Tag Archives: Credit Cards

5 Financial Decisions That Sound Smart but Are Really Dumb

By U.S. News

Vector illustration ? Empty head and money brain.

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Norma Yaeger, 83, of Encino, Calif., thought she was making a smart financial decision last fall, when, after pulling into a Ralph’s supermarket, she impulsively hired two men to fix her car.

“Two nice gentlemen came over to me and look at my fender, which was badly scratched. They said that they had a compound that will remove the scratches and restore the paint,” Yaeger says.
They would fix it, for just $50.

Yaeger isn’t a rube — she was, in fact, the first female stockbroker to work at the New York Stock Exchange (and recently wrote an autobiography, “Breaking Down the Walls”). She also served as president of two stock brokerage firms. The men who approached her seemed honest, and Yaeger was self-conscious about her fender. She paid the $50, a snap decision that seemed perfectly reasonable.

Instead — and you knew this was coming — when she returned from grocery shopping, her car fender hadn’t improved. In fact, it looked far worse. Yaeger drove to a mechanic and was told that it would take several days and $1,000 to fix her car.”The worst part was that I had to tell my husband about this embarrassing story,” Yaeger says.

[See: 12 Money Mistakes Almost Everyone Makes.]

Most people have made a financial mistake that seemed sensible at the time, but in hindsight turned out to be pretty stupid. With that in mind, here are some thoughts from a slew of personal finance experts on five financial decisions that sound smart but are likely a waste of money.

The Mistake: Buying something because it is interest-free for awhile.

Why It Can Seem Smart. It’s tempting to buy something with a zero-interest window, such as a “90-day, same-as-cash” offer, in which you’re charged no interest if you pay for the product within 90 days.

Why It May Be Stupid. Many people don’t end up saving the money or putting it aside when they get it, “and they end up paying accumulated interest at a high rate plus compounding interest on the balance going forward,” says Kelley Long, a Chicago-based certified public accountant.

She says consumers make such mistakes when they open a store credit card to get a 15 percent discount, for example, but then carry a 22 percent balance. Paying for things with a rewards credit card to earn frequent flier miles can also be a mistake if you’re not paying off the card in full each month. “The interest expenses end up far outweighing the price of an airline ticket,” Long says.

The Mistake: Buying long-term care insurance when you’re broke.

Why It Can Seem Smart. Who wouldn’t want long-term care insurance? It helps pay for basic activities that people need to do on a daily basis, …read more

Source: FULL ARTICLE at DailyFinance

Three Simple Steps: Managing Debt

By Dan Caplinger

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Being in debt can be one of the most overwhelming financial challenges you’ll ever face. That’s one reason that Americans have worked so hard to break themselves of their debt habit, with the Federal Reserve Bank of New York having reported recently that debt levels have fallen by $1.45 trillion since the third quarter of 2008. In particular, credit-card debt is down more than 20 percent over that time frame, reflecting the priority of getting high-interest-rate debt paid down fastest.

Even if you have a lot of debt, don’t panic! You can get your outstanding loans under control if you take a long-term view and start taking baby steps toward better managing your debt. Start out with these three simple tips:

1. Order your credit report from AnnualCreditReport.com, which is the free website set up under federal law to provide copies of credit reports to all Americans. You can get one free report every year from each of the three main credit-reporting agencies, and the report will tell you what loans and cards you have outstanding, how much you owe, and your payment history, including any late payments or delinquent accounts.

2. Gather up your loan and credit-card statements to match them up with your credit report. If you see extra entries on your credit report that aren’t among the bills you’re paying every month, flag those unknown accounts for future follow-up to avoid potentially nastier surprises further down the road.

3. Figure out the interest rates you’re paying on each of your loans and cards. Usually, that information will be right on the loan statement, and doing so will give you a good idea of how to prioritize which debt to pay off first. Moreover, it’ll give you ammunition in negotiating better interest rates down the road.

Debt can be a huge burden, but managing your debt doesn’t have to be. Instead of freaking out or hoping that your credit-card balances will just magically go away, taking these simple first steps will get you on the road toward dealing with your debt once and for all.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.

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Source: FULL ARTICLE at DailyFinance

Movie Horror: A Debt Collector Came After Me for $8.97

By Credit.com

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Alamy

By Deanna Templeton

We recently received a question from a reader who is looking for help with a past-due movie rental that went to collections:

Today I received a letter in the mail from a collection agency stating that a DVD I rented from Family Video (probably 5 years ago) has gone to collections. The total that I owe is $8.97. Am I going to get a bad credit score for an unpaid bill of $8.97?! Help would be greatly appreciated.
– Jillian

The debt collection industry has grown into a multi-billion-dollar business, and in order to stay competitive and profitable, collection companies are buying collection account portfolios from almost any company that’s willing to sell them or commission them to collect on their behalf. This includes credit card issuers, auto and mortgage lenders, cell phone companies, utility companies (cable, Internet, water, etc.), public libraries, gyms – and even video stores, as evidenced in your case.

