickly find the problem.

You know how you sometimes get a bill that you think you've already paid? It's very easy to find out by doing a search with the computer.

A word of caution: if you do use software then you MUST back up that data! It won't take long for you to completely abandon those paper ledgers, but PLEASE make a back up EVERY time you work on your bills!

Keep in mind that tracking alone won't solve money problems. For example, in 1995 I created a report for the year that detailed all my spending by category. I spent 18% of my income on the mortgage, 11% on groceries, 9% for utilities, 6% on federal tax, 6% on social security tax, 6% on property tax, 5% on medical.

Those are the top-spending categories which, used more than 50% of my income for the year. I cannot make changes in any of those categories unless I decided to sell my house, or cut back on food. Tracking lets me know where the money is going, but I have limited control over those categories. Areas I can change don't really add up to much, like 1.4% for entertainment.

4) Enter the transactions into the computer.
The software will not be helpful unless you enter the transactions. A strategy for accomplishing this is to put all credit card receipts in the Bills Unpaid file as soon as you get home from shopping. Then you can enter these transactions into the computer on the same day you pay bills.

Entering your transactions in the computer is the confirmation that your perception of what's going on matches your bank's. That means that your computer should be what's correct, and the credit card statement better match what your computer says or there's a mistake somewhere. It's your way to make sure you really did charge every item and write every check. It's the way to detect fraud and bank mistakes!

5) Pay bills on a specific day.
The one lesson I learned early on is that I didn't want to be tortured by dealing with bills every single day. That's why I put the bills in the Bills Unpaid file, and that's why I choose to pay bills once every two weeks--on pay day, always a good time, when I had the money. :)

It usually takes me about 2 to 3 hours to pay my personal bills once every two weeks. Once I start on this task I'm focused! I review every single credit card statement, check, transaction, credit offer, etc. to make sure that I'm receiving the best rates and lowest cost credit options.

Each transaction is carefully recorded in the computer. It's important that on this "bill pay day" everything matches. My billing statement matches what I have in the computer and all accounts balance. All check numbers line up so there are no missing checks.

6) Balance your checking account.
I've already mentioned this point, however I cannot stress it enough. Many people do not balance accounts and it's very costly if you don't. The consequences: bouncing checks. The fees for this can be as high as $35 from your bank and $35 from the bank of the person who you wrote the check to.

By balancing your accounts and using software to handle transactions you can easily avoid an incident that happened to a friend of mine. She accidentally wrote two checks for her mortgage and the mortgage company cashed both. The result was that ALL her other checks bounced like super balls! The cost, when the smoke cleared, for those bounced checks was more than $800 plus the aggravation of dealing with all the banks, freezing of accounts, and stress.

7) Create a list of all bills and debts.
One sheet of paper listing all bills, debts, due dates, contact phone, etc. is one of most powerful tools for financial success! I've included many of these worksheets in my best-selling book, Credit Card and Debt Management.

Each time you pay bills be sure to update the list. I started out with a list on paper then I moved to using Excel. Now, because I have so many credit cards, I had to create an Access database to track that information.

You need this list to be your roadmap. It's a planning tool for future spending. You'll be able to see your spending plans at a glance.

8) Create a list of credit offers.
You know that "junk mail" from your credit cards? Well some of those low rate offers are actually VERY good! I always keep a list of current offers from my all of my active credit card accounts. Usually, half of my credit cards are offering me transfer deals less than 5.99%! Some are even a true 0%!

I also keep a list of new credit card offers; however, I do prefer to take advantage of the offers from my current banks since I have a long history of doing business with them, giving me more bargaining power.

The key here is to create these lists. This way, if one of your current credit cards raises their rate, you don't have to look very far to find a better deal. You don't have to keep a stack of mail to go through. You simply pull out the list and start calling!

9) Start a financial notebook.
I keep all my notes on the computer but there was a time when I actually wrote in a book, how barbaric is that! :)

Whether by hand or in a computer this is very important! You need to have detailed notes when you contact your credit card banks, checking bank, mortgage company, etc.

The reason is that sometimes the phone reps don't make the proper notes in your account, and you'll need to reference your notes to keep all those banks in line.

