1. Unemployment: Credit card issuers don’t like to hear that you’re out of work. This word makes them think of another word–write-off.

If you have to say it: Stress how proactive you’re being in your job search. Don’t whine, “I’ve been looking for a job for six months!” Instead, stay calm and sound confident that you’re sure you’ll find work soon. And when you do, making the minimum payments again will resume. Negotiating a lower interest rate is a good idea, too.

2. Divorce: These situations can get messy in a hurry. Card issuers have dealt with situations where it was a joint account, but one spouse did most of the spending. And guess what happens? It gets disputed and no one wants to pay.

If you have to say it: Don’t bash your spouse, but be clear that the individual who made the purchases will be paying the debt as soon as the legalities are settled.

3. Bankruptcy: Filing for Chapter 7 bankruptcy wipes clean all unsecured debt–and this includes your credit cards. (With Chapter 13 bankruptcy, you agree to repay creditors over 3 to 5 years). Once your issuer knows this, your FICO score will drop about 100 points.

If you have to say it: If bankruptcy is in your future, you’ll be required to receive credit counseling. At that point, you’ll be advised about how to proceed and how creditors will be notified.

4. Write-off: By the time it gets to this point, your account will be handed over to a collection agency. Try to prevent reaching this stage by negotiating a lower interest rate or a due date that works better with your cash flow.

If you have to say it: This is a last resort. Don’t say this word unless you’ve exhausted all other possibiltites for repaying your debt.

5. Foreclosure: As long as you can stay on top of your credit card payments, don’t share this with your issuer. There’s simply no reason to make your issuer think you might have problems paying your next credit card bill.

If you have to say it: If it does impact your ability to make your minimum credit card payments, go ahead and discuss the situation. But be ready to say you have a plan in place for paying off your debts.

Below is a sample statement, from the Federal Reserve, that illistates those changes. Mouse over the number to read the details for each part of the statement.

#1: The Fraudulent Fraud Department
A scammer calls you, claiming to be from your bank’s credit card fraud investigation team. They rattle off your entire credit card number and mailing address, then ask you to confirm your recent $499 charge to an online retailer. When you say you didn’t make that charge, the caller asks for the three digit code from the back of your credit card. That’s all they need to unleash a flurry of charges to your account.

#2: The Server Skim
In restaurants and hotels, you’re likely to part ways with your credit card at some point. A fraud ring’s accomplice, often a hapless service worker paying off a gambling debt, runs your credit card through a handheld “skimmer” while out of your view. The contents of your magnetic stripe get transmitted to an accomplice who clones your card for big ticket purchases.

#3: The Nosy ATM
You think you’re playing it safe by looking for an ATM that’s part of your bank’s preferred network, in a well-lit neighborhood, under security cameras. What you might not notice are the extra chunks of plastic stuck to the teller machine. A magstripe skimmer can fit directly over an ATM’s own card reader, while a pinhole camera above the keypad captures your security code.

#4: The Suspicious Screen Saver
A good piece of malware doesn’t just show up on your computer by accident. Instead of sneaking in as a virus, the most effective identity theft tools pose as useful applications. Free screensavers and games can hide keystroke loggers that transmit every character you type to a remote location, revealing personal information like credit card numbers and bank passwords.

#5: The Awful Auction Escrow Service
You’ve just placed the winning bid for an eBay item, and the seller asks if you wouldn’t mind saving them some cash by paying through a special link instead of through the auction site’s own checkout system. Instead of buying a trinket, you’re really sending your credit card account details directly to an online fraud ring.

And if you’re not already wary, wait until your home phone and your cell phone both start ringing off the hook with strange, recorded sales pitches. Identity thieves tie up your phone lines while they drain your accounts. Your banks’ fraud departments won’t be able to reach you to confirm large charges, nor will you be able to use your own phone to call your card issuers. Security experts recommend keeping at least one private or emergency phone number, like a cheap, prepaid cell phone, to prevent this kind of identity hacking.

Skip the Bank, But Don’t Skip the Check
Credit cards and charge cards changed the way we do business by allowing consumers to use the same account with multiple vendors. Depending on who you ask, the first modern charge card came from either Brooklyn or Manhattan. In 1946, Flatbush resident John Biggins pitched his bank bosses the idea of acting as middlemen for transactions between merchants and depositors. When his neighbors used their “Charge-It” cards at Brooklyn businesses, Biggins would transfer cash from buyer to seller.

A few years later, a business dinner in the shadow of the Empire State Building almost turned into a nightmare for Frank McNamara. Vowing to never again ask his dining companions to cover his tab, McNamara returned to Major’s Cabin Grill a year later with his own invention: the Diner’s Club card. Banks added revolving credit to the cards championed by Biggins and McNamara, evolving into the credit card accounts we know today.