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A few years ago, these types of low dollar collections made headlines when a number of people began receiving collections for old, unpaid library fines that had been turned over to collections and reported in their credit reports. Yes, even minor past-due debts can turn into collections, regardless of how minor the amount. It’s something we should all be aware of.

If you find that you owe a small debt that seems trivial or insignificant and you’re on the fence about paying, it’s better to pay it than risk the chance of it turning into a collection and potentially hurting your credit down the road. No one wants to deal with the hassle of a collection, and it’s important to remember that a forgotten movie rental can happen to any of us.

Will a $9 Collection Hurt Your Credit?

The short answer here is: It depends. If the collection agency reports the collection to the credit bureaus, the answer is, yes, it will most likely have a significant impact and hurt your credit score. When it comes to collection accounts, the amount of the collection has no direct impact on your credit score. It’s the fact that the account made it to collection status that matters. This means a collection of $8 is just as damaging as a collection of $5,000 — with two exceptions.

Exceptions to the Rule: FICO8 & VantageScore 3.0

In late 2008/early 2009, FICO made several significant updates to the FICO credit score model, including how low dollar collections were factored in the score calculation. In the FICO8 model, collection accounts less than $100 are excluded from the calculation. This means an $8 collection would have no impact on your credit score. It’s important to understand that this is only the case with the FICO8 version of the

From: http://www.dailyfinance.com/2013/04/11/debt-collection-overdue-movie-rental/

6 Smart Moves to Boost Your Credit Score

By Selena Maranjian and Dan Caplinger

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Cassandra Hubbart, DailyFinance

If you think your credit score doesn’t matter too much to you because you’re not planning on getting a mortgage or applying for a credit card anytime soon, think again. Credit scores affect more aspects of our lives than you may realize (just ask these singles). That’s why it’s important to keep your score as high as possible.

Paying your bills on time and staying well below your credit limits are the best ways to build and maintain good credit. A healthy payment history is the biggest contributor to your credit score, accounting for 35 percent of the total. And another 30 percent of your credit score is based on the amount of debt you carry, as measured against the amount of available credit you have. It’s a good idea to keep your outstanding balances to less than 25 percent of the money available to you to spend.

But beyond the basic rules of smart credit management, there are some lesser-known strategies that can help you boost your score.

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The Slow Death of Credit Cards

By Morgan Housel, The Motley Fool

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Great news: Americans are giving up on one of the most ruthless destroyers of wealth the numerically challenged have ever known: Credit cards.

Even though unemployment is still brutal and mortgage delinquencies are high, credit card delinquencies are at the lowest rate in at least two decades, according to data from the Federal Reserve:

Consider that the unemployment rate in 2000 was 4%, versus 7.7% today, and these numbers are astounding. No job? Pay cut? Doesn’t matter. We’re more current on our credit card bills than we’ve been in decades.

How is that possible? In part, it’s because the most egregious lending made to borrowers who never stood a chance of repayment has been defaulted on and written off.

But there’s more to it than that.

If you look at this data from Card Hub, you’ll see that total credit card debt outstanding fell by about $200 billion from 2008 to 2012. During that time, banks wrote off $208 billion of bad credit card debt. So, the net increase in credit card debt between 2008 and 2012 was perhaps $8 billion, or virtually flat when compared to the $800 billion of debt outstanding. Inflation during that period totaled about 10%, and the U.S. population increased by 10 million. Debt in real, per-capita terms, therefore, is declining in excess of defaults. People are really, truly shunning credit cards.

In fact, real credit card debt per capita is now at the lowest level since 1996, and down by a quarter since the peak in 2007:

Source: Federal Reserve, Census Bureau.

Outside of defaults, there are two drivers of the decline. First, existing real balances are declining. Citigroup CFO John Gerspach mentioned in a conference call last year that “card revenues remain under pressure with declining average loan balances driven by continued consumer deleveraging.”

Another is that the number of cards in circulation is flatlining, or even declining slightly. Take Visa . While its debit card business is booming, the number of credit cards it had outstanding fell from 2009 to 2011, and as of the end of 2012, it was about flat from three years earlier:

Source: Visa.

I won’t burden you with another chart, but the pattern is similar for MasterCard . We’re just much more interested in debit cards than credit cards these days.

Which is great, frankly. Consumers are left with stronger finances. The three big credit card issuers — Citigroup, Bank of America , and JPMorgan Chase — are left with stronger balance sheets. And the old style of American consumerism, one built on debt, may be coming to an end. Total household debt as a share of GDP has been declining for five years.