Your financial notebook should include your strategies, for example, "Be sure to transfer the $2,000 balance from the Discover card to the Advanta 3.9% offer by 11/25." The beauty of keeping an organized notebook is that you can refer to your notes, which means you don't have to think about all the details all the time.

So there you have it. I have followed these steps for financial organization for years with incredible results. I've keep my interest costs down, I only have to deal with bills and payment one day every two weeks, I rarely bounce checks, I have corrected many bank errors (never in my favor of course), and I don't have to think about financial details on a moment-to-moment basis

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So Far in Debt; Can't Seem to Breathe
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
Help please! I heard you on the radio and what you had to say made sense to me. I am so far in debt and can't seem to breathe. I have 6 credit cards and I am $25,000 in debt.

I know you hear this all the time, I have been paying for over 2 years not charging anything and still cant get anywhere. I cut them 2 years ago, and called the companies to ask for a lower rate. They gave me like a year with low interest, and lower payments so my credit reports would not be hurt.

Bottom line, my credit report looks so bad, we can't even refinance our home. I am in so deep that if I had a pill I'd take it! When I called a company to help me all they wanted to do was charge me more money that I don't have. I am not sleeping, and just don't want to leave my home. I own my own business, and I am just asking for your personal help. Please, please help me.
Thank you,
Stephanie

Stephanie,

Thanks for writing (and listening)!

Sorry to hear how much your debt burden is affecting your health. I can certainly understand how you feel. Knowing that you owe money, expensive money (at high rates), can certainly stress-out anyone who wants to make good on their financial commitments.

As you're probably aware, getting out from under this debt will not be an easy one-step solution. It's going to be an ongoing process that will take years of focus, attention, planning, and work.

The broad picture to getting out of debt is three-fold:
1) Get organized financially.
2) Manage your current debts efficiently.
3) Get more money!

Since you own a small business, I have a feeling you're fairly organized. Briefly stated; files, worksheets, list of all the debts and bills.

It's number #2 that's the killer (no pun intended).

You already mentioned that you've tried to call the banks and get them to reduce your rate. You may want to call back and give them one last chance. If the first rep cannot help you, then ask to speak to a supervisor. There's much more about this topic in my next book, "Talk Your Way Out of Credit Card Debt" which is available for pre-order at Amazon.com (shameless plug).

If they don't lower the rate then you need to punish them! You need to spank their bottoms, well, bottom lines.

Apply for new credit. Do it now. Someone will give you a chance. Even if the rate isn't that great, meaning that it's not better than your current cards, get the card anyway and transfer your balance to teach your current banks a lesson. After that it won't be long before the banks start competing for your business.

You can read my article, "Getting better, cheaper credit--right now!" and apply for new credit.

Next, correct any errors that exist on your credit report. You can get a copy of your credit report from Equifax or TransUnion. Dispute anything that you think is not accurate.

The key to all of this is taking action. Start right now! Start calling right now, start applying for new credit right now. It's been my experience that it helps to have the same amount of credit as debt in order to get the banks to offer you good deals.

The best deals, and I mean lowest rate offers, will originate from your existing credit accounts, so get more of them. Don't cut up your cards, because when you do that you're cutting out your options.

You'll need $25,000 of available credit so you can transfer all your existing debt to new cards. Believe me, when those banks that just got paid off realize that they're not making any money from you they'll send a low rate offer pronto!

Just be sure to pay on time! There is no greater sin in the world of credit than being late. As long as you don't pay late and are active in seeking new credit deals, you'll be able to reduce your rates in time.

The last step is getting more money. You have a small business. What do you need to do to make it run better? What do you need to do to sell more?

I love reading books about marketing and motivation. The correct marketing can make all the difference in the world.

Here are a few of my favorites.

1) "There's a Customer Born Every Minute: P.T. Barnum's Secrets to Business Success", by Joe Vitale
2) "Ama Complete Guide to Small Business Advertising", by Joe Vitale
3) "Who Moved My Cheese? An Amazing Way to Deal with Change in Your Work and in Your Life", by Spencer Johnson
4) "Notes from a Friend", by Anthony Robbins

Lastly, in the scheme of what's important, your debt shouldn't make you feel unhealthy. Try to get back to sleeping. Relax. It will all work out. "Everything for the best," as Jhoon Rhee would say.