MasterCharge and BankAmericard Knew How to Send Great Mail
As regional banks joined the credit card fray, two camps formed. Bank of America used its market dominance to launch the BankAmericard. A coalition of smaller lenders joined forces under the MasterCharge logo. American Express, wanting to reinvent itself after a tumultuous few decades in the travel services business, rolled out the first plastic credit card in 1959. Merchants who accepted credit cards discovered that they could stay open later, since buyers didn’t have to collect cash from bank tellers for major purchases.

In today’s economy, most of us get excited just to see a credit card offer in our mailbox. During the 1960s, banks would simply send an activated BankAmericard or MasterCharge card to your house, no questions asked. You qualified for a card by keeping your other accounts with the bank in good standing, or by looking like a decent credit risk to a company that wanted to poach your business. Mail carriers delivered over 100 million working credit cards to American homes before fearful regulators forced banks to abandon the practice.

Credit Gets Magnetic
By the early 1970s, Americans grew accustomed to relying on credit cards. Merchants and banks turned to computers to pick up the pace of processing transactions, and the magnetic stripe was born. During the same era, a newly independent BankAmericard rebranded itself as Visa and got into the travelers cheque business. Meanwhile, American Express celebrated the tenth anniversary of its Gold Card, whose profits rivaled those of its heritage travel services.

The most recent major player in the credit card business emerged in 1986, when Sears tried to achieve synergy between its retail and financial divisions by launching the Discover Card. Not only did it create some fancy cards, it brought the concept of cash back rewards to the mainstream by throwing down the gauntlet in a Super Bowl ad. Technology has driven the credit card industry since then, ushering innovations like contactless credit cards and one-time-use account numbers.

Credit cards aren’t done evolving, either. Right now, banks are experimenting with credit cards embedded in cell phones and credit cards tied to your retinal scan. Pretty soon, you won’t even need to carry an actual credit card to exercise your purchasing power. Instead of an account number, you could find yourself shopping with a unique key phrase. Virtual wallets containing dozens of disposable accounts could someday protect you from identity theft. And if this Independence Day leaves you nostalgic for the days when you carried pictures of our founding fathers in your wallet, you can request a customized credit card emblazoned with a picture of Mount Rushmore.

Account Activity, Clear Due Dates, and Minimum Payments
Banks must now provide the big picture: How much you paid off, how much you spent, and how much you have to pay before you’re debt-free. Credit card issuers must prominently display the deadline for receiving an “on-time” payment and the minimum amount they expect you to send. Some banks earned harsh criticism from Congress for burying these details in small type. New rules require large, readable text.

Plain English Penalty Warnings
In simple language, banks must now tell you about what can happen to your account if you make a late payment or if you fail to make your minimum payment. Banks must also show you a grid outlining how long your debt lasts if you make only the minimum monthly payment, as well as the amount you must pay every month if you want to pay off your account in three years.

Advance Notices of Account Changes
This year’s new rules impose a 45-day notification period before your credit card company can change your interest rates or your fee schedule. While this can protect you from fee creep, it can also give you time to adjust your habits or make balance transfers if you’ve triggered a penalty interest rate.

Breakouts of Transactions and Fees, YTD Totals, and Finance Charge Reports
New statement designs must list transactions separately from fees. That way, you don’t see a balance transfer fee or an annual fee buried among a page full of your usual credit card charges. You also see a report detailing how much you’ve paid in interest during your most recent statement cycle, and how that stacks up to your annualized fees and finance charges.

When the Federal Reserve required banks to adopt a standard “Schumer Box” detailing rates and fees on their credit card applications, consumers gained awareness of credit cards’ hidden costs. Lawmakers hope that similar clarity on credit card statements can help cardholders make smarter decisions about their finances.

Consumer Financial Protection Bureau

Lawmakers compared the new bureau to a “financial EPA,” but a compromise in the bill’s language puts this powerful new body under the umbrella of the Federal Reserve. Despite warnings that a lack of oversight at the Fed led to 2008’s market collapse, the CFPB streamlines oversight of most lending and borrowing activity in the United States.

$10 Maximum Minimum on Credit Card Purchases

Although new investing and trading rules have dominated financial press headlines, consumers will feel the fastest changes from the financial reform bill at their local checkout counters. Until now, vendors posting “$10 minimum credit card purchase” signs at the register have technically violated their merchant agreements. Upon passage of the bill, merchants can make their own policies for minimum acceptance, up to the Federal Reserve’s $10 “maximum minimum.”

Cash Discounts Returning to Retailers

Credit card payment processors assess service fees to merchants based on industry risk factors, causing some retailers to pay service charges as high as five percent. The financial reform bill gives merchants the option to pass savings along to customers in the form of percentage discounts or rebates for cash payments. Dual pricing options were once the norm at gas stations, and could return upon the bill’s passage.