Is this a new trend? An enduring one that won’t revert back to the old, unsustainable ways? Let’s hope so. Good riddance, credit cards. 

More from the Motley Fool
Bank of America’s stock doubled in …read more
Source: FULL ARTICLE at DailyFinance

Walmart Offers 15¢-a-Gallon Gas Discounts to Cardholders

By Matt Brownell

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Victoria Arocho, Getty Images

If you’re looking to take some of the edge off high gas prices, your local Walmart (WMT) may be able to help.

The retailer announced Monday that drivers in 21 states will be able to get 15 cents per gallon off their gas purchase when they pay with a Walmart credit card or MoneyCard; those using a Walmart gift card will get 10 cents off. The discount is effective immediately at more than a thousand Murphy USA and Walmart gas stations.

The program is a revival of last fall’s “Great Gas Rollback” program, which offered an identical discount in 20 states. This iteration of the promotion will run through July 7.

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Walmart isn’t the only company offering a gas discount that depends on your payment method. As we’ve previously noted, mini-market chain Cumberland Farms offers a 10-cents-per-gallon discount when you pay using a smartphone app with a linked checking account. Walmart competitor Costco (COST), meanwhile, has an American Express (AXP) card that gives you 3% cash-back on all gas purchases. A few other credit cards likewise offer big cash-back bonuses for gas purchases, though those rates may vary by quarter.

As of this writing, the national average cost of a gallon of gas is $3.63. For the full list of states where you can get the discount, see Walmart’s announcement.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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ATM Viruses Are Out to Steal Your Cash

By Credit.com

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Eliot J. Schechter/ Bloomberg News

By Credit.com Staff

These days, consumers are often on the lookout for identity theft scams that may end up compromising many aspects of their finances, but now criminals are doing even more to rip them off, including targeting their banks with malicious software.

A new type of malware that targets point-of-sale systems and ATM card readers known as “Dump Memory Grabber” scans those devices for payment card data and is beginning to infect a large number of the nation’s largest banks, according to a report from SecurityWeek. The list of victims of this new software already includes Chase, Capital One, and Citibank, as well as Union Bank of California. In addition, it seems possible that store-branded credit cards may have also been compromised, because a video of the malware in action, which was posted to a Russian hacker forum, showed a number of Nordstrom’s cards potentially having been exposed.

The malware itself collects data stored in a card reader’s log files, filters the data quickly for credit card information, and then compiles all of it to a simple text file, the report said. That file can in turn be set to download straight to a hacker’s server, or even be sent via email.

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Information gathered about the creator of the Dump Memory Grabber malware seems to indicate that he is well-known in the Russian hacking community and has been involved with a large cybercriminal collective – potentially as its administrator – that engages in this type of activity, as well as attacks against a number of well-known security entities, the report said. Further, at least several of the group’s members are also active in Anonymous, and most are younger than 23 years old.

This is certainly not the first type of malware targeted directly at point of sale card readers and ATMs in the last few months, as a program known as “Dexter” may have recently stolen as many as 80,000 credit card numbers from Subway restaurants in 2012, the report said. In all, 42 percent of Dexter infections worldwide were located in the U.S.

The best way consumers can make sure they are not affected by these scams is to pay with cash whenever possible, and also keep close tabs on their financial documents for any suspicious charges that they may not recognize. These may be a sign that an account has been compromised.

More from Credit.com:

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The Worst Way to Pay Your Taxes: Put Them on a Credit Card

By Dan Caplinger

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Millions of people across the nation are looking forward to a nice refund check from the IRS. But if you’re one of the unfortunate ones who has to cut a check to Uncle Sam this year, you’ll want to steer clear of one increasingly popular way to pay taxes: using your credit card.

Many people are so scared of the IRS that they’d do just about anything to avoid any potential problems. That’s one reason that paying your outstanding taxes with a credit card is so appealing: One click and you’re done.

But the price of using a credit card is simply too high compared to the alternatives.

The private companies that the IRS has authorized to accept credit card tax payments charge as much as 2.35% in convenience charges up front. Even worse, if you can’t pay off the resulting balance on your card, you’ll boost your finance charges — and with typical cards carrying annual rates of 16% or more, those charges will add up in a hurry.

Cheaper Ways

If you have the money to pay by check, it makes far more sense than charging it. Unless you earn perks like cash-back rewards or airline miles that are worth more than the 2.35% fee, there’s no good reason to pay it.

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Even if you can’t afford to pay your whole tax bill right now, a better alternative for some is to use the IRS‘ own procedures to get some relief. Requests for up to 120 days of additional time to pay in full carry no fee, and although interest continues to accrue, the current annual rate of 3% is far less than what many credit cards charge. Longer repayment plans come with an application fee, but it can still be worth it if you can qualify for reduced IRS penalties.