One last book recommendation to help you feel a little better while you're working on your plan is "Don't Sweat the Small Stuff... and It's All Small Stuff: Simple Ways to Keep the Little Things from Taking over Your Life," by Richard Carlson.

Good luck! I really hope that helps!

Please keep in touch!

Regards,
Scott

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Collection Company After 23-Year-Old Debt
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
I received a letter telling me that I owed a debt of $535.73, but, "if I paid $214.00 immediately," they would cancel the debt. I cannot recall owing this debt. It was made, according to the company (I called this AM) in 1980, under my husband's name. We retired in 1978 and live on Social Security. He has never had a credit card and I have always taken care of our money, since he was in the Marine Corps and overseas so much. I have checked through as many old papers as I have and can't find this debt. When I pay a card off, I always cut it up. I have no cards now, and pay everything by check. Can they collect on a debt this old? I asked them to send any paperwork on this debt to me, but they said, "if I refuse to send a check at once," they will take me to court! What must I do? Thank you for your advice!
--Marjory

Marjory,

Disclaimer: Let me first say that I am not a lawyer. You should always seek the advice of licensed attorney in your state. This response is Scott's interpretation of legal issues and is for your entertainment only.

My impression is that you're dealing with an unscrupulous debt collection company that, quite frankly, may be lying about the debt! Be very careful not to disclose too much information to these people because you cannot trust them!

Do not send them any money! Do not give them any information about your checking account or any other accounts!

If the debt they are calling on is real, and 23 years old, it's going to be far past the statute of limitations in SC (10 years). You can send them a letter stating that, "This debt is past the statue of limitations and not legally collectable. Have a nice day. :)"

In the case that they claim it's not an old debt you are still protected against many debt collection tactics by The Fair Debt Collection Practices Act (FDCPA). This law requires many procedures to be followed by debt collection companies, and it seems that the company which called you violated it immediately.

Validation (Section 809a): Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, give you information such as the amount of the debt; the name of the original creditor; a statement that you have 30 days to dispute the debt; among other items. You can see the entire law by clicking on its hyperlink in the previous paragraph.

And if you ask, they have to prove it! Section (b) states, "If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector."

In your first conversation they threatened to take legal action when you asked to provide proof of the debt. Legally, they must give you that information. The next time they call tell them that according to the FDCPA, section 809a, they have 5 days to give you information about that debt.

After they send that information, dispute the debt. This will force the debt collector to do more research. Then, if they provide some paperwork about the original debt, you'll be able to better verify its accuracy.

Since the debt is probably not valid, you could simply send them a cease-and-desist letter as pursuant to 805c. Write that you want them to stop contacting you for any reason. However, there are some reasons that they can contact you again like to let you know that they're not going to contact you again or they're going to take some other legal action.

Please let me know what happens with your situation.

Good luck!

Scott

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Credit Card Balance Transfers
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
I would like to use a credit card introductory rate to pay off a bank loan. I will need to borrow $13,000.00 credit to pay off the loan. In order to do this, I will need to open two new credit cards, preferably with 0% interest for 6 months. I would then like to transfer the balances on those credit cards to new credit cards with low introductory rates. How often can I continue to transfer to new cards with introductory rates?

I have heard that if my credit report shows too many credit card company requests within one year that I will be turned down for new credit cards. I have also read that I can request credit card issuers not to run a credit report on myself--so that my credit report will not show that I have applied for several credit cards in a short period of time, and thus I would be extended credit by new credit agencies. I thought all credit card companies would only issue credit if they first run a credit report on the applicant. Is this true, or do the companies automatically run a credit report on the applicant every time a balance transfer request is made?
--Gail

Gail,

Thanks for writing!

You're being very DebtSmart® by transferring your balances to lower rates. Zero is always the best rate! Right now I have four cards offering me 0% for one year! Actually, I just got a fifth offer yesterday that I will also take advantage of to see if there are any tricks.

You can continue to transfer your balances to lower cards in perpetuity! My experience is certain proof of that result. I have been transferring my balances to low rate deals for over a decade. About 6 years ago I was told that these deals would end however, they've only gotten more frequent.