Caps on Merchant Service Fees from Large Banks

The financial reform bill also gives the Federal Reserve power to set limits on merchant service transaction fees. While retailers cheered the proposal, banks may curtail rewards and cash back rebates to preserve profits under the new rules. Although the bill enforces this rule only for banks with more than $10 billion in assets, analysts expect payment processors to set uniform rates that will affect smaller banks and credit unions.

Critics of the financial reform bill expressed concern about its unintended consequences. Just as previous interventions by the Federal Reserve resulted in tightened consumer credit lines, a sudden consumer shift to cash and debit away from credit card transactions could cause banks to rethink their service offerings. Lawmakers expressed optimism that the overall benefits of a tighter regulatory system for lending and investing would offset short term inconvenience.

Even though you can save your marriage with credit cards, you can just as easily wreck your romance with help from your latest account statement. Avoid these five common ways that spouses get into money trouble:

#1: Hiding Credit Card Debt from Your Spouse

If some financial advisors had their way, we’d all be getting credit checks in addition to blood tests before getting our marriage licenses. How can your spouse really trust you if you’re not honest about that extra $7,000 in debt you’ve been keeping secret?

#2: Forcing Your Spouse to Suffer Under Your Pre-Wedding Credit Card Habits

Even if you were totally up front with your spouse about your debt before you got married, you might still need to talk about how your credit report got in that condition. It might have been easy to rationalize a missed credit card payment or an over-the-limit charge when you were single. Now that your credit scores are intertwined, it’s time to play by the rules.

#3: Making Secret Credit Card Purchases

It’s harder than you think to bury a questionable credit card purchase. Bank Web sites, credit monitoring services, and online budgeting tools make it very easy for spouses to uncover visits to stores, restaurants, or hotels. Unless it’s an anniversary gift, don’t keep it a secret.

#4: Shifting Gears with Credit Card Balances

Some folks love to cycle large credit card balances, just to get cash back rebates or other rewards. Other people prefer never to touch their credit cards, except in the most dire emergency. Wherever you fall in that spectrum, it’s important to agree on your household strategy and make some compromises.

#5: Failing to Use Credit Cards Responsibly

Stress in other parts of your marriage can trickle into your credit card habits. Is missing your monthly payment just forgetfulness or something worse? Talk to your spouse early if you’ve got some unexpected money trouble that could impact your credit score.

Most of all, don’t attempt to use credit cards to hide behind any of the real issues causing friction in your relationship. If you’re overspending because your spouse isn’t spending enough time with you, budget issues could drive you apart for good. If you’re hiding new lines of credit to assert power in your relationship, expect to lose it all when your spouse finds out. Seeing any of these signs should spur you to see a marriage counselor before things really get out of hand. ]]> http://www.cardratings.com/creditcardblog/2010/06/credit-cards-mistakes-divorce.html/feed http://www.cardratings.com/creditcardblog/2010/06/credit-card-debt-cant-hide.html http://www.cardratings.com/creditcardblog/2010/06/credit-card-debt-cant-hide.html#comments Wed, 16 Jun 2010 22:54:59 +0000 Joe Taylor http://www.cardratings.com/creditcardblog/?p=10855 Their voicemail messages can sound so intimidating. “This is Mr. Stevens. I have a very urgent business matter that needs your immediate attention. Call me back before six o’clock today at 1-800…”

Debt collection agencies hire people that can sound and act like the scariest people you’ve ever met, which makes hiding from them sound like a pretty good strategy. However, if you’re sticking your head in the sand over unpaid credit card debt, consider what could happen to you if you keep letting those calls go unanswered:

• Debt collectors could call your loved ones, or your office. Although federal law prohibits debt collectors from divulging your financial situation, it only takes one phone call to cause permanent embarrassment or even job loss.
• Collection agencies can tack on service fees and finance charges. Debt collectors thrive by inflating balances. The longer you wait to deal with outstanding credit card debt, the more they’ll ask for.
• Bill collectors can wreck your credit score. Some collection agencies have been known to inflate balances to three or four times their original amounts, then report those figures to national credit bureaus.
• Collection attorneys can file suit against you and win a default judgment. In the worst cases, collection agencies can sue you for the amount they claim you owe. Though some judges have taken collectors to task for failing to properly serve notice of a pending lawsuit, many credit card cases result in default judgments when debtors fail to defend themselves.

Losing a judgment to a bill collector can hurt you in a variety of ways. You’ll no longer be able to dispute the amount you owe, even if a collector jacked up your balance. A winning collector can garnish up to 25% of your paycheck in many states, causing you even more embarrassment at work. The judge may even allow a creditor to seize your savings accounts or put liens on your property, which can join the black mark left by the judgment on your credit report.