So if you’re trying to figure out how you’ll pay your taxes next week, think twice before you use your credit card. You might be far better off seeking another way to pay.

For More on From The Tax Center:

Motley Fool contributor Dan Caplinger is paying his taxes the old-fashioned way next week. You can follow him on Twitter here.

NEXT: Learn From These Celeb Tax Mistakes

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Supreme Court's John Roberts Has Credit Card Number Stolen

By Matt Brownell

Supreme Court Chief Justice John Roberts  (Photo by Mark Wilson/Getty Images)

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Mark Wilson, Getty Images

No one is safe from identity theft — not even John Roberts, the Chief Justice of the Supreme Court.

On the morning that the Supreme Court was scheduled to hear arguments about gay marriage, Roberts was overheard telling a barista at his local Starbucks that he would have to pay cash for his coffee, as his credit card information had been stolen. The Associated Press spoke to a Supreme Court spokesperson, who confirmed that someone got hold of one of the Chief Justice‘s credit card account numbers. Apparently that meant that Roberts had to use cash while he waited for a new card from the bank.

Supreme Court Justices: They’re just like us!

Roberts isn’t the first high-profile Washington figure to become the victim of identity theft lately — earlier this month, First Lady Michelle Obama, Vice President Joe Biden and the director of the FBI all had their credit reports stolen and posted to a Russian website. Celebrities including Beyonce Knowles were also affected.

If the director of the FBI and the most powerful judge in the country can be impacted by identity theft, how are ordinary citizens supposed to keep their finances safe?

Short of shunning all credit cards and living a cash-only existence, you’re always going to be at some risk for identity theft. We’re not sure how Roberts lost his credit card number, but it could have happened anywhere. Maybe an online retailer where he’d used the card suffered a data breach that we don’t know about. It’s also possible he handed his card to a waiter at a restaurant, who then secretly swiped it in a portable card reader. From there, it would be a simple matter of “cloning” the card for use in stores, or simply using the number to make an online purchase.

In other words, you don’t have to be an idiot to get your credit card number stolen. The circumstances are frequently outside your control.

The good news is that Roberts (and most victims of credit-card theft) can usually nip it in the bud without any financial loss. Federal law caps losses due to credit card fraud at $50, and most credit cards go a step further and offer zero liability on fraudulent purchases. That’s contingent on you spotting the fraudulent charge in a timely manner and alerting the bank, so we might recommend setting up alerts on your credit card to let you know about possible fraudulent transactions; at the very least, you should carefully read your statement every month.

If you see anything out of the ordinary, just call the number on the back of your card and the bank should quickly credit you the amount and send you the new card. Like …read more
Source: FULL ARTICLE at DailyFinance

Medical Credit Cards Can Cause Heartburn

By Kiplinger

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Alamy

You already trust your health care providers with your physical well-being. Should you also trust them with your financial health?

That’s the question consumers are facing as a growing group of health care providers give patients the option to charge their treatment costs on so-called medical credit cards. These cards, offered by major financial-services firms such as Citigroup, GE Capital and Wells Fargo, are designed for consumers paying out of pocket for dental, vision, audiology and other treatments not covered by patients’ insurance. These cards also can cover veterinary costs for your pet.

Many patients sign up for these cards in their health care provider’s office. The cards typically offer “deferred interest” payment options that promise consumers will avoid paying interest as long as they pay the full balance within a certain time frame, often six months to two years. Most regular credit cards assess interest charges much sooner.

Such cards may sound like the perfect solution for seniors slapped with, say, a $3,000 dental bill that Medicare or private insurance won’t cover. But consumer advocates and state attorneys general are raising a host of concerns.

Among potential problems are confusing features of the deferred-interest payment options that can cause consumers to rack up huge interest charges. In some cases, there’s also the potential for consumers to be charged upfront for treatments they never receive. And paying promptly with plastic may mean that patients lose the opportunity to negotiate prices with health care providers-a move that could save them much more money than a zero-interest payment plan.

Patient advocates also question whether such products should be promoted in a doctor’s office. Often, in a health care setting, “you’re dealing with people in the most vulnerable state,” says Mark Rukavina, principal at consulting firm Community Health Advisors, in Chestnut Hill, Mass. “Most people go into a health care provider with pain and concern, and they’re not there to make a financial-services decision.”

Medical credit cards have gained steam as health care costs spiral higher and many patients find themselves paying a greater share of costs out of pocket. The cards attract health care providers because they can encourage more patients to move forward with treatments and offer immediate payment for services. GE Capital’s CareCredit card, for example, is now accepted by roughly 160,000 providers, up from fewer than 150,000 in 2011. Providers pay a fee to offer the cards. A 2010 investigation by New York‘s attorney general found that CareCredit paid providers rebates based on the amount consumers charged on the cards. CareCredit spokesperson Cristy Williams says “there’s no longer any type of rebate program.”