Last year credit card companies mailed 5 billion credit offers! That's up from 3 billion in the year 2000. I doubt it's going to be slowing down anytime soon. And because of that fact the consumer is in control! We have the power to decide which banks we spend our money on to buy their money.

It is true that when you apply for credit the bank looks at how many credit-inquires are shown on your credit report. The more inquires the more negatively it could, and I must stress, could, be in giving you the new credit line. Just because you have many inquires doesn't mean you're going to get turned down for new credit. Each bank has it's own criteria for determining who and how much credit to allow.

By the way, your current creditors also take a look at your credit from time to time. This too shows up as an inquiry to your credit report. I have a dozen inquires on my report and it has never stopped me from getting new credit.

Most importantly is that you have paid on time. Don't be late! That's is what will hurt your chances in the greatest way. Of course, judgments and repossessions don't help as well.

If you do get rejected for credit always remember to request a copy of your credit report. You should always request a copy of your credit report from the credit reporting agency that supplied that data to the creditor that rejected your application. And you get this report for free if you request it within 60 days of being rejected. Be sure to review that report for errors and dispute inaccurate information.

You cannot request that a bank does not look at your credit file. Well, I guess you could make that request but they would say, "okay we won't look but you won't be receiving any credit from us."

I doubt it's a standard for banks to review your credit report prior to completing a balance transfer on an existing account. However, they have probably warned you in their account terms that they can look at your credit report at anytime.

The bottom line here is that: 1) It's smart to transfer your balances to lower rates 2) Credit inquires may or may not hurt you depending on each banks criteria. 3) If you are rejected for credit always get a copy of your report and check it for error. And take a look at all the credit inquires.

Good luck!

Regards, Scott

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Transfer Credit Card Balances
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

My husband and I filed for bankruptcy in 1995. Since then we have established good payment records with high interest credit card companies. I'm ready to drop them and transfer my balances to a lower interest rate card(s). When I start looking on the net, I see introductory rates for first time applicants with good credit. I'm having a hard time finding cards with the transfer option.

I've had my existing accounts for several years (or more), plus we just bought a house, so I think we deserve better interest rates. I called my accounts personally, but they don't offer better rates, only a larger line of credit. I have enough credit already.
--Penny

Answer
Penny,

First of all Penny I'd like to say that I agree that you do deserve a better rate!

As you may know, bankruptcy stays on your credit report for 10 years. That means that all the banks know that you've had problems in the past, but that's long ago at this point, and I am sure there are banks that may be willing to give you a better deal.

The important issue now is how you've been handling your credit for the past few years. From what you've said my feeling is that you've been doing a good job with paying on time. That being my assumption it's time for the banks to give you a better deal or you should take your business elsewhere!

So you've already called your current banks and they won't budge on the rates. Try this, call them back and explain it this way, "I've just received a transfer offer in the mail for 1.9% and I'm going to take it if you don't reduce my rate. I've been happy dealing with your bank but it's just getting too costly. I'd be willing to stay a customer, but I need some type of reduction in my rate or I'll just have to take my business to another bank."

If the first rep you get on the phone cannot help you then ask to speak to a supervisor. If the supervisor says that they cannot lower the rate, then find out why and make it clear that they lost your business. WE MUST PUNISH THEM!!

Now, you mentioned that you have a few accounts. If the first bank won't lower the rate then call another account and transfer the balance from the first bank to this account. Tell the second bank, "If you give me a good deal on a balance transfer, right now, I'll do it." Well, at this point you should do it anyway. Just be sure to punish the first bank for not lowering the rate. Then, after the first bank doesn't have your business for a while you can give them a call and let them know that you're ready to start using them again if they give you a better rate or a transfer offer.

As far as the online offers go, it can sometimes be very difficult to get those low rate deals when applying online. I suggest you try in your snail-mailbox. That's where I always get the best offers. Actually, the best offers are from my current banks but there are other good offers from new banks all time. Last year banks mailed 3 billion offers to us consumers!

Never forget that no matter what your situation YOU are the customer and they should be treating you with the philosophy of "the customer is always right." There's a lot of competition out there for our business so let's all make them work to keep us satisfied.

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Paying Off a Loan with Credit Cards
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
I have a home eq. loan for 10 years at 8.50% for $26,000.00. Could I pay this down with credit cards using $500.00 a month payments?
--J.G.