If you’re scared of the voice on the phone, remember that federal and state laws protect you from abusive debt collection tactics. You can demand that all of your negotiation take place in writing, allowing you the ability to control your emotions while preserving the right to dispute inaccurate information. Because most debt collectors buy charged-off accounts at pennies on the dollar, you may be able to negotiate a settlement at a fraction of the amount you originally owed. Start communicating with your creditors, unless you want your credit card bill to turn into a court case.

Things have been tougher for young adults since the Credit CARD Act placed age and income restrictions on credit cards. You have to be at least 21 to get a card on your own, or else you have to be able to show proof that you have the independent means to repay your debt. This is tough to do when you’re still in college. So young adults and their parents have had to get a little creative when it comes to credit. But even though you might be using Dad’s credit card, there are still ways to get him something special without maxing out his card.

Dad’s Credit Card Bill Can’t Keep a Secret

• If you’re an authorized user on Dad’s rewards credit card, then take advantage of it. No, that doesn’t mean a trip to the Bahamas for you. Find out what the rewards card covers and buy Dad’s gift at a store where he can also get the rewards points. He’ll appreciate your ingenuity!
• If you’ve got your own card because your parents were co-signers, here’s a chance to reward their faith. Let your dad know that you bought his gift with your card. Thank him for giving you an opportunity to build credit at a young age. With the new card legislation, it will become increasingly difficult for young people to have a credit history by the time they leave college. So you really have been given a wonderful opportunity.
• If you actually got permission to use Dad’s own card on his gift, then do him a favor and buy a modest, but thoughtful gift. Gifts such as cheap-seat tickets to watch his favorite baseball team (and, yes, you have to go with him) or a framed photo of the two of you on a fun family vacation.

Whatever credit card scenario fits your situation, take time to let your dad know that you appreciate the helping hand. Just a few words of thanks will make it the best Father’s Day ever for your dad. Yes, even if he’s paying for his own gift.

#10: Document your debit and credit card numbers, PINs, and identification details.
Keep this information somewhere safe and secure, but in a place where a close friend or family member might find it. You may need to send them looking for it if you encounter your worst case scenario, and you won’t want to keep this information with you during your trip.

#9: Travel with at least two credit cards, but keep them separate.
While traveling, keep one credit card in your wallet and the other someplace safe, like a hidden pouch of your carry-on. Once you’ve checked in to your hotel, keep one card locked in the safe. This way, you won’t be stuck waiting for a replacement credit card if your wallet gets lost or stolen.

#8: Warn your bank that you’ll be out of the country and/or buying lots of soccer gear.
Credit card issuers analyze long term spending trends for signs of fraud. Meanwhile, special events like the World Cup can attract identity thieves using stolen credit cards. Notifying your credit card company in advance can prevent the frustration of a declined transactions.

#7: Link your bank account with your credit card’s website.
This strategy works especially well for Capital One accounts, which feature no foreign transaction fees but sometimes don’t extend the same credit lines as other card issuers.

#6: Map out preferred merchants and ATMs.
Every bank and payment processor has its own policies about ATM usage and transaction fees, as well as foreign currency conversion charges. Confirming a safe and secure place to get cash near your hotel or venue can save you some money while reducing your stress.

#5: Confirm your credit card issuers’ emergency replacement programs.
Visit your bank’s website or contact customer service to learn what you’ll need to do if your credit card goes missing. Write down the collect or local toll free service numbers for each issuer.

#4: Leave your everyday bill payment debit card at home.
A stolen debit card could end up overdrafting your account or causing automatic bill payments to stop. Use a credit card or a prepaid debit card instead.

#3: Collect receipts or keep a credit card spending diary.
Make it easier to check for incorrect or unauthorized transactions once you return home. Take advantages of credit card issuers’ e-mailed spending alerts, if you prefer your inbox to do the work for you.

#2: Discover special credit card travel discounts and offers.
South African museums, restaurants, and tourist associations have teamed up with global credit card issuers to lure visiting soccer fans between games. If your credit card offers travel and concierge services, they may already have some special opportunities lined up for you.

#1: Don’t enter the venue without your Visa Card!
Visa’s partnerships make it easy for travelers to enjoy the world’s biggest sporting events, as long as they carry Visa debit or credit cards. Just like the recent Vancouver Winter Olympics, the World Cup venues will only accept Visa. If you’re reading this on the way to the match, there’s still hope. Local retailers offer Visa prepaid credit cards and gift cards that will work on venue merchants’ registers.

Credit cards and prepaid debit cards make it easier than ever to focus on enjoying a once-in-a-lifetime experience while you support your favorite World Cup team.