Untangling the No-Interest Option

Many patients, meanwhile, are attracted by the cards promising no interest charges when balances are paid in full within a specific time frame. These plans typically require minimum monthly payments. If consumers don’t …read more
Source: FULL ARTICLE at DailyFinance

The Top 10 Consumer Complaints of 2012

By Selena Maranjian

The top complaints in America

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Alamy / AOL

If you’re fed up with hearing people complain, imagine being the Consumer Sentinel Network. This online database for law enforcement compiled and categorized more than 2 million complaints in 2012 — instances of fraud, scams, schemes, and violations consumers reported to everyone from the FTC to the Better Business Bureau to the U.S. Postal Inspection Service.

So which industries or groups of people cause us the most grief? Here are the CSN‘s findings for the top 10 complaint categories and the percentage of the total complaints that each represents:

1. Identity theft (18 percent)
2. Debt collection (10 percent)
3. Banks and lenders (6 percent)
4. Shop-at-home and catalog sales (6 percent)
5. Prizes, sweepstakes, and lotteries (5 percent)
6. Impostor scams (4 percent)
7. Internet services (4 percent)
8. Auto-related complaints (4 percent)
9. Telephone and mobile services (4 percent)
10. Credit cards (3 percent)

Stolen identities
It makes sense that identity theft tops the list. Detecting, uncovering and correcting the fallout from identity theft is a long, labyrinthine process. Sure, it’s terrible if you lose, say, $500 or $1,000. But with identity theft, some people have not only lost a lot of money but have spent years trying to undo the damage done, encountering many frustrations along the way.

Most of us know to shred documents containing personal information before discarding them, and to be careful to whom we divulge personal information. It can be easy to imagine that identity theft won’t happen to us. But according to the CSN, nearly one-fifth of all complaints — a whopping 369,132 — were about identity theft.

Military variations
The distribution of complaints was different among military personnel than other Americans. For example, while their top two complaints were the same as the overall results, their No. 6 complaint category was mortgage foreclosure relief and debt management, while it was just 15th for the overall nation.

Foreclosures and debt problems have been major issues for many service members. That’s because they often receive orders to pick up and move to a new location and assignment, but with our economy struggling and home prices depressed, they can end up owing more than their homes are worth. Worse still, hundreds have had their homes illegally foreclosed upon by big banks — JPMorgan Chase (JPM), Wells Fargo (WFC), Bank of America (BAC), and Citigroup (C) — as has been reported by The New York Times. Military members should know that settlements have been struck with big banks to address these and other wrongs, and that entities such as the Consumer Financial Protection Bureau are looking out for their interests.

Fraud
This wonderful digital age has ushered in new ways for scammers to scam us. The most common method …read more
Source: FULL ARTICLE at DailyFinance

What Happens to Your Credit Card Reward Points When You Die?

By Credit.com

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Alamy

By Gerri Detweiler

Before one of my relatives passed away from cancer last year, she mentioned to me a couple of times that she wanted one of her heirs to use the rewards points she had accumulated on her credit card. At the time, I thought it was a kind gesture but didn’t want to bother her with trying to transfer them while she was ill. That was probably a mistake, since it’s not clear now that we are going to be able to carry out her wishes. As it turns out, redeeming rewards points after someone has died is not always a simple matter.

Here are the three main reasons why reward balances may disappear when you die:

Your points may not really be yours. In July 2011, Professor Gerry W. Beyer, with the Texas Tech University School of Law, and Mikela Bryant, an editor with the Estate Planning and Community Property Law Journal, published Rewards from the Grave: Keeping Loyalty Program Benefits in the Family, the results of their research into policies of the major credit card companies, airlines, and other loyalty reward programs.

They found that in many cases, rewards aren’t considered property of the program member, and as a result, may be forfeited when a member dies. Yet, some companies will allow points to be transferred to or used by heirs, though there may be a fee charged for this service. For example, here are the published policies of several of the major airlines:

American Airlines: Neither accrued mileage, nor award tickets, nor upgrades are transferable by the member (i) upon death, (ii) as part of a domestic relations matter, or (iii) otherwise by operation of law. However, American Airlines, in its sole discretion, may credit accrued mileage to persons specifically identified in court approved divorce decrees and wills upon receipt of documentation satisfactory to American Airlines and upon payment of any applicable fees.

United MileagePlus: Accrued mileage and certificates do not constitute property of the member. Neither accrued mileage nor certificates are transferable (i) upon death, (ii) as part of a domestic relations matter, or (iv) otherwise by operation of law.