Answer
J.G.,

I think a better strategy is going to be to get another loan to pay this off. After all, 8.5% ARR is a fairly good rate so you may have some trouble beating this rate with credit cards over a ten year period. It can be done as long as you have enough credit to continually get good, true, low rate offers.

With interest rates dropping try shopping for a better loan on my web site at:
http://www.debtsmart.com/loan

Scott

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Don't Sell the Cattle!
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
I am a 53-year-old female with a husband that abuses credit cards. I have sold 2 houses and taken out an equity loan to pay off credit cards. Tell me how to talk to a man and tell him how stupid he is. I have the only retirement account. He has some cattle. I just heard you on the radio today about using credit cards to pay off the debt. Maybe I could convince him of that. Please explain. Thank you very much.
--Cecile

Cecile,

Thanks for writing and for listening to me on the radio!

It's always a smart move to pay off as much debt as possible. Credit cards interest rates are usually at a much greater rate than any other form of debt. I've seen credit card rates as high as 35%!

Now that you've paid off much of the debt with the sale of the two houses and the home equity loan it's time to look at other options. I always talk about making the banks fight for our business and that's what I mean when I say using credit cards to pay off debt.

As you transfer your balances from one bank to another you'll find that all your bankcards will start to offer you better and better deals. These lower rate deals can help you save thousands of dollars but there is one caution. That is to not spend the savings by charging the cards to the limit with new purchases.

Please read my article, Getting better, cheaper credit--right now! You may be able get start getting lower rates right away which will start saving you even more money!

Based on the results of my survey on 7/17/02 of DebtSmart® Readers I would have to guess that you pay the bills. You set the budget. The problem sounds like you're having trouble getting your husband to follow your financial plan.

You can try to change his philosophy about purchases by making him ask himself some questions before buying anything, especially with credit cards! You can read the question I ask myself, and the thinking of other DebtSmart® readers, from the last issue's survey by clicking here.

Here's the best strategy to you can try to curb his spending, simply take away his credit cards. I'm not saying to close all the accounts, just take away the card and give him cash to spend. When he runs out of cash, he runs out of buying power. This may not go over well at first however, it's the best measure attenuate his spending.

Good luck and please let me know what happens!

Regards,
Scott

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Equity Used For Down Payment
by Scott Bilker

Scott Bilker is the author of the best-selling book "Credit Card and Debt Management." He is also the Editor and publisher of the FREE DebtSmart® E-mail Newsletter (http://www.debtsmart.com). Sign up today!

Scott,
Here's my question. My husband and I want to buy a home being built in a new development. Our present home worth $260,000 has no mortgage except a $30,000 home equity loan. We need about $15,000 down payment for the home being built. Should we open a home-equity line of credit to pay the down payment? We will be selling our existing home so everything will be paid back at the settlement. If not, where is the best place to get the $15,000? We have several credit cards with 0 balances. Should we take a cash advance on one of those? Thanks.
--Marian

Marian,

Great question!

Coming up with the down payment for a house is always a major concern. When my wife and I purchased our house we had to use our credit cards, and other strategies, to come up with the cash however, this is a risky because mortgage companies want to be sure they track all money for that down payment. They don't want you to borrow from your credit cards because you must come up with actual cash or else it's a 100% financed home.

If I were you I would get the money from the home-equity line of credit since it's linked to your existing house or simply get a home equity loan. In fact, you could probably get a super large loan, like say, $150,000 and use that as a down payment since your home is going to be sold by settlement time.

Since your putting down such a large amount toward the new home, the mortgage bank won't really care too much about the new mortgage since they're lending you far less than the value of the house. Then, when you sell the existing house and get $260,000 you can pay back the $180,000, still have $80,000 cash, plus you'd have $150,000 equity in the new home!

The bottom line is that since you're going to be selling your existing house, and you have a lot of equity, you have a lot of creative financing options.

Good luck and please let me know what happens!

Regards,
Scott

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Creditors often consider debt consolidation programs a positive sign, that shows that you are putting serious effort into repaying your debt. As you begin to repay your debt as part of a debt consolidation program, your credit rating is likely to begin to improve.

For free, no obligation information about how debt consolidation can help you pay off your debts and improve your credit rating, fill out the form on the right.