Southwest Rapid Rewards: Points may not be transferred from one Member’s account to another, or to a Member’s estate, or as part of a settlement. (Despite this policy, Beyer and Bryant note that Rapid Rewards points earned in the newer version of the mileage program “may be used by anyone after the member’s death, whether stated in a will or not” as long as the account is active.)

Delta Skymiles: Upon the death of a Member, the Administrator or Executor of the Member’s Estate may designate one or more other Members to receive a transfer of the mileage credit in the deceased Member’s account. Only whole number amounts of miles may be transferred. …read more
Source: FULL ARTICLE at DailyFinance

This Couple Learned the True Cost of Living Beyond Their Means

By Business Insider

Photo courtesy of Travis Pizel

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(Photo courtesy of Travis Pizel)

By Mandi Woodruff

As a successful software engineer living in the suburbs of Minnesota, Travis Pizel never had an income problem.

Together, he and his wife, Vonnie, pulled in a cool six figures each year, more than enough to provide for their two children and still take the occasional weekend getaway. And if they couldn’t afford something when they wanted it, Travis knew exactly where to turn.

As tales of debt often do, his began with one credit card that eventually became two credit cards, then three, and so on. A few years into his marriage, Travis had 13 open lines of credit and was officially hiding the bills from his wife each month.

“I just stopped talking about how much [debt we were in],” Travis said. “Everyone else would go to bed at night and I would be trying to figure out how to move credit balances around, get new credit cards … whatever it took to keep our finances going.”

Within a decade, he had amassed $109,000 worth of debt.

A Tumbling House of Cards

It was the summer of 2009 when Pizel hit rock bottom. Chase announced a higher minimum payment requirement, and he was suddenly staring down the prospect of hundreds of dollars more in payments each month. It was money they didn’t have. His house of cards was on the brink of collapse.

“Marriage is built on trust and I didn’t do a good job on that,” Travis said. “[My wife and I] had a frank discussion on how we got there … and when it was all over, we started looking for solutions.”

Determined to avoid filing personal bankruptcy — “We felt really responsible for the debt we racked up,” he explained — the couple hit the Web for alternative options.

They decided to enroll with a debt management company.

When Travis found a debt management company online, he was dubious at best. The entire concept of paying a company to manage debt was foreign.

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Debt management companies aren’t exactly the golden parachute their name might bring to mind (and if a company portrays itself as one, it could be a scam). They negotiate a low-interest payment plan with lenders on the consumer’s behalf. In return, the consumer agrees to pay off their debts within a certain window of time, typically three to five years, and the company disperses a monthly payment across all proper channels. The fees for doing so are typically around $20 a month, though the Pizels pay $50 with their service.

After several hours-long conversations with company representatives, the Pizels signed up for 57 monthly payments of $2,489 each.

There was also a catch: Once enrolled in the service, all of their credit accounts were frozen.

“That was a big commitment to …read more
Source: FULL ARTICLE at DailyFinance

Living Without Credit Cards: She Made It Work, and You Can Too

By Michele Lerner

living without credit cards

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(Photo Courtesy Liz Smiley)
Every time you make a plane reservation or rent a car or pay for concert tickets, you’re asked to provide a credit card number. Liz Smiley, a social worker in Florida, provides a debit card number instead.

Smiley has lived without a credit card for more than four years, and she doesn’t miss it a bit.

“I got my first credit card when I turned 18, and I just got used to using credit to pay for things,” says Smiley, a single parent who was also the caretaker for her mother when she decided it was time to eliminate her debt.

Smiley had accumulated about $38,000 in credit card debt and was tired of spending all her income on credit card payments. She arranged a debt management plan through CredAbility, a credit counseling service in West Palm Beach, Fla., and repaid her debt in four years.

As part of her debt management plan, all of her credit card accounts were immediately closed. “I have to admit it was hell in the beginning, like going from eating lobster and caviar to a starvation diet,” says Smiley. “It was really hard to say that I couldn’t afford something and that I had to save for it.”

Not Accepted Everywhere

Smiley got around the need for a credit card for flights and online shopping by using her debit card. But it wasn’t always easy.

Some retailers won’t accept a debit card unless it has a Visa or MasterCard logo. And many hotels and rental car companies only accept credit cards, or will place a hold for hundreds of dollars on a debit card until the customer vacates the room or returns the car.

That means you need to make sure you have enough money in your bank account to cover the bill. “I always had to make sure I had at least $150 or more extra in my checking account when I rented a car,” says Smiley.

In spite of her $970 per month payments on her debt management plan, Smiley managed to save an emergency fund of $3,000 that she uses as a back-up to her checking account.

How to Make It Work

If you decide to live without a credit card, you’ll need to develop plans to pay for everything beyond your normal expenditures, such as vacations, gifts, car repairs and unexpected health care needs.

First, establish your emergency fund with three to six months of living expenses. Most financial experts suggest that you have a set amount transferred from each paycheck to build up your savings painlessly.

For health care costs, Smiley set up a health savings account at work where she saves pre-tax money for out-of-pocket health care …read more
Source: FULL ARTICLE at DailyFinance

Bank of America's Newest Credit Card Pays You to Repay Them

By Matt Brownell

Bank of America

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A new credit card from Bank of America (BAC) will offer cash rewards up to $120 a year to cardholders who pay off more than the minimum balance every month.

The BankAmericard Better Balance Rewards card gives cardholders $25 per quarter as long as they always pay their bill on time and pay off more than their monthly minimum due amount. Cardholders who also have a Bank of America bank account get another $5 each quarter, bringing the total to $120 a year just for staying on top of their bills and making an effort to bringing down their debt. The rewards can be cashed out or put toward your credit card balance.

Bank of America CardThat’s a very different rewards program than you see on standard rewards cards, which focus on getting cardholders to spend as much as possible to get cash back. And while those rewards cards tends to be geared toward people with excellent credit, the Los Angeles Times notes that this card is likely to be aimed at lower-income consumers with fair credit.

So is the card a good deal?

The rewards are certainly attractive. To get $120 in annual cash rewards on a standard rewards card with 1 percent cash-back, you’d need to spend $12,000 in a calendar year (though bonus categories with rewards of up to 5 percent can allow you to get there more quickly).

By contrast, you don’t have to rack up a ton of spending on this card to get a comparable cash bonus. In fact, even if you have only a $15 minimum payment, you could put a measly $20 on the card every month, and as long as you’re paying a little more than the minimum due amount, you’ll reap the rewards. If you also have a bank account with Bank of America, that means you could wind up getting $120 in bonuses on $240 of spending, a tidy 50% cash-back rate.

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But that same feature also means that the card doesn’t necessarily encourage people to make a serious dent in their balances. Because the cardholder need only pay “any amount more than the monthly minimum due” to get the cash bonus, simply paying a dollar over the minimum would be sufficient to get the rewards. A better incentive to encourage responsible borrowing might be to require cardholders to pay a minimum percentage of their total balance.

Another issue is that the annual $20 perk for holding an account with Bank of America might backfire on some consumers. The card, after all, is aimed at lower-income customers, who may not be able to maintain the necessary minimum account balance to avoid Bank of America’s monthly account fees. If you’re considering this card and you’re currently with a bank or credit union that …read more
Source: FULL ARTICLE at DailyFinance

Most Americans Have More Savings Than Credit Card Debt

By CNBC

Money savings vs. credit cards debt

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Rumors of the spendthrift American consumer may be slightly exaggerated. Bankrate’s 2013 February Financial Security Index found that a majority of consumers — by a narrow margin — say they have more savings than credit card debt.

For more than half the country, 55 percent, an emergency fund outweighs credit card debt. Nearly a quarter, 24 percent, admit to having more debt on plastic than money in the bank, while 16 percent say they have neither credit card debt nor savings. That puts 40 percent of the population close to the edge of ruin while everyone else seems to be sitting pretty.

If most people have more savings than credit card debt, “Why are so many people broke?”

It’s a curious question. The answer may be that although credit card balances came down through the financial downturn that began in 2007, consumers’ fundamental behavior of not saving enough did not change.

According to the Department of Commerce, for 2012, the overall savings of the average household were 3.9 percent, much better compared to the 0.9 percent Americans were saving in 2001. However, this is down from the average 5.4 percent savings rate in 2008.

Even with a low savings rate, why wouldn’t a supposedly low credit card debt rate put Americans in better financial shape?

“The fact of the matter is that America is broke — whether it’s mortgages, student loans or credit cards, we are broke. The old rule of thumb is that people should have six months’ of savings,” Dvorkin says.”If you talk to people, most don’t have two pennies.”

Who’s In Trouble?

In Bankrate’s survey, men were more likely than women to say their emergency fund outweighed credit card debt, at 60 percent, compared to 49 percent of women.

But credit card debt hits all kinds of consumers. Bankrate’s survey has found that roughly a quarter of all income levels has more credit card debt than savings.

“Credit card debt will eat you alive no matter who you are,” Dvorkin says.

Income Levels With More Credit Card Debt Than Savings.
Income Level $75K+ $50K-$74.9K $30K – $49.9K Under $30K
2011 22% 27% 29% 23%
2012 20% 31% 27% 30%
2013 23% 25% 30% 23%

Those people with incomes more than $75,000 were less likely to have no savings or credit card debt compared to those at the opposite end of the spectrum, with incomes less than $30,000. Only 7 percent of high earners have no …read more
Source: FULL ARTICLE at DailyFinance

Restaurants Stage One-Day Credit Card Boycott — WIth a Twist

By Matt Brownell

Credit card boycott at restauraunts

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Twenty restaurants and cafes in the Boston and Washington, D.C., areas staged a one-day credit card boycott on Tuesday, refusing to accept credit or debit cards from customers.

The boycott was targeted at interchange fees charged by card issuers every time they swipe a customer’s card. Those fees — which are capped at 21 cents per transaction on debit cards and tend to be around 2 percent to 4 percent on credit cards — have been a source of conflict between merchants and banks for years.

But this boycott wasn’t an organic grassroots movement by a coalition of angry merchants. Rather, it was organized by mobile payment processor LevelUp, and customers had the choice of using either cash or the LevelUp app to pay for their meals.

The app lets consumers link a credit card or debit card with the free smartphone app, which displays a QR code that can be scanned at the point of sale. Merchants using it are charged a 2 percent transaction fee, which is on the low end of normal credit card fees.

But the real advantage is that merchants can get rid of the transaction fee altogether if they instead opt to pay for LevelUp’s suite of advertising and loyalty programs, which make use of payment data gathered by the app. For instance, restaurants can offer discounts to customers using the app at their establishment for the first time, or give an automatic discount to customers who come in for a meal when it’s raining out.

So it’s not hard to see why merchants would want to use the system — it allows them to take money they’d normally hand over to the bank, and instead put it toward customer retention and promotions.

But we’re not sure about this credit card boycott, which the company framed as a “Credit Card Diet.” We’d certainly be pretty miffed to discover that our usual lunch spot had suddenly made it harder to pay for a sandwich just so that it could engage in a publicity stunt for a mobile payment processor.

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This boycott was just the latest instance of consumers getting caught in the swipe-fee crossfire. Merchants recently won a court ruling allowing them to pass along credit card fees to consumers, though most insist they won’t take advantage of this right. And when the Durbin Amendment to the Dodd-Frank Wall Street reform law capped debit card fees back in 2011, many banks implemented new checking account fees to make up for the loss of income.

As for Tuesday’s proceedings, LevelUp CEO Seth Priebatsch conceded that a small minority of customers walked out after being told that they couldn’t use their credit card. But he explained that LevelUp took precautions to make sure that restaurants completely alienate their customers.

“We had a street team member at all of the …read more
Source: FULL ARTICLE at DailyFinance

His Financial Goals: Saving More and Paying Down Credit Card Debt

By Jean Chatzky

Graham Wood, AOL Real Estate

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Everyone has things they want to improve about their financial lives, even those of us who are paid to write and think about money on a daily basis. To that end, the editors at DailyFinance and other AOL sites shared their 2013 goals with personal finance expert Jean Chatzky. Today she offers some tips to help AOL Real Estate editor-in-chief Graham Wood, who wants to be more disciplined about saving so he can wipe out his credit-card debt.

Here’s what Jean suggested:

Step 1: Here’s a…

His Financial Goals: Saving More and Paying Down Credit Card Debt originally appeared on DailyFinance.com on 2013-02-25T05:00:00Z.

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Source: FULL ARTICLE at DailyFinance

Want to Save on Gas? It's All About How You Pay

By Matt Brownell

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Drivers are once again feeling the sting of high gas prices, with the average price of regular gas rising by 15 cents a gallon in the last week alone. While you can always drive around town looking for the cheapest gallon in your area, it’s also important to remember that your method of payment can make a big difference.

We were reminded of this fact when Cumberland Farms, a chain of convenience stores and gas stations in the Northeast, announced that customers could get 10 cents a gallon off…

Want to Save on Gas? It’s All About How You Pay originally appeared on DailyFinance.com on 2013-02-22T05:00:00Z.

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Source: FULL ARTICLE at DailyFinance

When You've Passed On, Who Inherits Your Credit Card Debt?

By Selena Maranjian, The Motley Fool

Death grave cemetery

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When we die, we leave all kinds of things behind, including our debts. And it’s not always clear what exactly happens to those obligations.

Consider your credit card debt. According to Aaron Crowe at the Credit.com blog, your heirs are not likely to be stuck with it, though some parties might want you to believe otherwise.

It’s not unheard of, for example, for a debt collection agency to contact the bereaved, seeking loan repayment. Thanks to the Fair Debt Collection Practices Act, there are…

When You’ve Passed On, Who Inherits Your Credit Card Debt? originally appeared on DailyFinance.com on 2013-02-19T05:00:00Z.

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Source: FULL ARTICLE at DailyFinance